Tron Inc. 10-Q

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 March 31, 2025 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 001-41768 SRM ENTERTAINMENT, INC. (Exact name of registrant as specified in charter) Nevada 32-0686534 (State or other jurisdiction (IRS Employer of incorporation or organization) Identification No.) 941 W. Morse Blvd. Suite 100 Winter Park, FL 32789 (Address of principal executive offices) (Zip Code) (407) 230-8100 (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, $.0001 par value per share SRM 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 As of April 30, 2025, there were 17,243,610 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 4 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 12 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 12 Item 3 Defaults Upon Senior Securities 13 Item 4. Mine Safety Disclosures 13 Item 5. Other Information 13 Item 6. Exhibits 13 SIGNATURES 14 2 Table of Contents PART I - FINANCIAL INFORMATION This Quarterly Report on Form 10-Q includes the consolidated accounts of SRM Entertainment, Inc., a Nevada corporation and its subsidiaries. (“SRM”). References in this Report to “we”, “our”, “us” or the “Company” refer to SRM Entertainment, Inc. 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. We undertake no obligation to revise or update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this Quarterly Report on Form 10-Q. Readers are urged to carefully review and consider the various disclosures made throughout the entirety of this Quarterly Report on Form 10-Q, which attempts to advise interested parties of the risks and factors that may affect our businesses, financial condition, results of operations and prospects. 3 Table of Contents Item 1. Financial Statements SRM Entertainment, Inc. Page Consolidated Balance Sheets as of March 31, 2025 (Unaudited) and December 31, 2024 (Audited) F-2 Consolidated Statements of Operations for the Three Months Ended March 31, 2025 and 2024 (Unaudited) F-3 Consolidated Statements of Changes in Shareholders’ Equity (Deficit) for the Three Months Ended March 31, 2025 and 2024 (Unaudited) F-4 Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2025 and 2024 (Unaudited) F-5 Notes to the Financial Statements (Unaudited) F-6 F- 1 Table of Contents SRM Entertainment Inc. Consolidated Balance Sheets As of March 31, 2025 and December 31, 2024 March 31, December 31, 2025 2024 (Unaudited) (Audited) Assets Cash $ 895,930 $ 1,352,373 Account receivable 672,456 794,158 Inventory 956,034 783,800 Prepaid expenses and deposits 305,637 488,746 Investment in Gameverse Interactive Corp 190,500 - Other current assets 10,030 43,380 Total current assets 3,030,587 3,462,457 Intangible assets (net of amortization) – Related Party 2,724,242 2,796,567 Fixed assets, net of depreciation 55,933 48,279 Total assets $ 5,810,762 $ 6,307,303 Liabilities Accounts Payable $ 292,337 $ 263,993 Accrued and other liabilities 285,709 252,359 Secured loan from Related Party 250,000 500,000 Total Liabilities 828,046 1,016,352 Shareholders’ Equity (Deficit) Preferred stock, $ 0.0001 par value, 10,000,000 shares authorized of which none are issued - - Common stock, $ 0.0001 par value, 100,000,000 shares authorized 17,243,610 and 15,956,977 issues and outstanding at March 31, 2025 and December 31, 2024, respectively 1,725 1,596 Additional paid-in capital 11,002,818 10,195,598 Accumulated earnings (deficit) ( 6,343,827 ) ( 5,697,241 ) Common Stock Payable 322,000 790,998 Total Shareholders’ Equity (Deficit) 4,982,716 5,290,951 Total Liabilities and Shareholders’ Equity (Deficit) $ 5,810,762 $ 6,307,303 The accompanying notes are an integral part of these unaudited financial statements. F- 2 Table of Contents SRM Entertainment, Inc. Condensed Consolidated Statements of Operations For the Three Months Ended March 31, 2025 and 2024 (Unaudited) 2025 2024 Revenue Sales $ 1,089,634 $ 1,006,357 Cost of Sales 823,099 842,810 Gross profit 266,535 163,547 Operating expense General and administrative expenses 913,910 1,878,553 Total operating expenses 913,910 1,878,553 Other income / (expense) Interest income 6,295 5,002 Interest expense ( 5,506 ) - Total other income (expense) 789 5,002 ) Net income (loss) $ ( 646,586 ) $ ( 1,710,004 ) Net income (loss) per share: Basic $ ( 0.04 ) $ ( 0.17 ) Fully diluted $ ( 0.04 ) $ ( 0.17 ) Weighted average number of shares Basic 17,227,999 10,043,522 Fully diluted 17,227,999 10,043,522 The accompanying notes are an integral part of these unaudited financial statements. F- 3 Table of Contents SRM Entertainment, Inc. Condensed Consolidated Statements of Changes in Shareholders’ Equity (Deficit) For the Three Ended March 31, 2025 and 2024 Shares Amount Payable Capital Deficits Total Common Additional Common Stock Stock Paid-In Accumulated Shares Amount Payable Capital Deficits Total Balance, December 31, 2023 9,765,500 $ 977 $ 676,000 $ 4,805,117 $ ( 1,357,896 ) $ 4,124,198 Stock issued from common stock payable 200,000 20 ( 354,000 ) 353,980 - - Stock issued for services 200,000 20 - 283,980 - 284,000 Fair value of options granted to Officers, Directors and Employees - - - 573,548 - 573,548 Net loss for the three months ended March 31, 2025 - - - - ( 1,710,004 ) ( 1,710,004 ) Balance March 31, 2024 10,165,000 $ 1,017 $ 322,000 $ 6,016,625 $ ( 3,067,900 ) $ 3,271,742 Common Additional Common Stock Stock Paid-In Accumulated Shares Amount Payable Capital Deficits Total Balance, December 31, 2024 15,956,477 $ 1,596 $ 790,998 10,195,598 $ ( 5,697,241 ) $ 5,290,951 Balance 15,956,477 $ 1,596 $ 790,998 10,195,598 $ ( 5,697,241 ) $ 5,290,951 Pre-funded warrants exercised and issued from common stock payable 712,133 71 ( 452,748 ) 452,748 - 71 Stock issued for investment in Gameverse Inc. 500,000 50 - 190,450 - 190,500 Stock issued for services 75,000 8 ( 16,250 ) 44,387 - 28,145 Fair value of Options granted to Directors - - - 119,635 - 119,635 Net loss for the three months ended March 31, 2025 - - - - ( 646,586 ) ( 646,586 ) Net loss - - - - ( 646,586 ) ( 646,586 ) Balance March 31, 2025 17,243,610 $ 1,725 $ 322,000 $ 11,002,818 $ ( 6,343,827 ) $ 4,982,716 Balance 17,243,610 $ 1,725 $ 322,000 $ 11,002,818 $ ( 6,343,827 ) $ 4,982,716 The accompanying notes are an integral part of these unaudited financial statements. F- 4 Table of Contents SRM Entertainment, Inc. Condensed Consolidated Statement of Cash Flows For the Three Months Ended March 31, 2025 and 2024 (unaudited) 2025 2024 Three months ended March 31, 2025 2024 Cash flows from operating activities: Net (loss) $ ( 646,586 ) $ ( 1,710,004 ) Adjustment to reconcile net loss to operating activities Stock based compensation 28,145 536,000 Fair value of Officer, Director and Employee options 119,635 486,455 Depreciation 64,671 2,888 Changes in operating assets and liabilities: Accounts receivable 121,702 ( 128,264 ) Inventory ( 172,234 ) ( 291,150 ) Prepaid expenses 183,109 22,574 Accounts payable 28,344 ( 28,449 ) Accrued expenses 33,350 ( 28,517 ) Other assets 33,350 ( 31,900 ) Net cash (used in) provided by operating activities ( 206,514 ) ( 1,170,367 ) Cash flows from investing activities: - - Financing activities: Exercise of Pre-funded warrants 71 - Payment on promissory note - related party ( 250,000 ) - Cash flows from financing activities: ( 249,929 ) - Net increase in cash and cash equivalents ( 456,443 ) ( 1,170,367 ) Cash and cash equivalents at the beginning of the period 1,352,373 2,980,741 Cash and cash equivalents at the end of the period $ 895,930 $ 1,810,374 SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid for interest $ - $ - Cash paid for income taxes $ - $ - NON-CASH ITEMS Shares issued for purchase of Gameverse shares $ 190,500 $ - Stock issued from common stock payable $ 468,998 $ - The accompanying notes are an integral part of these unaudited financial statements. F- 5 Table of Contents SRM Entertainment, Inc. Notes to Financial Statements For the Three Months Ended March 31, 2025 and 2024 (Unaudited) Note 1 - Organization and Business Operations SRM Entertainment, Inc. (“SRM Inc”) is a Nevada corporation, listed and traded on NASDAQ, headquartered in Florida and was incorporated on April 22, 2022 . SRM. Entertainment Limited (“SRM Ltd”), a wholly-owned subsidiary, is a limited company incorporated in Hong Kong, on January 23, 1981. The combined SRM Inc and SRM Ltd are collectively referred to as the Company. The Company’s principal business is the design, manufacture, and sale of toys to premier theme parks. Going Concern Consideration As of March 31, 2025, and December 31, 2024, the Company had accumulated deficits of $ 6,343,827 and $ 5,697,241 , respectively and cash flow used in operations of $ 206,514 and $ 2,856,359 , respectively for the three months ended March 31, 2025, and year ended December 31, 2024. The Company has incurred and expects to continue to incur significant costs in pursuit of its expansion and development plans. At March 31, 2025, and December 31, 2024, the Company had $ 895,930 and $ 1,352,373 , respectively, in cash and working capital of $ 2,202,541 and $ 2,446,105 respectively. 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. Note 2 - Significant Accounting Policies Basis of Presentation 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”). 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. F- 6 Table of Contents 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. Recent Issued Accounting Pronouncements In November 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2023-07, enhancing segment reporting requirements under ASC 280. This ASU aims to provide investors with more detailed information about a public entity’s reportable segments, including those with a single reportable segment. The Key Provisions include: 1. Enhanced Expense Disclosures: Public entities must now disclose significant segment expenses that are regularly provided to the chief operating decision maker (CODM) and included in each reported measure of segment profit or loss. 3. Disclosure of Other Segment Items: Entities are required to disclose an amount for “other segment items” by reportable segment, representing the difference between reported segment revenues and the sum of significant segment expenses and the reported measure of segment profit or loss. A qualitative description of the composition of these other segment items is also required.Interim Reporting Requirements: All annual disclosures about a reportable segment’s profit or loss and assets, including the new disclosures introduced by ASU 2023-07, must now be provided in interim periods as well. 4. Single Reportable Segment Entities: Public entities with a single reportable segment are explicitly required to provide all segment disclosures mandated by ASC 280, including those introduced by ASU 2023-07. This clarification ensures that users receive comprehensive information about the entity’s operations and performance. 5. Disclosure of CODM Information: Entities must disclose the title and position of the CODM and explain how the CODM uses the reported measure(s) of segment profit or loss in assessing performance and allocating resources. These amendments are effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024. The Company adopted the ASU for the year ended December 31, 2024. 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 March 31, 2025 and December 31, 2024. 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. For the three months ended March 31, 2025 and year ended December 31, 2024, the Company did not recognize any allowance for doubtful collections Inventory Inventories will be stated at the lower of cost or market. The Company will periodically review 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. Investments in Non-Marketable Equity Securities Investments in non-marketable equity investments, including private company investments acquired through private placements, are accounted for using the alternative measurement under ASC 321. Under this method, investments are carried at cost, less any impairment, and adjusted for observable price changes in orderly transactions for the identical or a similar investment of the same issuer. The Company assesses non-marketable equity investments for impairment when events or changes in circumstances indicate that the investment may be impaired. If the fair value of the investment is less than its carrying amount, an impairment loss is recognized in earnings. Fixed Assets and Other Assets Fixed assets are stated at cost at the date of purchase. Depreciation is calculated using the straight-line method over the lesser of the estimated useful lives of the assets or the lease term. The Company purchases molds for the manufacture of some of its products and are included in fixed assets at cost. Certain agreements call for the manufacturer to reimburse the Company for the cost of the molds upon first shipment of products produced using the molds. The costs of these molds are removed from fixed assets upon reimbursement. Molds that are not subject to reimbursement are depreciated when the products are in production. F- 7 Table of Contents Net Loss Per Share of Common Stock Net income (loss) per share of Common Stock 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 shares of Common Stock would be to decrease the loss per share. Schedule of Net Loss Per Share of Common Stock 2025 2024 For the Three Months Ended March 31, 2025 2024 Numerator: Net (loss) $ ( 646,586 ) $ ( 1,710,004 ) Denominator: Denominator for basic earnings per share - Weighted-average of shares of Common Stock issued and outstanding during the period 17,227,999 10,043,522 Denominator for diluted earnings per share 17,227,999 10,043,522 Basic (loss) per share $ ( 0.04 ) $ ( 0.17 ) Diluted (loss) per share $ ( 0.04 ) $ ( 0.17 ) 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 will generate its revenue from the sale of its products directly to the end user (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. F- 8 Table of Contents 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 three months ended March 31, 2025 and the year ended December 31, 2024 and the cumulative translation gains and losses as of March 31, 2025 and December 31 2024 were not material. 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. The Company has 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. 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. 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. Segment Reporting The Company operates as a single reportable segment. The Chief Operating Decision Maker (CODM) (our CEO, Richard Miller) reviews the financial performance of the company on a consolidated basis and makes decisions regarding resource allocation at that level. The CODM has determined that all of the revenue, costs and expenses are attributable to the Company’s principal business with the exception of certain general and administrative expenses related to being a public company. As a result, the company has determined that it operates in a single operating segment in accordance with Accounting Standards Codification (ASC) 280, Segment Reporting . The Company’s principal business is the design, manufacture, and sale of toys to premier theme parks. Revenues from external customers are derived from e-commerce, distributors, and direct to retail consumers. 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. F- 9 Table of Contents The 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 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. Note 3 – Inventory At March 31, 2025 and December 31, 2024, the Company had inventory of finished goods of $ 956,034 and $ 783,800 , respectively. Note 4 - Accounts Receivable At March 31, 2025 and December 31, 2024, the Company had accounts receivable of $ 672,456 and $ 794,158 , respectively Note 5 – Prepaid Expenses At March 31, 2025, the Company had a total of $ 305,637 in prepaid expenses, consisting of deposits on orders of $ 203,663 , prepaid insurance of $ 13,353 and other expenses of $ 88,621 . The balance of prepaid expenses at December 31, 2024 was $ 488,746 consisting of deposits on orders of $ 396,489 , prepaid insurance of $ 33,382 and other prepaid expenses of $ 58,875 . Note 6 - Investment in Gameverse Interactive Corp On January 24, 2025, the Company entered into a Securities Purchase Agreement with Gameverse Interactive Corp, a video game developer (“Gameverse”) under the terms of which, the Company exchanged 500,000 shares of its restricted common stock for 132,000 shares of restricted common stock of Gameverse. The fair value of $ 190,500 was determined using the closing price of the Company’ common stock on the date of the agreement. Note 7 – Fixed Assets and Other Assets At March 31, 2025 and December 31, 2024, the Company had fixed assets totaling $ 55,933 and $ 48,279 , net of accumulated depreciation of $ 38,677 and $ 29,431 , respectively, as follows: Schedule of Fixed Assets Net March 31, December 31, 2025 2024 Asset Tooling and Molds $ 73,325 $ 56,425 Computer equipment and software 21,285 21,285 Fixed assets, gross 94,610 77,710 Accumulated depreciation ( 38,677 ) ( 29,431 ) Net fixed assets $ 55,933 $ 48,279 At March 31, 2025, and December 31, 2024 other assets consisting primarily of non-depreciable molds totaled $ 10,030 and $ 43,380 , respectively. Note 8 – Intangible Assets and Secured Note – Related Party On September 3, 2024, the Company entered into an Asset Purchase Agreement with Suretone Entertainment, Inc. (“Suretone” or “Seller”) pursuant to which the Company agreed to acquire the 2019 movie titled “The Kid” (directed by Vincent D’Onofrio and starring Ethan Hawke and Chris Pratt) and certain other assets (the “Assets”) related to “The Kid” from the Seller, for an aggregate purchase price of $ 2,893,000 (the “Purchase Price”). Jordan Schur, the owner and Chief Executive Officer of Suretone, is a board member and President of Safety Shot. At March 31, 2025, Safety Shot held 13.6 % of the Company’s common stock. In consideration for the purchased Assets, the Company paid the Purchase Price which consisted of: (i) payment of $ 250,000 in cash on September 3, 2024; (ii) issuance of 1,500,000 restricted shares of the Company’s common stock, par value $ 0.0001 per share (valued at $ 0.762 per share which, was the market per share value of the Company’s common stock); and (iii) issuance of a secured promissory note in the original amount of $ 1,500,000 (the “Secured Note”). The Secured Note’s term is one year with an interest rate of 8 %. On October 21, 2024, the Company paid $ 500,000 and on December 13, 2024, the Company paid an additional $ 500,000 of the principal balance of the Secured Note leaving a principal balance of $ 500,000 at December 31, 2024. On January 2, 2025, the Company paid $ 250,000 of the principal leaving a balance of $ 250,000 leaving a balance of $ 250,000 at March 31, 2025. During the three months ended March 31, 2025 and year ended December 31, 2024, the Company recorded interest expense of $ 5,111 and $ 31,655 , respectively. The Assets are being amortized over a ten-year 10 period. Amortization expense totaled $ 72,325 and $ 96,433 , respectively, for the three months ended March 31, 2025 and year ended December 31, 2024. F- 10 Table of Contents Note 9 - Capital Structure Preferred Stock – The Company has 10,000,000 shares, $ 0.0001 par value of Preferred Stock authorized of which none are issued Common Stock – The Company has 100,000,000 shares of Common Stock, par value $ 0.0001 authorized. At March 31, 2025 and December 31, 2024, the Company had 17,243,610 and 15,956,977 shares, respectively, of its common stock issued and outstanding At December 31, 2024, the Company had 15,956,977 shares of its common stock issued and outstanding. Shares issued during 2024 consisted of the following: The Company issued 200,000 shares of the Common Stock Payable at December 31, 2023. The Company entered into Consulting Agreements (the “Agreements”) with four consultants under the terms of which the Company issued 1,200,000 shares of its common stock valued at $ 1,261,000 . The shares were valued at the market rate of the Company’s stock on the date of the Agreements. The Company issued 1,500,000 shares of its common stock in connection with the Asset purchase described above. The shares were valued at $ 1,143,000 which was the market rate of the Company’s stock on the date of the Agreement. The Company issued a total of 3,291,477 shares of its common stock in connection with the Company’s Form S-3 Registration Statement (the “Registration”). The shares were issued at a negotiated price which generated net proceeds to the Company of $ 2,501,255 . At March 31, 2025, the Company had 17,243,610 shares of its common stock issued and outstanding. Shares issued during the three months ended March 31, 2025 consisted of the following: The Company issued 712,133 shares of its common stock valued at $ 452,748 upon conversion of 712,133 pre-funded warrants which were included in Common Stock Payable at December 31, 2024. The Company issued 25,000 shares of its common stock valued at $ 16,250 (market price at date of the agreement) in connection with a Consulting Agreement which was included in Common Stock Payable at December 31, 2024. The Company issued 500,000 shares of its common stock in connection with a Stock Purchase Agreement with Gameverse, Interactive Corp, 1000 S. Pine Island Suite 210 (“Gameverse”), valued at $ 190,500 (SRM market price at date of purchase) under which the Company received 132,000 share of common stock of Gameverse. The Company entered into a Consulting Agreement (the “Agreements”) under the terms of which the Company issued 50,000 shares of its common stock valued at $ 28,145 . The shares were valued at the market rate of the Company’s stock on the date of the Agreement. Common Stock Payable At December 31, 2023, the Company had $ 676,000 of Common Stock Payable. During the year ended December 31, 2024, the Company issued 200,000 shares of the Common Stock Payable valued at $ 354,000 . In connection with the sale of 1,580,000 shares of its common stock under the Registration as described above, the purchaser pre-funded the purchase of 712,133 warrants convertible into common stock shares valued at $ 452,748 which is included in Common Stock Payable. Additionally, the Company entered into a Consulting Agreement that called for the issuance of 25,000 shares valued at $ 16,250 (calculated using the market rate per share on date of the Agreement) which shares had not been issued at December 31, 2024. The balance of Common Stock Payable at December 31, 2024 was $ 790,998 . During the three months ended March 31, 2025, the Holder of the pre-funded warrants described above, converted the warrants into shares of the Company’s common stock valued at $ 452,748 . Additionally, the 25,000 shares under the Consulting Agreement were issued which were valued at $ 16,250 . At March 31, 2025 there was a balance of $ 322,000 in Common Stock Payable. F- 11 Table of Contents Note 10 – Options During the year ended December 31, 2024, the Company granted a total of 995,000 options to Officers, Directors and Employees with an exercise price of $ 1.21 , a five-year 5 term and are exercisable immediately. The Company recorded an expense of $ 573,548 in connection with these options. Additionally, the Company granted 50,000 options with an exercise price of $ 0.63 to a consultant, of which 25,000 are immediately vested and 25,000 are vested six months from the date of the agreement. The Company recorded an expense of $ 11,045 related to the vested options. During the three months ended March 31, 2025, the Company granted a total of 375,000 options to the Directors with an exercise price of $ 0.68 , a five-year term and are exercisable immediately. The Company recorded an expense of $ 119,635 in connection with these options. The fair value of these options 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. Schedule of Fair Value Option Assumption Market Number Price on of Term Exercise Grant Volatility Fair Reporting Date Options (Years) Price Date Percentage Value 02/21/2024 995,000 2.5 $ 1.21 $ 1.21 62.6 % $ 573,548 12/31/2024 25,000 5 $ 0.63 $ 0.63 86.4 % $ 11,045 01/07/2025 375,000 2.5 $ 0.68 $ 0.68 75.0 % $ 119,635 Note 11 - Commitments and Contingencies 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. Note 12 – Subsequent Events The Company evaluated subsequent events through the date of this filing and has had no material events subsequent to March 31, 2025. F- 12 Table of Contents 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”, “SRM” and the “Company” mean SRM Entertainment, Inc. General Overview SRM Entertainment, Inc. (“SRM Inc”) is a Nevada corporation, listed and traded on NASDAQ, headquartered in Florida and was incorporated on April 22, 2022. SRM. Entertainment Limited (“SRM Ltd”), a wholly-owned subsidiary, is a limited company incorporated in Hong Kong, on January 23, 1981. The combined SRM Inc and SRM Ltd are collectively referred to as the Company. 4 Table of Contents Basis of Presentation 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”). Business The Company is a trusted toy and souvenir designer and developer, selling into the world’s largest theme parks and entertainment venues. Our business is built on the principle that almost everyone is a fan of something and the evolution of pop culture is leading to increasing opportunities for fan loyalty. We create whimsical, fun and unique products that enable fans to express their affinity for their favorite “something”—whether it is a movie, TV show, favorite celebrity, or favorite restaurant. We infuse our distinct designs and aesthetic sensibility into a wide variety of product categories, including figures, plush, accessories, apparel, and homewares. With our unique style, expertise in pop culture, broad product distribution and highly accessible price points, we have developed a passionate following for our products that has underpinned our growth. We believe we sit at the nexus of pop culture—content providers value us for our broad network of retail customers, retailers value us for our portfolio of pop culture products and pop culture insights, and consumers value us for our distinct, stylized products and the content they represent. Pop culture pervades modern life and almost everyone is a fan of something. Today, more quality content is available and technology innovation has made content accessible anytime, anywhere. As a result, the breadth and depth of pop culture fandom resembles, and in many cases exceeds, the type of fandom previously associated only with sports. Everyday interactions at home, work or with friends are increasingly influenced by pop culture. We have invested strategically in our relationships with key constituents in pop culture. Content providers value us for our broad network of retail customers and retailers value us for our pop culture products, pop culture insights and ability to drive consumer traffic. Consumers, who value us for our distinct, stylized products, remain at the center of everything we do. Content Providers : We have licensing relationships with many established content providers, and our products appear in venues such as Walt Disney Parks and Resorts, Universal Studios, SeaWorld, Cedar Fair, Herschend Family Entertainment and Merlin Entertainment. We currently have licenses with Smurfs, The ICEE Company and Zoonicorn LLC, from which we can create multiple products based on each character within. Content providers trust us to design, create and manufacture unique, stylized extensions of their intellectual property that extend the relevance of their content with consumers through ongoing engagement, helping to maximize the lifetime value of their content. Consumers : Fans are increasingly looking for ways to express their affinity for and engage with their favorite pop culture content. Over time, many of our consumers evolve from occasional buyers to more frequent purchasers, whom we categorize as enthusiasts or collectors. We create innovative products to appeal to a broad array of fans across consumer demographic groups—men, women, boys and girls—not a single, narrow demographic. We currently offer an array of products that sell across several categories. Our products are generally priced between $2.50 and $50.00, which allows our diverse consumer base to express their fandom frequently and impulsively. We continue to introduce innovative products designed to facilitate fan engagement at different price points and styles. We have developed a nimble and low-fixed cost production model. The strength of our management team and relationships with content providers, retailers and third-party manufacturers allows us to move from product concept to a new product tactfully. As a result, we can dynamically manage our business to balance current content releases and pop culture trends with timeless content based on classic movies, such as Harry Potter or Star Wars. This has allowed us to deliver significant growth while lessening our dependence on individual content releases. 5 Table of Contents Recent Developments CEO and CFO Employment Agreements On September 10, 2024, the Compensation Committee of the Board reviewed and recommended approval that the Company enter into a new Employment Agreement (the “CEO Employment Agreement”) with Richard Miller as Chief Executive Officer (the “CEO”). Following approval from the Compensation Committee and the Board, the Company entered into the CEO Employment Agreement effective January 1, 2024 (the “Effective Date”), which cancels and supersedes Mr. Miller’s previous employment agreement with the Company as of the Effective Date. The CEO Employment Agreement is for an initial term of 3 years from the date thereof and automatically renews for successive 1-year periods. Pursuant to the CEO Employment Agreement, the Company will compensate Mr. Miller with a base salary of $225,000. Thereafter, his base salary shall increase at the rate of at least ten percent (10%) on January 1 of each following year. On January 13, 2025, the Compensation Committee of the Board of Directors (the “Board”) of the Company reviewed and recommended approval that the Company enter into a new Employment Agreement (the “CFO Employment Agreement”) with Douglas McKinnon as Chief Financial Officer (the “CFO”). Following approval from the Compensation Committee and the Board, the Company entered into the CFO Employment Agreement on January 22, 2025 with an effective date of January 1, 2024, which cancels and supersedes Mr. McKinnon’s previous employment agreement with the Company as of the Effective Date. The CFO Employment Agreement is for an initial term of 3 years from the date thereof and automatically renews for successive 1-year periods. Pursuant to the Employment Agreement, the Company will compensate Mr. McKinnon with a base salary of $215,000. Thereafter, his base salary shall increase at the rate of at least ten percent (10%) on January 1 of each following year. December Registered Direct Offering On December 5, 2024, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with the institutional investors named on the signature page thereto (the “Purchasers”), pursuant to which the Company agreed to sell and issue, in a registered direct offering, an aggregate of (i) 1,580,000 shares of the Company’s common stock, at a purchase price of $0.7385 per share, and (ii) 712,133 pre-funded warrants (the “Pre-Funded Warrants”) to purchase up to an aggregate of 712,133 shares of common stock (the “Pre-Funded Warrant Shares”) at a purchase price of $0.7384 per Pre-Funded Warrant, for aggregate gross proceeds to the Company of approximately $1.7 million, before deducting the placement agent fees and estimated offering expenses payable by the Company (the “December Registered Offering”). Pursuant to a placement agency agreement dated as of December 5, 2024 (the “Placement Agency Agreement”), the Company engaged D. Boral Capital LLC (the “Placement Agent”) to act as the sole placement agent in connection with the offering. The Company agreed to (i) pay the Placement Agent a cash fee equal to 8.0% of the aggregate gross proceeds of the December Registered Offering, and (ii) reimburse the Placement Agent for all reasonable and documented out-of-pocket expenses, including the reasonable fees, costs, and disbursements of its legal counsel of $50,000. The shares of common stock, the Pre-Funded Warrants and the Pre-Funded Warrant Shares were offered pursuant to a shelf registration statement on Form S-3 (File No. 333-282028), which was declared effective by the U.S. Securities and Exchange Commission on September 19, 2024, and a related prospectus supplement, dated December 5, 2024, related to the December Registered Offering. The December Registered Offering closed on December 6, 2024. Nasdaq Listing Deficiency On October 21, 2024, the Company received a deficiency letter (from the Listing Qualifications Department of The Nasdaq Stock Market LLC (“Nasdaq”) notifying the Company that, based upon the closing bid price of the Company’s common stock, par value $0.0001 per share, for the last 30 consecutive business days, the Company is not currently in compliance with the requirement to maintain a minimum bid price of $1.00 per share for continued listing on The Nasdaq Capital Market, as set forth in Nasdaq Listing Rule 5550(a)(2) (the “Minimum Bid Requirement”). The Notice has no immediate effect on the continued listing status of the common stock on The Nasdaq Capital Market, and, therefore, the Company’s listing remains fully effective. In accordance with Nasdaq Listing Rule 5810(c)(3)(A), the Company is provided a compliance period of 180 calendar days from the date of the Notice, or until April 21, 2025, to regain compliance with the Minimum Bid Requirement. To regain compliance, the closing bid price of the common stock must meet or exceed $1.00 per share for a minimum of ten consecutive business days prior to April 21, 2025. If the Company is not in compliance with the Minimum Bid Requirement by April 21, 2025, the Company may be afforded a second 180 calendar day compliance period. To qualify for this additional compliance period, the Company will be required to meet the continued listing requirement for market value of publicly held shares and all other initial listing standards for The Nasdaq Capital Market, with the exception of the Minimum Bid Price requirement. The Company intends to actively monitor the closing bid price of the common stock and will evaluate available options to regain compliance with the Minimum Bid Requirement. However, there can be no assurance that the Company will regain compliance with the Minimum Bid Requirement during the 180-day compliance period, secure a second period of 180 days to regain compliance, or maintain compliance with the other Nasdaq listing requirements. If the Company does not regain compliance within the allotted compliance period, including any extensions that Nasdaq grants, Nasdaq will provide notice that the common stock will be subject to delisting. The Company would then be entitled to appeal that determination to a Nasdaq hearings panel. 6 Table of Contents October Registered Direct Offering On October 18, 2024, and October 19, 2024, the Company entered into four Securities Purchase Agreements (each an “SPA”) with four accredited investors (the “Investors”), for the purchase and sale in a registered direct offering of 1,711,477 shares of the Company’s common stock at a price of $0.61 per share, generating gross proceeds from the offering of approximately $1,044,000 (the “October Registered Direct Offering”). Three SPAs, each dated as of October 18, 2024, were entered into with three investors, and one SPA, dated as of October 19, 2024, was entered into with a single investor. The Company did not utilize a placement agent or underwriter in connection with the October Registered Direct Offering. Asset Purchase Agreement with Suretone Entertainment 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 March 6, 2025, Safety Shot holds 13.6% of the Company’s common stock. 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. At December 31, 2024, the Company owed $500,000 on the principal balance of the Secured Note. 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. 7 Table of Contents 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 three months ended March 31, 2025 and 2024 and audited financial statements for the year ended December 31, 2024, 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 March 31, 2025 or December 31, 2024. 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. Three Months Ended March 31, 2025 2024 Numerator: Net (loss) $ (646,586 ) $ (1,710,004 ) Denominator: Denominator for basic earnings per share - Weighted-average of shares of Common Stock issued and outstanding during the period 17,227,999 10,043,522 Denominator for diluted earnings per share 17,227,999 10,043,522 Basic (loss) per share $ (0.04 ) $ (0.17 ) Diluted (loss) per share $ (0.04 ) $ (0.17 ) 8 Table of Contents 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. 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. 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 change 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 March 31, 2025 and December 31, 2024 consisted of net operating loss carry forwards calculated using effective tax rates (20.6% average of China and US rates) equating to approximately $1,504,698 and $1,377,232 respectively, less a valuation allowance in the amount of approximately $1,504,698 fully offset by a valuation allowance in the three months ended March 31, 2025 and years ended December 31, 2024. 9 Table of Contents 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 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 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. Related Party Loans As of December 31, 2021, the Company had an outstanding unsecured, non-interest bearing loan balance of $1,502,621 to Jupiter Wellness, Inc., its Parent. On September 1, 2022, the loan was converted to a six percent (6%) interest-bearing promissory note (the “Note”) due on the earlier of: (i) September 30, 2023 or (ii) the date on which Maker consummates an initial public offering of its securities. During 2022, the Company paid $50,000 to Jupiter related to the Note consisting of $19,948 principal reduction and $30,052 interest, leaving a Note balance of $1,482,673 at December 31, 2022. The total balance of $1,538,520 ($1,482,673 Note and $55,847 interest) due Jupiter was paid from proceeds of the Company’s Initial Public Offering (“IPO”) on August 14, 2023. Recent Accounting Pronouncements In November 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2023-07, enhancing segment reporting requirements under ASC 280. This ASU aims to provide investors with more detailed information about a public entity’s reportable segments, including those with a single reportable segment. The Key Provisions include : 1. Enhanced Expense Disclosures: Public entities must now disclose significant segment expenses that are regularly provided to the chief operating decision maker (CODM) and included in each reported measure of segment profit or loss. 2. Disclosure of Other Segment Items: Entities are required to disclose an amount for “other segment items” by reportable segment, representing the difference between reported segment revenues and the sum of significant segment expenses and the reported measure of segment profit or loss. A qualitative description of the composition of these other segment items is also required. 3. Interim Reporting Requirements: All annual disclosures about a reportable segment’s profit or loss and assets, including the new disclosures introduced by ASU 2023-07, must now be provided in interim periods as well. 4. Single Reportable Segment Entities: Public entities with a single reportable segment are explicitly required to provide all segment disclosures mandated by ASC 280, including those introduced by ASU 2023-07. This clarification ensures that users receive comprehensive information about the entity’s operations and performance. 5. Disclosure of CODM Information: Entities must disclose the title and position of the CODM and explain how the CODM uses the reported measure(s) of segment profit or loss in assessing performance and allocating resources. These amendments are effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024. The Company adopted the ASU for the year ended December 31, 2024. The company evaluated issued pronouncements and did not identify any additional recent pronouncements that apply to the company. Results of Operations For the three months ended March 31, 2025 and 2024 The following table provides selected financial data about us for the three months ended March 31, 2025 and 2024, respectively. Three Months ended March 31, 2025 2024 Revenue Sales $ 1,089,634 $ 1,006,357 Cost of Sales 823,099 842,810 Gross profit 266,535 163,547 Operating (expense) (913,910 ) (1,878,553 ) Total other income 789 5,002 Net income (loss) $ (646,586 ) $ (1,710,004 ) 10 Table of Contents Revenues and Cost of Sales We generated $1,089,634 in revenues for the three months ended March 31, 2025 compared to $1,006,357 revenues for the three months ended March 31, 2024. The increase is primarily due to the expansion of a major theme park opening in Orlando in 2025, Our business should benefit from the publicity and enthusiasm that typically surrounds new theme park openings. Additionally we have been able to increase our margins Operating Expenses and Other Income (Expense) Operating expenses for the three months ended March 31, 2025 and 2024 were $913,910 and $1,878,553, respectively. The operating expenses for the three months ended March 31, 2025, consisted of (i) marketing expense of $23,122, (ii) legal and professional fees of $198,070, (iii) amortization and depreciation of $81,571, (iv) rent and utilities of $20,323, (v) general and administrative expense of $443,044 and (vi) $147,780 of stock based compensation, versus the operating expenses for the three months ended March 31, 2024, consisting of (i) marketing expense of $20,403, (ii) legal and professional fees of $443,637, (iii) amortization and depreciation of $2,887, (iv) rent and utilities of $9,646, (v) general and administrative expense of $379,525 and (vi) $1,022,455 of stock based compensation. The Company had interest income of $6,295 and interest expense of $5,506 (net $789) for the three months ended March 31, 2025 compared to $5,002 interest income for the three months ended March 31, 2024. Income/Losses Net losses were $646,586 and $1,710,004 for the three months March 31, 2025 and 2024. Impact of Inflation We believe that inflation has had a negligible effect on operations since inception. We believe that we can offset inflationary increases in the cost of operations by increasing sales and improving operating efficiency. Off Balance Sheet Arrangements We do not have off-balance sheet arrangements, financings, or other relationships with unconsolidated entities or other persons, also known as “variable interest entities.” Liquidity and Capital Resources As of March 31, 2025, we had approximately $895,930 in cash and cash equivalents, a decrease of $456,443 from the $1,352,373 we had as of December 31, 2024. At March 31, 2025, we had approximately $2,202,541 in working capital, a decrease of $243.564 from the $2,446,105 we had at December 31, 2024. Operating Activities: Net cash used in our operating activities during the three months ended March 31, 2025 totaled $206,514 compared to $1,170,367 used during the three months ended March 31, 2025. Financing Activities: During the three months ended March 31, 2025, we paid $250,000 on a promissory note to a related party issued in connection with our purchase of the movie entitled “The Kid” leaving a balance of $250,000 at March 31, 2025, on the original principal of $1,500,000. 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 effective in reaching that level of assurance. Changes in Internal Control Over Financial Reporting 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 three months ended March 31, 2025 and year ended December 31, 2024 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. 11 Table of Contents 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. PART II - OTHER INFORMATION Item 1. Legal Proceedings None. 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 Unregistered Sales of Equity Securities None. 12 Table of Contents Item 3. Defaults Upon Senior Securities None. Item 4. Mine Safety Disclosures Not applicable. Item 5. Other Information None. 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 Inline XBRL Instance Document 101.SCH Inline XBRL Taxonomy Extension Schema Document 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase document 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document 101.PRE Inline 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. 13 Table of Contents 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. SRM Entertainment, Inc. /s/ Richard Miller Richard Miller Dated: May 08, 2025 Chief Executive Officer (Principal Executive Officer) 14