SecProbe.io

United States securities and exchange commission logo
December 23, 2022
Todd Sanders
Chief Executive Officer
Spirits Capital Corporation
100 Bayview Circle, Suite 4100
Newport Beach, CA 92660
Re:Spirits Capital Corporation
Amendment No. 1 to Draft Offering Statement on Form 1-A
Submitted November 4, 2022
CIK No. 0001881767
Dear Todd Sanders:
            We have reviewed your amended draft offering statement and have the following
comments.  In some of our comments, we may ask you to provide us with information so we
may better understand your disclosure.
            Please respond to this letter by providing the requested information and either submitting
an amended draft offering statement or publicly filing your offering statement on EDGAR.  If
you do not believe our comments apply to your facts and circumstances or do not believe an
amendment is appropriate, please tell us why in your response.  After reviewing any amendment
to your draft offering statement or filed offering statement and the information you provide in
response to these comments, we may have additional comments.
Amendment No. 1 to Draft Offering Statement on Form 1-A
General
1.Refer to your response to comment 1 that you do not intend to concurrently register a
class of securities under Section 12 of the Exchange Act.  Please revise your disclosure
accordingly.  For example, please remove your disclosure (i) on page 7 that "[o]nce this
Registration Statement becomes effective . . . , [you] will become subject to the reporting
requirements of Section 13(a) the Exchange Act[,] will be required to file annual reports
on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, and . .
. will be required to comply with all other obligations of the Exchange Act applicable to
issuers filing registration statements pursuant to Section 12(b) of the Exchange Act," (ii)
your disclosure on page 8 regarding your smaller reporting company status, (iii) your
disclosure on page 16 that states that you are subject to the reporting requirements of the
Exchange Act, (iv) your disclosure in the first risk factor on page 17 that indicates that

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your are a reporting company under Section 12 of the Exchange Act, and (v) your
disclosure on page 34 that you are "currently required to file periodic reports, proxy
statements, and other information with the SEC pursuant to the Securities Exchange Act
of 1934."
2.Refer to your response to comment 3.  If you may create, hold, acquire, or offer additional
crypto assets in the future, beyond the Security Tokens described in your offering circular:
•Please disclose the policies and procedures that you and your subsidiaries will use to
determine whether any such are securities for purposes of the federal securities
laws, or are likely to be deemed securities, and specifically disclose that any
determination that you or your subsidiaries make in that regard is a risk-based
judgment by the company and not a legal standard or determination binding on any
regulatory body.
•Include a risk factor related to such policies and procedures that addresses the
specific risks inherent in any policies and procedures for determining that any crypto
assets are not securities and describe the potential regulatory risks under the U.S.
federal securities laws if such crypto assets are determined to be securities, such as
whether the company could become subject to regulation under the Investment
Company Act or as a broker-dealer under the Securities Exchange Act.
3.Refer to your response to comment 5.  Please disclose how you will ensure that offers,
sales and transfers of deeds will comply with the federal securities laws, including the
specific exemption from registration upon which you intend to rely.
4.Please revise throughout to clearly disclose the stage of your operations so that investors
understand the platforms and crypto assets that you and your subsidiaries have fully
developed and that are currently in use, and, to the extent that your platforms, crypto
assets or securities are not fully developed, please describe the current stage of
development and the estimated timeline of when they will be fully developed.
5.Provide disclosure of any significant crypto asset market developments material to
understanding or assessing your business, financial condition and results of operations,
since your last reporting period, including any material impact from the price volatility of
crypto assets.
6.Please revise references to "OTCUS," "USOTC," "OTC US," and "OTCQB" to clarify the
OTC tier on which your common stock is quoted.  It appears your common stock is
quoted on OTC Pink.
Risk Factors, page 10
7.To the extent material, discuss any reputational harm you may face in light of the recent
disruption in the crypto asset markets. For example, discuss how market conditions have
affected or could affect how your business is perceived by potential investors,
counterparties, and regulators, and whether there is or could be a material impact on your
operations or financial condition.

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8.Describe any material risks to your business from the possibility of regulatory
developments related to crypto assets and crypto asset markets.  Identify material pending
crypto legislation or regulation and describe any material effects it may have on your
business, financial condition, and results of operations.
9.Describe any material risks related to safeguarding your, your affiliates’, or your
investors’ crypto assets. Describe any material risks to your business and financial
condition if your policies and procedures surrounding the safeguarding of crypto assets,
conflicts of interest, or comingling of assets are not effective.
10.To the extent material, describe any gaps your board or management have identified with
respect to risk management processes and policies in light of current crypto asset market
conditions as well as any changes they have made to address those gaps.
11.To the extent material, describe any of the following risks due to disruptions in the crypto
asset markets:
•Risk from depreciation in your stock price.
•Risk of loss of investor demand for your Security Tokens.
•Financing risk, including equity and debt financing.
•Risks of legal proceedings and government investigations, pending or known to be
threatened, in the United States or in other jurisdictions against you or your affiliates.
•Risks from price declines or price volatility of crypto assets.
Risks Related to Our Industry, page 17
12.Refer to your response to comment 8.  Please expand the risk factor disclosure related to
the volatility of the underlying assets as well as the risk of the destruction of the
underlying assets.  Provide additional risk factor disclosure regarding risks related to, and
the potential failure of, technologies used in operation of the platform and the Security
Tokens.  In addition, to the extent that you will store users' assets on your platform or will
use third parties to do so, disclose the risks related to such storage of crypto assets on your
platform, including the risks to investors if you or your subsidiaries declare bankruptcy,
and the risks related to the theft, loss, or hack of private keys.
The Company or its Third-Party Contractors may damage or misuse the private key management
part of the platform, page 17
13.Explain what exactly the "maintenance and organization of the private key" entails and
revise your Business section accordingly.
Cyber Security Breach could significantly Impair the Company, page 18
14.Describe here how a cybersecurity breach could impact you or your subsidiaries, your
security token platform, security tokens, private keys, and investors in your security
tokens.

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Business, page 22
15.Please provide a separate discussion in your offering circular that discloses all material
terms of the Security Tokens and the rights of its holders.  The following are examples
only and are not intended to be exhaustive:
•Explain exactly what interests holders will have, for example whether they are
receiving fractional interests in a specified barrel of whiskey, specified payments, or
otherwise, explaining in sufficient detail.
•Explain the timing of how payments will be made and whether they will occur before
or after you sell a barrel.
•Describe whether, and in what way, payments to security holders will depend upon
your sale of the barrel and the amount of proceeds you receive from the sale of the
barrel.
•Explain what voting rights Security Token holders have.
16.Refer to your response to comment 3.  Disclose what party has custody of Security Token
private keys during the twelve month holding period.  Also state whether SWT's platform
includes wallets in which investors can hold their Security Tokens and/or other crypto
assets.  Regarding each of these separate matters, describe the security and custody
arrangements in your Business section, including:
•The level of insurance that covers loss or theft of investor assets and who is covered
by such insurance (investors, you, custodians, or other parties).
•What party or parties store the crypto assets.
•The material terms of any agreements with third party custodians for the storage of
crypto assets.
•Whether any party has inspection rights related to any crypto assets held by third
parties.
•The types of storage utilized (hot or cold).
In addition, address the related risks, in detail, in your risk factors section.
17.Clarify what assets investors will be able to buy on SWT's platform.
18.Refer to your response to comments 4 and 9.  Please revise your disclosure on page 22 to
describe the "digital tracking mechanism, built on a blockchain platform" by which
investors can digitally track and monitor a particular spirit during the applicable
maturation process.  In addition, please disclose what you mean by the "rates available for
distributions."  For example, disclose whether the holders of the Security Tokens receive
distributions throughout the maturation process of the spirits represented by the Security
Token, and if so, what these distributions are based upon.  Also, disclose whether the
"disclosed offered amount" that investors receive upon the sale of the asset refers to the
amount received for the actual sale of the matured whiskey or a fixed amount specified at
the time the Security Token is purchased by the investor, regardless of the value of the
whiskey upon maturity, or some other amount.  Finally, please disclose what you mean in
your response letter that "in theory," upon the sale of the mature spirits, the token holder
will receive the disclosed offered amount at the end of the maturity period by disclosing

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the reasons why an investor may not receive the the disclosed offered amount at the end of
the maturity period.
19.Refer to your response to comments 4 and 9.  We note your disclosure that on page 22 that
Security Token holders have the right to transfer tokens to their personal wallets off your
platform after the twelve month holding period.  Please tells us how you intend to confirm
that the conditions under Rule 144 of the Securities Act have been satisfied, and how you
will ensure that any transfer of such Security Tokens are done in compliance with the
federal security laws.  In addition, please disclose how SWT performs KYC/AML and any
other compliance background checks prior to the sale or transfer of the Security Tokens.
In addition, please disclose how token holders will be made aware of the end of the
holding period and any actions the holders have to take to permit release of the tokens at
the end of the holding period.  Also disclose the process by which holders of Security
Tokens transfer their tokens.
20.Refer to your response to comments 4 and 9.  Please disclose how you verify and identify
the holder of a Security Token so that the distributions are made to the holder of the
Security Token and whether these distributions are made using crypto assets or fiat
currency.  Additionally, describe what distributions will occur with respect to the Security
Tokens.
21.Refer to your response to comments 4 and 9.  Please identify the crypto assets and fiat
currency that investors may use to purchase the Security Tokens, and please disclose how
SWT determines the value of the crypto assets used to purchase the Security Tokens.  In
addition, please disclose whether SWT intends to monetize the crypto assets it receives as
payments, and, if so, its policies related to exchanging the crypto assets for other crypto
assets or fiat currency.  Also discuss who bears the risk of exchange rate fluctuations, you
or Security Token subscribers, prior to the conversion of crypto assets paid during the
subscription process.
22.Refer to your response to comment 10.  Please expand this section to include a detailed
discussion of the federal and state regulations applicable to your business, whether related
to securities law or otherwise.
23.Refer to your response to comment 11.  Please revise to include the substance of the
response in your offering circular.  In addition, please disclose the level of insurance for
the barrels of Premium American Whiskey underlying the Cask Investment Deed and the
rights and obligations as well as the risks related to the offering and ownership of the
deeds.  Also disclose your policies related to the purchase, sale, storage and valuation of
the whiskey barrels.
24.Refer to your response to comment 12.  Please revise your offering circular to disclose the
number of Cask Investment Deeds and Security Tokens that are outstanding as of the most
practicable date.  In this regard, we note your disclosure in your response letter that as of
November 4, 2022 you had 400 Cask Investment Deed outstanding and no Security
Tokens outstanding.  Please disclose the maturity dates of the outstanding Cask

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Investment Deeds.  In addition, your disclosure in your offering circular that "SWT has
only created one securitized token in tandem with a spirits offering under Regulation D"
appears to be inconsistent with your response that no Security Tokens are outstanding.
Please revise the disclosure in your offering circular for clarity.
25.Please file, and disclose the material terms, of all material contracts with third-party
contractors or organizations that allow you or your subsidiaries to maintain your Ethereum
based token platform and Securitized Tokens monitoring program, as referenced on page
17.
26.You state that "lost Security Tokens occurring off our platform are not retrievable."
Please disclose what will happen to any payments, distributions, or "offered amount" you
send to Security Token holders, and where those payments will go, if a Security Token is
lost.
27.Explain how Each Security Token can hold the same value while also be linked to an
individual "applicable barrel."  Explain, for example, how all Security Tokens will have
the same value if a barrel linked to a particular Security Token is lost, contaminated,
damaged, or destroyed.
28.To the extent material, discuss how the bankruptcies of cer