# EDGAR Filing Document

**Accession Number:** 0001851860
**File Stem:** 0001213900-23-025453
**Filing Date:** 2023-3
**Character Count:** 532325
**Document Hash:** 443ef9de7d0f37ee09452d9e457f3d41
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001213900-23-025453.hdr.sgml**: 20230331

**ACCESSION NUMBER**: 0001213900-23-025453

**CONFORMED SUBMISSION TYPE**: 10-K

**PUBLIC DOCUMENT COUNT**: 81

**CONFORMED PERIOD OF REPORT**: 20221231

**FILED AS OF DATE**: 20230331

**DATE AS OF CHANGE**: 20230331

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** SMART FOR LIFE, INC.
- **CENTRAL INDEX KEY:** 0001851860
- **STANDARD INDUSTRIAL CLASSIFICATION:** MEDICINAL CHEMICALS & BOTANICAL PRODUCTS [2833]
- **IRS NUMBER:** 815360128
- **STATE OF INCORPORATION:** DE
- **FISCAL YEAR END:** 1231

**FILING VALUES:**
- **FORM TYPE:** 10-K
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 001-41290
- **FILM NUMBER:** 23787591

**BUSINESS ADDRESS:**
- **STREET 1:** 990 BISCAYNE BLVD., SUITE 503
- **CITY:** MIAMI
- **STATE:** FL
- **ZIP:** 33132
- **BUSINESS PHONE:** 786-749-1221

**MAIL ADDRESS:**
- **STREET 1:** 990 BISCAYNE BLVD., SUITE 503
- **CITY:** MIAMI
- **STATE:** FL
- **ZIP:** 33132

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** Bonne Sante Group, Inc.
- **DATE OF NAME CHANGE:** 20210317

?xml version="1.0" encoding="ASCII"?

**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

**FORM 10-K**

(Mark One)

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

For the fiscal year ended: <u>December 31, 2022</u>

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

For the transition period from ____________ to _____________

Commission File No. 001-41290

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| |
|:---|
| &nbsp;&nbsp;**SMART FOR LIFE, INC.** |
| &nbsp;&nbsp;(Exact name of registrant as specified in its charter) |

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| | |
|:---|:---|
| **Delaware** | **81-5360128** |
| (State or other jurisdiction of <br> incorporation or organization) | (I.R.S. Employer <br> Identification No.) |
| **990 S Rogers Circle, Suite 3, Boca Raton, FL** | **33487** |
| (Address of principal executive offices) | (Zip Code) |

---

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| |
|:---|
| **(786) 749-1221** |
| (Registrant's telephone number, including area code) |

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Securities registered pursuant to Section 12(b) of the Act:

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| | | |
|:---|:---|:---|
| <br> **Title of each class** | **Trading Symbol(s)** | **Name of each exchange on which registered** |
| Common Stock, par value $0.0001 per share | SMFL | The Nasdaq Stock Market LLC |

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Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

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 submitted pursuant to Rule 405 of Regulation S-T 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, a smaller reporting company, or 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 ☐ <br> Non-accelerated filer ☒ Smaller reporting company ☒ <br> 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 has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act by the registered public accounting firm that prepared or issued its audit report. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark whether registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

As of June 30, 2022 (the last business day of the registrant's most recently completed second fiscal quarter), the aggregate market value of the registrant's common stock held by non-affiliates (based upon the closing price of such shares as reported on the Nasdaq Capital Market) was approximately $10.2 million. Shares held by each executive officer and director and by each person who owns 10% or more of the outstanding common shares have been excluded from the calculation in that such persons may be deemed to be affiliates of the registrant. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

As of March 29, 2023, there were a total of 39,177,749 shares of the registrant's common stock issued and outstanding.

**DOCUMENTS INCORPORATED BY REFERENCE**

None.

**Smart for Life, Inc.**

**Annual Report on Form 10-K**

**Year Ended December 31, 2022**

**TABLE OF CONTENTS**

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| | | |
|:---|:---|:---|
| [PART I](#a_001) | [PART I](#a_001) | [PART I](#a_001) |
| Item 1. | [Business.](#a_002) | 1 |
| Item 1A. | [Risk Factors.](#a_003) | 13 |
| Item 1B. | [Unresolved Staff Comments.](#a_004) | 31 |
| Item 2. | [Properties.](#a_005) | 31 |
| Item 3. | [Legal Proceedings.](#a_006) | 31 |
| Item 4. | [Mine Safety Disclosures.](#a_007) | 31 |
| [PART II](#a_008) | [PART II](#a_008) | [PART II](#a_008) |
| Item 5. | [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.](#a_009) | 32 |
| Item 6. | [\[Reserved\]](#a_010) | 32 |
| Item 7. | [Management's Discussion and Analysis of Financial Condition and Results of Operations.](#a_011) | 33 |
| Item 7A. | [Quantitative and Qualitative Disclosures About Market Risk.](#a_012) | 44 |
| Item 8. | [Financial Statements and Supplementary Data.](#a_013) | 44 |
| Item 9. | [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.](#a_014) | 44 |
| Item 9A. | [Controls and Procedures.](#a_015) | 44 |
| Item 9B. | [Other Information.](#a_016) | 45 |
| Item 9C. | [Disclosure Regarding Foreign Jurisdictions That Prevent Inspections.](#a_017) | 45 |
| [PART III](#a_019) | [PART III](#a_019) | [PART III](#a_019) |
| Item 10. | [Directors, Executive Officers and Corporate Governance.](#a_020) | 46 |
| Item 11. | [Executive Compensation.](#a_021) | 51 |
| Item 12. | [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.](#a_022) | 57 |
| Item 13. | [Certain Relationships and Related Transactions, and Director Independence.](#a_023) | 58 |
| Item 14. | [Principal Accounting Fees and Services.](#a_024) | 59 |
| [PART IV](#a_025) | [PART IV](#a_025) | [PART IV](#a_025) |
| Item 15. | [Exhibit and Financial Statement Schedules.](#a_026) | 60 |
| Item 16. | [Form 10-K Summary.](#a_027) | 65 |

---

i

**INTRODUCTORY NOTES**

**Use of Terms**

Except as otherwise indicated by the context and for the purposes of this report only, references in this report to "we," "us," "our" and "our company" are to Smart for Life, Inc., a Delaware corporation, and its consolidated subsidiaries.

**Special Note Regarding Forward-Looking Statements**

This report contains forward-looking statements that are based on our management's beliefs and assumptions and on information currently available to us. All statements other than statements of historical facts are forward-looking statements. These statements relate to future events or to our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our 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. Forward-looking statements include, but are not limited to, statements about:

● our goals and strategies;

● our future business development, financial condition and results of operations;

● expected changes in our revenue, costs or expenditures;

● growth of and competition trends in our industry;

● our expectations regarding demand for, and market acceptance of, our products;

● our expectations regarding our relationships with investors, institutional funding partners and other parties with which we collaborate;

● fluctuations in general economic and business conditions in the markets in which we operate; and

● relevant government policies and regulations relating to our industry.

In some cases, you can identify forward-looking statements by terms such as "may," "could," "will," "should," "would," "expect," "plan," "intend," "anticipate," "believe," "estimate," "predict," "potential," "project" or "continue" or the negative of these terms or other comparable terminology. These statements are only predictions. You should not place undue reliance on forward-looking statements because they involve known and unknown risks, uncertainties and other factors, which are, in some cases, beyond our control and which could materially affect results. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed under Item 1A "*Risk Factors*" and elsewhere in this report. If one or more of these risks or uncertainties occur, or if our underlying assumptions prove to be incorrect, actual events or results may vary significantly from those implied or projected by the forward-looking statements. No forward-looking statement is a guarantee of future performance.

In addition, statements that "we believe" and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this report, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.

The forward-looking statements made in this report relate only to events or information as of the date on which the statements are made in this report. Except as expressly required by the federal securities laws, there is no undertaking to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changed circumstances or any other reason.

ii

**PART I**

**ITEM 1. BUSINESS.**

**Overview**

We are engaged in the development, marketing, manufacturing, acquisition, operation and sale of a broad spectrum of nutritional and related products with an emphasis on health and wellness. Structured as a global holding company, we are executing a buy-and-build strategy with serial accretive acquisitions creating a vertically integrated company with an objective of aggregating companies generating a minimum of $300 million in revenues by the fourth quarter of 2026. To drive growth and earnings, we are developing proprietary products as well as acquiring other profitable companies, encompassing brands, manufacturing and distribution channels.

We also operate a network platform in the affiliate marketing space. Affiliate marketing is an advertising model in which a product vendor compensates third-party digital marketers to generate traffic or leads for the product vendor's products and services. The third-party digital marketers are referred to as affiliates, and the commission fee incentivizes them to find ways to promote the products being sold by the product vendor.

**Business Model**

We are engaged in a comprehensive program to develop a robust pipeline of prospective acquisitions in addition to the companies currently operated by us. Our management has significant experience in locating and evaluating prospective target operating companies. We have also entered into buy-side agreements with certain advisers and consultants to assist management in identifying and evaluating prospective target operating companies. The nutritional products industry is highly fragmented with a large pool of companies generating less than $20 million in revenues representing significant opportunity for industry consolidation.

We plan to acquire target companies utilizing a combination of cash, promissory notes, earnouts and public company stock, generally at 4x to 6x trailing adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization). Aside from our first acquisition described below, we intend on paying no more than 60% cash on any acquisition that we execute with a target of 50%. The remainder is allocated between stock and a note and/or earnout with a heavier weighting toward the former. Although the acquisition consideration is structured, we believe that our acquisitions will provide three distinct benefits to the principals of an acquisition - first, a significant liquidity event; second, the creation of a significant equity position in an emerging growth public company; and third, ongoing employment at customary industry compensation.

We plan to acquire multiple companies aggregating a minimum of $300 million in annualized revenues by the fourth quarter of 2026. We do not currently have sufficient capital to complete these acquisitions. We intend to raise capital for additional acquisitions primarily through debt financing at our operating company level, additional equity offerings by our company, or by undertaking a combination of any of the above. The sale of additional equity securities could result in dilution to our stockholders. The incurrence of indebtedness would result in increased debt service obligations and could require us to agree to operating and financial covenants that would restrict our operations. Financing may not be available in amounts or on terms acceptable to us, if at all.

There is no guarantee that we will be able to acquire additional businesses under the terms outlined above or that we will be able to find additional acquisition candidates should we terminate our plans for any of our current acquisition targets.

**Corporate History and Structure**

Our company was incorporated in the State of Delaware on February 2, 2017 under the name Bonne Santé Group, Inc. On August 4, 2021, we changed our name to Smart for Life, Inc. in connection with the acquisition of DSO described below.

On March 8, 2018, we acquired 51% of Millenium Natural Manufacturing Corp. and Millenium Natural Health Products Inc. for a purchase price of $2,140,272. On October 8, 2019, we entered into an agreement to acquire the remaining 49% of these companies, which was completed on October 8, 2019. On September 30, 2020, we changed the name of Millenium Natural Manufacturing Corp. to Bonne Sante Natural Manufacturing, Inc., or BSNM, and on November 24, 2020, we merged Millenium Natural Health Products Inc. into BSNM to better reflect our vertical integration.

On February 11, 2020, we entered into securities purchase agreement, which was amended on July 7, 2020 and June 4, 2021, to acquire all of the issued and outstanding equity interests of Doctors Scientific Organica, LLC d/b/a Smart for Life, Oyster Management Services, Ltd., Lawee Enterprises, L.L.C. and U.S. Medical Care Holdings, L.L.C. On July 1, 2021, the acquisition was completed. On August 27, 2021, we transferred all of the equity interests of Oyster Management Services, Ltd., Lawee Enterprises, L.L.C. and U.S. Medical Care Holdings, L.L.C. to Doctors Scientific Organica, LLC. On December 13, 2022, we converted Oyster Management Services, Ltd. to a limited liability company known as Oyster Management Services, L.L.C. On May 19, 2022, we acquired Lavi Enterprises, LLC. On the same date, we transferred all of the equity interests of Lavi Enterprises, LLC to Doctors Scientific Organica, LLC. As a result, these entities are now wholly owned subsidiaries of Doctors Scientific Organica, LLC. In this report, we collectively refer to Doctors Scientific Organica, LLC and its consolidated subsidiaries as DSO.

On August 24, 2021, we established Smart for Life Canada Inc. as a wholly owned subsidiary of Doctors Scientific Organica, LLC in Canada. This subsidiary sells retail products through a retail store location in Montreal Canada and the same location also acts as distribution center for our international direct to consumer and big box customers. We maintain inventory and employees at this location.

On July 21, 2021, we entered into a securities purchase agreement, which was amended on November 8, 2021, to acquire all of the issued and outstanding capital stock of Nexus Offers, Inc., or Nexus. On November 8, 2021, the acquisition was completed.

On November 29, 2021, we entered into a contribution and exchange agreement to acquire all of the issued and outstanding capital stock of GSP Nutrition Inc., or GSP. On December 6, 2021, the acquisition was completed.

On March 14, 2022, we entered into securities purchase agreement, which was amended on July 29, 2022, to acquire all of the issued and outstanding equity interests of Ceautamed Worldwide LLC and its wholly-owned subsidiaries Wellness Watchers Global, LLC and Greens First Female LLC, which we collectively refer to in this report as Ceautamed. On July 29, 2022, the acquisition was completed.

On August 15, 2022, we organized Smart Acquisition Group, LLC in the State of Florida. This subsidiary is 50% owned by our company and 50% owned by Stuart Benson, the former owner and principal of Ceautamed. This special purpose subsidiary is dedicated exclusively to the identification, negotiation, financing, and acquisition of companies synergistic to our buy-and-build business model.

**Corporate Structure**

The following charts depict our organization structure.

![](image_001.jpg)

**Our Industry** 

The markets in which we operate are characterized by rapid technological changes, frequent new product introductions, established and emerging competition, extensive intellectual property disputes and litigation, price competition, aggressive marketing practices, evolving industry standards and changing customer preferences. Accordingly, our prospects must be considered in light of the uncertainties, risks, expenses, and difficulties frequently encountered by companies operating in rapidly changing and competitive markets.

 ****

***Nutraceutical Industry***

The nutraceutical industry focuses on nutritional supplements intended to improve longevity, sports fitness and provide health benefits in addition to the basic nutritional value present in food. Most people are familiar with various nutraceutical products—and have likely used them—even if they are unfamiliar with the industry name. Nutraceuticals comprise such commonly used items as herbal products, specific diet products, vitamins, processed foods and beverages, functional foods, isolated nutrients and other dietary products. Functional foods are foods that have a potentially positive effect on health beyond basic nutrition. A familiar example of a functional food is oatmeal because it contains soluble fiber that can help lower cholesterol levels. Some foods are also modified to have health benefits. An example is orange juice that has been fortified with calcium for bone health.

The following table prepared by the Council for Responsible Nutrition (www.crnusa.org), or CRN, depicts the types of supplements taken by the population in the different indicated categories beginning in 2018 and estimated through 2027. We sell products across all of these product categories, and we believe that our market share in each of these categories is currently less than 1%.

![](image_002.jpg)

SOURCE: Council for Responsible Nutrition

The nutraceutical industry has experienced significant growth across the globe, propelled by the increasing age expectancies and associated increases in diseases of aging and lifestyle. A shift in demographics has also allowed manufacturers to benefit in recent years. The number of Americans ages 65 and older is projected to nearly double from 52 million in 2018 to 95 million by 2060, and the 65-and-older age group's share of the total population will rise from 16% to 23%. Moreover, the CRN reported 77% of U.S. adults take dietary supplements.

Nutraceuticals are garnering immense attention in recent years due to various trends including changing lifestyles, burgeoning middle-class segment across emerging economies, transforming dietary habits, aging population, and increased life expectancy. In addition, the focus of R&D based pharmaceutical sector on expensive specialty drugs is increasing the burden on the healthcare system as well as resulting in higher out-of-pocket costs for drugs driving the focus on prevention than intervention. The self-care trend across the world is driving strong demand for nutraceuticals including superfoods, food and dietary supplements, sports nutrition, and functional foods and beverages. Given the hectic lifestyles and the lack of time for consumption of the required nutrients through regular diet, the need for replenishing such essential nutrients is increasing. In this context, nutraceuticals are emerging to be the solution for meeting this requirement. Nutraceuticals are considered to be the vital link between health and food.

The market is also experiencing strong demand for personalized approaches to wellness that is driving product innovation in the areas of weight management, sports nutrition, and healthy snacking. Other noteworthy trends benefiting market prospects in the near term include emergence of clean labeling as a new norm owing to increasing focus of consumers on ingredient list on the product; innovative delivery technologies such as microencapsulation, which protects the product from adverse conditions such as light and air.

As the overall population continues to turn to healthier living in hopes of offsetting rising healthcare expenditures and preventing general subpar health conditions, we believe that the demand for nutraceutical industry products will resemble a similar trend.

 ****

***Digital Marketing***

As a result of our acquisition of Nexus, we have entered the digital marketing industry as a way to promote the products and brands that we sell. Digital marketing is a component of marketing that uses internet and online based digital technologies such as desktop computers, mobile phones and other digital media and platforms to promote products and services.

The COVID-19 pandemic resulted in people staying at home and/or working remotely from home, resulting in huge increase in online traffic. Clicks and display ads are among the most prominent forms of digital marketing initiatives. Clicks are expensive compared to display ads, as clicks ensure the customer is directed to the advertiser's website. However, clicks provide a better return on investment.

**Our Operating Subsidiaries**

 ****

***BSNM***

BSNM is a nutraceutical contract manufacturer. Since 1998, our strong manufacturing capabilities and dedication to our clients has enabled us to build relationships with hundreds of customers throughout the United States and around the world, including South America, Central America and Europe. We specialize in a wide variety of products to fill our client's needs, from the private labeling of vitamins, dietary supplements, nutraceuticals, sport nutrition and broad-spectrum nutritional supplements. Our experienced team of scientists, formulators, and manufacturing experts have the years of knowledge necessary to take our client's concepts all the way from initial idea to finished product. In addition, we can provide the support for a simple and cost-effective "turn key" solution to manufacturing existing formulations.

To meet the specific demands of any order, we have state-of-the-art manufacturing and packaging lines to decrease cost and maximize efficiencies. We certify that all products and labels meet stringent U.S. Food and Drug Administration, or FDA, requirements and our quality control associates will continually monitor the entire process until products are delivered. Our goal is to exceed our customer's expectations with respect to product quality, service and price.

 ****

***DSO***

DSO manufactures, sells and owns the Smart for Life brand of natural health and wellness meal replacement products. The brand includes proprietary hunger suppressing functional foods that are designed to work with the body's natural ability to lose weight. The program uses an exact protein-to-sugar ratio, a low glycemic index and glycemic load as well as multiple small meals throughout the day to deliver specific amounts of protein, super fibers and complex carbs to suppress hunger, keep sugar and insulin low and trigger the body's release of the fat releasing hormone glucagon.

Our Smart for Life products deliver:

● Hunger controlling protein mix

● No toxins or preservatives

● The right amount of protein per calorie ratio

● No insulin spike, lets glucagon do its job

● A small amount of essential good fats

● Right amount of complex carbs

DSO also develops premium supplements and commodities that will promote optimal health and wellness. This natural product line uses simple quality ingredients to help create a more sustainable lifestyle. DSO has over 15 years of experience providing high-quality products to premium retail locations and companies. DSO branded vitamins and supplements are also being sold through Amazon, and this sales channel is becoming a major contributor to the growth of the brand online. All products are packaged in eco-friendly and bio-degradable packaging.

 ****

 ****

***GSP***

GSP is a sports nutrition company. It offers nutritional supplements for athletes and active lifestyle consumers through a variety of wellness solutions and delivery methods, including powders, tablets and soft gels that are formulated to support energy and performance; nutrition and wellness; and focus and clarity.

GSP's initial line of nutritional products are marketed under the Sports Illustrated Nutrition brand. The product line currently consists of whey protein isolate powder, tablet supplements for joint health, nitric oxide, post workout blends, Omega-3 supplements, and pre-workout supplements, among others.

We believe that the Sports Illustrated brand is one of the most recognized brands in sports and athletics. GSP has a license for the exclusive use of the Sports Illustrated brand (excluding the Sports Illustrated Swimsuit brand for which it has a right of first offer under the license) for certain dietary and nutritional supplements, in each case to be sold to/through certain approved accounts in the United States and Canada. See "*—Intellectual Property*" below for additional details regarding this license.

 ****

***Ceautamed***

Ceautamed is based in Boca Raton, Florida and is primarily engaged in the development and distribution of a wide variety of nutritional products, including antioxidant rich supplements, plant-based protein, alkalizing nutrients and products designed for weight management.

Ceautamed owns the Greens First line of branded products which have been specifically marketed to the healthcare provider sector. These vitamins and supplements have been sold on a business-to-business basis, direct-to-consumer, as well as sold utilizing an international medical distribution company.

The mission is to create a healthier world with nutritious wellness products made from the highest quality ingredients for superior benefits.

 ****

***Nexus***

Nexus operates a cost per action/cost per acquisition network. This network consists of hundreds of digital marketers who stand ready to market products introduced to the Nexus network. The cost per action/cost per acquisition model is where digital marketers are paid for an action (e.g., a product sale or lead generation) that is taken as a direct result of their marketing efforts. Through the digital marketer's method of marketing, the digital marketer sends traffic to one of the product vendor's offers listed on the network.

Nexus has relationships with both product vendors and digital marketers. A product vendor is a Nexus customer that has products, whether digital or physical, for sale and is looking for increased sales through digital marketing avenues from digital marketers. Digital marketers are Nexus contractors that engage in digital marketing. An example of a digital marketer is someone who has a strong Facebook following, or a strong knowledge of Facebook ad marketing. Other examples include google ad marketing or email marketers who send marketing messages to an opted in list of subscribers. Historically, Nexus' customers consisted exclusively of owners of digital products that were also delivered digitally. Following our acquisition of Nexus, BSNM, DSO, GSP and Ceautamed, as well as any additional nutraceutical companies that we acquire in the future, will also become customers of Nexus. Nexus will use its online marketplace to market our nutraceutical products through its network of digital marketers. Our nutraceutical product companies will then sell and physically deliver the nutraceutical products to the end users identified through the efforts of the digital marketers. Nexus has the ability to "plug and play" with any of the products sold by companies that we may acquire in the future as we can take the consumer facing products being sold by those companies and seamlessly add them to the Nexus network to generate sales.

Product vendors come to Nexus to increase sales of their products and digital marketers come to Nexus to receive a commission in exchange for their marketing efforts, which are designed to generate sales for the product vendors. When a digital marketer's marketing efforts results in a sale of a product by a product vendor, the digital marketer is then credited with a commission. The product vendor is billed weekly for the sales that the product vendor makes during the week as the result of such digital marketers' marketing efforts. The product vendor pays Nexus and Nexus pays the digital marketer. This is an anonymous transaction as digital marketers and product vendors are only defined inside the marketplace by an offer name (product vendor) and an affiliate number (digital marketer).

**Manufacturing, Distribution and Quality Control** 

BSNM operates a 22,000 square foot manufacturing facility in Doral, Florida. This facility primarily focuses on the contract manufacturing of vitamins and supplements, with a particular emphasis on the production of tablets, capsules and powders, along with turn-key solutions for packaging these health and wellness products in a wide variety of bottles, jars, sachets and stick packs. From inception through December 31, 2022, it has manufactured nutritional products for approximately 245 companies, and during the year ended December 31, 2022, it manufactured nutritional products for approximately 23 companies.

DSO operates a 30,000 square foot manufacturing facility in Riviera Beach, Florida. This facility is primarily focused on the production of natural health and wellness meal replacement products, including nutrition bars, cookies, soups and shakes, as well as some vitamin and supplement capabilities such as powders. In addition to our own products, DSO manufactures products on behalf of third parties. From inception through December 31, 2022, it has manufactured nutritional products for approximately 29 companies, and during the year ended December 31, 2022, it manufactured nutritional products for approximately 21 companies.

GSP and Ceautamed rely on third-party contract manufacturers to manufacture their products.

All our manufacturing operations are subject to good manufacturing practices, or GMPs, promulgated by the FDA and other applicable regulatory standards. We believe our manufacturing processes comply with the GMPs for dietary supplements or foods, and our manufacturing and distribution facilities generally have sufficient capacity to meet our current business requirements and our currently anticipated sales. We place special emphasis on quality control. We assign lot numbers to all raw materials and initially hold them in quarantine while our quality department evaluates them for compliance with established specifications. Once released, we retain samples and process the material according to approved formulas by blending, mixing and technically processing as necessary. We manufacture products in final delivery form as a capsule, tablet, powder, or nutrition bar. After a product is manufactured, our laboratory analysts test its weight, purity, potency, disintegration and dissolution, if applicable, utilizing both internal equipment and third-party labs. We hold the product in quarantine until we complete the quality evaluation and determine that the product meets all applicable specifications before packaging. When the manufactured product meets all specifications, our automated packaging equipment packages the product with at least one tamper-evident safety seal and affixes a label, an indelible lot number and, in most cases, the expiration or "best by" date.

Our manufacturing operations are designed to allow low-cost production of a wide variety of products of different quantities, physical sizes and packaging formats, while maintaining a high level of customer service and quality. Flexible production line changeover capabilities and reduced cycle times allow us to respond quickly to changes in manufacturing schedules and customer demands.

We have inventory control systems at our facilities that track each manufacturing and packaging component as we receive it from our supply sources through manufacturing and shipment of each product to customers. To facilitate this tracking, most products we sell are bar coded. We believe our distribution capabilities increase our flexibility in responding to our customers' delivery requirements.

**Raw Materials and Suppliers**

In fiscal 2022 and 2021, we spent approximately $9,335,000 and $3,454,000, respectively, on raw materials, excluding packaging and similar product materials. The principal raw materials required in our operations are vitamins, minerals, herbs, and gelatin. We believe that there are adequate sources of supply for all our principal raw materials, and in general we maintain two to three suppliers for many of our raw materials. From time to time, weather or unpredictable fluctuations in the supply and demand may affect price, quantity, availability, or selection of raw materials. We believe that our strong relationships with our suppliers yield high quality, competitive pricing, and overall good service to our customers. Although we cannot be sure that our sources of supply for our principal raw materials will be adequate in all circumstances, we believe that we can develop alternate sources in a timely and cost-effective manner if our current sources become inadequate. During fiscal 2022, two raw material suppliers, American International Foods and Univar USA, accounted for 16% and 11%, respectively, our raw material purchases. Due to availability of numerous alternative raw material suppliers, we do not believe that the loss of any single raw material supplier would have a material adverse effect on our consolidated financial condition or results of operations. See Item 1A "*Risk Factors—Risks Related to Our Business and Industry—An increase in the price and shortage of supply of key raw materials could adversely affect our business.*"

**Sales and Marketing**

We employ many different techniques and strategies within our marketing initiatives. These include direct to consumer outreach, use of influencers through social media, Facebook targeting, focused e-mail campaigns, and traditional media. Our marketing goal is always to increase visibility and relevance of our brands in the minds of our customers and potential customers. We hope to expand our programs to include experimental marketing techniques in the future.

We recently shifted the marketing focus of Nexus to target the nutraceutical industry away from all other efforts, which we believe will become a value-added component of our marketing strategies.

**Customers**

BSNM, DSO, GSP and Ceautamed primarily sell products to customers under individual purchase orders placed by them under their standard terms and conditions of sale. These terms and conditions generally include insurance requirements, representations by us with respect to the quality of our products and our manufacturing process, our obligations to comply with law, and indemnifications by us if we breach our representations or obligations. There is no commitment from any customer to purchase from us, or from us to sell to them, any minimum amount of product. During fiscal 2022, Amazon and Costco, accounted for 30% and 10%, respectively, of our total revenues.

Ceautamed has also entered distribution agreements with Boxout whereby it acts as an exclusive distributor of certain of Ceautamed's products to professional health and wellness providers and service locations, and to any distributors selling to such providers and locations, within the U.S. and Canada, as well as through e-commerce websites Amazon, Ebay and Walmart.

As described above, Nexus' customers are product vendors. Although the number of customers that Nexus has fluctuates from year to year, it has established long-term relationships with its significant product vendors, but it does not have long-term contracts with any of its customers. The relationship with customers can be terminated at any time by either party; however, as a result of Nexus' extensive network of digital marketers, which drive sales for product vendors, the average length of Nexus' relationships with its significant customers is 3 years. Most of Nexus' customers are acquired through existing customer referrals. Nexus also attends Internet marketing conferences to promote is service.

The loss of any major customer would have a material adverse effect on us if we were unable to replace that customer. See Item 1A "*Risk Factors—Risks Related to Our Business and Industry—Our major customers account for a significant portion of our consolidated net sales and the loss of any major customer could have a material adverse effect on our results of operations*."

**Competition**

The nutraceutical industry is highly competitive. Our competitors include a number of large, nationally known brands such as Nature Made (Pharmavite), Nature's Bounty, GNC, Spectrum (Hain Celestial), Country Life, Garden of Life and Jarrow Formulas, and many smaller brands, manufacturers and distributors. The sales of products through online marketplace platforms such as Amazon and firms' websites continue to expand. Private label products also provide competition to our products. Whole Foods Market, Walmart, CVS, Walgreens and many health stores also sell a portion of their nutritional supplement offerings under their own private labels. Private label products are often sold at a discount to branded products. We also compete with distributors that sell products to health stores as well as mass market retailers such as United Natural Foods and KeHE Distributors. In addition, several major pharmaceutical companies continue to offer nutritional supplement lines in the mass market, including Centrum (Pfizer and GSK) and One-A-Day (Bayer). Pharmaceutical companies also offer prescription and over-the-counter products that are or may be competitive with nutritional supplements, particularly with regard to certain categories of products. Finally, as the nutraceutical market generally has low barriers to entry, additional competitors enter the market regularly.

Nexus' competitors would be any digital marketing agency in the cost per acquisition space looking to acquire exclusive advertiser offers and high end publishers who can send high amounts of traffic through digital marketing media. Examples include Ca$hNetwork, OfferBlueprint and MaxBounty.

**Competitive Strengths**

Based on management's belief and experience in the industry, we believe that the following competitive strengths enable us to compete effectively.

●  ***Proprietary manufacturing facilities*** . BSNM and DSO own and operate proprietary manufacturing facilities, which allow for a high level of managerial control over all aspects of production, including sourcing, logistics and maintaining the highest levels of quality during the manufacturing process. Through direct ownership, we are able to optimize our sales and marketing practices and provide a completely integrated approach, all solidified by a single manufacturing platform for capsules, tablets, powders and various other delivery methods for all vitamins and supplements. In addition, as a private label contract manufacturer for third parties, we can provide a turnkey solution for brands and retailers who want to minimize their supply chain disruption and maximize their control over product flow to end customers. In addition, as a middle market-sized contract manufacturer, we are not encumbered by the often overly complex processes that our larger competitors may have. We can be nimble and highly adaptable, "flexing" with our customers' needs as they change over time, which allows us to better service our ever-expanding international client base. We are able to maintain a competitive advantage due to our vertically integrated operational control. This vertical integration also allows us to minimize intellectual property and data security risks, while also eliminating costs, improving focus, optimizing quality and launching with a faster time-to-market for new products. We retain control over every step of the manufacturing processes, allowing us to establish our own institutional advantages and maximize efficiencies.

●  ***Established and trusted brands*** . Smart for Life, Doctors Scientific Organica, Sports Illustrated Nutrition and Greens First are well-established brands in the in the health and wellness industry. In particular, Smart for Life products are currently sold in many of the largest big-box retailers in the United States and Canada, including Costco, Walmart, Sam's Club, BJ's and Publix, as well as through online channels such as Amazon. DSO has established a dedicated following of consumers that are strong believers in the high-quality vitamins and supplements it sells to its customers, along with the eco-friendly and bio-degradable packaging, with Amazon sales numbers continuing to increase as a result. We believe that the Sports Illustrated brand is one of the most recognized brands in sports and athletics. In connection with our acquisition of GSP, we acquired a license for the exclusive use of the Sports Illustrated brand (excluding the Sports Illustrated Swimsuit brand for which we have a right of first offer under the license) for certain dietary and nutritional supplements, in each case to be sold to/through certain approved accounts in the United States and Canada.

●  ***Client focused innovative research and development*** . We believe that our research and development team adds significant value to our company and our customers and is a differentiating factor for our company. We strive to be technology driven leveraging technology, science, and innovation in our research and development efforts. We work closely with our clients to create and develop new and exciting products. We frequently work directly with our customers in our research and development labs to create innovative solutions that create value for our customers in a timely manner. Our team works closely with physicians to create novel wholesome products that add nutritional and functional value.

●  ***Ability to market through captive marketing subsidiary*** . We believe that our subsidiary, Nexus, allows us access to a broad spectrum of marketing tools to be utilized across the entire spectrum of our products. We believe that having an experienced management team and existing customer base accessible to all of our other brands in our portfolio will allow us to drive sales and revenue of existing products as well as test new product offerings generated through our research and development.

●  ***Referral only network based on long term relationships*** . Nexus operates a referral only network, meaning that all of its digital marketers are referred. There is no way to get a Nexus account other than being directly referred by a known good account holder. This allows Nexus to stem any fraudulent traffic, which we believe is a substantial competitive advantage for product vendors. Nexus has also established long term relationships with its product vendors and offers competitive bonuses for its digital marketer base. We believe that these factors set Nexus apart from its competition.

**Growth Strategies**

We will strive to grow our business by pursuing the following growth strategies.

●  ***Acquisition of additional businesses*** . The nutritional products industry is highly fragmented with a large pool of companies generating less than $20 million in revenues representing significant opportunity for industry consolidation. As noted above, we plan to acquire multiple companies aggregating a minimum of $300 million in annualized revenues by the fourth quarter of 2026. As noted above, we also do not currently have sufficient capital to complete these acquisitions. We intend to raise capital for additional acquisitions primarily through debt financing at our operating company level, additional equity offerings by our company, or by undertaking a combination of any of the above. The sale of additional equity securities could result in dilution to our stockholders. The incurrence of indebtedness would result in increased debt service obligations and could require us to agree to operating and financial covenants that would restrict our operations. Financing may not be available in amounts or on terms acceptable to us, if at all. There is no guarantee that we will be able to acquire additional businesses under the terms outlined above or that we will be able to find additional acquisition candidates should we terminate our plans for any of our current acquisition targets.

●  ***Increase sales from existing and new customers*** . We expect to continue to drive growth for our consumer products branded business through our increased focus on our top brands and continued expansion in various health and wellness categories, which we expect to result in incremental shelf space with existing customers and new customer additions. We expect that our focus on delivering tangible benefits to consumers through product innovation will not only benefit us but also benefit our customers. Our ability to supply both branded and private label products broadens and deepens our partnerships with key retail customers, providing us more opportunities for category leadership and growth. We view the private label business as an important and valuable service that we provide to key accounts.

●  ***Further penetrate international markets*** . Our products are currently marketed and sold in approximately two countries. In fiscal 2022, approximately 10% of our sales were to customers outside the United States. We plan to capitalize on our marketing and distribution capabilities to drive incremental international sales of our consumer product brands in emerging markets, which are characterized by a rising middle class and a strong demand for high quality nutritional and wellness products from U.S.-based manufacturers.

●  ***Drive productivity through operational efficiencies*** . We expect to continue to focus on improving efficiency across our operations to allow us to reduce costs in our manufacturing facilities as well as across our overhead cost areas. Our recent acquisition of DSO significantly increased our production capacity. In addition, we have launched an initiative to optimize our product portfolio, which we expect will enable further efficiencies across our manufacturing network. We are also introducing new initiatives that leverage automation, standardization and simplification and are expected to increase productivity across our operations.

**Intellectual Property**

We believe trademark protection is particularly important to the maintenance of the recognized brand names under which we market our products. We own or have rights to material trademarks or trade names that we use in conjunction with the sale of our products, including the Smart for Life, Doctors Scientific Organica, Greens First, and Sports Illustrated Nutrition brand names. We also own website domain names and have proprietary methodologies that we use in our manufacturing businesses. We also rely upon trade secrets, know-how, continuing technological innovations and licensing opportunities to develop and maintain our competitive position.

In January 2020, GSP entered into a license agreement, which was amended on June 1, 2020 and August 1, 2021, for the exclusive use of the Sports Illustrated brand (excluding the Sports Illustrated Swimsuit brand for which GSP has a right of first offer under the license) in the United States and Canada for dietary and nutritional supplements in the form of capsules, softgel tablets, chewable tablets, lozenges, gummies, protein bars, and protein powders and concentrates for preparing sports drinks or energy drinks, and the non-exclusive right to use the brand for the production and sale of shaker bottles, in each case to be sold to/through certain approved accounts in the United States and Canada.

As consideration for the license, GSP must pay royalties in an amount that is between 4% and 14% of net sales (as defined in the license agreement) with certain amounts guaranteed in advance. The aggregate amount of such guaranteed royalties is $1 million for the initial term of the license agreement. In addition, GSP must contribute an amount ranging between 1% and 3% of its net sales to a common marketing fund, to be spent on an annual basis on marketing efforts, including advertising and promotional campaigns.

The license agreement has a term of five years ending on December 31, 2024, with a right to renew for an additional five-year term by providing written notice of renewal between June 1, 2023 and July 31, 2023. The licensor may terminate the license agreement upon breach by GSP of the payment or other terms of the license agreement (which is not cured within the applicable cure period, if any, if such breach is capable of cure) or in the event of certain other customary termination events. GSP may terminate the license agreement upon a material breach by the licensor if such breach is not cured with thirty (30) business days of the licensor's receipt of written notice thereof.

We protect our intellectual property rights through a variety of methods, including trademark, patent and trade secret laws, as well as confidentiality agreements and proprietary information agreements with vendors, employees, consultants and others who have access to our proprietary information. Protection of our intellectual property often affords us the opportunity to enhance our position in the marketplace by precluding our competitors from using or otherwise exploiting our technology and brands. We are also a party to several intellectual property license agreements relating to certain of our products. The duration of our trademark registrations is generally 10, 15 or 20 years, depending on the country in which the marks are registered, and we can renew the registrations. The scope and duration of our intellectual property protection varies throughout the world by jurisdiction and by individual product. Our global trademark portfolio, with the aforementioned registration durations, consists of our core marks for our business and our proprietary product brands which drive significant brand awareness for all of our businesses. Our proprietary product formulas and recipes, maintained as trade secrets, are significant to our growth and success as they form the foundation for our production and sales of effective, high quality products.

**Employees**

As of December 31, 2022, we had approximately 145 employees with approximately 68 of such employees being engaged in our manufacturing operations and the balance being engaged in management or middle management. None of our employees are represented by labor unions, and we believe that we have an excellent relationship with our employees.

**Regulation**

Our business is subject to varying degrees of regulation by a number of government authorities in the United States, including the FDA, the Federal Trade Commission, or the FTC, the Consumer Product Safety Commission, or the CPSC, the U.S. Department of Agriculture, or the USDA, and U.S. Environmental Protection Agency, or the EPA. Various agencies of the state and localities in which we operate and in which our products are sold also regulate our business.

The areas of our business that these and other authorities regulate include, among others:

● product claims and advertising;

● product labels;

● product ingredients; and

● how we manufacture, package, distribute, import, export, sell and store our products.

In addition, our products sold in foreign countries are also subject to regulation under various national, local and international laws that include provisions governing, among other things, the formulation, manufacturing, packaging, labeling, advertising and distribution of dietary supplements and over-the-counter drugs.

As a result of the acquisition of Nexus, we are also subject to laws and regulations generally applicable to providers of digital marketing services, including federal and state laws and regulations governing data security and privacy, unfair and deceptive acts and practices, advertising and content regulation.

We are also subject to a variety of other regulations in the United States, including those relating to taxes, employment, import and export, and intellectual property.

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***Food and Drug Administration***

The Dietary Supplement Health and Education Act of 1994, or DSHEA, amended the Federal Food, Drug, and Cosmetic Act, or the FDC Act, to establish a new framework governing the composition, safety, labeling, manufacturing and marketing of dietary supplements. Generally, under the FDC Act, dietary ingredients (i.e., vitamins; minerals; herb or other botanical; amino acids; or dietary substances for use by humans to supplement diet by increasing total dietary intake; or any concentrate, metabolite, constituent, extract or combination of any of the above) that were marketed in the United States prior to October 15, 1994 may be used in dietary supplements without notifying the FDA. New dietary ingredients (i.e., dietary ingredients that were not marketed in the United States before October 15, 1994) must be the subject of a new dietary ingredient notification submitted to the FDA unless the ingredient has been "present in the food supply as an article used for food" without being "chemically altered." A new dietary ingredient notification must provide the FDA evidence of a "history of use or other evidence of safety" establishing that use of the dietary ingredient "will reasonably be expected to be safe." A new dietary ingredient notification must be submitted to the FDA at least 75 days before the initial marketing of the new dietary ingredient. The FDA may determine that a new dietary ingredient notification does not provide an adequate basis to conclude that a dietary ingredient is reasonably expected to be safe. Such a determination could prevent the marketing of such dietary ingredient.

In 2011 and 2016, the FDA issued draft guidance setting forth recommendations for complying with the new dietary ingredient notification requirement. Although FDA guidance is non-binding and does not establish legally enforceable responsibilities, and companies are free to use an alternative approach if the approach satisfies the requirements of applicable laws and regulations, FDA guidance is a strong indication of the FDA's current thinking on the topic discussed in the guidance, including its position on enforcement. At this time, it is difficult to determine whether the 2016 draft guidance (which replaced the 2011 draft guidance), if finalized, would have a material impact on our operations. However, if the FDA were to enforce the applicable statutes and regulations in accordance with the draft guidance as written, such enforcement could require us to incur additional expenses, which could be significant, and negatively impact our business in several ways, including, but not limited to, enjoining the manufacturing of our products until the FDA determines that we are in compliance and can resume manufacturing, increasing our liability and reducing our growth prospects.

The FDA or other agencies could take actions against products or product ingredients that, in their determination, present an unreasonable health risk to consumers that would make it illegal for us to sell such products. In addition, the FDA could issue consumer warnings with respect to the products or ingredients in such products that are sold in our stores. Such actions or warnings could be based on information received through FDC Act-mandated reporting of serious adverse events.

We take a number of actions to ensure the products we sell comply with the FDC Act. Some of these actions include maintaining and continuously updating a list of restricted ingredients that will be prohibited from inclusion in any products that we sell. In addition, we have developed and maintain a list of ingredients that we believe comply with the applicable provisions of the FDC Act. As is common in our industry, we rely on some third-party vendors to ensure that the products they manufacture and sell to us comply with all applicable regulatory and legislative requirements. In general, we seek representations and warranties, indemnification and/or insurance from our vendors. However, even with adequate insurance and indemnification, any claims of non-compliance could significantly damage our reputation and consumer confidence in our products. In addition, the failure of such products to comply with applicable regulatory and legislative requirements could prevent us from marketing the products or require us to recall or remove such products from the market, which in certain cases could materially and adversely affect our business, financial condition and results of operations. A removal or recall could also result in negative publicity and damage to our reputation that could reduce future demand for our products. In the past, we have attempted to offset any losses related to recalls and removals with reformulated or alternative products; however, there can be no assurance that we would be able to offset all or any portion of losses related to any future removal or recall.

The FDC Act permits structure/function claims to be included in labels and labeling for dietary supplements without FDA pre-market approval. However, companies must have substantiation that the claims are "truthful and not misleading", and must submit a notification with the text of the claims to the FDA no later than 30 days after marketing the dietary supplement with the claims. Permissible structure/function claims may describe how a particular nutrient or dietary ingredient affects the structure, function or general well-being of the body, or characterize the documented mechanism of action by which a nutrient or dietary ingredient acts to maintain such structure or function. The label or labeling of a product marketed as a dietary supplement may not expressly or implicitly represent that a dietary supplement will diagnose, cure, mitigate, treat or prevent a disease (i.e. a disease claim). If the FDA determines that a particular structure/function claim is an unacceptable disease claim that causes the product to be regulated as a drug, a conventional food claim or an unauthorized version of a "health claim," or, if the FDA determines that a particular claim is not adequately supported by existing scientific data or is false or misleading in any particular, we would be prevented from using the claim and would have to update our product labels and labeling accordingly.

In addition, DSHEA provides that so-called "third-party literature," e.g., "a publication, including an article, a chapter in a book, or an official abstract of a peer-reviewed scientific publication that appears in an article and was prepared by the author or the editors of the publication" supplements, when reprinted in its entirety, may be used "in connection with the sale of a dietary supplement to consumers" without the literature being subject to regulation as labeling. Such literature: (1) must not be false or misleading; (2) may not "promote" a particular manufacturer or brand of dietary supplement; (3) must present a balanced view or is displayed or presented with other such items on the same subject matter so as to present a balanced view of the available scientific information; (4) if displayed in an establishment, must be physically separate from the dietary supplements; and (5) should not have appended to it any information by sticker or any other method. If the literature fails to satisfy each of these requirements, we may be prevented from disseminating such literature with our products, and any continued dissemination could subject our product to regulatory action as an illegal drug.

In June 2007, pursuant to the authority granted by the FDC Act as amended by DSHEA, the FDA published detailed GMP regulations that govern the manufacturing, packaging, labeling and holding operations of dietary supplement manufacturers. The GMP regulations, among other things, impose significant recordkeeping requirements on manufacturers. The GMP requirements are in effect for all dietary supplement manufacturers, and the FDA conducts inspections of dietary supplement manufacturers pursuant to these requirements. There remains considerable uncertainty with respect to the FDA's interpretation of the regulations and their actual implementation in manufacturing facilities.

In addition, the FDA's interpretation of the regulations governing dietary supplements will likely change over time as the agency becomes more familiar with the industry and the regulations. The failure of a manufacturing facility to comply with the GMP regulations renders products manufactured in such facility "adulterated," and subjects such products and the manufacturer to a variety of potential FDA enforcement actions. In addition, under the Food Safety Modernization Act, or FSMA, which was enacted in January 2011, the manufacturing of dietary ingredients contained in dietary supplements will be subject to similar or even more burdensome manufacturing requirements, which will likely increase the costs of dietary ingredients and will subject suppliers of such ingredients to more rigorous inspections and enforcement. The FSMA will also require importers of food, including dietary supplements and dietary ingredients, to conduct verification activities to ensure that the food they might import meets applicable domestic requirements.

The FDA has broad authority to enforce the provisions of federal law applicable to dietary supplements, including powers to issue a public warning or notice of violation letter to a company, publicize information about illegal products, detain products intended for import, require the reporting of serious adverse events, require a recall of illegal or unsafe products from the market, and request the Department of Justice to initiate a seizure action, an injunction action or a criminal prosecution in the United States courts.

The FSMA expands the reach and regulatory powers of the FDA with respect to the production and importation of food, including dietary supplements. The expanded reach and regulatory powers include the FDA's ability to order mandatory recalls, administratively detain domestic products, and require certification of compliance with domestic requirements for imported foods associated with safety issues. FMSA also gave FDA the authority to administratively revoke manufacturing facility registrations, effectively enjoining manufacturing of dietary ingredients and dietary supplements without judicial process. The regulation of dietary supplements may increase or become more restrictive in the future.

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***Federal Trade Commission***

The FTC exercises jurisdiction over the advertising of dietary supplements and other health-related products and requires that all advertising to consumers be truthful and non-misleading. The FTC actively monitors the dietary supplement space and has instituted numerous enforcement actions against dietary supplement companies for failure to have adequate substantiation for claims made in advertising or for the use of false or misleading advertising claims. FTC enforcement actions may result in consent decrees, cease and desist orders, judicial injunctions and the payment of fines with respect to advertising claims that are found to be unsubstantiated.

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***Environmental Regulation***

Our facilities and operations, in common with those of similar industries making similar products, are subject to many federal, state, provincial and local requirements, rules and regulations relating to the protection of the environment and of human health and safety, including those regulating the discharge of materials into the environment. We continually examine ways to reduce our emissions, minimize waste and limit our exposure to any liabilities, as well as decrease costs related to environmental compliance. Costs to comply with current and anticipated environmental requirements, rules and regulations and any estimated capital expenditures for environmental control facilities are not anticipated to be material when compared with overall costs and capital expenditures. Accordingly, we do not anticipate that such costs will have a material effect on our financial position, results of operations, cash flows or competitive position.

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***New Legislation or Regulation***

Legislation may be introduced which, if passed, would impose substantial new regulatory requirements on dietary supplements and other health products. We cannot determine what effect additional domestic or international governmental legislation, regulations, or administrative orders, when and if promulgated, would have on our business in the future. New legislation or regulations may require the reformulation of certain products to meet new standards, require the recall or discontinuance of certain products not capable of reformulation, impose additional record keeping or require expanded documentation of the properties of certain products, expanded or different labeling or scientific substantiation.

**ITEM 1A. RISK FACTORS.**

 

*An investment in our securities involves a high degree of risk. You should carefully read and consider all of the risks described below, together with all of the other information contained or referred to in this report, before making an investment decision with respect to our securities. If any of the following events occur, our financial condition, business and results of operations (including cash flows) may be materially adversely affected. In that event, the market price of our stock could decline, and you could lose all or part of your investment.* 

**Risks Related to Our Business and Industry** 

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***We are an early-stage company with a limited operating history.***

We were organized as a Delaware corporation in February 2017. We have a limited history upon which you can evaluate our business and prospects. Our prospects must be considered in light of the risks encountered by companies in the early stages of development in highly competitive markets, particularly the markets for nutraceuticals and related products. You should consider the frequency with which early-stage businesses encounter unforeseen expenses, difficulties, complications, delays and other adverse factors. These risks are described in more detail below.

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***We have incurred losses since our inception, and we may not be able to manage our businesses on a profitable basis.***

We have generated losses since inception and have relied on cash on hand, sales of securities, external bank lines of credit, and issuance of third-party and related party debt to support our operations. For the year ended December 31, 2022, we generated an operating loss of $12,206,586 and a net loss of $29,977,815. We cannot assure you that we will achieve profitably or that we will have adequate working capital to meet our obligations as they become due. Management believes that our success will depend on our ability to successfully complete additional acquisitions of profitable nutraceutical companies and related products as well as develop our own brands. We cannot guarantee that we will be successful in completing acquisitions or any other companies or products, that we will successfully integrate acquired companies, or that we will be able to successfully develop our own brands. We cannot assure you that even if we are successful in completing the acquisitions or in developing our own branded products, we will be successful in profitably managing such companies, acquired assets and brands. We cannot assure you that we will maintain profitability for any period of time or that investors will not lose their entire investment.

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***The effect of the COVID-19 pandemic on our operations, and the operations of our customers and suppliers, has had, and is expected to continue to have, a negative effect on our business, financial condition, cash flows and results of operations.***

The COVID-19 pandemic continues to rapidly evolve. At this time, there continues to be significant volatility and uncertainty relating to the full extent to which the COVID-19 pandemic and the various responses to it will impact our business, operations and financial results.

We are dependent upon certain contract manufacturers and suppliers and their ability to reliably and efficiently fulfill our orders is critical to our business success. The COVID-19 pandemic has impacted and may continue to impact certain of our manufacturers and suppliers. As a result, we have faced and may continue to face delays or difficulty sourcing certain products and raw materials, which could negatively affect our business and financial results. Even if we are able to find alternate sources for such raw materials, they may cost more, which could adversely impact our profitability and financial condition.

Furthermore, the global deterioration in economic conditions, which may have an adverse impact on discretionary consumer spending or investing, could also impact our business and demand for our products. For instance, consumer spending and investing may be negatively impacted by general macroeconomic conditions, including a rise in unemployment, and decreased consumer confidence resulting from the pandemic. Changing consumer and investor behaviors as a result of the pandemic may also have a material impact on our revenue.

Our efforts to help mitigate the negative impact of the outbreak on our business may not be effective, and we may be affected by a protracted economic downturn. Furthermore, while many governmental authorities around the world have and continue to enact legislation to address the impact of COVID-19, including measures intended to mitigate some of the more severe anticipated economic effects of the virus, we may not benefit from such legislation, or such legislation may prove to be ineffective in addressing COVID-19's impact on our and our customer's businesses and operations. Even after the COVID-19 outbreak has subsided, we may continue to experience impacts to our business as a result of COVID-19's global economic impact and any recession that has occurred or may occur in the future. Further, as the COVID-19 situation is unprecedented and continuously evolving, COVID-19 may also affect our operating and financial results in a manner that is not presently known to us or in a manner that we currently do not consider that may present significant risks to our operations.

The extent to which the COVID-19 pandemic may impact our results will depend on future developments, which are highly uncertain and cannot be predicted as of the date of this report. Nevertheless, the pandemic and the current financial, economic and capital markets environment, and future developments in the global supply chain and other areas present material uncertainty and risk with respect to our performance, financial condition, results of operations and cash flows.

To the extent the COVID-19 pandemic adversely affects our business and financial results, it may also have the effect of heightening many of the other risks described in this "*Risk Factors*" section.

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***If we fail to implement our business plan and complete acquisitions as planned, our mission will fail and our business will suffer accordingly.***

Our mission is the creation of a world-class nutraceutical company engaged in the development, manufacture and sales of quality nutraceutical and related health and lifestyle products for distribution to an expanding global marketplace. We expect that our holding company strategy through which we plan to acquire profitable but undervalued target companies and products will enable us to accelerate the development and expansion of our product portfolio, manufacturing capacity and distribution channels. If we are unable execute our strategy of completing acquisitions as planned, we will not be able to fulfill our mission or grow our business.

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***Our acquisitions may result in significant transaction expenses, integration and consolidation risks, and we may be unable to profitably operate our consolidated company.***

We are structured as a holding company and we have executed a buy and hold strategy. We are engaged in the business of acquisition, operation and management of nutraceutical and related products. Our acquisitions may result in significant transaction expenses and present new risks associated with entering additional markets or offering new products and services and integrating the acquired companies. We may not have sufficient management, financial and other resources to integrate companies we acquire or to successfully operate new businesses and we may be unable to profitably operate our expanded company. Moreover, any new businesses that we may acquire, once integrated with our existing operations, may not produce expected or intended results.

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***We may not be able to manage future growth effectively.***

We expect to continue to experience significant growth. Should we keep growing rapidly, our financial, management and operating resources may not expand sufficiently to adequately manage our growth. If we are unable to manage our growth, our costs may increase disproportionately, our future revenues may not grow or may decline, and we may face dissatisfied customers. Our failure to manage our growth may adversely impact our business and the value of your investment.

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***Our ability to obtain continued financing is critical to the growth of our business. We will need additional financing to fund operations, which additional financing may not be available on reasonable terms or at all.***

Our future growth, including the potential for future market expansion will require additional capital. We will consider raising additional funds through various financing sources, including the procurement of commercial debt financing. However, there can be no assurance that such funds will be available on commercially reasonable terms, if at all. If such financing is not available on satisfactory terms, we may be unable to execute our growth strategy, and operating results may be adversely affected. Any additional debt financing will increase expenses and must be repaid regardless of operating results and may involve restrictions limiting our operating flexibility.

Our ability to obtain financing may be impaired by such factors as the capital markets, both generally and specifically in our industry, which could impact the availability or cost of future financings. If the amount of capital we are able to raise from financing activities, together with our revenues from operations, are not sufficient to satisfy our capital needs, we may be required to decrease the pace of, or eliminate, our future product offerings and market expansion opportunities and potentially curtail operations.

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***Adverse developments affecting the financial services industry, such as actual events or concerns involving liquidity, defaults, or non-performance by financial institutions or transactional counterparties, could adversely affect our current and projected business operations and our financial condition and results of operations.***

Actual events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions, transactional counterparties or other companies in the financial services industry or the financial services industry generally, or concerns or rumors about any events of these kinds or other similar risks, have in the past and may in the future lead to market-wide liquidity problems. For example, on March 10, 2023, Silicon Valley Bank, or SVB, was closed by the California Department of Financial Protection and Innovation, which appointed the Federal Deposit Insurance Corporation, or the FDIC, as receiver. Similarly, on March 12, 2023, Signature Bank Corp., or Signature, and Silvergate Capital Corp. were each swept into receivership. Although a statement by the Department of the Treasury, the Federal Reserve and the FDIC indicated that all depositors of SVB would have access to all of their money after only one business day of closure, including funds held in uninsured deposit accounts, borrowers under credit agreements, letters of credit and certain other financial instruments with SVB, Signature or any other financial institution that is placed into receivership by the FDIC may be unable to access undrawn amounts thereunder.

At the time the FDIC took control, we held assets valued at approximately $50,000 in accounts with Signature. We received full access to those funds on March 27, 2023. As of the date of this report, we have full access to and control over all of our cash, cash equivalents and short-term investments. In addition, because a substantial majority of our cash, cash equivalents and short-term investments is held at financial institution unaffiliated with Signature, we do not expect any material impact to our operations directly related to the closure of Signature.

Although we are not a borrower under or party to any material letter of credit or any other such instruments with any other financial institution currently in receivership, if we enter into any such instruments and any of our lenders or counterparties to such instruments were to be placed into receivership, we may be unable to access such funds. In addition, if any of our partners, suppliers or other parties with whom we conduct business are unable to access funds pursuant to such instruments or lending arrangements with such a financial institution, such parties' ability to pay their obligations to us or to enter into new commercial arrangements requiring additional payments to us could be adversely affected. In this regard, counterparties to credit agreements and arrangements with these financial institutions, and third parties such as beneficiaries of letters of credit (among others), may experience direct impacts from the closure of these financial institutions and uncertainty remains over liquidity concerns in the broader financial services industry. Similar impacts have occurred in the past, such as during the 2008-2010 financial crisis.

Inflation and rapid increases in interest rates have led to a decline in the trading value of previously issued government securities with interest rates below current market interest rates. Although the U.S. Department of Treasury, FDIC and Federal Reserve Board have announced a program to provide up to $25 billion of loans to financial institutions secured by certain of such government securities held by financial institutions to mitigate the risk of potential losses on the sale of such instruments, widespread demands for customer withdrawals or other liquidity needs of financial institutions for immediately liquidity may exceed the capacity of such program.

Our access to funding sources and other credit arrangements in amounts adequate to finance or capitalize our current and projected future business operations could be significantly impaired by factors that affect us, any financial institutions with which we enter into credit agreements or arrangements directly, or the financial services industry or economy in general. These factors could include, among others, events such as liquidity constraints or failures, the ability to perform obligations under various types of financial, credit or liquidity agreements or arrangements, disruptions or instability in the financial services industry or financial markets, or concerns or negative expectations about the prospects for companies in the financial services industry. These factors could involve financial institutions or financial services industry companies with which we have financial or business relationships, but could also include factors involving financial markets or the financial services industry generally.

The results of events or concerns that involve one or more of these factors could include a variety of material and adverse impacts on our current and projected business operations and our financial condition and results of operations. These risks include, but may not be limited to, the following:

● delayed access to deposits or other financial assets or the uninsured loss of deposits or other financial assets;

● inability to enter into credit facilities or other working capital resources;

● potential or actual breach of contractual obligations that require us to maintain letters of credit or other credit support arrangements; or

● termination of cash management arrangements and/or delays in accessing or actual loss of funds subject to cash management arrangements.

In addition, investor concerns regarding the U.S. or international financial systems could result in less favorable commercial financing terms, including higher interest rates or costs and tighter financial and operating covenants, or systemic limitations on access to credit and liquidity sources, thereby making it more difficult for us to acquire financing on acceptable terms or at all. Any decline in available funding or access to our cash and liquidity resources could, among other risks, adversely impact our ability to meet our operating expenses or other obligations, financial or otherwise, result in breaches of our financial and/or contractual obligations, or result in violations of federal or state wage and hour laws. Any of these impacts, or any other impacts resulting from the factors described above or other related or similar factors, could have material adverse impacts on our liquidity and our current and/or projected business operations and financial condition and results of operations.

In addition, any further deterioration in the macroeconomic economy or financial services industry could lead to losses or defaults by our partners, vendors or suppliers, which in turn, could have a material adverse effect on our current and/or projected business operations and results of operations and financial condition. For example, a partner may fail to make payments when due, default under their agreements with us, become insolvent or declare bankruptcy, or a supplier may determine that it will no longer deal with us as a customer. In addition, a vendor or supplier could be adversely affected by any of the liquidity or other risks that are described above as factors that could result in material adverse impacts on us, including but not limited to delayed access or loss of access to uninsured deposits or loss of the ability to draw on existing credit facilities involving a troubled or failed financial institution. The bankruptcy or insolvency of any partner, vendor or supplier, or the failure of any partner to make payments when due, or any breach or default by a partner, vendor or supplier, or the loss of any significant supplier relationships, could cause us to suffer material losses and may have a material adverse impact on our business.

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***Unfavorable publicity or consumer perception of our products and any similar products distributed by other companies could have a material adverse effect on our business.***

We believe the nutritional supplement market is highly dependent upon consumer perception regarding the safety, efficacy and quality of nutritional supplements generally, as well as of products distributed specifically by us. Consumer perception of our products can be significantly influenced by scientific research or findings, regulatory investigations, litigation, national media attention and other publicity regarding the consumption of nutritional supplements. There can be no assurance that future scientific research, findings, regulatory proceedings, litigation, media attention or other research findings or publicity will be favorable to the nutritional supplement market or any particular product, or consistent with earlier publicity. Future research reports, findings, regulatory proceedings, litigation, media attention or other publicity that are perceived as less favorable than, or that question, earlier research reports, findings or publicity could have a material adverse effect on the demand for our products and our business, results of operations, financial condition and cash flows. Our dependence upon consumer perceptions means that adverse scientific research reports, findings, regulatory proceedings, litigation, media attention or other publicity, whether or not accurate or with merit, could have a material adverse effect on us, the demand for our products, and our business, results of operations, financial condition and cash flows. Further, adverse publicity reports or other media attention regarding the safety, efficacy and quality of nutritional supplements in general, or our products specifically, or associating the consumption of nutritional supplements with illness, could have such a material adverse effect. Such adverse publicity reports or other media attention could arise even if the adverse effects associated with such products resulted from consumers' failure to consume such products appropriately or as directed.

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***Our success is linked to the size and growth rate of the vitamin, mineral and supplement market and an adverse change in the size or growth rate of that market could have a material adverse effect on us.***

An adverse change in size or growth rate of the vitamin, mineral and supplement market could have a material adverse effect on us. Underlying market conditions are subject to change based on economic conditions, consumer preferences, the impact of COVID-19 and other factors that are beyond our control, including media attention and scientific research, which may be positive or negative.

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***General economic conditions, including a prolonged macroeconomic downturn, may negatively affect consumer purchases, which could adversely affect our sales, as well as our ability to access credit on terms previously obtained.***

Our results are dependent on a number of factors impacting consumer spending, including general economic and business conditions; consumer confidence; wages and employment levels; the housing market; consumer debt levels; availability of consumer credit; credit and interest rates; fuel and energy costs; energy shortages; taxes; and general political conditions, both domestic and abroad. Consumer product purchases, including purchases of our products, may decline during recessionary periods. A prolonged downturn or an uncertain outlook in the economy may materially adversely affect our business, revenues and profits and the market price of our common stock, and we cannot be certain that funding for our capital needs will be available from our existing financial institutions and the credit markets if needed, and if available, to the extent required and on acceptable terms. If we cannot obtain funding when needed, in each case on acceptable terms, we may be unable to adequately fund our operating expenses and fund required capital expenditures, which may have an adverse effect on our revenues and results of operations.

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***We operate in highly competitive and fast-evolving industries, and our failure to compete effectively could affect our market share, financial condition and growth prospects adversely.***

The markets in which we operate are characterized by rapid technological changes, frequent new product introductions, established and emerging competition, extensive intellectual property disputes and litigation, price competition, aggressive marketing practices, evolving industry standards and changing customer preferences. Accordingly, our prospects must be considered in light of the uncertainties, risks, expenses, and difficulties frequently encountered by companies operating in rapidly changing and competitive markets.

The nutritional supplement industry is a large and growing industry and is highly fragmented in terms of both geographical market coverage and product categories. The market for nutritional supplements is highly competitive in all our channels of distribution. We compete with companies that may have broader product lines or larger sales volumes, or both, than we do, and our products compete with nationally advertised brand name products. These national brand companies have resources greater than ours. Numerous companies compete with us in the development, manufacture and marketing of nutritional supplements worldwide. The market is highly sensitive to the introduction of new products, which may rapidly capture a significant share of the market. We also may face competition from low-cost entrants to the industry, including from international markets. Increased competition from companies that distribute through the wholesale channel, especially the private label market, could have a material adverse effect on our business, results of operations, financial condition and cash flows as these competitors may have greater financial and other resources available to them and possess extensive manufacturing, distribution and marketing capabilities far greater than ours. We are also subject to competition in the attraction and retention of employees. Many of our competitors have greater financial resources and can offer employees compensation packages with which it is difficult for us to compete.

With our acquisition of Nexus in 2021, we entered the digital marketing industry as a way to promote the products and brands that we sell. We compete with other advertising service providers that may reach our target audience by means that are more effective than our services. Further, if such other providers of advertising have a long operating history, large product and service suites, more capital resources and broad international or local recognition, our operating results may be adversely affected if we cannot successfully compete.

The digital advertising market is rapidly developing. Accordingly, the development of the markets in which we operate makes it difficult to evaluate the viability and sustainability of our business and its acceptance by advertisers and clients. We cannot assure you that we will be profitable every year. We expect that our operating expenses will increase as we expand. Any significant failure to realize anticipated revenue growth could result in operating losses.

We may not be able to compete effectively in some or all our markets, and our attempt to do so may require us to reduce our prices, which may result in lower margins. Failure to compete effectively could have a material adverse effect on our market share, business, results of operations, financial condition, cash flows and growth prospects.

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***Our major customers account for a significant portion of our consolidated net sales and the loss of any major customer could have a material adverse effect on our results of operations.***

During fiscal 2022, Amazon and Costco accounted for 30% and 10%, respectively, of our total revenues. We do not have a long-term contract with these major customers, and the loss of any major customer could have a material adverse effect on our results of operations. In addition, our results of operations and ability to service our debt obligations would be impacted negatively to the extent that any major customer is unable to make payments to us or does not make timely payments on outstanding accounts receivables.

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***Failure to develop new products and production technologies or to implement productivity and cost reduction initiatives successfully may harm our competitive position.***

Our business depends significantly on the development of commercially viable new products as well as process technologies. If we are unsuccessful in developing new products and production processes in the future, our competitive position and results of operations may be negatively affected. However, as we invest in new technology, we face the risk of unanticipated operational or commercialization difficulties, including an inability to obtain necessary permits or governmental approvals, the development of competing technologies, failure of facilities or processes to operate in accordance with specifications or expectations, construction delays, cost over-runs, the unavailability of financing, required materials or equipment and various other factors. Likewise, our initiatives to improve productivity and performance and to generate cost savings may not be completed or beneficial or the estimated cost savings from such activities may not be realized.

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***Resources devoted to product innovation may not yield new products that achieve commercial success.***

The development of new and innovative products requires significant investment in research and development and testing of new ingredients, formulas and possibly new production processes. The research and development process can be expensive and prolonged and entails considerable uncertainty. Products may appear promising in development but fail to reach market within the expected time frame, or at all. We may face significant challenges with regard to a key product launch. Further, products also may fail to achieve commercial viability due to pricing competitiveness with other retailers, failure to timely bring the product to market, failure to differentiate the product with our competitors and other reasons. Finally, there is no guarantee that our development teams will be able to successfully respond to competitive products that could render some of our offerings obsolete. Development of a new product, from discovery through testing to the store shelf, typically takes between four to seven months, but may require an even longer timeline if clinical trials are involved. Each of these time periods can vary considerably from product to product and therefore the costs and risks of producing a commercially viable product can increase significantly as time passes.

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***Our failure to appropriately respond to changing consumer preferences and demand for new products and services could harm our customer relationships and product sales significantly.***

The nutritional supplement industry is characterized by rapid and frequent changes in demand for products and new product introductions. Our failure to accurately predict these trends could negatively impact consumer opinion of us as a source for the latest products, which, in turn, could harm our customer relationships and cause decreases in our net sales. The success of our new product offerings depends upon a number of factors, including our ability to:

● accurately anticipate customer needs;

● innovate and develop new products;

● successfully commercialize new products in a timely manner;

● price our products competitively;

● manufacture and deliver our products in sufficient volumes and in a timely manner; and

● differentiate our product offerings from those of our competitors.

If any new products fail to gain market acceptance, are restricted by regulatory requirements or have quality problems, this would harm our results of operations. If we do not introduce new products or make enhancements to meet the changing needs of our customers in a timely manner, some of our products could be rendered obsolete, which could have a material adverse effect on our business, results of operations, financial condition and cash flows.

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***If we experience product recalls, we may incur significant and unexpected costs, and our business reputation could be adversely affected.***

We may be exposed to product recalls and adverse public relations if our products are mislabeled or alleged to cause injury or illness, or if we are alleged to have violated governmental regulations. A product recall could result in substantial and unexpected expenditures, which would reduce operating profit and cash flow. In addition, a product recall may require significant management attention. Product recalls may hurt the value of our brands and lead to decreased demand for our products. Product recalls also may lead to increased scrutiny by federal, state or international regulatory agencies of our operations and increased litigation and could have a material adverse effect on our business, results of operations, financial condition and cash flows.

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***We may incur material product liability claims, which could increase our costs and adversely affect our reputation, revenues and operating income.***

As a manufacturer and distributor of products designed for human consumption, we are subject to product liability claims if the use of our products is alleged to have resulted in injury. Our products consist of vitamins, minerals, dietary supplements and other ingredients that are classified as foods and dietary supplements, and, in most cases, are not necessarily subject to pre-market regulatory approval in the United States. Some of our products contain innovative ingredients that do not have long histories of human consumption. Previously unknown adverse reactions resulting from human consumption of these ingredients could occur. In addition, some of the products we sell are produced by third-party manufacturers. As a marketer of products manufactured by third parties, we also may be liable for various product liability claims for products we do not manufacture. We have been in the past, and may be in the future, subject to various product liability claims, including, among others, that our products include inadequate instructions for use or inadequate warnings concerning possible side effects and interactions with other substances. A product liability claim against us could result in increased costs and could adversely affect our reputation with our customers, which, in turn, could have a material adverse effect on our business, results of operations, financial condition and cash flows.

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***Insurance coverage, even where available, may not be sufficient to cover losses we may incur.***

Our business exposes us to the risk of liabilities arising from our operations. For example, we may be liable for claims brought by users of our products or by employees, customers or other third parties for personal injury or property damage occurring in the course of our operations. We seek to minimize these risks through various insurance contracts from third-party insurance carriers. However, our insurance coverage is subject to large individual claim deductibles, individual claim and aggregate policy limits, and other terms and conditions. We retain an insurance risk for the deductible portion of each claim and for any gaps in insurance coverage. We do not view insurance, by itself, as a material mitigant to these business risks.

We cannot assure that our insurance will be sufficient to cover our losses. Any losses that insurance does not substantially cover could have a material adverse effect on our business, results of operations, financial condition and cash flows.

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***We rely on our manufacturing operations to produce the vast majority of the nutritional supplements that we sell, and disruptions in our manufacturing system or losses of manufacturing certifications could affect our results of operations adversely.***

We currently operate manufacturing facilities in Doral and Riviera Beach, Florida. All our domestic and foreign operations manufacturing products for sale to the United States are subject to GMPs promulgated by the FDA and other applicable regulatory standards, including in the areas of environmental protection and worker health and safety. Any significant disruption in our operations at any of these facilities, including any disruption due to any regulatory requirement, could affect our ability to respond quickly to changes in consumer demand and could have a material adverse effect on our business, results of operations, financial condition and cash flows. Additionally, we may be exposed to risks relating to the transfer of work between facilities or risks associated with opening new facilities or closing existing facilities that may cause a disruption in our operations. Although we have implemented GMPs in our facilities, there can be no assurance that products manufactured in our plants will not be contaminated or otherwise fail to meet our quality standards. Any such contamination or other quality failures could result in costly recalls, litigation, regulatory actions or damage to our reputation, which could have a material adverse effect on our business, results of operations, financial condition and cash flows.

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***We are also dependent on certain third-party contract manufacturers and suppliers.***

Some of our own brand of vitamins and supplements, as well as the products we sell under the Sports Illustrated Nutrition brand, are produced by third party contract manufacturers. We also purchase certain important ingredients and raw materials from third-party suppliers. The principal raw materials required in our operations are vitamins, minerals, herbs, gelatin and packaging components. Real or perceived quality control problems with products manufactured by contract manufacturers or raw materials outsourced from certain suppliers could negatively impact consumer confidence in our products, or expose us to liability. In addition, disruption in the operations of any such manufacturer or supplier or material increases in the price of raw materials, for any reason, such as changes in economic and political conditions, tariffs, trade disputes, regulatory requirements, import restrictions, loss of certifications, power interruptions, fires, hurricanes, drought or other climate-related events, war or other events, could have a material adverse effect on our business, results of operations, financial condition and cash flows.

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***Natural disasters (whether or not caused by climate change), unusually adverse weather conditions, pandemic outbreaks, terrorist acts and global political events could cause permanent or temporary facility closures, impair our ability to purchase, receive or replenish raw materials or cause customer traffic to decline, all of which could result in lost sales and otherwise adversely affect our financial performance.***

The occurrence of one or more natural disasters, such as hurricanes, fires, floods and earthquakes (whether or not caused by climate change), unusually adverse weather conditions, pandemic outbreaks (including the recent outbreak of COVID-19), terrorist acts or disruptive global political events, such as civil unrest in locations where our facilities, contract manufacturers or suppliers are located, or similar disruptions could adversely affect our operations and financial performance. To the extent these events result in the closure of one or more of our manufacturing facilities or our corporate headquarters, or impact one or more of our contract manufacturers or key suppliers, our operations and financial performance could be materially adversely affected through lost sales. In addition, these events could result in increases in fuel (or other energy) prices or a fuel shortage, the temporary lack of an adequate work force in a market, the temporary or long-term disruption in the supply of products from some local and overseas suppliers, the temporary disruption in the transport of goods from overseas, delay in the delivery of goods to our customers, the temporary reduction in the availability of our products, expiration of inventory, future long-lived asset impairment charges and disruption to our information systems. These events also could have indirect consequences, such as increases in the cost of insurance, if they were to result in significant loss of property or other insurable damage.

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***An increase in the price and shortage of supply of key raw materials could adversely affect our business.***

Our products are composed of certain key raw materials. If the prices of these raw materials were to increase significantly, the costs to manufacture our products or to purchase products from our contract manufacturers could increase significantly and we may not be able to pass on such increases to our customers. Additionally, in the event any of our, or our contract manufacturer's, third-party suppliers or vendors become unable or unwilling to continue to provide raw materials in the required volumes and quality levels or in a timely manner, we, or our contract manufacturers, would be required to identify and obtain acceptable replacement supply sources. If we, or they, are unable to identify and obtain alternative supply sources in a timely manner or at all, our business could be adversely affected. A significant increase in the price of raw materials that cannot be passed on to customers could have a material adverse effect on our results of operations and financial condition. Events such as COVID-19, the threat of political or social unrest, or the perceived threat thereof, may also have a significant impact on raw material prices and transportation costs for our products. In addition, the interruption in supply of certain key raw materials essential to the manufacturing of our products may have an adverse impact on us and our suppliers' ability to provide us with the necessary products needed to maintain our customer relationships and an adequate level of sales.

General trade tensions between the U.S. and China have been escalating since 2018, with multiple rounds of U.S. tariffs on Chinese goods taking effect, with some subsequently being de-escalated. Furthermore, China or other countries may institute retaliatory trade measures in response to existing or future tariffs imposed by the U.S. that could have a negative impact on our business. If any of these events continue as described, we may need to seek alternative suppliers or vendors, raise prices, or make changes to our operations, any of which could have a material adverse effect on our sales and profitability, results of operations and financial condition.

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***Our expansion into new business lines and services may result in unseen risks, challenges and uncertainties.***

As a result of our acquisition of Nexus in November 2021, we have entered the digital marketing business as a way to promote the products and brands that we sell. Such acquisition may result in unseen risks, challenges and uncertainties. We may incur additional capital expenditure to support the expansion of our business and there is no guarantee that we may increase our revenues generated from such new business. Also, our failure to manage costs and expenses and evaluate consumer demands with respect to such new business could materially and adversely affect the prospects of us achieving overall profitability of and recouping our investments in this new business line. Moreover, this new business line may require significant managerial, financial, operational and other resources, as well as the smooth cooperation with our company. We may also face higher regulatory, legal and counterparty risks from entering this business. If we fail to manage the development of this new business line successfully, our growth potential, business and results of operations may be materially and adversely affected.

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***Declines in foot traffic, rising real estate prices and other costs and risks relating to operating a brick and mortar retail store could affect our results.***

On August 24, 2021, we established Smart for Life Canada Inc. as a wholly owned subsidiary of Doctors Scientific Organica, LLC in Canada. This subsidiary sells retail products through a retail store location in Montreal Canada and the same location also acts as distribution center for our international direct to consumer and big box customers.

The success of our retail store is affected by (1) the location of the store; (2) surrounding tenants or vacancies; (3) increased competition in the area where the store is located; (4) the amount spent on advertising and promotion to attract consumers to the store; and (5) a shift towards online shopping resulting in a decrease in retail store traffic. Declines in consumer traffic could have a negative impact on our net sales and could materially adversely affect our financial condition and results of operations. Furthermore, declines in traffic could result in store impairment charges if expected future cash flows of the related asset group do not exceed the carrying value.

We rent this store under a three-year lease agreement ending in September 2024. If we fail to negotiate appropriate terms for new leases or lease renewals, we may incur lease costs that are excessive and cause operating margins to be below acceptable levels. We may also make term commitments that are too long or too short, without the option to exit early or extend. Factors such as the condition of local property markets, availability of lease financing, taxes, zoning and environmental issues, and competitive actions may impact the availability of, and our ability to successfully negotiate, leases. Furthermore, the success of the store depends on a number of factors, including the success of the shopping center where our store is located, consumer demographics and consumer shopping patterns. These factors cannot be predicted with complete accuracy. If we fail to profitably operate this new store, our financial performance could be adversely affected.

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***Our success is dependent on the accuracy, reliability, and proper use of sophisticated and dependable information processing systems and management information technology and any interruption in these systems could have a material adverse effect on our business, financial condition, and results of operations.***

Our success is dependent on the accuracy, reliability, and proper use of sophisticated and dependable information processing systems and management information technology. Our information technology systems are designed and selected to facilitate order entry and customer billing, maintain customer records, accurately track purchases, manage accounting, finance and manufacturing operations, generate reports, and provide customer service and technical support. Any interruption in these systems or any interruption associated with the transition of these systems to a new information technology platform could have a material adverse effect on our business, financial condition, and results of operations.

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***System interruptions or security breaches may affect sales.***

Customer access to, and ability to use, our websites affect our sales. If we are unable to maintain and continually enhance the efficiency of our systems, we could experience system interruptions or delays that could affect our operating results negatively. In addition, we could be liable for breaches of security on our websites, loss or misuse of our customers' personal information or payment data. Although we have developed systems and processes that are designed to protect consumer information and prevent fraudulent credit card transactions and other security breaches, failure to prevent or mitigate such fraud or breaches may negatively affect our operating results.

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***We must successfully maintain and/or upgrade our information technology systems, and our failure to do so could have a material adverse effect on our business, financial condition or results of operations.***

We rely on various information technology systems to manage our operations. Recently, we have implemented, and we continue to implement, modifications and upgrades to such systems and acquired new systems with new functionality. These types of activities subject us to inherent costs and risks associated with replacing and changing these systems, including impairment of our ability to fulfill customer orders, potential disruption of our internal control structure, substantial capital expenditures, additional administration and operating expenses, retention of sufficiently skilled personnel to implement and operate the new systems, demands on management time and other risks and costs of delays or difficulties in transitioning to or integrating new systems into our current systems. These implementations, modifications and upgrades may not result in productivity improvements at a level that outweighs the costs of implementation, or at all. In addition, the difficulties with implementing new technology systems may cause disruptions in our business operations and have a material adverse effect on our business, financial condition or results of operations.

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***Privacy protection is increasingly demanding, and we may be exposed to risks and costs associated with security breaches, data loss, credit card fraud and identity theft that could cause us to incur unexpected expenses and loss of revenue, suffer reputational harm with our customers, as well as other risks.***

The protection of customer, employee, vendor and other business data is critical to us. We receive confidential customer data, including payment card and personally identifiable information, in the normal course of customer transactions. In order for our sales channels to function, we and other parties involved in processing customer transactions must be able to transmit confidential information, including credit card information, securely over public networks. While we have taken significant steps to protect customer and confidential information, the intentional or negligent actions of employees, business associates or third parties may undermine our security measures and result in unauthorized parties obtaining access to our data systems and misappropriating confidential data. There can be no assurance that advances in computer capabilities, new discoveries in the field of cryptography or other developments will prevent a compromise of our customer transaction processing capabilities and personal data. Because the techniques used to obtain unauthorized access to, disable, degrade, or sabotage systems change frequently and often are not recognized until launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures. Any compromise of our data security could result in a violation of applicable privacy and other laws or standards, significant legal and financial exposure beyond the scope or limits of our insurance coverage, interruption of our operations, increased operating costs associated with remediation, equipment acquisitions or disposal, added personnel, and a loss of confidence in our security measures, which could harm our business or investor confidence. Any security breach involving the misappropriation, loss or other unauthorized disclosure of sensitive or confidential information could attract a substantial amount of media attention, damage our reputation, expose us to risk of litigation and material liability, disrupt our operations and harm our business.

Federal, state, provincial and international laws and regulations govern the collection, retention, sharing and security of data that we receive from and about our employees, customers and vendors. The regulatory environment surrounding information security and privacy has been increasingly demanding in recent years, including the recent implementation of the California Consumer Privacy Act. In Canada, we are subject to Canada's Personal Information and Protection of Electronic Documents Act, which provides Canadian residents with privacy protections and sets out rules for how companies may collect, use and disclose personal information in the course of commercial activities. The costs of compliance with, and other burdens imposed by, these and other international data privacy and security laws may limit our business and services and could have a materially adverse impact on our business.

We believe that we are in material compliance with all laws, regulations and self-regulatory regimes that are applicable to us. However, the laws, regulations, and self-regulatory regimes may be modified, and new laws may be enacted in the future that may apply to us and affect our business. Further, data protection authorities may interpret existing laws in new ways. We may deploy new services from time to time, which may also require us to change our compliance practices. Any such developments (or developments stemming from enactment or modification of other laws) or the failure to anticipate accurately the application or interpretation of these laws could create liability for us, result in adverse publicity, increase our future compliance costs, make our products and services less attractive to our customers, or cause us to change or limit our business practices, and materially affect our business and operating results. Further, any failure or perceived failure by us or third-party service providers to comply with international data privacy and security laws may lead to regulatory enforcement actions, fines, private lawsuits or reputational damage.

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***We may not be able to protect our intellectual property rights.***

We regard our trademarks, service marks, copyrights, patents, trade secrets, proprietary technologies, domain names and similar intellectual property as important to our success. We rely on trademark, copyright and patent law, trade secret protection and confidentiality agreements with our future employees, consultants, vendors, customers and others to protect our proprietary rights. Many of the trademarks that we use contain words or terms having a somewhat common usage and, as a result, we may have difficulty registering them in certain jurisdictions. We have not yet obtained registrations for our most important marks. If other companies have registered or have been using in commerce similar trademarks for products similar to ours, we may have difficulty in registering, or enforcing an exclusive right to use, our marks.

There can be no assurance that our efforts to protect our proprietary rights will be sufficient or effective, that any pending or future patent and trademark applications will lead to issued patents and registered trademarks in all instances, that others will not develop or patent similar or superior technologies, products, or that our patents, trademarks, and other intellectual property will not be challenged, invalidated, misappropriated or infringed by others. Additionally, the intellectual property laws and enforcement practices of other countries in which our product is or may in the future be offered may not protect our products and intellectual property rights to the same extent as the laws of the United States. If we are unable to protect our intellectual property from unauthorized use, our brand image may be harmed, and our business and results of operations may suffer.

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***Assertions by third parties of infringement, misappropriation or other violation by us of their intellectual property rights could result in significant costs and substantially harm our business and operating results.***

In recent years, there has been significant litigation involving intellectual property rights in many technology-based industries. Any infringement, misappropriation or related claims, whether or not meritorious, is time-consuming, diverts technical and management personnel and is costly to resolve. As a result of any such dispute, we may have to develop non-infringing technology, pay damages, enter into royalty or licensing agreements, cease providing our product or take other actions to resolve the claims. These actions, if required, may be costly or unavailable on terms acceptable to us. Any of these events could result in increases in operating expenses, limit our product offerings or result in a loss of business.

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***We may be required to indemnify our vendors and/or customers, the payment of which could have a material adverse effect on our business, financial condition, and operating results.***

We provide certain rights of indemnification to our vendors and/or customers in certain circumstances. If any plaintiff is successful in certifying a class and thereafter prevailing on the merits of their complaint, such an adverse result could have a material adverse effect on us. In addition, due to the nature and scope of the indemnity and defense we will likely need to provide, the legal fees associated with such indemnification could be significant enough to have a material adverse effect on our cash flows until such matters are fully and finally resolved.

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***Compliance with new and existing laws and governmental regulations could increase our costs significantly and adversely affect our results of operations.***

The processing, formulation, safety, manufacturing, packaging, labeling, advertising and distribution of our products are subject to federal laws and regulation by one or more federal agencies, including the FDA, the FTC, the CPSC, the USDA and the EPA. These activities are also regulated by various state, local and international laws and agencies of the states and localities in which our products are sold. Government regulations may prevent or delay the introduction, or require the reformulation, of our products, which could result in lost revenues and increased costs to us. For instance, the FDA regulates, among other things, the composition, safety, manufacture, labeling and marketing of dietary ingredients and dietary supplements (including vitamins, minerals, herbs, and other dietary ingredients for human use). Dietary supplements and dietary ingredients that do not comply with FDA's regulations and/or the Dietary Supplement Health and Education Act of 1994 will be deemed adulterated or misbranded. Manufacturers and distributors of dietary supplements and dietary ingredients are prohibited from marketing products that are adulterated or misbranded, and the FDA may take enforcement action against any adulterated or misbranded dietary supplement on the market. The FDA has broad enforcement powers. If we violate applicable regulatory requirements, the FDA may bring enforcement actions against us, which could have a material adverse effect on our business, prospects, financial condition, and results of operations. The FDA may not accept the evidence of safety for any new ingredient that we may wish to market, may determine that a particular supplement or ingredient presents an unacceptable health risk based on the required submission of serious adverse events or other information, and may determine that a particular claim or statement of nutritional value that we use to support the marketing of a supplement is an impermissible drug claim, is not substantiated, or is an unauthorized version of a "health claim." See Item 1 "*Business—Regulation—Food and Drug Administration*" for additional information. Any of these actions could prevent us from marketing particular nutritional supplement products or making certain claims or statements with respect to those products. The FDA could also require us to remove a particular product from the market. Any future recall or removal would result in additional costs to us, including lost revenues from any products that we are required to remove from the market, any of which could be material. Any product recalls or removals could also lead to an increased risk of litigation and liability, substantial costs, and reduced growth prospects.

Additional or more stringent laws and regulations of dietary supplements and other products have been considered from time to time. These developments could require reformulation of some products to meet new standards, recalls or discontinuance of some products not able to be reformulated, additional record-keeping requirements, increased documentation of the properties of some products, additional or different labeling, additional scientific substantiation, or other new requirements. Any of these developments could increase our costs significantly. In addition, regulators' evolving interpretation of existing laws could have similar effects.

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***Our failure to comply with FTC regulations could result in substantial monetary penalties and could adversely affect our operating results.***

The FTC exercises jurisdiction over the advertising of dietary supplements and requires that all advertising to consumers be truthful and non-misleading. The FTC actively monitors the dietary supplement space and has instituted numerous enforcement actions against dietary supplement companies for failure to have adequate substantiation for claims made in advertising or for the use of false or misleading advertising claims. Failure to comply with applicable regulations could result in substantial monetary penalties, which could have a material adverse effect on our financial condition or results of operations.

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***Our operations are subject to environmental and health and safety laws and regulations that may increase our cost of operations or expose us to environmental liabilities.***

We are subject, directly or indirectly, to numerous federal, state, local and foreign environmental and health and safety laws and regulations governing our operations, including the handling, transportation and disposal of our non-hazardous and hazardous substances and wastes, as well as emissions and discharges from our operations into the environment, including discharges to air, surface water and groundwater. Failure to comply with such laws and regulations could result in costs for remedial actions, penalties or the imposition of other liabilities. New laws, changes in existing laws or the interpretation thereof, or the development of new facts or changes in their processes could also cause us to incur additional capital and operating expenditures to maintain compliance with environmental laws and regulations and environmental permits. Any failure by us to comply with environmental, health and safety requirements could result in the limitation or suspension of our operations, including operations at our manufacturing facility. We also could incur monetary fines, civil or criminal sanctions, third-party claims or cleanup or other costs as a result of violations of or liabilities under such requirements.

We also are subject to laws and regulations that impose liability and cleanup responsibility for releases of hazardous substances into the environment without regard to fault or knowledge about the condition or action causing the liability. Under certain of these laws and regulations, such liabilities can be imposed for cleanup of previously owned or operated properties, or for properties to which substances or wastes that were sent in connection with current or former operations at our facilities. The presence of contamination from such substances or wastes could also adversely affect our ability to sell or lease our properties, or to use them as collateral for financing.

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***Failure to comply with federal, state and international privacy, data protection, marketing and consumer protection laws, regulations and industry standards, or the expansion of current or the enactment or adoption of new privacy, data protection, marketing and consumer protection laws, regulations or industry standards, could adversely affect our business.***

We are subject to a variety of federal, state and foreign laws, regulations and industry standards regarding privacy, data protection, data security, marketing and consumer protection, which address the collection, storing, sharing, using, processing, disclosure and protection of data relating to individuals, as well as the tracking of consumer behavior and other consumer data. We are also subject to laws, regulations and industry standards relating to endorsements and influencer marketing. Many of these laws, regulations and industry standards are changing and may be subject to differing interpretations, are costly to comply with or inconsistent among jurisdictions. For example, the FTC expects companies like ours to comply with guidelines issued under the Federal Trade Commission Act that govern the collection, use, disclosure, and storage of consumer information, and establish principles relating to notice, consent, access and data integrity and security. The laws and regulations in many foreign countries relating to privacy, data protection, data security, marketing and consumer protection often are more restrictive than in the United States, and may in some cases be interpreted to have a greater scope. Additionally, the laws, regulations and industry standards, both foreign and domestic, relating to privacy, data protection, data security, marketing and consumer protection are dynamic and may be expanded or replaced by new laws, regulations or industry standards.

We strive to comply with applicable laws, policies, contractual and other legal obligations and certain applicable industry standards of conduct relating to privacy, data security, data protection, marketing and consumer protection. However, these obligations and standards of conduct often are complex, vague, and difficult to comply with fully, and it is possible that these obligations and standards of conduct may be interpreted and applied in new ways and/or in a manner that is inconsistent with each other or that new laws, regulations or other obligations may be enacted. It is possible that our practices may be argued or held to conflict with applicable laws, policies, contractual or other legal obligations, or applicable industry standards of conduct relating to privacy, data security, data protection, marketing or consumer protection. Any failure, or perceived failure, by us to comply with our posted privacy policies or with any data-related consent orders, the FTC, other regulatory requirements or orders or other federal, state or, as we continue to expand internationally, international privacy, data security, data protection, marketing or consumer protection-related laws, regulations, contractual obligations or self-regulatory principles or other industry standards could result in claims, proceedings or actions against us by governmental entities or others or other liabilities or could result in a loss of consumers. Any of these circumstances could adversely affect our business.

We expect that there will continue to be new proposed laws, regulations and industry standards concerning privacy, data protection and information security in the United States and other jurisdictions, and we cannot yet determine the impact such future laws, regulations and standards may have on our business. For instance, with the increased focus on the use of data for advertising, the anticipation and expectation of future laws, regulations, standards and other obligations could impact us. In addition, as we expand our data analytics and other data related product offerings there may be increased scrutiny on our use of data and we may be subject to new and unexpected regulations. Future laws, regulations, standards and other obligations could, for example, impair our ability to collect or use information that we utilize to provide targeted digital promotions and media to consumers, thereby impairing our ability to maintain and grow our total customers and increase revenues. Future restrictions on the collection, use, sharing or disclosure of our users' data or additional requirements for express or implied consent of users for the use and disclosure of such information could require us to modify our solutions, possibly in a material manner, and could limit our ability to develop or outright prohibit new solutions and features. Any such new laws, regulations, other legal obligations or industry standards, or any changed interpretation of existing laws, regulations or other standards may require us to incur additional costs and restrict our business operations. If our measures fail to comply with current or future laws, regulations, policies, legal obligations or industry standards relating to privacy, data protection, data security, marketing or consumer protection, we may be subject to litigation, regulatory investigations, fines or other liabilities, as well as negative publicity and a potential loss of business. Moreover, if future laws, regulations, other legal obligations or industry standards, or any changed interpretations of the foregoing limit our ability to store, process and share personally identifiable information or other data, demand for our products could decrease, our costs could increase, our revenue growth could slow, and our business, financial condition and operating results could be harmed.

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***We are exposed to potential liability for information on our customers' websites and for products and services sold through their websites and we may incur significant costs and damage to our reputation as a result of defending against such potential liability.***

We are exposed to potential liability for information on our customers' websites. We could be exposed to liability with respect to such third-party information such as their products, links to third-party websites, advertisements and content provided by customers. Among other things, we may face assertions that, by directly or indirectly providing such third-party content or links to other websites, we should be liable for defamation, negligence, copyright or trademark infringement, or other actions by parties providing such content or operating those websites. We may also face assertions that content on our publishers and advertisers' websites, including statistics or other data we compile internally, or information contained in websites linked to our websites contains false information, errors or omissions, and users and our customers could seek damages for losses incurred as a result of their reliance upon or otherwise relating to incorrect information. We may also be subject to fines and other sanctions by the government for such incorrect information. In addition, our services could be used as a platform for fraudulent transactions and third party products and services sold through us may be defective. The measures we take to guard against liability for third-party content, information, products and services may not be adequate to exonerate us from relevant civil and other liabilities.

Any such claims, with or without merit, could be time-consuming to defend and result in litigation and significant diversion of management's attention and resources. Even if these claims do not result in liability to us, we could incur significant costs in investigating and defending against these claims and suffer damage to our reputation.

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***If the use of third-party cookies or other tracking technology is rejected by Internet users, restricted by third parties outside of our control, or otherwise subject to unfavorable regulation, our performance could decline and we could lose customers and revenue.***

We use a number of technologies to collect information about our customers. For instance, we use small text files (referred to as "cookies"), placed through an Internet browser on an Internet user's machine which corresponds to a data set that we keep on our servers, to gather important data. Our cookies collect anonymous information, such as when an Internet user views an advertisement, clicks on an advertisement, or visits one of our advertisers' websites. In some countries, including countries in the European Economic Area, this information may be considered personal information under applicable data protection laws. On mobile devices, we may also obtain location-based information about the user's device through our cookies or other tracking technologies. We use these technologies to achieve our campaign goals, to ensure that the same Internet user does not unintentionally see the same media too frequently, to report aggregate information regarding the performance of our digital promotions and marketing campaigns, and to detect and prevent fraudulent activity throughout our network.

Cookies may easily be deleted or blocked by Internet users. All of the most commonly used Internet browsers (including Chrome, Firefox, Internet Explorer, and Safari) allow Internet users to prevent cookies from being accepted by their browsers. Internet users can also delete cookies from their computers at any time. Some Internet users also download "ad blocking" software that prevents cookies from being stored on a user's computer. If more Internet users adopt these settings or delete their cookies more frequently than they currently do, our business could be harmed. In addition, the Safari and Firefox browsers blocks third-party cookies by default, and other browsers may do so in the future. Unless such default settings in browsers were altered by Internet users to permit the placement of third-party cookies, we would be able to set fewer of our cookies in users' browsers, which could adversely affect our business. In addition, companies such as Google have publicly disclosed their intention to move away from cookies to another form of persistent unique identifier, or ID, to identify individual Internet users or Internet-connected devices in the bidding process on advertising exchanges. If companies do not use shared IDs across the entire ecosystem, this could have a negative impact on our ability to find the same anonymous user across different web properties, and reduce the effectiveness of our marketing efforts.

In addition, in the European Union, or EU, Directive 2009/136/EC, commonly referred to as the "Cookie Directive," directs EU member states to ensure that collecting information on an Internet user's computer, such as through a cookie, is allowed only if the Internet user has appropriately given his or her prior freely given, specific, informed and unambiguous consent. Similarly, this Directive which also contains specific rules for the sending of marketing communications, limits the use of marketing texts messages and e-mails. Additionally, an e-Privacy Regulation, which will replace the Cookie Directive with requirements that could be stricter in certain respects, apply directly to activities within the EU without the need to be transposed in each member state's law, and could impose stricter requirements regarding the use of cookies and marketing e-mails and text messages and additional penalties for noncompliance, has been proposed, although at this time it is unclear whether it will be approved as it is currently drafted or when its requirements will be effective. We may experience challenges in obtaining appropriate consent to our use of cookies from consumers or to send marketing communications to consumers within the EU, which may affect our ability to run promotions and our operating results and business in European markets, and we may not be able to develop or implement additional tools that compensate for the lack of data associated with cookies. Moreover, even if we are able to do so, such additional tools may be subject to further regulation, time consuming to develop or costly to obtain, and less effective than our current use of cookies.

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***Economic, political and other risks associated with our international operations could adversely affect our revenues and international growth prospects.***

On August 24, 2021, we established Smart for Life Canada Inc. as a wholly owned subsidiary of DSO in Canada. This subsidiary sells retail products through a retail store location in Montreal Canada and the same location also acts as distribution center for our international direct to consumer and big box customers. We maintain inventory and employees at this location. We have sales outside of the United States. For fiscal 2022 and 2021, international sales represented approximately 10% and 15%, respectively, of our total revenues.

We intend to expand our international presence as part of our business strategy. Our international operations are subject to a number of risks inherent to operating in foreign countries, and any expansion of our international operations will amplify the effects of these risks, which include, among others:

● differences in culture, economic and labor conditions and practices;

● the policies of the U.S. and foreign governments;

● disruptions in trade relations and economic instability;

● differences in enforcement of contract and intellectual property rights;

● social and political unrest;

● natural disasters, terrorist attacks, pandemics or other catastrophic events;

● complex, varying and changing government regulations and legal standards and requirements, particularly with respect to tax regulations, price protection, competition practices, export control regulations and restrictions, customs and tax requirements, immigration, anti-boycott regulations, data privacy, intellectual property, anti-corruption and environmental compliance, including the Foreign Corrupt Practices Act;

● greater difficulty enforcing intellectual property rights and weaker laws protecting such rights; and

● greater difficulty in accounts receivable collections and longer collection periods.

We are also affected by domestic and international laws and regulations applicable to companies doing business abroad or importing and exporting goods and materials. These include tax laws, laws regulating competition, anti-bribery/anti-corruption and other business practices, and trade regulations, including duties and tariffs. Compliance with these laws is costly, and future changes to these laws may require significant management attention and disrupt our operations. Additionally, while it is difficult to assess what changes may occur and the relative effect on our international tax structure, significant changes in how U.S. and foreign jurisdictions tax cross-border transactions could materially and adversely affect our results of operations and financial position.

Our results of operations and financial position are also impacted by changes in currency exchange rates. Unfavorable currency exchange rates between the US Dollar and foreign currencies, particularly the Canadian dollar, could adversely affect us in the future. Fluctuations in currency exchange rates may present challenges in comparing operating performance from period to period.

There are other risks that are inherent in our Canadian and other international operations, including the potential for changes in socio-economic conditions, laws and regulations, including, among others, competition, import, export, labor and environmental, health and safety laws and regulations, and monetary and fiscal policies, protectionist measures that may prohibit acquisitions or joint ventures, or impact trade volumes, unsettled political conditions; government-imposed plant or other operational shutdowns, backlash from foreign labor organizations related to our restructuring actions, corruption; natural and man-made disasters, hazards and losses, violence, civil and labor unrest, and possible terrorist attacks.

Additionally, if the opportunity arises, we may expand our operations into new and high-growth international markets. However, there is no assurance that we will expand our operations in such markets in our desired time frame. To expand our operations into new international markets, we may enter into business combination transactions, make acquisitions or enter into strategic partnerships, joint ventures or alliances, any of which may be material. We may enter into these transactions to acquire other businesses or products to expand our products or take advantage of new developments and potential changes in the industry. Our lack of experience operating in new international markets and our lack of familiarity with local economic, political and regulatory systems could prevent us from achieving the results that we expect on our anticipated time frame or at all. If we are unsuccessful in expanding into new or high-growth international markets, it could adversely affect our operating results and financial condition.

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***Our international operations require us to comply with anti-corruption laws and regulations of the U.S. government and various international jurisdictions in which we do business.***

Doing business on a worldwide basis requires us to comply with the laws and regulations of the U.S. government and various international jurisdictions, and our failure to successfully comply with these rules and regulations may expose us to liabilities. These laws and regulations apply to companies, individual directors, officers, employees, and agents, and may restrict our operations, trade practices, investment decisions and partnering activities. In particular, our international operations are subject to U.S. and foreign anti-corruption laws and regulations, such as the Foreign Corrupt Practices Act, or the FCPA. The FCPA prohibits us from providing anything of value to foreign officials for the purposes of influencing official decisions or obtaining or retaining business or otherwise obtaining favorable treatment, and requires us to maintain adequate record- keeping and internal accounting practices to accurately reflect our transactions. As part of our business, we may deal with state-owned business enterprises, the employees and representatives of which may be considered foreign officials for purposes of the FCPA. In addition, some of the international locations in which we operate lack a developed legal system and have elevated levels of corruption. As a result of the above activities, we are exposed to the risk of violating anti-corruption laws. Violations of these legal requirements are punishable by criminal fines and imprisonment, civil penalties, disgorgement of profits, injunctions, debarment from government contracts as well as other remedial measures. We have established policies and procedures designed to assist us and our personnel in complying with applicable U.S. and international laws and regulations. However, there can be no assurance that our policies and procedures will effectively prevent us from violating these regulations in every transaction in which we may engage, and such a violation could adversely affect our reputation, business, financial condition and results of operations.

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***Our success depends on the experience and skill of our board of directors, executive officers and key personnel, whom we may not be able to retain and we may not be able to hire enough additional personnel to meet our needs.***

We are dependent on Alfonso J. Cervantes, Jr. (Executive Chairman), Darren C. Minton (Chief Executive Officer and President), and Alan B. Bergman (Chief Financial Officer). There can be no assurance that they will continue to be employed by us for a particular period of time. The loss of any member of the board of directors or executive officer or advisors could harm our business, financial condition, cash flow and results of operations.

The success of our strategy will depend on a well-defined management structure and the availability of a management team with proven competencies in the identification, acquisition and integration of complementary companies and assets. To implement our business plan, we will need to keep the personnel that we currently have and, if our business is to grow as planned, we will need additional personnel. We cannot assure you that we will be successful in retaining our present team or in attracting and retaining additional personnel. If we are unable to attract and retain key personnel or are unable to do so in a cost-effective manner, our business may be materially and adversely affected.

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***Although dependent on certain key personnel, we do not have any key man life insurance policies on any such people.***

We are dependent on our management team to conduct our operations and execute our business plan, however, we have not purchased any insurance policies with respect to the management in the event of the death or disability of any of our key managers. Therefore, if any of the members of our management team dies or becomes disabled, we will not receive any compensation to assist with his absence.

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***We may be a party to lawsuits that arise in the ordinary course of business.***

We may be a party to lawsuits in the future (including product liability, false advertising, and intellectual property claims) that arise in the ordinary course of business. The possibility of such litigation, and its timing, is in large part outside our control. It is possible that future litigation could arise that could have material adverse effects on us.

**Risks Related to Ownership of Our Common Stock**

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***We may not be able to maintain a listing of our common stock on Nasdaq.***

Our common stock is currently listed on the Nasdaq Capital Market. We must meet certain financial and liquidity criteria to maintain the listing of our common stock on Nasdaq. If we fail to meet any of Nasdaq's continued listing standards or we violate Nasdaq listing requirements, our common stock may be delisted. In addition, our board of directors may determine that the cost of maintaining our listing on a national securities exchange outweighs the benefits of such listing.

On June 2, 2022, we received a notification letter, which was modified on June 3, 2022, from Nasdaq notifying us that we were not in compliance with the minimum bid price requirement set forth in Nasdaq Listing Rule 5550(a)(2) for continued listing on the Nasdaq. Nasdaq Listing Rule 5550(a)(2) requires listed securities to maintain a minimum bid price of $1.00 per share, and Listing Rule 5810(c)(3)(A) provides that a failure to meet the minimum bid price requirement exists if the deficiency continues for a period of 30 consecutive business days. Based on the closing bid price of our common stock for the 30 consecutive business days from April 20, 2022 to June 1, 2022, we no longer meet the minimum bid price requirement. In accordance with Nasdaq Listing Rule 5810(c)(3)(A), we were provided 180 calendar days, or until November 29, 2022, to regain compliance with Nasdaq Listing Rule 5550(a)(2).

On November 28, 2022, we received an additional notification letter from Nasdaq notifying us that we are not in compliance with the Nasdaq stockholders' equity requirement of $2,500,000 for continued listing on The Nasdaq Capital Market, as set forth in Listing Rule 5550(b), given that our Form 10-Q for the period ended September 30, 2022 evidenced stockholders' equity of only $2,051,279. Given the stockholders' equity deficiency, Nasdaq determined to terminate the grace period noted above one day early, pursuant to its discretionary authority, as set forth in Listing Rule 5101. Based on the foregoing, we requested a hearing before a Nasdaq Hearings Panel, which was held on January 19, 2023. The hearing request stayed any suspension or delisting action pending the conclusion of the hearings process.

On January 25, 2023, we received a notification letter from Nasdaq notifying us that the Nasdaq Hearings Panel granted an exception from the foregoing continued listing standards until May 30, 2023. Accordingly, we have until May 30, 2023 to regain compliance with the foregoing rules.

On March 15, 2023, we held a special meeting of stockholders at which we received stockholder approval for our board of directors to implement one or more reverse stock splits of our outstanding common stock at a ratio of not less than 1-for-5 and not more than 1-for-50 in the aggregate at any time prior to December 31, 2023. We intend to implement a reverse stock split within the next few weeks.

A delisting of our common stock from Nasdaq may materially impair our stockholders' ability to buy and sell our common stock and could have an adverse effect on the market price of, and the efficiency of the trading market for, our common stock. The delisting of our common stock could significantly impair our ability to raise capital and the value of your investment.

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***The market price of our stock may be highly volatile, and you could lose all or part of your investment.***

The market for our common stock may be characterized by significant price volatility when compared to the shares of larger, more established companies that have large public floats, and our stock price will likely be more volatile than the shares of such larger, more established companies for the indefinite future. The stock market in general has recently been highly volatile. Furthermore, there have been recent instances of extreme stock price run-ups followed by rapid price declines and stock price volatility following a number of recent initial public offerings, particularly among companies with relatively smaller public floats. We also experienced such volatility following our initial public offering in February 2022 and may continue to experience such volatility, which may be unrelated to our actual or expected operating performance and financial condition or prospects, making it difficult for prospective investors to assess the rapidly changing value of our common stock.

The market price of our common stock is likely to be volatile due to a number of factors. First, as noted above, our common stock is likely to be more sporadically and thinly traded compared to the shares of such larger, more established companies. The price for our common stock could, for example, decline precipitously in the event that a large number of shares is sold on the market without commensurate demand. Secondly, we are a speculative or "risky" investment due to our lack of profits to date. As a consequence of this enhanced risk, more risk-adverse investors may, under the fear of losing all or most of their investment in the event of negative news or lack of progress, be more inclined to sell their shares on the market more quickly and at greater discounts than would be the case with the stock of a larger, more established company that has a large public float. Many of these factors are beyond our control and may decrease the market price of our common stock regardless of our operating performance. The market price of our common stock could also be subject to wide fluctuations in response to a broad and diverse range of factors, including the following:

● actual or anticipated variations in our periodic operating results;

● increases in market interest rates that lead investors of our common stock to demand a higher investment return;

● changes in earnings estimates;

● changes in market valuations of similar companies;

● actions or announcements by our competitors;

● adverse market reaction to any increased indebtedness we may incur in the future;

● additions or departures of key personnel;

● actions by stockholders;

● speculation in the media, online forums, or investment community; and

● our ability to maintain the listing of our common stock on Nasdaq.

Volatility in the market price of our common stock may prevent investors from being able to sell their common stock at or above the price at which they purchased our common stock. As a result, you may suffer a loss on your investment.

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***We have not paid in the past and do not expect to declare or pay dividends in the foreseeable future.***

We have not paid in the past and do not expect to declare or pay dividends in the foreseeable future, as we anticipate that we will invest future earnings in the development and growth of our business. Therefore, holders of our common stock will not receive any return on their investment unless they sell their securities, and holders may be unable to sell their securities on favorable terms or at all.

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***Future issuances of our common stock or securities convertible into, or exercisable or exchangeable for, our common stock, or the expiration of lock-up agreements that restrict the issuance of new common stock or the trading of outstanding common stock, could cause the market price of our common stock to decline and would result in the dilution of your holdings.***

Future issuances of our common stock or securities convertible into, or exercisable or exchangeable for, our common stock, or the expiration of lock-up agreements that restrict the issuance of new common stock or the trading of outstanding common stock, could cause the market price of our common stock to decline. We cannot predict the effect, if any, of future issuances of our securities, or the future expirations of lock-up agreements, on the price of our common stock. In all events, future issuances of our common stock would result in the dilution of your holdings. In addition, the perception that new issuances of our securities could occur, or the perception that locked-up parties will sell their securities when the lock-ups expire, could adversely affect the market price of our common stock. In connection with our initial public offering, we and all of our directors and executive officers entered into lock-up agreements, pursuant to which we and each of these persons may not, without the prior written approval of the representative of the underwriters and subject to certain exceptions, offer, sell, contract to sell, pledge, or otherwise dispose of, directly or indirectly, our common stock or securities convertible into or exchangeable or exercisable for our common stock for a period of six months from the closing of the initial public offering with respect to our directors and executive officers and for a period of twelve months from the closing of the initial public offering with respect to our company. In addition to any adverse effects that may arise upon the expiration of these lock-up agreements, the lock-up provisions in these agreements may be waived, at any time and without notice. If the restrictions under the lock-up agreements are waived, our common stock may become available for resale, subject to applicable law, including without notice, which could reduce the market price for our common stock.

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***Future issuances of debt securities, which would rank senior to our common stock upon our bankruptcy or liquidation, and future issuances of preferred stock, which could rank senior to our common stock for the purposes of dividends and liquidating distributions, may adversely affect the level of return you may be able to achieve from an investment in our common stock.***

In the future, we may attempt to increase our capital resources by offering debt securities. Upon bankruptcy or liquidation, holders of our debt securities, and lenders with respect to other borrowings we may make, would receive distributions of our available assets prior to any distributions being made to holders of our common stock. Moreover, if we issue preferred stock, the holders of such preferred stock could be entitled to preferences over holders of common stock in respect of the payment of dividends and the payment of liquidating distributions. Because our decision to issue debt or preferred stock in any future offering, or borrow money from lenders, will depend in part on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of any such future offerings or borrowings. Holders of our common stock must bear the risk that any future offerings we conduct or borrowings we make may adversely affect the level of return, if any, they may be able to achieve from an investment in our common stock.

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***If securities industry analysts do not publish research reports on us, or publish unfavorable reports on us, then the market price and market trading volume of our common stock could be negatively affected.***

Any trading market for our common stock may be influenced in part by any research reports that securities industry analysts publish about us. We do not currently have and may never obtain research coverage by securities industry analysts. If no securities industry analysts commence coverage of us, the market price and market trading volume of our common stock could be negatively affected. In the event we are covered by analysts, and one or more of such analysts downgrade our securities, or otherwise reports on us unfavorably, or discontinues coverage of us, the market price and market trading volume of our common stock could be negatively affected.

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***If our shares of common stock become subject to the penny stock rules, it would become more difficult to trade our shares.***

The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a price of less than $5.00, other than securities registered on certain national securities exchanges or authorized for quotation on certain automated quotation systems, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system. If we do not retain a listing on Nasdaq or another national securities exchange and if the price of our common stock is less than $5.00, our common stock could be deemed a penny stock. The penny stock rules require a broker-dealer, before a transaction in a penny stock not otherwise exempt from those rules, to deliver a standardized risk disclosure document containing specified information. In addition, the penny stock rules require that before effecting any transaction in a penny stock not otherwise exempt from those rules, a broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive (i) the purchaser's written acknowledgment of the receipt of a risk disclosure statement; (ii) a written agreement to transactions involving penny stocks; and (iii) a signed and dated copy of a written suitability statement. These disclosure requirements may have the effect of reducing the trading activity in the secondary market for our common stock, and therefore stockholders may have difficulty selling their shares.

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***We are subject to ongoing public reporting requirements that are less rigorous than Exchange Act rules for companies that are not emerging growth companies and our stockholders could receive less information than they might expect to receive from more mature public companies.***

We are required to publicly report on an ongoing basis as an "emerging growth company" under the reporting rules set forth under the Exchange Act. For so long as we remain an emerging growth company, we may take advantage of certain exemptions from various reporting requirements that are applicable to other Exchange Act reporting companies that are not emerging growth companies. For so long as we are an emerging growth company, we will not be required to:

● have an auditor report on our internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act;

● comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor's report providing additional information about the audit and the financial statements (i.e., an auditor discussion and analysis);

● submit certain executive compensation matters to stockholder advisory votes, such as "say-on-pay" and "say-on-frequency;" and

● disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the chief executive officer's compensation to median employee compensation.

In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended, or the Securities Act, for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of the benefits of this extended transition period. Our financial statements may therefore not be comparable to those of companies that comply with such new or revised accounting standards.

We will remain an emerging growth company until the earliest of (i) the last day of the fiscal year following the fifth anniversary of our initial public offering, (ii) the last day of the first fiscal year in which our total annual gross revenues are $1.07 billion or more, (iii) the date that we become a "large accelerated filer" as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter, or (iv) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three year period.

Because we will be subject to ongoing public reporting requirements that are less rigorous than Exchange Act rules for companies that are not emerging growth companies, our stockholders could receive less information than they might expect to receive from more mature public companies. We cannot predict if investors will find our common stock less attractive if we elect to rely on these exemptions, or if taking advantage of these exemptions would result in less active trading or more volatility in the price of our common stock.

 ****

***Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of our company more difficult, and limit attempts by our stockholders to replace or remove our current management.***

Provisions in our certificate of incorporation and bylaws may have the effect of delaying or preventing a change of control or changes in our management. Our certificate of incorporation and bylaws include provisions that:

● permit the board of directors to establish the number of directors and fill any vacancies and newly created directorships;

● provide that directors may only be removed by the majority of the shares of voting stock then outstanding; and

● establish advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted upon by stockholders at annual stockholder meetings.

These provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors, which is responsible for appointing the members of our management.

**ITEM 1B. UNRESOLVED STAFF COMMENTS.**

Not applicable.

**ITEM 2. PROPERTIES.**

Our corporate offices, along with the Ceautamed office and warehouse, are located at 990 S Rogers Circle, Suite 3, Boca Raton, Florida 33487. We rent this facility under a lease that commenced on December 1, 2022 and ends on December 31, 2029, with one option to extend the term for five years. The monthly rent is approximately $13,283 for the first year, with 3.5% annual increases to approximately $16,328 in the final year of the initial term. We are also responsible for our proportionate (5.69%) share of any increases to the landlord's taxes, insurance and common area maintenance costs after December 31, 2022.

BSNM is located at 10575 N.W. 37th Terrace, Doral, Florida 33178. It operates a manufacturing facility at this address. The building housing this manufacturing facility is under a 5-year lease ending in December 1, 2027, at a rental rate of $7,856 per month with a 3% annual increase.

DSO's manufacturing and corporate offices are located at 1210 W 13th St, Riviera Beach, Florida 33404. It operates a 30,000 square foot manufacturing facility at this address. The building housing this manufacturing facility is under a five-year lease ending in August 2028 at a rental rate of $24,470 per month with a 3% annual increase. DSO has an option to renew this lease for an additional three years with a 3% annual increase in the rental amount.

Our Canadian subsidiary Smart for Life Canada Inc. operates a retail store located at 6525 Décarie Boulevard, Suite GR-3, Montreal, Quebec, Canada H3W-3E3. This location also acts as a distribution center for our international direct to consumer and big box customers. Smart for Life Canada Inc. rents this facility under a three-year lease agreement ending in September 2024 at a rental rate of C$37,570 per year (approximately US$46,734), plus its 3.53% proportionate share of real estate taxes and operating expenses.

We believe that all our properties have been adequately maintained, are generally in good condition, and are suitable and adequate for our business.

 **ITEM 3. LEGAL PROCEEDINGS.**

From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. We are currently not aware of any such legal proceedings or claims that we believe will have a material adverse effect on our business, financial condition or operating results.

 **ITEM 4. MINE SAFETY DISCLOSURES.**

Not applicable.

**PART II**

**ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.**

**Market Information**

Our common stock is listed on the Nasdaq Capital Market under the symbol "SMFL."

**Number of Holders of our Common Shares**

As of March 29, 2023, there were approximately 88 stockholders of record of our common stock. In computing the number of holders of record of our common stock, each broker-dealer and clearing corporation holding shares on behalf of its customers is counted as a single stockholder.

**Dividend Policy**

We have never declared or paid cash dividends on our common stock. We currently intend to retain all available funds and any future earnings for use in the operation of our business and do not anticipate paying any cash dividends on our common stock in the near future. We may also enter into credit agreements or other borrowing arrangements in the future that will restrict our ability to declare or pay cash dividends on our common stock. Any future determination to declare dividends will be made at the discretion of our board of directors and will depend on our financial condition, operating results, capital requirements, contractual restrictions, general business conditions and other factors that our board of directors may deem relevant. See also Item 1A "*Risk Factors—Risks Related Ownership of Our Common Stock—We have not paid in the past and do not expect to declare or pay dividends in the foreseeable future*."

**Securities Authorized for Issuance under Equity Compensation Plans**

See Item 12 "*Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters*."

**Recent Sales of Unregistered Securities** 

We have not sold any equity securities during the 2022 fiscal year that were not previously disclosed in a quarterly report on Form 10-Q or a current report on Form 8-K that was filed during the 2022 fiscal year.

**Purchases of Equity Securities** 

No repurchases of our common stock were made during the fourth quarter of 2022.

**ITEM 6. [RESERVED]**

**ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.**

*The following discussion and analysis summarizes the significant factors affecting our operating results, financial condition, liquidity and cash flows as of and for the periods presented below. The following discussion and analysis should be read in conjunction with our financial statements and the related notes thereto included elsewhere in this report. The discussion contains forward-looking statements that are based on the beliefs of management, as well as assumptions made by, and information currently available to, management. Actual results could differ materially from those discussed in or implied by forward-looking statements as a result of various factors, including those discussed below and elsewhere in this report, particularly in the sections titled "Risk Factors" and " Special Note Regarding Forward-Looking Statements."*

**Overview**

We are engaged in the development, marketing, manufacturing, acquisition, operation and sale of a broad spectrum of nutritional and related products with an emphasis on health and wellness. Structured as a global holding company, we are executing a buy-and-build strategy with serial accretive acquisitions creating a vertically integrated company with an objective of aggregating companies generating a minimum of $300 million in revenues by the fourth quarter of 2026. To drive growth and earnings, we are developing proprietary products as well as acquiring other profitable companies, encompassing brands, manufacturing and distribution channels.

We also operate a network platform in the affiliate marketing space. Affiliate marketing is an advertising model in which a product vendor compensates third-party digital marketers to generate traffic or leads for the product vendor's products and services. The third-party digital marketers are referred to as affiliates, and the commission fee incentivizes them to find ways to promote the products being sold by the product vendor.

On March 8, 2018, we acquired 51% of BSNM and on October 9, 2019, we acquired the remaining 49%. BSNM is a nutraceutical contract manufacturer. It specializes in a wide variety of products, from the private labeling of vitamins, dietary supplements, nutraceuticals, sport nutrition and broad-spectrum nutritional supplements, and sells them throughout the United States and around the world, including South America, Central America and Europe.

On July 1, 2021, we acquired DSO. DSO manufactures, sells and owns the Smart for Life brand of natural health and wellness meal replacement products. The brand includes proprietary hunger suppressing functional foods that are designed to work with the body's natural ability to lose weight. It also develops premium supplements and commodities that will promote optimal health and wellness. DSO has over 15 years of experience providing high-quality products to premium retail locations and companies. Its branded vitamins and supplements are also being sold through Amazon, and this sales channel is becoming a major contributor to the growth of the brand online.

On August 24, 2021, we established Smart for Life Canada Inc. as a wholly owned subsidiary of DSO in Canada. This subsidiary sells retail products through a retail store location in Montreal Canada and the same location also acts as distribution center for our international direct to consumer and big box customers. We maintain inventory and employees at this location.

On November 8, 2021, we acquired Nexus. Nexus operates a cost per action/cost per acquisition network. This network consists of hundreds of digital marketers who stand ready to market products introduced to the Nexus network. The cost per action/cost per acquisition model is where digital marketers are paid for an action (e.g., a product sale or lead generation) that is taken as a direct result of their marketing efforts. Through the digital marketer's method of marketing, the digital marketer sends traffic to one of the product vendor's offers listed on the network.

On December 6, 2021, we acquired GSP. GSP is a sports nutrition company. It offers nutritional supplements for athletes and active lifestyle consumers through a variety of wellness solutions and delivery methods, including powders, tablets and soft gels that are formulated to support energy and performance; nutrition and wellness; and focus and clarity. GSP's initial line of nutritional products are marketed under the Sports Illustrated Nutrition brand. The product line currently consists of whey protein isolate powder, tablet supplements for joint health, nitric oxide, post workout blends, Omega-3 supplements, and pre-workout supplements, among others.

On July 29, 2022, we acquired Ceautamed. Ceautamed is based in Boca Raton, Florida and owns the Greens First line of branded products which have been specifically marketed to the healthcare provider sector. These vitamins and supplements have been sold on a business-to-business basis, direct-to-consumer basis, as well as sold utilizing an international medical distribution company pursuant to a long-term contract.

**Recent Developments**

On February 14, 2023, we filed for Employee Retention Credits for an aggregate amount of approximately $1,635,000.

Subsequent to December 31, 2022, we issued additional original discount subordinated debentures in the aggregate principal amount of $1,046,471. The debentures contain an original issue discount of 15%, or an aggregate original issue discount of $156,971. As a result, the net proceeds recorded was $889,500. The debentures bear interest at a rate of 17.5% per annum.

**Impact of Coronavirus Pandemic**

The COVID-19 pandemic continues to rapidly evolve. At this time, there continues to be significant volatility and uncertainty relating to the full extent to which the COVID-19 pandemic and the various responses to it will impact our business, operations and financial results.

We are dependent upon certain contract manufacturers and suppliers and their ability to reliably and efficiently fulfill our orders is critical to our business success. The COVID-19 pandemic has impacted and may continue to impact certain of our manufacturers and suppliers. As a result, we have faced and may continue to face delays or difficulty sourcing certain products and raw materials, which could negatively affect our business and financial results. Even if we are able to find alternate sources for such raw materials, they may cost more, which could adversely impact our profitability and financial condition.

Furthermore, the global deterioration in economic conditions, which may have an adverse impact on discretionary consumer spending or investing, could also impact our business and demand for our products. For instance, consumer spending and investing may be negatively impacted by general macroeconomic conditions, including a rise in unemployment, and decreased consumer confidence resulting from the pandemic. Changing consumer and investor behaviors as a result of the pandemic may also have a material impact on our revenue.

Our efforts to help mitigate the negative impact of the outbreak on our business may not be effective, and we may be affected by a protracted economic downturn. Furthermore, while many governmental authorities around the world have and continue to enact legislation to address the impact of COVID-19, including measures intended to mitigate some of the more severe anticipated economic effects of the virus, we may not benefit from such legislation, or such legislation may prove to be ineffective in addressing COVID-19's impact on our and our customer's businesses and operations. Even after the COVID-19 outbreak has subsided, we may continue to experience impacts to our business as a result of COVID-19's global economic impact and any recession that has occurred or may occur in the future. Further, as the COVID-19 situation is unprecedented and continuously evolving, COVID-19 may also affect our operating and financial results in a manner that is not presently known to us or in a manner that we currently do not consider that may present significant risks to our operations.

The extent to which the COVID-19 pandemic may impact our results will depend on future developments, which are highly uncertain and cannot be predicted as of the date of this report. Nevertheless, the pandemic and the current financial, economic and capital markets environment, and future developments in the global supply chain and other areas present material uncertainty and risk with respect to our performance, financial condition, results of operations and cash flows. See also Item 1A "*Risk Factors*" for more information.

**Principal Factors Affecting Our Financial Performance**

Our operating results are primarily affected by the following factors:

● our ability to acquire new customers or retain existing customers;

● our ability to offer competitive product pricing;

● our ability to broaden product offerings;

● industry demand and competition; and

● market conditions and our market position.

**Emerging Growth Company** 

We qualify as an "emerging growth company" under the JOBS Act. As a result, we will be permitted to, and intend to, rely on exemptions from certain disclosure requirements. For so long as we are an emerging growth company, we will not be required to:

● have an auditor report on our internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act;

● comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor's report providing additional information about the audit and the financial statements (i.e., an auditor discussion and analysis);

● submit certain executive compensation matters to stockholder advisory votes, such as "say-on-pay" and "say-on-frequency;" and

● disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the chief executive officer's compensation to median employee compensation.

In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of the benefits of this extended transition period. Our financial statements may therefore not be comparable to those of companies that comply with such new or revised accounting standards.

We will remain an emerging growth company until the earliest of (i) the last day of the fiscal year following the fifth anniversary of our initial public offering, (ii) the last day of the first fiscal year in which our total annual gross revenues are $1.07 billion or more, (iii) the date that we become a "large accelerated filer" as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter or (iv) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three year period.

**Results of Operations**

 ****

***Comparison of Years Ended December 31, 2022 and 2021***

The following table sets forth key components of our results of operations during the years ended December 31, 2022 and 2021, both in dollars and as a percentage of our revenues.

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **December 31, 2022** | **December 31, 2022** | **December 31, 2021** | **December 31, 2021** |
|  | **Amount** | **% of**<br> **Revenues** | **Amount** | **% of**<br> **Revenues** |
| Revenues |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Products | $14331482 | 80.67% | $8330571 | 92.33% |
| &nbsp;&nbsp;&nbsp;Advertising | 3434879 | 19.33% | 692022 | 7.67% |
| Total revenues | 17766361 | 100.00% | 9022593 | 100.00% |
| Cost of revenues |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Products | 10327956 | 58.13% | 5596247 | 62.02% |
| &nbsp;&nbsp;&nbsp;Advertising | 2561276 | 14.42% | 528386 | 5.86% |
| Total cost of revenues | 12889232 | 72.55% | 6124633 | 67.88% |
| Gross profit | 4877129 | 27.45% | 2897960 | 32.12% |
| Operating expenses |  |  |  |  |
| &nbsp;&nbsp;&nbsp;General and administrative | 6321672 | 35.58% | 2948466 | 32.68% |
| &nbsp;&nbsp;&nbsp;Compensation | 6690889 | 37.66% | 3564978 | 39.51% |
| &nbsp;&nbsp;&nbsp;Professional Services | 1925713 | 10.84% | 907412 | 10.06% |
| &nbsp;&nbsp;&nbsp;Depreciation and amortization expense | 2145441 | 12.08% | 717925 | 7.96% |
| Total operating expenses | 17083715 | 96.16% | 8138781 | 90.20% |
| Operating loss | (12206586) | (68.71)% | (5240821) | (58.09)% |
| Other income (expense) |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Other expense | (8900) | (0.05)% | (12782) | (0.14)% |
| &nbsp;&nbsp;&nbsp;Consulting fees - related parties | (1471199) | (8.28)% |  |  |
| &nbsp;&nbsp;&nbsp;IPO expenses | (702394) | (3.95)% |  |  |
| &nbsp;&nbsp;&nbsp;Gain on extinguishment of debt | 329052 | 1.85% |  |  |
| &nbsp;&nbsp;&nbsp;Interest expense | (15917788) | (89.60)% | (2511920) | (27.84)% |
| Total other expense | (17771229) | (100.03)% | (2524702) | (27.98)% |
| Net loss | $(29977815) | (168.73)% | $(7765523) | (86.07)% |

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*<u>Revenues</u>*. Our total revenues increased by $8,743,768, or 96.91%, to $17,766,361 for the year ended December 31, 2022 from $9,022,593 for the year ended December 31, 2021. Such increase was primarily due to the acquisitions that were completed in 2021 and 2022, including the acquisition of DSO that was completed in the third quarter of 2021, the acquisitions of Nexus and GSP that were completed in the fourth quarter of 2021 and the acquisition of Ceautamed that was completed in the third quarter of 2022.

Our nutraceutical business generates revenue from the sales of nutritional and related products. Revenues from our nutraceutical business (products) increased by $6,000,911, or 72.03%, to $14,331,482 for the year ended December 31, 2022 from $8,330,571 for the year ended December 31, 2021. This increase was primarily due to the acquisitions, as well as increased sales of our contract manufacturing services associated with the relief of certain supply constraints of products and increased marketing efforts for our products and services. The increase was the result of an increase in the volume of products sold and not due to pricing changes.

Our digital marketing business generates revenues when sales of listed products are sold by product vendors through our network as a result of the marketing efforts of digital marketers. Revenues from our digital marketing business (advertising), which is operated by Nexus, were $3,434,879 for the year ended December 31, 2022 and $692,022 for the period from November 8, 2021 (date of acquisition) to December 31, 2021.

 

*<u>Cost of revenues</u>*. Our 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. Such increase was primarily due to the acquisitions described above.

Cost of revenues for our nutraceutical business consist of ingredients, packaging materials, freight, and labor associated with the production of various products. Cost of revenues for our nutraceutical business (products) increased by $4,731,709, or 84.55%, to $10,327,956 for the year ended December 31, 2022 from $5,596,247 for the year ended December 31, 2021. Such increase was primarily due to the acquisitions described above. As a percentage of product revenues, cost of revenues for product sales increased from 67.18% in 2021 to 72.55% in 2022 due to rising prices for raw materials.

Cost of revenues for our digital marketing business consist of commissions and bonuses paid to digital marketers. Cost of revenues from our digital marketing business (advertising) were $2,561,276 for the year ended December 31, 2022 and $528,386 for the period from November 8, 2021 (date of acquisition) to December 31, 2021. As a percentage of advertising revenues, cost of revenues for advertising sales was 74.57% for the year ended December 31, 2022 and 76.35% for the period from November 8, 2021 (date of acquisition) to December 31, 2021.

 

*<u>Gross profit</u>*. As a result of the foregoing, our gross profit increased by $1,979,169, or 68.30%, to $4,877,129 for the year ended December 31, 2022 from $2,897,960 for the year ended December 31, 2021. As a percentage of revenues, our gross profit decreased from 32.12% in 2021 to 27.45% in 2022.

 

*<u>General and administrative expenses</u>.* Our general and administrative expenses consist primarily of advertising expenses, bad debts, rent expense, insurance and other expenses incurred in connection with general operations. Our general and administrative expenses increased by $3,373,206, or 114.41% to $6,321,672 for the year ended December 31, 2022 from $2,948,466 for the year ended December 31, 2021. Such increase was primarily due to increased rates for insurance as a public company and full year operations for subsidiaries, including advertising, acquired in 2021 and five months of activities for Ceautamed, which was acquired during 2022. As a percentage of revenues, general and administrative expenses increased from 32.68% in 2021 to 35.58% in 2022.

 

*<u>Compensation</u>.* Our compensation expenses include both cash and non-cash items, including salaries plus related payroll taxes. Our compensation expenses increased by $3,125,911, or 87.68% to $6,690,889 for the year ended December 31, 2022 from $3,564,978 for the year ended December 31, 2021. Such increase was primarily due to the full year of operations for subsidiaries acquired in 2021 and five months of activity for Ceautamed, which was acquired in 2022. As a percentage of revenues, compensation expenses decreased from 39.51% in 2021 to 37.66% in 2022.

 

*<u>Professional services</u>.* Our professional services expenses consist primarily of investor relations, consulting, advisory, legal and audit expenses incurred in connection with general operations. Our professional services expenses increased by $1,018,301, or 112.22% to $1,925,713 for the year ended December 31, 2022 from $907,412 for the year ended December 31, 2021. Such increase was primarily due to our initial public offering, or the IPO, in February 2022. As a percentage of revenues, professional services expenses increased from 10.06% in 2021 to 10.84% in 2022.

 

*<u>Depreciation and amortization</u>.* Depreciation and amortization was $2,145,441, or 12.08% of revenues, for the year ended December 31, 2022, as compared to $717,925, or 7.96% of revenues, for the year ended December 31, 2021. The increase in amortization is associated with the amortization of the intangible assets acquired in the various acquisitions.

 

 

*<u>Total other income (expense)</u>*. We had $17,771,229 in total other expense, net, for the year ended December 31, 2022, as compared to total other expense, net, of $2,524,702 for the year ended December 31, 2021. Total other expense, net, for the year ended December 31, 2022 consisted of interest expense of $15,917,788, related party consulting fees of $1,471,199, IPO expenses of $702,394 and other expense of $8,900, offset by a gain on debt extinguishment of $329,052, while other expense, net, for the year ended December 31, 2021 consisted of interest expense of $2,511,920 and other expense of $12,782.

 

*<u>Net loss</u>*. As a result of the cumulative effect of the factors described above, we had a net loss of $29,977,815 for the year ended December 31, 2022, as compared to $7,765,523 for the year ended December 31, 2021, an increase of $22,212,292, or 286.04%.

**Liquidity and Capital Resources**

As of December 31, 2022, we had cash of $69,714. To date, we have financed our operations primarily through revenue generated from operations, bank borrowings and sales of our securities. Since our inception in 2017, we have experienced losses and as a result have continued to use cash in our operations. We have been dependent upon financing activities as we implement our acquisition strategy.

We believe that our current levels of cash, along with the recent acquisition of Ceautamed and with additional debt or equity issuances of approximately $12 million, will be sufficient to meet our anticipated cash needs for our operations for at least the next 12 months. Additional funds will be required to execute our business plan and our strategy of acquiring additional companies. The funds required to execute this business plan will depend on the size, capital structure and purchase price consideration that the seller of a target business deems acceptable in a given transaction. The amount of funds needed to execute our business plan also depends on what portion of the purchase price of a target business the seller of that business is willing to take in the form of seller notes or our equity or equity in one of our subsidiaries. As noted elsewhere in this report, we intend on paying no more than 60% cash on any acquisition that we execute with a target of 50%. Given these factors, we believe that the amount of outside additional capital necessary to execute our business plan for the next 12 months ranges from $10 million to $30 million.

We intend to raise capital for additional acquisitions primarily through debt financing at our operating company level, additional equity offerings by the Company, or by undertaking a combination of any of the above. The sale of additional equity securities could result in dilution to our stockholders. The incurrence of indebtedness would result in increased debt service obligations and could require us to agree to operating and financial covenants that would restrict our operations. Financing may not be available in amounts or on terms acceptable to us, if at all.

There is no guarantee that we will be able to acquire additional businesses under the terms outlined above or that we will be able to find additional acquisition candidates should we terminate our plans for any of our current acquisition targets.

 ****

***Summary of Cash Flow***

The following table provides detailed information about our net cash flow for the years ended December 31, 2022 and 2021.

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| | | |
|:---|:---|:---|
|  | **Year Ended December 31,** | **Year Ended December 31,** |
|  | **2022** | **2021** |
| Net cash used in operating activities | $(9377916) | $(4965458) |
| Net cash used in investing activities | (3064456) | (8241383) |
| Net cash provided by financing activities | 12306993 | 12926986 |
| Net change in cash | (135379) | (279855) |
| Cash and cash equivalents at beginning of year | 205093 | 484948 |
| Cash and cash equivalents at end of year | $69714 | $205093 |

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Our net cash used in operating activities was $9,377,916 for the year ended December 31, 2022, as compared to $4,965,458 for the year ended December 31, 2021. For the year ended December 31, 2022, our net loss of $29,977,815, offset by interest expense associated with future equity agreements of $10,844,960, debt issuance cost of $2,833,080, an increase in accounts payable of $2,463,903, and depreciation and amortization of $2,145,441, were the primary drivers for cash used in operations. For the year ended December 31, 2021, our net loss of $7,765,523 and a decrease in inventory of $842,049, offset by an increase in accrued expenses of $1,012,897, depreciation and amortization expense of $717,925 and debt issuances costs of $621,638, were the primary drivers for cash used in operations.

Our net cash used in investing activities was $3,064,456 for the year ended December 31, 2022, as compared to $8,241,383 for the year ended December 31, 2021. Net cash used in investing activities for the year ended December 31, 2022 consisted of cash paid for the acquisition of Ceautamed of $3,000,000 and purchase of equipment of $64,456, while the net cash used in investing activities for the year ended December 31, 2021 consisted of cash paid for the acquisition of DSO of $6,000,000, cash paid for the acquisition of Nexus of $2,100,000 and purchases of property and equipment of $141,383.

Our net cash provided by financing activities was $12,306,993 for the year ended December 31, 2022, as compared to $12,926,986 for the year ended December 31, 2021. Net cash provided by financing activities for the year ended December 31, 2022 consisted of proceeds from the IPO of $12,684,739, proceeds from convertible notes and notes payable of $9,797,275 and proceeds from a private placement of common stock of $910,001, offset by repayments on convertible notes and notes payable of $10,888,609 and payments to related parties of $196,413, while net cash provided by financing activities for the year ended December 31, 2021 consisted of proceeds from the issuance of note payables of $7,418,969, net proceeds of $7,080,000 from the private placement of preferred stock and receipts from related parties of $1,367,400, offset by repayments on convertible notes and notes payable of $1,851,860 and repayments to related parties of $1,087,523.

 ****

***Private Placement of Common Stock and Prefunded Warrants***

On December 8, 2022, we entered into a securities purchase agreement with certain accredited investors, pursuant to which we issued to the investors an aggregate of 1,282,896 shares of common stock and prefunded warrants to purchase an aggregate of 1,574,248 shares of common stock for an aggregate purchase price of $1,000,000, or $0.35 per underlying share.

The investors were previously issued 12% unsecured subordinated convertible debentures in the aggregate principal amount of $2,250,000, which were convertible into shares of common stock at a conversion price of $1.00 per share. In connection with the securities purchase agreement, the investors agreed to convert all outstanding principal and interest on the debentures, in the amount of $2,542,500, into an aggregate of 2,542,501 shares of common stock in accordance with the terms of the debentures. In consideration for, and as inducement for, the conversion of the debentures as aforesaid, we also issued to the investors debenture prefunded warrants to purchase an aggregate of 4,721,787 shares of common stock.

The investors were also previously issued warrants for the purchase of an aggregate of 11,999,404 shares of common stock at an exercise price of $6.25, which contain a full ratchet anti-dilution adjustment provision. As a result of the issuance of shares at $0.35 per share, the exercise price of these warrants was reduced to $0.35 per share and the number of shares underlying the warrants was increased to 214,275,076 shares in accordance with the terms of the warrants. Pursuant to the securities purchase agreement, the investors then agreed to amend and restate the terms of the warrants to, among other things, remove full ratchet anti-dilution adjustment provision.

Dawson James Securities, Inc. acted as placement agent in connection with the private placement described above and received a cash commission of $90,000 and warrants for the purchase of 228,572 shares of common at an exercise price of $0.35.

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***Initial Public Offering***

On February 16, 2022, we entered into an underwriting agreement with Dawson James Securities, Inc., as representative of the several underwriters named on Schedule I thereto, relating to our IPO of units, each unit consisting of one share of common stock, a series A warrant to purchase one share of common stock and a series B warrant to purchase one share of common stock. Pursuant to the underwriting agreement, we agreed to sell 1,440,000 units to the underwriters, at a purchase price per unit of $9.10 (the offering price to the public of $10.00 per unit minus the underwriters' discount), and also agreed to grant to the underwriters a 45-day option to purchase up to 216,000 additional shares of common stock, up to 216,000 additional series A warrants, and/or up to 216,000 additional series B warrants, in any combination thereof, at a purchase price to the public of $9.98 per share and $0.01 per warrant, less underwriting discounts and commissions, solely to cover over-allotments, if any.

On February 18, 2022, the closing of our IPO was completed. At the closing, the underwriters partially exercised the option and purchased 206,390 series A warrants and 206,390 series B warrants. Therefore, we sold 1,440,000 shares of common stock, 1,646,390 series A warrants and 1,646,390 series B warrants for total gross proceeds of $14,404,128. After deducting the underwriting commission and expenses, we received net proceeds of approximately $12,684,739. We used to the proceeds of the offering to pay off certain debt and plan to use the remaining net proceeds for working capital and general corporate purposes.

The series A warrants are exercisable until the fifth anniversary of the issuance date at an exercise price equal to $7.00 per share and may be exercised on a cashless basis if the issuance of common stock upon exercise of the warrants is not covered by an effective registration statement. The exercise price and number of shares of common stock issuable upon exercise of the series A warrants may be adjusted in certain circumstances, including in the event of a stock dividend, extraordinary dividend on or recapitalization, reorganization, merger, or consolidation.

The series B warrants are exercisable until the fifth anniversary of the issuance date at an exercise price equal to $10.00 per share and may be exercised on a cashless basis, whereby the holder will receive one share of common stock for each series B warrant exercised. As of December 31, 2022, 1,439,230 of the series B warrants were exercised on a cashless basis and we issued 1,439,230 shares of common stock upon such exercise.

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***Private Placement of Series A Convertible Preferred Stock***

On July 1, 2021, we completed a private placement in which we sold an aggregate of 6,000 shares of series A convertible preferred stock and warrants for the purchase of an aggregate of 8,999,552 shares of common stock to certain investors for gross proceeds of $6,000,000. On August 18, 2021, we completed an additional closing of this private placement in which we sold 2,000 shares of series A convertible preferred stock and warrants for the purchase of 2,999,852 shares of common stock for gross proceeds of $2,000,000.

During the first quarter of 2022, the holders converted an aggregate of 7,000 shares of series A convertible preferred stock into 10,499,469 shares of common stock.

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***Outstanding Debt***

 

*<u>Original Issue Discount Subordinated Debentures</u>*

In June 2022, we commenced an offering of original issue discount subordinated debentures. As of December 31, 2022, we have completed four closings of this offering and issued debentures in the aggregate principal amount of $3,911,770. The debentures contain an original issue discount of 15%, or an aggregate original issue discount of $586,770. As a result, the total purchase price was $3,325,000. The debentures bear interest at a rate of 17.5% per annum. The outstanding principal amount and all accrued interest is due and payable on the earlier of (i) the completion of our next equity financing in which we receive gross proceeds in excess of $20 million, (ii) twenty-four months after the date of issuance or (iii) within 30 days after election of repayment from the holder so long as the election is after the 6-month anniversary of the debenture. We may voluntarily prepay the debentures in whole or in part without premium or penalty. The debentures contain customary events of default for a loan of this type. The debentures are unsecured and are subordinated in right of payment to the prior payment in full of all senior indebtedness and are *pari passu* in right of payment to any other unsecured indebtedness incurred by us in favor of any third party. As of December 31, 2022, the outstanding principal balance of the debentures was $3,911,770 and debt issuance cost was $459,075.

 

*<u>Original Issue Discount Secured Subordinated Note</u>*

On July 29, 2022, we entered into a securities purchase agreement with an accredited investor, pursuant to which we sold an original issue discount secured subordinated note in the principal amount of $2,272,727 to such investor. The note contains an original issue discount of 12%, or an original issue discount of $272,727. As a result, the total purchase price was $2,000,000, the proceeds of which were used to fund the acquisition of Ceautamed. The note shall bear interest at the rate of 16% per annum and matures on July 29, 2027. The outstanding principal and all accrued interest shall be amortized on a 60-month straight-line basis and payable in accordance with the amortization schedule set forth on Exhibit A to the note. We may prepay the principal and all accrued and unpaid interest on the note without penalty, in whole or in part; provided however, in no event before January 15, 2023, unless with the explicit prior written approval of the holder. The note contains customary events of default for a loan of this type. The note is guaranteed by BSNM, DSO, Nexus, GSP and Ceautamed and is secured by a security interest in all of the assets of our company and such guarantors; provided that such security interest is subordinate to the rights of the lenders under any senior indebtedness (as defined in the note). As of December 31, 2022, the outstanding principal balance of the note was $2,242,853 and debt issuance cost was $250,025.

 

*<u>Acquisition Notes</u>*

On July 1, 2021, we issued a 6% secured subordinated promissory note in the principal amount of $3,000,000 to Sasson E. Moulavi in connection with the acquisition of DSO. This note accrues interest at 6% per annum with the outstanding principal and interest amortized on a straight-line basis and payable quarterly in accordance with the amortization schedule attached to the note, with all amounts due and payable on July 1, 2024. On November 29, 2022, we entered into a letter agreement with Sasson E. Moulavi to amend the terms of the note. Pursuant to the letter agreement, the parties agreed to amend and restate the note to amend the amortization schedule attached thereto, with the first payment deferred until February 15, 2023 and all amounts due and payable on August 15, 2024. In exchange for the agreement of Dr. Moulavi to enter into the letter agreement, we agreed to (i) issue to Dr. Moulavi 100,000 shares of common stock under our 2022 Equity Incentive Plan and (ii) pay to Dr. Moulavi a fee of $50,000 in cash, which shall be paid upon completion of our anticipated debt financing. We may prepay all or any portion of this note any time prior to maturity without premium or penalty. This note contains customary covenants and events of default for a loan of this type, including if a default occurs under any senior secured indebtedness to banks and other financial institutions or private equity funds, and is secured by a security interest in all of the assets of DSO; provided that such security interest is subordinate to the rights of the lenders under any such senior secured indebtedness. As of December 31, 2022, the outstanding principal balance of this note was $3,050,000.

On November 8, 2021, we issued a 5% secured subordinated promissory note in the principal amount of $1,900,000 to Justin Francisco and Steven Rubert in connection with the acquisition of Nexus. This note accrues interest at 5% per annum and the outstanding principal and interest will be amortized on a straight-line basis and are payable quarterly in accordance with the amortization schedule attached to the note, with all amounts due and payable on November 8, 2024. We may prepay all or any portion of this note any time prior to maturity without premium or penalty. The note contains customary covenants and events of default for a loan of this type, including if a default occurs under any senior secured indebtedness to banks and other financial institutions or private equity funds, and is secured by a security interest in all of our assets; provided that such security interest is subordinate to the rights of the lenders under any such senior secured indebtedness. As of December 31, 2022, the outstanding principal balance of this note was $1,900,000.

On July 29, 2022, we issued secured subordinated convertible promissory notes in the aggregate principal amount of $2,150,000 in connection with the acquisition of Ceautamed. The notes shall bear interest at the rate of 5% per annum with all principal and accrued interest being due and payable in one lump sum on July 29, 2025; provided that upon an event of default (as defined in the notes), such interest rate shall increase to 10%. The notes are convertible at the option of the holder into common stock at a conversion price of $6.25; provided that the holder may not elect to convert a portion of the outstanding principal in an amount less than the lesser of $200,000 or the remaining outstanding principal. The notes contain customary covenants and events of default for loans of this type, including upon any default under the senior indebtedness (as defined in the notes). The notes are guaranteed by Ceautamed and its subsidiaries and are secured by a security interest in all of the assets of such guarantors; provided that such security interest is subordinate to the rights of the lenders under any such senior indebtedness. As of December 31, 2022, the outstanding principal balance of these notes was $2,150,000.

On July 29, 2022, we issued secured subordinated promissory notes in the aggregate principal amount of $2,150,000 in connection with the acquisition of Ceautamed. The notes shall bear interest at the rate of 5% per annum and mature on July 29, 2025; provided that upon an event of default (as defined in the notes), such interest rate shall increase to 10%. The outstanding principal and all accrued interest shall be amortized on a five-year straight-line basis and payable in accordance with the amortization schedule set forth on Exhibit A to the notes. We may redeem all or any portion of the notes at any time without premium or penalty. The notes contain customary covenants and events of default for loans of this type, including upon any default under the senior indebtedness (as defined in the notes). The notes are guaranteed by Ceautamed and its subsidiaries and are secured by a security interest in all of the assets of such guarantors; provided that such security interest is subordinate to the rights of the lenders under any such senior indebtedness. As of December 31, 2022, the outstanding principal balance of these notes was $2,150,000.

On July 29, 2022, we issued secured subordinated promissory notes in the aggregate principal amount of $1,300,000 in connection with the acquisition of Ceautamed. The notes bore interest at the rate of 5% per annum with all principal and accrued interest being due and payable in one lump sum ninety (90) days from the date of the note; provided that upon an event of default (as defined in the notes), such interest rate shall increase to 10%. On November 28, 2022, we entered into letter agreements with the holders of most of the notes to amend the terms of these notes. Pursuant to letter agreements, the parties agreed to extend the maturity date to June 1, 2023 and agreed to a seven month payment schedule, with the first payment due December 1, 2022. The parties also agreed to increase the default interest rate from 10% to 15%. We also agreed that if an event of default (as defined in the notes) has occurred and is continuing, then we shall not create any senior indebtedness (as defined in the notes) without the consent of the holders of a majority of the principal amount of the notes. In exchange for the agreement of the holders to enter into the letter agreements, we agreed to pay certain amendment fees as more particularly described in the letter agreements. We are in the process of negotiating a similar extension of one remining note in the principal amount of $100,000. We may redeem all or any portion of the notes at any time without premium or penalty. The notes contain customary covenants and events of default for loans of this type, including upon any default under the senior indebtedness (as defined in the notes). The notes are guaranteed by Ceautamed and its subsidiaries and are secured by a security interest in all of the assets of such guarantors; provided that such security interest is subordinate to the rights of the lenders under any such senior indebtedness. As of December 31, 2022, the outstanding principal balance of these notes was $1,100,000.

 

*<u>Promissory Notes</u>*

On July 1, 2021, we entered into a loan agreement with Diamond Creek Capital, LLC for a term loan in the principal amount of up to $3,000,000. The loan bears interest at a rate of 15.0% per annum, provided that upon an event of default, such rate shall increase by 5%. The loan was due and payable on the earlier of July 1, 2022 or upon completion of the initial public offering. We repaid $1,325,000 of the principal balance and $27,604 of the interest from the proceeds of the initial public offering. In connection with such repayment, the lender agreed that the remaining loan is due and payable on July 1, 2023. The loan is secured by all of our assets and contains customary events of default. As of December 31, 2022, the outstanding principal balance of this note was $1,125,000.

Since inception, we have issued other promissory notes to various lenders. These notes accrued interest at rates between 12-17%. These notes were unsecured and contain customary events of default. As of December 31, 2021, the outstanding principal balance of these notes was $5,993,720. These notes were repaid in full upon closing of the initial public offering in February 2022, with the exception of a note which has an outstanding balance of $200,000 at December 31, 2022. This note accrues interest at 12% and is due and payable on April 1, 2023.

On November 2, 2022, we issued a promissory note in the principal amount of $50,000. This note bears interest at a rate of 12% and is due on demand. At December 31, 2022, the outstanding amount was $20,000.

On December 6, 2022, we issued a promissory note in the principal amount of $30,000. This note bears interest at a rate of 12% and is due on demand. At December 31, 2022, the outstanding amount was $30,000.

On December 21, 2022, we issued a promissory note in the principal amount of $100,000. This note bears interest at a rate of 12% and is due on demand. At December 31, 2022, the outstanding amount was $100,000.

 

*<u>Cash Advances</u>*

In June 2022, we entered into a cash advance agreement for $341,150 with a required repayment amount of $490,000, which requires weekly payments of approximately $19,738. At December 31, 2022, the outstanding amount was $67,624.

In July 2022, we entered into a cash advance agreement for $650,000 with a required repayment amount of $897,750, which requires weekly payments of approximately $40,806. At December 31, 2022, the outstanding amount was $474,690.

In August 2022, we entered into a cash advance agreement for $100,000 with a required repayment amount of $146,260, which requires weekly payments of approximately $6,200. At December 31, 2022, the outstanding amount was $35,460.

In September 2022, we entered into a cash advance agreement for $243,750 with a required repayment amount of $372,500, which requires weekly payments of approximately $15,000. At December 31, 2022, the outstanding amount was $272,500.

In October 2022, we entered into cash advance agreements for $250,000 with a required repayment amount of $303,000. At December 31, 2022, the outstanding amount was $258,000.

In November 2022, we entered into cash advance agreements for $592,236 with a required repayment amount of $994,460, which requires weekly payments of approximately $52,422. At December 31, 2022, the outstanding amount was $608,122.

In November 2022, we entered into a cash advance agreement for $379,585 which included $110,986 in cash and a refinance of a prior advance of $283,264, with a required repayment amount of $622,085, which requires weekly payments of approximately $34,560. At December 31, 2022, the outstanding amount was $312,991.

In December 2022, we entered into cash advance agreements for $293,000 with a required repayment amount of $439,207, which requires weekly payments of approximately $39,905. At December 31, 2022, the outstanding amount was $323,853.

 

*<u>Revolving Lines of Credit</u>*

In 2021, DSO entered into two revolving lines of credit with a bank, which permitted borrowings up to $1,176,000, and bears interest at 8.99% and 7.99%. As of December 31, 2022, the outstanding principal balance of this lines of credit was $670,096.

In August 2022, Ceautamed entered into a revolving line of credit with a bank, which permitted borrowing up to $60,000, and bears interest at 45.09%. As of December 31, 2022, the outstanding principal balance of this line of credit was $45,703.

In September 2022, DSO entered into a revolving line of credit with a bank, which permitted borrowings up to $70,000, and bears interest at 9.49%. As of December 31, 2022, the outstanding principal balance of this lines of credit was $59,253.

 

*<u>Equipment Financing Loan</u>*

In May 2022, we entered into an equipment financing loan for $146,765 used for the purchase of equipment within BSNM's operations. The loan bears interest at 10.18% and matures on April 1, 2027. At December 31, 2022, the outstanding amount was $133,211.

In August 2022, we entered into an equipment financing loan for $35,050 used for the purchase of equipment within BSNM's operations. The loan bears interest at 10.18% and matures on August 1, 2027. At December 31, 2022, the outstanding amount was $33,433.

In July 2022, we entered into an equipment financing loan for $8,463 used for the purchase of equipment within Ceautamed's operations. At December 31, 2022, the outstanding amount was $7,181.

 

*<u>EIDL Loan</u>*

In June 2020, pursuant to the economic injury disaster loan, or EIDL, program under the under the provisions of the Coronavirus Aid, Relief and Economic Security Act, or the CARES Act, we entered into a promissory note with the U.S. Small Business Administration, or the SBA, with a principal amount of $300,000. This loan matures in 30 years and bears interest at a rate of 3.75%. The loan is secured by all of our assets. As of December 31, 2022, the outstanding principal balance of this loan was $300,000.

 

*<u>PPP Loans</u>*

In February 2021, we received an additional $261,164 in PPP loans under the CARES Act. This loan bears interest at a rate of 1% per annum and matures in April 2025. In June 2022, $63,707 was forgiven under the provision of the CARES Act. As of December 31, 2022, the outstanding balance of this loan was $197,457.

**Contractual Obligations**

Our principal commitments consist mostly of obligations under the loans described above, the operating leases described under Item 2 "*Properties*" and pricing/margin structures for products established with our clients. We do not have any purchase obligations with any suppliers.

**Off-Balance Sheet Arrangements**

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

**Critical Accounting Policies**

The following discussion relates to critical accounting policies for our company. The preparation of financial statements in conformity with United States generally accepted accounting principles, or GAAP, requires our management to make assumptions, estimates and judgments that affect the amounts reported, including the notes thereto, and related disclosures of commitments and contingencies, if any. We have identified certain accounting policies that are significant to the preparation of our financial statements. These accounting policies are important for an understanding of our financial condition and results of operation. Critical accounting policies are those that are most important to the portrayal of our financial condition and results of operations and require management's difficult, subjective, or complex judgment, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. Certain accounting estimates are particularly sensitive because of their significance to financial statements and because of the possibility that future events affecting the estimate may differ significantly from management's current judgments. We believe the following critical accounting policies involve the most significant estimates and judgments used in the preparation of our financial statements:

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***Revenue Recognition***. We evaluate and recognize revenue by: identifying the contract(s) with the customer; identifying the performance obligations in the contract; determining the transaction price; allocating the transaction price to performance obligations in the contract; and recognizing revenue as each performance obligation is satisfied through the transfer of a promised good or service to a customer (i.e., "transfer of control").

 

*<u>Products (BSNM, DSO, GSP and Ceautamed)</u>*

We primarily generate product revenues by manufacturing and packaging of nutraceutical products as a contract manufacturer for our customers. The majority of our revenue is recognized when we satisfy a single performance obligation by transferring control of products to a customer. Control is generally transferred when our products are either shipped or delivered based on the terms contained within the underlying contracts or agreements. Our general payment terms are short-term in duration. We do not have significant financing components or payment terms. We did not have any material unsatisfied performance obligations at December 31, 2022 or 2021.

Distribution expenses to transport our products, where applicable, and warehousing expense after manufacture are accounted for within operating expenses.

 

*<u>Advertising/Marketing (Nexus)</u>*

Nexus generates advertising revenues when sales of listed products are sold by product vendors through its network as a result of the marketing efforts of digital marketers. The products on the network come from several different customers, which pay Nexus a specific amount per sale, the amount of which is dictated by the customer. The revenue is recognized upon the sale of a product by the customer, net of fraudulent traffic or disputed transactions. A portion of the specific amount received by Nexus for that sale is paid out to the digital marketer as a commission, which is recorded in cost of sales. To illustrate the revenue process, a digital marketer logs onto the platform and selects an offer to promote for the day. The platform generates a unique link which the digital marketer distributes either via email or a banner ad. As the link is distributed to the consumer via the marketing efforts of the digital marketer, the consumer visits that link to make a purchase from the customer's website, and when such purchase is complete, revenue is recognized by Nexus and the sale is credited to the digital marketer's Nexus account. The benefit to the digital marketer operating on Nexus' network is that the digital marketer receives a commission without the possibility of a claw back or refund. The customer benefits through increased sales of its products as a result of the marketing efforts of the digital marketers. Nexus' platform acts as the transaction ledger, keeping track of clicks, sales and commissions.

Nexus' general payment terms are short-term in duration. Insertion orders are utilized between Nexus and the customer for each campaign related to a particular product being marketed. The insertion order remains in effect until the customer or Nexus terminates the order, and either party may terminate the order at any time upon 14 days' written notice. The customer is billed weekly for the sales digital marketers have generated for the week. Nexus does not have significant financing components or payment terms. Nexus did not have any material unsatisfied performance obligations at December 31, 2022 or 2021.

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***Inventory, net***. Inventory consists of raw materials, packaging materials, and finished goods and is valued at the lower of cost (first-in, first-out) (replacement cost or net realizable value). An allowance for inventory obsolescence is provided for slow moving or obsolete inventory to write down historical cost to net realizable value. We primarily perform manufacturing for functional foods and nutraceuticals in the form of bars, cookies, powders, tablets and capsules. The allowance for obsolescence is an estimate established through charges to cost of goods sold. Management's judgment in determining the adequacy of the allowance is based upon several factors which include, but are not limited to, analysis of slow-moving inventory, analysis of the selling price of inventory, the predetermined shelf life of the product, and management's judgment with respect to current economic conditions. Given the nature of the inventory, it is reasonably possible our estimate of the allowance for obsolescence will change in the near term.

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***Property and Equipment***. Property and equipment are recorded at cost. Expenditures for major betterments and additions are charged to the asset accounts, while replacements, maintenance and repairs which do not improve or extend the lives of the respective assets are charged to expense as incurred. We provide for depreciation and amortization over the estimated useful lives of various assets using the straight-line method ranging from 3-15 years.

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***Intangible Assets***. In accordance with ASC Topic 350, *Intangibles—Goodwill and Other,* we review intangible assets at least annually for impairment. In connection with any such review, if the recorded value of intangible assets is greater than its fair value, they are written down and charged to results of operations. Intangible assets (excluding goodwill) are assessed at each reporting date for indications that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, we make an estimate of the asset's recoverable amount. The asset's recoverable amount is the higher of an asset's or cash-generating unit's fair value less costs of disposal and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset or a group of assets exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or the group of assets. Intangible assets and goodwill consist of customer relationships, non-compete agreements, license agreements, goodwill, and intellectual property acquired in the acquisitions of BSNM, DSO, Nexus, GSP and Ceautamed. We amortize intangible assets with finite lives on a straight-line basis over their estimated useful lives which ranges from 3 to 15 years.

***Goodwill***. We allocate goodwill to reporting units based on the reporting unit expected to benefit from the business combination. We evaluate our reporting units on an annual basis and, if necessary, reassign goodwill using a relative fair value allocation approach. Goodwill is tested for impairment at the reporting unit level (operating segment or one level below an operating segment) on an annual basis and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. These events or circumstances could include a significant change in the business climate, legal factors, operating performance indicators, competition, or sale or disposition of a significant portion of a reporting unit. In accordance with ASC Topic 350, *Intangibles—Goodwill and Other,* we review intangible assets at least annually for impairment. In connection with any such review, if the recorded value of intangible assets is greater than its fair value, they are written down and charged to results of operations. Application of the goodwill impairment test requires judgment, including the identification of reporting units, assignment of assets and liabilities to reporting units, assignment of goodwill to reporting units, and determination of the fair value of each reporting unit. The fair value of each reporting unit is estimated primarily through the use of a discounted cash flow methodology. This analysis requires significant judgments, including estimation of future cash flows, which is dependent on internal forecasts, estimation of the long-term rate of growth for our business, estimation of the useful life over which cash flows will occur, and determination of our weighted average cost of capital. The estimates used to calculate the fair value of a reporting unit change from year to year based on operating results, market conditions, and other factors. Changes in these estimates and assumptions could materially affect the determination of fair value and goodwill impairment for each reporting unit. In connection with the acquisition of DSO on July 1, 2021, we recognized goodwill which had a balance of $1,342,000 as of December 31, 2022.

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***Long-Lived Assets***. We assess potential impairments to long-lived assets when there is evidence that events or changes in circumstances indicate that the carrying amount of an asset may not be recovered. An impairment loss is recognized when the undiscounted cash flows expected to be generated by an asset (or group of assets) is less than its carrying amount. Any required impairment loss is measured as the amount by which the asset's carrying value exceeds its fair value and is recorded as a reduction in the carrying value of the related asset and a charge to operating results. We had no impairment of long-lived assets at December 31, 2022 and 2021.

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***Lease Right-of-Use Asset***. We record a right-of-use asset and lease liability on the balance sheet for all leases with terms longer than 12 months. Leases are classified either as finance or operating with the classification affecting the pattern of expense recognition. Lease liabilities are recognized based on the present value of the remaining lease payments and are discounted using the most reasonable incremental borrowing rate. We use the implicit rate when it is readily determinable. Since our lease does not provide an implicit rate, to determine the present value of lease payments, management uses our incremental borrowing rate based on the information available at lease commencement. Leases with a term of 12 months or less at inception are not recorded on our balance sheet and are expensed on a straight- line basis over the lease term.

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***Stock-based Compensation***. We recognize expense for stock options and warrants granted over the vesting period based on the fair value of the award at the grant date, are valued using a Black-Scholes option pricing model to determine the fair market value of the stock options. We calculate the amount of tax benefit available by tracking each stock option award on an employee-by-employee basis and on a grant-by-grant basis. We then compare the recorded expense to the tax deduction received for each stock option grant.

**ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.**

Not applicable.

**ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.**

The full text of our audited consolidated financial statements begins on page F-1 of this annual report.

**ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.**

None.

**ITEM 9A. CONTROLS AND PROCEDURES.**

**Evaluation of Disclosure Controls and Procedures**

We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act). Disclosure controls and procedures refer to controls and other procedures designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.

As required by Rule 13a-15(e) of the Exchange Act, our management has carried out an evaluation, with the participation and under the supervision of our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as of December 31, 2022. Based upon, and as of the date of this evaluation, our chief executive officer and chief financial officer determined that our disclosure controls and procedures were effective.

**Management's Annual Report on Internal Control over Financial Reporting**

Our management is responsible for establishing and maintaining adequate internal control over financial reporting for our company. Internal control over financial reporting refers to the process designed by, or under the supervision of, our principal executive officer and principal financial and accounting officer, and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with GAAP, and includes those policies and procedures that:

&nbsp;&nbsp;&nbsp;&nbsp;(1) pertain to the maintenance of records that in reasonable
detail accurately and fairly reflect the transactions and dispositions of our assets;

&nbsp;&nbsp;&nbsp;&nbsp;(2) provide reasonable assurance that transactions are recorded
as necessary to permit preparation of financial statements in accordance with GAAP, and that our receipts and expenditures are being
made only in accordance with the authorization of our management and directors; and

&nbsp;&nbsp;&nbsp;&nbsp;(3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

Our management evaluated the effectiveness of our internal control over financial reporting as of December 31, 2022. In making this evaluation, management used the framework established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, or COSO. The COSO framework summarizes each of the components of a company's internal control system, including (i) the control environment, (ii) risk assessment, (iii) control activities, (iv) information and communication, and (v) monitoring. Based on our evaluation, we determined that, as of December 31, 2022, our internal control over financial reporting was effective.

All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

**Changes in Internal Controls over Financial Reporting** 

We regularly review our system of internal control over financial reporting and make changes to our processes and systems to improve controls and increase efficiency, while ensuring that we maintain an effective internal control environment. Changes may include such activities as implementing new, more efficient systems, consolidating activities, and migrating processes.

There have been no changes in our internal control over financial reporting during the fourth quarter of fiscal year 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

**ITEM 9B. OTHER INFORMATION.**

None.

**ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.**

Not applicable.

**PART III**

 **ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.**

**Directors and Executive Officers** 

Set forth below is information regarding our directors and executive officers as of the date of this report.

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| | | |
|:---|:---|:---|
| <br> **Name** | **Age** | **Position** |
| Alfonso J. Cervantes, Jr. | 73 | Executive Chairman of the Board |
| Darren C. Minton | 40 | Chief Executive Officer, President and Director |
| Alan B. Bergman | 54 | Chief Financial Officer |
| Robert S. Rein | 78 | Director |
| Arthur S. Reynolds | 78 | Director |
| Roger Conley Wood | 55 | Director |

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***Alfonso J. Cervantes, Jr.*** Mr. Cervantes is the founder of our company and has served as our Executive Chairman since our inception. Mr. Cervantes is also Executive Chairman of Trilogy Capital Group, LLC, or Trilogy, a private equity firm and a principal stockholder, and served as Chairman and Chief Executive Officer of its predecessor, Trilogy Capital Partners, Inc. since 2002. Through more than 35 years as an executive in diversified businesses, Mr. Cervantes has accumulated extensive experience in the public markets with experience in corporate finance and emerging growth companies. His significant corporate finance experience includes mergers and acquisitions, initial public offerings, private placements as well as the reorganization of middle-market companies. Prior to joining us, Mr. Cervantes was the founder and Vice Chairman of Staffing 360 Solutions, Inc., from 2012 to 2015, where he facilitated, in association with Mr. Minton, multiple acquisitions and drove the company from pure startup to over $100 million in revenues in approximately two years. Mr. Cervantes is a graduate of Webster University with a degree in Communications. We believe Mr. Cervantes is qualified to serve on our board of directors due to his extensive corporate finance experience and knowledge of our company.

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***Darren C. Minton***. Mr. Minton has served as our Chief Executive Officer since April 2022, President since September 2017 and as a member of our board of directors since November 2018. Mr. Minton has more than 15 years of capital markets experience in both small and large organizations. Over the years, his capacities have ranged from various executive positions, as well as president and chief executive officer positions with entrepreneurial ventures to established roles reporting to public company boards, with significant leadership and team building skills. Prior to joining us, Mr. Minton was a co-founder and Executive Vice President at Staffing 360 Solutions, Inc., from 2012 to 2017, where he facilitated the company's alternative public offering and listing on Nasdaq. He previously served as President of Trilogy Capital Partners, Inc. and as an Analyst at Mesa West Capital, a privately held portfolio lender with a multi-billion dollar offering capability headquartered in Los Angeles, as well as First Republic Bank in Palo Alto. Mr. Minton is a graduate of Stanford University with a degree in Economics. We believe Mr. Minton is qualified to serve on our board of directors due to his extensive management and capital markets experience.

 ****

***Alan B. Bergman***. Mr. Bergman has served as our Chief Financial Officer since January 2021. Mr. Bergman's expertise includes corporate financial management, mergers and acquisitions, corporate reorganizations, cost reduction and avoidance, financial analysis and reporting, IPO management, contract negotiations, ISO 9000 Quality Systems and SEC reporting and compliance. Prior to joining us, he served as Chief Financial Officer, Vice President Finance at Bright Mountain Media, Inc. from June 2019 to December 2020. Prior to that, he served as Vice President Finance at Greenlane Holdings, Inc., from December 2018 to May 2019. He previously served as Controller for Woodfield Distribution from October 2013 to February 2018 and as Vice President Finance at Latitude Solutions from May 2011 to March 2013. Mr. Bergman commenced his career in 2000 with Deloitte as a Senior Auditor and subsequently as Audit Manager at Mallah Furman, P.A. and as Senior Auditor at Weinberg & Company, P.A. In addition, Mr. Bergman has been an Adjunct Professor of Accounting at Florida Atlantic University and Millennia Atlantic University. Mr. Bergman received his Master's in Accounting from University of Miami.

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***Robert S. Rein***. Mr. Rein has been a member of our board of directors since February 2022. Mr. Rein is an attorney and has been practicing law in California since 1971. Since 2008, Mr. Rein has been a Partner in Rein & Associates, a law firm representing businesses and individuals with respect to all aspects of business transactions and matters. His practice primarily consists of handling business, corporate and real estate matters; tax issues; and business and estate planning. Mr. Rein's experience includes business acquisitions and sales, reorganizations, financings, business and tax planning, and business counselling. His firm has represented both public and private entities. Prior to the formation of Rein & Associates, Mr. Rein was a partner in predecessors to Rein & Associates since 1975. Mr. Rein obtained his B.A. in Economics from Brandeis University and his J.D. from Harvard Law School. Upon graduating law school, Mr. Rein clerked for Judge Milton Conford, the then senior judge of the New Jersey Superior Court, Appellate Division. Mr. Rein is currently the CEO and a member of the board of directors of R Solutions, Inc., a corporation involved in the furniture and other corporate fulfilment business, and Racada Corp., a real estate investment company. We believe that Mr. Rein is well qualified to serve on our board of directors due to his extensive legal and business experience.

 ****

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***Arthur S. Reynolds***. Mr. Reynolds has been a member of our board of directors since October 2022. Mr. Reynolds is an accomplished international financier bringing more than 35 years of capital markets and financial experience providing cross-border financial consulting services in Europe for clients principally located in the United States. He is the founder of Rexon Limited of London and New York where, since 1999, he has served as managing director. Mr. Reynolds was founder and, from 1997 to 1999, managing partner of London-based Value Management & Research (UK) Limited. Mr. Reynolds was the founder and, from 1982 to 1997, served as managing director of Ferghana Financial Services Limited. Prior thereto, Mr. Reynolds held executive positions at Merrill Lynch International Bank Limited, Banque de la Société Financière Européene, J.P. Morgan & Company and Mobil Corporation. Between 2006 and 2016, Mr. Reynolds served on the Board of Directors of ThermoEnergy Corporation, first as Chairman of the Audit Committee, subsequently as Chief Financial Officer, and finally as Chairman. Mr. Reynolds is a member of the Board of the International Festival Society and serves as Chairman of the Elgar Society's North America Branch. Mr. Reynolds holds an B.A. from Columbia University, a M.A. from Cambridge University, and an M.B.A. in Finance from New York University. Mr. Reynolds brings to the board extensive financial and executive experience across multiple sectors, with special strength in the international arena.

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***Roger Conley Wood***. Mr. Wood has been a member of our board of directors since February 2022. Mr. Wood is a seasoned executive with over 25 years of experience serving in C-level positions with various technology and consumer product businesses. He is currently Chairman of Conley Holdings, a private family company with interests in Homebuilding, Fashion, Training & Education, Pet Care, Media & Entertainment and Personal Care sectors. He served as the Chief Executive Officer and Managing Partner of Blue Bear Brands, a marketing consultancy specializing in predicative analytics and machine learning, from 2014 to 2020. He previously held senior management positions with Hearst Corporation, Orca Payments, Amobee Media, Willis Group, Reebok International, Omnipoint Voicestream and Motorola. He has served on the board of directors of numerous private companies and the board of trustees for the Wardlaw-Hartridge School, Global Alumni Board of Harvard Business School, Junior Achievement and the British American Business Council. Mr. Wood obtained his B.A. in Marketing and Statistics from Morehouse College and his Master's in Business Administration from Harvard University. We believe Mr. Wood is qualified to serve on our board of directors due to his extensive management and prior board experience.

Our directors currently have terms which will end at our next annual meeting of the stockholders or until their successors are elected and qualify, subject to their prior death, resignation or removal. Officers serve at the discretion of the board of directors. There is no arrangement or understanding between any director or executive officer and any other person pursuant to which he was or is to be selected as a director, nominee or officer.

**Family Relationships** 

There are no family relationships among any of our officers or directors.

**Involvement in Certain Legal Proceedings** 

To the best of our knowledge, except as described below, none of our directors or executive officers has, during the past ten years:

● been convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other minor offences);

● had any bankruptcy petition filed by or against the business or property of the person, or of any partnership, corporation or business association of which he was a general partner or executive officer, either at the time of the bankruptcy filing or within two years prior to that time;

● been subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction or federal or state authority, permanently or temporarily enjoining, barring, suspending or otherwise limiting, his involvement in any type of business, securities, futures, commodities, investment, banking, savings and loan, or insurance activities, or to be associated with persons engaged in any such activity;

● been found by a court of competent jurisdiction in a civil action or by the Securities and Exchange Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated;

● been the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated (not including any settlement of a civil proceeding among private litigants), relating to an alleged violation of any federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or

● been the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.

**Corporate Governance**

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***Governance Structure***

We chose to appoint a separate Chairman of the Board who is not our Chief Executive Officer. Our board of directors has made this decision based on their belief that a separate Chairman of the Board can act as a balance to the Chief Executive Officer, who also serves as a non-independent director.

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***The Board's Role in Risk Oversight***

The board of directors oversees that the assets of our company are properly safeguarded, that the appropriate financial and other controls are maintained, and that our business is conducted wisely and in compliance with applicable laws and regulations and proper governance. Included in these responsibilities is the board's oversight of the various risks facing our company. In this regard, our board seeks to understand and oversee critical business risks. Our board does not view risk in isolation. Risks are considered in virtually every business decision and as part of our business strategy. Our board recognizes that it is neither possible nor prudent to eliminate all risk. Indeed, purposeful and appropriate risk-taking is essential for our company to be competitive on a global basis and to achieve its objectives.

While the board oversees risk management, company management is charged with managing risk. Management communicates routinely with the board and individual directors on the significant risks identified and how they are being managed. Directors are free to, and indeed often do, communicate directly with senior management.

Our board administers its risk oversight function as a whole by making risk oversight a matter of collective consideration; however, much of the work is delegated to committees, which will meet regularly and report back to the full board. The audit committee oversees risks related to our financial statements, the financial reporting process, accounting and legal matters, the compensation committee evaluates the risks and rewards associated with our compensation philosophy and programs, and that the nominating and corporate governance committee evaluates risk associated with management decisions and strategic direction.

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***Independent Directors***

Our board of directors has determined that all of our directors, other than Messrs. Cervantes and Minton, qualify as "independent" directors in accordance with the rules and regulations of Nasdaq. Messrs. Cervantes and Minton are not considered independent because they are employees of our company and/or its subsidiaries. In making its independence determinations, the board considered, among other things, relevant transactions between our company and entities associated with the independent directors, as described under the heading Item 13 "*Certain Relationships and Related Party Transactions, and Director Independence*," and determined that none have any relationship with our company or other relationships that would impair the directors' independence.

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***Committees of the Board of Directors***

Our board has established an audit committee, a compensation committee and a nominating and corporate governance committee, each with its own charter approved by the board. Each committee's charter available on our website at www.smartforlifecorp.com. In addition, our board of directors may, from time to time, designate one or more additional committees, which shall have the duties and powers granted to it by our board of directors.

 

*<u>Audit Committee</u>*

Robert S. Rein, Arthur S. Reynolds and Roger Conley Wood have been appointed to serve on our audit committee, with Mr. Arthur S. Reynolds serving as the chairman. Our board has determined that each member of the audit committee is an independent director under Nasdaq's rules and under Rule 10A-3 under the Exchange Act. All members of our audit committee meet the requirements for financial literacy under the applicable rules and regulations of the SEC and Nasdaq. Our board has determined that Mr. Reynolds is an "audit committee financial expert" as defined by applicable SEC rules and has the requisite financial sophistication as defined under the applicable Nasdaq rules and regulations.

The audit committee oversees our accounting and financial reporting processes and the audits of our consolidated financial statements. The audit committee is responsible for, among other things: (i) retaining and overseeing our independent accountants; (ii) assisting the board in its oversight of the integrity of our financial statements, the qualifications, independence and performance of our independent auditors and our compliance with legal and regulatory requirements; (iii) reviewing and approving the plan and scope of the internal and external audit; (iv) pre-approving any audit and non-audit services provided by our independent auditors; (v) approving the fees to be paid to our independent auditors; (vi) reviewing with our chief executive officer and chief financial officer and independent auditors the adequacy and effectiveness of our internal controls; (vii) reviewing and approving related party transactions; (viii) reviewing hedging transactions; and (ix) reviewing and assessing annually the audit committee's performance and the adequacy of its charter.

 

*<u>Compensation Committee</u>*

Robert S. Rein, Arthur S. Reynolds and Roger Conley Wood have been appointed to serve on our compensation committee, with Mr. Rein serving as the chairman. Our board has determined that each member of the compensation committee is independent under the applicable rules and regulations of Nasdaq and is a "non-employee director" as defined under Rule 16b-3 of the Exchange Act.

The compensation committee assists the board in reviewing and approving the compensation structure, including all forms of compensation, relating to our directors and executive officers. The compensation committee is responsible for, among other things: (i) reviewing and approving the compensation of our executive officers; (ii) evaluating and making recommendations to the board regarding the compensation of our independent directors; (iii) evaluating and making recommendations to the board regarding equity-based and incentive compensation plans, policies and programs; and (iv) administering all such equity-based and incentive compensation plans, policies and programs.

 

*<u>Nominating and Corporate Governance Committee</u>*

Robert S. Rein, Arthur S. Reynolds and Roger Conley Wood have been appointed to serve on our nominating and corporate governance committee, with Mr. Wood serving as the chairman. Our board has determined that each member of the nominating and corporate governance committee is an independent director under the applicable rules and regulations of Nasdaq.

The nominating and corporate governance committee assists the board in selecting individuals qualified to become directors and in determining the composition of the board and its committees. The nominating and corporate governance committee is responsible for, among other things: (i) identifying and evaluating individuals qualified to become members of the board by reviewing nominees for election to the board submitted by stockholders and recommending to the board director nominees for each annual meeting of stockholders and for election to fill any vacancies on the board, (ii) advising the board with respect to board organization, desired qualifications of board members, the membership, function, operation, structure and composition of committees (including any committee authority to delegate to subcommittees), and self-evaluation and policies, (iii) advising on matters relating to corporate governance and monitoring developments in the law and practice of corporate governance, and (iv) overseeing compliance with our code of business conduct and ethics and conduct of our officers and directors.

The nominating and corporate governance committee's methods for identifying candidates for election to the board (other than those proposed by our stockholders, as discussed below) will include the solicitation of ideas for possible candidates from a number of sources - members of our board, our executives, individuals personally known to the members of our board, and other research. The nominating and corporate governance committee may also, from time-to-time, retain one or more third-party search firms to identify suitable candidates.

In making director recommendations, the nominating and corporate governance committee may consider some or all of the following factors: (i) the candidate's judgment, skill, experience with other organizations of comparable purpose, complexity and size, and subject to similar legal restrictions and oversight; (ii) the interplay of the candidate's experience with the experience of other board members; (iii) the extent to which the candidate would be a desirable addition to the board and any committee thereof; (iv) whether or not the person has any relationships that might impair his or her independence; and (v) the candidate's ability to contribute to the effective management of our company, taking into account the needs of our company and such factors as the individual's experience, perspective, skills and knowledge of the industry in which we operate.

A stockholder may nominate one or more persons for election as a director at an annual meeting of stockholders if the stockholder complies with the notice and information provisions contained in our bylaws. Such notice must be in writing not less than 90 days and not more than 120 days prior to the anniversary date of the preceding year's annual meeting of stockholders or as otherwise required by requirements of the Exchange Act. In addition, stockholders furnishing such notice must be a holder of record on both (i) the date of delivering such notice and (ii) the record date for the determination of stockholders entitled to vote at such meeting.

**Code of Ethics** 

We have adopted a code of ethics that applies to all of our directors, officers and employees, including our principal executive officer, principal financial officer and principal accounting officer. Such code of ethics addresses, among other things, honesty and ethical conduct, conflicts of interest, compliance with laws, regulations and policies, including disclosure requirements under the federal securities laws, and reporting of violations of the code.

We are required to disclose any amendment to, or waiver from, a provision of our code of ethics applicable to our principal executive officer, principal financial officer, principal accounting officer, controller, or persons performing similar functions. We intend to use our website as a method of disseminating this disclosure, as permitted by applicable SEC rules. Any such disclosure will be posted to our website within four (4) business days following the date of any such amendment to, or waiver from, a provision of our code of ethics.

**Insider Trading Policy**

We have adopted an insider trading policy which prohibits our directors, officers and employees from engaging in transactions in our common stock while in the possession of material non-public information; engaging in transactions in the stock of other companies while in possession of material non-public information that they become aware of in performing their duties; and disclosing material non-public information to unauthorized persons outside our company.

Our insider trading policy restricts trading by directors, officers and certain key employees during blackout periods, which generally begin 15 calendar days before the end of each fiscal quarter and end two business days after the issuance of our earnings release for the quarter. Additional blackout periods may be imposed with or without notice, as the circumstances require.

Our insider trading policy also prohibits our directors, officers and employees from purchasing financial instruments (such as prepaid variable forward contracts, equity swaps, collars and exchange funds) designed to hedge or offset any decrease in the market value of our common stock they hold, directly or indirectly. In addition, directors, officers and employees are expressly prohibited from pledging our common stock to secure personal loans or other obligations, including by holding their common stock in a margin account, unless such arrangement is specifically approved in advance by the administrator of our insider trading policy, or making short-sale transactions in our common stock.

**Section 16(a) Beneficial Ownership Reporting Compliance** 

Section 16(a) of the Exchange Act requires our directors and executive officers, and persons who own more than 10% of a registered class of our equity securities, to file with the SEC initial reports of ownership and reports of changes in ownership of common stock and other equity securities of the company. Officers, directors and greater than 10% stockholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file. We believe, based solely on a review of the copies of such reports furnished to us and representations of these persons, that all reports were timely filed for the year ended December 31, 2022.

 **ITEM 11. EXECUTIVE COMPENSATION.**

**Summary Compensation Table - Years Ended December 31, 2022 and 2021**

The following table sets forth information concerning all cash and non-cash compensation awarded to, earned by or paid to the named persons for services rendered in all capacities during the noted periods. No other executive officers received total annual salary and bonus compensation in excess of $100,000.

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| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| **Name and Principal Position** | **Year** | **Salary<br> ($)** | **Bonus<br> ($)** | **Stock Awards** <br> **($)<sup>(1)</sup>** | **Option Awards** <br> **($)<sup>(1)</sup>** | **All Other<br> Compensation**<br> **($)<sup>(2)</sup>** | **Total<br> ($)** |
| Alfonso J. Cervantes, Jr., | 2022 | 300000 |  | 234500 | 154200 |  | 688700 |
| Executive Chairman | 2021 | 216667 |  |  |  |  | 216667 |
| Darren C. Minton, | 2022 | 200000 |  | 93800 | 51900 |  | 345700 |
| Chief Executive Officer | 2021 | 175000 |  |  |  |  | 175000 |
| Ryan F. Zackon, | 2022 | 275000 |  | 93800 |  |  | 368800 |
| Former Chief Executive Officer<sup>(3)</sup> | 2021 | 254166 |  |  |  | 16968 | 271134 |
| Alan Bergman, | 2022 | 200000 | 25000 | 32830 | 51900 |  | 309730 |
| Chief Financial Officer | 2021 | 175000 |  |  |  |  | 175000 |

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(1) The amount is equal to the aggregate grant-date fair value
with respect to the awards, computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic
718. (2) Other compensation includes automobile allowances.

(3) Mr. Zackon served as our Chief Executive Officer from November
15, 2020 to April 30, 2022.

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***Employment Agreements***

On July 1, 2020, we entered into an employment agreement with Mr. Cervantes, our Executive Chairman. Pursuant to the employment agreement, Mr. Cervantes was entitled to an annual base salary of $200,000, which was increased to $250,000 on July 1, 2021 and was increased to $300,000 on November 8, 2021. In addition, Mr. Cervantes is eligible to receive a bonus of $100,000 for each bona fide acquisition that we complete. He will also be entitled to an annual bonus of 20% of his base salary based on meeting company objectives and the remainder will be based on meeting mutually agreed employee objections or as otherwise determined by the board. Mr. Cervantes is eligible to participate in all equity incentive plans and other employee benefit plans, including health insurance, commensurate with his position. The term of Mr. Cervantes' agreement is five years, commencing July 1, 2020 and terminating June 30, 2025. His employment agreement is terminable on 30 days' notice; however, we may terminate Mr. Cervantes' employment without notice for cause (as defined in the employment agreement). If we terminate Mr. Cervantes' employment without cause or due to a disability, he is entitled to twelve (12) months of severance pay equal to the base salary of the current year, which will be paid on a bi-weekly schedule. The employment agreement contains standard confidentiality provisions and restrictive covenants prohibiting Mr. Cervantes from owning or operating a business that competes with our company during the term of his employment.

On July 1, 2020, we entered into an employment agreement with Mr. Minton, our Chief Executive Officer and President. Pursuant to the employment agreement, Mr. Minton was entitled to an annual base salary of $200,000, which was increased to $250,000 on July 1, 2021. He will also be entitled to receive an annual bonus of up to 20% of his base salary based on meeting mutually agreed objectives or as otherwise determined by the board. Mr. Minton is eligible to participate in all equity incentive plans and other employee benefit plans, including health insurance, commensurate with his position. The term of Mr. Minton's agreement is three years, commencing July 1, 2020 and terminating June 30, 2023. His employment agreement is terminable on 30 days' notice; however, we may terminate Mr. Minton's employment without notice for cause (as defined in the employment agreement). If we terminate Mr. Minton's employment without cause or due to a disability, he is entitled to six (6) months of severance pay equal to the base salary of the current year, which will be paid on a bi-weekly schedule. The employment agreement contains standard confidentiality provisions and restrictive covenants prohibiting Mr. Minton from owning or operating a business that competes with our company during the term of his employment.

On November 15, 2020, we entered into an employment agreement with Mr. Zackon, our former Chief Executive Officer. Pursuant to the employment agreement, Mr. Zackon was entitled to an annual base salary of $250,000, which was increased to $300,000 after the first year of employment. On May 4, 2022, we entered into a separation agreement and release of claims with Mr. Zackon providing for the separation of his employment effective as of April 30, 2022. Under the separation agreement, we agreed to pay Mr. Zackon a severance payment in the amount of $175,000, equal to seven months of his base salary at his current level, less applicable statutory deductions and authorized withholdings, payable in equal installments on our regular payroll dates during the period commencing on May 1, 2022 and ending on November 30, 2022. We also agreed to pay Mr. Zackon a separation expense reimbursement of $10,000. The separation agreement also includes a customary release of claims by Mr. Zackon in favor of our company and its affiliates, as well as customary confidentiality and mutual non-disparagement provisions.

On December 12, 2020, we entered into an employment agreement with Mr. Bergman, our Chief Financial Officer. Pursuant to the employment agreement, Mr. Bergman was entitled to an annual base salary of $175,000, which was increased to $200,000 on January 1, 2022 and to $250,000 on January 1, 2023. He will also be entitled to receive an annual bonus between 10% to 20% of his base salary based on meeting mutually agreed objectives or as otherwise determined by the board. We also agreed to issue 30,000 shares of common stock to Mr. Bergman. Mr. Bergman is eligible to participate in all equity incentive plans and other employee benefit plans, including health insurance, commensurate with his position. The term of Mr. Bergman's agreement commenced on January 1, 2021 and will continue until terminated. His employment agreement is terminable on 90 days' notice; however, we may terminate Mr. Bergman's employment without notice for cause (as defined in the employment agreement). If we terminate Mr. Bergman's employment without cause or due to a disability, he is entitled to one (1) month of severance pay equal to the base salary of the current year, which will be paid on a bi-weekly schedule. The employment agreement contains standard confidentiality provisions and restrictive covenants prohibiting Mr. Bergman from owning or operating a business that competes with our company during the term of his employment.

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***Retirement Benefits***

We have not maintained, and do not currently maintain, a defined benefit pension plan or nonqualified deferred compensation plan. We currently make available a retirement plan intended to provide benefits under Section 401(k) of the Internal Revenue Code of 1986, as amended, or the Code, pursuant to which employees, including the executive officers named above, can make voluntary pre-tax contributions.

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***Potential Payments Upon Termination or Change in Control***

As described under "—*Employment Agreements*" above, Mr. Zackon is entitled to severance in accordance with the separation agreement and Messrs. Cervantes, Minton and Bergman are entitled severance if their employment is terminated without cause.

**Outstanding Equity Awards at Fiscal Year-End** 

The following table includes certain information with respect to the value of all unexercised options and unvested shares of restricted stock previously awarded to the executive officers named above at the fiscal year ended December 31, 2022.

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| | **Option Awards** | **Option Awards** | **Option Awards** | **Option Awards** | **Option Awards** |
| <br>**Name** | **Number of<br> Securities<br> Underlying<br> Unexercised<br> Options (#)<br> Exercisable** | **Number of<br> Securities<br> Underlying<br> Unexercised<br> Options (#)<br> Unexercisable** | **Equity Incentive<br> Plan Awards:<br> Number of<br> Securities<br> Underlying<br> Unexercised<br> Unearned <br> Options (#)** | **Option<br> Exercise <br> Price ($)** | **Option<br> Expiration<br> Date** |
| Alfonso J. Cervantes, Jr. | 1000000 |  |  | $0.010 | 09/14/2030 |
| Alfonso J. Cervantes, Jr. | 16667 | 283333 |  | $0.693 | 08/12/2027 |
| Darren C. Minton | 250000 |  |  | $0.010 | 09/14/2030 |
| Darren C. Minton | 5556 | 94444 |  | $0.630 | 08/12/2032 |
| Alan B. Bergman | 5556 | 94444 |  | $0.630 | 08/12/2032 |

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**Director Compensation**

The table below sets forth the compensation paid to our independent directors during the fiscal year ended December 31, 2022.

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| | | | |
|:---|:---|:---|:---|
| <br>**Name** | **Fees Earned<br> or Paid in<br> Cash<br> ($)** | **Stock <br> Awards<br> ($)<sup>(1)</sup>** | **Total<br> ($)** |
| Ronald S. Altbach | 18000 | 46900 | 64900 |
| Richard M. Cohen<sup>(2)</sup> | 16000 | 46900 | 62900 |
| Robert S. Rein | 16000 | 46900 | 62900 |
| Roger Conley Wood | 14000 | 46900 | 60900 |
| Arthur S. Reynolds | 5000 |  | 5000 |

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(1) The amount is equal to the aggregate grant-date fair value
with respect to the awards, computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic
718. (2) Mr. Cohen resigned from the Board on October 17, 2022.

Commencing in March 2022, our independent directors received an annual fee of $10,000, payable monthly, with each committee chair receiving an additional annual fee of $4,000 and each other committee member receiving an additional annual fee of $2,000; provided that Mr. Reynolds receives an annual fee of $35,000. Each independent director also receives $2,000 for each in person board meeting and may be reimbursed for pre-approved reasonable business-related expenses incurred in good faith in connection with his or her duties to our company.

On March 10, 2022, we granted restricted stock awards for 50,000 shares of common stock to each independent director serving at such time. On October 17, 2022, we granted a restricted stock award to Mr. Reynolds for 100,000 shares of common stock upon his appointment to the board. All restricted stock awards vest monthly over a one-year period.

**2020 Stock Incentive Plan**

On September 14, 2020, our board adopted the Bonne Santé Group, Inc. 2020 Stock Incentive Plan, or the 2020 Plan, which was approved by our stockholders on September 14, 2020. The following is a summary of certain significant features of the 2020 Plan.

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***Purposes***: The purpose of the 2020 Plan is to offer selected employees, consultants, advisors and outside directors the opportunity to acquire equity in our company.

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***Types of Awards***: Awards that may be granted include incentive stock options as described in section 422(b) of the Code, non-qualified stock options (i.e., options that are not incentive stock options) and awards of restricted stock. These awards offer our employees, consultants, advisors and outside directors the possibility of future value, depending on the long-term price appreciation of our common stock and the award holder's continuing service with our company or one or more of its subsidiaries.

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***Eligible Recipients***: Persons eligible to receive awards under the 2020 Plan will be those employees, consultants, advisors and outside directors of our company and its subsidiaries who are selected by the Administrator.

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***Administration***: The 2020 Plan is administered by our compensation committee. Among other things, the administrator has the authority to select persons who will receive awards, determine the types of awards and the number of shares to be covered by awards, and to establish the terms, conditions, restrictions and other provisions of awards.

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***Shares Available***: The maximum number of shares of common stock that may be delivered to participants under the 2020 Plan is 2,000,000, subject to adjustment for certain corporate changes affecting the shares, such as stock splits. Shares subject to an award under the 2020 Plan for which the award is canceled, forfeited or expires again become available for grants under the 2020 Plan. Shares subject to an award that is settled in cash will not again be made available for grants under the 2020 Plan. As of the date of this report, 7,505 shares remain available for issuance under the 2020 Plan.

 ****

 ****

***Stock Options***:

 

*General*. Subject to the provisions of the 2020 Plan, the administrator has the authority to determine all grants of stock options. That determination will include: (i) the number of shares subject to any option; (ii) the exercise price per share; (iii) the expiration date of the option; (iv) the manner, time and date of permitted exercise; (v) other restrictions, if any, on the option or the shares underlying the option; and (vi) any other terms and conditions as the administrator may determine.

 

*Option Price*. The exercise price for stock options will be determined at the time of grant. Normally, the exercise price will not be less than the fair market value on the date of grant, as determined in good faith by the administrator. As a matter of tax law, the exercise price for any incentive stock option awarded may not be less than the fair market value of the shares on the date of grant. However, incentive stock option grants to any person owning more than 10% of our voting stock must have an exercise price of not less than 110% of the fair market value on the grant date.

 

*Exercise of Options*. An option may be exercised only in accordance with the terms and conditions for the option agreement as established by the administrator at the time of the grant. The option must be exercised by notice to us, accompanied by payment of the exercise price. Payments may be made in cash or, at the option of the administrator, by actual or constructive delivery of shares of common stock to the holder of the option based upon the fair market value of the shares on the date of exercise.

 

*Expiration or Termination*. Options, if not previously exercised, will expire on the expiration date established by the administrator at the time of grant; provided that such term cannot exceed ten years and that such term of an incentive stock option granted to a holder of more than 10% of our voting stock cannot exceed five years. Options will terminate before their expiration date if the holder's service with us terminates before the expiration date. The option may remain exercisable for specified periods after certain terminations of service, including terminations as a result of death, disability or retirement, with the precise period during which the option may be exercised to be established by the administrator and reflected in the grant evidencing the award.

 ****

***Stock Awards***: Stock awards can also be granted under the 2020 Plan. A stock award is a grant of shares of common stock. These awards will be subject to such conditions, restrictions and contingencies as the administrator shall determine at the date of grant. Those may include requirements for continuous service and/or the achievement of specified performance goals.

 ****

***Other Material Provisions***: Awards will be evidenced by a written agreement, in such form as may be approved by the administrator. In the event of various changes to our capitalization, such as stock splits, stock dividends and similar re-capitalizations, an appropriate adjustment will be made by the administrator to the number of shares covered by outstanding awards or to the exercise price of such awards. The administrator is also permitted to include in the written agreement provisions that provide for certain changes in the award in the event of a change of control of our company, including acceleration of vesting. Except as otherwise determined by the administrator at the date of grant, awards will not be transferable, other than by will or the laws of descent and distribution. Prior to any award distribution, we are permitted to deduct or withhold amounts sufficient to satisfy any employee withholding tax requirements. The board also has the authority, at any time, to discontinue the granting of awards. The board also has the authority to alter or amend the 2020 Plan or any outstanding award or may terminate the 2020 Plan as to further grants, provided that no amendment will, without the approval of our stockholders, increase the number of shares available under the 2020 Plan or change the persons eligible for awards under the 2020 Plan. No amendment that would adversely affect any outstanding award made under the 2020 Plan can be made without the consent of the holder of such award.

**2022 Equity Incentive Plan**

On January 13, 2022, our board of directors adopted the Smart for Life, Inc. 2022 Equity Incentive Plan, or the 2022 Plan, which was approved by our stockholders on January 13, 2022. On January 12, 2023, our board approved an amendment to the 2022 Plan to increase the number of shares reserved for issuance under the 2022 Plan from 2,000,000 shares to 70,000,000 shares, which was approved by our stockholders on March 15, 2023. The following is a summary of certain significant features of the 2022 Plan.

 ****

***Purposes***: The purposes of the 2022 Plan are to attract and retain officers, employees, directors and consultants for our company and its subsidiaries; motivate them by means of appropriate incentives to achieve long-range goals; provide incentive compensation opportunities; and further align their interests with those of our stockholders through compensation that is based on our common stock.

 ****

***Types of Awards***: Awards that may be granted include: (a) incentive stock options, (b) non-qualified stock options, (c) stock appreciation rights, (d) restricted awards, (e) performance share awards, and (f) performance compensation awards. These awards offer our officers, employees, consultants and directors the possibility of future value, depending on the long-term price appreciation of our common stock and the award holder's continuing service with our company.

 ****

***Eligible Recipients***: Persons eligible to receive awards under the 2022 Plan will be those officers, employees, directors and consultants of the Company and its subsidiaries who are selected by the administrator.

 ****

 ****

***Administration***: The 2022 Plan is administered by our compensation committee. Among other things, the administrator has the authority to select persons who will receive awards, determine the types of awards and the number of shares to be covered by awards, and to establish the terms, conditions, performance criteria, restrictions and other provisions of awards. The administrator has authority to establish, amend and rescind rules and regulations relating to the 2022 Plan.

 ****

***Shares Available***: The maximum number of shares of our common stock that may be delivered to participants under the 2022 Plan is 70,000,000, subject to adjustment for certain corporate changes affecting the shares, such as stock splits. Shares subject to an award under the 2022 Plan for which the award is canceled, forfeited or expires again become available for grants under the 2022 Plan. Shares subject to an award that is settled in cash will not again be made available for grants under the 2022 Plan. As of the date of this report, 68,142,000 shares remain available for issuance under the 2022 Plan.

 ****

***Stock Options***:

 

*General*. Stock options give the option holder the right to acquire from us a designated number of shares of common stock at a purchase price that is fixed upon the grant of the option. Stock options granted may be either tax-qualified stock options (so-called "incentive stock options") or non-qualified stock options. Subject to the provisions of the 2022 Plan, the administrator has the authority to determine all grants of stock options. That determination will include: (i) the number of shares subject to any option; (ii) the exercise price per share; (iii) the expiration date of the option; (iv) the manner, time and date of permitted exercise; (v) other restrictions, if any, on the option or the shares underlying the option; and (vi) any other terms and conditions as the administrator may determine.

 

*Option Price*. The exercise price for stock options will be determined at the time of grant. Normally, the exercise price will not be less than the fair market value on the date of grant. As a matter of tax law, the exercise price for any incentive stock option awarded may not be less than the fair market value of the shares on the date of grant. However, incentive stock option grants to any person owning more than 10% of our voting stock must have an exercise price of not less than 110% of the fair market value on the grant date.

 

*Exercise of Options*. An option may be exercised only in accordance with the terms and conditions for the option agreement as established by the administrator at the time of the grant. The option must be exercised by notice to us, accompanied by payment of the exercise price. Payments may be made in cash or, at the option of the administrator, by actual or constructive delivery of shares of common stock to the holder of the option based upon the fair market value of the shares on the date of exercise.

 

*Expiration or Termination*. Options, if not previously exercised, will expire on the expiration date established by the administrator at the time of grant. In the case of incentive stock options, such term cannot exceed ten years provided that in the case of holders of more than 10% of our voting stock, such term cannot exceed five years. Options will terminate before their expiration date if the holder's service with our company or a subsidiary terminates before the expiration date. The option may remain exercisable for specified periods after certain terminations of employment, including terminations as a result of death, disability or retirement, with the precise period during which the option may be exercised to be established by the administrator and reflected in the grant evidencing the award.

 

*Incentive and Non-Qualified Options*. As described elsewhere in this summary, an incentive stock option is an option that is intended to qualify under certain provisions of the Code for more favorable tax treatment than applies to non-qualified stock options. Any option that does not qualify as an incentive stock option will be a non-qualified stock option. Under the Code, certain restrictions apply to incentive stock options. For example, the exercise price for incentive stock options may not be less than the fair market value of the shares on the grant date and the term of the option may not exceed ten years. In addition, an incentive stock option may not be transferred, other than by will or the laws of descent and distribution, and is exercisable during the holder's lifetime only by the holder. In addition, no incentive stock options may be granted to a holder that is first exercisable in a single year if that option, together with all incentive stock options previously granted to the holder that also first become exercisable in that year, relate to shares having an aggregate fair market value in excess of $100,000, measured at the grant date.

 ****

***Stock Appreciation Rights***: Stock appreciation rights, or SARs, which may be granted alone or in tandem with options, have an economic value similar to that of options. When an SAR for a particular number of shares is exercised, the holder receives a payment equal to the difference between the market price of the shares on the date of exercise and the exercise price of the shares under the SAR. Again, the exercise price for SARs normally is the market price of the shares on the date the SAR is granted. Under the 2022 Plan, holders of SARs may receive this payment - the appreciation value - either in cash or shares valued at the fair market value on the date of exercise. The form of payment will be determined by us.

 ****

 ****

***Restricted Awards***: Restricted awards are shares awarded to participants at no cost. Restricted awards can take the form of awards of restricted stock, which represent issued and outstanding shares subject to vesting criteria, or restricted stock units, which represent the right to receive shares subject to satisfaction of the vesting criteria. Restricted stock awards are forfeitable and non-transferable until the shares vest. The vesting date or dates and other conditions for vesting are established when the shares are awarded. These awards will be subject to such conditions, restrictions and contingencies as the administrator shall determine at the date of grant. Those may include requirements for continuous service and/or the achievement of specified performance goals.

 ****

***Performance Awards***: A performance award is an award that may be in the form of cash or shares or a combination, based on the attainment of pre-established performance goals and other conditions, restrictions and contingencies identified by the administrator.

 ****

***Performance Criteria***: Under the 2022 Plan, one or more performance criteria will be used by the administrator in establishing performance goals. Any one or more of the performance criteria may be used on an absolute or relative basis to measure the performance of our company, as the administrator may deem appropriate, or as compared to the performance of a group of comparable companies, or published or special index that the administrator deems appropriate. In determining the actual size of an individual performance compensation award, the administrator may reduce or eliminate the amount of the award through the use of negative discretion if, in its sole judgment, such reduction or elimination is appropriate. The administrator shall not have the discretion to (i) grant or provide payment in respect of performance compensation awards if the performance goals have not been attained or (ii) increase a performance compensation award above the maximum amount payable under the 2022 Plan.

 ****

***Other Material Provisions***: Awards will be evidenced by a written agreement, in such form as may be approved by the administrator. In the event of various changes to the capitalization of our company, such as stock splits, stock dividends and similar re-capitalizations, an appropriate adjustment will be made by the administrator to the number of shares covered by outstanding awards or to the exercise price of such awards. The administrator is also permitted to include in the written agreement provisions that provide for certain changes in the award in the event of a change of control of our company, including acceleration of vesting. Except as otherwise determined by the administrator at the date of grant, awards will not be transferable, other than by will or the laws of descent and distribution. Prior to any award distribution, we are permitted to deduct or withhold amounts sufficient to satisfy any employee withholding tax requirements. Our board also has the authority, at any time, to discontinue the granting of awards. The board also has the authority to alter or amend the 2022 Plan or any outstanding award or may terminate the 2022 Plan as to further grants, provided that no amendment will, without the approval of our stockholders, to the extent that such approval is required by law or the rules of an applicable exchange, increase the number of shares available under the 2022 Plan, change the persons eligible for awards under the 2022 Plan, extend the time within which awards may be made, or amend the provisions of the 2022 Plan related to amendments. No amendment that would adversely affect any outstanding award made under the 2022 Plan can be made without the consent of the holder of such award.

 **ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.**

**Security Ownership of Certain Beneficial Owners and Management**

The following table sets forth certain information with respect to the beneficial ownership of our common stock as of March 29, 2023 for (i) each of our named executive officers and directors; (ii) all of our named executive officers and directors as a group; and (iii) each other shareholder known by us to be the beneficial owner of more than 5% of our outstanding common stock. Unless otherwise indicated, the address of each beneficial owner listed in the table below is c/o our company, 990 S Rogers Circle, Suite 3, Boca Raton, Florida 33487.

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| | | | |
|:---|:---|:---|:---|
| <br>**Name and Address of Beneficial Owner** | **Title of Class** | **Amount and<br> Nature of<br> Beneficial<br> Ownership<sup>(1)</sup>** | **Percent of<br> Class<sup>(2)</sup>** |
| Alfonso J. Cervantes, Jr., Executive Chairman<sup>(3)</sup> | Common Stock | 8254000 | 20.53% |
| Darren C. Minton, Chief Executive Officer and Director<sup>(4)</sup> | Common Stock | 1608333 | 4.08% |
| Alan B. Bergman, Chief Financial Officer<sup>(5)</sup> | Common Stock | 58333 | \* |
| Robert S. Rein, Director | Common Stock | 1237000 | 3.16% |
| Arthur S. Reynolds, Director | Common Stock | 100000 | \* |
| Roger Conley Wood, Director | Common Stock | 50000 | \* |
| All executive officers and directors as a group (6 persons above) | Common Stock | 11307666 | 28.30% |
| Brendan O'Neil<sup>(6)(7)</sup> | Common Stock | 2516160 | 6.42% |
| Ionic Ventures, LLC<sup>(7)</sup> | Common Stock | 2166160 | 5.53% |

---

\* Less than 1%

(1) Beneficial
ownership is determined in accordance with SEC rules and generally includes voting or investment power with respect to securities. For
purposes of this table, a person or group of persons is deemed to have "beneficial ownership" of any shares that such person
or any member of such group has the right to acquire within sixty (60) days. For purposes of computing the percentage of outstanding
shares of our common shares held by each person or group of persons named above, any shares that such person or persons has the right
to acquire within sixty (60) days of March 29, 2023 are deemed to be
outstanding for such person, but not deemed to be outstanding for the purpose of computing the percentage ownership of any other person.
The inclusion herein of any shares listed as beneficially owned does not constitute an admission of beneficial ownership by any person .

(2) Based on 39,177,749 shares of common stock issued and outstanding
as of March 29, 2023.

(3) Includes 2,000,000 shares of common stock held directly,
1,025,000 shares of common stock which Mr. Cervantes has the right to acquire within 60 days through the exercise of vested options and
5,229,000 shares of common stock held by Trilogy. Mr. Cervantes is the Chairman of Trilogy and has voting and investment power over the
securities held by it. Mr. Cervantes disclaims beneficial ownership of the shares held by Trilogy except to the extent of his pecuniary
interest, if any, in such shares.

(4) Includes 1,350,000 shares of common stock held directly and
258,333 shares of common stock which Mr. Minton has the right to acquire within 60 days through the exercise of vested options.

(5) Includes 50,000 shares of common stock held directly and
8,333 shares of common stock which Mr. Bergman has the right to acquire within 60 days through the exercise of vested options.

(6) Based solely on the information set forth in the Schedule
13G filed with the SEC on February 13, 2023, includes 350,000 shares held directly and 2,166,160 shares of common stock held by Ionic
Ventures, LLC.

(7) Based solely on the information set forth in the Schedule
13G filed with the SEC on February 13, 2023, Brendan O'Neil and Keith Coulston are the managers of Ionic Ventures, LLC and hold
voting and dispositive power over the shares held by it.

**Changes in Control** 

We do not currently have any arrangements which if consummated may result in a change of control of our company.

**Securities Authorized for Issuance Under Equity Compensation Plans**

The following table sets forth certain information about the securities authorized for issuance under our incentive plans as of December 31, 2022.

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| | | | |
|:---|:---|:---|:---|
| <br>**Plan Category** | **Number of securities <br> to be issued upon<br> exercise** <br> **of outstanding** <br> **options, <br> warrants<br> and rights**<br>**(a)** | **Weighted-average<br> exercise price of<br> outstanding<br> options, warrants<br> and rights**<br>**(b)** | **Number of <br> securities<br> remaining available <br> for future issuance <br> under equity <br> compensation plans (excluding securities<br> reflected<br> in column<br> (a)) (c)** |
| Equity compensation plans approved by security holders | 2578000 | $&nbsp;&nbsp;&nbsp;&nbsp;0.01 | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 149505 |
| Equity compensation plans not approved by security holders | - | - | - |
| Total | 2578000 | $0.01 | 149505 |

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On September 14, 2020, we established the 2020 Plan. As of December 31, 2022, the maximum number of shares of common stock that may be issued pursuant to awards granted under the 2020 Plan is 2,000,000 shares. On January 13, 2022, we established the 2022 Plan. As of December 31, 2022, the maximum number of shares of common stock that may be issued pursuant to awards granted under the 2022 Plan is 2,000,000 shares.

 **ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.**

**Transactions with Related Persons** 

The following includes a summary of transactions since the beginning of our 2021 fiscal year, or any currently proposed transaction, in which we were or are to be a participant and the amount involved exceeded or exceeds the lesser of $120,000 or one percent of the average of our total assets at year-end for the last two completed fiscal years, and in which any related person had or will have a direct or indirect material interest (other than compensation described under Item 11 "*Executive Compensation*" above). We believe the terms obtained or consideration that we paid or received, as applicable, in connection with the transactions described below were comparable to terms available or the amounts that would be paid or received, as applicable, in arm's-length transactions.

● We have a management services agreement with Trilogy, a company controlled by our Executive Chairman. As of December 31, 2022 and 2021, the amounts due to Trilogy are $0 and $325,966, respectively, which are presented net of amounts due from Trilogy. For the year ended December 31, 2022, we paid Trilogy for $1,476,475 for services rendered under a consulting agreement which are reflected in the statement of operation as consulting fees – related parties.

● Prior to November 30, 2021, Doctor Scientific Organica rented its operating facility from Scientific Real Estate Holdings, LLC, a non-consolidating company owned by its former sole member, Sasson Moulavi. Rent expense paid to the related party for the year ended December 31, 2021 was $153,798.

**Director Independence** 

Our board of directors has determined that Robert S. Rein, Arthur S. Reynolds and Roger Conley Wood are independent within the meaning of the rules of Nasdaq.

 **ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.**

**Independent Auditors' Fees** 

The following is a summary of the fees billed to us for professional services rendered for the fiscal years ended December 31, 2022 and 2021:

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| | | |
|:---|:---|:---|
|  | **Years Ended December 31,** | **Years Ended December 31,** |
|  | **2022** | **2021** |
| Audit Fees | $106750 | $86750 |
| Audit-Related Fees |  |  |
| Tax Fees | 7000 | 6000 |
| All Other Fees |  |  |
| TOTAL | $113750 | $92750 |

---

"Audit Fees" consisted of fees billed for professional services rendered by the principal accountant for the audit of our annual financial statements and review of the financial statements included in our registration statement or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements.

"Audit-Related Fees" consisted of fees billed for assurance and related services by the principal accountant that were reasonably related to the performance of the audit or review of our financial statements and are not reported under the paragraph captioned "Audit Fees" above.

"Tax Fees" consisted of fees billed for professional services rendered by the principal accountant for tax returns preparation.

"All Other Fees" consisted of fees billed for products and services provided by the principal accountant, other than the services reported above under other captions of this Item 14.

**Pre-Approval Policies and Procedures** 

Under the Sarbanes-Oxley Act of 2002, all audit and non-audit services performed by our auditors must be approved in advance by our board of directors to assure that such services do not impair the auditors' independence from us. In accordance with its policies and procedures, our board of directors pre-approved the audit service performed by Daszkal Bolton LLP for our financial statements as of and for the year ended December 31, 2022.

**PART IV**

**ITEM 15. EXHIBIT AND FINANCIAL STATEMENT SCHEDULES.**

**(a)**  ***List of Documents Filed as a Part of This Report:*** 

(1) *Index to Financial Statements:* 

---

| | |
|:---|:---|
|  | **Page** |
| [Report of Independent Registered Public Accounting Firm (PCAOB ID 229)](#f_001) | F-2 |
| [Consolidated Balance Sheets as of December 31, 2022 and 2021](#f_002) | F-4 |
| [Consolidated Statements of Operations for the Years Ended December 31, 2022 and 2021](#f_003) | F-5 |
| [Consolidated Statement of Changes in Stockholders' Deficit for the Years Ended December 31, 2022 and 2021](#f_004) | F-6 |
| [Consolidated Statements of Cash Flows for the Years Ended December 31, 2022 and 2021](#f_005) | F-7 |
| [Notes to Consolidated Financial Statements](#f_006) | F-8 |

---

(2) Index *to Financial Statement Schedules:* 

All schedules have been omitted because the required information is included in the financial statements or the notes thereto, or because it is not required.

(3) Index *to Exhibits:* 

See exhibits listed under Part (b) below.

**(b) *Exhibits:***

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---

| | |
|:---|:---|
| **Exhibit No.** | **Description** |
| 3.1 | [Certificate of Incorporation of Smart for Life, Inc., as amended (incorporated by reference to Exhibit 3.1 to the Registration Statement on Form S-1 filed on December 16, 2021)](http://www.sec.gov/Archives/edgar/data/1851860/000121390021065747/fs12021ex3-1_smartforlife.htm) |
| 3.2 | [Certificate of Designation of Series A Convertible Preferred Stock (incorporated by reference to Exhibit 3.2 to the Registration Statement on Form S-1 filed on December 16, 2021)](http://www.sec.gov/Archives/edgar/data/1851860/000121390021065747/fs12021ex3-2_smartforlife.htm) |
| 3.3 | [Bylaws of Smart for Life, Inc. (incorporated by reference to Exhibit 3.4 to the Registration Statement on Form S-1 filed on December 16, 2021)](http://www.sec.gov/Archives/edgar/data/1851860/000121390021065747/fs12021ex3-4_smartforlife.htm) |
| 4.1\* | [Description of Securities of Smart for Life, Inc.](f10k2022ex4-1_smartforlife.htm) |
| 4.2 | [Pre-Funded Common Stock Purchase Warrant issued by Smart for Life, Inc. to Anson East Master Fund LP on December 8, 2022 (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed on December 9, 2022)](http://www.sec.gov/Archives/edgar/data/1851860/000121390022078793/ea169907ex4-1_smart.htm) |
| 4.3 | [Pre-Funded Common Stock Purchase Warrant issued by Smart for Life, Inc. to Anson Investments Master Fund LP on December 8, 2022 (incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K filed on December 9, 2022)](http://www.sec.gov/Archives/edgar/data/1851860/000121390022078793/ea169907ex4-2_smart.htm) |
| 4.4 | [Pre-Funded Common Stock Purchase Warrant issued by Smart for Life, Inc. to District 2 Capital Fund LP on December 8, 2022 (incorporated by reference to Exhibit 4.3 to the Current Report on Form 8-K filed on December 9, 2022)](http://www.sec.gov/Archives/edgar/data/1851860/000121390022078793/ea169907ex4-3_smart.htm) |
| 4.5 | [Pre-Funded Common Stock Purchase Warrant issued by Smart for Life, Inc. to Ionic Ventures, LLC on December 8, 2022 (incorporated by reference to Exhibit 4.4 to the Current Report on Form 8-K filed on December 9, 2022)](http://www.sec.gov/Archives/edgar/data/1851860/000121390022078793/ea169907ex4-4_smart.htm) |
| 4.6 | [Pre-Funded Common Stock Purchase Warrant issued by Smart for Life, Inc. to Sabby Volatility Warrant Master Fund Ltd. on December 8, 2022 (incorporated by reference to Exhibit 4.5 to the Current Report on Form 8-K filed on December 9, 2022)](http://www.sec.gov/Archives/edgar/data/1851860/000121390022078793/ea169907ex4-5_smart.htm) |

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4.7 [Debenture Pre-Funded Common Stock Purchase Warrant issued by Smart for Life, Inc. to Anson East Master Fund LP on December 8, 2022 (incorporated by reference to Exhibit 4.6 to the Current Report on Form 8-K filed on December 9, 2022)](http://www.sec.gov/Archives/edgar/data/1851860/000121390022078793/ea169907ex4-6_smart.htm)

4.8 [Debenture Pre-Funded Common Stock Purchase Warrant issued by Smart for Life, Inc. to Anson Investments Master Fund LP on December 8, 2022 (incorporated by reference to Exhibit 4.7 to the Current Report on Form 8-K filed on December 9, 2022)](http://www.sec.gov/Archives/edgar/data/1851860/000121390022078793/ea169907ex4-7_smart.htm)

4.9 [Debenture Pre-Funded Common Stock Purchase Warrant issued by Smart for Life, Inc. to District 2 Capital Fund LP on December 8, 2022 (incorporated by reference to Exhibit 4.8 to the Current Report on Form 8-K filed on December 9, 2022)](http://www.sec.gov/Archives/edgar/data/1851860/000121390022078793/ea169907ex4-8_smart.htm)

4.10 [Debenture Pre-Funded Common Stock Purchase Warrant issued by Smart for Life, Inc. to Ionic Ventures, LLC on December 8, 2022 (incorporated by reference to Exhibit 4.9 to the Current Report on Form 8-K filed on December 9, 2022)](http://www.sec.gov/Archives/edgar/data/1851860/000121390022078793/ea169907ex4-9_smart.htm)

4.11 [Debenture Pre-Funded Common Stock Purchase Warrant issued by Smart for Life, Inc. to Sabby Volatility Warrant Master Fund Ltd. on December 8, 2022 (incorporated by reference to Exhibit 4.10 to the Current Report on Form 8-K filed on December 9, 2022)](http://www.sec.gov/Archives/edgar/data/1851860/000121390022078793/ea169907ex4-10_smart.htm)

4.12 [Amended and Restated Common Stock Purchase Warrant issued by Smart for Life, Inc. to Anson East Master Fund LP on December 8, 2022 (incorporated by reference to Exhibit 4.11 to the Current Report on Form 8-K filed on December 9, 2022)](http://www.sec.gov/Archives/edgar/data/1851860/000121390022078793/ea169907ex4-11_smart.htm)

4.13 [Amended and Restated Common Stock Purchase Warrant issued by Smart for Life, Inc. to Anson East Master Fund LP on December 8, 2022 (incorporated by reference to Exhibit 4.12 to the Current Report on Form 8-K filed on December 9, 2022)](http://www.sec.gov/Archives/edgar/data/1851860/000121390022078793/ea169907ex4-12_smart.htm)

4.14 [Amended and Restated Common Stock Purchase Warrant issued by Smart for Life, Inc. to Anson Investments Master Fund LP on December 8, 2022 (incorporated by reference to Exhibit 4.13 to the Current Report on Form 8-K filed on December 9, 2022)](http://www.sec.gov/Archives/edgar/data/1851860/000121390022078793/ea169907ex4-13_smart.htm)

4.15 [Amended and Restated Common Stock Purchase Warrant issued by Smart for Life, Inc. to Anson Investments Master Fund LP on December 8, 2022 (incorporated by reference to Exhibit 4.14 to the Current Report on Form 8-K filed on December 9, 2022)](http://www.sec.gov/Archives/edgar/data/1851860/000121390022078793/ea169907ex4-14_smart.htm)

4.16 [Amended and Restated Common Stock Purchase Warrant issued by Smart for Life, Inc. to District 2 Capital Fund LP on December 8, 2022 (incorporated by reference to Exhibit 4.15 to the Current Report on Form 8-K filed on December 9, 2022)](http://www.sec.gov/Archives/edgar/data/1851860/000121390022078793/ea169907ex4-15_smart.htm)

4.17 [Amended and Restated Common Stock Purchase Warrant issued by Smart for Life, Inc. to District 2 Capital Fund LP on December 8, 2022 (incorporated by reference to Exhibit 4.16 to the Current Report on Form 8-K filed on December 9, 2022)](http://www.sec.gov/Archives/edgar/data/1851860/000121390022078793/ea169907ex4-16_smart.htm)

4.18 [Amended and Restated Common Stock Purchase Warrant issued by Smart for Life, Inc. to Ionic Ventures, LLC on December 8, 2022 (incorporated by reference to Exhibit 4.17 to the Current Report on Form 8-K filed on December 9, 2022)](http://www.sec.gov/Archives/edgar/data/1851860/000121390022078793/ea169907ex4-17_smart.htm)

4.19 [Amended and Restated Common Stock Purchase Warrant issued by Smart for Life, Inc. to Ionic Ventures, LLC on December 8, 2022 (incorporated by reference to Exhibit 4.18 to the Current Report on Form 8-K filed on December 9, 2022)](http://www.sec.gov/Archives/edgar/data/1851860/000121390022078793/ea169907ex4-18_smart.htm)

4.20 [Amended and Restated Common Stock Purchase Warrant issued by Smart for Life, Inc. to Sabby Volatility Warrant Master Fund Ltd. on December 8, 2022 (incorporated by reference to Exhibit 4.19 to the Current Report on Form 8-K filed on December 9, 2022)](http://www.sec.gov/Archives/edgar/data/1851860/000121390022078793/ea169907ex4-19_smart.htm)

4.21 [Amended and Restated Common Stock Purchase Warrant issued by Smart for Life, Inc. to Sabby Volatility Warrant Master Fund Ltd. on December 8, 2022 (incorporated by reference to Exhibit 4.20 to the Current Report on Form 8-K filed on December 9, 2022)](http://www.sec.gov/Archives/edgar/data/1851860/000121390022078793/ea169907ex4-20_smart.htm)

4.22 [Common Stock Purchase Warrant issued by Smart for Life, Inc. to Dawson James Securities, Inc. on December 8, 2022 (incorporated by reference to Exhibit 4.21 to the Current Report on Form 8-K filed on December 9, 2022)](http://www.sec.gov/Archives/edgar/data/1851860/000121390022078793/ea169907ex4-21_smart.htm)

---

| | |
|:---|:---|
| 4.23 | [Common Stock Purchase Warrant issued by Smart for Life, Inc. to Dawson James Securities, Inc. on December 8, 2022 (incorporated by reference to Exhibit 4.22 to the Current Report on Form 8-K filed on December 9, 2022)](http://www.sec.gov/Archives/edgar/data/1851860/000121390022078793/ea169907ex4-22_smart.htm) |
| 4.24 | [Common Stock Purchase Warrant issued by Smart for Life, Inc. to Robert D. Keyser, Jr. on December 8, 2022 (incorporated by reference to Exhibit 4.23 to the Current Report on Form 8-K filed on December 9, 2022)](http://www.sec.gov/Archives/edgar/data/1851860/000121390022078793/ea169907ex4-23_smart.htm) |
| 4.25 | [Common Stock Purchase Warrant issued by Smart for Life, Inc. to James Hopkins on December 8, 2022 (incorporated by reference to Exhibit 4.24 to the Current Report on Form 8-K filed on December 9, 2022)](http://www.sec.gov/Archives/edgar/data/1851860/000121390022078793/ea169907ex4-24_smart.htm) |
| 4.26 | [Warrant Agent Agreement, dated February 16, 2022, between Smart for Life, Inc. and VStock Transfer, LLC and Forms of Warrants (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed on February 23, 2022)](http://www.sec.gov/Archives/edgar/data/1851860/000121390022009014/ea156077ex4-1_smartfor.htm) |
| 4.27 | [Warrant issued by Smart for Life, Inc. to Joseph Xiras on January 13, 2022 (incorporated by reference to Exhibit 4.21 to Amendment No. 2 to Registration Statement on Form S-1/A filed on January 21, 2022)](http://www.sec.gov/Archives/edgar/data/1851860/000121390022002875/fs12022a2ex4-21_smart.htm) |
| 4.28 | [Warrant issued by Smart for Life, Inc. to Leonite Fund I, LP on January 13, 2022 (incorporated by reference to Exhibit 4.22 to Amendment No. 2 to Registration Statement on Form S-1/A filed on January 21, 2022)](http://www.sec.gov/Archives/edgar/data/1851860/000121390022002875/fs12022a2ex4-22_smart.htm) |
| 4.29 | [Warrant issued by Smart for Life, Inc. to Laurie Rosenthal on January 7, 2022 (incorporated by reference to Exhibit 4.20 to Amendment No. 2 to Registration Statement on Form S-1/A filed on January 21, 2022)](http://www.sec.gov/Archives/edgar/data/1851860/000121390022002875/fs12022a2ex4-20_smart.htm) |
| 4.30 | [Warrant issued by Smart for Life, Inc. to Robert Rein on January 3, 2022 (incorporated by reference to Exhibit 4.19 to Amendment No. 2 to Registration Statement on Form S-1/A filed on January 21, 2022)](http://www.sec.gov/Archives/edgar/data/1851860/000121390022002875/fs12022a2ex4-19_smart.htm) |
| 4.31 | [Warrant issued by Smart for Life, Inc. to Thomas L Calkins II and Diane M Calkins JTIC on December 27, 2021 (incorporated by reference to Exhibit 4.18 to Amendment No. 2 to Registration Statement on Form S-1/A filed on January 21, 2022)](http://www.sec.gov/Archives/edgar/data/1851860/000121390022002875/fs12022a2ex4-18_smart.htm) |
| 4.32 | [Warrant issued by Smart for Life, Inc. to Ryan Hazel on December 23, 2021 (incorporated by reference to Exhibit 4.17 to Amendment No. 2 to Registration Statement on Form S-1/A filed on January 21, 2022)](http://www.sec.gov/Archives/edgar/data/1851860/000121390022002875/fs12022a2ex4-17_smart.htm) |
| 4.33 | [Amended and Restated Warrant issued by Smart for Life, Inc. to Dawson James Securities, Inc. on February 1, 2022 (incorporated by reference to Exhibit 4.25 to Amendment No. 3 to Registration Statement on Form S-1/A filed on February 2, 2022)](http://www.sec.gov/Archives/edgar/data/1851860/000121390022005023/fs12022a3ex4-25_smart.htm) |
| 4.34 | [Warrant issued by Smart for Life, Inc. to Dawson James Securities, Inc. on July 1, 2021 (incorporated by reference to Exhibit 4.23 to Amendment No. 3 to Registration Statement on Form S-1/A filed on February 2, 2022)](http://www.sec.gov/Archives/edgar/data/1851860/000121390022005023/fs12022a3ex4-23_smart.htm) |
| 4.35 | [Warrant issued by Smart for Life, Inc. to Dawson James Securities, Inc. on July 1, 2021 (incorporated by reference to Exhibit 4.24 to Amendment No. 3 to Registration Statement on Form S-1/A filed on February 2, 2022)](http://www.sec.gov/Archives/edgar/data/1851860/000121390022005023/fs12022a3ex4-24_smart.htm) |
| 4.36 | [Common Stock Purchase Warrant issued by Smart for Life, Inc. to Peah Capital, LLC on December 18, 2020 (incorporated by reference to Exhibit 4.14 to the Registration Statement on Form S-1 filed on December 16, 2021)](http://www.sec.gov/Archives/edgar/data/1851860/000121390021065747/fs12021ex4-14_smartforlife.htm) |
| 4.37 | [Amendment No 1 to Common Stock Purchase Warrant, dated June 30, 2021, between Smart for Life, Inc. and Peah Capital, LLC (incorporated by reference to Exhibit 4.15 to the Registration Statement on Form S-1 filed on December 16, 2021)](http://www.sec.gov/Archives/edgar/data/1851860/000121390021065747/fs12021ex4-15_smartforlife.htm) |
| 10.1 | [Securities Purchase Agreement, dated December 8, 2022, among Smart for Life, Inc. and the purchasers signatory thereto (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on December 9, 2022)](http://www.sec.gov/Archives/edgar/data/1851860/000121390022078793/ea169907ex10-1_smart.htm) |
| 10.2 | [Registration Rights Agreement, dated December 8, 2022, among Smart for Life, Inc. and the purchasers signatory thereto (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed on December 9, 2022)](http://www.sec.gov/Archives/edgar/data/1851860/000121390022078793/ea169907ex10-2_smart.htm) |
| 10.3+ | [License Agreement, dated January 1, 2020, between ABG-SI, LLC and GSP Nutrition Inc. (incorporated by reference to Exhibit 10.37 to Amendment No. 1 to Registration Statement on Form S-1/A filed on January 14, 2022)](http://www.sec.gov/Archives/edgar/data/1851860/000121390022002202/fs12022a1ex10-37_smartforlif.htm) |

---

---

| | |
|:---|:---|
| 10.4+ | [Amendment No. 1 to License Agreement, dated June 1, 2020, between ABG-SI, LLC and GSP Nutrition Inc. (incorporated by reference to Exhibit 10.50 to Amendment No. 1 to Registration Statement on Form S-1/A filed on January 14, 2022)](http://www.sec.gov/Archives/edgar/data/1851860/000121390022002202/fs12022a1ex10-50_smartforlif.htm) |
| 10.5+ | [Amendment No. 2 to License Agreement, dated August 1, 2021, between ABG-SI, LLC and GSP Nutrition Inc. (incorporated by reference to Exhibit 10.51 to Amendment No. 1 to Registration Statement on Form S-1/A filed on January 14, 2022)](http://www.sec.gov/Archives/edgar/data/1851860/000121390022002202/fs12022a1ex10-51_smartforlif.htm) |
| 10.6 | [Secured Subordinated Convertible Promissory Note issued by Smart for Life, Inc. to RMB Industries, Inc. on July 29, 2022 (incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K filed on August 4, 2022)](http://www.sec.gov/Archives/edgar/data/1851860/000121390022044756/ea163798ex10-3_smartforlife.htm) |
| 10.7 | [Secured Subordinated Convertible Promissory Note issued by Smart for Life, Inc. to RTB Childrens Trust on July 29, 2022 (incorporated by reference to Exhibit 10.4 to the Current Report on Form 8-K filed on August 4, 2022)](http://www.sec.gov/Archives/edgar/data/1851860/000121390022044756/ea163798ex10-4_smartforlife.htm) |
| 10.8 | [Secured Subordinated Convertible Promissory Note issued by Smart for Life, Inc. to D&D Hayes, LLC on July 29, 2022 (incorporated by reference to Exhibit 10.5 to the Current Report on Form 8-K filed on August 4, 2022)](http://www.sec.gov/Archives/edgar/data/1851860/000121390022044756/ea163798ex10-5_smartforlife.htm) |
| 10.9 | [Secured Subordinated Promissory Note issued by Smart for Life, Inc. to RMB Industries, Inc. on July 29, 2022 (incorporated by reference to Exhibit 10.6 to the Current Report on Form 8-K filed on August 4, 2022)](http://www.sec.gov/Archives/edgar/data/1851860/000121390022044756/ea163798ex10-6_smartforlife.htm) |
| 10.10 | [Secured Subordinated Promissory Note issued by Smart for Life, Inc. to RTB Childrens Trust on July 29, 2022 (incorporated by reference to Exhibit 10.7 to the Current Report on Form 8-K filed on August 4, 2022)](http://www.sec.gov/Archives/edgar/data/1851860/000121390022044756/ea163798ex10-7_smartforlife.htm) |
| 10.11 | [Secured Subordinated Promissory Note issued by Smart for Life, Inc. to D&D Hayes, LLC on July 29, 2022 (incorporated by reference to Exhibit 10.8 to the Current Report on Form 8-K filed on August 4, 2022)](http://www.sec.gov/Archives/edgar/data/1851860/000121390022044756/ea163798ex10-8_smartforlife.htm) |
| 10.12 | [Secured Subordinated Promissory Note issued by Smart for Life, Inc. to RMB Industries, Inc. on July 29, 2022 (incorporated by reference to Exhibit 10.9 to the Current Report on Form 8-K filed on August 4, 2022)](http://www.sec.gov/Archives/edgar/data/1851860/000121390022044756/ea163798ex10-9_smartforlife.htm) |
| 10.13 | [Letter Agreement, dated November 28, 2022, between Smart for Life, Inc. and RMB Industries, Inc. (incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K filed on December 2, 2022)](http://www.sec.gov/Archives/edgar/data/1851860/000121390022077385/ea169583ex10-3_smartfor.htm) |
| 10.14 | [Secured Subordinated Promissory Note issued by Smart for Life, Inc. to D&D Hayes, LLC on July 29, 2022 (incorporated by reference to Exhibit 10.10 to the Current Report on Form 8-K filed on August 4, 2022)](http://www.sec.gov/Archives/edgar/data/1851860/000121390022044756/ea163798ex10-10_smartforlife.htm) |
| 10.15 | [Letter Agreement, dated November 28, 2022, between Smart for Life, Inc. and D&D Hayes, LLC (incorporated by reference to Exhibit 10.5 to the Current Report on Form 8-K filed on December 2, 2022)](http://www.sec.gov/Archives/edgar/data/1851860/000121390022077385/ea169583ex10-5_smartfor.htm) |
| 10.16 | [Secured Subordinated Promissory Note issued by Smart for Life, Inc. to Bactolac Pharmaceuticals, Inc. on July 29, 2022 (incorporated by reference to Exhibit 10.11 to the Current Report on Form 8-K filed on August 4, 2022)](http://www.sec.gov/Archives/edgar/data/1851860/000121390022044756/ea163798ex10-11_smartforlife.htm) |
| 10.17 | [Secured Subordinated Promissory Note issued by Smart for Life, Inc. to Stuart Benson on July 29, 2022 (incorporated by reference to Exhibit 10.12 to the Current Report on Form 8-K filed on August 4, 2022)](http://www.sec.gov/Archives/edgar/data/1851860/000121390022044756/ea163798ex10-12_smartforlife.htm) |
| 10.18 | [Letter Agreement, dated November 28, 2022, between Smart for Life, Inc. and Stuart Benson (incorporated by reference to Exhibit 10.7 to the Current Report on Form 8-K filed on December 2, 2022)](http://www.sec.gov/Archives/edgar/data/1851860/000121390022077385/ea169583ex10-7_smartfor.htm) |
| 10.19 | [5% Secured Subordinated Promissory Note issued by Smart for Life, Inc. to Justin Francisco and Steven Rubert on November 8, 2021 (incorporated by reference to Exhibit 10.14 to the Registration Statement on Form S-1 filed on December 16, 2021)](http://www.sec.gov/Archives/edgar/data/1851860/000121390021065747/fs12021ex10-14_smartforlife.htm) |
| 10.20 | [Amended and Restated 6% Secured Subordinated Promissory Note issued by Smart for Life, Inc. to Sasson E. Moulavi on November 29, 2022 (incorporated by reference to Exhibit 10.10 to the Current Report on Form 8-K filed on December 2, 2022)](http://www.sec.gov/Archives/edgar/data/1851860/000121390022077385/ea169583ex10-10_smartfor.htm) |

---

---

| | |
|:---|:---|
| 10.21 | [Original Issue Discount Secured Subordinated Note issued by Smart for Life, Inc. to Joseph X. Xiras on July 29, 2022 (incorporated by reference to Exhibit 10.14 to the Current Report on Form 8-K filed on August 4, 2022)](http://www.sec.gov/Archives/edgar/data/1851860/000121390022044756/ea163798ex10-14_smartforlife.htm) |
| 10.22 | [Form of Debenture relating to 2022 private placement (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed on October 5, 2022)](http://www.sec.gov/Archives/edgar/data/1851860/000121390022062245/ea166813ex10-2_smart.htm) |
| 10.23 | [Loan Agreement, dated July 1, 2021, among Smart for Life, Inc., Bonne Sante Natural Manufacturing, Inc., Doctors Scientific Organica, LLC and Diamond Creek Capital, LLC (incorporated by reference to Exhibit 10.21 to the Registration Statement on Form S-1 filed on December 16, 2021)](http://www.sec.gov/Archives/edgar/data/1851860/000121390021065747/fs12021ex10-21_smartforlife.htm) |
| 10.24\* | [First Amendment to Loan Agreement, dated June 29, 2022, among Smart for Life, Inc., Bonne Sante Natural Manufacturing, Inc., Doctors Scientific Organica, LLC and Diamond Creek Capital, LLC](f10k2022ex10-24_smartforlife.htm) |
| 10.25 | [Second Amendment to Loan Agreement, dated December 29, 2022, among Smart for Life, Inc., Bonne Sante Natural Manufacturing, Inc., Doctors Scientific Organica, LLC and Diamond Creek Capital, LLC (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on January 5, 2023)](http://www.sec.gov/Archives/edgar/data/1851860/000121390023001113/ea171303ex10-1_smartfor.htm) |
| 10.26 | [Term Loan Promissory Note issued by Smart for Life, Inc., Bonne Sante Natural Manufacturing, Inc. and Doctors Scientific Organica, LLC to Diamond Creek Capital, LLC on July 1, 2021 (incorporated by reference to Exhibit 10.22 to the Registration Statement on Form S-1 filed on December 16, 2021)](http://www.sec.gov/Archives/edgar/data/1851860/000121390021065747/fs12021ex10-22_smartforlife.htm) |
| 10.27 | [Security Agreement, dated July 1, 2021, among Smart for Life, Inc., Bonne Sante Natural Manufacturing, Inc., Doctors Scientific Organica, LLC and Diamond Creek Capital, LLC (incorporated by reference to Exhibit 10.23 to the Registration Statement on Form S-1 filed on December 16, 2021)](http://www.sec.gov/Archives/edgar/data/1851860/000121390021065747/fs12021ex10-23_smartforlife.htm) |
| 10.28 | [Lease Agreement, dated November 28, 2022, between 990 S Rogers Circle, LLC and Smart for Life, Inc. (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on December 2, 2022)](http://www.sec.gov/Archives/edgar/data/1851860/000121390022077385/ea169583ex10-1_smartfor.htm) |
| 10.29 | [Lease, dated February 3, 2012, between O & B Properties, Inc. and Bonne Sante Natural Manufacturing, Inc., as amended (incorporated by reference to Exhibit 10.33 to the Registration Statement on Form S-1 filed on December 16, 2021)](http://www.sec.gov/Archives/edgar/data/1851860/000121390021065747/fs12021ex10-33_smartforlife.htm) |
| 10.30 | [Business Lease, dated November 20, 2015, between Aqua USA Property Management LLC and Bonne Sante Natural Manufacturing, Inc. (incorporated by reference to Exhibit 10.34 to the Registration Statement on Form S-1 filed on December 16, 2021)](http://www.sec.gov/Archives/edgar/data/1851860/000121390021065747/fs12021ex10-34_smartforlife.htm) |
| 10.31 | [Lease, dated September 1, 2018, between Scientific Real Estate Holdings LLC and Doctors Scientific Organica, LLC (incorporated by reference to Exhibit 10.35 to the Registration Statement on Form S-1 filed on December 16, 2021)](http://www.sec.gov/Archives/edgar/data/1851860/000121390021065747/fs12021ex10-35_smartforlife.htm) |
| 10.32 | [Memorandum of Agreement of Lease, dated September 30, 2021, between The Linger Corporation and Smart for Life Canada Inc. (incorporated by reference to Exhibit 10.36 to the Registration Statement on Form S-1 filed on December 16, 2021)](http://www.sec.gov/Archives/edgar/data/1851860/000121390021065747/fs12021ex10-36_smartforlife.htm) |
| 10.33† | [Employment Agreement, dated July 1, 2020, between Smart for Life, Inc. and Alfonso J. Cervantes (incorporated by reference to Exhibit 10.38 to the Registration Statement on Form S-1 filed on December 16, 2021)](http://www.sec.gov/Archives/edgar/data/1851860/000121390021065747/fs12021ex10-38_smartforlife.htm) |
| 10.34† | [Employment Agreement, dated July 1, 2020, between Smart for Life, Inc. and Darren C. Minton (incorporated by reference to Exhibit 10.40 to the Registration Statement on Form S-1 filed on December 16, 2021)](http://www.sec.gov/Archives/edgar/data/1851860/000121390021065747/fs12021ex10-40_smartforlife.htm) |
| 10.35 | [Form of Independent Director Agreement between Smart for Life, Inc. and each of Robert S. Rein and Roger Conley Wood (incorporated by reference to Exhibit 10.41 to Amendment No. 1 to Registration Statement on Form S-1/A filed on January 14, 2022)](http://www.sec.gov/Archives/edgar/data/1851860/000121390022002202/fs12022a1ex10-41_smartforlif.htm) |
| 10.36 | [Independent Director Agreement, dated October 17, 2022, between Smart for Life, Inc. and Arthur S. Reynolds (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on October 21, 2022)](http://www.sec.gov/Archives/edgar/data/1851860/000121390022065526/ea167422ex10-1_smartfor.htm) |
| 10.37 | [Form of Indemnification Agreement between Smart for Life, Inc. and each independent director (incorporated by reference to Exhibit 10.42 to Amendment No. 1 to Registration Statement on Form S-1/A filed on January 14, 2022)](http://www.sec.gov/Archives/edgar/data/1851860/000121390022002202/fs12022a1ex10-42_smartforlif.htm) |

---

---

| | |
|:---|:---|
| 10.38† | [2020 Stock Incentive Plan (incorporated by reference to Exhibit 10.43 to the Registration Statement on Form S-1 filed on December 16, 2021)](http://www.sec.gov/Archives/edgar/data/1851860/000121390021065747/fs12021ex10-43_smartforlife.htm) |
| 10.39† | [Form of Stock Option Agreement for 2020 Stock Incentive Plan (incorporated by reference to Exhibit 10.44 to the Registration Statement on Form S-1 filed on December 16, 2021)](http://www.sec.gov/Archives/edgar/data/1851860/000121390021065747/fs12021ex10-44_smartforlife.htm) |
| 10.40† | [Form of Restricted Stock Award Agreement for 2020 Stock Incentive Plan (incorporated by reference to Exhibit 10.45 to the Registration Statement on Form S-1 filed on December 16, 2021)](http://www.sec.gov/Archives/edgar/data/1851860/000121390021065747/fs12021ex10-45_smartforlife.htm) |
| 10.41† | [2022 Equity Incentive Plan (incorporated by reference to Exhibit 10.46 to Amendment No. 1 to Registration Statement on Form S-1/A filed on January 14, 2022)](http://www.sec.gov/Archives/edgar/data/1851860/000121390022002202/fs12022a1ex10-46_smartforlif.htm) |
| 10.42†\* | [Amendment No. 1 to 2022 Equity Incentive Plan](f10k2022ex10-42_smartforlife.htm) |
| 10.43† | [Form of Stock Option Agreement for 2022 Equity Incentive Plan (incorporated by reference to Exhibit 10.47 to Amendment No. 1 to Registration Statement on Form S-1/A filed on January 14, 2022)](http://www.sec.gov/Archives/edgar/data/1851860/000121390022002202/fs12022a1ex10-47_smartforlif.htm) |
| 10.44† | [Form of Restricted Stock Award Agreement for 2022 Equity Incentive Plan (incorporated by reference to Exhibit 10.48 to Amendment No. 1 to Registration Statement on Form S-1/A filed on January 14, 2022)](http://www.sec.gov/Archives/edgar/data/1851860/000121390022002202/fs12022a1ex10-48_smartforlif.htm) |
| 10.45† | [Form of Restricted Stock Unit Award Agreement for 2022 Equity Incentive Plan (incorporated by reference to Exhibit 10.49 to Amendment No. 1 to Registration Statement on Form S-1/A filed on January 14, 2022)](http://www.sec.gov/Archives/edgar/data/1851860/000121390022002202/fs12022a1ex10-49_smartforlif.htm) |
| 14.1 | [Code of Business Conduct and Ethics (incorporated by reference to Exhibit 14.1 to the Annual Report on Form 10-K filed on March 31, 2022)](http://www.sec.gov/Archives/edgar/data/1851860/000121390022016904/f10k2021ex14-1_smartforlife.htm) |
| 19.1\* | [Insider Trading Policy](f10k2022ex19-1_smartforlife.htm) |
| 21.1\* | [Subsidiaries of Smart for Life, Inc.](f10k2022ex21-1_smartforlife.htm) |
| 23.1\* | [Consent of Daszkal Bolton LLP](f10k2022ex23-1_smartforlife.htm) |
| 31.1\* | [Certifications of Principal Executive Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002](f10k2022ex31-1_smartforlife.htm) |
| 31.2\* | [Certifications of Principal Financial and Accounting Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002](f10k2022ex31-2_smartforlife.htm) |
| 32.1\* | [Certifications of Principal Executive Officer furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002](f10k2022ex32-1_smartforlife.htm) |
| 32.2\* | [Certifications of Principal Financial and Accounting Officer furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002](f10k2022ex32-2_smartforlife.htm) |
| 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) |

---

\* Filed herewith

+ Certain confidential information contained these exhibits has been omitted in accordance with Item 6.01(b)(10) because it is both (i) not material and (ii) is the type that we treat as private or confidential because it would be competitively harmful if publicly disclosed

† Executive compensation plan or arrangement

**ITEM 16. FORM 10-K SUMMARY.**

None.

**FINANCIAL STATEMENTS**

---

| | |
|:---|:---|
|  | **Page** |
| [Report of Independent Registered Public Accounting Firm (PCAOB ID 229)](#f_001) | F-2 |
| [Consolidated Balance Sheets as of December 31, 2022 and 2021](#f_002) | F-4 |
| [Consolidated Statements of Operations for the Years Ended December 31, 2022 and 2021](#f_003) | F-5 |
| [Consolidated Statement of Changes in Stockholders' Deficit for the Years Ended December 31, 2022 and 2021](#f_004) | F-6 |
| [Consolidated Statements of Cash Flows for the Years Ended December 31, 2022 and 2021](#f_005) | F-7 |
| [Notes to Consolidated Financial Statements](#f_006) | F-8 |

---

**Report of Independent Registered Public Accounting Firm**

To the Board of Directors and Stockholders

Smart for Life, Inc.

Doral, Florida

***Opinion on the Consolidated Financial Statements***

We have audited the accompanying consolidated balance sheets of Smart for Life, Inc. (the Company) as of December 31, 2022 and 2021, and the related consolidated statements of income, changes in stockholders' deficit, and cash flows for each of the years in the two-year period ended December 31, 2022, and the related notes (collectively referred to as the "consolidated financial statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

***Going Concern Uncertainty***

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As described in Note 2 to the consolidated financial statements, the Company has sustained recurring losses and has a deficiency in working capital of approximately $11.5 million at December 31, 2022, which raises substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Our opinion is not modified with respect to this matter.

***Basis for Opinion***

These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

 ****

***Critical Audit Matters***

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that are communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved are especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

***<u>Valuation of Intangible Assets and Goodwill in Acquisitions</u>***

As described in Notes 3 to the consolidated financial statements, the Company completed an acquisition for consideration of $8.6 million and the transaction was accounted for as business combinations. The Company recorded acquired intangible assets at fair value on the date of acquisition. The methods used to estimate the fair value of acquired intangible assets involve significant assumptions. The significant assumptions applied by management in estimating the fair value of the acquired intangible assets included income projections and discount rates.

The principal considerations for our determination that performing procedures relating to the valuation of acquired intangible assets is a critical audit matter are (1) there was a high degree of auditor judgment and subjectivity in applying procedures relating to the fair value of intangible assets acquired due to the significant judgment by management when developing the estimates and (2) significant audit effort was required in evaluating the significant assumptions relating to the estimates, including the income projections and discount rates. In addition, the audit effort involved the use of professionals with specialized skill and knowledge to assist in performing these procedures and evaluating the audit evidence obtained.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included, among others, reading the purchase agreements, and testing management's process for estimating the fair value of intangible assets. Testing management's process included evaluating the appropriateness of the valuation models, testing the completeness, accuracy, and relevance of underlying data used in the models, and testing the reasonableness of significant assumptions, including the income projections and discount rates. Evaluating the reasonableness of the income projections involved considering the current performance of the acquired businesses, the consistency with external market and industry data, and whether these assumptions were consistent with other evidence obtained in other areas of the audit.

***Intangible Assets Impairment Assessments***

As described in Notes 3 and 6 to the consolidated financial statements, the Company has goodwill and intangible assets of $24.8 million at December 31, 2022. In most cases, no directly observable market inputs are available to measure the fair value to determine if the asset is impaired. Therefore, an estimate is derived indirectly and is based on net present value techniques utilizing post-tax cash flows and discount rates. The estimates that management used in calculating the net present values depend on assumptions specific to the nature of the management service activities with regard to the amount and timing of projected future cash flows; long-term forecasts; actions of competitors (competing services), future tax and discount rates.

The principal considerations for our determination that performing procedures relating to the intangible assets impairment assessment is a critical audit matter are the significant judgment by management when developing the net present value of the intangible assets. This in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management's significant assumptions related to the amount and timing of projected future cash flows and the discount rate.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing management's process for developing the fair value estimate; evaluating the appropriateness of the net present value techniques; testing the completeness and accuracy of underlying data used in the model; and evaluating the significant assumptions used by management, including the amount and timing of projected future cash flows and the discount rate. Evaluating management's assumptions related to the amount and timing of projected future cash flows and the discount rate involved evaluating whether the assumptions used by management were reasonable considering the current and past performance of the intangible assets and whether these assumptions were consistent with evidence obtained in other areas of the audit.

*/s/ Daszkal Bolton LLP*

Daszkal Bolton LLP

We have served as the Company's auditor since 2021

Fort Lauderdale, Florida

March 31, 2023

**SMART FOR LIFE, INC. CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2022 AND 2021**

---

| | | |
|:---|:---|:---|
|  | **December 31,<br> 2022** | **December 31,<br> 2021** |
| **ASSETS** | | |
| Current assets: |  |  |
| &nbsp;&nbsp;&nbsp;Cash | $69714 | $205093 |
| &nbsp;&nbsp;&nbsp;Accounts receivable, net | 561894 | 388958 |
| &nbsp;&nbsp;&nbsp;Inventory | 2665501 | 3392544 |
| &nbsp;&nbsp;&nbsp;Prepaid expenses and other current assets | 306867 | 352909 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total current assets | 3603976 | 4339504 |
| Property and equipment, net | 482219 | 523044 |
| Intangible assets, net | 20936258 | 14420900 |
| Goodwill | 1342000 | 1342000 |
| Deposits and other assets | 109638 | 61877 |
| Operating lease right-of-use assets | 2672866 | 1923082 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total other assets | 25542981 | 18270903 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total assets | $29146957 | $22610407 |
| **LIABILITIES AND STOCKHOLDERS' DEFICIT** |  |  |
| Current liabilities: |  |  |
| &nbsp;&nbsp;&nbsp;Accounts payable | $4123837 | $1991788 |
| &nbsp;&nbsp;&nbsp;Accrued expenses | 1888013 | 2066087 |
| &nbsp;&nbsp;&nbsp;Accrued expenses, related parties | 947951 | 371319 |
| &nbsp;&nbsp;&nbsp;Due to related parties, net |  | 325966 |
| &nbsp;&nbsp;&nbsp;Deferred revenue | 662879 | 681786 |
| &nbsp;&nbsp;&nbsp;Preferred stock dividends payable | 600750 | 355417 |
| &nbsp;&nbsp;&nbsp;Lease liability, current | 303819 | 384530 |
| &nbsp;&nbsp;&nbsp;Debt, current, net of debt discounts | 6616273 | 10967855 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total current liabilities | 15143522 | 17144748 |
| Long-term liabilities: |  |  |
| &nbsp;&nbsp;&nbsp;Lease liability, noncurrent | 2423446 | 1570388 |
| &nbsp;&nbsp;&nbsp;Debt, noncurrent | 13941973 | 9986009 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total long-term liabilities | 16365419 | 11556397 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total liabilities | 31508941 | 28701145 |
| Commitments and contingencies |  |  |
| Stockholders' Deficit |  |  |
| &nbsp;&nbsp;&nbsp;Preferred Stock, $.0001 par value, 10,000,000 shares authorized and 1,000 and 8,000 shares outstanding as of December 31, 2022 and 2021, respectively |  |  |
| &nbsp;&nbsp;&nbsp;Series A Convertible Preferred Stock, $.0001 par value, 8,000 shares authorized, 1,000 and 8,000 shares issued and outstanding as of December 31, 2022 and 2021, respectively |  | 1 |
| &nbsp;&nbsp;&nbsp;Common Stock, $.0001 par value, 100,000,000 shares authorized, 36,103,067 and 13,937,500 issued and outstanding as of December 31, 2022 and 2021, respectively | 3610 | 1394 |
| &nbsp;&nbsp;&nbsp;Additional paid in capital | 42626821 | 8922467 |
| &nbsp;&nbsp;&nbsp;Accumulated deficit | (44992415) | (15014600) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total stockholders' deficit | (2361984) | (6090738) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total liabilities and stockholders' equity | $29146957 | $22610407 |

---

*The accompanying notes are an integral part of these consolidated financial statements*

 

**SMART FOR LIFE, INC. CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021**

---

| | | |
|:---|:---|:---|
|  | **December 31,<br> 2022** | **December 31,<br> 2021** |
| Revenues |  |  |
| &nbsp;&nbsp;&nbsp;Products | $14331482 | $8330571 |
| &nbsp;&nbsp;&nbsp;Advertising | 3434879 | 692022 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total revenues | 17766361 | 9022593 |
| Cost of revenues |  |  |
| &nbsp;&nbsp;&nbsp;Products | 10327956 | 5596247 |
| &nbsp;&nbsp;&nbsp;Advertising | 2561276 | 528386 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total cost of revenues | 12889232 | 6124633 |
| Gross profit | 4877129 | 2897960 |
| Operating expenses |  |  |
| &nbsp;&nbsp;&nbsp;General and administrative | 6321672 | 2948466 |
| &nbsp;&nbsp;&nbsp;Compensation | 6690889 | 3564978 |
| &nbsp;&nbsp;&nbsp;Professional services | 1925713 | 907412 |
| &nbsp;&nbsp;&nbsp;Depreciation and amortization expense | 2145441 | 717925 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total operating expenses | 17083715 | 8138781 |
| Operating loss | (12206586) | (5240821) |
| Other income (expense) |  |  |
| &nbsp;&nbsp;&nbsp;Other (expense) | (8900) | (12782) |
| &nbsp;&nbsp;&nbsp;Consulting fees – related parties | (1471199) |  |
| &nbsp;&nbsp;&nbsp;IPO expenses | (702394) |  |
| &nbsp;&nbsp;&nbsp;Gain on debt extinguishment | 329052 |  |
| &nbsp;&nbsp;&nbsp;Interest (expense) | (15917788) | (2511920) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total other (expense) | (17771229) | (2524702) |
| Loss before income taxes | (29977815) | (7765523) |
| Income tax expense |  |  |
| Net loss | $(29977815) | $(7765523) |
| Series A Preferred Stock dividends | 600750 | 355417 |
| Net loss attributable to common shareholders | (30578565) | (8120940) |
| Weighted average shares outstanding | 30762944 | 13397034 |
| Loss per share | $(.99) | $(0.61) |
| Weighted average shares outstanding | 30762944 | 13397034 |

---

*The accompanying notes are an integral part of these consolidated financial statements*

**SMART FOR LIFE, INC. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021**

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| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **Preferred Stock** | **Preferred Stock** | **Common Stock** | **Common Stock** | | | |
|  | **Shares** | **Amount** | **Shares** | **Amount** | **Additional Paid-In**<br>**Capital** | **Accumulated**<br>**Deficit** |<br>**Total** |
| Balance, December 31, 2020 |  | $— | 13805000 | $1381 | $121870 | $(7249077) | $(7125826) |
| Stock issued for services |  |  | 90000 | 9 | 891 |  | 900 |
| Stock issued for acquisition |  |  | 42500 | 4 | 424996 |  | 425000 |
| Preferred stock, Series A, dividends payable |  |  |  |  | (355417) |  | (355417) |
| Warrants issued in connection with debt |  |  |  |  | 1650128 |  | 1650128 |
| Stock issued for cash | 8000 | 1 |  |  | 7079999 |  | 7080000 |
| Net loss |  |  |  |  |  | (7765523) | (7765523) |
| Balance, December 31, 2021 | 8000 | $1 | 13937500 | 1394 | $8922467 | $(15014600) | $(6090738) |
| Common stock issued for cash with initial public offering |  |  | 1440000 | 144 | 10668316 |  | 10688460 |
| Series A warrants issued in connection with initial public offering |  |  |  |  | 1910743 |  | 1910743 |
| Series B warrants in connection with initial public offering |  |  |  |  | 159229 |  | 159229 |
| Warrants issued in connection with debt |  |  |  |  | 65624 |  | 65624 |
| Common stock issued upon exercise of series B warrants |  |  | 1439230 | 144 | (144) |  |  |
| Common stock issued upon conversion of convertible notes |  |  | 3781995 | 378 | 8165007 |  | 8165385 |
| Common stock issued in connection with acquisition |  |  | 42500 | 4 | (4) |  |  |
| Common stock issued for conversion of accounts payable |  |  | 14723 | 1 | 147222 |  | 147223 |
| Common stock issued for services |  |  | 1127000 | 113 | 922262 |  | 922375 |
| Common stock issued upon conversion of preferred stock | (7000) | (1) | 10499469 | 1050 | (1049) |  |  |
| Common stock issued under future equity agreements |  |  | 2168992 | 217 | 10844743 |  | 10844960 |
| Common stock issued upon option exercise |  |  | 195495 | 20 | (20) |  |  |
| Common stock issued upon conversion of promissory note |  |  | 73267 | 7 | 73720 |  | 73727 |
| Stock issued for cash in private placement |  |  | 1282896 | 128 | 909872 |  | 910000 |
| Stock issued for debt forbearance |  |  | 100000 | 10 | 30490 |  | 30500 |
| Preferred stock Series A dividend payable |  |  |  |  | (245333) |  | (245333) |
| Stock based compensation |  |  |  |  | 53676 |  | 53676 |
| Net loss |  |  |  |  |  | (29977815) | (29977815) |
| Balance, December 31, 2022 | 1000 | $— | 36103067 | $3610 | $42626821 | $(44992415) | $(2361984) |

---

*The accompanying notes are an integral part of these consolidated financial statements*

**SMART FOR LIFE, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021**

---

| | | |
|:---|:---|:---|
|  | **December 31, <br> 2022** | **December 31, <br> 2021** |
| Cash flows from operating activities: |  |  |
| &nbsp;&nbsp;&nbsp;Net loss | $(29977815) | $(7765523) |
| &nbsp;&nbsp;&nbsp;Adjustments to reconcile net loss to net cash used in operating activities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Bad debt expense | 40411 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Debt issuance cost | 2833080 | 621638 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Depreciation and amortization expense | 2145441 | 717925 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Gain on extinguishment of debt | (326567) |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stock-based compensation | 53676 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stock issued for services | 1049795 | 900 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest expense associated with warrants issued with debt | 65624 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest expense associated with future equity agreements | 10844960 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accretion related to right of use asset | 665872 | 53654 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Change in operating assets and liabilities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts receivable, net | (213347) | 94530 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inventory | 727043 | (842049) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prepaid expenses and other current assets | 46042 | (264854) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deposits and other assets | (47761) | (24680) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts payable | 2463903 | 734134 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accrued expenses | 337311 | 1012897 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accrued expenses, related parties | 576632 | 208204 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Repayment of right of use asset | (643309) |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred revenue | (18907) | 487766 |
| Net cash used in operating activities | (9377916) | (4965458) |
| &nbsp;&nbsp;&nbsp;Cash flows from investing activities: |  |  |
| &nbsp;&nbsp;&nbsp;Cash paid for acquisition of DSO |  | (6000000) |
| &nbsp;&nbsp;&nbsp;Cash paid for acquisition of Ceautamed | (3000000) |  |
| &nbsp;&nbsp;&nbsp;Cash paid for acquisition of Nexus |  | (2100000) |
| &nbsp;&nbsp;&nbsp;Additions to property and equipment | (64456) | (141383) |
| &nbsp;&nbsp;&nbsp;Net cash used in investing activities | (3064456) | (8241383) |
| Cash flows from financing activities: |  |  |
| &nbsp;&nbsp;&nbsp;Receipts from related parties |  | 1367400 |
| &nbsp;&nbsp;&nbsp;Payments to related parties | (196413) | (1087523) |
| &nbsp;&nbsp;&nbsp;Proceeds from initial public offering | 12684739 |  |
| &nbsp;&nbsp;&nbsp;Proceeds from issuance of common stock | 910001 |  |
| &nbsp;&nbsp;&nbsp;Proceeds from private placement |  | 7080000 |
| &nbsp;&nbsp;&nbsp;Proceeds from convertible notes and notes payable | 9797275 | 7418969 |
| &nbsp;&nbsp;&nbsp;Repayments on convertible notes and notes payable | (10888609) | (1851860) |
| &nbsp;&nbsp;&nbsp;Net cash provided by financing activities | 12306993 | 12926986 |
| Net decrease in cash | (135379) | (279855) |
| Cash, beginning of year | 205093 | 484948 |
| Cash, end of year | $69714 | $205093 |
| **Supplemental disclosure of cash flow information:** |  |  |
| &nbsp;&nbsp;&nbsp;Interest paid | $4112081 | $937034 |
| **Non-cash investing and financing activities:** |  |  |
| &nbsp;&nbsp;&nbsp;Stock issued for conversion of accounts payable | $147223 | $— |
| &nbsp;&nbsp;&nbsp;Stock issued for conversion of convertible notes and interest | $8165385 | $— |
| &nbsp;&nbsp;&nbsp;Debt issued for acquisition of Ceautamed | $5600000 | $— |
| &nbsp;&nbsp;&nbsp;Equipment obtained with financing | $190278 | $— |
| &nbsp;&nbsp;&nbsp;Issuance of common stock for acquisition of GSP | $— | $425000 |
| &nbsp;&nbsp;&nbsp;Non-cash acquisition of Doctors Scientific Organica | $— | $6000000 |
| &nbsp;&nbsp;&nbsp;Non-cash acquisition of Nexus Offers | $— | $3800000 |

---

*The accompanying notes are an integral part of these consolidated financial statements*

 

**SMART FOR LIFE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2022 AND 2021**

**Note 1 — Description of Business**

Smart for Life, Inc., formerly Bonne Santé Group, Inc. ("SMFL"), is a Delaware corporation which was formed on February 2, 2017. Structured as a global holding company, it is engaged in the development, marketing, manufacturing, acquisition, operation and sale of a broad spectrum of nutraceutical and related products with an emphasis on Health & Wellness.

On March 8, 2018, SMFL acquired 51% of Millenium Natural Manufacturing Corp. and Millenium Natural Health Products, Inc. On October 8, 2019, SMFL entered into an agreement to acquire the remaining 49% of these companies, subject to certain conditions which were subsequently met. On September 30, 2020, the name of Millenium Natural Manufacturing Corp. was changed to Bonne Sante Natural Manufacturing, Inc. ("BSNM"), and on November 24, 2020, Millenium Natural Health Products Inc. was merged into BSNM. Based in Doral, Florida, BSNM operates a 22,000 square-foot FDA-certified manufacturing facility. It manufactures nutritional products for a significant number of customers.

On July 1, 2021, SMFL acquired Doctors Scientific Organica, LLC d/b/a Smart for Life, Oyster Management Services, Ltd., Lawee Enterprises, L.L.C. and U.S. Medical Care Holdings, L.L.C. On August 27, 2021, SMFL transferred all of the equity interests of Oyster Management Services, Ltd., Lawee Enterprises, L.L.C. and U.S. Medical Care Holdings, L.L.C. to Doctors Scientific Organica, LLC. On May 19, 2022, SMFL acquired Lavi Enterprises, LLC. On the same date, SMFL transferred all of the equity interests of Lavi Enterprises, LLC to Doctors Scientific Organica, LLC. On December 13, 2022, Oyster Management Services, Ltd. was converted to a limited liability company known as Oyster Management Services, L.L.C. As a result of the foregoing, Oyster Management Services, L.L.C., Lawee Enterprises, L.L.C., U.S. Medical Care Holdings, L.L.C. and Lavi Enterprises, LLC are now wholly owned subsidiaries of Doctors Scientific Organica, LLC (collectively, "DSO"). Based in Riviera Beach, Florida, DSO operates a 30,000 square-foot FDA-certified manufacturing facility. DSO manufactures and sells weight management foods and related products. Additionally, DSO provides manufacturing services for other customers.

On August 24, 2021, Smart for Life Canada Inc. ("DSO Canada") was established as a wholly owned subsidiary of Doctors Scientific Organica, LLC in Canada. SMFL Canada sells retail products through a retail store location in Montreal Canada and the same location also acts as distribution center for international direct to consumer and big box customers. It maintains inventory and employees at this location.

On November 8, 2021, SMFL acquired Nexus Offers, Inc. ("Nexus"). Nexus is a network platform in the affiliate marketing space. Affiliate marketing is an advertising model in which a product vendor compensates third-party digital marketers to generate traffic or leads for the product vendor's products and services. The third-party digital marketers are referred to as affiliates, and the commission fee incentivizes them to find ways to promote the products being sold by the product vendor. Based in Miami, Florida, Nexus operates virtually.

On December 6, 2021, SMFL acquired GSP Nutrition Inc. ("GSP"). GSP is a sports nutrition company that offers nutritional supplements for athletes and active lifestyle consumers under the Sports Illustrated Nutrition brand. Based in Miami, Florida, GSP operates virtually.

On July 29, 2022, SMFL acquired Ceautamed Worldwide, LLC and its wholly-owned subsidiaries Wellness Watchers Global, LLC and Greens First Female LLC (collectively, "Ceautamed"). Ceautamed is based in Boca Raton, Florida and owns the Greens First line of branded products which have been specifically marketed to the healthcare provider sector.

On August 15, 2022, SMFL entered into a joint venture with a seller of Ceautamed to form Smart Acquisition Group, LLC. This company was formed to expand M&A growth initiatives through the identification, negotiation, financing and acquisition of companies by SMFL.

**SMART FOR LIFE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2022 AND 2021**

**Note 2 — Summary of Significant Accounting Policies**

 ****

***Principles of Consolidation***

The consolidated financial statements reflect the consolidated operations of SMFL and its wholly owned subsidiaries BSNM, DSO, DSO Canada, Nexus, GSP and Ceautamed (collectively the "Company") and are prepared in the United States Dollars in accordance with generally accepted accounting principles in the United States of America ("GAAP"). Intercompany balances and transactions have been eliminated in consolidation.

 ****

***Reclassifications***

Certain prior period amounts have been reclassified to conform with the current year presentation.

 ****

***Liquidity, Capital Resources and Going Concern***

The Company's consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has suffered recurring losses from operations and has a working capital deficiency of $11.5 million. These conditions raise substantial doubt about the Company's ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Management believes that current available resources will not be sufficient to fund the Company's planned expenditures over the next 12 months. Accordingly, the Company will be dependent upon the raising of additional capital through placement of common stock and/or debt financing in order to implement its business plan. There is no assurance that the Company will be successful with future financing ventures, and the inability to secure such financing may have a material adverse effect on the Company's financial condition. These consolidated financial statements do not include any adjustments to the amounts and classifications of assets and liabilities that might be necessary should the Company be unable to continue as a going concern.

 ****

***Use of Estimates***

The preparation of the consolidated financial statements in conformity with 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 consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. These estimates include, among other items, assessing the collectability of receivables, the realization of deferred taxes, useful lives and recoverability of tangible and intangible assets, assumptions used in the valuation of options, the computation of revenue based on the proportional delivery of services, and accruals for commitments and contingencies. Some of these estimates can be subjective and complex and, consequently, actual results could differ materially from those estimates.

 **

***Fair Value Measurements***

 **

Fair value is the exchange price to sell an asset or transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. The Company uses market data or assumptions market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs may be readily observable, corroborated by market data, or generally unobservable. The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs.

Recurring Fair Value Measurements

The Company has no financial assets and liabilities that were accounted for at fair value on a recurring basis as of December 31, 2022 or 2021.

Non-Recurring Fair Value Measurements

The Company has certain assets that are measured at fair value on a non-recurring basis including those described in Note 6 —Intangible Assets, and are adjusted to fair value only when the carrying values are more than the fair values. The categorization of the framework used to price the assets is considered a Level 3 measurement due to the subjective nature of the unobservable inputs used to determine the fair value.

Fair Value of Other Financial Instruments

Certain nonfinancial assets and liabilities are measured at fair value on a non-recurring basis and are subject to fair value adjustments in certain circumstances, such as when there is evidence of impairment. The estimated fair value of financial instruments is determined using the best available market information and appropriate valuation methodologies. Considerable judgment is necessary, however, in interpreting market data to develop the estimates of fair value. Accordingly, the estimates presented are not necessarily indicative of the amounts that the Company could realize in a current market exchange, or the value that ultimately will be realized upon maturity or disposition. The use of different market assumptions may have a material effect on the estimated fair value amounts. The following methods and assumptions were used to estimate the fair value of financial instruments:

Cash and cash equivalents: The carrying amount of these assets approximates fair value because of the short maturity of these instruments.

Other long-term debt: The Wallace Convertible Promissory Note is not actively traded and is considered a Level 3 instrument. The Company believes the current carrying value of this debt approximates its fair value.

 ****

**SMART FOR LIFE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2022 AND 2021**

***Cash Equivalents***

The Company considers all highly liquid investments purchased with an original maturity of three (3) months or less to be cash equivalents. At December 31, 2022 and 2021, there were no cash equivalents.

 ****

***Accounts Receivable and Allowance for Doubtful Accounts***

The Company's allowance for doubtful accounts represents the Company's estimate for uncollectible receivables based on a review of specific accounts and the Company's historical collection experience. The Company writes off specific accounts based on an ongoing review of collectability, as well as management's past experience with the customers. Accounts receivable are presented net of an allowance for doubtful accounts of $57,581 and $17,170 at December 31, 2022 and 2021, respectively.

 ****

***Inventory, net***

Inventory consists of raw materials, packaging materials, and finished goods and is valued at the lower of cost (first-in, first-out) (replacement cost or net realizable value). An allowance for inventory obsolescence is provided for slow moving or obsolete inventory to write down historical cost to net realizable value. The Company primarily performs its manufacturing for functional foods and nutraceuticals in the form of bars, cookies, powders, tablets and capsules.

The allowance for obsolescence is an estimate established through charges to cost of goods sold. Management's judgment in determining the adequacy of the allowance is based upon several factors which include, but are not limited to, analysis of slow-moving inventory, analysis of the selling price of inventory, the predetermined shelf life of the product, and management's judgment with respect to current economic conditions. Given the nature of the inventory, it is reasonably possible the Company's estimate of the allowance for obsolescence will change in the near term.

 ****

***Property and Equipment***

Property and equipment are recorded at cost. Expenditures for major betterments and additions are charged to the asset accounts, while replacements, maintenance and repairs which do not improve or extend the lives of the respective assets are charged to expense as incurred. The Company provides for depreciation and amortization over the estimated useful lives of various assets using the straight-line method ranging from 3-5 years.

 ****

***Intangible Assets***

In accordance with ASC Topic 350, *Intangibles—Goodwill and Other,* the Company reviews intangible assets at least annually for impairment. In connection with any such review, if the recorded value of intangible assets is greater than its fair value, they are written down and charged to results of operations. Intangible assets (excluding goodwill) are assessed at each reporting date for indications that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Company makes an estimate of the asset's recoverable amount. The asset's recoverable amount is the higher of an asset's or cash-generating unit's fair value less costs of disposal and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset or a group of assets exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or the group of assets.

Intangible assets and goodwill consist of customer relationships, non-compete agreements, license agreements, goodwill, and intellectual property acquired in the acquisitions of BSNM, DSO, Nexus, GSP and Ceautamed. The Company amortizes intangible assets with finite lives on a straight-line basis over their estimated useful lives which ranges from 3 to 15 years.

 **

***Goodwill***

 **

The Company allocates goodwill to reporting units based on the reporting unit expected to benefit from the business combination. The Company evaluates its reporting units on an annual basis and, if necessary, reassign goodwill using a relative fair value allocation approach. Goodwill is tested for impairment at the reporting unit level (operating segment or one level below an operating segment) on an annual basis and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. These events or circumstances could include a significant change in the business climate, legal factors, operating performance indicators, competition, or sale or disposition of a significant portion of a reporting unit.

In accordance with ASC Topic 350, *Intangibles—Goodwill and Other,* the Company reviews intangible assets at least annually for impairment. In connection with any such review, if the recorded value of intangible assets is greater than its fair value, they are written down and charged to results of operations. Application of the goodwill impairment test requires judgment, including the identification of reporting units, assignment of assets and liabilities to reporting units, assignment of goodwill to reporting units, and determination of the fair value of each reporting unit. The fair value of each reporting unit is estimated primarily through the use of a discounted cash flow methodology. This analysis requires significant judgments, including estimation of future cash flows, which is dependent on internal forecasts, estimation of the long-term rate of growth for our business, estimation of the useful life over which cash flows will occur, and determination of our weighted average cost of capital.

The estimates used to calculate the fair value of a reporting unit change from year to year based on operating results, market conditions, and other factors. Changes in these estimates and assumptions could materially affect the determination of fair value and goodwill impairment for each reporting unit.

In connection with the acquisition of DSO on July 1, 2021, the Company recognized goodwill which had a balance of $1,342,000 as of December 31, 2022.

 ****

***Long-Lived Assets***

The Company assesses potential impairments to its long-lived assets when there is evidence that events or changes in circumstances indicate that the carrying amount of an asset may not be recovered. An impairment loss is recognized when the undiscounted cash flows expected to be generated by an asset (or group of assets) is less than its carrying amount. Any required impairment loss is measured as the amount by which the asset's carrying value exceeds its fair value and is recorded as a reduction in the carrying value of the related asset and a charge to operating results. The Company had no impairment of long-lived assets at December 31, 2022 and 2021.

 ****

 **

**SMART FOR LIFE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2022 AND 2021**

 

***Lease Right-of-Use Asset***

The Company records a right-of-use ("ROU") asset and lease liability on the balance sheet for all leases with terms longer than 12 months. Leases are classified either as finance or operating with the classification affecting the pattern of expense recognition.

Lease liabilities are recognized based on the present value of the remaining lease payments and are discounted using the most reasonable incremental borrowing rate. The Company uses the implicit rate when it is readily determinable. Since the Company's lease does not provide an implicit rate, to determine the present value of lease payments, management uses the Company's incremental borrowing rate based on the information available at lease commencement. Leases with a term of 12 months or less at inception are not recorded on the balance sheet and are expensed on a straight- line basis over the lease term.

 **

***Related Parties***

 **

The Company follows ASC 850, *"Related Party Disclosures,"* for the identification of related parties and disclosure of related party transactions (see Note 13).

 ****

***Debt Issuance Cost***

In accordance with ASC 835-30, Other Presentation Matters, the Company has reported debt issuance cost as a deduction from the carrying amount of debt and amortizes these costs using the effective interest method over the term of the debt as interest expense.

 ****

***Revenue Recognition***

The Company evaluates and recognize revenue by:

● identifying the contract(s) with the customer,

● identifying the performance obligations in the contract,

● determining the transaction price,

● allocating the transaction price to performance obligations in the contract; and

● recognizing revenue as each performance obligation is satisfied through the transfer of a promised good or service to a customer (i.e., "transfer of control").

 

*<u>Products (BSNM, DSO, GSP and Ceautamed)</u>*

The Company primarily generates revenues by manufacturing and packaging of nutraceutical products as a contract manufacturer for customers. The majority of the Company's revenue is recognized when it satisfies a single performance obligation by transferring control of its products to a customer. Control is generally transferred when the Company's products are either shipped or delivered based on the terms contained within the underlying contracts or agreements. The Company's general payment terms are short-term in duration. The Company does not have significant financing components or payment terms. The Company did not have any material unsatisfied performance obligations at December 31, 2022 or 2021.

Distribution expenses to transport the Company's products, where applicable, and warehousing expense after manufacture are accounted for within operating expenses.

 

*<u>Marketing (Nexus)</u>*

Nexus generates revenues when sales of listed products are sold by product vendors through its network as a result of the marketing efforts of digital marketers. The products on the network come from several different customers, which pay Nexus a specific amount per sale, the amount of which is dictated by the customer. The revenue is recognized upon the sale of a product by the customer, net of fraudulent traffic or disputed transactions. A portion of the specific amount received by Nexus for that sale is paid out to the digital marketer as a commission, which is recorded in cost of sales. To illustrate the revenue process, a digital marketer logs onto the platform and selects an offer to promote for the day. The platform generates a unique link which the digital marketer distributes either via email or a banner ad. As the link is distributed to the consumer via the marketing efforts of the digital marketer, the consumer visits that link to make a purchase from the customer's website, and when such purchase is complete, revenue is recognized by Nexus and the sale is credited to the digital marketer's Nexus account. The benefit to the digital marketer operating on Nexus' network is that the digital marketer receives a commission without the possibility of a claw back or refund. The customer benefits through increased sales of its products as a result of the marketing efforts of the digital marketers. Nexus' platform acts as the transaction ledger, keeping track of clicks, sales and commissions.

Nexus' general payment terms are short-term in duration. Insertion orders are utilized between Nexus and the customer for each campaign related to a particular product being marketed. The insertion order remains in effect until the customer or Nexus terminates the order, and either party may terminate the order at any time upon 14 days' written notice. The customer is billed weekly for the sales digital marketers have generated for the week. Nexus does not have significant financing components or payment terms. Nexus did not have any material unsatisfied performance obligations at December 31, 2022 or 2021.

 ****

 **

**SMART FOR LIFE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2022 AND 2021**

 

***Freight***

For the years ended December 31, 2022 and 2021, freight costs amounted to $889,493 and $390,804, respectively, and have been recorded in cost of goods sold in the accompanying consolidated statement of operations.

 ****

***Advertising***

Advertising costs are expensed as incurred. Advertising costs for the years ended December 31, 2022 and 2021 were $2,173,594 and $1,019,705, respectively.

 ****

***Paycheck Protection Program***

The Company records Paycheck Protection Program ("PPP") loan proceeds in accordance with ASC 470, Debt. Debt is extinguished when either the debtor pays the creditor or the debtor is legally released from being the primary obligor, either judicially or by the creditor.

 ****

***Stock-based Compensation***

The Company recognizes expense for stock options and warrants granted over the vesting period based on the fair value of the award at the grant date, valued using a Black-Scholes option pricing model to determine the fair market value of the stock options. The Company calculates the amount of tax benefit available by tracking each stock option award on an employee-by-employee basis and on a grant-by-grant basis. The Company then compares the recorded expense to the tax deduction received for each stock option grant.

 ****

***Income Taxes***

The Company accounts for income tax under the provisions of ASC 740, Income Taxes. The Company records a liability for uncertain tax positions when it is probable that a loss has been incurred and the amount can be reasonably estimated. At December 31, 2022 and 2021, the Company has no liabilities for uncertain tax positions. The Company continually evaluates expiring statutes of limitations, audits, proposed settlements, changes in tax law and new authoritative rulings. The Company's tax years subject to examination by tax authorities generally remain open for three (3) years from the date of filing. Due to the continued losses, the Company has recorded a full valuation at the end of December 31, 2022 and 2021.

The provision for income taxes is computed using the asset and liability method, under which deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating losses and tax credit carry forwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates that apply to taxable income in effect for the years in which those tax assets are expected to be realized or settled. The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.

 **

***Recent Accounting Standards Issued Adopted***

 **

In August 2020, the Financial Accounting Standards Board ("FASB") issued ASU 2020-06, ASC Subtopic 470-20 "Debt—Debt with "Conversion and Other Options" and ASC subtopic 815-40 "Hedging—Contracts in Entity's Own Equity". The standard reduced the number of accounting models for convertible debt instruments and convertible preferred stock. Convertible instruments that continue to be subject to separation models are (1) those with embedded conversion features that are not clearly and closely related to the host contract, that meet the definition of a derivative, and that do not qualify for a scope exception from derivative accounting; and (2) convertible debt instruments issued with substantial premiums for which the premiums are recorded as paid-in capital. The amendments in this update are effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. The Company adopted this standard at December 31, 2022 which resulted in no impact in connection with convertible debt instruments for the year ended December 31, 2022.

 ****

***Recent Accounting Standards Issued Not Yet Adopted***

On August 5, 2020, the FASB issued ASU 2020-06,1 which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity's own equity. The ASU is part of the FASB's simplification initiative, which aims to reduce unnecessary complexity in GAAP. This ASU is effective for fiscal years beginning after December 31, 2023. The Company feels the adoption of this ASU will not have a material impact to the financial statements.

 ****

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**SMART FOR LIFE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2022 AND 2021**

**Note 3 — Acquisitions**

 ****

***Acquisition of Ceautamed***

On March 14, 2022, the Company entered into securities purchase agreement, which was amended on July 29, 2022, to acquire Ceautamed. On July 29, 2022, the acquisition was completed.

Pursuant to the terms of the securities purchase agreement, as amended, the Company acquired Ceautamed for an aggregate purchase price of $8,600,000. The purchase price consists of (i) $3,000,000 in cash, of which $1,000,000 was previously paid by the Company and $2,000,000 was paid at closing, (ii) secured subordinated convertible promissory notes in the aggregate principal amount of $2,150,000; (iii) secured subordinated promissory notes in the aggregate principal amount of $2,150,000 and (iv) secured subordinated promissory notes in the aggregate principal amount of $1,300,000.

The table below summarizes the value of the total consideration given in the transaction.

---

| | |
|:---|:---|
|  | **Amount** |
| Cash issued | $3000000 |
| Debt issued | 5600000 |
| Total consideration | $8600000 |

---

Under the acquisition method of accounting outlined in ASC 805, the identifiable assets acquired and liabilities assumed in the acquisitions are recorded at their acquisition-date fair values and are included in the Company's consolidated financial position.

The following table summarizes the preliminary purchase price allocation for the assets acquired and liabilities assumed in connection with the acquisition of Ceautamed.

---

| | |
|:---|:---|
|  | **Amount** |
| Tangible assets acquired | $635223 |
| Liabilities assumed | (392529) |
| Intangible assets | 8357306 |
| Net assets acquired | $8600000 |

---

The intangible assets acquired from Ceautamed are comprised of the following:

---

| | | |
|:---|:---|:---|
|  | **Useful life<br> in years** | **Amount** |
| Non-compete agreements | 3 | $785530 |
| Customer contracts | 10 | 7186577 |
| Intellectual property | 10 | 385199 |
|  |  | $8357306 |

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**SMART FOR LIFE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2022 AND 2021**

***Proforma***

The following unaudited supplemental proforma financial information reflects the combined results of operations had the Ceautamed acquisition along with the acquisitions completed during 2021 had occurred at the beginning of 2021. The proforma information reflects certain adjustments related to the acquisitions including adjusted amortization and depreciation expense based on the fair values of the assets acquired. The proforma combined results of operations are as follows:

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| | | |
|:---|:---|:---|
|  | **Year Ended<br> December 31, <br> 2022** | **Year Ended<br> December 31, <br> 2021** |
| Net sales | $19596961 | $22643109 |
| Net income (loss) | $(29742915) | $(11183002) |
| Earnings (loss) per share, basic and diluted | $(0.99) | $(0.83) |
| Weighted average shares outstanding, basic and diluted | 30762944 | 13397034 |

---

**Note 4 — Inventory**

Inventory consisted of the following at December 31:

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| | | |
|:---|:---|:---|
|  | **2022** | **2021** |
| Raw materials | $644202 | $452583 |
| Work in Progress | 946884 | 1029111 |
| Finished goods | 1074415 | 1910850 |
|  | 2665501 | 3392544 |
| Less: allowance for obsolescence |  |  |
|  | $2665501 | $3392544 |

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**Note 5 — Property and Equipment**

Property and equipment consisted of the following at December 31:

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| | | | |
|:---|:---|:---|:---|
|  | **Estimated<br> Useful Lives<br> (in Years)** | **2022** | **2021** |
| Furniture and fixtures | 7 | $9139 | $9139 |
| Equipment – Manufacturing | 5 | 1342702 | 1102239 |
| Building & Equipment | 5 | 3840 | 193 |
| Leasehold improvements | 2.5 | 90099 | 71539 |
|  |  | 1445780 | 1183110 |
| Less: accumulated depreciation and amortization |  | (963561) | (660066) |
| Property and equipment, net |  | $482219 | $523044 |

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Depreciation and amortization expense for the years ended December 31, 2022 and 2021 totaled $303,493 and $231,741, respectively.

**SMART FOR LIFE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2022 AND 2021**

**Note 6 — Intangible Assets**

Intangible assets consisted of the following at December 31:

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| | | | |
|:---|:---|:---|:---|
|  | **Estimated<br> Useful Lives<br> (in Years)** | **2022** | **2021** |
| Customer contracts | 10 | $17046076 | $9859499 |
| Developed technology | 15 | 1570000 | 1570000 |
| Non-compete agreements | 3 | 1595530 | 810000 |
| Patents | 5 | 230000 | 230000 |
| Tradename | 15 | 2010000 | 2010000 |
| Intellectual property | 10 | 385199 |  |
| Licenses agreements | 5 | 584220 | 584220 |
| Total intangible assets |  | 23421025 | 15063917 |
| Less: amortization |  | (2484767) | (642819) |
| Intangibles, net |  | $20936258 | $14420900 |

---

During 2022, identifiable intangible assets increased by $8.4 million related to the acquisition of Ceautamed and declined by $1.8 million due to amortization. During 2021, identifiable intangible assets increased by $14.6 million related to acquisitions and declined by $.5 million due to amortization.

Amortization (included in depreciation and amortization expense) for the years ended December 31, 2022 and 2021 was $1,841,948 and $486,184, respectively.

The future amortization is as follows:

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| | |
|:---|:---|
| **Years Ending December 31:** | |
| 2023 | $2440871 |
| 2024 | 2440871 |
| 2025 | 2331770 |
| 2026 | 2125115 |
| 2027 | 2006901 |
| Thereafter | 9586393 |
| Total | $20936258 |

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**Note 7 — Lease Commitments**

The Company enters into lessee arrangements consisting of operating leases for premises. The Company had four operating leases for premises as of December 31, 2022 and 2021.

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***Discount Rate Applied to Property Operating Lease***

To determine the present value of minimum future lease payments for its operating lease at January 1, 2020, the Company was required to estimate a rate of interest that it would have to pay to borrow on a collateralized basis over a similar term for an amount equal to the lease payments in a similar economic environment (the "incremental borrowing rate").

The lease asset and liability were calculated utilizing a discount rate of 12%, according to the Company's elected policy.

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 **

**SMART FOR LIFE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2022 AND 2021**

 

***Right of Use Asset and Liability***

The right of use asset and liability is included in the accompanying consolidated balance sheets as follows at December 31:

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| | | |
|:---|:---|:---|
|  | **2022** | **2021** |
| <u>Asset</u> |  |  |
| Right of use asset | $2672866 | $1923082 |
| <u>Liability</u> |  |  |
| Right of use liability, current portion | $303819 | $384530 |
| Right of use liability, net of current portion | 2423446 | 1570388 |
| Total lease liability | $2727265 | $1954918 |

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Minimum lease payments under the operating lease are recognized on a straight-line basis over the term of the lease.

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| | |
|:---|:---|
| **For the Year Ended December 31:** | |
| 2023 | $614828 |
| 2024 | 633038 |
| 2025 | 651829 |
| 2026 | 671213 |
| 2027 | 658622 |
| Thereafter | 636777 |
| Total payments | 3866306 |
| Less: amount representing interest | (1139042) |
| Lease obligation, net | 2727265 |
| Less: current portion | (303819) |
| Lease obligation – long-term | $2423446 |

---

Rent expense for the years ended December 31, 2022 and 2021 was $431,330 and $417,669, respectively.

**Note 8 — Debt**

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***Original Issue Discount Subordinated Debentures***

In June 2022, the Company commenced an offering of original issue discount subordinated debentures. As of December 31, 2022, the Company has completed four closings of this offering and issued debentures in the aggregate principal amount of $3,911,770. The debentures contain an original issue discount of 15%, or an aggregate original issue discount of $586,770. As a result, the total purchase price was $3,325,000. The debentures bear interest at a rate of 17.5% per annum. The outstanding principal amount and all accrued interest is due and payable on the earlier of (i) the completion of the Company's next equity financing in which it receives gross proceeds in excess of $20 million, (ii) twenty-four months after the date of issuance or (iii) within 30 days after election of repayment from the holder so long as the election is after the 6-month anniversary of the debenture. The Company may voluntarily prepay the debentures in whole or in part without premium or penalty. The debentures contain customary events of default for a loan of this type. The debentures are unsecured and are subordinated in right of payment to the prior payment in full of all senior indebtedness and are *pari passu* in right of payment to any other unsecured indebtedness incurred by the Company in favor of any third party. As of December 31, 2022, the outstanding principal balance of the debentures was $3,911,770 and debt issuance cost was $459,075. ****

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**SMART FOR LIFE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2022 AND 2021**

 

***Original Issue Discount Secured Subordinated Note***

On July 29, 2022, the Company entered into a securities purchase agreement with an accredited investor, pursuant to which it sold an original issue discount secured subordinated note in the principal amount of $2,272,727 to such investor. The note contains an original issue discount of 12%, or an original issue discount of $272,727. As a result, the total purchase price was $2,000,000, the proceeds of which were used to fund the acquisition of Ceautamed. The note shall bear interest at the rate of 16% per annum and matures on July 29, 2027. The outstanding principal and all accrued interest shall be amortized on a 60-month straight-line basis and payable in accordance with the amortization schedule set forth on Exhibit A to the note. The Company may prepay the principal and all accrued and unpaid interest on the note without penalty, in whole or in part; provided however, in no event before January 15, 2023, unless with the explicit prior written approval of the holder. The note contains customary events of default for a loan of this type. The note is guaranteed by BSNM, DSO, Nexus, GSP and Ceautamed and is secured by a security interest in all of the assets of the Company and such guarantors; provided that such security interest is subordinate to the rights of the lenders under any senior indebtedness (as defined in the note). As of December 31, 2022, the outstanding principal balance of the note was $2,242,853 and debt issuance cost was $250,025.

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***12% Unsecured Subordinated Convertible Debentures***

On November 5, 2021, the Company entered into a securities purchase agreement with certain investors, pursuant to which it sold 12% unsecured subordinated convertible debentures in the aggregate principal amount of $2,250,000 to such investors for gross proceeds of $2,214,000, the proceeds of which were used to fund the acquisition of Nexus. Interest at a rate of 12% per annum accrued on the principal balance of the debentures from the date of issuance until February 14, 2022, the date that the registration statement related to the IPO was declared effective by the Securities and Exchange Commission (the "IPO Date"). On December 9, 2022, the notes and accrued interest were converted into 2,542,501 shares of the Company's common stock at a conversion price of $1.00.

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***Acquisition Notes***

On July 1, 2021, the Company issued a 6% secured subordinated convertible promissory note in the principal amount of $3,000,000 to a related party, Sasson E. Moulavi, in connection with the acquisition of DSO. This note accrued interest at 6% per annum and was to mature on July 1, 2024. As of December 31, 2021, the outstanding principal balance of this note was $3,000,000. This note and accrued interest automatically converted into 623,200 shares of common stock concurrent with the closing of the IPO on February 18, 2022.

On July 1, 2021, the Company issued a 6% secured subordinated promissory note in the principal amount of $3,000,000 to a related party, Sasson E. Moulavi, in connection with the acquisition of DSO. This note accrues interest at 6% per annum and the outstanding principal and interest will be amortized on a straight-line basis and are payable quarterly in accordance with the amortization schedule attached to the note, with all amounts due and payable on July 1, 2024. The Company may prepay all or any portion of this note any time prior to maturity without premium or penalty. This note contains customary covenants and events of default for a loan of this type, including if a default occurs under any senior secured indebtedness to banks and other financial institutions or private equity funds, and is secured by a security interest in all of the assets of DSO; provided that such security interest is subordinate to the rights of the lenders under any such senior secured indebtedness. As of December 31, 2022, the outstanding principal balance of this note was $3,050,000.

On November 8, 2021, the Company issued a 5% secured subordinated convertible promissory note in the principal amount of $1,900,000 to related parties, Justin Francisco and Steven Rubert, in connection with the acquisition of Nexus. This note accrued interest at 5% per annum and was to mature on November 8, 2024. As of December 31, 2021, the outstanding principal balance of this note was $1,900,000. This note and accrued interest automatically converted into 386,460 shares of common stock concurrent with the closing of the IPO on February 18, 2022.

**SMART FOR LIFE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2022 AND 2021**

On November 8, 2021, the Company issued a 5% secured subordinated promissory note in the principal amount of $1,900,000 to related parties, Justin Francisco and Steven Rubert, in connection with the acquisition of Nexus. This note accrues interest at 5% per annum and the outstanding principal and interest will be amortized on a straight-line basis and are payable quarterly in accordance with the amortization schedule attached to the note, with all amounts due and payable on November 8, 2024. The Company may prepay all or any portion of this note any time prior to maturity without premium or penalty. The note contains customary covenants and events of default for a loan of this type, including if a default occurs under any senior secured indebtedness to banks and other financial institutions or private equity funds, and is secured by a security interest in all of the Company's assets; provided that such security interest is subordinate to the rights of the lenders under any such senior secured indebtedness. As of December 31, 2022, the outstanding principal balance of this note was $1,900,000.

On July 29, 2022, the Company issued secured subordinated convertible promissory notes in the aggregate principal amount of $2,150,000 in connection with the acquisition of Ceautamed, which are partially with a related party. The notes shall bear interest at the rate of 5% per annum with all principal and accrued interest being due and payable in one lump sum on July 29, 2025; provided that upon an event of default (as defined in the notes), such interest rate shall increase to 10%. The notes are convertible at the option of the holder into common stock at a conversion price of $6.25; provided that the holder may not elect to convert a portion of the outstanding principal in an amount less than the lesser of $200,000 or the remaining outstanding principal. The notes contain customary covenants and events of default for loans of this type, including upon any default under the senior indebtedness (as defined in the notes). The notes are guaranteed by Ceautamed and are secured by a security interest in all of the assets of such guarantors; provided that such security interest is subordinate to the rights of the lenders under any such senior indebtedness. As of December 31, 2022, the outstanding principal balance of these notes was $2,150,000.

On July 29, 2022, the Company issued secured subordinated promissory notes in the aggregate principal amount of $2,150,000 in connection with the acquisition of Ceautamed, which are partially with a related party. The notes shall bear interest at the rate of 5% per annum and mature on July 29, 2025; provided that upon an event of default (as defined in the notes), such interest rate shall increase to 10%. The outstanding principal and all accrued interest shall be amortized on a five-year straight-line basis and payable quarterly in accordance with the amortization schedule set forth on Exhibit A to the notes. The Company may redeem all or any portion of the notes at any time without premium or penalty. The notes contain customary covenants and events of default for loans of this type, including upon any default under the senior indebtedness (as defined in the notes). The notes are guaranteed by Ceautamed and are secured by a security interest in all of the assets of such guarantors; provided that such security interest is subordinate to the rights of the lenders under any such senior indebtedness. As of December 31, 2022, the outstanding principal balance of these notes was $2,150,000.

On July 29, 2022, the Company issued secured subordinated promissory notes in the aggregate principal amount of $1,300,000 in connection with the acquisition of Ceautamed, which are partially with a related party. The notes bore interest at the rate of 5% per annum with all principal and accrued interest being due and payable in one lump sum ninety (90) days from the date of the note; provided that upon an event of default (as defined in the notes), such interest rate shall increase to 10%. On November 28, 2022, the Company entered into letter agreements with the holders of most of the notes to amend the terms of these notes. Pursuant to letter agreements, the parties agreed to extend the maturity date to June 1, 2023 and agreed to a seven month payment schedule, with the first payment due December 1, 2022. The parties also agreed to increase the default interest rate from 10% to 15%. The Company also agreed that if an event of default (as defined in the notes) has occurred and is continuing, then the Company shall not create any senior indebtedness (as defined in the notes) without the consent of the holders of a majority of the principal amount of the notes. In exchange for the agreement of the holders to enter into the letter agreements, the Company agreed to pay certain amendment fees as more particularly described in the letter agreements. The Company is in the process of negotiating a similar extension of one remining note in the principal amount of $100,000. The Company may redeem all or any portion of the notes at any time without premium or penalty. The notes contain customary covenants and events of default for loans of this type, including upon any default under the senior indebtedness (as defined in the notes). The notes are guaranteed by Ceautamed and are secured by a security interest in all of the assets of such guarantors; provided that such security interest is subordinate to the rights of the lenders under any such senior indebtedness. As of December 31, 2022, the outstanding principal balance of these notes was $1,100,000.

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**SMART FOR LIFE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2022 AND 2021**

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***Other Promissory Notes and Cash Advances***

 

*<u>Promissory Notes</u>*

On July 1, 2021, the Company entered into a loan agreement with Diamond Creek Capital, LLC for a term loan in the principal amount of up to $3,000,000. The loan bears interest at a rate of 15.0% per annum, provided that upon an event of default, such rate shall increase by 5%. The loan was due and payable on the earlier of July 1, 2022 or upon completion of the IPO. The Company repaid $1,325,000 of the principal balance and $27,604 of the interest from the proceeds of the IPO. In connection with such repayment, the lender agreed that the remaining loan is due and payable on July 1, 2023. The loan is secured by all of the Company's assets and contains customary events of default. As of December 31, 2022, the outstanding principal balance of this note was $1,125,000.

On May 10, 2021, the Company issued a convertible promissory note in the principal amount of $73,727 to Bevilacqua PLLC, the Company's outside securities counsel. This note accrues interest at 15% per annum and matures on May 10, 2022. The note is convertible at the option of the holder into shares of common stock at a conversion price that is equal to forty percent (40%) of either (i) the price per share paid by investors in the Company's next priced equity financing or (ii) the volume weighted average price of the common stock for the five trading days from and including the date that the conversion notice is given. As of December 31, 2021, the outstanding principal balance of this note was $73,727. On April 8, 2022, the holder converted the outstanding balance of this note into 73,267 shares of common stock.

On December 18, 2020, the Company entered into a loan and security agreement with Peah Capital, LLC for a term loan in the principal amount of up to $1,500,000, which was amended on April 27, 2021 to increase the loan amount to $1,625,000. In connection with such amendment, on April 27, 2021, the Company issued a second amended and restated promissory note to Peah Capital, LLC in the principal amount of $1,625,000. The loan bears interest at a rate of 17.5% per annum, provided that upon an event of default, such rate shall increase to 25% per annum. The loan was repaid in full on July 29, 2022.

Since inception, the Company has issued other promissory notes to various lenders. These notes accrued interest at rates between 12-17%. These notes were unsecured and contain customary events of default. As of December 31, 2021, the outstanding principal balance of these notes was $5,993,720. These notes were repaid in full upon closing of the IPO with the exception of a note which has an outstanding balance of $200,000 at December 31, 2022. This note accrues interest at 12% and is due and payable on April 1, 2023.

On February 25, 2021, the Company issued a convertible promissory note in the principal amount of $500,000. This note accrued interest at 15% per annum and was to mature on March 31, 2023. As of December 31, 2021, the outstanding principal balance of this note was $500,000. This note automatically converted into 229,834 shares of common stock concurrent with the closing of the IPO on February 18, 2022.

On November 2, 2022, the Company issued a promissory note to a board member in the principal amount of $50,000. This note bears interest at a rate of 12% and is due on demand. At December 31, 2022, the outstanding amount was $20,000.

On December 6, 2022, the Company issued a promissory note to a board member in the principal amount of $30,000. This note bears interest at a rate of 12% and is due on demand. At December 31, 2022, the outstanding amount was $30,000.

On December 21, 2022, the Company issued a promissory note to a board member in the principal amount of $100,000. This note bears interest at a rate of 12% and is due on demand. At December 31, 2022, the outstanding amount was $100,000.

 

*<u>Cash Advances</u>*

In December 2021, the Company entered into a cash advance agreement for $340,000 with a required repayment amount of $493,500, which requires weekly payments of approximately $20,562. At December 31, 2022, the outstanding amount was $0.

In January 2022, the Company entered into a cash advance agreement for $300,000 with a required repayment amount of $414,000, which requires weekly payments of approximately $14,786. At December 31, 2022, the outstanding amount was $0.

**SMART FOR LIFE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2022 AND 2021**

In June 2022, the Company entered into a cash advance agreement for $341,150 with a required repayment amount of $490,000, which requires weekly payments of approximately $19,738. At December 31, 2022, the outstanding amount was $67,624.

In July 2022, the Company entered into a cash advance agreement for $650,000 with a required repayment amount of $897,750, which requires weekly payments of approximately $40,806. At December 31, 2022, the outstanding amount was $474,690.

In August 2022, the Company entered into a cash advance agreement for $100,000 with a required repayment amount of $146,260, which requires weekly payments of approximately $6,200. At December 31, 2022, the outstanding amount was $35,460.

In September 2022, the Company entered into a cash advance agreement for $243,750 with a required repayment amount of $372,500, which requires weekly payments of approximately $15,000. At December 31, 2022, the outstanding amount was $272,500.

In October 2022, the Company entered into cash advance agreements for $250,000 with a required repayment amount of $303,000. At December 31, 2022, the outstanding amount was $258,000.

In November 2022, the Company entered into cash advance agreements for $592,236 with a required repayment amount of $994,460, which requires weekly payments of approximately $52,422. At December 31, 2022, the outstanding amount was $608,122.

In November 2022, the Company entered into a cash advance agreement for $379,585 which included $110,986 in cash and a refinance of a prior advance of $283,264, with a required repayment amount of $622,085, which requires weekly payments of approximately $34,560. At December 31, 2022, the outstanding amount was $312,991.

In December 2022, the Company entered into cash advance agreements for $293,000 with a required repayment amount of $439,207, which requires weekly payments of approximately $39,905. At December 31, 2022, the outstanding amount was $323,853.

 

*<u>Equipment Financing Loan</u>*

In May 2022, the Company entered into an equipment financing loan for $146,765 used for the purchase of equipment within BSNM's operations. The loan bears interest at 10.18% and matures on April 1, 2027. At December 31, 2022, the outstanding amount was $133,211.

In August 2022, the Company entered into an equipment financing loan for $35,050 used for the purchase of equipment within BSNM's operations. The loan bears interest at 10.18% and matures on August 1, 2027. At December 31, 2022, the outstanding amount was $33,433.

In July 2022, the Company entered into an equipment financing loan for $8,463 used for the purchase of equipment within Ceautamed's operations. At December 31, 2022, the outstanding amount was $7,181.

 

 

***SMART FOR LIFE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2022 AND 2021***

 

*<u>Revolving Lines of Credit</u>*

In 2021, DSO entered into two revolving lines of credit with a bank, which permitted borrowings up to $1,176,000, and bears interest at 8.99% and 7.99%. As of December 31, 2022, the outstanding principal balance of this lines of credit was $670,096.

In August 2022, Ceautamed entered into a revolving line of credit with a bank, which permitted borrowing up to $60,000, and bears interest at 45.09%. As of December 31, 2022, the outstanding principal balance of this line of credit was $45,703.

In September 2022, DSO entered into a revolving line of credit with a bank, which permitted borrowings up to $70,000, and bears interest at 9.49%. As of December 31, 2022, the outstanding principal balance of this lines of credit was $59,253. ****

 ****

***EIDL Loan***

In June 2020, pursuant to the economic injury disaster loan ("EIDL") program under the under the provisions of the Coronavirus Aid, Relief and Economic Security Act (the "CARES Act"), the Company entered into a promissory note with the U.S. Small Business Administration (the "SBA") with a principal amount of $300,000. This loan matures in 30 years and bears interest at a rate of 3.75%. The loan is secured by all of the Company's assets. As of December 31, 2021, the outstanding principal balance of this loan was $300,000. As of December 31, 2022, the outstanding principal balance of this loan was $300,000.

 ****

***PPP Loans***

In May 2020, the Company received $239,262 in PPP loans under the CARES Act. This loan bears interest at a rate of 1% per annum and matures in May 2025. In June 2022, the loans were forgiven under the provisions of the CARES Act. As of December 31, 2022, the outstanding principal balance of this loan was $0.

In February 2021, the Company received an additional $261,164 in PPP loans under the CARES Act. This loan bears interest at a rate of 1% per annum and matures in April 2025. In June 2022, $63,707 was forgiven under the provision of the CARES Act. As of December 31, 2022, the outstanding balance of this loan was $197,457.

 ****

***<u>Total Debt</u>***

Debt is comprised of the following components as of December 31, 2022:

---

| | |
|:---|:---|
| Original issue discount subordinated debentures | $3911770 |
| Original issue discount secured subordinated note | 2242853 |
| Acquisition notes | 10765993 |
| Promissory notes and cash advances | 3328784 |
| Revolving lines of credit | 775052 |
| Equipment financing loan | 173825 |
| EIDL loan | 300000 |
| PPP loans | 197457 |
|  | 21695733 |
| Debt issuance costs | (1137488) |
| Total | $20558246 |

---

**SMART FOR LIFE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2022 AND 2021**

The future contractual maturities of the debt are as follows:

---

| | |
|:---|:---|
| **For the Year Ended December 31:** | |
| 2023 | $6616273 |
| 2024 | 8585839 |
| 2025 | 4203647 |
| 2026 | 518775 |
| 2027 | 421432 |
| Thereafter | 212280 |
| Total | $20558246 |

---

**Note 9 — Concentrations of Credit Risks**

 ****

***Credit Risks***

Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of cash and accounts receivable. The Company maintains bank accounts with several financial institutions. Concentrations of credit risk with respect to accounts receivable are limited to the dispersion of customers across different industries and geographic regions.

 ****

***Cash***

The Company places its cash with high credit quality financial institutions. At December 31, 2022 and 2021, the Company had cash balances of $0 in excess of the Federal Deposit Insurance Corporation coverage of $250,000 per institution. The Company has not experienced any losses in such accounts.

 ****

***Major Customers***

For the year ended December 31, 2022, the Company had two significant customers representing an aggregate of 8% of revenues and one that makes up 20% of the accounts receivable balance. The Company's officers are closely monitoring the relationships with all customers.

 ****

***Major Vendors***

The Company does not have any suppliers which represent a significant portion of its supply chain. The Company's officers are closely monitoring the relationships with all suppliers.

**Note 10 — Income Taxes**

The Company has evaluated the positive and negative evidence in assessing the realizability of its deferred tax assets. This assessment included the evaluation of scheduled reversals of deferred tax liabilities, estimates of projected future taxable income and tax planning strategies to determine which deferred tax assets are more likely than not to be realized in the future.

The Company records a liability for uncertain tax positions when it is probable that a loss has been incurred and the amount can be reasonably estimated. Interest and penalties related to income tax matters, if any, would be recognized as a component of income tax expense. At December 31, 2022 and 2021, the Company had no liabilities for uncertain tax positions. The Company continually evaluates expiring statutes of limitations, audits, proposed settlements, changes in tax law and new authoritative rulings. Currently, the tax years subsequent to 2018 are open and subject to examination by the taxing authorities.

At December 31, 2022, the Company had net operating loss carry forwards for federal income tax purposes of approximately $14.3 million, which will be available to offset future taxable income.

**SMART FOR LIFE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2022 AND 2021**

**Note 11 — Stockholders' Equity** 

 ****

***Preferred Stock***

On June 29, 2021, the Company filed a certificate of designation with the Delaware Secretary of State to establish its series A convertible preferred stock. The Company designated a total of 8,000 shares of its preferred stock as series A convertible preferred stock. The series A convertible preferred stock has the following voting powers, designations, preferences and relative rights, qualifications, limitations or restrictions:

 

*Dividend Rights.* Prior to February 14, 2022 (the IPO Date), holders of series A convertible preferred stock were entitled to receive cumulative dividends at a rate of 7.5% of the stated value per share ($1,000, subject to adjustment) per annum, which increased to 15% per annum after November 23, 2021 and 24% per annum after December 31, 2021. Holders of series A convertible preferred stock are no longer entitled to dividends. The dividend accrual was 600,750 as of December 31, 2022.

 

*Liquidation Rights*. Upon any liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary, or upon a change of control, the holders of series A convertible preferred stock shall be entitled to receive out of the assets of the Company the same amount that a holder of common stock would receive if the series A convertible preferred stock were fully converted (disregarding for such purposes any conversion limitations) to common stock which amounts shall be paid *pari passu* with all holders of common stock.

 

*Voting Rights*. The series A convertible preferred stock have no voting rights except as set forth below. As long as any shares of series A convertible preferred stock are outstanding, the Company shall not, without the affirmative vote of the holders of a majority of the then outstanding shares of the series A convertible preferred stock, (a) alter or change adversely the powers, preferences or rights given to the series A convertible preferred stock or alter or amend the certificate of designation, (b) authorize or create any class of stock ranking as to dividends, redemption or distribution of assets upon a liquidation senior to, or otherwise *pari passu* with, the series A convertible preferred stock, (c) amend the certificate of incorporation or other charter documents in any manner that adversely affects any rights of the holders of series A convertible preferred stock, or (d) enter into any agreement with respect to any of the foregoing.

 

*Conversion Rights*. Each share of series A convertible preferred stock is convertible, at any time and from time to time from at the option of the holder thereof, into that number of shares of common stock determined by dividing the stated value of such share of series A convertible preferred stock (plus any accrued but unpaid dividends thereon) by the conversion price. The conversion price is initially equal $0.6667 (subject to adjustments). Notwithstanding the foregoing, the Company shall not effect any conversion, and a holder shall not have the right to convert, any portion of the series A convertible preferred stock to the extent that, after giving effect to the conversion, such holder (together with such holder's affiliates) would beneficially own in excess of 4.99% of the number of shares of common stock outstanding immediately after giving effect to the issuance of shares issuable upon the conversion. This limitation may be waived (up to a maximum of 9.99%) by the holder and in its sole discretion, upon not less than sixty-one (61) days' prior notice to the Company.

On July 1, 2021, the Company completed a private placement in which it sold an aggregate of 6,000 shares of series A convertible preferred stock and warrants for the purchase of an aggregate of 8,999,552 shares of common stock to certain investors for gross proceeds of $6,000,000. On August 18, 2021, the completed an additional closing of this private placement in which it sold 2,000 shares of series A convertible preferred stock and warrants for the purchase of 2,999,852 shares of common stock for gross proceeds of $2,000,000.

During the first quarter of 2022, the holders converted an aggregate of 7,000 shares of series A convertible preferred stock into 10,499,469 shares of common stock.

 ****

***Common Stock***

On April 21, 2021, the Company issued 45,000 shares of common stock for compensation valued at $4 per share.

On April 21, 2021, the Company issued 20,000 shares of common stock for services rendered valued at $2 per share.

**SMART FOR LIFE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2022 AND 2021**

On February 16, 2022, the Company entered into an underwriting agreement with Dawson James Securities, Inc., as representative of the several underwriters named on Schedule I thereto, relating to its IPO of units, each unit consisting of one share of common stock, a series A warrant to purchase one share of common stock and a series B warrant to purchase one share of common stock. Pursuant to the underwriting agreement, the Company agreed to sell 1,440,000 units to the underwriters, at a purchase price per unit of $9.10 (the offering price to the public of $10.00 per unit minus the underwriters' discount), and also agreed to grant to the underwriters a 45-day option to purchase up to 216,000 additional shares of common stock, up to 216,000 additional series A warrants, and/or up to 216,000 additional series B warrants, in any combination thereof, at a purchase price to the public of $9.98 per share and $0.01 per warrant, less underwriting discounts and commissions, solely to cover over-allotments, if any.

On February 18, 2022, the closing of the IPO was completed. At the closing, the underwriters partially exercised the option and purchased 206,390 series A warrants and 206,390 series B warrants. Therefore, the Company sold 1,440,000 shares of common stock, 1,646,390 series A warrants and 1,646,390 series B warrants for total gross proceeds of $14,404,128. After deducting the underwriting commission and expenses, the Company received net proceeds of $12,738,288.

On February 18, 2022, the Company issued 386,460 shares of common stock upon the conversion of the 5% secured subordinated convertible promissory note in the principal amount of $1,900,000 along with interest of $32,500 issued to Justin Francisco and Steven Rubert in connection with the acquisition of Nexus.

On February 18, 2022, the Company issued 623,200 shares of common stock upon the conversion of the 6% secured subordinated convertible promissory note in the principal amount of $3,000,000 along with interest of $116,000 issued to Sasson E. Moulavi in connection with the acquisition of DSO.

On February 18, 2022, the Company issued 229,834 shares of common stock upon the conversion of the convertible promissory note in the principal amount of $500,000 along with interest of $74,583 issued to East West Capital LLC.

On February 18, 2022, the Company issued 42,500 additional shares of common stock to the stockholders of GSP and 14,723 additional shares of common stock to certain vendors of GSP in accordance with the terms of the contribution and exchange agreement described above. Based on the IPO share allocation of the unit, it was determined that the Company would issue the additional 42,500 shares.

On February 18, 2022, the Company issued an aggregate of 2,168,492 shares of common stock to various lenders pursuant to future equity agreements which required the Company to issue shares of common stock upon closing of the IPO, which resulted in an interest expense of $10,844,960.

In February through March 2022, the Company issued 1,182,558 shares of common stock upon the conversion of the convertible promissory note in the principal amount of $2,250,000 along with interest of $292,500 issued to several debt holders.

On March 10, 2022, the Company granted restricted stock awards for an aggregate of 877,000 shares of common stock to certain directors, officers, and consultants. A total of 677,000 of these shares vested in full on the date of grant. The remaining 200,000 shares, which were granted to independent directors, vest monthly over a one-year period which were recorded as a prepaid of $46,900 at December 31, 2022. A total of 547,000 of these shares were granted under the 2020 Stock Incentive Plan described below. The remaining 330,000 were granted under the 2022 Equity Incentive Plan described below. The shares, valued at $822,626, were based on the closing trading price per share of $0.938 on the date of the grant.

On April 8, 2022, the Company issued 73,267 shares of common stock to Bevilacqua PLLC upon conversion of its convertible promissory note in the principal amount of $73,727 (see Note 9).

On June 9, 2022, the Company issued 195,495 shares of common stock to a director upon a cashless exercise of a stock option.

On December 8, 2022, the Company entered into a securities purchase agreement with certain accredited investors pursuant to which the Company issued to the investors an aggregate of 1,282,896 shares of common stock and prefunded warrants to purchase an aggregate of 1,574,248 shares of common stock for an aggregate purchase price of $1,000,000, or $0.35 per underlying share, with a $90,000 placement fee resulting in $910,000 in net proceeds.

On December 14, 2022, the Company issued 100,000 shares of common stock to a debt holder in exchange for a debt forbearance. The shares, valued at $30,500, were based on the closing trading price per share of $0.35 on the date of the grant.

**SMART FOR LIFE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2022 AND 2021**

During the year ended December 31, 2022, a total of 1,439,230 of the series B warrants were exercised on a cashless basis and the Company issued 1,439,230 shares of common stock upon such exercise.

During the year ended December 31, 2022, the Company issued an aggregate of 10,499,469 shares of common stock upon the conversion of 7,000 shares of series A convertible preferred stock.

 ****

***Stock Options and Warrants***

In September 2020, the Company adopted its 2020 Incentive Plan (the "2020 Plan") under which the Company is authorized to issue awards for up to 2,000,000 shares of common stock to directors, officers, employees, and consultants who provide services to the Company. Awards that may be granted include incentive stock options, non-qualified stock options and awards of restricted stock.

At December 31, 2022 and 2021, there were 7,505 and 550,000 shares of common stock available for issuance under the 2020 Plan, respectively. On April 13, 2021, the Company granted an option for the purchase of 200,000 shares of common stock at an exercise price of $0.01 to Ronald Altbach, a director. On June 9, 2022, Mr. Altbach exercised this option on a cashless basis and the Company issued 195,495 shares of common stock to Mr. Altbach. The Company did not issue any other stock options under the 2020 Plan during the years ended December 31, 2022 and 2021.

In January 2022, the Company adopted its 2022 Equity Inventive Plan (the "2022 Plan") under which the Company is authorized to issue awards for up to 2,000,000 shares of common stock to directors, officers, employees, and consultants who provide services to the Company. Awards that may be granted include incentive stock options, non-qualified stock options, stock appreciation rights, restricted awards, performance share awards and performance compensation awards. At December 31, 2022, there were 142,000 shares of common stock available for issuance under the 2022 Plan.

On August 12, 2022, the Company issued stock options to employees under the 2022 Plan for an aggregate of 1,328,000 shares of common stock. The stock options have an exercise price of $0.63 per share, will vest quarterly over a three-year period and expire ten (10) years after the date of issuance; provided that an option granted to Alfonso J. Cervantes, Jr., the Company's Executive Chairman, for the purchase of 300,000 shares of common stock has an exercise price of $0.693 per share and expires five (5) years after the date of issuance. The Company did not issue any other stock options under the 2022 Plan during the year ended December 31, 2022.

The Company recognized $53,676 and $0 of compensation expense related to the vesting of options during the years ended December 31, 2022 and 2021, respectively.

The series A warrants sold in the IPO are exercisable until the fifth anniversary of the issuance date at an exercise price equal to $7.00 per share and may be exercised on a cashless basis if the issuance of common stock upon exercise of the warrants is not covered by an effective registration statement. The exercise price and number of shares of common stock issuable upon exercise of the series A warrants may be adjusted in certain circumstances, including in the event of a stock dividend, extraordinary dividend on or recapitalization, reorganization, merger, or consolidation.

The series B warrants sold in the IPO are exercisable until the fifth anniversary of the issuance date at an exercise price equal to $10.00 per share and may be exercised on a cashless basis, whereby the holder will receive one share of common stock for each series B warrant exercised. As of December 31, 2022, 1,439,230 of the series B warrants were exercised on a cashless basis and the Company issued 1,439,230 shares of common stock upon such exercise.

**SMART FOR LIFE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2022 AND 2021**

The following is a summary of options granted, exercised, forfeited and outstanding during the year ended December 31, 2022:

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **2022-Stock Options** | **2022-Stock Options** | **2022-Warrants** | **2022-Warrants** |
|  | **Number of <br> Options** | **Weighted <br> Average <br> Exercise <br> Price** | **Number of <br> Warrants** | **Weighted <br> Average <br> Exercise <br> Price** |
| Outstanding at beginning of year | 1450000 | $0.01 | 14802006 | $5.18 |
| Granted | 1328000 | 0.63 | 11021560 | 2.67 |
| Exercised | 195495 | 0.01 | 1439230 | 1.49 |
| Forfeited | 4505 | 0.01 | 275988 |  |
| Outstanding at December 31, | 2578000 | $0.33 | 24108348 | $4.49 |
| Exercisable at December 31, | 1250000 |  | 24108348 |  |
| Available for issuance at December 31, | 149505 |  |  |  |

---

During 2022, there were 1,328,000 stock options granted. At December 31, 2022, total future compensation costs related to non-vested stock options, less estimated forfeitures, are approximately $598,004 and will be recognized over the next three years.

The following is a summary of options granted, exercised, forfeited and outstanding during the year ended December 31, 2021:

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **2021-Stock Options** | **2021-Stock Options** | **2021-Warrants** | **2021-Warrants** |
|  | **Number of <br> Options** | **Weighted <br> Average <br> Exercise <br> Price** | **Number of <br> Warrants** | **Weighted <br> Average <br> Exercise <br> Price** |
| Outstanding at beginning of year | 1250000 | $0.01 | 1382441 | $0.01 |
| Granted | 200000 | 0.01 | 13419565 | 5.78 |
| Exercised |  |  |  |  |
| Forfeited |  |  |  |  |
| Outstanding at December 31, | 1450000 | $0.01 | 1480157 | $5.18 |
| Exercisable at December 31, | 1450000 |  | 1480157 |  |
| Available for issuance at December 31, | 550000 |  |  |  |

---

During 2021, there were 200,000 stock options granted. At December 31, 2021, total future compensation costs related to non-vested stock options, less estimated forfeitures, are approximately $3,000 and will be recognized over the next three years. During 2020, there were 1,250,000 stock options granted.

 ****

***Valuation Assumptions for Stock Options and Warrants***

The fair value of each option was estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions:

---

| | | |
|:---|:---|:---|
|  | **2022** | **2021** |
| Risk-free interest rate | 2.90% | 0.36% |
| Expected volatility | 80% | 77% |
| Expected life (years) | 5 | 5 |
| Dividend yield | 0% | 0% |

---

The expected life represents the weighted average period of time that options granted are expected to be outstanding giving consideration to vesting schedules and the Company's historical exercise patterns. The risk-free rate is based on the U.S. Treasury yield constant maturity in effect at the time of grant for periods corresponding with the expected life of the option.

**SMART FOR LIFE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2022 AND 2021**

**Note 12 — Commitments and Contingencies**

 ****

***COVID-19 Pandemic***

On March 11, 2020, the World Health Organization classified the COVID-19 outbreak as a pandemic, based on the rapid increase in exposure globally. The full impact of the COVID-19 outbreak continues to evolve as of the date of these consolidated financial statements. As such, it is uncertain as to the full magnitude that the pandemic will have on the Company's consolidated financial condition, liquidity, and future results of operations. Management is actively monitoring the impact of the global situation on its consolidated financial condition, liquidity, operations, suppliers, industry, and workforce. Given the daily evolution of the COVID-19 outbreak and the global responses to curb its spread, the Company is not able to estimate the effects of the COVID-19 outbreak on its results of consolidated financial condition, liquidity or operations for 2023.

 ****

***Legal Matters***

From time to time, the Company may become subject to threatened and/or asserted claims arising in the ordinary course of business. Management is not aware of any matters, either individually or in the aggregate, that are reasonably likely to have a material adverse effect on the Company's financial condition, results of operations or liquidity.

 ****

***Employment Agreements***

In November 2020, the Company hired a Chief Executive Officer for a 3-year term. Compensation ranges from $200,000 to $350,000. Compensation includes annual bonuses of 10-20% if certain milestones are met and issuance of 250,000 shares of restricted common stock of which 83,333 shares vest at 1 year anniversary and remaining amount over last 2 years of the agreement. In April 2022, the Chief Executive Officer resigned from his position.

In January 2021, the Company hired a Chief Financial Officer for a 3-year term. Compensation ranges from $175,000 to $250,000. Compensation includes annual bonuses of 0-20% if certain milestones are met.

In April 2022, the Board of Directors appointed the Company's current President and a member of the Board of Directors as the new Chief Executive Officer of the Company. In connection with this transition of position there was no modification to his employment agreement or compensation.

**Note 13 — Related Party Transactions**

The Company entered into debt with related parties which are reflected in Note 8.

The Company is party to a management services agreement with Trilogy Capital Group, LLC ("Trilogy"), a company controlled by the Company's Executive Chairman. As of December 31, 2022 and 2021, the amounts due to Trilogy are $0 and $325,966, respectively, which are presented net of amounts due from Trilogy. For the year ended December 31, 2022 and 2021, the Company paid Trilogy $1,476,475 and $0, respectively, for services rendered under a consulting agreement which are reflected in the statement of operation as consulting fees – related parties.

Prior to September 30, 2021, DSO rented its operating facility from Scientific Real Estate Holdings, LLC, a non-consolidating company owned by its former sole member. Rent paid to the related party for the year ended December 31, 2021 was $153,798.

Prior to October 1, 2021, DSO sold its products to Control de Poids / Smart for Life-Montreal, which was considered a related party due to common ownership by its former sole member. During the year ended December 31, 2021, sales to this related party were $25,384.

In November 2022, the Company amended its debt agreement with a related party whereby the Company agreed to pay the related party $50,000 in consideration of the amendment. The amount is outstanding at December 31, 2022.

In December 2022, the Company amended its debt agreement with a related party whereby the Company agreed to pay the related party $108,000 in consideration of the amendment. The amount is outstanding at December 31, 2022.

**Note 14 — Subsequent Events**

In accordance with ASC 855-10, the Company has reviewed its operations subsequent to December 31, 2022 to the date these consolidated financial statements were issued, and has determined that, except as set forth below, it does not have any material subsequent events to disclose in these financial statements.

Subsequent to December 31, 2022, the Company issued an aggregate of 3,074,682 shares of common stock upon exercises of warrants.

On February 14, 2023, the Company filed for Employee Retention Credits for an aggregate amount of approximately $1,635,000.

Subsequent to December 31, 2022, the Company issued additional original discount subordinated debentures in the aggregate principal amount of $1,046,471. The debentures contain an original issue discount of 15%, or an aggregate original issue discount of $156,971. As a result, the funds received was $889,500. The debentures bear interest at a rate of 17.5% per annum.

On March 24, 2023, the Company executed a non-binding amended term sheet with a premium health supplement company to acquire such company. The term sheet calls for total consideration of approximately $16 million to be paid in a combination of cash and preferred stock.

**SIGNATURES**

Pursuant to the requirements of Section 13 or 15(d) 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.

---

| | | |
|:---|:---|:---|
| Date: March 31, 2023 | **SMART FOR LIFE, INC.** | **SMART FOR LIFE, INC.** |
|  | /s/ Darren C. Minton | /s/ Darren C. Minton |
|  | Name: | Darren C. Minton |
|  | Title: | Chief Executive Officer |
|  |  | *(Principal Executive Officer)* |
|  | /s/ Alan B. Bergman | /s/ Alan B. Bergman |
|  | Name: | Alan B. Bergman |
|  | Title: | Chief Financial Officer |
|  |  | *(Principal Financial and Accounting Officer)* |

---

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

---

| | | |
|:---|:---|:---|
| **SIGNATURE** | **TITLE** | **DATE** |
| /s/ Darren C. Minton | Chief Executive Officer and Director | March 31, 2023 |
| Darren C. Minton | (principal executive officer) |  |
| /s/ Alan B. Bergman | Chief Financial Officer | March 31, 2023 |
| Alan B. Bergman | (principal financial and accounting officer) |  |
| /s/ Alfonso J. Cervantes, Jr. | Executive Chairman | March 31, 2023 |
| Alfonso J. Cervantes, Jr. |  |  |
| /s/ Robert S. Rein | Director | March 31, 2023 |
| Robert S. Rein |  |  |
| /s/ Arthur S. Reynolds | Director | March 31, 2023 |
| Arthur S. Reynolds |  |  |
| /s/ Roger Conley Wood | Director | March 31, 2023 |
| Roger Conley Wood |  |  |

---

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## Exhibit 4.1

**Exhibit 4.1**

**DESCRIPTION OF SECURITIES**

**General** 

The following description summarizes important terms of the classes of our capital stock as of December 31, 2022. This summary does not purport to be complete and is qualified in its entirety by the provisions of our certificate of incorporation, the certificate of designation for our series A convertible preferred stock and our bylaws, which have been filed as exhibits to this annual report.

Our authorized capital stock consists of 100,000,000 shares of common stock, par value $0.0001 per share, and 10,000,000 shares of preferred stock, par value $0.0001 per share.

As of December 31, 2022, there were 36,103,067 shares of common stock and 1,000 shares of series A convertible preferred stock issued and outstanding.

**Common Stock** 

 

*Dividend Rights*. Subject to preferences that may be applicable to any then-outstanding preferred stock, holders of common stock are entitled to receive ratably those dividends, if any, as may be declared from time to time by the board of directors out of legally available funds.

 

*Liquidation Rights*. In the event of our liquidation, dissolution or winding up, holders of common stock will be entitled to share ratably in the net assets legally available for distribution to stockholders after the payment of all of our debts and other liabilities and the satisfaction of any liquidation preference granted to the holders of any then-outstanding shares of preferred stock.

 

*Voting Rights*. The holders of common stock are entitled to one vote for each share held of record on all matters submitted to a vote of the stockholders. Under our certificate of incorporation and bylaws, any corporate action to be taken by vote of stockholders other than for election of directors shall be authorized by the affirmative vote of the majority of votes cast. Directors are elected by a plurality of votes. Stockholders do not have cumulative voting rights.

 

*Other Rights*. Holders of common stock have no preemptive, conversion or subscription rights and there are no redemption or sinking fund provisions applicable to the common stock. The rights, preferences and privileges of the holders of common stock are subject to, and may be adversely affected by, the rights of the holders of shares of any series of preferred stock.

**Preferred Stock** 

Our certificate of incorporation authorizes our board to issue up to 10,000,000 shares of preferred stock in one or more series, to determine the designations and the powers, preferences and rights and the qualifications, limitations and restrictions thereof, including the dividend rights, conversion or exchange rights, voting rights (including the number of votes per share), redemption rights and terms, liquidation preferences, sinking fund provisions and the number of shares constituting the series. Our board of directors could, without stockholder approval, issue preferred stock with voting and other rights that could adversely affect the voting power and other rights of the holders of common stock and which could have the effect of making it more difficult for a third party to acquire, or of discouraging a third party from attempting to acquire, a majority of our outstanding voting stock.

 ****

 ****

***Series A Convertible Preferred Stock***

On June 29, 2021, we filed a certificate of designation with the Delaware Secretary of State to establish our series A convertible preferred stock. We designated a total of 8,000 shares of our preferred stock as series A convertible preferred stock. Our series A convertible preferred stock has the following voting powers, designations, preferences and relative rights, qualifications, limitations or restrictions:

 

*Dividend Rights.* Prior to February 14, 2022, the date that the registration statement relating to the initial public offering was declared effective by the SEC (which we refer to as the IPO date), holders of series A convertible preferred stock were entitled to receive cumulative dividends at a rate of 7.5% of the stated value per share ($1,000, subject to adjustment) per annum, which increased to 15% per annum after November 23, 2021 and 24% per annum after December 31, 2021. Holders of series A convertible preferred stock are no longer entitled to dividends.

 

*Liquidation Rights*. Upon any liquidation, dissolution or winding-up of our company, whether voluntary or involuntary, or upon a change of control, the holders of series A convertible preferred stock shall be entitled to receive out of the assets of our company the same amount that a holder of common stock would receive if the series A convertible preferred stock were fully converted (disregarding for such purposes any conversion limitations) to common stock which amounts shall be paid *pari passu* with all holders of common stock.

 

*Voting Rights*. The series A convertible preferred stock have no voting rights except as set forth below. As long as any shares of series A convertible preferred stock are outstanding, we shall not, without the affirmative vote of the holders of a majority of the then outstanding shares of the series A convertible preferred stock, (a) alter or change adversely the powers, preferences or rights given to the series A convertible preferred stock or alter or amend the certificate of designation, (b) authorize or create any class of stock ranking as to dividends, redemption or distribution of assets upon a liquidation senior to, or otherwise *pari passu* with, the series A convertible preferred stock, (c) amend our certificate of incorporation or other charter documents in any manner that adversely affects any rights of the holders of series A convertible preferred stock, or (d) enter into any agreement with respect to any of the foregoing.

 

*Conversion Rights*. Each share of series A convertible preferred stock is convertible, at any time and from time to time from at the option of the holder thereof, into that number of shares of common stock determined by dividing the stated value of such share of series A convertible preferred stock (plus any accrued but unpaid dividends thereon) by the conversion price. The conversion price is initially equal $0.6667 (subject to adjustments). Notwithstanding the foregoing, we shall not effect any conversion, and a holder shall not have the right to convert, any portion of the series A convertible preferred stock to the extent that, after giving effect to the conversion, such holder (together with such holder's affiliates) would beneficially own in excess of 4.99% of the number of shares of common stock outstanding immediately after giving effect to the issuance of shares issuable upon the conversion. This limitation may be waived (up to a maximum of 9.99%) by the holder and in its sole discretion, upon not less than sixty-one (61) days' prior notice to us.

**Options**

As of December 31, 2022, we have issued options to purchase an aggregate of 2,578,000 shares of common stock under the 2020 Plan and 2022 Plan at a weighted average exercise price of $0.33 per share.

**Warrants** 

On December 18, 2020, we issued a warrant for the purchase of 1,292,445 shares of common stock to Peah Capital, LLC. This warrant is exercisable for the period commencing on January 31, 2022 and ending on December 18, 2027; provided that, the warrant will automatically expire and terminate in the event a registration statement covering the resale of all shares issued pursuant a future equity agreement with Peah Capital, LLC has been declared effective by the SEC. The exercise price of this warrant is $0.0001, subject to standard adjustments for stock splits, stock combinations, stock dividends, reclassifications and similar transactions. In addition, in the event that the number of our outstanding shares of common stock is increased prior to the 18-month anniversary of the warrant, the number of shares issuable upon exercise of the warrant shall be automatically increased to represent that number which is 9.9% of the then total outstanding capitalization.

In July and August 2021, we issued warrants for the purchase of an aggregate of 11,999,404 shares of common stock at an exercise price of $6.25. Due to the issuance of common stock in a private placement completed in December 2022 at $0.35 per share, the exercise price of these warrants was reduced to $0.35 per share and the number of shares underlying the warrants was increased to 214,275,076 shares in accordance with the terms of the warrants. The warrants were then amended and restated. The amended and restated warrants expire on August 14, 2027, have an exercise price of $0.35 and may be exercised on a cashless basis if there is no effective registration statement registering the shares issuable upon exercise of the amended and restated warrants; provided that the amended and restated warrants may not be exercised in full until we have sufficient authorized shares to accommodate such exercise. The exercise price is subject to a price-based adjustment for new issuances of securities below the exercise price (subject to certain exceptions), as well as standard adjustments for stock splits, stock dividends, recapitalizations, mergers and similar transactions. In addition to the foregoing, the amended and restated warrants provide that if we combine (including by way of reverse stock split) outstanding shares of common stock into a smaller number of shares and the lowest volume weighted average price of our common stock during the five consecutive trading days commencing on the effective date of such combination is less than the exercise price then in effect, then the exercise price shall be reduced (but in no event increased) to such lower price. The amended and restated warrants also contain a beneficial ownership limitation which provides that we shall not effect any exercise, and a holder shall not have the right to exercise, any portion of a amended and restated warrants to the extent that, after giving effect to the exercise, such holder (together with such holder's affiliates) would beneficially own in excess of 4.99% of the number of shares of common stock outstanding immediately after giving effect to the issuance of shares issuable upon the exercise. This limitation may be waived (up to a maximum of 9.99%) by the holder and in its sole discretion, upon not less than sixty-one (61) days' prior notice to us.

On July 1, 2021, we issued warrants for the purchase of an aggregate of 1,078,173 shares of common stock to Dawson James Securities, Inc. and its designees as partial compensation for services rendered in connection with our private placement of series A convertible preferred stock and loan from Diamond Creek Capital, LLC that were completed on July 1, 2021. These warrants are exercisable for a period of five years at an exercise price of $0.6667 per share, subject to standard adjustments for stock splits, stock combinations, stock dividends, reclassifications, mergers, consolidations, reorganizations and similar transactions, and may be exercised on a cashless basis.

On November 5, 2021, we issued warrants for the purchase of 72,000 shares of common stock to Dawson James Securities, Inc. and its designees as partial compensation for services rendered in connection with our private placement of debentures that was completed on November 5, 2021. Half to these shares, or 36,000 shares, were subsequently forfeited by Dawson James Securities, Inc. These warrants are exercisable for a period of five years at an exercise price of $2.50 per share, subject to standard adjustments for stock splits, stock combinations, stock dividends, reclassifications, mergers, consolidations, reorganizations and similar transactions, and may be exercised on a cashless basis.

In December 2021 and January 2022, we entered into note and warrant purchase agreements with certain investors, pursuant to which we sold to such investors (i) original issue discount secured subordinated promissory notes in the aggregate principal amount of $705,882 and (ii) warrants for the purchase of 120,000 shares of our common stock. These warrants are excisable at any time during the three (3) year period commencing on August 18, 2022, the sixth (6th) month anniversary of the closing of our initial public offering. The exercise price per share is $6.25, subject to standard adjustments for stock splits, stock combinations, stock dividends, reclassifications, mergers, consolidations, reorganizations and similar transactions, and may be exercised on a cashless basis if the market value of our common stock is greater than such exercise price.

On February 18, 2022, we issued series A warrants for the purchase of 1,646,390 shares of common stock in connection with our initial public offering. The series A warrants are exercisable until the fifth anniversary of the issuance date at an exercise price equal to $7.00 per share and may be exercised on a cashless basis if the issuance of common stock upon exercise of the warrants is not covered by an effective registration statement. The exercise price and number of shares of common stock issuable upon exercise of the series A warrants may be adjusted in certain circumstances, including in the event of a stock dividend, extraordinary dividend on or recapitalization, reorganization, merger or consolidation.

On February 18, 2022, we issued series B warrants for the purchase of 1,646,390 shares of common stock in connection with our initial public offering. Most of the series B warrants were subsequently exercised. As of December 31, 2022, series B warrants for the purchase of 207,160 shares of common stock remain outstanding. The series B warrants are exercisable until the fifth anniversary of the issuance date at an exercise price equal to $10.00 per share and may be exercised on a cashless basis. In such event, the aggregate number of shares of common stock issuable in such cashless exercise shall equal the product of (x) the aggregate number of shares of common stock that would be issuable upon exercise of the series B warrant in accordance with its terms if such exercise were by means of a cash exercise rather than a cashless exercise and (y) 1.00.

On December 8, 2022, we issued prefunded warrants to purchase an aggregate of 1,574,248 shares of common stock. The prefunded warrants have a nominal exercise price of $0.0001 (subject to standard adjustments for stock splits, stock dividends, recapitalizations, mergers and similar transactions) and may be exercised on a cashless basis. The prefunded warrants contain a beneficial ownership limitation which provides that we shall not effect any exercise, and a holder shall not have the right to exercise, any portion of a prefunded warrants to the extent that, after giving effect to the exercise, such holder (together with such holder's affiliates) would beneficially own in excess of 4.99% of the number of shares of common stock outstanding immediately after giving effect to the issuance of shares issuable upon the exercise. This limitation may be waived (up to a maximum of 9.99%) by the holder and in its sole discretion, upon not less than sixty-one (61) days' prior notice to us.

On December 8, 2022, we also issued debenture prefunded warrants to purchase an aggregate of 4,721,787 shares of common stock. The debenture prefunded warrants have the same terms as the prefunded warrants; provided that they contain a one-time adjustment which provides that on the date that we complete a reverse split of our outstanding common stock, if the lowest volume weighted average price of our common stock during the five consecutive trading days commencing on such date, or the Market Price, is less than $0.35 (as adjusted for the reverse split), then the number of shares issuable upon exercise of the debenture prefunded warrants shall increase to equal (i) the principal amount plus accrued but unpaid interest of the debentures issued to the holders that was outstanding on the date of conversion thereof divided by the applicable Market Price minus (ii) the number of shares issued upon conversion of the debentures; provided, however, that regardless of the actual Market Price, the Market Price for purposes of this adjustment shall not be less than $0.25.

On December 8, 2022, we issued warrants for the purchase of an aggregate of 228,572 shares of common stock to Dawson James Securities, Inc. and its designees as partial compensation for services rendered in connection with our private placement of common stock and prefunded warrants that was completed on such date. These warrants are exercisable for a period of five years at an exercise price of $0.35 per share, subject to standard adjustments for stock splits, stock combinations, stock dividends, reclassifications, mergers, consolidations, reorganizations and similar transactions, and may be exercised on a cashless basis; provided that such exercise is subject to stockholder approval.

**Convertible Promissory Notes**

On July 29, 2022, we issued secured subordinated convertible promissory notes in the aggregate principal amount of $2,150,000 in connection with the acquisition of Ceautamed. The notes shall bear interest at the rate of 5% per annum with all principal and accrued interest being due and payable in one lump sum on July 29, 2025; provided that upon an event of default (as defined in the notes), such interest rate shall increase to 10%. The notes are convertible at the option of the holder into common stock at a conversion price of $6.25; provided that the holder may not elect to convert a portion of the outstanding principal in an amount less than the lesser of $200,000 or the remaining outstanding principal.

**Anti-takeover Effects of Delaware Law and Charter Provisions**

We have elected not to be governed by Section 203 of the General Corporation Law of the State of Delaware, which prohibits a publicly-held Delaware corporation from engaging in a business combination, except under certain circumstances, with an interested stockholder.

Our certificate of incorporation and bylaws contain certain provisions that may have anti-takeover effects, making it more difficult for or preventing a third party from acquiring control of our company or changing our board of directors and management.

Our certificate of incorporation authorizes our board of directors to issue up to 10,000,000 shares of preferred stock without further stockholder approval. The preferred stock may be issued in one or more series, the terms of which may be determined at the time of issuance by the board of directors without further action by the stockholders. These terms may include preferences as to dividends and liquidation, conversion rights, redemption rights and sinking fund provisions. The issuance of any preferred stock could diminish the rights of holders of our common stock, and therefore could reduce the value of such common stock. In addition, specific rights granted to future holders of preferred stock could be used to restrict our ability to merge with, or sell assets to, a third party. The ability of our board of directors to issue preferred stock could make it more difficult, delay, discourage, prevent or make it more costly to acquire or effect a change-in-control, which in turn could prevent our stockholders from recognizing a gain in the event that a favorable offer is extended and could materially and negatively affect the market price of our common stock.

Our bylaws permit the board of directors to establish the number of directors and fill any vacancies and newly created directorships. These provisions will prevent a stockholder from increasing the size of our board of directors and gaining control of our board of directors by filling the resulting vacancies with its own nominees. In addition, our bylaws provide that no member of our board of directors may be removed from office by our stockholders without cause and, in addition to any other vote required by law, upon the approval of not less than the majority of the total voting power of all of our outstanding voting stock then entitled to vote in the election of directors.

Our bylaws establish an advance notice procedure for stockholder proposals to be brought before an annual meeting of our stockholders, including proposed nominations of persons for election to the board of directors. Stockholders at an annual meeting will only be able to consider proposals or nominations specified in the notice of meeting or brought before the meeting by or at the direction of the board of directors or by a stockholder who was a stockholder of record on the record date for the meeting, who is entitled to vote at the meeting and who has given us timely written notice, in proper form, of the stockholder's intention to bring that business before the meeting. Although our bylaws do not give the board of directors the power to approve or disapprove stockholder nominations of candidates or proposals regarding other business to be conducted at a special or annual meeting, our bylaws may have the effect of precluding the conduct of certain business at a meeting if the proper procedures are not followed or may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect its own slate of directors or otherwise attempting to obtain control of our company.

Furthermore, neither the holders of our common stock nor the holders of our preferred stock have cumulative voting rights in the election of our directors. The combination of the present ownership by a few stockholders of a significant portion of our issued and outstanding common stock and lack of cumulative voting makes it more difficult for other stockholders to replace our board of directors or for a third party to obtain control of our company by replacing its board of directors.

**Transfer Agent and Registrar** 

VStock Transfer, LLC, 18 Lafayette Place, Woodmere, NY 11598, telephone 212-828-8436, is the transfer agent for our common stock.

## Exhibit 10.24

**Exhibit 10.24**

**FIRST AMENDMENT TO LOAN AGREEMENT**

**THIS FIRST AMENDMENT TO THE LOAN AGREEMENT** (this "<u>Amendment</u>"), dated and effective as ofJune 30, 2022, amends the Loan Agreement dated as ofJuly 1, 2021 by and between Smart For Life, Inc., a Delaware corporation ("<u>SFL</u>" or the "<u>Company</u>"), and Diamond Creek Capital, LLC, a Delaware limited liability company ("<u>Lender</u>'') (as amended, the "<u>Loan Agreement</u>"). Capitalized terms used and not otherwise defined herein shall have the meanings ascribed to them in the Loan Agreement (as defined below).

WHEREAS, the Lender, the Company (formerly, Bonne Sante Group, Inc.), Doctors Scientific Organica, LLC, a Florida limited liability company ("<u>DSO</u>"), Bonne Sante Natural Manufacturing, Inc., a Florida corporation ("<u>BSNM</u>"), Nexus Offers, Inc., a Florida company ("<u>Nexus</u>") and GSP Nutrition, Inc., a Delaware corporation ("<u>GSP</u>" and together with the Company, DSO, BSNM, and Nexus the "<u>Borrower</u>"), are parties to (i) the Loan Agreement dated July 1, 2021, and (ii) Security Agreement dated July 1, 2021 (the "<u>Security Agreement</u>" and together with the promissory note and any other agreements relating thereto, the "<u>Loan Agreements</u>").

1. RECITALS

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Il. **WHEREAS,** Borrower and Lender desire to amend certain terms of the Loan Agreement;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;III. **WHEREAS,** the Borrower currently has an outstanding principal balance of $1,175,000 in Loans under the Loan Agreement identified above as ofJune 30, 2022; accrued and unpaid interest on such Loans of $14,687.50 through and including June 30, 2022; an outstanding Monitoring Fee in the amount of$1,000.00 as ofJune 30, 2022; and an earned Success Fee in the amount of $250,000.00 which is due and payable in cash on July l, 2022.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;IV. **NOW, THEREFORE,** in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties, intending to be legally bound, hereby agree as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. <u>Definitions.</u> Section 1.01 ofthe Loan Agreement is hereby amended to delete and replace the following definition:

"<u>Maturity Date</u>" means the earlier of (a) January 1, 2023, and (b) such earlier date on which the Loan is due and payable (whether at stated maturity, by acceleration or otheIWise) in accordance with the terms of this Agreement."

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. <u>Amendments.</u> Section 2.06(c) of tbe Loan Agreement has been amended such that Lender shall receive the balance of the success fee ("<u>Success Fee</u>") equal to $250,000.00 in kind effective July 1, 2022. Specifically, the earned balance of the Success Fee will be added to the outstanding loan balance and accrue interest at the stated Interest Rate and be payable monthly on the first day of each month that the loan remains outstanding. The unamortized portion of the principal balance of the Success Fee shall be payable in cash on the earlier of: (i) the Maturity Date, (ii) any prepayment in full of the Loans, or (iii) a Change in Control.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. <u>Waiver Fee</u>. Lender shall receive a Waiver Fee in the amount of $11,750.00 for agreeing to extend the Loans and agree to the aforementioned amendments. Lender and Borrower agree that the Waiver Fee will be paid from expense deposits previously paid to Lender.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. <u>Reaffirmation</u>. The Loan Agreement, as amended hereby, shall be and remain in full force and effect in accordance with its respective terms and hereby is ratified and confirmed in all respects. Borrower ratifies and reaffirms the continuing effectiveness of all agreements entered into in connection with the Agreement. Borrower confirms that after giving effect to this Amendment, an Event of Default has not occurred and is not continuing.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5. <u>Loan Agreement</u>. Except as expressly amended and modified by this Amendment (and any prior amendments), the Loan Agreement shall remain in full force and effect.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6. <u>Counterparts</u>. This Amendment may be executed in any number of counterparts, any of which may be executed and transmitted by facsimile or electronic mail transmission, and each of which will be deemed to be an original of this Amendment, and all of which, when taken together, shall be deemed to constitute one and the same agreement.

*[signature page follows]*

 

IN WITNESS WHEREOF, the parties hereto have caused this Waiver to be executed and delivered as of the date first above written.

---

| | | | |
|:---|:---|:---|:---|
| **BORROWER:** | **BORROWER:** | **LENDER:** | **LENDER:** |
| **Smart for Life, Inc.,** | **Smart for Life, Inc.,** | **Diamond Creek Capital, LLC** | **Diamond Creek Capital, LLC** |
| a Delaware corporation | a Delaware corporation | a Delaware limited liability company | a Delaware limited liability company |
| By: | /s/ Alfonso J. Cervantes, Jr. | By: | /s/ Thomas P. Harrison |
| Name: | Alfonso J. Cervantes, Jr | Name: | Thomas P. Harrison |
| Title: | Executive Chairman | Title: | Managing Partner |

---

---

| | |
|:---|:---|
| **Bonne Sante Natural Manufacturing, Inc.,** | **Bonne Sante Natural Manufacturing, Inc.,** |
| a Florida corporation | a Florida corporation |
| By: | /s/ Alfonso J. Cervantes, Jr. |
| Name: | Alfonso J. Cervantes, Jr. |
| its: | Executive Chairman |
| **Doctors Scientific Organica, LLC,** | **Doctors Scientific Organica, LLC,** |
| a Florida limited liability company | a Florida limited liability company |
| By: | /s/ Alfonso J. Cervantes, Jr. |
| Name: | Alfonso J. Cervantes, Jr. |
| its: | Executive Chairman |

---

## Exhibit 10.42

**Exhibit 10.42**

**AMENDMENT NO. 1** 

**TO** 

**SMART FOR LIFE, INC.<br> 2022 EQUITY INCENTIVE PLAN**

The Smart for Life, Inc. Equity Incentive Plan (the "**Plan**") is hereby amended as follows:

Section 4.1 of the Plan is hereby amended in its entirety to read as follows:

*"4.1* Subject to adjustment in accordance with **Section 11**, a total of 70,000,000 shares of Common Stock shall be available for the grant of Awards under the Plan. Shares of Common Stock granted in connection with all Awards under the Plan shall be counted against this limit as one (1) share of Common Stock for every one (1) share of Common Stock granted in connection with such Award. During the terms of the Awards, the Company shall keep available at all times the number of shares of Common Stock required to satisfy such Awards."

Except as herein amended, the provisions of the Plan shall remain in full force and effect.

Effective as of March 15, 2023

## Exhibit 19.1

**Exhibit 19.1**

**SMART FOR LIFE, INC.**

**INSIDER TRADING POLICY**

**1.** **PURPOSE** 

This Insider Trading Policy (this "**Policy**") states the policy with respect to transactions in the securities of Smart for Life, Inc. (the "**Company**"), and the handling of confidential information about the Company and other companies with which the Company does business. The Company's Board of Directors has adopted this Policy to promote compliance with federal and state securities laws that prohibit certain persons who are aware of material nonpublic information about a company from (i) trading in securities of that company, or (ii) providing material nonpublic information to other persons who may trade on the basis of that information.

**2.** **PERSONS SUBJECT TO THE POLICY** 

This Policy applies to all members of the Company's Board of Directors (collectively, "**directors**" and each, a "**director**"), officers and employees of the Company and its subsidiaries. The Company may also determine that other persons should be subject to this Policy, such as contractors or consultants who have access to material nonpublic information about the Company. With respect to any person covered by this Policy, this Policy also applies to that person's family members, other members of that person's household, and entities controlled by that person, as described below under "Transactions by Family Members and Others" and "Transactions by Entities That You Influence or Control."

**3.** **TRANSACTIONS SUBJECT TO THE POLICY** 

This Policy applies to transactions in the Company's securities (collectively, "**Company Securities**"), including the Company's common stock, restricted stock, options to purchase common stock, or any other type of security the Company may issue, including (but not limited to) preferred stock, convertible debentures and warrants. In addition, this Policy applies to derivative securities that are not issued by the Company but which relate to Company Securities, such as exchange-traded put or call options or swaps. This Policy similarly applies to transactions in or relating to the securities of certain other companies with which the Company does business.

**4.** **INDIVIDUAL RESPONSIBILITY** 

Persons subject to this Policy have ethical and legal obligations to maintain the confidentiality of information about the Company and to not engage in transactions in Company Securities while in possession of material nonpublic information. Each individual is responsible for making sure that he or she complies with this Policy, and that any family member, household member or related entity whose transactions are subject to this Policy, as discussed below, also comply with this Policy. In all cases, the responsibility for determining whether an individual is in possession of material nonpublic information rests with that individual, and any action on the part of the Company, the Administrator (as defined below) or any other employee or director pursuant to this Policy (or otherwise) does not in any way constitute legal advice or insulate an individual from liability under applicable securities laws. You could be subject to severe legal penalties and disciplinary action by the Company for any conduct prohibited by this Policy or applicable securities laws, as described below under "Consequences of Violations."

**5.** **ADMINISTRATION OF THE POLICY** 

The "**Administrator**" of this Policy is the Company's Chief Financial Officer, or such other individual designated by the Company's Board of Directors from time to time. All determinations and interpretations by the Administrator are final and not subject to further review.

**6.** **PRINCIPAL STATEMENT OF POLICY** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(a) Trading in Company Securities and Disclosure of Nonpublic Information**. No director, officer or other employee of the Company (or any other person designated by this Policy or by the Administrator as subject to this Policy) who is aware of material nonpublic information relating to the Company may, directly or indirectly through family members or other persons or entities:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) engage in transactions in Company Securities, except as otherwise specified in this Policy under the heading "Limited Exceptions;"

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) recommend the purchase or sale of any Company Securities;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) disclose material nonpublic information to persons within the Company whose jobs do not require them to have that information, or to persons outside of the Company, including, but not limited to, family, friends, business associates, investors and consultants, except as required in the performance of regular corporate duties and only to the extent appropriate confidentiality protections are effective and the disclosure conforms to Company policies; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) assist anyone engaged in the above activities.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(b) Trading in Securities of Other Companies**. No director, officer or other employee of the Company (or any other person designated by this Policy or by the Administrator as subject to this Policy) who, in the course of working for the Company, learns of **<u>material nonpublic information</u>** about a company with which the Company does or intends to do business, including a customer, supplier or service provider of the Company, may trade in that company's securities until the information becomes public or is no longer material.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(c) No Exceptions**. There are no exceptions to this Policy, except as specifically noted herein. Transactions that may be necessary or justifiable for independent reasons (such as the need to raise money for an emergency expenditure), or small transactions, are not excluded from this Policy. The securities laws do not recognize any mitigating circumstances, and, in any event, even the appearance of an improper transaction must be avoided to preserve the Company's reputation for adhering to the highest standards of conduct.

**7.** **DEFINITION OF MATERIAL NONPUBLIC INFORMATION** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(a) Material Information**. Information is considered "material" if a reasonable investor would consider that information important in making a decision to buy, hold or sell securities. **<u>Any information that could be expected to impact the Company's stock price, whether it is positive or negative, is considered material.</u>** There is no bright-line standard for assessing materiality; rather, materiality is based on an assessment of all of the facts and circumstances, and is often evaluated by enforcement authorities with the benefit of hindsight. While it is not possible to define all categories of material information, some examples of information that ordinarily would be regarded as material are:

● operating or financial results or projections, including earnings guidance;

● analyst upgrades or downgrades of the Company or one of its securities;

● corporate transactions, such as mergers, acquisitions or restructurings;

● dividend, share repurchase or recapitalization matters;

● debt or equity financing matters;

● regulatory matters;

● a change in the Board of Directors or senior management;

● a change in auditors or disagreements with auditors;

● impending bankruptcy or the existence of severe liquidity problems;

● litigation or regulatory proceedings and investigations;

● the imposition of a ban on trading in Company Securities or other securities;

● intellectual property and other proprietary information; and

● significant corporate developments, including with respect to research and development activities.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(b) Nonpublic Information**. Information is considered "nonpublic" if that information has not been broadly disclosed to the marketplace, such as by press release or a filing with the U.S. Securities and Exchange Commission (the "**SEC**"), and/or the investing public has not had time to fully absorb that information. Nonpublic information may include:

● information available to a select group of persons subject to confidentiality obligations to the Company;

● undisclosed facts that are the subject of rumors, even if the rumors are widely circulated; and

● information that has been entrusted to the Company on a confidential basis.

As a general rule, information should not be considered fully absorbed by the investing public until the second business day after the day on which the information is released. If, for example, the Company makes an announcement at 9 am ET on Monday, a person subject to this Policy should not trade in Company Securities until the market opens on Wednesday. If such an announcement were made at 6 pm ET on Monday, the person subject to this Policy should not trade in Company Securities until the market opens on Thursday. Depending on the particular circumstances, the Company may determine that a longer or shorter period should apply.

**8.** **TRANSACTIONS BY FAMILY MEMBERS AND OTHERS** 

This Policy applies to your family members who reside with you, anyone else who lives in your household and any family members who do not live in your household but whose transactions in Company Securities are directed by you or are subject to your influence or control, such as parents or children who consult with you before they trade in Company Securities (collectively, "**Family Members**"). You are responsible for the transactions of your Family Members and therefore should make them aware of the need to confer with you before they trade in Company Securities, and you should treat all such transactions for the purposes of this Policy and applicable securities laws as if the transactions were for your own account. This Policy does not, however, apply to personal securities transactions of Family Members where the purchase or sale decision is made by a third party not controlled by, influenced by or related to you or your Family Members.

**9.** **TRANSACTIONS BY ENTITIES THAT YOU INFLUENCE OR CONTROL** 

This Policy applies to any entities that you influence or control, including any corporations, partnerships or trusts (collectively, "**Controlled Entities**"), and transactions by these Controlled Entities should be treated for the purposes of this Policy and applicable securities laws as if they were for your own account.

**10.** **LIMITED EXCEPTIONS** 

This Policy does not apply in the case of the following transactions (although these transactions may nevertheless be subject to the requirements of Section 16 of the Securities Exchange Act of 1934, as amended (the "**Exchange Act**"), applicable to directors and executive officers):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(a) Option Exercises**. This Policy does not apply generally to the exercise of an option, including a cashless exercise solely through the Company or the exercise of a tax withholding right through the Company to satisfy tax withholding requirements. However, this Policy does apply to any sale of stock received upon exercise of an option, including any deemed sale caused by an election to make a cashless exercise through a broker, or any other market sale for the purpose of generating the cash necessary to pay the option exercise price.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(b) Rule 10b5-1 Plans**. Rule 10b5-1 under the Exchange Act provides a defense from insider trading liability under Rule 10b-5. In order to be eligible to rely on this defense, a person subject to this Policy must enter into a Rule 10b5-1 plan for transactions in Company Securities that meets certain conditions specified in the Rule (a "**Rule 10b5-1 Plan**"). If the plan meets the requirements of Rule 10b5-1, Company Securities may be purchased or sold without regard to certain insider trading restrictions. To comply with this Policy, a Rule 10b5-1 Plan must be approved by the Administrator and meet the requirements of Rule 10b5-l and the Company's "Guidelines for Rule 10b5-l Plans," which are set forth in <u>Appendix 10(b)</u> to this Policy. In general, to ensure that a Rule 10b5-1 Plan is entered into at a time when the person entering into the plan is not aware of material nonpublic information, it must be entered into during an Open Trading Window. Once the plan is adopted, the person must not exercise any influence over the amount of securities to be traded, the price at which they are to be traded or the date of the trade. The plan must either specify the amount, pricing and timing of transactions in advance or delegate discretion on these matters to an independent third party. Any Rule 10b5-l Plan must be submitted for approval at least five business days prior to the entry into the Rule 10b5-l Plan. No further pre-approval of transactions conducted pursuant to the Rule 10b5-l Plan will be required.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(c) 401(k) Plan**. This Policy does not apply to purchases of Company Securities in the Company's 401(k) plan resulting from your periodic contribution of money to the plan pursuant to your payroll deduction election. This Policy does apply, however, to certain elections you may make under the 401(k) plan, including: (i) an election to increase or decrease the percentage of your periodic contributions that will be allocated to any Company stock fund; (ii) an election to make an intra-plan transfer of an existing account balance into or out of any Company stock fund; (iii) an election to borrow money against your 401(k) plan account if the loan will result in a liquidation of some or all of any Company stock fund balance; and (iv) an election to pre-pay a plan loan if the pre-payment will result in allocation of loan proceeds to any Company stock fund.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(d) Transactions Not Involving a Purchase or Sale**. Bona fide gifts are not transactions subject to this Policy, unless the person making the gift has reason to believe that the recipient intends to sell the Company Securities while the director, officer or employee is aware of material nonpublic information, or the person making the gift is subject to the trading restrictions specified below under "Additional Procedures" and the sales by the recipient of the Company Securities occur outside an Open Trading Window (as defined below). Further, transactions in mutual funds that are invested in Company Securities are not transactions subject to this Policy.

**11.** **SPECIAL AND PROHIBITED TRANSACTIONS** 

The Company has determined that there is a heightened legal risk and/or the appearance of improper or inappropriate conduct if the persons subject to this Policy engage in certain types of transactions. Therefore, it is the Company's policy that any persons covered by this Policy may not engage in any of the following transactions, or should otherwise consider the Company's preferences as described below:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(a) Short-Term Trading**. Short-term trading of Company Securities may be distracting to the person and may unduly focus the person on the Company's short-term stock market performance instead of the Company's long-term business objectives. For these reasons, all persons subject to this Policy who purchase Company Securities in the open market are discouraged from selling any Company Securities of the same class during the six months following the purchase (or vice versa). Furthermore, such short-term trading by directors or executive officers (as defined by Rule 16a-l) may result in short-swing profit liability under Section 16(b) of the Exchange Act.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(b) Short Sales**. Short sales of Company Securities (i.e., the sale of a security that the seller does not own) may evidence an expectation on the part of the seller that the securities will decline in value, and therefore have the potential to signal to the market that the seller lacks confidence in the Company's prospects. In addition, short sales may reduce a seller's incentive to seek to improve the Company's performance. For these reasons, short sales of Company Securities are prohibited. Furthermore, Section 16(c) of the Exchange Act prohibits directors and executive officers (as defined by Rule 16a-l) from engaging in short sales. Short sales arising from certain types of hedging transactions are subject to the paragraph below captioned "Hedging Transactions."

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(c) Publicly-Traded Options**. Given the relatively short term of publicly-traded options, transactions in options may imply that a director, officer or employee is trading based on material nonpublic information and focus that director's, officer's or other employee's attention on short-term performance at the expense of the Company's long-term objectives. Accordingly, transactions in put options, call options or other derivative securities, on an exchange or in any other organized market, are prohibited by this Policy. Option positions arising from certain types of hedging transactions are subject to the paragraph below captioned "Hedging Transactions."

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(d) Hedging Transactions**. Hedging or monetization transactions can be accomplished through a number of possible mechanisms, including through the use of financial instruments such as prepaid variable forwards, equity swaps, collars and exchange funds. Such hedging transactions may permit a director, officer or employee to continue to own Company Securities, but without the full risks and rewards of ownership. When that occurs, the director, officer or employee may no longer have the same objectives as the Company's other stockholders. Therefore, directors, officers and employees are prohibited from engaging in any such transactions.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(e) Margin Accounts and Pledged Securities**. Securities held in a margin account as collateral for a margin loan may be sold by the broker without the customer's consent if the customer fails to meet a margin call. Similarly, securities pledged (or hypothecated) as collateral for a loan may be sold in foreclosure if the borrower defaults on the loan. Because a margin sale or foreclosure sale may occur at a time when the pledgor is aware of material nonpublic information or otherwise is not permitted to trade in Company Securities, directors, officers and other employees are prohibited from holding Company Securities in a margin account or otherwise pledging Company Securities as collateral for a loan unless the arrangement is specifically approved in advance by the Administrator. Pledges of Company Securities arising from certain types of hedging transactions are subject to the paragraph above captioned "Hedging Transactions."

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(f) Standing and Limit Orders**. Standing and limit orders (except standing and limit orders under approved Rule 10b5-1 Plans, as described above) create heightened risks for insider trading violations similar to the use of margin accounts. There is no control over the timing of purchases or sales that result from standing instructions to a broker, and as a result the broker could execute a transaction when a director, officer or other employee is in possession of material nonpublic information. The Company therefore discourages placing standing or limit orders on Company Securities. If a person subject to this Policy determines that they must use a standing order or limit order, the order should be limited to short duration and should otherwise comply with the restrictions and procedures outlined below under the heading "Additional Procedures."

**12.** **ADDITIONAL PROCEDURES** 

The Company has established additional procedures in order to assist the Company in the administration of this Policy, to facilitate compliance with laws prohibiting insider trading while in possession of material nonpublic information, and to avoid the appearance of any impropriety. These additional procedures are applicable only to those individuals described below.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(a) Pre-Clearance Procedures**. All directors, officers and key employees of the Company and its subsidiaries, as well as the Family Members and Controlled Entities of such persons ("**Restricted Persons**"), may not engage in **<u>any transaction</u>** in Company Securities without first obtaining pre-clearance of the transaction from the Administrator. A "**key employee**" is an individual that has been designated as such by the Administrator due to their position in the Company and possible access to material nonpublic information. Key employees generally include senior employees in human resources, accounting and finance functions, but may include other employees as designated by the Administrator. The list of Restricted Persons is updated periodically by the Administrator. You will be notified by the Administrator if you are considered a Restricted Person for purposes of this Policy. **<u>Restricted Persons should submit a request for pre-clearance to the Administrator at least two business days in advance of the proposed transaction.</u>** The Administrator is under no obligation to approve a transaction submitted for pre-clearance and may determine not to permit the transaction. If a Restricted Person seeks pre-clearance and permission to engage in the transaction is denied, then he or she should refrain from initiating any transaction in Company Securities and should not inform any other person of the restriction.

When a request for pre-clearance is made, the requestor should carefully consider whether he or she may be aware of any material nonpublic information about the Company and should describe fully those circumstances to the Administrator. The requestor should also indicate whether he or she has effected any non-exempt "opposite-way" transactions (e.g., an open market sale would be "opposite" any open market purchase, and vice versa) within the past six months, and should be prepared to report the proposed transaction on an appropriate Form 4 or Form 5. The requestor should also be prepared to comply with SEC Rule 144 and file Form 144, if necessary, at the time of any sale.

A request for pre-clearance must be made in writing, preferably by submission of a completed Request for Pre-Clearance in the form of <u>Exhibit A</u> to this Policy. Pre-cleared transactions should be effected promptly. Requestors are required to refresh the request for pre-clearance if a pre-cleared transaction is not effected within five business days after pre-clearance is received.

**<u>Furthermore, requestors must immediately notify the Administrator following the execution of any transaction.</u>**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(b) Quarterly Trading Restrictions**. Restricted Persons may not conduct any transactions involving the Company's Securities (other than as specified by this Policy) except during an Open Trading Window. An "**Open Trading Window**" generally begins on the second business day following the day of public release of the Company's quarterly (or annual) earnings and ends 15 calendar days prior to the end of the then current quarter. The Administrator will notify Restricted Persons of the opening and closing of the trading window.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(c) Event-Specific Trading Restriction Periods**. From time to time, an event may occur that is material to the Company and is known by only a few directors, officers and/or employees. So long as the event remains material and nonpublic, the persons designated by the Administrator may not trade Company Securities. In addition, material developments impacting the Company may occur in a particular fiscal quarter that, in the judgment of the Administrator, make it advisable that designated persons should refrain from trading in Company Securities even during the ordinary Open Trading Window described above. In that situation, the Administrator may notify these persons that they should not trade in the Company's Securities, without disclosing the reason for the restriction. The existence of an event-specific trading restriction period or the closing of the Open Trading Window will be announced by the Administrator to persons designated by the Administrator. **<u>Even if the Administrator has not designated you a person who should not trade due to an event-specific restriction, you may not trade while aware of material nonpublic information.</u>** Exceptions will not be granted during an event-specific trading restriction period.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(d) Exceptions**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) The quarterly trading restrictions and event-driven trading restrictions do not apply to those transactions to which this Policy does not apply, as described above under the heading "Limited Exceptions," nor do they apply to an election to participate in an employer plan during an open enrollment period.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) The Administrator in his or her discretion may approve other or further exceptions to these requirements on a case-by-case basis in extraordinary circumstances. Any request for an exception pursuant to this paragraph must be submitted in advance and in writing, and any approval must be in writing.

**13.** **POST-TERMINATION TRANSACTIONS** 

This Policy continues to apply to transactions in Company Securities even after termination of service to the Company. If an individual is in possession of material nonpublic information when his or her service terminates, that individual may not trade in Company Securities until that information has become public or is no longer material. The pre-clearance procedures specified under the heading "Additional Procedures" above and applicable to Restricted Persons will continue to apply for a period of six months after a termination of service, in order to facilitate compliance with Section 16 of the Exchange Act.

**14.** **CONSEQUENCES OF VIOLATIONS** 

The purchase or sale of securities while aware of material nonpublic information, or the disclosure of material nonpublic information to others who then trade in the Company's Securities, is prohibited by federal and state laws. Insider trading violations are pursued vigorously by the SEC, the U.S. Department of Justice and state enforcement authorities. Punishment for insider trading violations is severe and could include significant fines and imprisonment. While the regulatory authorities concentrate their efforts on the individuals who trade, or who tip inside information to others who trade, the federal securities laws also impose potential liability on companies and other "controlling persons" if they fail to take reasonable steps to prevent insider trading by company personnel.

In addition, an individual's failure to comply with this Policy may subject the individual to Company-imposed sanctions, up to and including termination of employment, whether or not the employee's failure to comply results in a violation of law. Needless to say, a violation of law, or even an SEC investigation that does not result in prosecution, can tarnish a person's reputation and irreparably damage a career.

**15.** **REPORTING OF VIOLATIONS** 

Any person who violates this Policy or any federal or state law governing insider trading or tipping, or who knows of or reasonably suspects any such violation by another person, should report the matter immediately to his or her supervisor and/or to the Administrator identified in Section 5. Employees are obligated to report suspected and actual violations of Company policy or the law. Doing so brings the concern into the open so that it can be resolved quickly and more serious harm can be prevented. Failure to do so could result in disciplinary action up to and including termination of employment.

If you encounter a situation or are considering a course of action and its appropriateness is unclear, do not hesitate to reach out the Administrator with any questions; even the appearance of impropriety can be very damaging and should be avoided, and the Administrator may be in the best position to provide helpful information or other resources.

**16.** **CERTIFICATION** 

All persons subject to this Policy may be required to certify and re-certify, from time to time, their understanding of, and intent to comply with, this Policy.

**17.** **AMENDMENT** 

This Policy may be amended by the Board of Directors or any committee or designee to which the Board of Directors delegates this authority.

The Administrator has the authority to make determinations under, and interpretations of, this Policy, as specified in this Policy under the heading "Administration of the Policy." In addition, the Administrator is authorized to approve amendments to this Policy that: (i) correct obvious errors (e.g., typographical or grammatical errors); (ii) are necessitated by changes in legal requirements; (iii) are necessary to clarify the meaning of this Policy; or (iv) are administrative in nature, such as the provisions of this Policy under the heading "Additional Procedures."

**Appendix 10(b)**

**Guidelines for Rule 10b5-1 Plans<sup>⁎</sup>**

Rule 10b5-1 under the Exchange Act provides a defense from insider trading liability under Rule 10b-5. In order to be eligible to rely on this defense, a person subject to our Insider Trading Policy must enter into a Rule 10b5-l Plan for transactions in Company Securities (as defined in the Insider Trading Policy) that meets certain conditions specified in the Rule. If the plan meets the requirements of Rule 10b5-l, Company Securities may be purchased or sold without regard to certain insider trading restrictions. In general, a Rule 10b5-l Plan must be entered into at a time when the person entering into the plan is not aware of material nonpublic information. Once the plan is adopted, the person must not exercise any influence over the amount of securities to be traded, the price at which they are to be traded or the date of the trade. The plan must either specify the amount, pricing and timing of transactions in advance or delegate discretion on these matters to an independent third party.

As specified in the Company's Insider Trading Policy, a Rule 10b5-l Plan must be approved by the Administrator and meet the requirements of Rule 10b5-l and these guidelines. Any Rule 10b5-l Plan must be submitted for approval at least five business days prior to the entry into the Rule 10b5-l Plan. Once a 10b5-1 Plan is approved, no further pre-approval of transactions conducted pursuant to the plan will be required.

The following guidelines apply to all Rule 10b5-l Plans:

● You may not enter into, modify or terminate a trading program outside of an Open Trading Window or while in possession of material nonpublic information.

● All Rule 10b5-l Plans must have a duration of at least six months and no more than two years.

● If a Rule 10b5-l Plan is terminated, you must wait at least 30 days before trading outside of the Rule 10b5-l Plan.

● If a trading program is terminated, you must wait until the commencement of the next Open Trading Window before a new Rule 10b5-l Plan may be adopted.

● You may not commence sales under a trading program until at least 30 days following the date of establishment of a trading program. Any modification of a trading program must not take effect for at least 30 days from the date of modification.

● You may not enter into any transaction in Company Securities while the Rule 10b5- l Plan is in effect.

The approval or adoption of a Rule 10b5-l Plan in no way reduces or eliminates a person's obligations under Section 16 of the Exchange Act, including disclosure obligations and liability for short-swing profits. Persons subject to Section 16 of the Exchange Act should consult with their own counsel in implementing a Rule 10b5-l Plan.

<sup>⁎</sup> *Capitalized terms used but not defined herein have the meanings ascribed to them in the Smart for Life, Inc. Insider Trading Policy.*

**Exhibit A**

**Request for Pre-Clearance<sup>⁎</sup>**

*For pre-clearance to transact in Company Securities.*

**Upon executing a transaction, Restricted Persons must immediately notify the Company.**

---

| | |
|:---|:---|
| **Transaction Vehicle (check one)** | **Transaction Initiated By (check one)** |
| ☐ Open Market Transaction | ☐ Employee or immediate family member directly |
| ☐ Equity Compensation Plan | ☐ Court or government decree (e.g., divorce decree) |
| ☐ Other (specify): | ☐ Broker (provide name, firm, telephone and e-mail): |
| <br> **Type of Transaction (check one)** | <br> **Type of Transaction (check one)** |
| ☐ Purchase or acquire common stock | ☐ Purchase or acquire common stock |
| ☐ Sell or dispose of common stock | ☐ Sell or dispose of common stock |
| ☐ Move Company Securities from one account to another (e.g., in or out of a trust) | ☐ Move Company Securities from one account to another (e.g., in or out of a trust) |
| ☐ Dispose of fractional shares | ☐ Dispose of fractional shares |
| ☐ Pledge Company Securities for margin account, or otherwise | ☐ Pledge Company Securities for margin account, or otherwise |
| ☐ Exercise options without subsequent sale | ☐ Exercise options without subsequent sale |
| ☐ Exercise options with subsequent sale (e.g., a "cashless exercise") | ☐ Exercise options with subsequent sale (e.g., a "cashless exercise") |
| Other (describe): |  |
| <br> **Transaction Detail (provide the following information)** | <br> **Transaction Detail (provide the following information)** |
| Number of securities: |  |
| Estimated share price: |  |
| Contemplated execution date: |  |
| Date of your last "opposite way" transaction<sup>⁎⁎</sup>: |  |

---

**Certification**

I certify that I have fully disclosed the information requested in this form, I have read the Smart for Life, Inc. Insider Trading Policy, I am not in possession of material nonpublic information, and to the best of my knowledge and belief the proposed transaction will not violate the Smart for Life, Inc. Insider Trading Policy.

---

| |
|:---|
| (Sign Above) |
| (Print Name Above) |
| (Date) |

---

<sup>⁎</sup> *Capitalized terms used but not defined herein have the meanings ascribed to them in the Smart for Life, Inc. Insider Trading Policy.*

 

---

| | |
|:---|:---|
| ⁎⁎ | *If a Section 16 insider buys and sells (or sells and buys) Company Securities within a six-month time frame and such transactions are not exempt under SEC rules, the two transactions can be "matched" for purposes of Section 16. The insider may be sued and will be strictly liable for any profits made, **<u>regardless of whether the insider was in possession of material nonpublic information</u>**.* |

---

## Exhibit 21.1

**Exhibit 21.1**

**LIST OF SUBSIDIARIES**

---

| | | |
|:---|:---|:---|
| **Name of Subsidiary** | **Jurisdiction of**<br> **Organization** | **Percentage of<br> Ownership** |
| Bonne Sante Natural Manufacturing, Inc. | Florida | 100% |
| Doctors Scientific Organica, LLC | Florida | 100% |
| &nbsp;&nbsp;&nbsp;Oyster Management Services, L.L.C. | Florida | 100% |
| &nbsp;&nbsp;&nbsp;U.S. Medical Care Holdings, L.L.C. | Florida | 100% |
| &nbsp;&nbsp;&nbsp;Lawee Enterprises, L.L.C. | Florida | 100% |
| &nbsp;&nbsp;&nbsp;Lavi Enterprises, LLC | Florida | 100% |
| &nbsp;&nbsp;&nbsp;Smart for Life Canada Inc. | Canada | 100% |
| Nexus Offers, Inc. | Florida | 100% |
| GSP Nutrition Inc. | Delaware | 100% |
| Ceautamed Worldwide LLC | Florida | 100% |
| &nbsp;&nbsp;&nbsp;Wellness Watchers Global, LLC | Florida | 100% |
| &nbsp;&nbsp;&nbsp;Greens First Female LLC | Florida | 100% |

---

## Exhibit 23.1

**Exhibit 23.1**

**CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

Smart for Life, Inc.

Fort Lauderdale, Florida

We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 333-263018 and 333-263019) of Smart for Life, Inc. of our report, dated March 31, 2023, relating to the consolidated financial statements of Smart for Life, Inc. at and for the years ended December 31, 2022 and 2021, which appear in this Form 10-K.

/s/ Daszkal Bolton, LLP

Fort Lauderdale, Florida

March 31, 2023

## Exhibit 31.1

**Exhibit 31.1**

**CERTIFICATIONS**

I, Darren C. Minton, certify that:

&nbsp;&nbsp;&nbsp;&nbsp;1. I have reviewed this annual
report on Form 10-K of Smart for Life, Inc.;

&nbsp;&nbsp;&nbsp;&nbsp;2. Based on my knowledge, this
report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made,
in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

&nbsp;&nbsp;&nbsp;&nbsp;3. Based on my knowledge, the
financial statements, and other financial information included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

&nbsp;&nbsp;&nbsp;&nbsp;4. The registrant's other
certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange
Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))
for the registrant and have:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a) Designed such disclosure controls
and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information
relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b) Designed
such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision,
to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c) Evaluated
the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;
and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d) Disclosed in this report any
change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal
quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably
likely to materially affect, the registrant's internal control over financial reporting; and

&nbsp;&nbsp;&nbsp;&nbsp;5. The registrant's other
certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent
functions):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a) All significant deficiencies
and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely
affect the registrant's ability to record, process, summarize and report financial information; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b) Any fraud, whether or not material,
that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: March 31, 2023

---

| |
|:---|
| /s/ Darren C. Minton |
| Darren C. Minton |
| Chief Executive Officer |
| *(Principal Executive Officer)* |

---

## Exhibit 31.2

**Exhibit 31.2**

**CERTIFICATIONS**

I, Alan B. Bergman, certify that:

&nbsp;&nbsp;&nbsp;&nbsp;1. I have reviewed this annual
report on Form 10-K of Smart for Life, Inc.;

&nbsp;&nbsp;&nbsp;&nbsp;2. Based on my knowledge, this
report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made,
in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

&nbsp;&nbsp;&nbsp;&nbsp;3. Based on my knowledge, the
financial statements, and other financial information included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

&nbsp;&nbsp;&nbsp;&nbsp;4. The registrant's other
certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange
Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))
for the registrant and have:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a) Designed such disclosure controls
and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information
relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b) Designed
such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision,
to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c) Evaluated the effectiveness
of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of
the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d) Disclosed in this report any
change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal
quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably
likely to materially affect, the registrant's internal control over financial reporting; and

&nbsp;&nbsp;&nbsp;&nbsp;5. The registrant's other
certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent
functions):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a) All significant deficiencies
and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely
affect the registrant's ability to record, process, summarize and report financial information; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b) Any fraud, whether or not material,
that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: March 31, 2023

---

| |
|:---|
| /s/ Alan B. Bergman |
| Alan B. Bergman |
| Chief Financial Officer |
| *(Principal Financial and Accounting Officer)* |

---

## Exhibit 32.1

**Exhibit 32.1**

**CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906<br> OF THE SARBANES-OXLEY ACT OF 2002**

The undersigned Chief Executive Officer of SMART FOR LIFE, INC. (the "Company"), DOES HEREBY CERTIFY that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. The Company's Annual Report on Form 10-K for the year
ended December 31, 2022 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange
Act of 1934; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. Information contained in the Report fairly presents, in all
material respects, the financial condition and results of operation of the Company.

IN WITNESS WHEREOF, the undersigned has executed this statement on March 31, 2023.

---

| |
|:---|
| /s/ Darren C. Minton |
| Darren C. Minton |
| Chief Executive Officer |
| *(Principal Executive Officer)* |

---

A signed original of this written statement required by Section 906 has been provided to Smart for Life, Inc. and will be retained by Smart for Life, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

The forgoing certification is being furnished to the Securities and Exchange Commission pursuant to § 18 U.S.C. Section 1350. It is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

## Exhibit 32.2

**Exhibit 32.2**

**CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906<br> OF THE SARBANES-OXLEY ACT OF 2002**

The undersigned Chief Financial Officer of SMART FOR LIFE, INC. (the "Company"), DOES HEREBY CERTIFY that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. The Company's Annual Report on Form 10-K for the year
ended December 31, 2022 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange
Act of 1934; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. Information contained in the Report fairly presents, in all
material respects, the financial condition and results of operation of the Company.

IN WITNESS WHEREOF, the undersigned has executed this statement on March 31, 2023.

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| |
|:---|
| /s/ Alan B. Bergman |
| Alan B. Bergman |
| Chief Financial Officer |
| *(Principal Financial and Accounting Officer)* |

---

A signed original of this written statement required by Section 906 has been provided to Smart for Life, Inc. and will be retained by Smart for Life, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

The forgoing certification is being furnished to the Securities and Exchange Commission pursuant to § 18 U.S.C. Section 1350. It is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.