SRM Entertainment Inc
For the period ended Sep 30, 2024. Filed Nov 13, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2024 · Filed Nov 13, 2024
TRON$1.41+4.4%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-06-30; filed 2024-08-12.
0001493152-24-031263
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-11-13.
0001493152-24-045149
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 68 previous paragraphs and 79 current paragraphs.
49 unchanged; 13 reworded; 15 added; 4 removed; 2 previous and 2 current paragraphs rearranged.
Tables are not compared: 3 previous and 8 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (15)
Current report
On September 3, 2024, the Company entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) with Suretone Entertainment, Inc. (“Suretone” or “Seller”) pursuant to which the Company agreed to acquire certain assets related to the movie with the title The Kid (directed by Vincent D’Onofrio) from the Seller, for an aggregate purchase price of $2,983,000 (the “Purchase Price”). Jordan Schur, the owner and Chief Executive Officer of Suretone, is a board member and President of Safety Shot. Prior to the transaction, Safety Shot held 34.27% of the Company’s common stock.
Current report
In consideration for the acquired assets, the Buyer paid the Purchase Price by: (i) paying $250,000 in cash on September 3, 2024; (ii) issuing 1,500,000 restricted shares of the Company’s common stock, par value $0.0001 per share (valued at $0.762 per share); and (iii) issuing a secured promissory note in the original amount of $1,500,000 (the “Secured Note”). The Assets are being amortized over a ten-year period. Amortization expense totaled $24,108 for the nine months ended September 30, 2024.
Current report
On September 3, 2024, the Company (or “Buyer”) entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) with Suretone Entertainment, Inc. (“Suretone” or “Seller”) pursuant to which the Buyer has agreed to acquire certain assets related to the movie with the title The Kid (directed by Vincent D’Onofrio) from the Seller, for an aggregate purchase price of $3,000,000 (the “Purchase Price”). Jordan Schur, the owner and Chief Executive Officer of Suretone, is a board member and President of Safety Shot. As of November 12, 2024, Safety Shot holds 24.8% of the Company’s common stock.
Current report
In consideration for the acquired assets, the Buyer paid the Purchase Price by: (i) paying $250,000 in cash on September 3, 2024); (ii) issuing 1,500,000 restricted shares of the Company’s common stock, par value $0.001 per share (valued at $0.8333 per share); and (iii) issuing a secured promissory note in the original amount of $1,500,000 (the “Secured Note”). The Secured Note will bear interest at the rate of 8% per annum and will mature on September 3, 2025 (the “Maturity Date”), calculated on a 365-day year, and is due along with the principal on the Maturity Date. The Secured Note is secured by the assets purchased pursuant to the Asset Purchase Agreement. If the Company secures financing of at least $5 million during the term of the Secured Note, it must use the proceeds to repay the Secured Note. The Company can prepay the Secured Note at any time without penalty but must provide 15 days’ notice to Suretone. The Secured Note is subject to immediate acceleration if the Company commences bankruptcy proceedings, if it winds down its operations, if the Company fails to stay current in its SEC reporting obligations, or if the Company’s common stock is delisted from the Nasdaq Stock Market.
Current report
Liquidity and Capital Resources
Current report
In October 2024, the Company closed private placements in a registered direct offering of 1,711,477 shares of common stock (the “Shares”) among four accredited Investors generating gross proceeds of $1,044,000. The Shares were offered and sold to the Investors pursuant to a prospectus supplement and accompanying prospectus, which was filed with theSEC, in connection with a takedown from the Company’s effective shelf registration statement on Form S-3 (File No. 333-282028) which was filed with the SEC on September 11, 2024 and subsequently declared effective on September 19, 2024.
Current report
Commitments
Current report
There are no fixed forward commitments for lease expense, license fees, or capital expenditures.
Current report
Off-Balance Sheet Arrangements
Current report
We did not have, during the periods presented, any off-balance sheet financing arrangements or any relationships with unconsolidated entities or financial partnerships, including entities sometimes referred to as structured finance or special purpose entities that were established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.
Current report
Cash Flow
Current report
The following table presents our cash flows for the periods presented:
Current report
Net cash used in operating activities was $1,681,081 and $412,789 for the nine months ended September 30, 2024, and 2023. The increase in cash used in operations was primarily due to increases in inventory of $536,876, increased general and administrative expenses of $282,634 and other increases including investor relations and legal and professional expenses.
Current report
Net cash used in investing activities during the nine months ended September 30, 2024 included purchase of fixed assets of $23,264 and the cash portion of $250,000 in the purchase of intangible assets compared to fixed asset purchases of $42,780 and $350,301 for the SRM Ltd acquisition during the nine months ended September 30, 2023.
Current report
The Company had no cash provided by financing activities during the nine months ended September 30, 2024 and the net cash provided by financing activities for nine months ended September 30, 2023 were the net proceeds from the Company’s IPO in 2023.
Removed paragraphs (4)
Previous report
On December 8, 2022, the Company entered into the Exchange Agreement with Jupiter Wellness, Inc. (“Jupiter”) to govern the separation of the Company’s business from Jupiter. On May 26, 2023, the parties entered into the Amended and Restated Exchange Agreement to include additional information regarding the distribution and separation of our business from Jupiter under the terms of which, Jupiter acquired 6,500,000 shares of common stock on May 31, 2023, in exchange for all of the issued and outstanding ordinary shares of SRM Limited, an entity formed in Hong Kong in 1981 and acquired by Jupiter in 2020. The 6.5 million newly-issued shares of the common stock represented approximately 79.3% of the outstanding shares post-issuance. Jupiter distributed 2,000,000 shares of the Company’s common stock to Jupiter’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, Jupiter owned 4.5 million of the 9,450,000 shares of common stock outstanding and SRM Limited is a wholly owned subsidiary of the Company.
Previous report
Basis of Presentation
Previous report
Results of Operations
Previous report
For the three and six-months months ended June 30, 2024 and 2023
Reworded paragraphs (13)
Previous wording
SRM. Entertainment Limited (“SRM Ltd”), is a limited company incorporated in the Hong Kong, now a Special Administrative Region of the People’s Republic of China, on January 23, 1981. SRM Entertainment, Inc. (“SRM Inc”) is a Nevada corporation and was incorporated on April 22, 2022. On August 14, 2023, SRM Inc merged with SRM Ltd. The merger of SRM Inc and SRM Ltd has been accounted for as a Reverse Acquisition (seeBasis of Presentationbelow). The combined SRM Inc and SRM Ltd are collectively referred to as the Company.
Current wording
SRM Entertainment, Inc. (“SRM Inc”) is a Nevada corporation and was incorporated on April 22, 2022. SRM. Entertainment Limited (“SRM Ltd”), is a limited company incorporated in Hong Kong, now a Special Administrative Region of the People’s Republic of China, on January 23, 1981 and formerly owned by Jupiter Wellness, Inc. Effective August 14, 2023, SRM Inc acquired SRM Ltd. The acquisition of SRM Ltd by SRM Inc has been accounted for as a Reverse Acquisition (see Basis of Presentation below). The combined SRM Inc and SRM Ltd are collectively referred to as the Company or SRM.
Previous wording
On December 9, 2022, we entered into a stock exchange agreement (the “Exchange Agreement”) with Jupiter Wellness, Inc. (“Jupiter”) to govern the separation of our business from Jupiter. On May 26, 2023, we amended and restated the Exchange Agreement (the “Share Exchange”) to include additional information regarding the distribution and the separation of our business from Jupiter. The separation as set forth in the Share Exchange with Jupiter closed August 14, 2023. Pursuant to the Share Exchange, on May 31, 2023, we issued 6,500,000 shares of our common stock (representing 79.3% of our outstanding shares of common stock) to Jupiter in exchange for 2 ordinary shares of SRM Ltd (representing all of the issued and outstanding ordinary shares of SRM Ltd). As of March 31, 2024, Jupiter owns approximately 35% shares of our common stock.
Current wording
On December 9, 2022, we entered into a stock exchange agreement (the “Exchange Agreement”) with Jupiter Wellness, Inc. (“Jupiter”) to govern the separation of our business from Jupiter. On May 26, 2023, we amended and restated the Exchange Agreement (the “Share Exchange”) to include additional information regarding the distribution and the separation of our business from Jupiter. The separation as set forth in the Share Exchange with Jupiter closed August 14, 2023. Pursuant to the Share Exchange, on May 31, 2023, we issued 6,500,000 shares of our common stock (representing 79.3% of our outstanding shares of common stock) to Jupiter in exchange for 2 ordinary shares of SRM Ltd (representing all of the issued and outstanding ordinary shares of SRM Ltd). Effective as of September 15, 2023, Jupiter changed its name to Safety Shot, Inc. (“Safety Shot”). As of November 12, 2024, Safety Shot owned 3,436,005 shares of our common stock representing 24.8% of our issued and outstanding shares of common stock.
Previous wording
The accompanying 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 acquisition of SRM Ltd and SRM Inc occurred on August 14, 2023. The financial statements are prepared using Reverse Acquisition Accounting and as such, for legal purposes SRM Inc was the acquiring company and for GAAP accounting, SRM Ltd was the acquiring company. Therefore, the financial statements are presented using the historical financial statements of SRM Ltd.. The combined SRM Inc and SRM Ltd are collectively referred to as the Company or SRM.
Current wording
The accompanying 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 acquisition of SRM Ltd by SRM Inc occurred on August 14, 2023. The financial statements are prepared using Reverse Acquisition Accounting and as such, for legal purposes SRM Inc was the acquiring company and for GAAP accounting, SRM Ltd was the acquiring company. Therefore, the financial statements are presented using the historical financial statements of SRM Ltd. The combined SRM Inc and SRM Ltd are collectively referred to as the “Company” or “SRM.”
Previous wording
The accompanying 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 merger of SRM Ltd and SRM Inc occurred on August 14, 2023. The financial statements are prepared using Reverse Acquisition Accounting and as such, for legal purposes SRM Inc was the acquiring company and for GAAP accounting, SRM Ltd was the acquiring company. Therefore, the financial statements are presented using the historical financial statements of SRM Ltd and 6,500,000 shares of common stock owned by Jupiter. The combined SRM Inc and SRM Ltd are collectively referred to as the “Company” or “SRM.”
Current wording
The accompanying 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 acquisition of SRM Ltd by SRM Inc occurred on August 14, 2023. The financial statements are prepared using Reverse Acquisition Accounting and as such, for legal purposes SRM Inc was the acquiring company and for GAAP accounting, SRM Ltd was the acquiring company. Therefore, the financial statements are presented using the historical financial statements of SRM Ltd. The combined SRM Inc and SRM Ltd are collectively referred to as the Company or SRM.
Previous wording
The Company’s deferred tax asset at June 30, 2024 and December 31, 2023 consisted of net operating loss carry forwards calculated using effective tax rates (20.6% average of China and US rates) equating to approximately $957,375 and $497,655 respectively, less a valuation allowance in the amount of approximately $954,375 and $497,655, respectively. Because of the Company’s lack of earnings history, the deferred tax asset has been fully offset by a valuation allowance at June 30, 2024 and December 31, 2023.
Current wording
The Company’s deferred tax asset at September 30, 2024 and December 31, 2023 consisted of net operating loss carry forwards calculated using effective tax rates (20.6% average of China and US rates) equating to approximately $1,177,676 and $497,655 respectively, less a valuation allowance in the amount of approximately $1,177,676 and $497,655, respectively. Because of the Company’s lack of earnings history, the deferred tax asset has been fully offset by a valuation allowance at September 30, 2024 and December 31, 2023.
Previous wording
The Company had sales of $1,507,927 and $2,341,955 for the three months ended June 30, 2024 and 2023. The decrease in sales is due to declines in attendance at our customers theme parks. Gross margins were reasonably consistent at 21.5% for the three months ended June 30, 2024 versus 21.7% for June 30, 2023.
Current wording
The Company had sales of $876,392 and $1,128,062 for the three months ended September 30, 2024 and 2023. The decrease in sales is due to declines in attendance at our customers theme parks. Gross margins were slightly higher at 22.4% for the three months ended September 30, 2024 versus 20.3% for September 30, 2023.
Previous wording
Operating expenses totaled $2,729,695 and $509,656 for the six months ended June 30, 2024 and 2023, respectively. Operating expenses for the six months ended June 30, 2024 included (i) marketing expenses of $32,251, (ii) legal and professional fees of $717,637, (iii) rent and utilities of $17,581, (iv) depreciation of $7,246, (v) general and administrative expenses of $792,932 and (vi) stock based compensation of $1,162,048. Operating expenses for the six months ended June 30, 2023 included (i) marketing expenses of $11,470, (ii) legal and professional fees of $42,270, (iii) rent and utilities of $4,057, (iv) depreciation of $1,485, (v) general and administrative expenses of $450,374 and (vi) no stock based compensation. The increase in expenses is a result of being a stand-alone public company which includes all of the additional costs related to a small public company during 2024 versus being a wholly owned subsidiary of a larger company in 2023.
Current wording
Operating expenses totaled $1,328,851 and $1,717,777 for the three months ended September 30, 2024 and 2023, respectively. Operating expenses for the three months ended September 30, 2024 included (i) marketing expenses of $7,083, (ii) legal and professional fees of $656,900, (iii) rent and utilities of $16,885, (iv) depreciation and amortization of $28,908, (v) general and administrative expenses of $416,575 and (vi) stock based compensation of $202,500. Operating expenses for the three months ended September 30, 2023 included (i) marketing expenses of $281, (ii) legal and professional fees of $1,233,519, (iii) rent and utilities of $5,199, depreciation of $2,279, (v) general and administrative expenses of $476,499 and (vi) no stock based compensation. The decrease in expenses is a result of the initial costs of “going public” in the third quarter of 2023 which were greater than the increased investors relation costs of being a public company.
Previous wording
Net losses were $520,971 for the three months June, 2024 compared to net income of $228,022 in 2023.
Current wording
Net losses were $1,128,872 for the three months ended September 30, 2024 compared to net income of $1,486,749 for the same period in 2023.
Previous wording
The Company had sales of $2,514,284 and $3,428,843 for the six months ended June 30, 2024 and 2023. The decrease in sales is due to declines in attendance at our customers’ theme parks. Gross margins were lower than expected in the first quarter of 2024 due to increased manufacturing costs which decreased our six months’ margin to 19.4% compared to 21.7% for the six months ended June 30, 2023.
Current wording
The Company had sales of $3,390,676 and $4,556,905 for the nine months ended September 30, 2024 and 2023. The decrease in sales is due to declines in attendance at our customers’ theme parks. Gross margins were lower than expected in the first quarter of 2024 due to increased manufacturing costs which decreased our nine months’ margin to 20.2% compared to 21.4% for the nine months ended September 30, 2023.
Previous wording
Operating expenses totaled $851,142 and $258,072 for the three months ended June 30, 2024 and 2023, respectively. Operating expenses for the three months ended June 30, 2024 included (i) marketing expenses of $11,848, (ii) legal and professional fees of $274,000, (iii) rent and utilities of $7,935, (iv) depreciation of $4,359, (v) general and administrative expenses of $413,407 and (vi) stock based compensation of $139,593. Operating expenses for the three months ended June 30, 2023 included (i) marketing expenses of $2,019, (ii) legal and professional fees of $42,270, (iii) rent and utilities of $2,820, (iv) depreciation of $902, (v) general and administrative expenses of $210,061 and (vi) no stock based compensation. The increase in expenses is a result of being a stand-alone public company which includes all of the additional costs related to a small public company during 2024 versus being a wholly owned subsidiary of a larger company in 2023.
Current wording
Operating expenses totaled $4,058,546 and $2,227,432 for the nine months ended September 30, 2024 and 2023, respectively. Operating expenses for the nine months ended September 30, 2024 included (i) marketing expenses of $39,334, (ii) legal and professional fees of $1,374,537, (iii) rent and utilities of $34,466, (iv) depreciation and amortization of $36,154, (v) general and administrative expenses of $1,209,507 and (vi) stock based compensation of $1,364,548. Operating expenses for the nine months ended September 30, 2023 included (i) marketing expenses of $11,750, (ii) legal and professional fees of $1,275,789, (iii) rent and utilities of $9,256, (iv) depreciation of $3,764, (v) general and administrative expenses of $926,873 and (vi) no stock based compensation. The increase in expenses is a result of being a stand-alone public company which includes all of the additional costs related to a small public company during 2024 versus being a wholly owned subsidiary of a larger company in 2023.
Previous wording
During the three months ended June 30, 2024, the Company generated net interest income of $5,505 as a result of higher cash balances in 2024 due to the Company’s IPO in 2023 versus a net interest expense of $21,927 in 2023 which was due to interest bearing loans to its Parent prior to the Company’s IPO.
Current wording
During the nine months ended September 30, 2024, the Company generated net interest income of $13,968 as a result of higher cash balances in 2024 due to the Company’s IPO in 2023 versus a net interest expense of $42,589 in 2023 which was due to interest bearing loans to its Parent prior to the Company’s IPO.
Previous wording
Net losses were $2,230,975 for the six months June 30, 2024 compared to net income of $190,020 in 2023.
Current wording
Net losses were $3,359,847 for the nine months September 30, 2024 compared to net loss of $1,296,729 in 2023.
Previous wording
Pursuant to the IPO, the Company sold 1,250,000 shares of common stock at a price of $5.00 per share, resulting in gross proceeds to the Company of approximately $6.25 million. Net proceeds to the Company, after deducting underwriting discounts and commissions and offering expenses paid by the Company, were approximately $5.3 million. All shares sold in our IPO were registered pursuant to the Registration Statement, declared effective by the SEC on August 14, 2023. EF Hutton acted as lead book-running manager for the offering and Dominari Securities LLC acted as co-manager for the offering. The underwriters did not exercise their option to purchase up to an additional 187,500 shares of common stock. The Company paid the underwriters an underwriting discount of eight percent (8%) of the amount raised in the offering. Additionally, as partial consideration for services rendered in connection with the offering, the Company issued EF Hutton warrants to purchase an aggregate of 57,500 shares of common stock, representing 4.0% of the aggregate shares sold in the offering. The warrants are exercisable at $6.00 per share, which represents 120% of the initial public offering price per share in the IPO, at any time and from time to time, in whole or in part, commencing on February 10, 2024, 180 days from the effective date of the Registration Statement, and expiring on August 14, 2028. The Company has applied the net proceeds from the IPO for the development of licensed goods, expansion of SRM products, increased deposits, accounts receivable and inventory, marketing, advertising, and trade shows, general administrative expenses, repayment of a promissory note payable to Jupiter Wellness, and general corporate purposes.
Current wording
Prior to our Initial Public Offering (“IPO”), our operations participated in cash management and funding arrangements managed by Safety Shot. Pursuant to the IPO, which went effective on August 14, 2023, the Company sold 1,250,000 shares of its common stock at a price of $5.00 per share, resulting in gross proceeds to the Company of approximately $6.25 million. Net proceeds to the Company, after deducting underwriting discounts and commissions and offering expenses paid by the Company and the repayment of a $1,538,520 loan from Safet Shot, were $3,629,805. These proceeds have been adequate to finance the operations of the Company and at September 30, 2024 and December 31, 2023 the Company had $346,327 and $4,078,736, respectively in working capital.
Rearranged current paragraphs (2)
Current report — wording carried from elsewhere
During the three months ended September 30, 2024, the Company generated net interest income of $3,461 versus $1,678 of net interest income during the three months ended September 30, 2023.
Current report — wording carried from elsewhere
Nine months ended September 30, 2024 compared to 2023
Rearranged previous paragraphs (2)
Previous report — wording carried elsewhere
Six months ended June 30, 2024 compared to 2023
Previous report — wording carried elsewhere
During the six months ended June 30, 2024, the Company generated net interest income of $10,507 as a result of higher cash balances in 2024 due to the Company’s IPO in 2023 versus a net interest expense of $44,167 in 2023 which was due to interest bearing loans to its Parent prior to the Company’s IPO.