Safety Shot(SHOT) - 2021 Q4 - Annual Report

Part I Business Jupiter Wellness, Inc. develops and markets CBD-based medical therapeutics and wellness products, diversifying into amusement park merchandise through the SRM Entertainment acquisition - The company's core business is developing CBD-based medical therapeutics and wellness products, with a clinical pipeline for skin conditions like eczema, burns, and skin cancer[16][24] - Key proprietary product lines include CaniSun (sun care), CaniSkin (skin care), and CaniDermRX (dermatological treatments)[16] - A clinical trial for JW-100 (a CBD and aspartame combination) for eczema showed that 50% of subjects achieved clear or almost clear skin, a statistically significant result (p=0.028) compared to CBD-only and placebo arms[17] - In November 2020, the company acquired SRM Entertainment, a supplier of exclusive products to the amusement park industry, to diversify operations and create new sales channels for its sun care products[22][28][48] - The company is actively pursuing intellectual property protection, having filed patents for its CBD/Aspartame combination (CaniDermRX) and CBD-infused sunscreen formulations (CaniSun)[39][60][61] Research and Development Expenses (YoY) | Fiscal Year | R&D Expense | | :--- | :--- | | 2021 | $1,079,362 | | 2020 | $308,367 | - The business operates under the regulatory framework of the 2018 Farm Bill, which legalized hemp-derived products with less than 0.3% THC, but remains subject to evolving FDA regulations regarding CBD products[75][76][86] Risk Factors The company faces significant risks from evolving CBD regulations, intense competition, costly and uncertain FDA approval processes, financial instability, and the adverse impact of the COVID-19 pandemic on its SRM subsidiary - Significant risk exists due to the uncertain and evolving regulatory environment for CBD products, with potential for conflicting federal, state, and FDA regulations that could harm the business[98][99][100] - The company's business is highly dependent on receiving FDA and other governmental approvals for its therapeutic product candidates, a process that is expensive, lengthy, and uncertain[119] - The COVID-19 pandemic has had a material adverse effect on the business, particularly its subsidiary SRM, whose revenue from the amusement park industry fell from over $7 million in 2019 to $2.7 million in 2021[156] - The company's auditors previously expressed doubt about its ability to continue as a going concern due to significant costs and accumulated deficits, although management believes recent financing has alleviated this[166] - There are risks associated with integrating the SRM acquisition, which could challenge management resources and disrupt business momentum[157] - The company faces intellectual property risks, including the potential for litigation, the cost of enforcement, and the possibility that its proprietary rights may not be sufficient to prevent infringement[171][175][179] Unresolved Staff Comments The company reports no unresolved staff comments - The company has no unresolved staff comments from the SEC[197] Properties The company leases its principal executive office in Jupiter, Florida, and does not own any real estate - The company's principal executive office is located at 1061 E. Indiantown Rd., Ste. 110, Jupiter, FL 33477[198] - The company does not own any real property and leases its office space[93][198] Legal Proceedings The company is engaged in a lawsuit against Robert Koch for alleged extortion, seeking $10 million in damages, and settled a separate legal matter involving its Magical Beasts LLC subsidiary - The company filed a lawsuit against Robert Koch and others alleging extortion, seeking $5 million in actual and $5 million in punitive damages, with a jury trial scheduled for no earlier than November 14, 2022[201] - A lawsuit related to a judgment against the former owner of subsidiary Magical Beasts LLC was settled, where the company agreed to pay $334,000 to the plaintiff on behalf of the former owner[202][203] - As part of an Omnibus Amendment related to the Magical Beasts settlement, the company recognized a gain of $669,200 from the forgiveness of debt and write-off of a non-compete agreement[204] Mine Safety Disclosures This section is not applicable to the company's operations - This item is not applicable to the company's operations[205] Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's common stock and warrants trade on NASDAQ, exhibiting volatility, and the company does not anticipate paying cash dividends, while having approved an equity incentive plan - The company's common stock trades on the NASDAQ under the symbol JUPW, and its warrants trade under JUPWW[208] 2021 Quarterly Stock Price Range | Quarter | High ($) | Low ($) | | :--- | :--- | :--- | | Q1 2021 | 7.98 | 4.56 | | Q2 2021 | 5.07 | 3.76 | | Q3 2021 | 4.61 | 1.36 | | Q4 2021 | 2.11 | 0.83 | - The company does not expect to pay any cash dividends on its common stock in the foreseeable future[213] - The Jupiter Wellness, Inc. 2021 Equity Incentive Plan was approved, authorizing up to 3,500,000 shares of common stock for equity awards to officers, directors, employees, and consultants[218][343] Selected Financial Data This section is not applicable as the company qualifies as a smaller reporting company - This section is not applicable as the company qualifies as a smaller reporting company[219] Management's Discussion and Analysis of Financial Condition and Results of Operations In 2021, revenue increased to $2.88 million, but net loss significantly widened to $28.1 million due to substantial operating expenses, including a $10 million impairment and $9.4 million in stock-based compensation Results of Operations (2021 vs. 2020) | Metric | 2021 | 2020 | | :--- | :--- | :--- | | Sales | $2,876,273 | $1,065,665 | | Gross Profit | $535,485 | $441,095 | | Total Expenses | $28,635,730 | $6,730,300 | | Net Loss | ($28,100,245) | ($6,289,205) | - The increase in revenue in 2021 is attributed to recovery from the negative impacts of COVID-19 in 2020, which had caused closures of beaches and theme parks[280] - Operating expenses in 2021 included significant one-time or non-cash charges: a $10 million impairment on a promissory note, $9.4 million in stock-based compensation, and a $300,000 impairment of intellectual property[282] - Legal and professional expenses rose to $3.1 million in 2021, primarily for due diligence on two proposed mergers and corporate advisory services[282] Net Loss Per Share (2021 vs. 2020) | Metric | 2021 | 2020 | | :--- | :--- | :--- | | Basic (loss) per share | ($1.69) | ($0.86) | | Diluted (loss) per share | ($1.69) | ($0.86) | Quantitative and Qualitative Disclosures About Market Risk This section is not applicable as the company qualifies as a smaller reporting company - This section is not applicable as the company qualifies as a smaller reporting company[288] Financial Statements and Supplementary Data This section presents the company's audited consolidated financial statements for 2021 and 2020, with the auditor's report highlighting critical audit matters regarding investment and note receivable valuations - The independent auditor's report identified two critical audit matters: the valuation and impairment analysis of a held-to-maturity investment in an unconsolidated entity, and the valuation and impairment analysis of a note receivable related to a future acquisition[388][389][390] Consolidated Balance Sheet Highlights (As of Dec 31) | Account | 2021 | 2020 | | :--- | :--- | :--- | | Cash | $11,754,558 | $4,262,168 | | Total Assets | $18,867,465 | $6,525,593 | | Total Liabilities | $2,265,046 | $2,132,052 | | Total Shareholders' Equity | $16,602,419 | $4,393,541 | Consolidated Statement of Cash Flows Highlights (Year Ended Dec 31) | Account | 2021 | 2020 | | :--- | :--- | :--- | | Net cash used in operating activities | ($7,567,645) | ($2,732,736) | | Net cash used in investing activities | ($13,146,597) | ($245,986) | | Net cash provided by financing activities | $28,206,632 | $6,709,864 | | Net increase in cash | $7,492,390 | $3,731,142 | - The 'going concern' issue noted in 2020 was alleviated in 2021 after the company raised net proceeds of $28.3 million from a public offering, providing sufficient capital to execute its business plan[404] - A $10 million Secured Promissory Note issued to Next Frontier Pharmaceuticals, Inc. (NFP) in December 2021 was fully impaired in the same year after NFP terminated the acquisition agreement in February 2022[445][532] Changes in and Disagreements With Accountants on Accounting and Financial Disclosure The company reports no changes in or disagreements with its accountants on accounting and financial disclosures - There were no disagreements with accountants on accounting and financial disclosures[290] Controls and Procedures As of December 31, 2021, management concluded that both disclosure controls and internal control over financial reporting were ineffective due to the small management team - Management concluded that the company's disclosure controls and procedures were ineffective as of the end of the period[292] - Management also concluded that the company's internal control over financial reporting was ineffective as of December 31, 2021, based on the COSO framework[294] - The ineffectiveness was attributed to the assessment and control of disclosure decisions being performed by a small team[292] - No changes in internal controls over financial reporting occurred during the fiscal year that materially affected, or are reasonably likely to materially affect, these controls[297] Other Information There is no other information to report in this section - None[299] Part III Directors, Executive Officers and Corporate Governance This section details the company's directors and executive officers, board composition, established committees, separation of CEO and Chairman roles, and adopted corporate governance guidelines - The company's key executive officers include Brian S. John (CEO), Douglas O. McKinnon (CFO), Richard Miller (Chief Compliance Officer), and Dr. Glynn Wilson (Chairman and Chief Science Officer)[301] - The Board of Directors has seven members, with four (Ms. Kaufman and Messrs. Melton, Alila, and Young) determined to be independent[317] - The Board has established an Audit Committee, a Compensation Committee, and a Nominating and Corporate Governance Committee, with memberships and chairmanships defined[319][320][322] - The roles of Chief Executive Officer and Chairman of the Board are separate, with Brian S. John as CEO and Dr. Glynn Wilson as Chairman[325] Executive Compensation This section details executive compensation for 2021 and 2020, including salaries, bonuses, and stock awards, and outlines employment agreements and the 2021 Equity Incentive Plan Summary Compensation Table (2021) | Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($) | All Other Comp ($) | Total ($) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Brian S. John, CEO | 2021 | 200,000 | 43,122 | 33,333 | 20,000 | 296,455 | | Richard Miller, CCO | 2021 | 151,042 | 43,122 | 16,667 | - | 230,830 | | Dr. Glynn Wilson, Chairman & CSO | 2021 | 121,875 | - | 225,000 | - | 366,875 | - Employment agreements for CEO Brian John and other executives were amended effective June 1, 2021, to increase base salaries and provide for severance payments upon termination without cause or change of control[333][335][338] - The 2021 Equity Incentive Plan was approved, reserving 3,500,000 shares of common stock for issuance as equity awards[343] Security Ownership of Certain Beneficial Owners and Management As of March 31, 2022, the company's directors and executive officers collectively beneficially owned approximately 30.55% of outstanding common stock, with CEO Brian S. John holding 13.74% Beneficial Ownership of Directors and Officers (as of March 31, 2022) | Name of Beneficial Owner | % of Shares Beneficially Owned | | :--- | :--- | | Brian S. John (CEO and Director) | 13.74% | | Richard Miller (COO and Director) | 5.79% | | Glynn Wilson (Chairman) | 7.20% | | All officers and directors (8 persons) | 30.55% | Certain Relationships and Related Transactions, and Director Independence The company engaged in related-party transactions, including convertible notes with CEO Brian S. John and Chairman Dr. Glynn Wilson, and a $2.9 million investment in Jupiter Wellness Sponsor LLC (JWSL), a SPAC sponsor - The company issued convertible promissory notes to entities affiliated with CEO Brian S. John and Chairman Dr. Glynn Wilson, which were subsequently paid in full or converted into common stock[357][358] - As of December 31, 2021, the company had invested $2,908,300 in Jupiter Wellness Sponsor LLC (JWSL), the sponsor of a SPAC named Jupiter Wellness Acquisition Corp. (JWAC), where the company's CEO, Brian John, is the managing member of JWSL and CEO of JWAC[365] Principal Accountant Fees and Services The company paid M&K CPAS audit fees of $86,260 in 2021 and $60,075 in 2020, with no other fees incurred Audit Fees Paid to M&K CPAS | Fiscal Year | Audit Fees ($) | | :--- | :--- | | 2021 | 86,260 | | 2020 | 60,075 | Part IV Exhibits, Financial Statement Schedules This section indexes all exhibits filed with the Form 10-K, including corporate documents, material contracts, and Sarbanes-Oxley Act certifications - Lists key corporate documents filed as exhibits, including the Second Amended and Restated Certificate of Incorporation (Exhibit 3.5) and Bylaws (Exhibit 3.3)[373] - Includes material contracts such as employment agreements with Brian John (10.8) and Richard Miller (10.9), and the Share Exchange Agreement for the SRM acquisition (10.15)[375] - Certifications by the CEO and CFO pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act are included as exhibits (31.1, 31.2, 32.1, 32.2)[375]