UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2021

☐	TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______________ to ______________

Commission File Number 001-39569

JUPITER WELLNESS, INC.

(Exact name of registrant as specified in charter)

Delaware		83-2455880
(State or other jurisdiction		(IRS Employer
of incorporation or organization)		Identification No.)

1061 E. Indiantown Road, Suite 110
Jupiter, FL		33477
(Address of principal executive offices)		(Zip Code)

(561) 244-7100

(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
Common Stock, $.001 par value per share	JUPW	Nasdaq
Warrants to purchase shares of common stock	JUPWW	Nasdaq

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. ☒ YES ☐ 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). ☒ YES ☐ 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	☐
Non-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 ☒ NO

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

As of August 13, 2021, there were 22,927,465 shares of the registrant’s common stock outstanding.

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	11

Item 4.	Controls and Procedures	11

PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	12

Item 1A.	Risk Factors	13

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	13

Item 3.	Defaults Upon Senior Securities	13

Item 4.	Mine Safety Disclosures	13

Item 5.	Other Information	13

Item 6.	Exhibits	13

SIGNATURES		14

Table of Contents

PART I - FINANCIAL INFORMATION

This Quarterly Report on Form 10-Q includes the accounts of Jupiter Wellness, Inc., a Delaware corporation (“Jupiter Wellness”). References in this Report to “we”, “our”, “us” or the “Company” refer to Jupiter Wellness, 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.

Table of Contents

Item 1. Financial Statements

Jupiter Wellness, Inc.

Condensed Consolidated Balance Sheets

As of June 30, 2021 and December 31, 2020

	Six Months ended June 30,			Year ended December 31,
	2021			2020
	(Unaudited)			(audited)
Assets
Cash	$	3,940,968		$	4,262,168
Due from third party
Inventory		255,062			225,924
Account receivable		415,123			255,111
Prepaid expenses and deposits		191,256			215,904
Right of use assets		-			29,157
Other assets

Total current assets		4,802,409			4,988,264

Intangible assets		498,694			559,800
Goodwill		941,937			941,937
Transportation Equipment		81,621			35,592
Total assets	$	6,324,661		$	6,525,593

Liabilities and Shareholders’ Equity

Accounts Payable	$	398,172		$	688,835
Convertible notes, net of discounts		2,004,818			525,000
Contingent note payable issued in acquisition		-			691,500
Current portion of lease liability		-			23,754
Accrued liabilities		120,236			112,001
Covid - 19 SBA Loan		84,354			84,578
Total current Liabilities		2,607,580			2,125,668

Long-term portion lease liability		-			6,384
Total liabilities		2,607,580			2,132,052

Preferred stock, $0.001 par value, 100,000 shares authorized of which none are issued and outstanding
Common stock, $.001 par value, 100,000,000 shares authorized, of which 11,496,032 and 10,655,833 shares issued and outstanding as of June 30, 2021 and December 31, 2020		11,496			10,656
Additional paid-in capital		16,998,373			11,657,286
Common stock payable		328,450			-
Accumulated deficits		(13,621,238	)		(7,274,401	)
Total Shareholders’ Equity		3,717,081			4,393,541

Total Liabilities and Shareholders’ Equity	$	6,324,661		$	6,525,593

The accompanying notes are an integral part of these unaudited financial statements

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Jupiter Wellness, Inc.

Condensed Consolidated Statement of Operations

For the Three and Six Months Ended June 30, 2021 and 2020

(Unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021			2020
Revenue
Sales	$	595,088		$	457,667		$	643,934		$	575,394
Cost of Sales		413,913			236,794			437,365			336,697
Gross profit		181,175			220,873			206,569			238,697

Operating expense
General and administrative expenses		3,839,316			618,113			6,727,610			1,100,366

Other income / (expense)
Interest income		871			69			2,149			915
Interest expense		(493,804	)		(36,204	)		(497,145	)		(54,419	)
Other income / (expense)		—			—			669,200			—
Total other income (expense)		(492,933	)		(36,135	)		174,204			(53,504	)

Net (loss)	$	(4,151,074	)	$	(433,375	)	$	(6,346,837	)	$	(915,173	)

Net (loss) per share:
Basic	$	(0.37	)	$	(0.06	)	$	(0.56	)	$	(0.13	)

Weighted average number of shares
Basic		11,359,797			6,983,000			11,265,828			6,983,000

The accompanying notes are an integral part of these unaudited financial statements

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Jupiter Wellness, Inc.

Condensed Statement of Changes in Stockholders’ Equity

For the Six Months Ended June 30, 2021 and Year ended December 31, 2020

(Unaudited)


	Common Stock				Common Stock			Additional Paid-In			Accumulated
	Shares		Amount		Payable			Capital			Deficits			Total
Balance, December 31, 2019		6,893,000	$	6,893	$	325,000		$	1,032,511		$	(985,196	)	$	379,208

Stock options issued in acquisition		—		—		—			156,612			—			156,612
Stock options issued to Officers and employees		—		—		—			251,526			—			251,526
Common stock payable issued as compensation		700,000		700		(325,000	)		549,300			—			225,000
Shares issued in Initial Public Offering (“IPO”)		933,333		933		—			5,860,353			—			5,861,286
Common stock issued upon exercise of warrants		1,146,000		1,146		—			487,854			—			489,000
Common stock issued for services		475,000		475		—			1,761,650			—			1,762,125
Common stock issued upon conversion of notes		300,000		300		—			349,700			—			350,000
Common stock issued in debt settlement		8,500		9		—			8,491			—			8,500
Common stock issued in acquisition		200,000		200		—			1,039,800			—			1,040,000
Common stock issued in Endorsement Agmt		—		—		—			159,489			—			159,489
Net Loss		—		—		—			—			(6,289,205	)		(6,289,205	)
Balance, December 31, 2020		10,655,833	$	10,656	$	—		$	11,657,286		$	(7,274,401	)	$	4,393,541

Common stock payable		—		—		328,450			—			—			328,450
Common stock issued upon conversion of notes		186,832		187		—			560,309			—
Common stock issued for services		420,000		420		—			2,013,080			—			2,013,500
Common stock issued upon exercise of cashless options		222,367		222		—			(222	)		—			—
Common stock issued as compensation		11,000		11		—			77,209			—			77,220
Stock options granted to Officers and Directors		—		—		—			1,244,180			—			1,244,180
Fair value of warrants issued and beneficial conversion feature in connection with Convertible Promissory Notes		—		—		—			1,446,531			—			1,446,531
Net Loss		—		—		—			—			(6,346,837	)		(6,346,837	)
Balance, June 30, 2021 (Unaudited)		11,496,032	$	11,496	$	328,450		$	16,998,373		$	(13,621,238	)	$	3,717,081

The accompanying notes are an integral part of these financial statements

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Jupiter Wellness, Inc.

Condensed Consolidated Statement of Cash Flows

For the Six Months Ended June 30, 2021 and 2020

(Unaudited)


	For the Six Months Ended March 31,
	2021			2020
Cash flows from operating activities:
Net (loss)	$	(6,346,837	)	$	(915,173	)
Stock Based compensation		3,663,350			47,159
Gain on settlement		(669,200	)		-
Depreciation & Amortization		44,423			67,591
Amortization of debt discount		458,849			-
Adjustments to reconcile net income to net cash provided by (used in) operating activities

Due from third party		-			400
Prepaid expenses		24,648			(25,000	)
Right of Entry asset		29,157			10,152
Accounts receivable		(160,012	)		(44,572	)
Inventory		(29,138	)		(36,857	)
Security deposits and other assets		-			(1,390	)
Accounts payable		(290,663	)		(2,953	)
Accrued liabilities		43,507			61,203
Lease liability		(30,138	)		(9,905	)
Legal fees		25,000			-
Net cash (used in) operating activities		(3,237,054	)		(849,345	)

Cash flows from investing activities:
Purchase of fixed assets		(51,646	)		(44,000	)
Net cash paid in acquisition		-			(245,391	)
Net cash (used in) investing activities		(51,646	)		(289,391	)

Cash flows from financing activities:
Proceeds from convertible debt		2,967,500			825,000
Covid -19 SBA Loan		-			84,578
Net cash provided by financing activities		2,967,500			909,578

Net increase (decrease) in cash and cash equivalents		(321,200	)		(229,158	)

Cash and cash equivalents at the beginning of the period		4,262,168			531,026

Cash and cash equivalents at the end of the period	$	3,940,968		$	301,868

SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest	$	-		$	-
Cash paid for income taxes	$	-		$	-
Acquisition of Magical Beasts, LLC (see note 12)	$	-		$	1,111,648
Common stock issued in conversion of promissory notes	$	560,496		$	-
Fair value of warrants issued and beneficial conversion feature in connection with convertible promissory notes	$	1,446,531		$	-
Cashless exercise of options	$	222		$	-

The accompanying notes are an integral part of these unaudited financial statements

F-4

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JUPITER WELLNESS, INC.

Notes to Financial Statements

For the Six Months Ended June 30, 2020

and Year Ended December 31, 2020

Note 1 - Organization and Business Operations

Jupiter Wellness, Inc. (the “Company”) was formed on October 24, 2018 as CBD Brands, Inc. under the laws of the State of Delaware, and is headquartered in Jupiter, Florida. The Company is a leading cutting-edge wellness brand dedicated to exploring and developing multiple therapeutic and medical use for Cannabidiol (CBD) in the treatment of various ailment and diseases such as cancer, arthritis, anxiety, insomnia, psoriasis, chronic pain amongst others.

Going Concern Consideration

As of June 30, 2021 and December 31, 2020, the Company had $3,940,968 and $4,262,168 in cash, an accumulated deficit of $13,621,238 and $7,274,401 and cash flow used in operations of $3,237,054 for the six months ended June 30, 2021 and $2,732,736 for the year ended December 31, 2020. The Company has incurred and expects to continue to incur significant costs in pursuit of its expansion and development plans. These conditions have raised doubt about the Company’s ability to continue as a going concern as noted by our Auditors, M&K CPAS, PLLC. Subsequent to June 30, 2021, the Company closed an underwritten public offering (the “Offering”) of 11,066,258 shares (the “Company Offering Shares”) of common stock, par value $0.001 per share and warrants (the “Warrants”) to purchase up to 11,607,142 shares of Common Stock. The Warrants will be exercisable immediately upon issuance with an exercise price of $2.79 per share and will expire on the fifth anniversary of the original issuance date. The net proceeds from the Offering, after deducting underwriting discounts and commissions and Offering expenses, were $28,318,314. As a result, Management believes that the Company has sufficient capital to execute its business plan and the need for a going concern opinion has been alleviated.

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, Magical Beasts, LLC, a Nevada limited liability company and SRM Entertainment, Limited, a Hong Kong private limited company. All intercompany accounts and transactions have been eliminated.

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.

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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 no cash equivalents as of June 30, 2021.

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.

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.

	June 30, 2021			June 30, 2020
	For the Six			For the Six
	Months Ended			Months Ended
	June 30, 2021			June 30, 2020
Numerator:
Net (loss)	$	(6,346,837	)	$	(915,173	)

Denominator:
Denominator for basic earnings per share - Weighted-average common shares issued and outstanding during the period		11,265,828			6,983,000
Denominator for diluted earnings per share		11,265,828			6,983,000
Basic (loss) per share	$	(0.56	)	$	(0.13	)
Diluted (loss) per share	$	(0.56	)	$	(0.13	)

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.

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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 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.

Our revenue currently is generated from one general product category of health care products with one performance obligation and geographically there are no specific concentrations of our customer base to disaggregate our revenue stream.

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 December 31, 2020, the Company recorded an allowance of $118,761 against accounts receivable acquired in connection with the acquisition of SRM Entertainment and as of June 30, 2021, the Company had recognized no additional 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 six months ended June 30, 2021 and year ended December 31, 2020 and the cumulative translation gains and losses as of June 30, 2021 and December 31, 2020 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 $195,716 and $63,813 for the six months ended June 30, 2021 and 2020, respectively.

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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 nonemployees for goods or services. Consequently, the accounting for share-based payments to nonemployees and employees will be substantially aligned.

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, 2020 consists of net operating loss carry forwards calculated using federal and state effective tax rates equating to approximately $936,311 less a valuation allowance in the amount of approximately $936,311. Because of 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, 2020.

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.

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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.

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.

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Note 3 - Accounts Receivable

As of June 30, 2021 and December 31, 2020, the Company had accounts receivable of $415,123 (net of an allowance of $118,761) and $255,111, respectively.

Note 4 - Prepaid Expenses and Deposits

As of June 30, 2021 and December 31, 2020, the Company had prepaid expenses of $191,256 and $215,904, respectively consisting primarily of deposits and prepayments on purchase orders.

Note 5 - Inventory

As of June 30, 2021 and December 31, 2020, the Company had inventory of $255,062 and $225,924, consisting of finished goods, raw materials and packaging supplies.

Note 6 - Intangible Assets

In connection with the acquisition of Magical Beasts (see Note 12 below), the Company allocated the purchase price to intangible assets as follows:


Tradenames & trademarks	$	151,800
Customer base		651,220
Non-compete		154,500
Goodwill		308,690
Total	$	1,266,210

The Non-compete has an estimated life of two years, the Customer base has an estimated life of fifteen years and the Tradenames & trademarks and Goodwill have indefinite lives and will be reviewed at each subsequent reporting period to determine if the assets have been impaired. At December 31, 2020, Goodwill was analyzed by management, assisted by a third party valuation company, and determined that the Goodwill associated with the acquisition of Magical Beasts has been impaired and as a result the Company recognized a charge to earnings of $308,690 in the year ended December 31, 2020. Additionally, the Intangibles were analyzed by management, assisted by a third-party valuation company, and determined that the Intangible associated with the acquisition of Magical Beasts had also been impaired and as a result the Company recognized an additional charge to earnings of $731,628 in the year ended December 31, 2020. The balance of the Intangible Assets at June 30, 2021 and December, 31, 2020 attributable to Magical Beasts totals $97,836 and $122,501, respectively.

In connection with the acquisition of SRM Entertainment, Limited (see Note 13 below), the Company allocated the purchase price to intangible assets as follows:


Distribution Agreements	$	437,300
Goodwill		941,937
Total	$	1,379,237

The Distribution Agreements have an estimated life of six years and Goodwill has an indefinite life and will be reviewed at each subsequent reporting period to determine if the assets have been impaired.

Amortization for the six months ended June 30, 2021 totaled $36,442 and amortization for the year ended December 31, 2020 was $18,221. The balance of the Intangible Assets at June 30, 2021 and December, 31, 2020 attributable to SRM totals $400,858 and $419,079, respectively.

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Note 7 - Convertible Notes Payable – Related Parties

The 2019 Notes:

On July 25, 2019, the Company issued a Convertible Promissory Note for $50,000 to its Chairman, with a term of one year, an annual interest rate of ten percent (10%), which is non compounded and payable semi-annually, and convertible into the Company’s common stock at any time by the holder at a conversion price of $0.25 per share. The conversion feature was considered the fair value of the Company’s common stock based on the arm’s length equity transactions since there was no open market for the Company’s common stock when issued. As a result, the Company determined that the conversion features contained in this Convertible Promissory Note should carry neither beneficial conversion feature nor derivative liabilities. This note was converted into 200,000 shares of the Company’s common stock along with the cash payment of $7,028 for the accrued interest in December 2020.

On December 31, 2019, the Company issued a Convertible Promissory Note for $250,000 to a related party, with a term of one year, an annual interest rate of eight percent (8%), which is non compounded and payable semi-annually, and convertible into the Company’s common stock at any time by the holders at a conversion price of $3.00 per share, which was considered the fair value of the Company’s common stock based on the arm’s length equity transactions since there was no open market for the Company’s common stock. As a result, the Company determined that the conversion features contained in the Note should carry neither beneficial conversion feature nor derivative liabilities. The note and accrued interest were paid in full in November 2020 with cash payments totaling $267,178.

The 2020 Notes:

During the year ended December 31, 2020, the Company issued nine convertible promissory notes totaling $1,075,000 (the “2020 Notes”) as follows:

Amount			Dated	Conversion Rate

$	25,000	(1)	01/02/20	$	3.00

	250,000	(2)	01/23/20		3.00

	300,000	(1)	03/09/20		3.00

	50,000	(2)	05/01/20		3.00

	50,000	(2)	05/27/20		3.00

	50,000	(2)	05/27/20		3.00

	100,000	(3)	06/24/20		5.00

	125,000	(4)	09/11/20		5.00

	125,000	(4)	09/16/20		5.00

$	1,075,000

1.	Issued to a non-affiliate.
2.	Issued to a Secured and Collateralized Lending LLC, an entity run by a consultant of the Company.
3.	Issued to BBBY, Ltd, an LLC of which Byron Young, a Company Director, is a manager and a member.
4.	Issued to Asia Pacific Partners Inc., an entity run by a consultant of the Company.

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In November 2020, the $300,000 note was converted into 100,000 shares of the Company’s common stock along with a payment of $16,067 for accrued interest. Additionally, in November 2020 the $250,000 note plus accrued interest was paid in full by cash payments totaling 267,177 and the two $125,000 notes plus accrued interest of $2,778 were paid in full for total cash payments of $252,778.

At December 31, 2020, the Company had a total of $525,000 plus accrued interest of $32,856 due on convertible promissory notes. In January 2021, the Company received conversion notices from all of the note holders to convert the $525,000 principal balance of its convertible promissory notes plus $35,496 accrued interest through the date of conversion, into 186,832 shares of the Company’s common stock ($3.00 per share conversion price). The shares were issued in January 2021.

The 2021 Notes:

In May 2021, the Company issued three Convertible Promissory Notes totaling $3,150,000 ($2,500,000, $500,000 and $150,000) (the “2021 Notes”). The 2021 Notes were issued with an Original Issue Discount (“OID”) of five percent (5%), a term of six months, an annual interest rate of eight percent (8%) and convertible into shares of the Company’s common stock at a conversion price of $6.00 per share. Additionally, the Company issued a total of 525,000 warrants in connection with the 2021 Notes. 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 as follows:

							Market
							Price
Reporting	Relative		Term		Exercise		on Grant		Volatility			Risk-free
Date	Fair Value		(Years)		Price		Date		Percentage			Rate
05/10/2021	$	1,026,300		5	$	6.00	$	4.27		299	%		0.0080
05/05/2021	$	203,532		5	$	6.00	$	4.21		299	%		0.0080
05/19/2021	$	62,033		5	$	6.00	$	4.30		312	%		0.0089

Net carrying value of the 2021 Notes at June 30 2021 is summarized as follows:

Schedule of Net Carrying Value


Principal balance at June 30, 2021	$	3,150,000
Unamortized Original issues discount		(111,184	)
Unamortized Warrant discount and beneficial conversion feature		(1,033,988	)
Carrying value of 202 Notes	$	2,004,818

The following table sets forth a summary of the principal balances of the Company’s convertible promissory notes activity for the six months ended June 30, 2021 and year ended December 31, 2020:

Principal Balance, December 31, 2019	$	300,000
2020 Notes		1,075,000
Conversions of Notes		(350,000	)
Payments on Notes		(500,000	)
Balance, December 31, 2020		525,000
Conversions of Notes		(525,000	)
2021 Notes		3,150,000
Principal Balance, June 30, 2021	$	3,150,000

Subsequent to June 31, 2021, the 2021 Notes were paid in full.

The Company recorded interest expense of $34,389 and $74,326 related to the Convertible Promissory Notes during the six months ended June 30, 2020 and year ended December 31, 2020.

Note 8 - Note payable issued in acquisition

In connection with the Acquisition of Magical Beasts, LLC (see Note 12), the Company issued a non-interest bearing $1,000,000 promissory note (“Note”), due upon the earlier of i) the closing of a public offering or ii) December 31, 2020. The note has been valued at its discounted amount of $950,427. During the year ended December 31, 2020, the Company recognized $49,573 of interest expense for the accretion of the discount.

In August 2020, a Nevada court imputed a judgement of Ms. Whitley (the former owner of Magical Beasts, LLC) to Magical Beasts (see Note 14 Legal proceedings) and advised the Company that before paying any funds under the note to Ms. Whitley, the Company must first satisfy the judgement to the Plaintiff. In October 2020, the Company, Ms. Whitley and the Plaintiff in the judgement action against Ms. Whitley reached an agreement whereby Ms. Whitley agreed that of the $1,000,000 payable to Ms. Whitley, the first $336,450 would be paid to the Plaintiff which the Company has paid in full with a cash payment of $300,000 and the issuance of 8,500 shares of its common stock leaving a balance of $691,500 at December 31, 2020.

In January 2021, the Company entered into an Omnibus Amendment to the original Purchase Agreement (see Note 12) which satisfied the Company’s obligation on the Note.

Note 9 – Covid-19 SBA Loans

During the year ended December 31, 2020, the Company applied for and received $28,878 under the Federal Paycheck Protection Program (“PPP”) and $55,700 unde

SEC Form 10-Q filed by Jupiter Wellness, Inc.