Core Insights - Smart for Life, Inc. is participating in the NASC Annual Conference 2024, highlighting its commitment to growth and innovation in the nutraceutical industry [1][3] - The NASC Conference serves as a significant platform for networking and collaboration within the pet supplement industry, featuring over 50 exhibitors and various sessions [2] - The company aims to establish partnerships that enhance product offerings and deliver value to consumers and stakeholders, aligning with its Buy-and-Build strategy [3][6] Company Overview - Smart for Life, Inc. focuses on the development, marketing, and manufacturing of nutritional products, emphasizing Health & Wellness [6] - The company is executing a Buy-and-Build strategy, which includes acquiring profitable companies and developing proprietary products to drive growth [6] - Recent restructuring efforts have improved the company's balance sheet, including the recapitalization and liquidation of senior debt [6] Industry Context - The National Animal Supplement Council (NASC) is a leading trade association representing nearly 300 companies in the animal health supplement industry [5] - The NASC Quality Program is recognized as the Gold Standard for quality and consistency in the industry, promoting responsible supply practices [5]

Revenue Performance - Total revenues decreased by $2,606,680, or 48.66%, to $2,750,305 for the three months ended September 30, 2023, compared to $5,356,985 for the same period in 2022[244]. - Revenues from the nutraceutical business decreased by $1,757,351, or 39.04%, to $2,744,306 for the three months ended September 30, 2023, from $4,501,657 for the same period in 2022, primarily due to cash constraints affecting the ability to purchase raw materials[246]. - Digital marketing business revenues decreased by $849,329, or 99.30%, to $5,999 for the three months ended September 30, 2023, from $855,328 for the same period in 2022[247]. - Total revenues decreased by $6,658,787, or 47.23%, to $7,438,575 for the nine months ended September 30, 2023, from $14,097,362 for the same period in 2022[261]. - Revenues from the nutraceutical business decreased by $4,459,936, or 38.66%, to $7,077,105 for the nine months ended September 30, 2023, from $11,537,041 for the same period in 2022[262]. Profitability and Loss - Gross profit for the three months ended September 30, 2023, was $1,061,686, representing a gross margin of 38.60%, down from $2,632,664 and a gross margin of 49.14% in the same period of 2022[245]. - Gross profit decreased by $1,570,978, or 59.67%, to $1,061,686 for the three months ended September 30, 2023, from $2,632,664 for the same period in 2022[252]. - Gross profit decreased by $3,299,962, or 55.64%, to $2,631,435 for the nine months ended September 30, 2023, from $5,931,397 for the same period in 2022[267]. - Net loss for the three months ended September 30, 2023, was $(4,344,107), or (157.95)% of total revenues, compared to $(1,947,721), or (36.36)% in the same period of 2022[245]. - Net loss increased by $2,396,386, or 123.04%, to $4,344,107 for the three months ended September 30, 2023, from $1,947,721 for the same period in 2022[259]. - The net loss for the nine months ended September 30, 2023, was $12,848,419, a reduction of $9,058,974 or 41.35% compared to a net loss of $21,907,393 in the prior year[276]. Operating Expenses - Operating loss increased to $(3,207,206) for the three months ended September 30, 2023, compared to $(1,446,385) for the same period in 2022, reflecting a significant rise in operating expenses[245]. - Total operating expenses rose to $4,268,892, or 155.22% of revenues, for the three months ended September 30, 2023, compared to $4,079,049, or 76.14% of revenues, in the same period of 2022[245]. - Selling, general and administrative expenses decreased by $521,756, or 29.64%, to $1,238,625 for the three months ended September 30, 2023, from $1,760,381 for the same period in 2022[253]. - Compensation expenses increased by $566,404, or 38.28%, to $2,046,220 for the three months ended September 30, 2023, from $1,479,816 for the same period in 2022[254]. Financial Position - As of September 30, 2023, the company had a working capital deficiency of approximately $11.4 million and cash of only $8,890[278]. - The company has outstanding debt of $12,909,530 as of September 30, 2023, with $4,404,462 due within the next 12 months[297]. - Cash used in operating activities for the nine months ended September 30, 2023, was $5,065,754, an improvement from $7,491,867 in the same period of 2022[283]. - Net cash provided by financing activities for the nine months ended September 30, 2023, was $5,008,380, down from $10,662,578 in the same period of 2022[285]. Strategic Initiatives - The company is executing a buy-and-build strategy aiming to aggregate companies generating a minimum of $300 million in revenues by Q4 2026[233]. - The company operates a network platform in the affiliate marketing space, compensating third-party digital marketers to generate traffic for its products[234]. - The company has engaged a middle market investment banking firm to assist in raising additional capital through equity and debt financing[279]. - The company completed two registered direct offerings in May 2023, raising total gross proceeds of $2,484,383[291][295]. - A 1-for-3 reverse stock split was executed on October 27, 2023, reducing authorized common stock from 166,666,667 shares to 55,555,556 shares[241]. Impairment and Other Expenses - Impairment of intangible assets recognized was $466,737 during the nine months ended September 30, 2023, with no impairment recognized in the same period in 2022[273]. - The company recognized an impairment of $466,737 related to the affiliate relationship asset associated with Nexus due to decreased revenues[302]. - Total other expense, net for the nine months ended September 30, 2023, was $2,818,762, a decrease of 80.7% from $14,580,624 for the same period in 2022[275].

Revenue Performance - Total revenues decreased by $2,001,788, or 46.71%, to $2,283,703 for the three months ended June 30, 2023, from $4,285,491 for the same period in 2022[231]. - Revenues from the nutraceutical business decreased by $1,186,839, or 34.30%, to $2,273,087 for the three months ended June 30, 2023, from $3,459,926 for the same period in 2022, primarily due to cash constraints affecting the ability to pay for raw materials[232]. - Digital marketing revenues decreased by $814,949, or 98.71%, to $10,616 for the three months ended June 30, 2023, from $825,565 for the same period in 2022[233]. - Total revenues decreased by $4,052,107, or 46.36%, to $4,688,270 for the six months ended June 30, 2023, from $8,740,377 for the same period in 2022[247]. - Revenues from the nutraceutical business decreased by $2,702,585, or 38.41%, to $4,332,799 for the six months ended June 30, 2023, from $7,035,384 for the same period in 2022[248]. Profitability and Loss - Gross profit for the three months ended June 30, 2023, was $742,021, representing a gross margin of 32.49%, compared to $1,781,171 and a gross margin of 41.56% for the same period in 2022[231]. - The operating loss for the three months ended June 30, 2023, was $(4,059,845), or (177.77)% of revenues, compared to $(2,608,416), or (60.87)% of revenues, for the same period in 2022[231]. - Net loss for the three months ended June 30, 2023, was $(4,219,996), or (184.79)% of revenues, compared to $(3,385,285), or (78.99)% of revenues, for the same period in 2022[231]. - Gross profit decreased by $1,039,150, or 58.34%, to $742,021 for the three months ended June 30, 2023, from $1,781,171 for the same period in 2022[238]. - Net loss increased by $834,711, or 24.66%, to $4,219,996 for the three months ended June 30, 2023, compared to $3,385,285 for the same period in 2022[245]. - The company reported a net loss of $8,504,311 for the six months ended June 30, 2023, a decrease of $11,455,451, or 57.39%, compared to a net loss of $19,959,762 for the same period in 2022[262]. Operating Expenses - Total operating expenses increased to $4,801,866, or 210.27% of revenues, for the three months ended June 30, 2023, compared to $4,389,587, or 102.43% of revenues, for the same period in 2022[231]. - Total cost of revenues decreased by $962,638, or 38.44%, to $1,541,682 for the three months ended June 30, 2023, from $2,504,320 for the same period in 2022[234]. - Total cost of revenues decreased by $2,323,122, or 42.69%, to $3,118,521 for the six months ended June 30, 2023, from $5,441,643 for the same period in 2022[250]. - Gross profit decreased by $1,728,985, or 52.41%, to $1,569,749 for the six months ended June 30, 2023, from $3,298,734 for the same period in 2022[253]. Cash Flow and Financing - As of June 30, 2023, the company had cash of $0.4 million and a working capital deficiency of $9.6 million, raising substantial doubt about its ability to continue as a going concern[263][264]. - The company experienced net cash used in operating activities of $4,502,620 for the six months ended June 30, 2023, compared to $5,996,785 for the same period in 2022[270]. - Net cash provided by financing activities was $4,812,038 for the six months ended June 30, 2023, down from $6,966,744 in the same period in 2022[272]. - The company has engaged a middle market investment banking firm to facilitate raising additional capital through common and preferred stock placements and debt financing[265]. - The company completed a registered direct offering on May 5, 2023, raising total gross proceeds of $899,326 and net proceeds of $751,933[278]. - A second registered direct offering was completed on May 19, 2023, generating total gross proceeds of $1,585,057 and net proceeds of $1,074,377[281]. Debt and Obligations - As of June 30, 2023, the outstanding principal balance of original issue discount subordinated debentures was $4,402,947, with accrued interest of $675,197[283]. - The company has outstanding original issue discount secured subordinated notes with an outstanding principal balance of $2,242,853 and accrued interest of $179,428 as of June 30, 2023[284]. - The company issued a 6% secured subordinated promissory note of $3,000,000 on July 1, 2021, with a principal balance of $1,548,950 and accrued interest of $9,036 as of June 30, 2023[285]. - A total of $2,150,000 in secured subordinated promissory notes was issued on July 29, 2022, with an outstanding principal balance of $2,204,993 and accrued interest of $102,900 as of June 30, 2023[286]. - The company has a term loan agreement with Diamond Creek Capital for up to $3,000,000, with an outstanding principal balance of $750,000 and accrued interest of $52,864 as of June 30, 2023[289]. - The company entered into cash advance agreements totaling $592,236 with a required repayment amount of $994,460, with an outstanding amount of $139,540 as of June 30, 2023[298]. - An equipment financing loan of $146,765 was taken in May 2022, with an outstanding amount of $120,938 as of June 30, 2023[300]. - The company has a principal commitment of $300,000 under an EIDL loan with accrued interest of $33,906 as of June 30, 2023[305]. - The company received $261,164 in Paycheck Protection Program loans, with an outstanding balance of $197,457 and accrued interest of $9,422 as of June 30, 2023[306]. - The company made principal cash payments of $150,000 on the subordinated promissory note during the six months ended June 30, 2023[285]. - A gain on extinguishment of debt of $60,764 was recognized due to a settlement with a note holder[287]. Strategic Initiatives - The company is executing a buy-and-build strategy with the objective of aggregating companies generating a minimum of $300 million in revenues by the fourth quarter of 2026[219]. - The company has established a wholly owned subsidiary in Canada, Smart for Life Canada Inc., which sells retail products and acts as a distribution center for international customers[223]. - The company is in the process of finalizing an acquisition, with financing expected to exceed the required purchase amount, providing additional working capital[266]. Impairment and Accounting - The company recognized an impairment loss of $466,737 related to the affiliate relationship asset associated with Nexus due to decreased revenues that are not expected to recover[310]. - The impairment analysis was conducted in accordance with ASC 360 following a triggering event related to the Nexus subsidiary's performance[310]. - Management's discussion includes critical accounting policies that could materially affect reported financial position, results of operations, or cash flows[311]. - There were no applicable quantitative and qualitative disclosures about market risk reported[312].

Business Strategy and Operations - The company aims to aggregate companies generating a minimum of $300 million in revenues by Q4 2026 through a buy-and-build strategy[184]. - The company operates a network platform in affiliate marketing, compensating third-party digital marketers to generate traffic for its products[185]. - The company has established a wholly owned subsidiary in Canada, Smart for Life Canada Inc., to sell retail products and act as a distribution center[188]. - The company has acquired multiple entities, including GSP Nutrition Inc. and Ceautamed Worldwide, LLC, to expand its product offerings in the health and wellness sector[190][191]. - The company has developed proprietary products aimed at promoting optimal health and wellness, including hunger-suppressing functional foods[187]. - The company’s branded vitamins and supplements are sold through various channels, including Amazon, contributing significantly to online growth[187]. Financial Performance - Total revenues decreased by $2,050,319, or 46.02%, to $2,404,567 for the three months ended March 31, 2023, compared to $4,454,886 for the same period in 2022[208]. - Revenues from the nutraceutical business decreased by $1,515,747, or 42.39%, to $2,059,712 for the three months ended March 31, 2023, primarily due to cash constraints affecting raw material purchases[210]. - Revenues from the digital marketing business decreased by $534,572, or 60.79%, to $344,855 for the three months ended March 31, 2023, attributed to cash constraints impacting affiliate advertisers[211]. - Total cost of revenues decreased by $1,360,485, or 46.32%, to $1,576,838 for the three months ended March 31, 2023, from $2,937,323 for the same period in 2022[212]. - Gross profit decreased by $689,834, or 45.46%, to $827,729 for the three months ended March 31, 2023, with a gross profit margin of 34.42%[215]. - The company reported a net loss of $4,284,315 for the three months ended March 31, 2023, compared to a net loss of $16,574,477 for the same period in 2022[209]. - The net loss for Q1 2023 was $4,284,315, down 74.15% from $16,574,477 in Q1 2022, indicating improved financial performance[222]. Expenses and Cost Management - General and administrative expenses decreased by $626,648, or 36.39%, to $1,095,207 for the three months ended March 31, 2023, representing 45.55% of revenues[216]. - Compensation expenses decreased by $531,461, or 26.52%, to $1,472,374 for the three months ended March 31, 2023, accounting for 61.23% of revenues[217]. - Professional services expenses decreased by $336,735, or 52.55%, to $303,996 for the three months ended March 31, 2023, representing 12.64% of revenues[218]. - Depreciation and amortization increased to $691,210, or 28.75% of revenues, for the three months ended March 31, 2023, compared to $423,010, or 9.50% of revenues, for the same period in 2022[220]. Cash Flow and Liquidity - As of March 31, 2023, the company had cash of $86,194 and a working capital deficiency of $15 million, raising concerns about its ability to continue as a going concern[224]. - Net cash used in operating activities for Q1 2023 was $378,715, significantly lower than $4,212,202 in Q1 2022, showing improved cash management[227]. - Net cash provided by financing activities in Q1 2023 was $395,195, a decrease from $5,574,127 in Q1 2022, highlighting reduced financing activity[229]. Debt and Financial Obligations - The company has issued subordinated debentures totaling $4,764,099 as of March 31, 2023, with an interest rate of 17.5% per annum[234]. - An original issue discount secured subordinated note of $2,272,727 was sold to fund the acquisition of Ceautamed, bearing interest at 16% per annum[235]. - The outstanding principal balance of acquisition notes related to DSO was $3,050,000 as of March 31, 2023, with accrued interest of $324,317[236]. - The company issued secured subordinated convertible promissory notes totaling $2,150,000 for the acquisition of Ceautamed, with a conversion price of $6.25[238]. - As of March 31, 2023, the outstanding principal balance of secured subordinated promissory notes related to Ceautamed was $2,204,993, with accrued interest of $75,031[239]. - The company issued secured subordinated promissory notes totaling $1,300,000 for the acquisition of Ceautamed, with an interest rate of 5% per annum, increasing to 10% upon default[240]. - As of March 31, 2023, the outstanding principal balance of the notes related to Ceautamed was $1,148,000, with accrued interest of $92,011[240]. - The company entered into a loan agreement for a term loan of up to $3,000,000, with an outstanding principal balance of $1,075,000 and accrued interest of $69,475 as of March 31, 2023[241]. - The company has outstanding cash advances totaling $22,124 from a June 2022 agreement for $341,150, with a required repayment amount of $490,000[247]. - As of March 31, 2023, the outstanding principal balance of revolving lines of credit was $412,184, with interest rates ranging from 7.99% to 8.99%[253]. - The company has a principal commitment of $300,000 under the EIDL loan, with accrued interest of $31,063 as of March 31, 2023[255]. - The company received $261,164 in PPP loans, with an outstanding balance of $197,457 and accrued interest of $8,923 as of March 31, 2023[256]. - The company has no off-balance sheet arrangements that could affect its financial condition[258]. - The company has no purchase obligations with any suppliers, focusing on obligations under existing loans and pricing structures[257]. - The company is negotiating an extension for a remaining note of $100,000, indicating ongoing financial management efforts[240]. Corporate Changes - A reverse stock split was executed on April 24, 2023, reducing outstanding common stock from 40,440,129 shares to 822,303 shares[193]. - The company completed a registered direct offering on May 2, 2023, raising total gross proceeds of $899,326 and net proceeds of $751,933[195]. - A second registered direct offering on May 17, 2023, resulted in total gross proceeds of $1,585,057 and net proceeds of $1,074,377[199]. - The company’s domicile changed from Delaware to Nevada, increasing the authorized shares from 100 million to 500 million[194].

Revenue Growth - Total revenues increased by $8,743,768, or 96.91%, to $17,766,361 for the year ended December 31, 2022, compared to $9,022,593 for the year ended December 31, 2021, primarily due to acquisitions completed in 2021 [238]. - Revenues from the nutraceutical business increased by $6,000,911, or 72.03%, to $14,331,482 for the year ended December 31, 2022, driven by acquisitions and increased sales of contract manufacturing services [241]. - Revenues from the digital marketing business were $3,434,879 for the year ended December 31, 2022, compared to $692,022 for the period from November 8, 2021, to December 31, 2021 [242]. Cost of Revenues - Total cost of revenues increased by $6,764,599, or 110.45%, to $12,889,232 for the year ended December 31, 2022, from $6,124,633 for the year ended December 31, 2021, primarily due to acquisitions [243]. - Cost of revenues for the nutraceutical business increased by $4,731,709, or 84.55%, to $10,327,956 for the year ended December 31, 2022, with cost of revenues as a percentage of product revenues rising from 67.18% in 2021 to 72.55% in 2022 [244]. Operating and Net Loss - Operating loss for the year ended December 31, 2022, was $(12,206,586), representing (68.71)% of total revenues, compared to an operating loss of $(5,240,821), or (58.09)% of total revenues in 2021 [238]. - Net loss for the year ended December 31, 2022, was $(29,977,815), or (168.73)% of total revenues, compared to a net loss of $(7,765,523), or (86.07)% of total revenues in 2021 [238]. Expenses - General and administrative expenses increased to $6,321,672, or 35.58% of total revenues, for the year ended December 31, 2022, compared to $2,948,466, or 32.68% of total revenues, in 2021 [238]. - Compensation expenses rose to $6,690,889, or 37.66% of total revenues, for the year ended December 31, 2022, compared to $3,564,978, or 39.51% of total revenues, in 2021 [238]. - Professional services expenses increased by $1,018,301, or 112.22%, to $1,925,713 for the year ended December 31, 2022, with expenses as a percentage of revenues rising from 10.06% in 2021 to 10.84% in 2022 [249]. Gross Profit - Gross profit increased by $1,979,169, or 68.30%, to $4,877,129 for the year ended December 31, 2022, while gross profit as a percentage of revenues decreased from 32.12% in 2021 to 27.45% in 2022 [246]. Cash Flow and Financing - Cash and cash equivalents at the end of the year were $69,714, down from $205,093 at the beginning of the year [258]. - Net cash used in operating activities was $9,377,916 for the year ended December 31, 2022, compared to $4,965,458 for the year ended December 31, 2021 [258]. - Net cash provided by financing activities was $12,306,993 for the year ended December 31, 2022, compared to $12,926,986 for the year ended December 31, 2021 [260]. - The company intends to raise additional capital for acquisitions through debt financing and equity offerings, estimating the need for $10 million to $30 million in outside capital over the next 12 months [254]. - The IPO completed on February 18, 2022, generated net proceeds of approximately $12,684,739, which will be used for working capital and general corporate purposes [266]. Debt and Obligations - As of December 31, 2022, the outstanding principal balance of original issue discount subordinated debentures was $3,911,770, with an original issue discount of 15% totaling $586,770 [271]. - The original issue discount secured subordinated note issued on July 29, 2022, had an outstanding principal balance of $2,242,853 and a total purchase price of $2,000,000 [272]. - The 6% secured subordinated promissory note related to the acquisition of DSO had an outstanding principal balance of $3,050,000 as of December 31, 2022 [274]. - The total outstanding principal balance of secured subordinated convertible promissory notes issued for the acquisition of Ceautamed was $2,150,000 as of December 31, 2022 [276]. - The outstanding principal balance of the term loan with Diamond Creek Capital was $1,125,000 as of December 31, 2022, after repaying $1,325,000 from the IPO proceeds [280]. - As of December 31, 2022, the outstanding amount for cash advance agreements totaled $67,624 from a $341,150 agreement, with a required repayment amount of $490,000 [284]. - The outstanding principal balance of revolving lines of credit as of December 31, 2022, was $670,096, with interest rates of 8.99% and 7.99% [289]. - The equipment financing loan for $146,765 had an outstanding amount of $133,211 as of December 31, 2022, with an interest rate of 10.18% [291]. - The company entered into cash advance agreements totaling $293,000, with an outstanding amount of $323,853 as of December 31, 2022 [288]. - The company has issued promissory notes with an outstanding balance of $200,000 at December 31, 2022, accruing interest at 12% and due on April 1, 2023 [281]. - The company entered into a promissory note for an EIDL loan with a principal amount of $300,000, maturing in 30 years at an interest rate of 3.75% [293]. - An additional PPP loan of $261,164 was received, with an outstanding balance of $197,457 as of December 31, 2022, after $63,707 was forgiven [294]. - The company has no off-balance sheet arrangements that could affect its financial condition or results of operations [296]. Revenue Recognition and Inventory - Revenue is primarily generated through the manufacturing and packaging of nutraceutical products, recognized upon transfer of control to customers [300]. - Nexus generates advertising revenues based on sales from product vendors, with revenue recognized upon sale, net of fraudulent traffic [302]. - Inventory is valued at the lower of cost or net realizable value, with an allowance for obsolescence based on slow-moving inventory [304]. Goodwill and Impairment - Goodwill from the acquisition of DSO was recorded at $1,342,000 as of December 31, 2022 [307]. - The company assesses potential impairments to long-lived assets and had no impairment losses recognized at December 31, 2022 [308]. Stock-Based Compensation - Stock-based compensation expenses are recognized over the vesting period based on the fair value of the awards at grant date [310].

Acquisition Strategy - The company aims to aggregate companies generating a minimum of $300 million in revenues within the next thirty-six months through a buy-and-build strategy[178]. - The acquisition of Ceautamed was completed for an aggregate purchase price of $8.6 million, which includes $3 million in cash and various secured subordinated promissory notes[188]. - The company has expanded its product offerings through acquisitions, including GSP Nutrition Inc., which specializes in sports nutrition products marketed under the Sports Illustrated Nutrition brand[184]. - The company has completed multiple acquisitions, including Doctors Scientific Organica, LLC, and Nexus Offers, Inc., to enhance its product portfolio and market reach[181][183]. - The company plans to acquire multiple companies aggregating a minimum of $100 million in annualized revenues over the next 24 months, requiring additional capital ranging from $20 million to $60 million[235]. Financial Performance - Total revenues for the three months ended June 30, 2022, were $4,285,491, an increase of $3,430,358, or 401.15%, compared to $855,133 for the same period in 2021, primarily due to acquisitions[211]. - Revenues from the nutraceutical business were $3,459,926 for the three months ended June 30, 2022, including $2,780,038 from DSO and GSP, while excluding these acquisitions, revenues decreased by $175,245, or 20.49%[212]. - Total revenues for the six months ended June 30, 2022, were $8,740,377, an increase of $7,313,736, or 512.65%, compared to $1,426,641 for the same period in 2021, primarily due to acquisitions[224]. - Revenues from the nutraceutical business were $7,035,384 for the six months ended June 30, 2022, which included $5,762,863 from acquisitions, while excluding these, revenues decreased by $154,120, or 10.80%[224]. Costs and Expenses - Total cost of revenues increased to $2,504,320 for the three months ended June 30, 2022, from $846,187 in 2021, an increase of $1,658,133, or 195.95%, mainly due to acquisitions[214]. - The total cost of revenues increased to $5,441,643 for the six months ended June 30, 2022, from $1,396,337 in 2021, an increase of $4,045,306, or 289.71%, mainly due to acquisitions[225]. - General and administrative expenses rose to $3,959,495 for the three months ended June 30, 2022, an increase of $3,065,493, or 342.90%, compared to $894,002 in 2021, largely due to increased headcount and advertising expenses[218]. - General and administrative expenses rose to $8,325,915 for the six months ended June 30, 2022, an increase of $6,766,559, or 433.93%, compared to $1,559,356 in 2021[230]. Profitability - Gross profit for the three months ended June 30, 2022, was $1,781,171, an increase of $1,772,225, or 19,810.25%, compared to $8,946 in 2021, driven by acquisitions[217]. - Gross profit for the six months ended June 30, 2022, was $3,298,734, an increase of $3,268,430, or 10,785.47%, compared to $30,304 in 2021[228]. - The company reported a net loss of $3,385,195 for the three months ended June 30, 2022, compared to a net loss of $960,722 in 2021[210]. - The company reported a net loss of $19,959,672 for the six months ended June 30, 2022, compared to a net loss of $1,741,363 for the same period in 2021, representing an increase of $18,218,309, or 1,046.21%[233]. Cash Flow and Financing - Net cash used in operating activities was $5,996,785 for the six months ended June 30, 2022, compared to $1,478,627 for the same period in 2021[239]. - Net cash provided by financing activities was $6,996,774 for the six months ended June 30, 2022, compared to $1,323,678 for the same period in 2021, primarily from IPO proceeds[241]. - The company completed its IPO on February 18, 2022, selling 1,440,000 units at a purchase price of $9.10 per unit, resulting in total gross proceeds of $14,404,128[243]. - After deducting underwriting commissions and expenses, the net proceeds from the IPO were approximately $12,763,000, which will be used to pay off certain debt and for working capital[243]. Debt and Liabilities - The company has outstanding debt of $2,250,000 from 12% unsecured subordinated convertible debentures, which are due on November 30, 2022[248]. - The company issued original issue discount subordinated debentures totaling $1,755,883 with a 15% discount, resulting in a total purchase price of $1,500,000[250]. - As of June 30, 2022, the outstanding principal balance of the revolving lines of credit was $914,000, with interest rates of 8.99% and 7.99%[257]. - The company entered into a cash advance agreement for $350,000, with a required repayment amount of $490,000[258]. Operational Insights - The company operates a network platform in affiliate marketing, compensating third-party digital marketers to generate traffic for its products[179]. - The company primarily generates product revenues through the manufacturing and packaging of nutraceutical products, recognizing revenue upon transfer of control to customers[266]. - Nexus generates advertising revenues through sales of listed products by product vendors, with revenue recognized upon sale, net of fraudulent traffic or disputed transactions[268]. - The company bills customers weekly for sales generated by digital marketers, with no significant financing components or unsatisfied performance obligations reported as of June 30, 2022[269]. Asset Management - Inventory is valued at the lower of cost or net realizable value, with an allowance for obsolescence established for slow-moving inventory[270]. - Property and equipment are recorded at cost, with depreciation and amortization provided over estimated useful lives ranging from 3 to 7 years[271]. - Goodwill is subject to annual impairment tests, with no impairments recognized during the three and six months ended June 30, 2022 and 2021[272]. - Long-lived assets are assessed for impairment when evidence indicates that the carrying amount may not be recoverable, with no impairments reported as of June 30, 2022[273]. - Right-of-use assets and lease liabilities are recorded for leases longer than 12 months, with lease liabilities recognized based on the present value of remaining lease payments[274]. - Stock-based compensation expenses are recognized over the vesting period based on the fair value of the award at grant date, using the Black-Scholes option pricing model[275]. Regulatory and Market Conditions - The company remains an emerging growth company, allowing it to rely on certain exemptions from disclosure requirements under the JOBS Act[207]. - The COVID-19 pandemic continues to create uncertainty and may impact the company's operations and financial results due to supply chain disruptions and changes in consumer behavior[206].

Business Strategy and Acquisitions - The company aims to aggregate companies generating a minimum of $300 million in revenues within the next thirty-six months through a buy-and-build strategy [154]. - The company has acquired several subsidiaries, including Doctors Scientific Organica, LLC, which focuses on natural health and wellness meal replacement products, contributing to its growth [157]. - The company has established a wholly owned subsidiary in Canada, Smart for Life Canada Inc., to enhance retail and distribution capabilities [158]. - The company acquired GSP Nutrition Inc., which offers sports nutrition products under the Sports Illustrated Nutrition brand, expanding its product offerings [160]. - The company plans to acquire multiple companies aggregating a minimum of $100 million in annualized revenues over the next 24 months, requiring additional capital ranging from $20 million to $60 million [185]. Financial Performance - Total revenues for the three months ended March 31, 2022, were $4,454,886, an increase of $3,883,378 or 679.50% compared to $571,508 for the same period in 2021, primarily due to acquisitions of DSO, Nexus, and GSP [172]. - Revenues from the nutraceutical business were $3,575,459, including $2,982,825 from DSO and GSP, while excluding these acquisitions, revenues increased by $21,125 or 3.70% [173]. - Total cost of revenues for the three months ended March 31, 2022, was $2,937,323, an increase of $2,387,173 or 433.91% compared to $550,150 for the same period in 2021, mainly due to the acquisitions [176]. - Gross profit for the three months ended March 31, 2022, was $1,517,563, an increase of $1,496,205 or 7,005.36% compared to $21,358 for the same period in 2021 [179]. - General and administrative expenses were $4,366,421 for the three months ended March 31, 2022, an increase of $3,701,067 or 556.26% compared to $665,354 for the same period in 2021 [180]. - Total other expense for the three months ended March 31, 2022, was $13,302,609, compared to $82,637 for the same period in 2021, primarily due to interest expense of $12,757,479 [182]. - Net loss for the three months ended March 31, 2022, was $16,574,477, an increase of $15,793,836 or 2,023.19% compared to $780,641 for the same period in 2021 [183]. Market Conditions and Challenges - The COVID-19 pandemic has created significant volatility and uncertainty, impacting supply chains and consumer spending, which may affect financial results [161][164]. - The company has faced challenges in sourcing products and raw materials due to the pandemic, potentially impacting profitability [163]. - Key factors affecting financial performance include customer acquisition and retention, competitive pricing, and market conditions [170]. Capital and Financing - The IPO completed on February 18, 2022, raised net proceeds of approximately $12,763,000, which will be used for working capital and general corporate purposes [193]. - The company completed a private placement on July 1, 2021, selling 6,000 shares of Series A convertible preferred stock and warrants for gross proceeds of $6,000,000, followed by an additional closing on August 18, 2021, raising another $2,000,000 [196]. - As of March 31, 2022, the outstanding principal balance of 12% unsecured subordinated convertible debentures was $2,250,000 as of March 31, 2022, with interest accrued at 12% per annum [198]. - The company issued a 5% secured subordinated promissory note of $1,900,000 in connection with the acquisition of Nexus, with an outstanding principal balance of $1,900,000 as of March 31, 2022 [200]. - A 6% secured subordinated promissory note of $3,000,000 was issued for the acquisition of DSO, with an outstanding principal balance of $3,000,000 as of March 31, 2022 [201]. - As of March 31, 2022, the outstanding principal balance of a term loan with Diamond Creek Capital was $1,325,000, which bears interest at 15% per annum [202]. - The company entered into a loan agreement with Peah Capital for a term loan of $1,625,000, with an outstanding principal balance of $614,906 as of March 31, 2022 [204]. - The company received $239,262 and $261,164 in Paycheck Protection Program loans, with outstanding balances of $239,262 and $261,164 as of March 31, 2022, respectively [207]. - As of March 31, 2022, the outstanding principal balance of two revolving lines of credit was $431,525, with interest rates of 8.99% and 7.99% [209]. Asset Management - No impairment of long-lived assets was recorded as of March 31, 2022, and December 31, 2021 [220]. - Right-of-use assets and lease liabilities are recorded for all leases longer than 12 months, with lease liabilities recognized based on the present value of remaining lease payments [221]. - Stock-based compensation expenses are recognized over the vesting period based on the fair value at grant date, using the Black-Scholes option pricing model [222].

Company Strategy and Acquisitions - The company aims to aggregate companies generating a minimum of $300 million in revenues within the next thirty-six months through a buy-and-build strategy [224]. - The company plans to acquire multiple companies over the next 24 months, targeting a minimum of $100 million in annualized revenues [268]. - The company intends to pay no more than 60% cash on any acquisition, with a target of 50% [268]. - The company acquired Ceautamed for an aggregate purchase price of $9,750,000, which includes $4,875,000 in cash and convertible and non-convertible promissory notes [243]. - The purchase price for Ceautamed is based on a six and one-half (6.5) times multiple of estimated adjusted EBITDA for the calendar year 2021 [244]. - The company has engaged a firm to prepare a quality of earnings report on Ceautamed and its subsidiaries as part of the acquisition process [244]. Financial Performance - Total revenues for the year ended December 31, 2021, were $9,022,593, an increase of $7,062,998, or 360.43%, compared to $1,959,595 for 2020 [260]. - Gross profit for 2021 was $2,897,960, representing an increase of $2,769,994, or 2,164.63%, from $127,966 in 2020 [262]. - Net loss for the year ended December 31, 2021, was $7,765,523, an increase of $4,596,505, or 145.05%, compared to a net loss of $3,169,018 in 2020 [266]. - General and administrative expenses increased by $5,557,769, or 298.31%, to $7,420,856 in 2021 from $1,863,087 in 2020 [263]. - Total cost of revenues for 2021 was $6,124,633, an increase of $4,293,004, or 234.38%, from $1,831,629 in 2020 [261]. - The cost of revenues as a percentage of revenues decreased from 93.47% in 2020 to 67.88% in 2021, indicating improved purchasing power [261]. Cash Flow and Financing Activities - Net cash used in operating activities was $5,019,113 for the year ended December 31, 2021, compared to $1,903,116 for 2020, reflecting a significant increase in operational losses [272]. - Net cash used in investing activities was $8,241,383 for the year ended December 31, 2021, primarily due to acquisitions of DSO and Nexus totaling $8,100,000 [273]. - Net cash provided by financing activities was $12,980,640 for the year ended December 31, 2021, a substantial increase from $2,486,265 in 2020, driven by private placements and note payables [274]. - The company completed a private placement of 6,000 shares of Series A convertible preferred stock for gross proceeds of $6,000,000 on July 1, 2021, followed by an additional $2,000,000 on August 18, 2021 [275]. - The company issued 12% unsecured subordinated convertible debentures totaling $2,250,000 on November 5, 2021, with an outstanding principal balance of $2,214,000 as of December 31, 2021 [276]. - A 5% secured subordinated convertible promissory note of $1,900,000 was issued for the acquisition of Nexus, with the outstanding principal balance also at $1,900,000 as of December 31, 2021 [278]. - The company entered into a loan agreement for a term loan of up to $3,000,000, with an outstanding principal balance of $2,750,000 as of December 31, 2021 [283]. - The company has outstanding principal balances of $5,993,720 for various unsecured promissory notes as of December 31, 2021, up from $3,312,971 in 2020 [286]. - The company received $239,262 in PPP loans in May 2020 and an additional $261,164 in February 2021, both with outstanding balances as of December 31, 2021 [291][292]. Operational Challenges and Market Conditions - The COVID-19 pandemic continues to create significant volatility and uncertainty regarding the company's operations and financial results [250]. - As of December 31, 2021, the company had cash of $205,093, indicating a need for additional funds to execute its business plan [267]. - The company expects to require between $20 million to $60 million in additional capital to execute its business plan over the next 24 months [268]. Accounting and Revenue Recognition - Revenue recognition is evaluated based on ASC 606, with no impact on retained earnings from the adoption of the new standard [296]. - The company primarily generates revenue through the manufacturing and packaging of nutraceutical products, recognizing revenue upon transfer of control to customers [297]. - Nexus generates revenue through sales by product vendors, with revenue recognized net of fraudulent traffic or disputed transactions [299]. - Nexus' general payment terms are short-term, with weekly billing for sales generated by digital marketers [300]. - The company does not have significant financing components or payment terms in its revenue recognition processes [297][300]. Assets and Inventory Management - Goodwill increased by $1.3 million in 2021 due to the acquisition of DSO, while identifiable intangible assets increased by $16.0 million from acquisitions [303]. - No goodwill impairments were recognized during 2021, and there were no impairments of long-lived assets at December 31, 2021 [303][304]. - Inventory is valued at the lower of cost or net realizable value, with an allowance for obsolescence based on slow-moving inventory and current economic conditions [301]. Stock-Based Compensation - Stock-based compensation expenses are recognized over the vesting period, calculated using the Black-Scholes option pricing model [306].