Bonk, Inc 10-Q/A for FY2023 Q3
Bonk, Inc. (BNKK)
About this 10-Q/A
Bonk, Inc filed this 10-Q/A on January 5, 2024, covering the quarter ended September 30, 2023 (FY2023 Q3).
Headline figures
Quarter ended September 30, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $11.88K
- down 86.1% from $85.47K a year earlier
- Net loss
- $7.74M
- compared with a net loss of $2.33M a year earlier
- Diluted EPS
- -$0.26
- compared with -$0.10 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
(Amendment No. 1)
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the quarterly period ended
or
| TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _____________to__________________
Commission
File Number
(Exact name of registrant as specified in charter)
(Formerly
known as
| (State or other jurisdiction | (IRS Employer | |
| of incorporation or organization) | Identification No.) | |
| (Address of principal executive offices) | (Zip Code) |
(Registrant’s telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of exchange on which registered | ||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ ☐ NO
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be pursuant to Rule 405 of Regulation S- T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ ☐ NO
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) ☐ YES ☒
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
As of November 13, 2023, there were shares of the registrant’s common stock outstanding.
Explanatory Note
Background of Reclassification
Through a series of exchange agreements ( collectively the “Exchange Agreement”) that the Company entered into with SRM Entertainment Limited with respect to the separation of the business of SRM Ltd from the Company which separation closed on August 14, 2023 (the “Separation Date”). Pursuant to the Exchange Agreement, SRM issued to the Company 6,500,000 shares of SRM Common Stock (the “Exchange Shares”), representing 79.3% of SRM’s outstanding shares of Common Stock, in exchange for 2 ordinary shares of SRM Ltd owned by the Company (representing all of the issued and outstanding ordinary shares of SRM Ltd). On August 14, 2023, SRM completed its Initial Public Offering (“IPO”), pursuant to which it sold 1,250,000 shares of its common stock at a price of $5.00 per share. In connection with the Share Exchange and SRM’s IPO, the Company distributed 2,000,000 shares of the 6,500,000 Exchange Shares to the Company’s stockholders and certain warrant holders (the “Distribution”). The Distribution occurred on the effective date of the Registration Statement but prior to the closing of the IPO. Following the Distribution, the Company owns 4,500,000 of the 9,450,000 shares of SRM’s outstanding common stock. As a result, SRM is no longer consolidated and is now accounted for using the equity method of accounting.
The financial statements included herein for the period immediately preceding the effective date of the Share Exchange have been reclassified to reflect the respective SRM Ltd assets and liabilities as being held for sale and the operations of SRM Ltd are reflected as discontinued operations.
FORM 10-Q
TABLE OF CONTENTS
| PART I - FINANCIAL INFORMATION | ||
| Item 1. | Financial Statements | F-1 |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 2 |
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 9 |
| Item 4. | Controls and Procedures | 9 |
| PART II - OTHER INFORMATION | 10 | |
| Item 1. | Legal Proceedings | 10 |
| Item 1A. | Risk Factors | 10 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 10 |
| Item 3. | Defaults Upon Senior Securities | 10 |
| Item 4. | Mine Safety Disclosures | 10 |
| Item 5. | Other Information | 10 |
| Item 6. | Exhibits | 11 |
| SIGNATURES | 12 | |
PART I - FINANCIAL INFORMATION
This Quarterly Report on Form 10-Q includes the accounts of Safety Shot, Inc., a Delaware corporation (“Safety Shot”). References in this Report to “we”, “our”, “us” or the “Company” refer to Safety Shot, Inc. and its consolidated subsidiaries unless the context dictates otherwise.
FORWARD LOOKING STATEMENTS
Certain statements in this report, including information incorporated by reference, are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995, as amended. Forward-looking statements reflect current views about future events and financial performance based on certain assumptions. They include opinions, forecasts, intentions, plans, goals, projections, guidance, expectations, beliefs or other statements that are not statements of historical fact. Words such as “will,” “may,” “should,” “could,” “would,” “expects,” “plans,” “believes,” “anticipates,” “intends,” “estimates,” “approximates,” “predicts,” “forecasts,” “potential,” “continue,” or “projects,” or the negative or other variation of such words, and similar expressions may identify a statement as a forward-looking statement. Any statements that refer to projections of our future financial performance, our anticipated growth and trends in our businesses, our goals, strategies, focus and plans, and other characterizations of future events or circumstances, including statements expressing general optimism about future operating results and the development of our products, are forward-looking statements.
Although forward-looking statements in this Quarterly Report on Form 10-Q reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by us. Consequently, forward-looking statements are inherently subject to risks and uncertainties and actual results and outcomes may differ materially from the results and outcomes discussed in or anticipated by the forward-looking statements. Factors that could cause or contribute to such differences in results and outcomes include, without limitation, those specifically addressed under the heading “Risk Factors” below, as well as those discussed elsewhere in this Quarterly Report on Form 10-Q. Readers are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this Quarterly Report on Form 10-Q. We file reports with the Securities and Exchange Commission (“SEC”). The public can read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. You can obtain additional information about the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains an Internet site (www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, including us.
| 1 |
Item 1. Financial Statements
Safety Shot, Inc.
| F-1 |
Safety Shot, Inc.
(Formerly known as Jupiter Wellness, Inc.)
Condensed Consolidated Balance Sheets
As of September 30, 2023 and December 31, 2022
| Nine months Ended September 30, 2023 (Unaudited) | Year ended December 31, 2022 (Audited) | |||||||
| Assets | ||||||||
| Cash | $ | $ | ||||||
| Marketable Securities | ||||||||
| Inventory | ||||||||
| Account receivable | ||||||||
| Prepaid expenses and deposits | ||||||||
| Investment in affiliates | ||||||||
| Loan receivable from SRM Entertainment Ltd | ||||||||
| Current assets held for sale | | |||||||
| Total current assets | ||||||||
| Long-Term Assets | ||||||||
| Right of use assets | ||||||||
| Intangible assets, net | ||||||||
| Goodwill | ||||||||
| Intellectual property, net | ||||||||
| Fixed assets, net | ||||||||
| Assets held for sale | | |||||||
| Total assets | $ | $ | ||||||
| Liabilities and Shareholders’ Equity | ||||||||
| Accounts Payable | $ | $ | ||||||
| Convertible notes, net of discounts | ||||||||
| Current portion of lease liability | ||||||||
| Accrued interest | ||||||||
| Accrued liabilities | ||||||||
| Covid - 19 SBA Loan | ||||||||
| Current liabilities held for sale | | |||||||
| Total current Liabilities | ||||||||
| Long-term portion lease liability | ||||||||
| Total liabilities | ||||||||
| Shareholders’ Equity | ||||||||
| Preferred stock, $ par value, shares authorized of which are issued and outstanding | ||||||||
| Common stock, $ par value, shares authorized, of which and shares issued and outstanding as of September 30, 2023 and December 31, 2022 | ||||||||
| Additional paid-in capital | ||||||||
| Common stock payable | ||||||||
| Accumulated deficits | ( | ) | ( | ) | ||||
| Total Shareholders’ Equity | ||||||||
| Total Liabilities and Shareholders’ Equity | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited financial statements.
| F-2 |
Safety Shot, Inc.
(Formerly known as Jupiter Wellness, Inc.)
Condensed Consolidated Statement of Operations
For the Three and Nine months Ended September 30, 2023 and 2022
(Unaudited)
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Revenue | ||||||||||||||||
| Sales | $ | $ | $ | $ | ||||||||||||
| Cost of Sales | ||||||||||||||||
| Gross profit (loss) from continuing operations | ( | ) | ( | ) | ||||||||||||
| Operating expense | ||||||||||||||||
| General and administrative expenses | ||||||||||||||||
| Impairment of Promissory Note | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Other income / (expense) | ||||||||||||||||
| Interest income | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income / (expense) | ( | ) | ( | ) | ||||||||||||
| Unrecognized gain / (loss) on equity investment | ( | ) | ( | ) | ||||||||||||
| Total other income (expense) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net (loss) from continuing operations | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Income (loss) from discontinued operations | ( | ) | ( | ) | ||||||||||||
| Net (loss) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net (loss) per share: | ||||||||||||||||
| Basic | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted average number of shares | ||||||||||||||||
| Basic | ||||||||||||||||
The accompanying notes are an integral part of these unaudited financial statements.
| F-3 |
Safety Shot, Inc.
(Formerly known as Jupiter Wellness, Inc.)
Condensed Consolidated Statement of Changes in Shareholders’ Equity
For the Three and Nine months Ended September 30, 2023 and 2022
(Unaudited)
| Shares | Amount | Shares | Amount | Payable | Capital | Deficits | Total | |||||||||||||||||||||||||
| Treasury Shares | Common Stock | Common Stock | Additional Paid-In | Accumulated | ||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Payable | Capital | Deficits | Total | |||||||||||||||||||||||||
| Balance, December 31, 2021 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||||||
| Shares issued for services | - | |||||||||||||||||||||||||||||||
| Treasury shares purchased | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance March 31, 2022 | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Treasury shares purchased | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||
| Treasury shares cancelled | ( | ) | - | ( | ) | |||||||||||||||||||||||||||
| Shares issued in connection with convertible promissory note | - | |||||||||||||||||||||||||||||||
| Fair value of warrants issued and issue discounts with convertible note | - | - | ||||||||||||||||||||||||||||||
| Stock options issued for services | - | - | ||||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance June 30, 2022 | ( | ) | $ | $ | ( | ) | $ | |||||||||||||||||||||||||
| Treasury shares purchased | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||
| Shares issued for services | - | |||||||||||||||||||||||||||||||
| Common Stock to be issued for services | - | - | ||||||||||||||||||||||||||||||
| Management common shares cancelled | - | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance September 30, 2022 | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Balance December 31, 2022 | $ | $ | $ | $ | ) | $ | ||||||||||||||||||||||||||
| Shares issued in Public Offering | - | |||||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance March 31, 2023 | ( | ) | ||||||||||||||||||||||||||||||
Shares issued for services | - | |||||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance June 30, 2023 | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||
| Shares issued for Stock payable | - | ( | ) | |||||||||||||||||||||||||||||
Stock payable for services | - | - | ||||||||||||||||||||||||||||||
| Stock payable for inducement | - | - | ||||||||||||||||||||||||||||||
| Purchase of intangible asset | - | |||||||||||||||||||||||||||||||
| Stock issued for services | - | |||||||||||||||||||||||||||||||
| Warrant conversions | - | |||||||||||||||||||||||||||||||
| Deconsolidation of SRM Entertainment and change to equity method of accounting | - | - | ||||||||||||||||||||||||||||||
| Fair value of price reduction on conversion price for notes and warrants | - | - | ||||||||||||||||||||||||||||||
| Fair value of options granted to employees | - | - | ||||||||||||||||||||||||||||||
| Fair value of warrants granted for services | - | - | ||||||||||||||||||||||||||||||
| Net Loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance September 30, 2023 | ( | ) | ||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited financial statements.
| F-4 |
Safety Shot, Inc.
(Formerly known as Jupiter Wellness, Inc.)
Condensed Consolidated Statement of Cash Flows
For the Nine months Ended September 30, 2023 and 2022
(Unaudited)
| 2023 | 2022 | |||||||
| 2023 | 2022 | |||||||
| Cash flows from continuing operating activities: | ||||||||
| Net (loss) | $ | ( | ) | $ | ( | ) | ||
| Depreciation & Amortization | ||||||||
| Gain on sale of fixed assets | ( | ) | ( | ) | ||||
| Impairment IP | ||||||||
| Fair value of options issued for services | ||||||||
| Fair value of shares issued for services | ||||||||
Fair value of shares issued for inducement | ||||||||
Fair value of warrants issued for services | ||||||||
| Amortization of debt discount | ||||||||
| Amortization of Clinical research agreement | ||||||||
| Loss on extinguishment | ||||||||
| Unrealized gain/loss on equity investment | ||||||||
Realized gain/loss on sale of marketable securities | ( | ) | ||||||
| Unrealized loss on marketable securities | ||||||||
| Bad debt | ||||||||
| Adjustments to reconcile net income to net cash provided by (used in) operating activities | ||||||||
| Prepaid expenses and deposits | ( | ) | ( | ) | ||||
| Right of Entry asset | ||||||||
| Accounts receivable | ( | ) | ||||||
| Inventory | ( | ) | ||||||
| Accounts payable | ( | ) | ( | ) | ||||
| Accrued liabilities | ||||||||
| Lease liability | ( | ) | ( | ) | ||||
| Net cash (used in) continuing operating activities | ( | ) | ( | ) | ||||
| Cash flows from discontinued operating activities: | ||||||||
| Income (loss) from discontinued operations | ( | ) | ||||||
| Reclassification of assets and liabilities to held for sale | ( | ) | ||||||
| Cash provided from discontinued operations | ||||||||
| Cash flows from investing activities: | ||||||||
| Cash paid for purchase of assets | ( | ) | ( | ) | ||||
| Cash paid for research agreement | ( | ) | ||||||
| Cash paid for marketable securities | ( | ) | ||||||
| Cash paid for purchase of fixed assets | ( | ) | ( | ) | ||||
| Cash paid for SRM Inc. | ( | ) | ||||||
Cash received from SRM Ltd. | ||||||||
Cash received for sale of marketable securities | ||||||||
| Net change to value of marketable securities | ||||||||
| Cash paid for investment | ( | ) | ||||||
| Proceeds from sale of assets | ||||||||
| Net cash (used in) investing activities | ( | ) | ||||||
| Cash flows from financing activities: | ||||||||
| Shares issued for cash | ||||||||
| Cash paid for Treasury Stock | ( | ) | ||||||
| Proceeds from Promissory notes | ||||||||
| Loans to affiliates | ( | ) | ||||||
| Borrowings on debt | ||||||||
| Payments on debt | ( | ) | ( | ) | ||||
| Net cash (used in) provided by financing activities | ( | ) | ||||||
| Net (decrease) in cash and cash equivalents | ( | ) | ||||||
| Cash and cash equivalents at the beginning of the period | ||||||||
| Cash and cash equivalents at the end of the period | $ | $ | ||||||
| SUPPLEMENTAL CASH FLOW INFORMATION: | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for income taxes | $ | $ | ||||||
| Non-cash items: | - | |||||||
| Fair value of Warrants issued and beneficial conversion feature in connection with convertible notes | $ | $ | ||||||
| Reclassification of Held to Maturity investments to Marketable Securities | $ | $ | ||||||
| Shares issued from stock payable for services | $ | $ | ||||||
| Shares issued for GBB asset purchase | $ | $ | ||||||
| Reclassification for SRM Ltd deconsolidation | $ | $ | ||||||
| Common stock issued in connection with promissory notes | $ | $ | ||||||
| Treasury shares cancelled | $ | $ | ||||||
| Cancellation of shares issued to management | $ | |||||||
The accompanying notes are an integral part of these unaudited financial statements.
| F-5 |
Safety Shot, Inc.
(Formerly known as Jupiter Wellness, Inc.)
Notes to Financial Statements
For the Nine months Ended September 30, 2023 and Year Ended December 31, 2022
(Unaudited)
Note 1 – Organization and Business Operations
Safety Shot Inc. (NASDAQ: SHOT) was formerly known as Jupiter Wellness Inc. In August 2023 the Company acquired certain assets of GBB Drink Lab Inc which included the blood alcohol detox drink Safety Shot, an over-the-counter drink that can lower blood alcohol content to allow recovery from the effects of alcohol at a rate faster than would occur normally. Concurrently with the purchase, the Company changed its name to Safety Shot, Inc. and changed its NASDAQ trading symbol to SHOT. The Company launched Safety Shot in December 2023.
Safety Shot has a well-established clinical development infrastructure and fits within the Company’s existing over-the-counter and prescription-grade health and wellness products. The Company will continue its current products line as an operating division and is committed to supporting health and wellness by developing innovative solutions to a range of conditions. We take pride in our research and development of over-the-counter (OTC) products and intellectual property, which aim to address some of the most prevalent health and wellness concerns today. Our product pipeline includes a diverse range of products, such as hair loss treatments, eczema creams, vitiligo solutions, and sexual wellness products, that cater to different health and wellness needs. We are dedicated to staying up-to-date with the latest scientific research and technology, ensuring that our products are effective, safe, and meet the highest industry standards.
To achieve our mission, we rely on a team of highly skilled and experienced professionals who are committed to advancing our vision of health and wellness. Our team includes scientists, researchers, product developers, and business experts who collaborate to create new products and enhance existing ones. We also partner with industry leaders and organizations to leverage the latest technologies and expand our reach.
We generate revenue through various channels, including the sales of our OTC and consumer products, as well as licensing royalties. Our products are available through various retailers and e-commerce platforms, making them accessible to a broad customer base. Additionally, we collaborate with other companies to license our intellectual property, creating additional revenue streams and expanding our global presence.
Going Concern Consideration
As
of September 30, 2023 and December 31, 2022, the Company had an accumulated deficits of $
Note 2 – Significant Accounting Policies Basis of Presentation
The accompanying consolidated financial statements are presented in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of US Securities and Exchange Commission (“SEC”). The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Jupiter Wellness, Inc., a Florida corporation, and Jupiter Wellness Investments, Inc., a Florida corporation at September 30. 2023 and December 31, 2022 and for the three and nine months ended September 30, 2023 and 2022. All intercompany accounts and transactions have been eliminated. The Company adopted the FASB Accounting Standards Update No. 2014-08 Discontinued Operations requiring entities to reclassify assets and liabilities of a discontinued operation for all comparative periods presented in the statement of financial position. Effective August 14, 2023, the Company sold SRM Entertainment Ltd, (“SRM”) a previously wholly owned subsidiary. Financial statements preceding the effective date of the sale have been reclassified to reflect the respective SRM assets and liabilities as being held for sale and the operations of SRM are reflected a discontinued operation.
Debt Extinguishment and Modification
Any changes or modification to debt instruments must be examined to determine if the modification has any significant effect. If the changes or modifications are material, the change or modification must be accounted for as an extinguishment. If determined to be an extinguishment, the change or modification to the original debt is derecognized and a new debt is recognized. Any difference in the fair value is recognized as a gain or loss on extinguishment.
Deconsolidation
The Company will use Deconsolidation Accounting upon
the loss of control of a subsidiary determined to be less than
Discontinued Operations
The Company adopted the FASB Accounting Standards Update No. 2014-08 Discontinued Operations requiring entities to reclassify assets and liabilities of a discontinued operation for all comparative periods presented in the statement of financial position. Effective August 14, 2023, the Company sold SRM Entertainment Ltd, (“SRM”) a wholly owned subsidiary. Financial statements preceding the effective date of the sale have been reclassified to reflect the respective SRM assets and liabilities as being held for sale and the operations of SRM are reflected a discontinued operation.
Equity Method for Investments
Investments in unconsolidated affiliates, which the Company exerts significant influence but does not control or otherwise consolidate, are accounted for using the equity method. Equity method investments are initially recorded at cost. These investments are included in investment in joint ventures in the accompanying consolidated balance sheets. The Company’s share of the profits and losses from these investments is reported in loss from equity method joint venture in the accompanying consolidated statements of operations. The Company monitors its investments for other-than-temporary impairment by considering factors such as current economic and market conditions and the operating performance of the investees and records reductions in carrying values when necessary.
Asset Purchases
The Company accounts for an acquisitive transaction determined to be an asset purchase based on the cost accumulation and allocation method, under which the costs to purchase the asset or set of assets are allocated to the assets acquired. No goodwill is recorded in connection with an asset purchase.
Investments in Marketable Securities
The Company’s Marketable Securities are considered Held-For-Trading (“HFT”) or Trading Assets. HTF- Trading securities are valued at their fair value when purchased/sold, and any unrealized gains or losses are recorded periodically on financial reporting dates as other income or loss.
Emerging Growth Company Status
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended, (the “Securities Act”), as modified by the Jumpstart our Business Startups Act of 2012, (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
| F-6 |
Use of Estimates
The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
The
Company considers all short-term investments with a maturity of three months or less when purchased to be cash and equivalents for purposes
of the statement of cash flows. There were
Inventory
Inventories
are stated at the lower of cost or market. The Company periodically reviews the value of items in inventory and provides write-downs
or write- offs of inventory based on its assessment of market conditions. Write-downs and write-offs are charged to cost of goods
sold. Inventory is based upon the average cost method of accounting. During the Nine months ended September 30, 2023, the Company
had expired inventory write-downs of $
Investments Held-to-Maturity
Investments that the Company’s management has the “positive intent and ability” to hold through maturity are classified and accounted for as hold-to- maturity investments (“HTM”). HTM investments are carried at amortized cost in the financial statements. For investments classified as HTM, no unrealized gains and losses will be recognized in financial statements.
Assets and liabilities Held for Sale
On December 9, 2022, The Company entered into a stock exchange agreement (the “Exchange Agreement”) with
SRM Entertainment, Inc. (“SRM”) to govern the separation of SRM from the Company. On May 26, 2023, we amended and restated
the Exchange Agreement (the “Amended and Restated Exchange Agreement”) to include additional information regarding the distribution
and the separation of SRM the Company. The separation as set forth in the Amended and Restated Exchange Agreement with Jupiter closed
August 14, 2023. Pursuant to the Amended and Restated Exchange Agreement, on May 31, 2023, SRM issued to the Company shares
of SRM Common Stock (representing
The Company has reclassified all of the assets and liabilities of SRM held prior to the to the Share Exchange as assets and liabilities held for sale.
At September 30, 2023, the Company had no assets or liabilities held for
sale. At December 31, 2022, the Company had current assets held for sale totaling $
The following table presents the major classes of assets and liabilities of discontinued operations reported in the consolidated balance sheets:
Schedule of Assets and Liabilities of Discontinued Operations
| September 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Cash | $ | $ | ||||||
| Inventory | ||||||||
| Account receivable | ||||||||
| Prepaid expenses and deposits | ||||||||
| Investment in Affiliate | ||||||||
| Loan to SRM | ( | ) | ||||||
| Total current asset held for sale | ||||||||
| Intangible assets | ||||||||
| Goodwill | ||||||||
| FF&E | ||||||||
| Assets held for sale | ||||||||
| Total assets | $ | $ | ||||||
| Accounts Payable | $ | $ | ||||||
| Accrued liabilities | ||||||||
| Total current Liabilities | $ | $ | ||||||
The following table presents the components of discontinued operations reported in the consolidated statements of operations:
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Three months ended September 30 | Nine months ended September 30 | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Sales | $ | $ | $ | $ | ||||||||||||
| Cost of Sales | ||||||||||||||||
| Gross profit | ||||||||||||||||
| Operating expense | ||||||||||||||||
| Other (income) expense | ||||||||||||||||
| Total expenses | ||||||||||||||||
| Net income (loss) from discontinued operations | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
Trading Securities
Securities that the Company intends to sell are classified as trading securities. Trading securities are carried at fair value with gains and losses recognized in current period earnings.
Net income (loss) per common share is computed pursuant to section 260-10-45 of the FASB Accounting Standards Codification. Basic net income (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period. If applicable, diluted earnings per share assume the conversion, exercise or issuance of all common stock instruments such as options, warrants, convertible securities and preferred stock, unless the effect is to reduce a loss or increase earnings per share. As such, options, warrants, convertible securities, and preferred stock are not considered in the calculations, as the impact of the potential common shares would be to decrease the loss per share.
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| For the Three Months Ended September 30, | For the Nine months Ended September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Numerator: | ||||||||||||||||
| Net (loss) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Denominator: | ||||||||||||||||
| Denominator for basic earnings per share – Weighted- average common shares issued and outstanding during the period | ||||||||||||||||
| Denominator for diluted earnings per share | ||||||||||||||||
| Basic (loss) per share | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Diluted (loss) per share | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| F-7 |
Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value Measurements and Disclosures,” approximates the carrying amounts represented in the accompanying balance sheet, primarily due to their short-term nature.
Revenue Recognition
The Company generates its revenue from the sale of its products directly to the end user or through a distributor (collectively the “customers”).
The Company recognizes revenues by applying the following steps in accordance with FASB Accounting Standards Codification 606 “Revenue from Contracts with Customers” (“ASC 606”). Under ASC 606, revenues are recognized when control of the promised goods or services are transferred to a customer, in an amount that reflects the consideration that the Company expects to receive in exchange for those goods or services. The Company applies the following five steps in order to determine the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its agreements:
| ● | identify the contract with a customer; | |
| ● | identify the performance obligations in the contract; | |
| ● | determine the transaction price; | |
| ● | allocate the transaction price to performance obligations in the contract; and |
The Company’s performance obligations are satisfied when goods or products are shipped on a FOB shipping point basis as title passes when shipped. Our products are generally paid in advance of shipment or standard net 30 days and we offer no specific right of return, refund or warranty related to our products except for cases of defective products of which there have been none to date.
Accounts Receivable and Credit Risk
Accounts receivable are generated from sales of the Company’s products. The Company provides an allowance for doubtful collections, which is based upon a review of outstanding receivables, historical collection information, and existing economic conditions. During the Nine months ended September 30, 2023 and year ended December 31, 2022, the Company recognized allowance for doubtful collections.
Impairment of Long-Lived Assets
We evaluate long-lived assets (including intangible assets) for impairment whenever events or changes in circumstances indicate that the carrying amount of a long-lived asset may not be recoverable. An asset is considered impaired if its carrying amount exceeds the undiscounted future net cash flow the asset is expected to generate.
Goodwill and Intangible Assets
Goodwill is tested for impairment at a minimum on an annual basis. Goodwill is tested for impairment at the reporting unit level by first performing a qualitative assessment to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying value. If the reporting unit does not pass the qualitative assessment, then the reporting unit’s carrying value is compared to its fair value. The fair values of the reporting units are estimated using market and discounted cash flow approaches. Goodwill is considered impaired if the carrying value of the reporting unit exceeds its fair value. The discounted cash flow approach uses expected future operating results. Failure to achieve these expected results may cause a future impairment of goodwill at the reporting unit.
We
conducted an evaluation of our goodwill as of December 31, 2022 and there was
Intangible assets consist of patents and trademarks, purchased customer contracts, purchased customer and merchant relationships, purchased trade names, purchased technology, and non-compete agreements. Intangible assets are amortized over the period of estimated benefit using the straight-line method and estimated useful lives ranging from one to twenty years. No significant residual value is estimated for intangible assets. We evaluate long-lived assets (including intangible assets) for impairment whenever events or changes in circumstances indicate that the carrying amount of a long-lived asset may not be recoverable. An asset is considered impaired if its carrying amount exceeds the undiscounted future net cash flow the asset is expected to generate.
The
Company’s evaluation of its long-lived assets resulted in an impairment expense of $
Foreign Currency Translation
Assets and liabilities in foreign currencies are translated using the exchange rate at the balance sheet date, while revenue and expense accounts are translated at the average exchange rates prevailing during the period. Equity accounts are translated at historical exchange rates. Cumulative gains and losses from foreign currency transactions and translation for the Nine months September 30, 2023 and the year ended December 31, 2022 were not material.
Research and Development
The
Company accounts for research and development costs in accordance with the Accounting Standards Codification subtopic 730-10, Research
and Development (“ASC 730-10”). Under ASC 730-10, all research and development costs must be charged to expense as incurred.
Accordingly, internal research and development costs are expensed as incurred. Third-party research and developments costs are expensed
when the contracted work has been performed or as milestone results have been achieved. Company-sponsored research and development costs
related to both present and future products are expensed in the period incurred. The Company incurred research and development expenses
of $
Stock Based Compensation
The Company recognizes compensation costs to employees under FASB Accounting Standards Codification 718 “Compensation – Stock Compensation” (“ASC 718”). Under ASC 718, companies are required to measure the compensation costs of share-based compensation arrangements based on the grant- date fair value and recognize the costs in the financial statements over the period during which employees are required to provide services. Share based compensation arrangements include stock options and warrants. As such, compensation cost is measured on the date of grant at their fair value. Such compensation amounts, if any, are amortized over the respective vesting periods of the option grant.
On October 24, 2018, the inception date, the Company adopted ASU No. 2018-07 “Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting.” These amendments expand the scope of Topic 718, Compensation – Stock Compensation (which currently only includes share-based payments to employees) to include share-based payments issued to non-employees for goods or services. Consequently, the accounting for share-based payments to nonemployees and employees will be substantially aligned.
| F-8 |
Income Taxes
The Company accounts for income taxes under ASC 740 Income Taxes (“ASC 740”). ASC 740 requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the financial statement and tax basis of assets and liabilities and for the expected future tax benefit to be derived from tax loss and tax credit carry forwards. ASC 740 additionally requires a valuation allowance to be established when it is more likely than not that all or a portion of deferred tax assets will not be realized.
ASC 740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim period, disclosure and transition. Based on the Company’s evaluation, it has been concluded that there are no significant uncertain tax positions requiring recognition in the Company’s financial statements. Since the Company was incorporated on October 24, 2018, the evaluation was performed for 2018 tax year which would be the only period subject to examination. The Company believes that its income tax positions and deductions would be sustained on audit and does not anticipate any adjustments that would result in a material changes to its financial position. The Company’s policy for recording interest and penalties associated with audits is to record such items as a component of income tax expense.
The
Company’s deferred tax asset at December 31, 2022 consists of net operating loss carry forwards calculated using federal and state
effective tax rates equating to approximately $
Related parties
The Company follows subtopic 850-10 of the FASB Accounting Standards Codification for the identification of related parties and disclosure of related party transactions.
Pursuant to Section 850-10-20 the related parties include a. affiliates of the Company; b. entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section 825–10–15, to be accounted for by the equity method by the investing entity; c. trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management; d. principal owners of the Company; e. management of the Company; f. other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g. other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.
The consolidated financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated or combined financial statements is not required in those statements. The disclosures shall include: a. the nature of the relationship(s) involved; b. a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; c. the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and d. amounts due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.
Reclassifications
Certain current and prior period balances have been adjusted to reflect current period presentation.
Recent Accounting Pronouncements
In June 2018, the FASB issued ASU 2018-07, which simplifies the accounting for non-employee share-based payment transactions. The amendments specify that Topic 718 applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards. The standard will be effective for us in the first quarter of our fiscal year 2020, although early adoption is permitted (but no sooner than the adoption of Topic 606). The Company has adopted this standard beginning January 1, 2019. The adoption of this standard has not had a significant impact on the Company’s results of operations, financial condition, cash flows, and financial statement disclosures.
In February 2016, Topic 842, “Leases” was issued to replace the leases requirements in Topic 840, “Leases”. The main difference between previous GAAP and Topic 842 is the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous GAAP. A lessee should recognize in the balance sheet a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. If a lessee makes this election, it should recognize lease expense for such leases generally on a straight-line basis over the lease term. The accounting applied by a lessor is largely unchanged from that applied under previous GAAP. Topic 842 will be effective for annual reporting periods beginning after December 15, 2018, including interim periods within those annual periods and is to be retrospectively applied. The Company has adopted this standard beginning January 1, 2019. The adoption of this standard has not had a significant impact on the Company’s results of operations, financial condition, cash flows, and financial statement disclosures.
Note 3 – Accounts Receivable
At
September 30, 2023 and December 31, 2022, the Company had accounts receivable of $
Note 4 – Prepaid Expenses and Deposits
At
September 30, 2023 and December 31, 2022, the Company had prepaid expenses and deposits of
$
Note 5 – Inventory
At
September 30, 2023 and December 31, 2022, the Company had inventory of $
| F-9 |
Note 6 – Marketable Securities, Investment in and Loans to Affiliates
At
December 31, 2022, the Company had invested $
JWAC filed a Current Report on Form 8-K filed with the Securities Exchange Commission on May 2, 2023. JWAC’s stockholders approved JWAC’s business combination with Chijet Inc. and its affiliates including Chijet Motor Company Inc. (collectively “Chijet”), at its Special Meeting of Stockholders held on May 2, 2023 and closed the transaction on June 1, 2023. As a result, on June 27, 2023, the Company received a total of shares of restricted common stock of Chijet (Nasdaq: CJET) in exchange for its Loans. In August 2023, the Company receive additional shares ChiJet due to downside protection clauses in the business combination agreements.
In
May 2023, the Company purchased
shares of JWAC (now Chijet) common stock for $
During
the nine months ended September 30, 2023 the Company sold ChiJet shares for a realized gain of $
At
September 30, 2023 the Company, the Company held
In
connection with the Chijet transaction, our CEO Brian John is “entitled to a twenty percent (20%) bonus based on the net profits
realized from any investment made by the Company.” At June 30, 2023 the Company had recorded a contingent liability of $
On December 9, 2022, The Company
entered into a stock exchange agreement (the “Exchange Agreement”) with SRM Entertainment, Inc. (“SRM”) to govern
the separation of SRM from the Company. On May 26, 2023, we amended and restated the Exchange Agreement (the “Amended and Restated
Exchange Agreement”) to include additional information regarding the distribution and the separation of SRM the Company. The separation
as set forth in the Amended and Restated Exchange Agreement with Jupiter closed August 14, 2023. Pursuant to the Amended and Restated
Exchange Agreement, on May 31, 2023, SRM issued to the Company shares of SRM Common Stock (representing
At December 31, 2022, the Company had an outstanding
unsecured, non-interest bearing loan receivable balance of $
At
December 31, 2022, the Company had loans totaling $
Note 7 – Note Receivable
On
December 8, 2021, the Company issued a Secured Promissory Note (the “Note”) in the amount of $
In
February 2022, NFP terminated the SPA and in March 2022, the Company issued a Notice of Default on the NFP Note. As a result, the Company has determined that the Notes have been impaired and has taken an impairment charge of $
Note 8 – Intangible Assets
SRM Entertainment
In connection with the acquisition of SRM Entertainment, Limited (“SRM Ltd), the Company allocated the purchase price to intangible assets as follows:
Schedule of Purchase Price to Intangible Assets
| Distribution Agreements | $ | |||
| Goodwill | ||||
| Total | $ |
The
Distribution Agreements have an estimated life of
Effective
August 14, 2023 the Company spun-off
Summary of deconsolidation loss:
Schedule of Deconsolidation and Equity
| Goodwill and Intangibles | $ | |||
| Net assets of SRM Ltd at deconsolidation | ||||
| Equity of SRM Ltd | ||||
| Effect of deconsolidation | ||||
| Fair value of Consideration | ( | ) | ||
| Loss on deconsolidation | $ | ( | ) |
Summary of Changes to Equity Method Investment
Summary of Asset Value
| Fair value of Consideration | $ | |||
| Equity in SRM losses | ( | ) | ||
| Balance | $ |
| F-10 |
Licensing agreements
During
the year ended December 31, 2021, the Company entered into two licensing agreements for the rights to use certain patented
technologies. The Company paid a total of $
Clinical Research Agreement
During
the year ended December 31, 2022, the Company entered into a Clinical Research Agreement to research new treatments for post
COVID-19 syndrome and symptoms and other projects which include treatments for respiratory diseases (such as influenza), herpes,
eczema, and other skin indications. As of December 31, 2022, the Company had paid $
Safety Shot Acquisition
In August 2023 the Company acquired certain assets
of GBB Drink Lab Inc (“GBB”) which included the patents for a blood alcohol detox drink Safety Shot, an over-the-counter
drink that can lower blood alcohol content to allow recovery from the effects of alcohol at a rate faster than would occur normally.
The purchase price was shares of the Company’s restricted common stock, valued at $
The patents will be amortized over twelve years (the
remaining 12 year life of the patents). During the nine months ended September 30, 2023, the Company recognized $
Summary of transaction and carrying value:
Summary of Transaction and Carrying Value
| Purchase price: | Allocation of Purchase price: | |||||||||
| Cash | $ | Patents | $ | |||||||
| Fair value of stock issued | Amortization | ( | ) | |||||||
| Balance | $ | Balance | $ | |||||||
Note 9 – Accrued Interest and Other Accrued Liabilities
At
September 30, 2023 and December 31, 2022, the Company had accrued interest on the convertible notes below of $
At
September 30, 2023 and December 31, 2022, the Company had accrued liabilities totalling $
Note 10 – Convertible Notes Payable – Related Parties
On
April 20, 2022, the Company entered into a $
The
Notes have an original issuance discount of five percent (
The
fair value of origination shares and warrants issued in connection with the 2022 Note totals $
The following table sets forth a summary of the principal balances of the Company’s convertible promissory notes activity for the year and three months ended September 30, 2023:
Schedule of Convertible promissory Notes
| Principal Balance, December 31, 2021 | $ | |||
| The Notes | ||||
| Principal Balance, September 30, 2023 and December 31, 2022 | $ |
Interest
expense for the Nine months ended September 30, 2023 on the Notes totals $
During
the nine months ended September 30, 2023, the Notes were amended to change the conversion price of the Notes and exercise price of
all outstanding warrants was reduced to $
Note 11 – Covid-19 SBA Loans
During
the year ended December 31, 2020, the Company applied for and received $
| F-11 |
Note 12 – Capital Structure
Common Stock – The Company is authorized to issue a total of shares of common stock with par value of $and shares of preferred stock with par value of $. As of September 30, 2023 and December 31, 2022, there were and shares of common stock issued and outstanding, respectively, and shares of preferred stock were issued and outstanding.
Year ended December 31, 2022 issuances
Treasury Shares Purchased
In
November 2021, the Company engaged Oppenheimer & Co. to repurchase shares of the Company’s common stock from the public market.
During the year ended December 31, 2022, the Company purchased shares of its common stock for $
Share and warrants issued in connection with convertible debt
During
the year ended December 31, 2022, The Company issued shares (the “Origination Shares”) in connection with the issuance
of two convertible promissory notes (see Note 10 – Convertible Notes Payable) with a total face value of $
Shares issued for services
During the year ended December 31, 2022, the Company entered into six Consulting Agreements under the terms of which the Company issued shares of its common stock. The shares were issued at their respective fair value based on the Company’s Nasdaq closing price of the shares on the date of the agreements. The Company recognized a total of $ as stock-based compensation in the year ended December 31, 2022 in connection with these issuances. As of December 31, 2022, the Company had not issued of these shares which are included in common stock payable.
Management return and cancellation of shares
On
September 28, 2022, the Company received a letter from Nasdaq stating that, because the Company made certain share issuances outside
of a shareholder approved equity compensation plan, Nasdaq had determined that the Company did not comply with Listing Rule 563(I).
On July 26, 2022,
Nine months ended September 30, 2023 issuances:
Shares issued in Public Offering
Concurrently
to the PIPE Agreement and Offering of Stock Warrants (see Note 13 below), the Company entered into a Securities Purchase Agreement (the
“RD Agreement”) with certain purchasers, pursuant to which on January 23, 2023, shares of common stock, par value
$ (the “Common Stock”), at a price of $ per share were issued to the purchasers (the “RD Offering”).
The Common Stock was issued pursuant to a Registration Statement on Form S-3 filed by the Company with the Securities and Exchange Commission
(the “Commission”) on September 28, 2022 (File No. 333- 267644) and declared effective on November 9, 2022. The aggregate
gross proceeds to the Company from both the PIPE Offering and the RD Offering were approximately $
Shares issued for services
During the Nine months ended September 30, 2023, the Company entered into Consulting Agreements under the terms of which the Company granted shares of its common stock. The shares were issued at their respective fair value based on the Company’s Nasdaq closing price of the shares on the date of the issuance of the shares. The Company recognized $ as stock-based compensation in the Nine months ended September 30, 2023 in connection with this issuances. As of December 31, 2022, the Company had not issued of these shares which are included in common stock payable.
Shares issued for stock payable
During the Nine months ended September 30, 2023, the Company issued shares which were included in Common Stock Payable at December 31, 2022.
Shares issued for purchase of assets
In July 2023, the Company entered into an Asset Purchase Agreement for the purchase of intellectual property relating to Safety Shot (see Note 8). The purchase price included the issuance of shares of the Company’s restricted common stock.
Shares issued for exercise of warrants related to promissory notes
In
August 2023, the Company issued a total of shares upon exercise of warrants related to the Promissory Notes described in
Note 10. The Company received $
Shares issued for purchase of warrants related to the Pipe transaction
In August and September 2023, the certain holders of warrants related to the PIPE transaction above, exercised a portion of their warrant holdings and the Company issued a total shares of its common stock upon exercise. The Company received $ for the exercise.
The following table sets forth the issuances of the Company’s shares of common stock for the year and Nine months ended September 30, 2023 as follows:
Schedule of Stock Holders
| Balance December 31, 2021 | ||||
| Public offering | ||||
| Shares issued for stock payable | ||||
| Shares issued for services | ||||
| Loan origination shares for promissory note | ||||
| Shares repurchased from the market | ( | ) | ||
| Management shares cancelled | ( | ) | ||
| Balance December 31, 2022 | ||||
| Public offering | ||||
| Shares issued for stock payable | ||||
| Shares issued for services | ||||
| Stock issued for asset purchase | ||||
| Stock issued for conversion of warrants related to Notes | ||||
| Stock issued for conversion of warrants related to PIPE | ||||
| Balance September 30, 2023 |
| F-12 |
Common Stock Payable
During
the year ended 2021, the Company entered into two consulting agreement which call for a cash component and a stock component and during
the year ended December 31, 2022, the Company entered into another consulting agreement which called for a cash component and a stock
component. At December 31, 2022, the Company had accrued a total of $
During the nine months ended September 30, 2023, the Company issued
shares for valued at $
Warrants
Convertible
Note Warrants: During the years ended December 31, 2022 and 2021, the Company issued a total of
Reporting Date | Relative Fair Value | Term (Years) | Exercise Price | Market Price on Grant Date | Volatility Percentage | Risk-free Rate | ||||||||||||||||||
| to | $ | $ | - | - | % | |||||||||||||||||||
| $ | $ | $ | % | |||||||||||||||||||||
| $ | $ | | $ | | | % | | |||||||||||||||||
PIPE
Warrants: On January 19, 2023, in a private placement, the Company entered into a Securities Purchase Agreement (the “PIPE
Agreement”) with certain purchasers, for the issuance of
Reporting Date | Relative Fair Value | Term (Years) | Exercise Price | Market Price on Grant Date | Volatility Percentage | Risk-free Rate | ||||||||||||||||||
| $ | $ | $ | | | % | |||||||||||||||||||
| $ | $ | | $ | % | | |||||||||||||||||||
During
the nine months ended September 30, 2023, the Company entered into three Investor Relations Consulting Agreements under the terms of
which the Company issued
Reporting Date | Relative Fair Value | Term (Years) | Exercise Price | Market Price on Grant Date | Volatility Percentage | Risk-free Rate | ||||||||||||||||||
| - | $ | $ | - | $ | - | | % | - | ||||||||||||||||
The following tables summarize all warrants outstanding as of September 30, 2023 and December 31, 2022, and the related changes during the period.
Exercise price is the weighted average for the respective warrants and end of period.
Summary of Warrant Outstanding
Number of Warrants | Exercise Price | |||||||
| Balance at December 31, 2021 | $ | |||||||
| Warrants issued in connection with Convertible Notes | ||||||||
| Warrants issued in connection with Convertible Notes | ||||||||
| Balance at December 31, 2022 | $ | |||||||
| Warrants issued in Public Offering | ||||||||
| Warrants issued for services | ||||||||
| Warrants exercised in connection with Convertible notes | ( | ) | ||||||
| Warrants exercised in connection with PIPE | ( | ) | ||||||
| Balance at September 30, 2023 | $ | |||||||
| Warrants Exercisable at September 30, 2022 | $ | |||||||
Stock Options
In 2022, the Company issued a total of options with an exercise price between $ and $ each with a five-year term to its Officers, Directors, and employees. The Company recorded an expense of $ in connection with the Officers’, Directors’, and employees’ issuance.
During the nine months ended September 30, 2022, the Company entered into an Investor Relations and other Consulting Agreement under the terms of which the Company issued two-year options, immediately vested, with an exercise price of $. The Company recorded an expense of $ in connection with this issuance.
Schedule of Fair Value Using Black Scholes Method
| Reporting Date | Number of Options | Term (Years) | Exercise Price | Grant Date | Market Price on Volatility Percentage | Fair Value | ||||||||||||||||||
| $ | $ | % | $ | |||||||||||||||||||||
| $ | – | $ | % | $ | ||||||||||||||||||||
During the nine months ended September 30, 2023, the Company entered into four employment and director agreements under the terms of which the Company issued -year options, with quarterly vesting, with an exercise price between $ and $ and three-year options, immediately vesting with an exercise price of $. The total fair value of the options $. The fair value of the options is being amortized over the vesting period. The Company recognized expense for the nine months ended September 30, 2023.
The fair value of these warrants was measured using the Black-Scholes valuation model at the grant date. The table below sets forth the assumptions for Black-Scholes valuation model on the respective reporting date.
| Reporting Date | Number of Options | Term (Years) | Exercise Price | Grant Date | Market Price on Volatility Percentage | Fair Value | ||||||||||||||||||
| – | - | $ | - | $ | - | - | % | $ | ||||||||||||||||
At September 30, 2023 the Company had options outstanding.
| F-13 |
Note 14 – Commitments and Contingencies
The Company entered into a new office lease Effective July 1, 2021. The primary term of the lease is five years with one renewal option for an additional three years. Minimum annual lease payments for the primary term and one renewal are as follows:
Schedule of Minimum Annual Lease Payments
| Primary Period | Amount | Amount During Renewal Period | Amount | |||||||
| July 1 to June 30, 2022 | $ | July 1 to June 30, 2027 | $ | |||||||
| July 1 to June 30, 2023 | $ | July 1 to June 30, 2028 | $ | |||||||
| July 1 to June 30, 2024 | $ | July 1 to June 30, 2029 | $ | |||||||
| July 1 to June 30, 2025 | $ | |||||||||
| July 1 to June 30, 2026 | $ | |||||||||
Under
the new standard for lease reporting, the Company recorded a Right of Use Asset (“ROU”) and an offsetting lease
liability of $
Additionally,
the Company recognized accreted interest expense of $
Legal Proceedings
The Company may be subject to legal proceedings and claims arising from contracts or other matters from time to time in the ordinary course of business. Management is not aware of any pending or threatened litigation where the ultimate disposition or resolution could have a material adverse effect on its financial position, results of operations or liquidity.
On
August 6, 2020, the Company, Messrs. John and Miller and certain affiliated entities filed a lawsuit in the United States District Court,
Southern District of New York against Robert Koch, Bedford Investment Partners, LLC, Kaizen Advisors, LLC and certain other unnamed defendants.
The lawsuit alleged that Mr. Koch and the other defendants were attempting to extort the Company and Messrs. John and Miller to issue
the defendants shares of the Company’s common stock which they claim are owed to them. The Company asserted that they have no oral
or written agreement with Mr. Koch or any of his affiliates that entitle him to shares of the Company’s common stock. The Company’s
complaint seeks actual damages in the amount of $
Note 15 – Subsequent Events
Subsequent to September 30, 2023, the Company issued shares upon conversion of warrants.
In accordance with ASC Topic 855-10, the Company has analyzed its operations subsequent to September 30, 2023 to the date these financial statements were issued and has determined that it does not have any additional material subsequent events to disclose in these financial statements.
| F-14 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
FORWARD LOOKING STATEMENTS
This quarterly report contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may”, “should”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward- looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.
Our unaudited financial statements are stated in United States Dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles. The following discussion should be read in conjunction with our financial statements and the related notes that appear elsewhere in this quarterly report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed below and elsewhere in this quarterly report.
In this quarterly report, unless otherwise specified, all dollar amounts are expressed in United States dollars and all references to “common shares” refer to the common shares in our capital stock.
As used in this quarterly report and unless otherwise indicated, the terms “we”, “us”, “our”, “JUPW”, “SHOT” and the “Company” mean Safety Shot, Inc.
General Overview
Safety Shot Inc. (NASDAQ: SHOT) was formerly known as Jupiter Wellness Inc. In August 2023 the Company acquired certain assets of GBB Drink Lab Inc which included the blood alcohol detox drink Safety Shot, an over-the-counter drink that can lower blood alcohol content to allow recovery from the effects of alcohol at a rate faster than would occur normally. Concurrently with the acquisition, the Company changed its name to Safety Shot, Inc. and changed its NASDAQ trading symbol to SHOT. The Company launched Safety Shot in December 2023.
Safety Shot has a well-established clinical development infrastructure and fits within the Company’s existing over-the-counter and prescription-grade health and wellness products. The Company will continue its current products line as an operating division and is committed to supporting health and wellness by developing innovative solutions to a range of conditions. We take pride in our research and development of over-the-counter (OTC) products and intellectual property, which aim to address some of the most prevalent health and wellness concerns today. Our product pipeline includes a diverse range of products, such as hair loss treatments, eczema creams, vitiligo solutions, and sexual wellness products, that cater to different health and wellness needs. We are dedicated to staying up-to-date with the latest scientific research and technology, ensuring that our products are effective, safe, and meet the highest industry standards.
To achieve our mission, we rely on a team of highly skilled and experienced professionals who are committed to advancing our vision of health and wellness. Our team includes scientists, researchers, product developers, and business experts who collaborate to create new products and enhance existing ones. We also partner with industry leaders and organizations to leverage the latest technologies and expand our reach.
We generate revenue through various channels, including the sales of our OTC and consumer products, as well as licensing royalties. Our products are available through various retailers and e-commerce platforms, making them accessible to a broad customer base. Additionally, we collaborate with other companies to license our intellectual property, creating additional revenue streams and expanding our global presence.
We signed agreements to license JW-700 to Taisho, a $2.6 billion revenue company and Japan’s leading seller of minoxidil products. Taisho plans on launching the product commercially in 2024. In India, the Company signed an agreement with Cosmofix Technovation Pvt Ltd and Sanpellegrino Cosmetics to license its JW-700 and Photocil products. Additional licensing opportunities for these products are being pursued primarily in overseas markets.
Products Roadmap
Safety Shot launched initially online and through Amazon in the near future and plans to launch in Big Box stores in 2024.
The Company is advancing several formulations to address psoriasis and vitiligo (Photocil), increase the effectiveness of minoxidil to treat hair loss (JW-700 “minoxidil booster”), women’s sexual wellness (JW-500), and jellyfish sting prevention sunscreen (NoStingz), and atopic dermatitis/eczema (JW- 110).
Photocil was launched commercially in India in Q3 2022 as a treatment for vitiligo and psoriasis. Photocil is a topical cream that works with natural sunlight to provide patients with safe and effective phototherapy at home by blocking harmful radiation and permitting the passage of therapeutic UV radiation from the sun.
NoStingz provides an effective barrier against the stinging mechanism of jellyfish cnidocyte preventing the delivery of venom to the victim. Applied like other topical sun screen products, the product is clinically proven to protect users from jellyfish, sea lice, and UVA/UVB rays.
JW-700, currently being licensed abroad and developed for US launch, the product has been clinically shown to increase the enzymes needed for minoxidil to work, sulfotransferase enzymes, by using the product topically in conjunction with topical minoxidil. Additional studies and formulation work are ongoing.
JW-500 was born out of clinical trials designed to establish a topical treatment for the restoration of nipple sensitivity for breast augmentation patients, in addition to patients who had undergone chemotherapy or lumpectomy surgery following a cancer diagnosis. During early studies, women reported not only increased sensitivity but also increased libido. The Company plans to file for a pre-IND meeting with the US FDA and seek Orphan Drug Designation. An expedited 505(b)(2) regulatory pathway for development is being considered as the current formulation contains an already approved drug.
| 2 |
Research and Development
Our research and development team in continually looking to develop new therapeutic products, while continually improving and enhancing our existing products and product candidates to address customer demands and emerging trends. Our team is currently working to further improve the protection provided by NoStingz and develop more effective formulas for our JW-700 product.
We have conducted extensive research and experimentation involving a substantial number of subjects under the influence of intoxicants. Our findings indicate that the Safety Shot drink has proven to reduce alcohol absorption. Furthermore, in diverse cases, it has demonstrated a reduction in Blood Alcohol Content, as measured by the premier Breathalyzer in the market. The observable enhancements in cognitive abilities among the test subjects have been meticulously documented.
The Company engaged Angelshark Consulting, LLC to conduct a Safety Shot product test, which took place on September 15, 2023. The investigation aimed to explore the impact of Safety Shot on blood alcohol content (BAC) during a controlled event where volunteer participants consumed alcoholic beverages. The study encompassed various Various motor skill Assessments, including breathalyzer assessments, evaluations of energy levels and speech, as well as tests related to participants’ ability to touch their nose. The informal study suggested that Safety Shot significantly reduced %BAC. However, confounding factors, such as the timing of breathalyzer tests, food consumption, and water intake during the 30-minute interval after Safety Shot administration, were acknowledged, indicating the need for further controlled research.
Furthermore, the study delved into the effects of Safety Shot on energy levels and speech. While there was a reported increase in energy levels after Safety Shot administration, the sample size was considered insufficient for robust statistical analysis. Speech tests indicated a slight reduction in mistakes, with confounding variables such as participants’ familiarity with tongue twisters being noted. Despite positive indications, the report emphasized the necessity for more research under controlled conditions to validate Safety Shot’s effects on BAC, energy levels, and motor skill functionality. The study concluded with recommendations for refining the product taste and addressing confounding elements in future research.
In October 2023, the Company commissioned the Center for Applied Health Sciences (CAHS) in Canfield, Ohio, to serve as its primary Contracted Research Organization (CRO) for a study titled: “Effects of a Multi-Ingredient Supplement Consisting of Vitamins, Minerals, and Botanicals in Healthy Subjects on Various Psychometric and Physiologic Indices of Affect After Moderate Alcohol Consumption.” The study will involve a minimum of 36 subjects who have been thoroughly screened (healthy individuals of legal drinking age) to participate in a double-blind, placebo-controlled, crossover-designed investigation examining the impacts of alcohol both before and after the consumption of Safety Shot. Subjects will be randomly assigned either the drink itself or a placebo, following a specific protocol to induce blood alcohol elevation. Measurements, including breathalyzer and blood drawings, will be conducted to determine blood alcohol concentration (BAC), various psychomotor skill abilities, diverse health and wellness markers, and urinalysis markers assessing how alcohol is metabolized and its effects on mental clarity. Subjects will return after a one-week washout period for re-testing with the exact protocols but will be given the alternative sample. Throughout the study, a physician will be present to monitor the proceedings. Subjects will not be allowed to operate their own vehicles and will be provided with transportation. A third-party organization (Substantiation Sciences Inc. in Weston, FL) has been appointed to audit the entire study, ensuring accuracy and adherence to the protocol.
The study has received approval from the Institutional Review Board (IRB) for studies involving human subjects, and recruitment is currently underway. Subjects are anticipated to undergo baseline assessments and health screenings starting next week, with the actual testing protocol commencing in the following days. The study is projected to extend over several months in the event that the minimum required number of participants (36) is not attained promptly. Preliminary results will be available shortly after, with subsequent submission to various research journals determined by the science team.
Sales and Marketing
We primarily sell our products through third-party physical retail stores and partners who license and distribute them to other markets. Currently, our products are licensed for distribution in over 31 countries. The majority of our sales occur via traditional physical retailers, including their websites. We also sell via online retailers, such as Amazon and Walmart. To drive loyalty, word-of-mouth marketing, and sustainable growth, we invest in customer experience and customer relationship management. Our marketing investments are directed towards driving profitable growth through advertising, public relations, and brand promotion activities, including digital platforms, sponsorships, collaborations, brand activations, and channel marketing. Additionally, we continue to invest in our marketing and brand development efforts by investing capital expenditures on product displays to support our channel marketing via our retail partners.
Manufacturing, Logistics and Fulfillment
We outsource the manufacturing of our products to contract manufacturers, who produce them according to our formulation specifications. Our products are manufactured by contract manufacturers in India and the US. The majority of our products will then be shipped to third-party warehouses and to our corporate offices, which can either transport them to our distributors, retailers, or directly to our customers. Our third-party warehouses are located in the US. We use a limited number of logistics providers to deliver our products to both distributors and retailers, which allows us to lessen order fulfillment time, cut shipping costs, and improve inventory flexibility.
SRM Entertainment
On December 9, 2022, the Company entered into a stock exchange agreement (the “Exchange Agreement”) with SRM Entertainment, Inc. (“SRM”) to govern the separation of SRM the Company. On May 26, 2023, we amended and restated the Exchange Agreement (the “Amended and Restated Exchange Agreement”) to include additional information regarding the distribution and the separation of SRM the Company. The separation as set forth in the Amended and Restated Exchange Agreement with Jupiter closed August 14, 2023. Pursuant to the Amended and Restated Exchange Agreement, on May 31, 2023, SRM issued to the Company 6,500,000 shares of SRM Common Stock (representing 79.3% of SRM’s outstanding shares of Common Stock) in exchange for 2 ordinary shares of SRM Ltd owned by the Company (representing all of the issued and outstanding ordinary shares of SRM) (the “Share Exchange”). On August 14, 2023, SRM consummated its Initial Public Offering (“IPO”), pursuant to which it sold 1,250,000 shares of its common stock at a price of $5.00 per share. In connection with the Share Exchange and SRM’s IPO, the Company distributed 2,000,000 shares of SRM’s common stock to the Company’s stockholders and certain warrant holders (out of the 6.5 million shares issued in May 2023) which occurred on the effective date of the Registration Statement but prior to the closing of the IPO. Following such distribution, the Company owns 4.5 million of the 9,450,000 shares of common stock outstanding and SRM is now a minority owned subsidiary of the Company. SRM.
Competitive Strengths
We are committed to driving continuous improvement through innovation. Since our inception, we have made significant investments in research and development and have acquired a substantial portfolio of intellectual property, which continues to grow each year. Our commitment to innovation has allowed us to create unique products that address unmet needs in the market, all backed by rigorous clinical research. Our focus on research and development has enabled us to stay ahead of the curve and provide our customers with products that are not only effective but also innovative. We take pride in our patent portfolio and the continuous growth we have achieved, as it showcases our dedication to creating new and unique solutions for our customers. By staying committed to innovation, we are confident in our ability to meet the ever-changing needs of the market and continue to be a leading player in the wellness industry.
| 3 |
Recent Developments
On January 19, 2023, the Company entered into a Securities Purchase Agreement (the “PIPE Agreement”) with certain purchasers, for the issuance of 8,631,574 common stock warrants (the “PIPE Offering”) at a price of $0.125 per warrant, comprised of two common stock warrants (the “Common Warrants,”), each to purchase up to one share of Common Stock per Common Warrant with an exercise price of $1.00 per share, with (a) 4,315,787 Common Warrants being immediately exercisable for three years following 6 months from the closing of the PIPE Offering, and (b) 4,315,787 Common Warrants being immediately exercisable for five years following 6 months from the closing of the PIPE Offering. Concurrently to the PIPE Agreement, the Company entered into a Securities Purchase Agreement (the “RD Agreement”) with certain purchasers, pursuant to which on January 23, 2023, 4,315,787 shares of common stock, par value $0.001 (the “Common Stock”), at a price of $0.70 per share were issued to the purchasers (the “RD Offering”). The Common Stock was issued pursuant to a Registration Statement on Form S-3 filed by the Company with the Securities and Exchange Commission (the “Commission”) on September 28, 2022 (File No. 333-267644) and declared effective on November 9, 2022. The aggregate gross proceeds to the Company from both the PIPE Offering and the RD Offering were approximately $4.1 million, with the purchase price of one share, one 3- year warrant and one 5-year warrant as $0.95. The net proceeds were $3,450,675.
On March 31, 2023 the Company entered into a Financial Advisory Agreement (“FSA”) with Greentree Financial Group, Inc. to render certain professional services to the Company. In connection with the FSA, The Company issued 500,000 restricted shares of its common stock to Greentree.
On July 10, 2023, the Company entered into an asset purchase agreement (the “Agreement”) with GBB Labs, Inc., a Delaware corporation (“Buyer”), GBB Drink Lab Inc., a Florida corporation (“Seller”), 2V Consulting LLC, a Florida limited liability company, the Jarrett A Boon Revocable Trust Dated October 22, 2014, Gregory D. Blackman, an individual and Brothers Investment 7777. Pursuant to the Agreement, the Buyer shall purchase certain assets relating to the Seller’s business for a consideration comprising of: (a) the sum of Two Hundred Thousand U.S. Dollars (US $200,000) (the “Cash Purchase Price”); and (b) 5,000,000 Common Shares (the “Consideration Shares” and together with the Cash Purchase Price, collectively, the “Purchase Price”). The acquisition was closed on August 31, 2023.
Basis of Presentation
The accompanying consolidated financial statements are presented in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of US Securities and Exchange Commission (“SEC”). The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Jupiter Wellness, Inc., a Florida corporation, and Jupiter Wellness Investments, Inc., a Florida corporation at September 30. 2023 and December 31, 2022 and for the three and nine months ended September 30, 2023 and 2022. All intercompany accounts and transactions have been eliminated. The Company adopted the FASB Accounting Standards Update No. 2014-08 Discontinued Operations requiring entities to reclassify assets and liabilities of a discontinued operation for all comparative periods presented in the statement of financial position. Effective August 14, 2023, the Company sold SRM Entertainment Ltd, (“SRM”) a previously wholly owned subsidiary. Financial statements preceding the effective date of the sale have been reclassified to reflect the respective SRM assets and liabilities as being held for sale and the operations of SRM are reflected a discontinued operation.
Emerging Growth Company Status
We are an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended, (the “Securities Act”), as modified by the Jumpstart our Business Startups Act of 2012, (the “JOBS Act”), and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. We have elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, we, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of our financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Significant Accounting Policies and Estimates
Our management’s discussion and analysis of our financial condition and results of operations is based on our unaudited financial statements for the Nine months ended September 30, 2023 and 2022 and audited financial statements for the year ended December 31, 2022, which have been prepared in accordance with United States generally accepted accounting principles, or U.S. GAAP, and the rules and regulations of the Securities and Exchange Commission. The preparation of the financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported revenue generated, and expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions and any such differences may be material. We believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates.
Cash and Cash Equivalents
The Company considers all short-term investments with a maturity of three months or less when purchased to be cash and equivalents for purposes of the statement of cash flows. There were no cash equivalents as of September 30, 2023 or December 31, 2022.
Investments Held-to-Maturity
Investments that the Company’s management has the “positive intent and ability” to hold through maturity are classified and accounted for as hold- to-maturity investments (“HTM”). HTM investments are carried at amortized cost in the financial statements. For investments classified as HTM, no unrealized gains and losses will be recognized in financial statements.
Assets and liabilities Held for Sale
On December 9, 2022, The Company entered into a stock exchange agreement (the “Exchange Agreement”) with SRM Entertainment, Inc. (“SRM”) to govern the separation of SRM from the Company. On May 26, 2023, we amended and restated the Exchange Agreement (the “Amended and Restated Exchange Agreement”) to include additional information regarding the distribution and the separation of SRM the Company. The separation as set forth in the Amended and Restated Exchange Agreement with Jupiter closed August 14, 2023. Pursuant to the Amended and Restated Exchange Agreement, on May 31, 2023, SRM issued to the Company 6,500,000 shares of SRM Common Stock (representing 79.3% of SRM’s outstanding shares of Common Stock) in exchange for 2 ordinary shares of SRM Ltd owned by the Company (representing all of the issued and outstanding ordinary shares of SRM) (the “Share Exchange”). On August 14, 2023, SRM consummated its Initial Public Offering (“IPO”), pursuant to which it sold 1,250,000 shares of its common stock at a price of $5.00 per share. In connection with the Share Exchange and SRM’s IPO, the Company distributed 2,000,000 shares of SRM’s common stock to the Company’s stockholders and certain warrant holders (out of the 6.5 million shares issued in May 2023) which occurred on the effective date of the Registration Statement but prior to the closing of the IPO. Following such distribution, the Company owns 4.5 million of the 9,450,000 shares of common stock outstanding and SRM is now a minority owned subsidiary of the Company.
The Company has reclassified all of the assets and liabilities of SRM held prior to the to the Share Exchange as assets and liabilities held for sale.
At December 31, 2022 and 2021, the Company had current assets held for sale totaling $611,316 and 322,525, respectively, long term assets held for sale totaling $1,242,803 and $1,313,735 and liabilities held for sale totaling $593,192 and $647,055, respectively.
The following table presents the major classes of assets and liabilities of discontinued operations of Communications reported in the consolidated balance sheets:
| December 31, | ||||||||
| 2022 | 2021 | |||||||
| Cash | $ | 453,516 | $ | 529,520 | ||||
| Inventory | 290,200 | 55,482 | ||||||
| Account receivable | 621,090 | 688,768 | ||||||
| Prepaid expenses and deposits | 697,725 | 551,376 | ||||||
| Investment in Affiliate | 7,699 | - | ||||||
| Loan to SRM | (1,458,914 | ) | (1,502,621 | ) | ||||
| Total current asset held for sale | 611,316 | 322,525 | ||||||
| Intangible assets | 291,533 | 364,417 | ||||||
| Goodwill | 941,937 | 941,937 | ||||||
| Fixed assets | 9,333 | 7,381 | ||||||
| Assets held for sale | 1,242,803 | 1,313,735 | ||||||
| Total assets | $ | 1,854,119 | $ | 1,636,260 | ||||
| Accounts Payable | $ | 378,804 | $ | 532,899 | ||||
| Accrued liabilities | 214,388 | 114,156 | ||||||
| Total current Liabilities | $ | 593,192 | $ | 647,055 | ||||
The following table presents the components of discontinued operations in relation to Communications reported in the consolidated statements of operations:
| Year ended December 31, | ||||||||
| 2022 | 2021 | |||||||
| Sales | $ | 6,076,116 | $ | 2,693,131 | ||||
| Cost of Sales | 4,845,217 | 2,137,699 | ||||||
| Gross profit | 1,230,899 | 555,432 | ||||||
| Operating expense | 887,495 | 659,074 | ||||||
| Other (income) expense | (768 | ) | 3,339 | |||||
| Total expenses | 886,727 | 662,413 | ||||||
| Net income (loss) from discontinued operations | $ | 344,172 | $ | (106,981 | ) | |||
| 4 |
Net Loss per Common Share
Net income (loss) per common share is computed pursuant to section 260-10-45 of the FASB Accounting Standards Codification. Basic net income (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period. If applicable, diluted earnings per share assume the conversion, exercise or issuance of all common stock instruments such as options, warrants, convertible securities and preferred stock, unless the effect is to reduce a loss or increase earnings per share. As such, options, warrants, convertible securities and preferred stock are not considered in the calculations, as the impact of the potential common shares would be to decrease the loss per share.
| For the Three months Ended September 30, | For the Nine months Ended September 30, | |||||||||||||||
| 2023 | 2022 | 2022 | 2021 | |||||||||||||
| Numerator: | ||||||||||||||||
| Net (loss) | (7,738,301 | ) | (2,332,426 | ) | (9,406,066 | ) | (6,692,957 | ) | ||||||||
| Denominator: | ||||||||||||||||
| Denominator for basic earnings per share - Weighted- average common shares issued and outstanding during the period | 29,836,485 | 21,530,012 | 27,370,658 | 22,191,644 | ||||||||||||
| Denominator for diluted earnings per share | 29,836,485 | 21,530,012 | 27,370,658 | 22,191,644 | ||||||||||||
| Basic (loss) per share | (0.26 | ) | (0.10 | ) | (0.34 | ) | (0.30 | ) | ||||||||
| Diluted (loss) per share | (0.26 | ) | (0.10 | ) | (.034 | ) | (0.30 | ) | ||||||||
Revenue Recognition
The Company generates its revenue from the sale of its products directly to the end user or distributor (collectively the “customer”).
The Company recognizes revenues by applying the following steps in accordance with FASB Accounting Standards Codification 606 “Revenue from Contracts with Customers” (“ASC 606”). Under ASC 606, revenues are recognized when control of the promised goods or services are transferred to a customer, in an amount that reflects the consideration that the Company expects to receive in exchange for those goods or services. The Company applies the following five steps in order to determine the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its agreements:
| ● | identify the contract with a customer; | |
| ● | identify the performance obligations in the contract; | |
| ● | determine the transaction price; | |
| ● | allocate the transaction price to performance obligations in the contract; and | |
| ● | recognize revenue as the performance obligation is satisfied. |
The Company’s performance obligations are satisfied when goods or products are shipped on an FOB shipping point basis as title passes when shipped. Our product is generally paid in advance of shipment or standard net 30 days and we offer no specific right of return, refund or warranty related to our products except for cases of defective products of which there have been none to date.
Accounts Receivable and Credit Risk
Accounts receivable are generated from sales of the Company’s products. The Company provides an allowance for doubtful collections, which is based upon a review of outstanding receivables, historical collection information, and existing economic conditions. As of September 30, 2023 and December 31, 2022, the Company had not recognized an allowance for doubtful collections.
Foreign Currency Translation
Assets and liabilities in foreign currencies are translated using the exchange rate at the balance sheet date, while revenue and expense accounts are translated at the average exchange rates prevailing during the period. Equity accounts are translated at historical exchange rates. Gains and losses from foreign currency transactions and translation for the Nine months ended September 30, 2022 and year ended December 31, 2021 and the cumulative translation gains and losses as of September 30, 2023 and December 31, 2022 were not material.
Inventory
Inventories are stated at the lower of cost or market. The Company periodically reviews the value of items in inventory and provides write-downs or write-offs of inventory based on its assessment of market conditions. Write-downs and write-offs are charged to cost of goods sold. Inventory is based upon the average cost method of accounting.
Debt Extinguishment and Modification
Any changes or modification to debt instruments must be examined to determine if the modification has any significant effect. If the changes or modifications are material, the change or modification must be accounted for as an extinguishment. If determined to be an extinguishment, the change or modification to the original debt is derecognized and a new debt is recognized. Any difference in the fair value is recognized as a gain or loss on extinguishment.
Deconsolidation
The Company will use Deconsolidation Accounting upon the loss of control of a subsidiary determined to be less than 50% owned. Upon deconsolidation, the Company will no longer present the subsidiary’s assets, liabilities, and results of operations in its consolidated financial statements. If the Company owns more than 20% but less than 50% the Company will continue to report under the Equity Method.
Equity Method for Investments
Investments in unconsolidated affiliates, which the Company exerts significant influence but does not control or otherwise consolidate, are accounted for using the equity method. Equity method investments are initially recorded at cost. These investments are included in investment in joint ventures in the accompanying consolidated balance sheets. The Company’s share of the profits and losses from these investments is reported in loss from equity method joint venture in the accompanying consolidated statements of operations. The Company monitors its investments for other-than-temporary impairment by considering factors such as current economic and market conditions and the operating performance of the investees and records reductions in carrying values when necessary.
Asset Purchases
The Company accounts for an acquisitive transaction determined to be an asset purchase based on the cost accumulation and allocation method, under which the costs to purchase the asset or set of assets are allocated to the assets acquired. No goodwill is recorded in connection with an asset purchase.
Investments in Marketable Securities
The Company’s Marketable Securities are considered Held-For-Trading (“HFT”) or Trading Assets. HTF- Trading securities are valued at their fair value when purchased/sold, and any unrealized gains or losses are recorded periodically on financial reporting dates as other income or loss.
| 5 |
Income Taxes
We account for income taxes under ASC 740 Income Taxes (“ASC 740”). ASC 740 requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the financial statement and tax basis of assets and liabilities and for the expected future tax benefit to be derived from tax loss and tax credit carry forwards. ASC 740 additionally requires a valuation allowance to be established when it is more likely than not that all or a portion of deferred tax assets will not be realized.
ASC 740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim period, disclosure and transition. Based on our evaluation, it has been concluded that there are no significant uncertain tax positions requiring recognition in our financial statements. Since we were incorporated on October 24, 2018, the evaluation was performed for 2018 tax year, which would be the only period subject to examination. We believe that our income tax positions and deductions would be sustained on audit and does not anticipate any adjustments that would result in a material changes to our financial position. Our policy for recording interest and penalties associated with audits is to record such items as a component of income tax expense.
The Company’s deferred tax asset at December 31, 2022 consists of net operating loss carry forwards calculated using federal and state effective tax rates equating to approximately $7,110,329 less a valuation allowance in the amount of approximately $7,110,329. Due to the Company’s lack of earnings history, the deferred tax asset has been fully offset by a valuation allowance in the year ended December 31, 2022.
Research and Development
The Company accounts for research and development costs in accordance with the Accounting Standards Codification subtopic 730-10, Research and Development (“ASC 730-10”). Under ASC 730-10, all research and development costs must be charged to expense as incurred. Accordingly, internal research and development costs are expensed as incurred. Third-party research and developments costs are expensed when the contracted work has been performed or as milestone results have been achieved. Company-sponsored research and development costs related to both present and future products are expensed in the period incurred. The Company incurred research and development expenses of $98,091.24 and $128,241 for the Nine months ended September 30, 2023 and 2022, respectively.
Stock Based Compensation
We recognize compensation costs to employees under FASB Accounting Standards Codification 718 “Compensation - Stock Compensation” (“ASC 718”). Under ASC 718, companies are required to measure the compensation costs of share-based compensation arrangements based on the grant-date fair value and recognize the costs in the financial statements over the period during which employees are required to provide services. Share based compensation arrangements include stock options and warrants. As such, compensation cost is measured on the date of grant at their fair value. Such compensation amounts, if any, are amortized over the respective vesting periods of the option grant.
On October 24, 2018, the inception date (“Inception”), we adopted ASU No. 2018-07 “Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting.” These amendments expand the scope of Topic 718, Compensation - Stock Compensation (which currently only includes share-based payments to employees) to include share-based payments issued to nonemployees for goods or services. Consequently, the accounting for share-based payments to nonemployees and employees will be substantially aligned.
Related parties
The Company follows subtopic 850-10 of the FASB Accounting Standards Codification for the identification of related parties and disclosure of related party transactions.
Pursuant to Section 850-10-20 the related parties include a. affiliates of the Company; b. Entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section 825–10–15, to be accounted for by the equity method by the investing entity; c. trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management; d. principal owners of the Company; e. management of the Company; f. other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g. Other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.
The consolidated financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated or combined financial statements is not required in those statements. The disclosures shall include: a. the nature of the relationship(s) involved; b. a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; c. the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and d. amounts due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.
| 6 |
Recent Accounting Pronouncements
In June 2018, the FASB issued ASU 2018-07, which simplifies the accounting for non-employee share-based payment transactions. The amendments specify that Topic 718 applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards. The Company has adopted this standard beginning January 1, 2019. The adoption of this standard did not have a significant impact on our results of operations, financial condition, cash flows, and financial statement disclosures.
In February 2016, Topic 842, “Leases” was issued to replace the leases requirements in Topic 840, “Leases”. The main difference between previous GAAP and Topic 842 is the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous GAAP. A lessee should recognize in the balance sheet a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. If a lessee makes this election, it should recognize lease expense for such leases generally on a straight-line basis over the lease term. The accounting applied by a lessor is largely unchanged from that applied under previous GAAP. Topic 842 will be effective for annual reporting periods beginning after December 15, 2018, including interim periods within those annual periods and is to be retrospectively applied. The Company has adopted this standard beginning January 1, 2019. The adoption of this standard did not have a significant impact on our results of operations, financial condition, cash flows, and financial statement disclosures.
Management does not believe that any recently issued, but not effective, accounting standards, if currently adopted, would have a material effect on our financial statements.
Results of Operations
For the three months ended September 30, 2023 and 2022
The following table provides selected financial data about us for the three months ended September 30, 2023 and 2022, respectively.
| September 30, 2023 | September 30, 2022 | |||||||
| Sales | $ | 11,877 | $ | 85,467 | ||||
| Cost of Sales | 46,436 | 74,365 | ||||||
| Gross Profit (Loss) | (34,561 | ) | 11,102 | |||||
| Total operating expenses | (4,090,608 | ) | (1,977,175 | ) | ||||
| Other income (expense) | (3,152,437 | ) | (549,232 | ) | ||||
| Net Loss from operations | $ | (7,277,606 | ) | $ | (2,515,305 | ) | ||
| Income from discontinued operations | (460,695 | ) | 182,879 | |||||
| Net (loss) | $ | (7,738,301 | ) | $ | (2,332,426 | ) | ||
Revenues and Cost of Sales
We generated $11,877 in revenues for the three months ended September 30, 2023 compared to $85,467 revenues in the three months ended September 30, 2022. Cost of sales were $46,436 for the three months ended September 30, 2023 compared to $74,365 for the for the three months ended September 30, 2022. Gross profit (loss) was ($34,561) and $11,102, respectively for the three months ended September 30, 2023 and 2022.
Operating Expenses and Other Income (Expense)
We had total operating expenses of $4,090,608 and other expenses of $3,152,437 for the three months ended September 30, 2023 compared to $1,977,155 and other expenses of $549,232 for the three months ended September 30, 2022.
Operating expenses for the three months ended September 30, 2023 were in connection with our daily operations as follows: (i) marketing expenses of $170,633; (ii) research and development of $61,163; (iii) legal and professional expenses of $1,613,981, consisting of corporate advisory services, annual report preparation fees and general corporate governance fees; (iv) rent and utilities of $49,547; (v) depreciation and amortization of $67,355; (vi) general and administrative expenses of $872,884, consisting of payroll and related taxes, travel, meals and entertainment, office supplies and expense, compensation related to management transition agreements and other normal office and administration expenses; and (vii) stock based compensation of $1,245,029. Other income for the three months ended September 30, 2023 consisted of interest income of $56,113, interest expense of $54,751, unrecognized loss on equity investments of $726,884 and other expenses of $2,426,893.
Operating expenses for the three months ended September 30, 2022 were in connection with our daily operations as follows: (i) marketing expenses of $9,575; (ii) research and development of $3,876; (iii) legal and professional expenses of $942,618, consisting of corporate advisory services, annual report preparation fees and general corporate governance fees; (iv) rent and utilities of $46,054; (v) depreciation and amortization of $4,382; (vi) general and administrative expenses of $674,810, consisting of payroll and related taxes, travel, meals and entertainment, office supplies and expense, compensation related to management transition agreements and other normal office and administration expenses; and (vii) stock based compensation of $295,860. Other income for the three months ended September 30, 2022, consisted of interest income of $549,246.
Discontinued operations
During the three months ended September 30, 2023, the Company had a loss of ($460,695) from discontinued operations and income of $182,879 for the three months ended September 30, 2022.
Income/Losses
Net losses were $7,738,301 and $2,332,426 for the three months ended September 30, 2023 and 2022, respectively.
| 7 |
For the Nine months ended September 30, 2023 and 2022
The following table provides selected financial data about us for the Nine months ended September 30, 2023 and 2022, respectively.
| September 30, 2023 | September 30, 2022 | |||||||
| Sales | $ | 69,968 | $ | 125,417 | ||||
| Cost of Sales | 97,977 | 93,869 | ||||||
| Gross Profit (Loss) | (28,008 | ) | 31,548 | |||||
| Total operating expenses | (7,040,858 | ) | (6,043,504 | ) | ||||
| Other income (expense) | (2,075,671 | ) | (1,118,148 | ) | ||||
| Net Loss from operations | $ | (9,144,538 | ) | $ | (7,130,104 | ) | ||
| Income from discontinued operations | (261,528 | ) | 437,147 | |||||
| Net (loss) | $ | (9,406,066 | ) | $ | (6,692,957 | ) | ||
Revenues and Cost of Sales
We generated $69,968 in revenues for the nine months ended September 30, 2023 compared to $125,417 revenues in the Nine months ended September 30, 2022. Cost of sales were $97,977 for the Nine months ended September 30, 2023 compared to $93,869 for the for the Nine months ended September 30, 2022. Gross profit (loss) was ($28,008) and $31,548, respectively for the nine months ended September 30, 2023 and 2022.
Operating Expenses and Other Income (Expense)
We had total operating expenses of $7,040,858 and $2,075,671 of other loss for the Nine months ended September 30, 2023 compared to $6,043,504 and $1,118,148 of other expenses for the nine months ended September 30, 2022.
Operating expenses for the Nine months ended September 30, 2023 were in connection with our daily operations as follows: (i) marketing expenses of $206,047; (ii) research and development of $98,091; (iii) legal and professional expenses of $2,563,047, consisting of corporate advisory services, annual report preparation fees and general corporate governance fees; (iv) rent and utilities of $156,870; (v) depreciation and amortization of $110,674; (vi) general and administrative expenses of $2,441,100, consisting of payroll and related taxes, travel, meals and entertainment, office supplies and expense, compensation related to management transition agreements and other normal office and administration expenses; and (vii) stock based compensation of $1,465,029. Other income for the Nine months ended September 30, 2023 consisted of net interest income of $56,802, interest expense of $168,869, unrecognized loss on equity investments of $726,884 and other expenses of $1,236,720.
Operating expenses for the nine months ended September 30, 2022 were in connection with our daily operations as follows: (i) marketing expenses of $78,719; (ii) research and development of $132,117; (iii) legal and professional expenses of $1,753,640, consisting of corporate advisory services, annual report preparation fees, investor relations, and general corporate governance fees; (iv) rent and utilities of $128,006; (v) depreciation and amortization of $52,646; (vi) general and administrative expenses of $3,355,347, consisting of $1,000,000 impairment of a promissory note, payroll and related taxes, travel, meals and entertainment, office supplies and expense and other normal office and administration expenses; and (vii) stock based compensation of $543,029. Other income for the Nine months ended September 30, 2023 consisted of net interest expense of $1,122,961 (which includes $876,926 of amortization of original issue discount and Warrant discount on convertible promissory notes) and other income of $4,813.
Discontinued operations
During the nine months ended September 30, 2023, the Company had a loss of $261,528 from discontinued operations and income of $437,147 for the nine months ended September 30, 2022.
Income/Losses
Net losses were $9,406,066 and $6,692,957 for the Nine months ended September 30, 2023 and 2022, respectively.
| 8 |
Item 3. Quantitative and Qualitative Disclosures About Market Risk
As a “smaller reporting company”, we are not required to provide the information required by this Item.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company’s Exchange Act reports is recorded, processed, summarized and reported within the time communicated to the Company’s management, including its Chief Executive Officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure based closely on the definition of “disclosure controls and procedures” in Rule 13a-15(e). The Company’s disclosure controls and procedures are designed to provide a reasonable level of assurance of reaching the Company’s desired disclosure control objectives. In designing periods specified in the SEC’s rules and forms, and that such information is accumulated and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. The Company’s certifying officers have concluded that the Company’s disclosure controls and procedures are not effective this quarter in reaching that level of assurance as evidenced by the number and magnitude of adjustments made by our external auditors.
At the end of the period being reported upon, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and principal financial officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based on the foregoing, our Chief Executive Officer and principal financial officer concluded that our disclosure controls and procedures were ineffective to ensure that the material information required to be included in our Securities and Exchange Commission reports is accumulated and communicated to our management, including our principal executive and financial officer, recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms relating to the Company, based on the assessment and control of disclosure decisions currently performed by a small team. The Company plans to expand its management team and build a fulsome internal control framework required by a more complex entity.
Changes in Internal Control Over Financial Reporting
During the past three months and previous fiscal year, we implemented significant measures to remediate the previously disclosed ineffectiveness of our internal control over financial reporting, which included an insufficient degree of segregation of duties amongst our accounting and financial reporting personnel, and the lack of a formalized and complete set of policy and procedure documentation evidencing our system of internal controls over financial reporting. The remediation measures consisted of the hiring of individuals with appropriate experience in internal controls over financial reporting, and the modification of our accounting processes and enhancement to our financial controls, including the testing of such controls.
Other than as described above, there was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) or 15d-15(f) under the Exchange Act) identified in connection with the evaluation required by Rules 13a-15(d) or 15d-15(d) that occurred during the Nine months ended September 30, 2023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Limitations on the Effectiveness of Controls
Management has confidence in its internal controls and procedures. The Company’s management believes that a control system, no matter how well designed and operated can provide only reasonable assurance and cannot provide absolute assurance that the objectives of the internal control system are met, and no evaluation of internal controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. Further, the design of an internal control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitation in all internal control systems, no evaluation of controls can provide absolute assurance that all control issuers and instances of fraud, if any, within the Company have been detected.
| 9 |
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties and an adverse result in these or other matters may arise from time to time that may harm our business.
Item 1A. Risk Factors
As a “smaller reporting company”, we are not required to provide the information required by this Item.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
On April 20, 2022, Safety Shot, Inc. (the “Company”) entered into a $1,500,000 Loan Agreement (the “Greentree Loan”). Pursuant to the Greentree Loan the Company issued a Convertible Promissory Note in the principal amount of $1,500,000 (the “Greentree Note”) and the issuance of a Common Stock Purchase Warrant for 1,100,000 shares of the Company’s common stock (the “Greentree Warrant”). The Greentree Note has a maturity date of January 31, 2024.
On April 20, 2022, the Company entered into a $500,000 Loan Agreement (the “L&H Loan,” collectively with Greentree Loan as the “Loan Agreements”). Pursuant to the L&H Loan the Company issued a Convertible Promissory Note in the principal amount of $500,000 (the “L&H Note,” collectively with Greentree Note as the “Notes”) and the issuance of a Common Stock Purchase Warrant for 360,000 shares of the Company’s common stock (the “L&H Warrant,” collectively with Greentree Warrant as the “Warrants”). The L&H Note has a maturity date of January 31, 2024.
On January 19, 2023, in a private placement, the Company entered into a Securities Purchase Agreement (the “PIPE Agreement”) with certain purchasers, for the issuance of 8,631,574 common stock warrants (the “PIPE Offering”) at a price of $0.125 per warrant, comprised of two common stock warrants (the “Common Warrants,”), each to purchase up to one share of Common Stock per Common Warrant with an exercise price of $1.00 per share, with (a) 4,315,787 Common Warrants being immediately exercisable for three years following 6 months from the closing of the PIPE Offering, and (b) 4,315,787 Common Warrants being immediately exercisable for five years following 6 months from the closing of the PIPE Offering. On February 14, 2023, the Company filed an S-1 Registration Statement covering the underlying shares of the Warrants.
On March 31, 2023 the Company entered into a Financial Advisory Agreement (“FSA”) with Greentree Financial Group, Inc. to render certain professional services to the Company. In connection with the FSA, The Company issued 500,000 restricted shares of its common stock to Greentree.
On July 10, 2023, the Company entered into an asset purchase agreement (the “APA”) with GBB Labs, Inc., a Delaware corporation (“Buyer”), GBB Drink Lab Inc., a Florida corporation (“Seller”), 2V Consulting LLC, a Florida limited liability company, the Jarrett A Boon Revocable Trust Dated October 22, 2014, Gregory D. Blackman, an individual and Brothers Investment 7777. Pursuant to the Agreement, the Buyer shall purchase certain assets relating to the Seller’s business for a consideration comprising of: (a) the sum of Two Hundred Thousand U.S. Dollars (US $200,000) (the “Cash Purchase Price”); and (b) 5,000,000 restricted Common Shares (the “Consideration Shares” and together with the Cash Purchase Price, collectively, the “Purchase Price”). The Consideration Shares were issued on August 29, 2023 and the acquisition was closed on August 31, 2023.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None
| 10 |
Item 6. Exhibits
| Exhibit | ||
| Number | Description | |
| (31) | Rule 13a-14 (d)/15d-14d) Certifications | |
| 31.1 | Section 302 Certification by the Principal Executive Officer | |
| 31.2 | Section 302 Certification by the Principal Financial Officer and Principal Accounting Officer | |
| (32) | Section 1350 Certifications | |
| 32.1* | Section 906 Certification by the Principal Executive Officer | |
| 32.2 | Section 906 Certification by the Principal Financial Officer and Principal Accounting Officer | |
| 101* | Interactive Data File | |
| 101.INS | XBRL Instance Document | |
| 101.SCH | XBRL Taxonomy Extension Schema Document | |
| 101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | |
| 101.DEF | XBRL Taxonomy Extension Definition Linkbase Document | |
| 101.LAB | XBRL Taxonomy Extension Label Linkbase Document | |
| 101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document | |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
* The certifications attached as Exhibits 32.1 and 32.2 accompany this quarterly report on Form 10-Q pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed “filed” by the Registrant for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.
| 11 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| Safety Shot, Inc. | |
| Dated: January 5, 2024 | /s/ Brian S. John |
| Brian S. John | |
| Chief Executive Officer | |
| (Principal Executive Officer Officer) |
| 12 |
EXHIBIT 31.1
CERTIFICATIONS PURSUANT TO
18 U.S.C. ss 1350, AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Brian S. John, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q/A of Safety Shot, Inc.; |
| 2 | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: January 5, 2024 | |
| /s/ Brian S. John | |
| Brian S. John | |
| Chief Executive Officer (Principal Executive Officer) |
EXHIBIT 31.2
CERTIFICATIONS PURSUANT TO
18 U.S.C. ss 1350, AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Markita Russell, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q/A of Safety Shot, Inc.; |
| 2 | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: January 5, 2024
| /s/ Markita Russell | |
| Markita Russell | |
| Chief Financial Officer | |
| (Principal Financial Officer | |
| and Principal Accounting Officer) |
EXHIBIT 32.1
CERTIFICATIONS PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Brian S. John, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
| (1) | the Quarterly Report on Form 10-Q/A of Safety Shot, Inc. for the period ended September 30, 2023 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| (2) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Safety Shot, Inc. |
| Dated: January 5, 2024 | /s/ Brian S. John |
| Brian S. John | |
| Chief Executive Officer | |
| (Principal Executive Officer Officer) Safety Shot, Inc. |
EXHIBIT 32.2
CERTIFICATIONS PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Markita Russell, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
| (1) | the Quarterly Report on Form 10-Q/A of Safety Shot, Inc. for the period ended September 30, 2023 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| (2) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Safety Shot, Inc. |
| Dated: January 5, 2024 | /s/ Markita Russell |
Markita Russell | |
| Chief Financial Officer | |
| (Principal Financial Officer | |
| and Principal Accounting Officer) | |
| Safety Shot, Inc. |