# EDGAR Filing Document

**Accession Number:** 0001851860
**File Stem:** 0001213900-25-053419
**Filing Date:** 2025-6
**Character Count:** 174465
**Document Hash:** b5582764fc05cc8649ea12c22526ae46
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001213900-25-053419.hdr.sgml**: 20250611

**ACCESSION NUMBER**: 0001213900-25-053419

**CONFORMED SUBMISSION TYPE**: 10-Q

**PUBLIC DOCUMENT COUNT**: 73

**CONFORMED PERIOD OF REPORT**: 20240930

**FILED AS OF DATE**: 20250611

**DATE AS OF CHANGE**: 20250611

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** SMART FOR LIFE, INC.
- **CENTRAL INDEX KEY:** 0001851860
- **STANDARD INDUSTRIAL CLASSIFICATION:** MEDICINAL CHEMICALS & BOTANICAL PRODUCTS [2833]
- **ORGANIZATION NAME:** 03 Life Sciences
- **EIN:** 815360128
- **STATE OF INCORPORATION:** DE
- **FISCAL YEAR END:** 1231

**FILING VALUES:**
- **FORM TYPE:** 10-Q
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 001-41290
- **FILM NUMBER:** 251039819

**BUSINESS ADDRESS:**
- **STREET 1:** 900 BISCAYNE BLVD., SUITE 505
- **CITY:** MIAMI
- **STATE:** FL
- **ZIP:** 33132
- **BUSINESS PHONE:** 786-749-1221

**MAIL ADDRESS:**
- **STREET 1:** 900 BISCAYNE BLVD., SUITE 505
- **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-Q**

(Mark One)

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

For the quarterly period ended: September 30, 2024

or

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

For the transition period from ____________ to _____________

Commission File Number: 001-41290

**SMART FOR LIFE, INC.**

(Exact name of registrant as specified in its charter)

---

| | |
|:---|:---|
| &nbsp;&nbsp;**Nevada** | &nbsp;&nbsp;**81-5360128** |
| &nbsp;&nbsp;(State or other jurisdiction of <br> incorporation or organization) | &nbsp;&nbsp;(I.R.S. Employer <br> Identification No.) |

---

---

| | |
|:---|:---|
| &nbsp;&nbsp;**990 Biscayne Blvd, Suite 505, Miami, FL** | &nbsp;&nbsp;**33132** |
| &nbsp;&nbsp;(Address of principal executive offices) | &nbsp;&nbsp;(Zip Code) |

---

---

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

---

---

| |
|:---|
| &nbsp;&nbsp;**N/A** |
| &nbsp;&nbsp;(Former name, former address and former fiscal year, if changed since last report) |

---

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

---

| | |
|:---|:---|
| **Title of each class** | **Trading Symbol(s)** |
| Common Stock, par value $0.0001 per share | SMFL N/A<sup>(1)</sup> |

---

(1) On March 21, 2025, the Nasdaq Stock Market LLC ("Nasdaq") filed
a Form 25 with the U.S. Securities and Exchange Commission to complete the delisting of the Company's common stock from The Nasdaq
Capital Market, which became effective on March 31, 2025. The deregistration of the common stock under Section 12(b) of the Act will be
effective 90 days, o r such shorter period as the U.S. Securities and Exchange Commission may determine,
after filing of the Form 25. The common stock is currently quoted on the OTC Pink Market maintained by the OTC Markets Group, Inc. under
the symbol "SMFL."

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 an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐ Accelerated filer ☐ <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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of June 10, 2025, there were 7,090,728 shares of the registrant's common stock issued and outstanding.

**Smart for Life, Inc.**

**Quarterly Report on Form 10-Q**

**Period Ended September 30, 2024**

**TABLE OF CONTENTS**

---

| | | |
|:---|:---|:---|
| [**PART I**](#a_001) | [**PART I**](#a_001) | [**PART I**](#a_001) |
| [**FINANCIAL INFORMATION**](#a_002) | [**FINANCIAL INFORMATION**](#a_002) | [**FINANCIAL INFORMATION**](#a_002) |
| Item 1. | [Financial Statements](#a_003) | 1 |
| Item 2. | [Management's Discussion and Analysis of Financial Condition and Results of Operations](#a_004) | 32 |
| Item 3. | [Quantitative and Qualitative Disclosures About Market Risk](#a_005) | 41 |
| Item 4. | [Controls and Procedures](#a_006) | 41 |
| [**PART II**](#a_007) | [**PART II**](#a_007) | [**PART II**](#a_007) |
| [**OTHER INFORMATION**](#a_008) | [**OTHER INFORMATION**](#a_008) | [**OTHER INFORMATION**](#a_008) |
| Item 1. | [Legal Proceedings](#a_009) | 42 |
| Item 1A. | [Risk Factors](#a_010) | 42 |
| Item 2. | [Unregistered Sales of Equity Securities and Use of Proceeds](#a_011) | 42 |
| Item 3. | [Defaults Upon Senior Securities](#a_012) | 42 |
| Item 4. | [Mine Safety Disclosures](#a_013) | 42 |
| Item 5. | [Other Information](#a_014) | 42 |
| Item 6. | [Exhibits](#a_015) | 43 |

---

i

**PART I**

**<u>FINANCIAL INFORMATION</u>**

**ITEM 1. FINANCIAL STATEMENTS.**

**SMART FOR LIFE, INC.**

**UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

---

| | |
|:---|:---|
|  | **Page** |
| [Condensed Consolidated Balance Sheets as of September 30, 2024 (unaudited) and December 31, 2023](#a_016) | 2 |
| [Condensed Consolidated Statements of Operations for the Three and Nine Months ended September 30, 2024 and 2023 (unaudited)](#a_017) | 3 |
| [Condensed Consolidated Statement of Changes in Stockholders' Equity (deficit) for the Three and Nine Months ended September 30, 2024 and 2023 (unaudited)](#a_018) | 4 |
| [Condensed Consolidated Statements of Cash Flows for the Nine Months ended September 30, 2024 and 2023 (unaudited)](#a_019) | 6 |
| [Notes to Unaudited Condensed Consolidated Financial Statements](#a_020) | 7 |

---

**SMART FOR LIFE, INC.**

**CONDENSED CONSOLIDATED BALANCE SHEETS**

**SEPTEMBER 30, 2024 AND DECEMBER 31, 2023**

---

| | | |
|:---|:---|:---|
|  | **September 30,<br> 2024** | **December 31, <br> 2023** |
|  | **(Unaudited)** | |
| **ASSETS** | | |
| Current assets: |  |  |
| &nbsp;&nbsp;&nbsp;Cash | $35608 | $154666 |
| &nbsp;&nbsp;&nbsp;Accounts receivable, net | 98036 | 128304 |
| &nbsp;&nbsp;&nbsp;Inventory | 747172 | 1424989 |
| &nbsp;&nbsp;&nbsp;Related party receivable, net | 711644 | 325942 |
| &nbsp;&nbsp;&nbsp;Prepaid expenses and other current assets | 68433 | 152752 |
| &nbsp;&nbsp;&nbsp;Current assets of discontinued operations |  | 145057 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total current assets | 1660893 | 2331710 |
| Property and equipment, net | 163170 | 264937 |
| Intangible assets, net | 6713077 | 7135748 |
| Goodwill | 3045000 | 3045000 |
| Deposits and other assets | 66291 | 98945 |
| Operating lease right-of-use assets | 1077311 | 2164862 |
| Assets of discontinued operations |  | 4618025 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total other assets | 11064849 | 17327517 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total assets | $12725742 | $19659227 |
| **LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)** |  |  |
| Current liabilities: |  |  |
| Accounts payable | $3624886 | $4078434 |
| Accrued expenses | 2860657 | 4093419 |
| Accrued expenses, related parties | 504059 | 264141 |
| Contract liabilities | 409820 | 500820 |
| Preferred stock dividends payable |  | 450562 |
| Operating lease liability, current | 229192 | 1104443 |
| Debt, current, net of debt discounts | 2179952 | 10702731 |
| Debt, current – related party | 41211 |  |
| Current liabilities of discontinued operations |  | 861358 |
| Total current liabilities | 9849777 | 22055908 |
| Long-term liabilities: |  |  |
| Operating lease liability, noncurrent | 919494 | 1152900 |
| Debt, noncurrent, net of debt issuance cost | 809225 | 2190615 |
| Debt, noncurrent – related party | 208789 |  |
| Liabilities of discontinued operations, noncurrent |  | 647258 |
| Total long-term liabilities | 1937508 | 3990773 |
| Total liabilities | 11787285 | 26046681 |
| Commitments and contingencies |  |  |
| Stockholders' Equity (Deficit) |  |  |
| &nbsp;&nbsp;&nbsp;Series B Preferred Stock, $0.0001 par value, 5,000,000 shares authorized, 17,985 and 26,239 shares issued and outstanding as of September 30, 2024 and December 31, 2023, respectively | 2 | 3 |
| &nbsp;&nbsp;&nbsp;Series C Preferred Stock, $0.0001 par value, 5,000,000 shares authorized, 10,709 and 0 shares issued and outstanding as of September 30, 2024 and December 31, 2023, respectively | 1 |  |
| &nbsp;&nbsp;&nbsp;Common Stock, $0.0001 par value, 7,936,508 shares authorized, 7,090,728 and 373,526 shares issued and outstanding as of September 30, 2024 and December 31, 2023, respectively | 709 | 37 |
| &nbsp;&nbsp;&nbsp;Additional paid in capital | 76948974 | 61280662 |
| &nbsp;&nbsp;&nbsp;Accumulated deficit | (76011229) | (67668156) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total stockholders' equity (deficit) | 938457 | (6387454) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total liabilities and stockholders' equity (deficit) | $12725742 | $19659227 |

---

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

**SMART FOR LIFE, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023**

**(UNAUDITED)**

 

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **Three Months Ended** <br> **September 30,** | **Three Months Ended** <br> **September 30,** | **Nine Months Ended** <br> **September 30,** | **Nine Months Ended** <br> **September 30,** |
|  | **2024** | **2023** | **2024** | **2023** |
| Revenues |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Products | $1269373 | $2239556 | $2625965 | $4824906 |
| &nbsp;&nbsp;&nbsp;Advertising |  | 5999 | 115 | 361470 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total revenues | 1269373 | 2245555 | 2626080 | 5186376 |
| Cost of revenues |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Products | 751317 | 1408646 | 1494279 | 3389788 |
| &nbsp;&nbsp;&nbsp;Advertising |  | 522 |  | 279037 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total cost of revenues | 751317 | 1409168 | 1494279 | 3668825 |
| Gross profit | 518056 | 836387 | 1131801 | 1517551 |
| Operating expenses |  |  |  |  |
| &nbsp;&nbsp;&nbsp;General and administrative | 428554 | 1174348 | 1390638 | 3580098 |
| &nbsp;&nbsp;&nbsp;Compensation – administrative | 570126 | 1907195 | 1460524 | 4527332 |
| &nbsp;&nbsp;&nbsp;Professional services | 422842 | 348598 | 1566484 | 1568896 |
| &nbsp;&nbsp;&nbsp;Consulting fees – related parties |  | 19139 |  | 46686 |
| &nbsp;&nbsp;&nbsp;Impairment of intangible assets |  |  |  | 466737 |
| &nbsp;&nbsp;&nbsp;Depreciation and amortization expense | 300636 | 303538 | 946888 | 700723 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total operating expenses | 1722158 | 3752818 | 5364534 | 10890472 |
| Operating loss | (1204102) | (2916431) | (4232733) | (9372921) |
| Other income (expense) |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Other income (expense) | (179536) | 19820 | (241298) | 324672 |
| &nbsp;&nbsp;&nbsp;Gain on debt extinguishment | 194114 | 16021 | 286510 | 205727 |
| &nbsp;&nbsp;&nbsp;Loss on sale of subsidiaries |  |  | (132491) |  |
| &nbsp;&nbsp;&nbsp;Interest expense | (2046324) | (1105289) | (4112464) | (3028915) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total other income (expense) | (2031746) | (1069448) | (4199743) | (2498516) |
| Loss from continuing operations | $(3235848) | $(3985879) | $(8432476) | $(11871437) |
| Income (loss) from discontinued operations | $(30) | $(358228) | $89403 | $(976982) |
| Net loss | $(3235878) | $(4344107) | $(8343073) | $(12848419) |
| Loss per share continuing operations, basic and diluted | $(0.94) | $(6.89) | $(3.52) | $(38.93) |
| (Loss) earnings per share discontinued operations, basic and diluted | $(0.00) | $(0.62) | $0.04 | $(3.20) |
| Loss per share, basic and diluted | $(0.94) | $(7.51) | $(3.49) | $(42.13) |
| Weighted average shares outstanding, basic and diluted | 3457980 | 578686 | 2392793 | 304950 |

---

 

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

**SMART FOR LIFE, INC. CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT) FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2024, AND 2023**

**(UNAUDITED)**

**For the Three and Nine Months Ended September 30, 2024**

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **Preferred Stock** | **Preferred Stock** | **Common Stock** | **Common Stock** | | | |
|  | **Shares** | **Amount** | **Shares** | **Amount** | **Additional Paid-In**<br>**Capital** | **Accumulated**<br>**Deficit** |<br>**Total** |
| Balance, January 1, 2024 | 26239 | $3 | 373526 | $37 | $61280662 | $(67668156) | $(6387454) |
| Exercise of warrants |  |  | 3572 |  | 38000 |  | 38000 |
| Stock-based compensation |  |  |  |  | 27613 |  | 27613 |
| Conversion of series B preferred stock to common stock | (6727) | (1) | 10678 | 1 |  |  |  |
| Conversion of series C preferred stock to common stock | (16688) | (2) | 238399 | 24 | (22) |  |  |
| Common stock issued for services |  |  | 9377 | 1 | 91249 |  | 91250 |
| Common stock issued for conversion of notes payable |  |  | 285305 | 29 | 1695834 |  | 1695863 |
| Series C preferred stock issued for conversion of notes payable | 36507 | 4 |  |  | 3650676 |  | 3650680 |
| Conversion of Series A dividends to common stock |  |  | 102172 | 10 | 450554 |  | 450564 |
| Net loss |  |  |  |  |  | (2896174) | (2896174) |
| Balance, March 31, 2024 | 39331 | $4 | 1023029 | $102 | $67234566 | $(70564330) | $(3329658) |
| Exercise of warrants |  |  | 183370 | 18 | 569885 |  | 569903 |
| Conversion of series C preferred stock to common stock | (10088) | (1) | 144120 | 14 | (13) |  |  |
| Common stock issued for conversion of notes payable |  |  | 1069759 | 107 | 3499004 |  | 3499111 |
| Cashless Warrants exercised for debt settlement |  |  | 44322 | 4 | 142536 |  | 142540 |
| Stock-based compensation |  |  |  |  | 26747 |  | 26747 |
| Net loss |  |  |  |  |  | (2211021) | (2211021) |
| Balance, June 30, 2024 | 29243 | 3 | 2464600 | 246 | 71472724 | (72775351) | (1302378) |
| Series B preferred stock converted to debt | (1527) |  |  |  | (340412) |  | (340412) |
| Series C preferred stock converted to debt | (6419) |  |  |  | (641878) |  | (641878) |
| Common stock issued from conversion of debt |  |  | 4582864 | 458 | 6251078 |  | 6251536 |
| Common stock issued for debt settlement |  |  | 203301 | 20 | 184730 |  | 184750 |
| Series C preferred stock issued for return of common stock | 7397 |  | (105670) | (10) | 10 |  |  |
| Cancelation of stock |  |  | (54367) | (5) | 5 |  |  |
| Stock based compensation |  |  |  |  | 22717 |  | 22717 |
| Net loss |  |  |  |  |  | (3235878) | (3235878) |
| Balance, September 30, 2024 | 28694 | $3 | 7090728 | $709 | $76948974 | $(76011229) | $938457 |

---

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **Preferred Stock** | **Preferred Stock** | **Common Stock** | **Common Stock** | | | |
|  | **Shares** | **Amount** | **Shares** | **Amount** | **Additional Paid-In**<br>**Capital** | **Accumulated**<br>**Deficit** |<br>**Total** |
| Balance, January 1, 2023 | 1000 | $— | 77614 | $8 | $42630425 | $(44992415) | $(2361984) |
| Exercise of warrants |  |  | 978 |  | 119 |  | 119 |
| Stock based compensation |  |  |  |  | 52473 |  | 52473 |
| Net loss |  |  |  |  |  | (4284315) | (4284316) |
| Balance, March 31, 2023 | 1000 |  | 78592 | 8 | 42683017 | (49276730) | (6593707) |
| Conversion of notes and interest | 29398 | 3 |  |  | 6462688 |  | 6462691 |
| Conversion of preferred stock | (1000) |  | 477 |  |  |  |  |
| Stock based compensation |  |  |  |  | 27735 |  | 27735 |
| Stock issued for debt amendment fee |  |  | 160 |  | 99199 |  | 99199 |
| Conversion of board fees | 135 |  |  |  | 30000 |  | 30000 |
| Conversion of accrued compensation | 5285 | 1 |  |  | 1178310 |  | 1178311 |
| Exercise of warrants |  |  | 41839 | 4 | 5425017 |  | 5425021 |
| Shares issued for cash, net |  |  | 13738 | 1 | 2151309 |  | 2151310 |
| Net loss |  |  |  |  |  | (4219996) | (4219996) |
| Balance, June 30, 2023 | 34818 | 4 | 134806 | $13 | $58057275 | $(53496726) | $4560564 |
| Stock issued for debt amendment fee |  |  | 2155 |  | 50000 |  | 50000 |
| Stock issued for exercise of warrants |  |  | 18517 | 2 | (2) |  |  |
| Stock based compensation |  |  |  |  | 685380 |  | 685380 |
| Net loss |  |  |  |  |  | (4344107) | (4344107) |
| Balance, September 30, 2023 | 34818 | $4 | 155478 | $15 | $58792653 | $(57840833) | $951836 |

---

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

**SMART FOR LIFE, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023**

**(UNAUDITED)**

---

| | | |
|:---|:---|:---|
|  | **Nine Months Ended <br> September 30,** | **Nine Months Ended <br> September 30,** |
|  | **2024** | **2023** |
| Cash flows from operating activities: |  |  |
| &nbsp;&nbsp;&nbsp;Net loss | $(8343073) | $(12848419) |
| &nbsp;&nbsp;&nbsp;Adjustments to reconcile net loss to net cash used in operating activities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Debt issuance cost | 222446 | 901389 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Loss on sales of subsidiaries | 132491 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Depreciation and amortization expense | 946888 | 700723 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Gain on extinguishment of debt | (286510) | (205727) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Impairment on intangible assets |  | 466737 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stock-based compensation | 318327 | 914787 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Non-cash finance fees | 2055084 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Non-cash expenses paid with debt | 202698 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Non-cash operating lease costs, net | (21106) | 16595 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Provision for bad debt |  | 193330 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Changes in operating assets and liabilities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts receivable, net | 30268 | (42183) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inventory | 677817 | 596437 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prepaid expenses and other current assets | 84320 | 173439 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deposits and other assets | 32654 | 10713 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts payable | 1054830 | 164409 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accrued expenses | 1242320 | 2018441 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accrued expenses, related parties | 239918 | 389657 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Contract liabilities | (91000) | (79705) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Discontinued operations | 984844 | 676667 |
| Net cash used in operating activities | (516784) | (5952710) |
| Cash flows from investing activities: |  |  |
| &nbsp;&nbsp;&nbsp;Additions to property and equipment | (5343) |  |
| Net cash used in investing activities | (5343) |  |
| Cash flows from financing activities: |  |  |
| &nbsp;&nbsp;&nbsp;Receipts from related parties | 1778442 | 147621 |
| &nbsp;&nbsp;&nbsp;Payments to related parties | (1914146) | (25586) |
| &nbsp;&nbsp;&nbsp;Proceeds from issuance of common stock, net |  | 2151310 |
| &nbsp;&nbsp;&nbsp;Proceeds from warrant exercise | 607903 | 5425112 |
| &nbsp;&nbsp;&nbsp;Proceeds from debt | 163500 | 2706791 |
| &nbsp;&nbsp;&nbsp;Repayments on debt | (232630) | (4507644) |
| Net cash provided by financing activities | 403069 | 5897604 |
| Net decrease in cash | (119058) | (55106) |
| Cash, beginning of period | 154666 | 60790 |
| Cash, end of period | $35608 | $5684 |
| **Supplemental disclosure of cash flow information:** |  |  |
| Interest paid | $18232 | $274439 |
| **Non-cash investing and financing activities:** |  |  |
| &nbsp;&nbsp;&nbsp;Non-cash debt issuance | $250000 | $— |
| &nbsp;&nbsp;&nbsp;Non-cash conversion of accounts payable to debt | $1268261 | $— |
| &nbsp;&nbsp;&nbsp;Conversion of notes payable to equity | $7899435 | $— |
| &nbsp;&nbsp;&nbsp;Conversion of interest to equity | 2564788 | $— |
| &nbsp;&nbsp;&nbsp;Conversion of preferred dividends to common stock | $450500 | $— |
| &nbsp;&nbsp;&nbsp;Conversion of preferred stock to promissory note | $3650680 | $— |
| &nbsp;&nbsp;&nbsp;Warrants exercised for debt settlement | $142540 | $— |
| &nbsp;&nbsp;&nbsp;Stock issued to settle accounts payable | $34750 | $— |
| &nbsp;&nbsp;&nbsp;Conversion of preferred stock to common stock | $39 | $— |

---

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

**SMART FOR LIFE, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2024 AND 2023**

**(UNAUDITED)**

**Note 1 — Description of Business**

Smart for Life, Inc., formerly Bonne Santé Group, Inc. ("SMFL"), is a Nevada corporation which was originally formed in the State of Delaware on February 7, 2017 and converted to a Nevada corporation on April 10, 2023. 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 and 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 March 6, 2024, the Company entered into a sale and leaseback agreement relating to BSNM as more fully described under Note 2.

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. On January 8, 2024, the retail store location was closed.

On November 8, 2021, SMFL acquired 100% of 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 100% of GSP Nutrition Inc. ("GSP"). GSP is a sports nutrition company that offers nutritional supplements for athletes and active lifestyle consumers. 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 January 29, 2024, the Company entered into an asset purchase agreement pursuant to which the Company agreed to sell nearly all of the assets of Ceautamed for a 49% ownership interest in a new limited liability company, First Health FL LLC, or First Health. The agreement included an option for the 51% owner to purchase the remaining 49% for $1.00 at an unspecified future date. On October 1, 2024, such owner elected to exercise the option, effective as of October 2, 2024, paid to the Company the option price of $1.00, and the Company delivered the remaining 49% interest in First Health to such owner.

On August 15, 2022, SMFL entered into a joint venture with a seller of Ceautamed to form Smart Acquisition Group, LLC. This subsidiary was 50% owned by the Company and 50% owned by Stuart Benson, the former owner and principal of Ceautamed. This company was formed to expand M&A growth initiatives through the identification, negotiation, financing and acquisition of companies by SMFL. On September 22, 2023, we dissolved this subsidiary.

**SMART FOR LIFE, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2024 AND 2023**

**(UNAUDITED)**

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

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***Principles of Consolidation***

The condensed consolidated financial statements reflect the consolidated operations of SMFL and its wholly owned subsidiaries DSO, DSO Canada, Nexus, GSP and BSNM (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"). Ceautamed has been deemed to be a discontinued operation. Intercompany balances and transactions have been eliminated in consolidation.

***Reclassifications***

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

 

*Reclassifications - Discontinued Operations to Continued Operations*

 

The 2023 financials have been reclassified from reporting BSNM as discontinued operations to continued operations due to a change in the plan of the sale / leaseback of BSNM. In December 2023, with the board's approval, the Company planned to sell BSNM. The Company had a buyer, who signed an offer letter, but was unable to work out the economics of the deal and therefore had not closed the transaction. Following this, in October 2024, management and the board revised its decision to sell BSNM and continue operating the business line. Also in October 2024, the Company started moving most of the equipment and much of the usable inventory to its Riviera Beach facility. The Company also surrendered the BSNM facility in November 2024 back to the landlord. As a result, the classification of BSNM has been revised in accordance with Accounting Standards Codification ("ASC") 360-10, Property, Plant, and Equipment. The results of BSNM have been reclassified from discontinued operations to continuing operations for all periods presented to ensure comparability of the financial statements. The impact of the reclassification on previously reported amounts is summarized below:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. Reclassification of $505,643 of operating income, $834,487 in cost of goods sold, $1,167,481 in expenses and $58,808 in other expense from discontinued operations to continuing operations.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. Adjustment to depreciation and amortization expenses, as BSNM is no longer classified as held for sale.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. Reclassification of $1,401,300 in assets and $3,062,749 in liability balances to reflect continuing operations.

The comparative financial statements for the years ended December 31, 2023 and 2024, have been adjusted accordingly.

Ceautamed has been deemed to be a discontinued operation (see Note 3).

These reclassifications did not impact previously reported net income, earnings per share, or the Company's consolidated financial position.

**SMART FOR LIFE, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2024 AND 2023**

**(UNAUDITED)**

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***Basis of Presentation***

The Company's fiscal year end is December 31. The Company uses the accrual method of accounting. The accompanying unaudited interim condensed consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements. The balance sheet as of December 31, 2023 has been derived from audited consolidated financial statements.

The accompanying unaudited condensed consolidated financial statements for the three and nine months ended September 30, 2024 and 2023 have been prepared in accordance with GAAP for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC"). Accordingly, they do not include all the information and footnotes required by GAAP for complete financial statements.

The unaudited financial information included in this report includes all adjustments (consisting of normal recurring adjustments) which are, in the opinion of management, necessary to reflect a fair statement of the results for the interim periods. The results of operations for the three and nine months ended September 30, 2024 are not necessarily indicative of the results of the full fiscal year.

The condensed consolidated financial statements included in this report should be read in conjunction with the financial statements and notes thereto included in the Company's financial statements for the fiscal year ended December 31, 2023.

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On April 24, 2023, the Company effected a 1-for-50 reverse stock split of its issued and outstanding common stock. The impact of this transaction is reflected within all common stock, options, and warrant information retrospectively in these condensed consolidated financial statements.

On August 2, 2023, the Company effected a 1-for-3 reverse stock split of its authorized and outstanding common stock. The impact of this transaction is reflected within all common stock, options, and warrant information retrospectively in these consolidated financial statements. As a result of the reverse stock split, the Company's authorized common stock decreased to 166,666,667 shares.

On October 27, 2023, the Company effected a 1-for-3 reverse stock split of its authorized and outstanding common stock. The impact of this transaction is reflected within all common stock, options, and warrant information retrospectively in these consolidated financial statements. As a result of the reverse stock split, the Company's authorized common stock decreased to 55,555,556 shares.

On April 22, 2024, the Company effected a 1-for-7 reverse stock split of its authorized and outstanding common stock. The impact of this transaction is reflected within all common stock, options, and warrant information retrospectively in these consolidated financial statements. As a result of the reverse stock split, the Company's authorized common stock decreased to 7,936,508 shares.

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

The accompanying condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company has sustained recurring losses and has a deficiency in working capital of approximately $8.2 million at September 30, 2024, which raises substantial doubt about its ability to continue as a going concern. The condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

**SMART FOR LIFE, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2024 AND 2023**

**(UNAUDITED)**

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***Use of Estimates***

The preparation of the condensed 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 condensed 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.

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***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 September 30, 2024 and December 31, 2023, there were no cash equivalents.

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

The Company's accounts receivable consists primarily of receivables from customers. The balance is presented net of an allowance for expected credit losses. The Company monitors the financial condition of its customers and records the allowance for expected credit losses on receivables when it believes customers are unable to make their required payments based on factors such as delinquencies and aging trends. The allowance for expected credit loss is the Company's best estimate of the amount of probable credit losses related to existing accounts receivable. Accounts receivable are presented net of an allowance for expected credit losses of $22,686 and $22,686 at September 30, 2024 and December 31, 2023, respectively.

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***Inventory***

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.

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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. The Company provides for depreciation and amortization over the estimated useful lives of various assets using the straight-line method ranging from 3-7 years.

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***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 December 31 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.

No goodwill impairments were recognized during the three and nine months ended September 30, 2024 and 2023.

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***Intangible Assets***

Intangible assets consist of customer contracts, developed technology, non-compete agreements, license agreements, 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.

**SMART FOR LIFE, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2024 AND 2023**

**(UNAUDITED)**

***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.

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***Lease Right-of-Use Assets and Liabilities***

The Company records a right-of-use asset and lease liability on the condensed consolidated balance sheets 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.

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***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).

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***Debt Issuance Costs***

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.

 

**SMART FOR LIFE, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2024 AND 2023**

**(UNAUDITED)**

***Fair Value Measurement***

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Under ASC Topic 820, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., an exit price). ASC Topic 820 establishes a hierarchy for inputs to valuation techniques used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that reflect assumptions market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company's own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. There are three levels to the hierarchy based on the reliability of inputs, as follows:

Level 1 - Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2 - Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets or liabilities in active markets, or quoted prices for identical or similar assets and liabilities in markets that are not active.

Level 3 - Unobservable inputs for the asset or liability. The degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized in Level 3.

The Company's cash and cash equivalents are measured using Level 1 inputs and include cash on hand, deposits in banks, certificates of deposit and money market funds. Due to their short-term nature, the carrying amounts reported in the consolidated balance sheets approximate the fair value of cash and cash equivalents.

The Company has certain assets that are measured at fair value on a non-recurring basis including those described in Note 6, 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.

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. In the evaluation of the estimated value of such assets, data for determining the value of the estimates are utilized based on the relevant facts and circumstances. The use of different market assumptions may have a material effect on the estimated fair value amounts.

***Revenue Recognition***

The Company evaluates and recognizes revenues by:

● identifying the contract(s) with the customer,

● identifying the performance obligations in the contract,

● determining the transaction price,

**SMART FOR LIFE, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2024 AND 2023**

**(UNAUDITED)**

● 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 generates product 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. For the three months ended September 30, 2024 and 2023, revenue was made up of contract manufacturing of $19,475 and $467,177, online marketing of $1,249,898 and $1,537,044, wholesale of $0 and $201,940, and direct marketing of $0 and $33,394, respectively. For the nine months ended September 30, 2024 and 2023, revenue was made up of contract manufacturing of $19,475 and 1,990,579, online marketing of $2,603,989 and $2,549,532, wholesale of $0 and $185,698, and direct marketing of $2,500 and $91,882, respectively. The Company does not have significant financing components or payment terms. The Company records deferred revenues for prepaid amounts from customers due to no performance obligations being met at such time. The Company had unsatisfied performance obligations of $405,762 and $496,762 at September 30, 2024 and December 31, 2023, respectively.

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

 

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

Nexus generates advertising revenue 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.

Nexus' general payment terms are short-term in duration. Nexus does not have significant financing components or payment terms. Nexus had unsatisfied performance obligations of $4,058 at September 30, 2024 and December 31, 2023.

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***Freight***

Freight costs for the nine months ended September 30, 2024 and 2023 amounted to $147,844 and $115,337, respectively. Freight costs for the three months ended September 30, 2024 and 2023 were $74,139 and $26,170, respectively.

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***Advertising***

Advertising costs are expensed as incurred. Advertising costs for the nine months ended September 30, 2024 and 2023 were $362,577 and $1,349,648, respectively. Advertising costs for the three months ended September 30, 2024 and 2023 were $184,981 and $472,854, respectively.

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***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.

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***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 and valued using a Black-Scholes option pricing model to determine the fair market value of the stock options and warrants. Forfeitures are reduced from options and warrants outstanding and 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 and warrant grant. The Company's policy is to recognize forfeitures as they occur.

**SMART FOR LIFE, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2024 AND 2023**

**(UNAUDITED)**

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***Income Taxes***

The Company accounts for income taxes 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 September 30, 2024 and December 31, 2023, 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. The Company's tax years subject to examination by tax authorities generally remain open for three (3) years from the date of filing.

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. Due to the continued losses, the Company has recorded a full valuation allowance at the end of September 30, 2024 and December 31, 2023.

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***Employee Retention Credits***

In accordance with the Coronavirus Aid, Relief and Economic Security Act (the "CARES Act"), the Company filed for Employee Retention Credits for applicable periods in 2020 and 2021. As amounts to be refunded are subject to IRS calculations, and the timing for processing of the credits are unknown, the Company recognizes as other income amounts refunded upon the receipt of the payment. During the nine months ended September 30, 2024 and 2023 the Company received $0 and $586,556, respectively.

***Recent Accounting Standards Adopted***

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On August 5, 2020, the Financial Accounting Standards Board ("FASB") issued ASU 2020-06, "Debt – Debt With Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity's Own Equity (Subtopic 815-40)," 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 adoption of this guidance did not materially impact the financial statements.

***Recent Accounting Standards Not Yet Effective***

In December 2023, the FASB issued ASU No. 2023-09, "Improvements to Income Tax Disclosures". The ASU is intended to improve the transparency of income tax disclosures by requiring consistent categories and greater disaggregation of information in the rate reconciliation, as well as income taxes paid disaggregated by jurisdiction. The ASU is effective for annual periods beginning after December 15, 2024 and should be applied on a prospective basis, but retrospective application is permitted. We are currently assessing the impact that this ASU will have on the Company's financial statements.

In March 2024, the FASB issued ASU 2024-02, "Codification Improvements – Amendments to Remove References to the Concept Statements". The ASU is part of the Board's standing project to make "Codification updates for technical corrections such as conforming amendments, clarifications to guidance, simplifications to wording or the structure of guidance, and other minor improvements." We are currently assessing the impact that this ASU will have on the Company's financial statements.

In November 2024, the FASB issued ASU No. 2024-03, "Disaggregation of Income Statement Expenses". The ASU is intended to improve financial reporting by requiring disaggregated disclosure of certain costs and expenses. The ASU is effective for fiscal years beginning after December 15, 2026 and for interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. The ASU may be applied on either a prospective or retrospective basis. We are currently assessing the impact that this ASU will have on the Company's financial statements.

The Company has reviewed all other recently issued accounting pronouncements and concluded that they were either not applicable or not expected to have a material impact on the Company's financial statements.

**SMART FOR LIFE, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2024 AND 2023**

**(UNAUDITED)**

**Note 3 — Discontinued Operations**

ASC 360, "Property, Plant, and Equipment" requires that a long-lived asset (disposal group) to be sold shall be classified as held for sale in the period in which a set of criteria have been met, including criteria that the sale of the asset (disposal group) is probable, and actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn. On January 29, 2024, the Company contributed nearly all of the assets of Ceautamed into First Health for a 49% ownership of First Health.

For comparability purposes, certain prior period line items relating to the assets held for sale have been reclassified and presented as discontinued operations for all periods presented in the accompanying consolidated statements of operations, consolidated statements of cash flows, and the consolidated balance sheets.

In accordance with ASC 205-20-S99, "Allocation of Interest to Discontinued Operations," the Company elected to not allocate consolidated interest expense to discontinued operations where the debt is not directly attributable to or related to discontinued operations.

The following information presents the major classes of line item of assets and liabilities included as part of discontinued operations in the consolidated balance sheets as of September 30, 2024 and December 31, 2023:

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| | | |
|:---|:---|:---|
|  | **September 30, <br> 2024** | **December 31, <br> 2023** |
| **ASSETS** | | |
| Current assets: |  |  |
| &nbsp;&nbsp;&nbsp;Cash | $&nbsp;&nbsp;&nbsp;&nbsp; — | $29872 |
| &nbsp;&nbsp;&nbsp;Accounts receivable, net |  | 18688 |
| &nbsp;&nbsp;&nbsp;Inventory |  | 89997 |
| &nbsp;&nbsp;&nbsp;Prepaid expenses and other current assets |  | 6500 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total current assets |  | 145057 |
| Property and equipment, net |  | 4188 |
| Intangible assets, net |  | 3765962 |
| Operating lease right-of-use assets |  | 702818 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total other assets |  | 4472968 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total assets | $— | $4618025 |
| **LIABILITIES AND STOCKHOLDERS' DEFICIT** |  |  |
| Current liabilities: |  |  |
| &nbsp;&nbsp;&nbsp;Accounts payable | $— | $528129 |
| &nbsp;&nbsp;&nbsp;Accrued expenses |  | 109623 |
| &nbsp;&nbsp;&nbsp;Contract liabilities |  | 99408 |
| &nbsp;&nbsp;&nbsp;Lease liability, current |  | 72431 |
| &nbsp;&nbsp;&nbsp;Debt, current, net of debt discounts |  | 51767 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total current liabilities |  | 861358 |
| Long-term liabilities: |  |  |
| &nbsp;&nbsp;&nbsp;Lease liability, noncurrent |  | 647258 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total long-term liabilities |  | 647258 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total liabilities | $— | $1508616 |

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**SMART FOR LIFE, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2024 AND 2023**

**(UNAUDITED)**

The following information presents the major classes of line items constituting the after-tax loss from discontinued operations in the consolidated statements of operations for the nine months ended September 30, 2024 and 2023:

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| | | |
|:---|:---|:---|
|  | **September 30,<br> 2024** | **September 30,<br> 2023** |
| Revenues |  |  |
| &nbsp;&nbsp;&nbsp;Products | $158613 | $2486412 |
| Cost of revenues |  |  |
| &nbsp;&nbsp;&nbsp;Products | 18989 | 1372528 |
| Gross profit | 139624 | 1113884 |
| Operating expenses |  |  |
| &nbsp;&nbsp;&nbsp;General and administrative | 28572 | 246050 |
| &nbsp;&nbsp;&nbsp;Compensation | 18205 | 401994 |
| &nbsp;&nbsp;&nbsp;Professional services |  | (3500) |
| &nbsp;&nbsp;&nbsp;Depreciation and amortization expense |  | 1113890 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total operating expenses | 46777 | 1758434 |
| Operating profit (loss) | 92847 | (644550) |
| Other income (expense) |  |  |
| &nbsp;&nbsp;&nbsp;Other income (expense) |  | 8826 |
| &nbsp;&nbsp;&nbsp;Gain on extinguishment of debt |  | 67332 |
| &nbsp;&nbsp;&nbsp;Interest expense | (3444) | (408590) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total other income (expense) | (3444) | (332432) |
| Net income (loss) from discontinued operations | 89403 | (976982) |
| Income tax expense |  |  |
| Net income (loss) | $89403 | $(976982) |

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**SMART FOR LIFE, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2024 AND 2023**

**(UNAUDITED)**

**Note 4 — Inventory**

Inventory consisted of the following:

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| | | |
|:---|:---|:---|
|  | **September 30,<br> 2024** | **December 31,**<br> **2023** |
| Raw materials | $192613 | $386860 |
| Packaging materials | 524430 | 755059 |
| Finished goods | 30129 | 283070 |
|  | 747172 | 1424989 |
| Less: allowance for obsolescence |  |  |
|  | $747172 | $1424989 |

---

**Note 5 — Property and Equipment**

Property and equipment consisted of the following:

---

| | | | |
|:---|:---|:---|:---|
|  | **Estimated<br> Useful Lives<br> (in Years)** | **September 30,<br> 2024** | **December 31,<br> 2023** |
| Furniture and fixtures | 7 | $9803 | $9135 |
| Equipment – manufacturing | 5 | 1338218 | 1338218 |
| Building and equipment | 5 | 3840 | 3840 |
| Leasehold improvements | 3.5 | 75061 | 90100 |
|  |  | 1426922 | 1441293 |
| Less: accumulated depreciation and amortization |  | (1263752) | (1176356) |
| Property and equipment, net |  | $163170 | $264937 |

---

**SMART FOR LIFE, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2024 AND 2023**

**(UNAUDITED)**

Depreciation and amortization expense for the nine months ended September 30, 2024 and 2023 totaled $100,537 and $172,190, respectively, which is included in depreciation and amortization expense. Depreciation and amortization expense for the three months ended September 30, 2024 and 2023 totaled $18,519 and $45,609, respectively, which is included in depreciation and amortization expense.

**Note 6 — Intangible Assets**

Intangible assets consisted of the following:

---

| | | | |
|:---|:---|:---|:---|
|  | **Estimated<br> Useful Lives<br> (in Years)** | **September 30,<br> 2024** | **December 31,<br> 2023** |
| Goodwill |  | $3045000 | $3045000 |
| Customer contracts | 7-10 | 5805749 | 5483263 |
| Developed technology | 15 | 1660000 | 1660000 |
| Non-compete agreements | 3 | 840000 | 840000 |
| Patents | 5-10 | 230000 | 230000 |
| Tradename | 10-15 | 2010000 | 2010000 |
| Total intangible assets |  | 10545749 | 10223263 |
| Less: amortization |  | (3832672) | (3087515) |
| Intangibles, net |  | $6713077 | $7135748 |

---

**SMART FOR LIFE, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2024 AND 2023**

**(UNAUDITED)**

Amortization for the nine months ended September 30, 2024 and 2023 was $846,351 and $528,533, respectively, which is included in depreciation and amortization expense. Amortization for the three months ended September 30, 2024 and 2023 was $282,117 and $257,929, respectively, which is included in depreciation and amortization expense.

The future amortization is as follows:

---

| | |
|:---|:---|
| **Years Ending December 31:** | |
| 2024 (remainder of year) | $282117 |
| 2025 | 1015571 |
| 2026 | 858466 |
| 2027 | 858466 |
| 2028 | 724350 |
| Thereafter | 2974107 |
| Total | $6713077 |

---

**Note 7 — Leases**

 ****

***Leases Involving Real Estate***

Leases of distribution and manufacturing facilities, customer support centers and the Company's corporate headquarters have lease terms that generally range from 5 to 7 years.

Rental payments on these leases typically provide for fixed minimum payments that increase over the lease term at predetermined amounts. Certain leases of real estate provide for rental increases based on the consumer price index, which are included in the Company's measurement of lease payments based on the rate or index in effect at lease commencement, and are therefore included in the measurement of the lease liabilities.

 ****

***Leases Involving Equipment***

Equipment leases have lease terms that generally range from less than 4 years to 5 years. Rental payments on these leases typically provide for fixed minimum payments that increase over the lease term at predetermined amounts, are included in the measurement of lease payments, and are included in the measurement of lease liabilities. Certain of the leases involving equipment have purchase options. When those options are reasonably certain of being exercised, the Company reflects such purchase options when measuring the lease term and lease payments for those leases.

 ****

***Financial Information***

The following provides information about the Company's right of use assets and lease liabilities as of September 30, 2024 and December 31, 2023:

---

| | | | |
|:---|:---|:---|:---|
|  | **Balance Sheet classification** | **September 30,<br> 2024** | **December 31, <br> 2023** |
| Right of use assets operating leases | Operating leases right-of-use asset | $1077311 | $2164862 |
| Lease liabilities |  |  |  |
| Current |  |  |  |
| Operating leases | Operating lease liabilities, current portion | 229192 | 1104443 |
| Noncurrent |  |  |  |
| Operating leases | Operating lease liabilities, non-current portion | 919494 | 1152900 |
| Total lease liabilities |  | $1148686 | $2257343 |

---

The components of the Company's lease costs for the nine months ended September 30, 2023 and 2023 are as follows:

---

| | | | |
|:---|:---|:---|:---|
|  | **Income Statement Classification** | **September 30,<br> 2024** | **September 30,<br> 2023** |
| Rent expense | General and administration | $279428 | $377149 |

---

**SMART FOR LIFE, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2024 AND 2023**

**(UNAUDITED)**

Supplemental cash flow information related to Company's leases for the nine months ended September 30, 2024:

---

| | |
|:---|:---|
|  | **Operating<br> Leases** |
| Cash paid for amounts included in the measurement of lease liabilities | $259601 |

---

Weighted average remaining lease term and weighted average discount rate for the Company's leases as of September 30, 2024:

---

| | |
|:---|:---|
|  | **Operating<br> Leases** |
| Weighted average remaining term (in years) | 3.92 |
| Weighted average discount rate | 12.00% |

---

Annual maturity analysis of the Company's lease liabilities as of September 30, 2024:

---

| | |
|:---|:---|
|  | **Operating Leases** |
| 2024 | $87399 |
| 2025 | 357409 |
| 2026 | 368132 |
| 2027 | 379176 |
| Thereafter | 259718 |
| Total payments | 1451834 |
| Less: interest | (303148) |
| Present value of lease liability | 1148686 |
| Less: Current portion of lease liabilities | (229192) |
| Noncurrent portion of lease liabilities | $919494 |

---

**Note 8 — Debt**

 ****

***Original Issue Discount Subordinated Debentures***

In June 2022, the Company commenced offerings of original issue discount subordinated debentures. As of September 30, 2024, the Company has completed multiple closings and issued debentures in the aggregate principal amount of $5,277,241, of which $189,613 was issued with issuances costs of $26,113 and $3,057,954 of principal and $743,261 of interest was converted into shares of the Company's stock for the nine months ended September 30, 2024. The debentures contain an original issue discount of 15%, or an aggregate original issue discount of $726,706. As a result, the total purchase price was $4,550,535. The debentures bear interest at a rate of 17.5% per annum and are due from January 2024 through January 2025. 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. The outstanding principal balance of the debentures was $1,547,135 and $4,415,476, the unamortized debt issuance cost was $3,588 and $84,774, and accrued interest was $485,636 and $1,053,260 as of September 30, 2024 and December 31, 2023, respectively.

On February 21, 2024, the Company received a judgement on an original issue discount subordinated debenture dated August 26, 2022, whereby the outstanding amount of the debenture was amended to $399,306 inclusive of legal fees. On May 30, 2024, the Company entered into a memorandum of understanding with the holder and the parties executed a conversion agreement to convert a portion of the outstanding balance of the debenture totaling $256,765 into 79,840 shares of common stock and the outstanding balance of $142,540 to be exchanged for prepaid warrants exercisable for 44,322 warrant shares. As of September 30, 2024, the outstanding principal balance of the debenture was $0 and accrued interest was $0.

 ****

**SMART FOR LIFE, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2024 AND 2023**

**(UNAUDITED)**

 ****

***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 $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. 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). On January 26, 2024, the note was modified increasing the principal amount to $2,800,452 inclusive of interest and finance fees, and the interest changed to 13%. For the nine months ended September 30, 2024, $2,668,738 has been converted into shares of the Company's common stock. The outstanding principal balance of the note was $131,714 and $2,182,853, the unamortized debt issuance cost was $0 and $172,807, and accrued interest was $11,634 and $494,700 as of September 30, 2024 and December 31, 2023, respectively.

***Acquisition Notes – Related Parties***

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 ("Dr. Moulavi"), in connection with the acquisition of DSO. This note accrued interest at 6% per annum and the outstanding principal and interest was amortized on a straight-line basis and was payable quarterly in accordance with the amortization schedule, with all amounts due and payable on July 1, 2024. On November 29, 2022, the Company 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, 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, the Company agreed to (i) issue to Dr. Moulavi 100,000 shares of common stock under the Company's 2022 Equity Incentive Plan and (ii) pay to Dr. Moulavi a fee of $50,000 in cash, which shall be paid upon completion of the Company's anticipated debt financing and is included in debt balance. On February 6, 2024, $123,930 of principal was converted into 121,500 shares of common stock. On February 21, 2024, $100,400 of principal was converted into 125,500 shares of common stock. On February 28, 2024, $126,028 of principal was converted into 128,600 shares of common stock. On February 29, 2024, the outstanding balance and accrued interest of $1,038,592 and $167,667, respectively was converted into 12,063 shares of series C preferred stock and 53,659 shares of common stock. The outstanding principal balance of this note was $0 and $1,388,950 and accrued interest was $0 and $37,697 as of September 30, 2024 and December 31, 2023, respectively.

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 accrued interest at 5% per annum and the outstanding principal and interest was amortized on a straight-line basis and was payable quarterly in accordance with the amortization schedule attached to the note, with all amounts due and payable on November 8, 2024. During the year ended December 31, 2023, the outstanding balance including accrued interest was converted into series B preferred stock. As of September 30, 2024, the outstanding principal balance of this note was $0 and accrued interest was $0.

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 bore 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%. On January 29, 2024, the notes were forgiven as part of the transaction in which the assets of Ceautamed were contributed into First Health. The outstanding principal balance of these notes was $0 and accrued interest was $0 as of September 30, 2024 and December 31, 2023.

**SMART FOR LIFE, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2024 AND 2023**

**(UNAUDITED)**

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 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. On January 29, 2024, $1,097,997 of this note was forgiven as part of the transaction in which the assets of Ceautamed were contributed into First Health. Also on January 29, 2024, the remaining balance of $1,094,496 was modified to $351,293. The outstanding principal balance of these notes was $51,193 and $2,189,493 and accrued interest was $1,941 and $237,430 as of September 30, 2024 and December 31, 2023, respectively.

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 remaining 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. On January 29, 2024, $1,210,000 of this note was forgiven as part of the transaction in which the assets of Ceautamed were contributed into First Health. The outstanding principal balance of this note was $90,000 and $90,000 and accrued interest was $9,925 and 6,500 as of September 30, 2024 and December 31, 2023, respectively.

 ****

**SMART FOR LIFE, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2024 AND 2023**

**(UNAUDITED)**

 ****

***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 bore interest at a rate of 15.0% per annum, provided that upon an event of default, such rate would increase by 5%. The loan was due and payable on the earlier of July 1, 2022 or upon completion of the Company's initial public offering (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 was due and payable on July 1, 2023. On April 20, 2023, the Company entered into an amendment to the loan agreement, which provided that the Company would make a payment towards the reduction of principal in the amount of $250,000 within two business days of certain events, which did not occur. On January 29, 2024, this note was fully paid as part of the transaction in which the assets of Ceautamed were contributed into First Health. The outstanding principal balance of this note was $0 and $542,163 and accrued interest was $0 and $0 as of September 30, 2024 and December 31, 2023, respectively.

In 2018, the Company entered into an amended note agreement and convertible promissory note for $200,000 with a third party. The outstanding amount was $100,000 and $100,000 and accrued interest was $170,351 and $149,351 at September 30, 2024 and December 31, 2023, respectively. The amended loan agreement and convertible promissory note (convertible at fair value of shares) was in default as of September 30, 2024.

On October 12, 2022, the Company issued promissory notes in the principal amount of $258,000 to third parties. These promissory notes bear interest of 15% to 20% and are payable on December 2022 and January 2023. During the year ended December 31, 2023, the Company made various principal and interest payments on the notes. On May 26, 2023, only the remaining principal balance of $105,000 was converted into 471 shares of the Company's series B preferred stock, the accrued interest was not converted. The outstanding principal balance was $<u>0</u> and accrued interest was $11,999 as of September 30, 2024 and December 31, 2023.

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. During the year ended December 31, 2023 the principal balance was paid in full, however the accrued interest was not paid. The outstanding amount was $0 and accrued interest was $2,387 as of September 30, 2024 and December 31, 2023.

On December 6, 2022, the Company issued a promissory note to a board member in the principal amount of $30,000. This note bore interest at a rate of 12% and was due on demand. The remaining principal balance of $30,000 as of May 26, 2023 was converted into 135 shares of the Company's series B preferred stock which resulted in the note being fully paid.

On December 21, 2022, the Company issued a promissory note to a board member in the principal amount of $100,000. This note bore interest at a rate of 12% and was due on demand. The remaining principal balance of $100,000 as of May 26, 2023 was converted into 449 shares of the Company's series B preferred stock which resulted in the note being fully paid.

On February 8, 2023, the Company issued a promissory note to a board member in the principal amount of $50,000. This note bore interest at a rate of 12% and was due on demand. The remaining principal balance as of May 26, 2023 was converted into 225 shares of the Company's series B preferred stock which resulted in the note being fully paid.

On February 14, 2023, the Company issued a promissory note to a third party in the principal amount of $50,000. This note bore interest at a rate of 12% and was due on demand. During the year ended December 31, 2023, the Company made various principal and interest payments on the note. The remaining principal balance of $20,000 as of May 26, 2023 was converted into 90 shares of the Company's series B preferred stock which resulted in the note being fully paid.

On February 19, 2023, the Company issued a promissory note to a third party in the principal amount of $50,000. This note bore interest at a rate of 12% and was due on August 26, 2023. The remaining principal balance as of May 26, 2023 was converted into 225 shares of the Company's series B preferred stock which resulted in the note being fully paid.

On March 7, 2023, the Company issued a promissory note to a board member in the principal amount of $137,000. This note bears interest at a rate of 12% and is due on demand. During the year ended December 31, 2023, the Company made various principal and interest payments on the notes. On May 26, 2023, $50,000 of principal and $1,137 of interest was converted into 230 shares of the Company's series B preferred stock. The outstanding amount was $51,294 and $51,294 and accrued interest was $10,505 and $5,312 as of September 30, 2024 and December 31, 2023, respectively.

**SMART FOR LIFE, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2024 AND 2023**

**(UNAUDITED)**

On April 13, 2023, the Company issued a promissory note to a third party in the principal amount of $59,000. This note bore interest at a rate of 12% and was due on demand. The remaining principal balance as of May 26, 2023, was converted into 265 shares of the Company's series B preferred stock which resulted in the note being fully paid*.*

 

On April 21, 2023, the Company issued a promissory note to a board member in the principal amount of $53,000. This note bears interest at a rate of 12% and is due on demand. The outstanding amount was $30,000 and $30,000 and accrued interest was $1,600 and $800 as of September 30, 2024 and December 31, 2023, respectively.

 

On June 22, 2023, the Company issued an original issue discount promissory note to a board member in the principal amount of $118,000. This note bears interest at a rate of 17.5% and is due on demand. The outstanding amount was $353 and $118,000, an unamortized discount was $0 and $0, and accrued interest was $0 and $10,862 as of September 30, 2024 and December 31, 2023, respectively.

 

On July 12, 2023, the Company issued a promissory note to a third party in the principal amount of $25,000. This note bears interest at a rate of 12% and is due on demand. The outstanding amount was $25,000 and $25,000 and accrued interest was $3,666 and $1,414 as of September 30, 2024 and December 31, 2023, respectively.

On August 10, 2023, 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. The outstanding amount was $50,000 and $50,000 and accrued interest was $6,855 and $2,351 as of September 30, 2024 and December 31, 2023, respectively.

On August 15, 2023, 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. The outstanding amount was $30,000 and $30,000 and accrued interest was $4,064 and $1,361 as of September 30, 2024 and December 31, 2023, respectively.

 

On August 24, 2023, the Company issued a promissory note to a third party in the principal amount of $60,000. This note bears interest at a rate of 12% and is due on demand. On May 25, 2023, the principal of $60,000 and interest of $6,451 were converted into 346 shares of the Company's series B preferred stock which resulted in the note being fully paid.

On September 7, 2023, the Company issued a promissory note to a board member in the principal amount of $35,000. This note bears interest at a rate of 12% and is due on demand. The outstanding amount was $35,000 and $35,000 and accrued interest was $4,476 and $1,323 as of September 30, 2024 and December 31, 2023, respectively.

On September 14, 2023, the Company issued a promissory note to a third party in the principal amount of $100,000. This note bears interest at a rate of 12% and is due on demand. On February 29, 2024, the principal of $100,000 and accrued interest of $5,523 were converted into 1,055 shares of the Company's series C preferred stock. The outstanding amount was $0 and $100,000 and accrued interest was $0 and $3,551 as of September 30, 2024 and December 31, 2023, respectively.

On September 29, 2023, the Company issued a promissory note to a board member in the principal amount of $35,000. This note bears interest at a rate of 12% and is due on demand. The outstanding amount was $35,000 and $35,000 and accrued interest was $4,223 and $1,070 as September 30, 2024 and December 31, 2023, respectively.

On October 4, 2023, the Company issued a promissory note to a board member in the principal amount of $15,000. This note bears interest at a rate of 12% and is due on demand. The outstanding amount was $15,000 and $15,000 and accrued interest was $1,785 and $434 as of September 30, 2024 and December 31, 2023, respectively.

On October 11, 2023, the Company issued a promissory note to a third party in the principal amount of $24,000. This note bears interest at a rate of 12% and is due on demand. On February 29, 2024, the principal of $24,000 and accrued interest of $6,157 was converted into 302 shares of the Company's series C preferred stock. The outstanding amount was $0 and $24,000 and accrued interest was $0 and $639 as of September 30, 2023 and December 31, 2023, respectively.

On November 14, 2023, 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. The outstanding amount was $30,000 and $30,000 and accrued interest was $3,166 and $464 as of September 30, 2024 and December 31, 2023, respectively.

On November 30, 2023, the Company issued a promissory note to a board member in the principal amount of $15,000. This note bears interest at a rate of 12% and is due on demand. The outstanding amount was $15,000 and $15,000 and accrued interest was $1,504 and $153 as of September 30, 2024 and December 31, 2023, respectively.

 

**SMART FOR LIFE, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2024 AND 2023**

**(UNAUDITED)**

 

*<u>Promissory Note - Related Party</u>*

On March 5, 2024, the Company issued a promissory note to a related party in the principal amount of $250,000. This note bears interest at a rate of 12% and is due on March 5, 2029. At September 30, 2024, the outstanding amount was $250,000 and accrued interest was $17,178.

 

*<u>Cash Advances</u>*

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. The outstanding amount was $42,846 and $147,500 as of September 30, 2024 and December 31, 2023, respectively.

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. The outstanding amount was $2,020 and $4,360 as of September 30, 2024 and December 31, 2023, respectively.

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. The outstanding amount was $12,584 as of September 30, 2024 and December 31, 2023.

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. The outstanding amount was $0 and $83,037 and unamortized debt issuance cost was $0 and $0 as of September 30, 2024 and December 31, 2023, respectively.

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. The outstanding amount was $8,271 and unamortized debt issuance cost was $0 as of September 30, 2024 and December 31, 2023.

In June 2023, the Company refinanced the January 2023 agreements with balances of $284,029 and entered into cash advance agreements and received an additional $107,071 with a required repayment amount of $604,035, which requires weekly payments of approximately $48,625. The outstanding amount was $0 and $497,158 and unamortized debt issuance cost was $0 and $0 as of September 30, 2024 and December 31, 2023, respectively.

In July 2023, the Company entered into cash advance agreements for $74,950 with a required repayment amount of $74,950, which requires weekly payments of approximately $7,495. The outstanding amount was $7,974 as of September 30, 2024 and December 31, 2023.

In August 2023, the Company refinanced an agreement from June 2023, as a result the Company received an additional $48,030. The outstanding amount was $0 and $48,030 and unamortized debt issuance cost was $0 and $0 as of September 30, 2024 and December 31, 2023, respectively.

In November 2023, the Company entered into cash advance agreements for $49,476 with a required repayment amount of $49,476. The outstanding amount was $49,476 as of September 30, 2024 and December 31, 2023.

 

*<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. The outstanding amount was $106,016 and $108,249 as of September 30, 2024 and December 31, 2023, respectively.

**SMART FOR LIFE, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2024 AND 2023**

**(UNAUDITED)**

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. The outstanding amount was $27,214 as of September 30, 2024 and December 31, 2023.

In July 2022, the Company entered into an equipment financing loan for $8,463 used for the purchase of equipment within Ceautamed's operations. The outstanding amount was $0 and $4,360 as of September 30, 2024 and December 31, 2023, respectively, and is included within the liabilities of discontinued operations.

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

In August 2022, Ceautamed entered into a revolving line of credit with a bank, which permits borrowings up to $50,000 and bears interest at 45.09% with no expiration date. In 2023, the Company borrowed an additional $43,000. The outstanding principal balance of these lines of credit was $0 and $47,407 as of September 30, 2024 and December 31, 2023, respectively and is included within discontinued operations.

In September 2022, DSO entered into a revolving line of credit with a bank, which permits borrowings up to $70,000 and bears interest at 9.49% with no expiration date. The outstanding principal balance of this line of credit was $0 and $16,471 as of September 30, 2024 and December 31, 2023, respectively.

 ****

In September 2023, DSO entered into a merchant loan agreement for $113,000. Repayment amounts are 17% of the daily account credits processed through the provider until the loan amount is paid in full. The outstanding principal balance was $2,219 and $103,648 as of September 30, 2024 and December 31, 2023, respectively.

 ****

***EIDL Loan***

In June 2020, pursuant to the economic injury disaster loan program under the under the provisions of the CARES Act, the Company entered into a promissory note with the U.S. Small Business Administration 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. The outstanding principal balance of this loan was $300,000 and $300,000 and accrued interest was $48,219 and $33,953 as of September 30, 2024 and December 31, 2023, respectively.

 ****

***PPP Loans***

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. The outstanding balance of this loan was $197,457 and $197,457 and accrued interest was $11,934 and $8,429 as of September 30, 2024 and December 31, 2023, respectively.

 ****

***Total Debt***

Debt is comprised of the following components as of September 30, 2024:

---

| | |
|:---|:---|
| Original issue discount subordinated debentures | $1547135 |
| Original issue discount secured subordinated note | 131714 |
| Acquisition notes – related party | 141193 |
| Promissory notes and cash advances | 539818 |
| Promissory note – related party | 250000 |
| Revolving lines of credit | 2219 |
| Equipment financing loan | 133230 |
| EIDL loan | 300000 |
| PPP loans | 197457 |
|  | 3242766 |
| Debt issuance costs | (3589) |
| Debt, net | 3239177 |
| Debt, current | 2223820 |
| Debt issuance costs, current | (2657) |
| Current portion of debt, net | 2221163 |
| Debt, non-current | 1018946 |
| Debt issuance costs, non-current | (932) |
| Non-current portion of debt, net | $1018014 |

---

The Company was not in compliance with all debt covenants as of September 30, 2024, but waivers of non-compliance were obtained for all such debt, except as disclosed in Note 8.

**SMART FOR LIFE, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2024 AND 2023**

**(UNAUDITED)**

The future contractual maturities of the debt are as follows:

---

| | |
|:---|:---|
| **For the Year Ended December 31:** | |
| 2024 (remainder of year) | $2190474 |
| 2025 | 189609 |
| 2026 | 426679 |
| 2027 | 97884 |
| 2028 | 78294 |
| Thereafter | 256237 |
| Total | $3239177 |

---

**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 September 30, 2024 and December 31, 2023, the Company had no cash balances 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 nine months ended September 30, 2024 and 2023, the Company had two significant customers representing an aggregate of 92% and 54% of revenues, respectively, and one that makes up 0% and 4% of the accounts receivable balance, respectively.

For the three months ended September 30, 2024 and 2023, the Company had two and two significant customers representing an aggregate of 89% and 64% of revenues and one that makes up 0% and 20% of the accounts receivable balance, respectively. The Company's officers are closely monitoring the relationships with all customers.

 ****

***Major Vendors***

For the nine months ended September 30, 2024 and 2023, the Company had three and one major supplier representing an aggregate 59% and 16% of purchases, respectively.

For the three months ended September 30, 2024 and 2023, the Company had four and one major supplier representing 87% and 17% of purchases, respectively. The Company's officers are closely monitoring the relationships with all significant 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 September 30, 2024 and December 2023, 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 September 30, 2024, the Company had net operating loss carry forwards for federal income tax purposes of approximately $20.8 million, which will be available to offset future taxable income.

**SMART FOR LIFE, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2024 AND 2023**

**(UNAUDITED)**

**Note 11 — Stockholders' Equity** 

 ****

***Preferred Stock***

During the three months ended September 30, 2024, 1,527 shares of series B preferred stock were cancelled in exchange for debt. During the nine months ended September 30, 2024, 6,727 shares of series B preferred stock were converted into 10,678 shares of common stock.

During the three months ended September 30, 2024, the Company issued 7,397 shares of series C preferred stock in exchange for the return of 105,670 shares of common stock and all but 978 of those shares of series C preferred stock were subsequently exchange for debt. During the nine months ended September 30, 2024, the Company issued 43,904 shares of series C preferred stock and 26,776 shares of series C preferred stock were subsequently converted into 382,519 shares of common stock and 6,419 shares of series C preferred stock were subsequently exchanged for debt.

***Common Stock***

During the three and nine months ended September 30, 2024, the Company issued (i) 0 and 186,942 shares of common stock upon the exercise of warrants; (ii) 0 and 10,678 shares of common stock upon the conversion of 0 and 6,727 shares of series B preferred stock; (iii) 0 and 382,519 shares of common stock upon the conversion of 10,088 and 26,776 shares of series C preferred stock; (iv) 203,301 and 212,678 shares of common stock for settlement of debt; (v) 4,582,864 and 5,937,928 shares of common stock upon the conversion of debt and interest; (vi) 0 and 102,172 shares of common stock upon the conversion of series A preferred stock dividends, (vii) 0 and 44,322 shares of common stock upon the cashless exercise of warrants, (viii) exchanged 105,670 and 105,670 shares of common stock for return of shares of series C preferred stock and (ix) cancelled 54,367 and 54,367 shares of common stock, respectively.

During the three and nine months ended September 30, 2023, the Company issued (i) 18,517 and 61,334 shares of common stock upon exercise of warrants; (ii) 0 and 477 shares of common stock upon the conversion of 0 and 1,000 shares of Series A preferred stock; (iii) 0 and 80 shares of common stock as compensation for amending the license agreement for Sports Illustrated Nutrition; (iv) 2,155 and 2,235 shares of common stock as compensation for the amendment of a note payable; and (v) 0 and 13,738 shares of common stock as part of a securities purchase agreement.

***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 13,334 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 September 30, 2024, there were no shares of common stock available for issuance under the 2020 Plan. The Company did not issue any stock options under the 2020 Plan during the nine months ended September 30, 2024 or 2023.

In January 2022, the Company adopted its 2022 Equity Inventive Plan, as amended (the "2022 Plan"), under which the Company is authorized to issue awards for up to 47,620 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 September 30, 2024, there were 4,176 shares of common stock available for issuance under the 2022 Plan.

The Company did not issue any stock options under the 2022 Plan during the nine months ended September 30, 2024. On September 5, 2023, the Company issued options for the purchase of 21,919 shares of common stock at an exercise price of $23.31 and on September 6, 2023, the Company issued options for the purchase of 20,719 shares of common stock at an exercise price of $20.7921.

The Company recognized $77,077 and $765,588 of compensation expense related to the vesting of options based on the service period during the nine months ended September 30, 2024 and 2023, respectively. The compensation expense recognized for the three months ended September 30, 2024 and 2023 was $22,717 and $685,380, respectively.

**SMART FOR LIFE, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2024 AND 2023**

**(UNAUDITED)**

***Warrant Solicitation***

On May 30, 2024, the Company entered into warrant solicitation inducement letters (the "Inducement Letters") with the holders (the "Exercising Holders") of warrants for the purchase of an aggregate of 183,370 shares of common stock at an exercise price of $10.64 issued on December 4, 2023 (the "Existing Warrants"), pursuant to which the Exercising Holders agreed to exercise the Existing Warrants for cash at a reduced exercise price of $4.25 per share, or for gross proceeds of $779,322.50 in the aggregate. In consideration for the immediate exercise of the Existing Warrants for cash, the Company agreed to issue to the Exercising Holders new warrants for the purchase of an aggregate of 550,110 shares of common stock (the "New Warrants").

On June 3, 2024, the closing of this transaction was completed, and the Company issued the New Warrants. The New Warrants are exercisable for a period of eighteen months at an initial exercise price of $4.25 per share and may be exercised on a cashless basis if at the time of exercise there is no effective registration statement registering, or the prospectus contained therein is not available for the resale of, the shares issuable upon exercise of the New Warrants. The exercise price will be subject to customary adjustments in the event of stock splits, stock dividends, stock combinations and similar recapitalization transactions. The New Warrants also contain a beneficial ownership limitation which provides that the Company shall not effect any exercise, and a holder shall not have the right to exercise, any portion of a New Warrant 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 a holder in its sole discretion upon not less than sixty-one (61) days' prior notice to the Company.

H.C. Wainwright & Co., LLC acted as warrant inducement agent and financial advisor in connection with the transaction and received a cash fee equal to 7.5% of the gross proceeds, a management fee equal to 1% of the gross proceeds and reimbursement of certain expenses. After these fees, the Company received net proceeds of approximately $458,473. In addition, the Company issued to certain designees of H.C. Wainwright & Co., LLC warrants to purchase 13,753 shares of common stock at an exercise price of $5.3125 per share, which such warrants will have the same terms of the New Warrants (other than the exercise price).

On June 3, 2024, the Company issued a pre-funded warrant for the purchase of 44,322 shares of common stock in exchange for the conversion of debt in the amount of $142,541. The warrant was immediately exercised in full on June 3, 2024.

In addition to the warrant exercises described above, in the nine months ended September 30, 2024, warrant holders exercised an aggregate of 46,773 shares of common stock. In the nine months ended September 30, 2023, warrant holders exercised an aggregate of 42,817 shares of common stock.

**SMART FOR LIFE, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2024 AND 2023**

**(UNAUDITED)**

The following is a summary of options and warrants granted, exercised, forfeited and outstanding during the nine months ended September 30, 2024:

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **2024-Stock Options** | **2024-Stock Options** | **2024-Warrants** | **2024-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 January 1, 2024 | 43259 | $32.73 | 217313 | $812.73 |
| Granted |  |  | 608185 | 4.13 |
| Exercised |  |  | (231264) | (3.98) |
| Forfeited |  |  |  |  |
| Outstanding at September 30, 2024 | 43259 | $32.73 | 594234 | $812.88 |
| Exercisable at September 30, 2024 | 21205 |  | 594234 |  |

---

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **2023-Stock Options** | **2023-Stock Options** | **2023-Warrants** | **2023-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 January 1, 2023 | 876 | $1984.50 | 71513 | $1984.50 |
| Granted |  |  | 157196 | 1984.50 |
| Exercised |  |  | (70961) | (1984.50) |
| Forfeited | (59) | (1984.50) |  |  |
| Outstanding at September 30, 2023 | 817 | $1984.50 | 157748 | $1984.50 |
| Exercisable at September 30, 2023 | 817 |  | 157748 |  |

---

The fair value of each option and warrant in 2024 was estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions:

---

| | | |
|:---|:---|:---|
| Risk-free interest rate | 4.27 – 4.30 | 4.27 – 4.30% |
| Expected volatility |  | 53% |
| Expected life (years) |  | 10 |
| Dividend yield |  | 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.

***Net Loss Per Share***

 ****

Basic and diluted net loss per share of common stock for the nine months ended September 30, 2024, and 2023 was determined by dividing net loss by the weighted average shares of common stock outstanding during the period. The Company's potentially dilutive shares, consisting of 380,493 warrants and 43,259 stock options, have not been included in the computation of dilutive net loss per share for the periods as the result would be antidilutive.

**SMART FOR LIFE, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2024 AND 2023**

**(UNAUDITED)**

**Note 12 — Commitments and Contingencies**

***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.

**Note 13 — Related Party Transactions**

The Company entered into debt with related parties which are reflected in Note 7.

The Company is party to a management services agreement with Trilogy Capital Group, LLC ("Trilogy"), a company controlled by the Company's Executive Chairman. For the nine months ended September 30, 2024 and 2023, the Company paid Trilogy $0 and $46,686, respectively, for services rendered under a consulting agreement which are reflected in the statements of operations as consulting fees – related parties.

**Note 14 — Subsequent Events**

In accordance with ASC 855, Subsequent Events, the Company has reviewed its operations subsequent to September 30, 2024 to the date these condensed 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.

 ****

***Completion of Ceautamed Disposition***

As noted above, on October 1, 2024, the 51% owner of First Health elected to exercise the option to purchase the remaining 49% interest in First Health from the Company, effective as of October 2, 2024, paid to the Company the option price of $1.00, and the Company delivered the remaining 49% interest in First Health to such owner.

**ITEM 2. 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 the 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, our 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.*

**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 Nevada 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" included in our Annual Report on Form 10-K for the year ended December 31, 2023, or the Form 10-K, or 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.

**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. 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 Millenium Natural Manufacturing Corp. and Millenium Natural Health Products Inc. and on October 9, 2019, we acquired the remaining 49% of these companies. 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. In November 2024 we relocated the operations of BSNM from Doral, Florida to Riviera Beach, Florida. It manufactures nutritional products for a significant number of customers.

On July 1, 2021, we 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, 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 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. 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. In this report, we collectively refer to Doctors Scientific Organica, LLC and its consolidated subsidiaries as 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 November 8, 2021, we acquired 100% of Nexus Offers, Inc., or 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 100% of GSP Nutrition Inc., or GSP. GSP is a sports nutrition company that offers nutritional supplements for athletes and active lifestyle consumers.

**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 access capital needed for operations including purchasing raw materials;

● 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 Jumpstart Our Business Startups Act of 2012, or 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 of 1933, as amended, 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 $1.235 billion or more, (iii) the date that we become a "large accelerated filer" as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended, or 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.

**Discontinued Operations**

On July 29, 2022, we acquired 100% of Ceautamed Worldwide, LLC and its wholly-owned subsidiaries Wellness Watchers Global, LLC and Greens First Female LLC (which we collectively refer to as Ceautamed), which owns the Greens First line of branded products which have been specifically marketed to the healthcare provider sector. On January 29, 2024, we entered into an asset purchase agreement pursuant to which we agreed to sell nearly all of the assets of Ceautamed and its subsidiaries for a 49% ownership interest in a new limited liability company, First Health FL LLC, or First Health. The agreement allows for the 51% owner to purchase the remaining 49% for $1 at an unspecified future date. On October 1, 2024, such owner elected to exercise the option, effective as of October 2, 2024, paid us the option price of $1.00, and we delivered the remaining 49% interest in First Health to such owner. As a result, the financial results and balances of Ceautamed have been classified as discontinued operations within this report and the accompanying unaudited condensed consolidated financial statements.

**Results of Operations**

 ****

***Comparison of Three Months Ended September 30, 2024 and 2023***

The following table sets forth key components of our results of operations during the three months ended September 30, 2024 and 2023, both in dollars and as a percentage of our revenues.

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **September 30, 2024** | **September 30, 2024** | **September 30, 2023** | **September 30, 2023** |
|  | **Amount** | **% of<br> Revenues** | **Amount** | **% of<br> Revenues** |
| Revenues |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Products | $1269373 | 100.00% | $2239556 | 99.73% |
| &nbsp;&nbsp;&nbsp;Advertising |  |  | 5999 | 0.27% |
| Total revenues | 1269373 | 100.00% | 2245555 | 100.00% |
| Cost of revenues |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Products | 751317 | 59.19% | 1408646 | 62.73% |
| &nbsp;&nbsp;&nbsp;Advertising |  |  | 522 | 0.02% |
| Total cost of revenues | 751317 | 59.19% | 1409168 | 62.75% |
| Gross profit | 518056 | 40.81% | 836387 | 37.25% |
| Operating expenses |  |  |  |  |
| &nbsp;&nbsp;&nbsp;General and administrative | 428554 | 33.76% | 1174348 | 52.30% |
| &nbsp;&nbsp;&nbsp;Compensation - administrative | 570126 | 44.91% | 1907195 | 84.93% |
| &nbsp;&nbsp;&nbsp;Professional services | 422842 | 33.31% | 348598 | 15.52% |
| &nbsp;&nbsp;&nbsp;Consulting fees - related parties |  |  | 19139 | 0.85% |
| &nbsp;&nbsp;&nbsp;Depreciation and amortization expense | 300636 | 23.68% | 303538 | 13.52% |
| Total operating expenses | 1722158 | 135.67% | 3752818 | 167.12% |
| Operating loss | (1204102) | (94.86)% | (2916431) | (129.88)% |
| Other income (expense) |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Other income (expense) | (179536) | (14.14)% | 19820 | 0.88% |
| &nbsp;&nbsp;&nbsp;Gain on debt extinguishment | 194114 | 15.29% | 16021 | 0.71% |
| &nbsp;&nbsp;&nbsp;Interest expense | (2046324) | (161.21)% | (1105289) | (49.22)% |
| Total other income (expense) | (2031746) | (160.06)% | (1069448) | (47.63)% |
| Loss from continuing operations | (3235848) | (254.92)% | (3985879) | (177.50)% |
| Loss from discontinued operations | (30) | (0.00)% | (358228) | (15.95)% |
| Net loss | $(3235878) | (254.92)% | $(4344107) | (193.45)% |

---

*<u>Revenues</u>*. Our total revenues decreased by $976,182, or 43.47%, to $1,269,373 for the three months ended September 30, 2024 from $2,245,555 for the three months ended September 30, 2023.

Our nutraceutical business generates revenue from the sales of nutritional and related products. Revenues from our nutraceutical business (products) decreased by $970,183, or 43.32%, to $1,269,373 for the three months ended September 30, 2024 from $2,239,556 for the three months ended September 30, 2023. This decrease was primarily due to our cash constraints and our inability to pay for raw materials used in the production of both branded and contract manufacturing products. The decreased revenues were the result of a decrease 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. We did not generate any revenues from our digital marketing business (advertising) for the three months ended September 30, 2024, as compared to $5,999, for the three months ended September 30, 2023. The decrease in revenue is attributable to our repurposing of the subsidiary from affiliate network management to focusing on the advertising of our other subsidiaries.

*<u>Cost of revenues</u>*. Our total cost of revenues decreased by $657,851, or 46.68%, to $751,317 for the three months ended September 30, 2024 from $1,409,168 for the three months ended September 30, 2023. Such decrease is directly related to the decrease in revenues.

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) decreased by $657,329, or 46.66%, to $751,317 for the three months ended September 30, 2024 from $1,408,646 for the three months ended September 30, 2023. As a percentage of product revenues, cost of revenues for product sales were 59.19% and 62.90% for the three months ended September 30, 2024, and 2023, respectively. The decreased percentage is due to decreased product offerings allowing for a concentration of ingredients used in production.

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) was $0 for the three months ended September 30, 2024, as compared to $522 for the three months ended September 30, 2023. As a percentage of advertising revenues, cost of revenues for advertising sales was 0% and 8.70% for the three months ended September 30, 2024 and 2023, respectively. Such decrease is directly related to the decrease in revenues.

*<u>Gross profit</u>*. As a result of the foregoing, our gross profit decreased by $318,331, or 38.06%, to $518,056 for the three months ended September 30, 2024 from $836,387 for the three months ended September 30, 2023. As a percentage of revenues, our gross profit was 40.81% and 37.25% for the three months ended September 30, 2024 and 2023, respectively.

*<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 decreased by $745,793, or 63.51%, to $428,554 for the three months ended September 30, 2024 from $1,174,348 for the three months ended September 30, 2023. As a percentage of revenues, our general and administrative expenses were 33.76% and 52.30% for the three months ended September 30, 2024 and 2023, respectively. Such decrease was primarily due to decreased advertising costs and insurance rates in 2024.

*<u>Compensation - administrative</u>.* Our compensation expenses include both cash and non-cash items, including salaries plus related payroll taxes. Our compensation expenses decreased by $1,337,069, or 70.11%, to $570,126 for the three months ended September 30, 2024 from $1,907,195 for the three months ended September 30, 2023. As a percentage of revenues, our compensation expenses were 44.91% and 84.93% for the three months ended September 30, 2024 and 2023, respectively. Such decrease was primarily due to a reduction of headcount.

*<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 $74,244, or 21.30%, to $422,842 for the three months ended September 30, 2024 from $348,598 for the three months ended September 30, 2023. As a percentage of revenues, our professional services expenses were 33.31% and 15.52% for the three months ended September 30 2024 and 2023, respectively. Such increase was primarily due to increased advisory fees related to Nasdaq compliance and increased legal fees.

*<u>Consulting fees - related parties</u>.* For the three months ended September 30, 2024 and 2023, we paid Trilogy Capital Group, LLC, a company controlled by our Executive Chairman, $0 and $19,139, respectively, for services rendered under a consulting agreement.

*<u>Depreciation and amortization</u>.* Depreciation and amortization was $300,636, or 23.68% of revenues, for the three months ended September 30, 2024, as compared to $303,538, or 13.52% of revenues, for the three months ended September 30, 2023. The decrease in depreciation is associated with assets which were fully depreciated in prior periods.

*<u>Total other expense</u>*. We had $2,031,746 in total other expense, net, for the three months ended September 30, 2024, as compared to total other expense, net, of $1,069,448 for the three months ended September 30, 2023. Total other expense, net, for the three months ended September 30, 2024 consisted of interest expense of $2,046,324 and other expense of $179,536, offset by gain on extinguishment of debt of $194,114, while other expense, net, for the three months ended September 30, 2023 consisted of interest expense of $1,105,289, offset by other income of $19,820 and gain on extinguishment of debt of $16,021.

*<u>Loss from discontinued operations</u>*. We had $30 in net loss from discontinued operations for the three months ended September 30, 2024, as compared to $358,228 for the three months ended September 30, 2023.

*<u>Net loss</u>*. As a result of the cumulative effect of the factors described above, we had a net loss of $3,235,878 for the three months ended September 30, 2024, as compared to $4,344,107 for the three months ended September 30, 2023, a decrease of $1,108,229 or 25.51%.

 ****

***Comparison of Nine Months Ended September 30, 2024 and 2023***

The following table sets forth key components of our results of operations during the nine months ended September 30, 2024 and 2023, both in dollars and as a percentage of our revenues.

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **September 30, 2024** | **September 30, 2024** | **September 30, 2023** | **September 30, 2023** |
|  | **Amount** | **% of<br> Revenues** | **Amount** | **% of<br> Revenues** |
| Revenues |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Products | $2625965 | 100.00% | $4824906 | 93.03% |
| &nbsp;&nbsp;&nbsp;Advertising | 115 |  | 361470 | 6.97% |
| Total revenues | 2626080 | 100.00% | 5186376 | 100.00% |
| Cost of revenues |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Products | 1494279 | 56.90% | 3389788 | 65.36% |
| &nbsp;&nbsp;&nbsp;Advertising |  |  | 279037 | 5.38% |
| Total cost of revenues | 1494279 | 56.90% | 3668825 | 70.74% |
| Gross profit | 1131801 | 43.10% | 1517551 | 29.26% |
| Operating expenses |  |  |  |  |
| &nbsp;&nbsp;&nbsp;General and administrative | 1390638 | 52.95% | 3580098 | 69.03% |
| &nbsp;&nbsp;&nbsp;Compensation - administrative | 1460524 | 55.62% | 4527332 | 87.29% |
| &nbsp;&nbsp;&nbsp;Professional services | 1566484 | 59.65% | 1568896 | 30.25% |
| &nbsp;&nbsp;&nbsp;Consulting fees - related parties |  |  | 46686 | 0.90% |
| &nbsp;&nbsp;&nbsp;Impairment of intangible assets |  |  | 466737 | 9.00% |
| &nbsp;&nbsp;&nbsp;Depreciation and amortization expense | 946888 | 36.06% | 700723 | 13.51% |
| Total operating expenses | 5364534 | 204.28% | 10890472 | 209.98% |
| Operating loss | (4232733) | (161.18)% | (9372921) | (180.72)% |
| Other income (expense) |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Other income (expense) | (241298) | (9.19)% | 324672 | 6.26% |
| &nbsp;&nbsp;&nbsp;Gain on debt extinguishment | 286510 | 10.91% | 205727 | 3.97% |
| &nbsp;&nbsp;&nbsp;Gain on sale of subsidiaries | (132491) | (5.05)% |  |  |
| &nbsp;&nbsp;&nbsp;Interest expense | (4112464) | (156.60)% | (3028915) | (58.40)% |
| Total other income (expense) | (4199743) | (159.92)% | (2498516) | (48.17)% |
| Loss from continuing operations | (8432476) | (321.11)% | (11871437) | (228.90)% |
| Income (loss) from discontinued operations | 89403 | 3.40% | (976982) | (18.84)% |
| Net loss | $(8343073) | (317.70)% | $(12848419) | (247.73)% |

---

*<u>Revenues</u>*. Our total revenues decreased by $2,560,296, or 49.37%, to $2,626,080 for the nine months ended September 30, 2024 from $5,186,376 for the nine months ended September 30, 2023.

Revenues from our nutraceutical business (products) decreased by $2,198,941, or 45.57%, to $2,625,965 for the nine months ended September 30, 2024 from $4,824,906 for the nine months ended September 30, 2023. This decrease was primarily due to our cash constraints and our inability to pay for raw materials used in the production of both branded and contract manufacturing products. The decreased revenues were the result of a decrease in the volume of products sold and not due to pricing changes.

Revenues from our digital marketing business (advertising) decreased by $361,355, or 99.97%, to $115 for the nine months ended September 30, 2024 from $361,470 for the nine months ended September 30, 2023. The decrease in revenue is attributable to our repurposing of the subsidiary from affiliate network management to focusing on the advertising of our other subsidiaries.

*<u>Cost of revenues</u>*. Our total cost of revenues decreased by $2,174,546, or 59.27%, to $1,494,279 for the nine months ended September 30, 2024 from $3,668,825 for the nine months ended September 30, 2023. Such decrease is directly related to the decrease in revenues.

Cost of revenues for our nutraceutical business (products) decreased by $1,895,509, or 55.92%, to $1,494,279 for the nine months ended September 30, 2024 from $3,389,788 for the nine months ended September 30, 2023. As a percentage of product revenues, cost of revenues for product sales were 56.90% and 70.26% for the nine months ended September 30, 2024 and 2023, respectively. The decreased percentage is due to decreased product offerings allowing for a concentration of ingredients used in production.

Cost of revenues from our digital marketing business (advertising) was $0 for the nine months ended September 30, 2024, as compared to $279,037 for the nine months ended September 30, 2023. As a percentage of advertising revenues, cost of revenues for advertising sales was 0% and 77.20% for the nine months ended September 30, 2024 and 2023, respectively. Such decrease is directly related to the decrease in revenues.

*<u>Gross profit</u>*. As a result of the foregoing, our gross profit decreased by $385,750, or 25.42%, to $1,131,801 for the nine months ended September 30, 2024 from $1,517,551 for the nine months ended September 30, 2023.

 

*<u>General and administrative expenses</u>.* Our general and administrative expenses decreased by $2,189,460, or 61.16%, to $1,390,638 for the nine months ended September 30, 2024 from $3,580,098 for the nine months ended September 30, 2023. As a percentage of revenues, our general and administrative expenses were 52.95% and 69.03% for the nine months ended September 30, 2024 and 2023, respectively. Such decrease was primarily due to decreased advertising costs and insurance rates in 2024.

*<u>Compensation - administrative</u>.* Our compensation expenses decreased by $3,066,808, or 67.74%, to $1,460,524 for the nine months ended September 30, 2024 from $4,527,332 for the nine months ended September 30, 2023. As a percentage of revenues, our compensation expenses were 55.62% and 87.29% for the nine months ended September 30, 2024 and 2023, respectively. Such decrease was primarily due to reduced headcount.

*<u>Professional services</u>.* Our professional services expenses decreased by $2,412, or 0.15%, to $1,566,484 for the nine months ended September 30, 2024 from $1,568,896 for the nine months ended September 30, 2023. As a percentage of revenues, our professional services expenses were 59.65% and 30.25% for the nine months ended September 30, 2024 and 2023, respectively. Such percentage increase was primarily due to legal fees and Nasdaq compliance consulting fees incurred.

*<u>Consulting fees - related parties</u>.* For the nine months ended September 30, 2024 and 2023, we paid Trilogy Capital Group, LLC, a company controlled by our Executive Chairman, $0 and $46,686, respectively, for services rendered under a consulting agreement.

*<u>Impairment of intangible assets</u>*. Due to a significant decrease in advertising revenues, we performed an impairment analysis on the affiliate relationships associated with our Nexus subsidiary and recognized an impairment of $466,737 during the nine months ended September 30, 2023. No impairment was recognized during the nine months ended September 30 2024.

*<u>Depreciation and amortization</u>.* Depreciation and amortization was $946,888, or 36.06% of revenues, for the nine months ended September 30, 2024, as compared to $700,723 or 13.51% of revenues, for the nine months ended September 30, 2023.

*<u>Total other expense</u>*. We had $4,199,743 in total other expense, net, for the nine months ended September 30, 2024, as compared to total other expense, net, of $2,498,516 for the nine months ended September 30, 2023. Total other expense, net, for the nine months ended September 30, 2024 consisted of interest expense of $4,112,464, other expense of $241,298 and loss on sale of subsidiary of $132,491, offset by gain on extinguishment of debt of $286,510, while other expense, net, for the nine months ended September 30, 2023 consisted of interest expense of $3,028,915, offset by a gain on extinguishment of debt of $205,727 and other income of $324,672.

*<u>Net loss</u>*. As a result of the cumulative effect of the factors described above, we had a net loss of $8,343,073 for the nine months ended September 30, 2024, as compared to $12,848,419 for the nine months ended September 30, 2023, a decrease of $4,505,346, or 35.07%.

**Liquidity and Capital Resources** 

As of September 30, 2024, we had cash of $35,608. 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.

Our unaudited condensed consolidated financial statements have been prepared assuming that we will continue as a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. We have suffered recurring losses from operations and have a working capital deficiency of $8.2 million at September 30, 2024. These conditions raise substantial doubt about our ability to continue as a going concern. The unaudited condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Management believes that currently available resources will not be sufficient to fund our planned expenditures over the next 12 months from the date hereof. Accordingly, we will be dependent upon the raising of additional capital through the placement of common and preferred stock as well as debt financing in order to implement our business plan. There is no assurance that we will be successful with future financing ventures, and the inability to secure such financing may have a material adverse effect on our financial condition.

 ****

***Summary of Cash Flow***

The following table provides detailed information about our net cash flow for the nine months ended September 30, 2024 and 2023.

---

| | | |
|:---|:---|:---|
|  | **Nine Months Ended <br> September 30,** | **Nine Months Ended <br> September 30,** |
|  | **2024** | **2023** |
| Net cash used in operating activities | $(516784) | $(5952710) |
| Net cash used in investing activities | (5343) |  |
| Net cash provided by financing activities | 403069 | 5897604 |
| Net change in cash | (119058) | (55106) |
| Cash and cash equivalents at beginning of period | 154666 | 60790 |
| Cash and cash equivalents at end of period | $35608 | $5684 |

---

Our net cash used in operating activities was $516,784 for the nine months ended September 30, 2024, as compared to $5,952,710 for the nine months ended September 30, 2023. For the nine months ended September 30, 2024, our net loss of $8,343,073, offset by non-cash finance fees of $2,055,084, decreased accrued expenses of $1,242,320, a reduction in payables of $1,054,830 and depreciation and amortization of $946,888, were the primary drivers for cash used in operations. For the nine months ended September 30, 2023, our net loss of $12,848,419, offset by an increase in accrued expenses of $2,018,441, depreciation and amortization of $946,888 and stock based compensation of $914,787, were the primary drivers for cash used in operations.

Our net cash used in investing activities was $5,343 and $0 for the nine months ended September 30, 2024, and 2023, which consisted entirely of additions to property and equipment.

Our net cash provided by financing activities was $403,069 for the nine months ended September 30, 2024, as compared to $5,897,604 for the nine months ended September 30, 2023. Net cash provided by financing activities for the nine months ended September 30, 2024 consisted of receipts from related parties of $1,778,442, proceeds from the exercise of warrants of $607,903 and proceeds from debt of $163,500, offset by repayments to related parties of $1,914,146 and repayment of debt of $232,630. Net cash provided by financing activities for the nine months ended September 30, 2023 consisted of proceeds from the exercise of warrants of $5,425,112, proceeds from debt of $2,706,791, proceeds from the issuance of common stock of $2,151,310 and receipts from related parties of $147,621, offset by repayments on debt of $4,507,644 and repayments to related parties of $25,586.

 ****

 **

***Outstanding Debt***

 **

The following table shows aggregate figures for our total debt outstanding at September 30, 2024. For a complete description of the terms of our outstanding debt, please see Note 8 to our unaudited condensed consolidated financial statements above.

---

| | |
|:---|:---|
| Original issue discount subordinated debentures | $1547135 |
| Original issue discount secured subordinated note | 131714 |
| Acquisition notes – related party | 141193 |
| Promissory notes and cash advances | 539818 |
| Promissory note – related party | 250000 |
| Revolving lines of credit | 2219 |
| Equipment financing loan | 133230 |
| EIDL loan | 300000 |
| PPP loans | 197457 |
|  | 3242766 |
| Debt issuance costs | (3589) |
| Debt, net | 3239177 |
| Debt, current | 2223820 |
| Debt issuance costs, current | (2657) |
| Current portion of debt, net | 2221163 |
| Debt, non-current | 1018946 |
| Debt issuance costs, non-current | (932) |
| Non-current portion of debt, net | $1018014 |

---

**Contractual Obligations**

Our principal commitments consist mostly of obligations under the loans described above 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 preparation of our unaudited condensed consolidated financial statements requires our management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On a regular basis, we evaluate these estimates. These estimates are based on management's historical industry experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results may differ from these estimates.

For a description of the accounting policies that, in management's opinion, involve the most significant application of judgment or involve complex estimation and which could, if different judgment or estimates were made, materially affect our reported financial position, results of operations, or cash flows, see "Management's Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies" in the Form 10-K.

**ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.**

Not applicable.

**ITEM 4. 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 Securities and Exchange Commission 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 September 30, 2024. Based upon, and as of the date of this evaluation, our chief executive officer and chief financial officer determined that because of the material weaknesses described in Item 9A "Controls and Procedures" of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, which we are still in the process of remediating as of September 30, 2024, our disclosure controls and procedures were not effective. Investors are directed to Item 9A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, for the description of these weaknesses.

**Remediation of Material Weaknesses in Internal Control Over Financial Reporting**

As disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, our management has identified the steps necessary to address the material weaknesses, and in the third quarter of 2024, we continued to implement these remedial procedures.

As part of our plan to remediate this material weakness, we are performing a full review of our internal control procedures. We have implemented, and plan to continue to implement, new controls and new processes. We have hired and plan to continue to hire additional qualified personnel and establish more robust processes to support our internal control over financial reporting, including clearly defined roles and responsibilities. We anticipate time being required to complete the implementation and to assess and ensure the sustainability of these controls. The material weakness will not be considered remediated until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.

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 Control Over Financial Reporting**

Other than in connection with the implementation of the remedial measures described above, there were no changes in our internal control over financial reporting or in any other factors that could significantly affect these controls during the three months ended September 30, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

**PART II**

**<u>OTHER INFORMATION</u>**

**ITEM 1. 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 1A. RISK FACTORS.**

Not applicable.

**ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.**

We have not sold any equity securities during the three months ended September 30, 2024 that were not previously disclosed in a current report on Form 8-K that was filed during the quarter.

We did not repurchase any shares of our common stock during the three months ended September 30, 2024.

**ITEM 3. DEFAULTS UPON SENIOR SECURITIES.**

None.

**ITEM 4. MINE SAFETY DISCLOSURES.**

Not applicable.

**ITEM 5. OTHER INFORMATION.**

None.

**ITEM 6. EXHIBITS.**

---

| | |
|:---|:---|
| **Exhibit No.** | **Description** |
| 2.1 | [Plan of Conversion, dated January 12, 2023 (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed on April 13, 2023)](https://www.sec.gov/Archives/edgar/data/1851860/000121390023029562/ea176888ex2-1_smartforlife.htm) |
| 2.2 | [Certificate of Conversion as filed with the Secretary of State of the State of Delaware on April 10, 2023 (incorporated by reference to Exhibit 2.2 to the Current Report on Form 8-K filed on April 13, 2023)](https://www.sec.gov/Archives/edgar/data/1851860/000121390023029562/ea176888ex2-2_smartforlife.htm) |
| 2.3 | [Articles of Conversion as filed with the Secretary of State of the State of Nevada on April 10, 2023 (incorporated by reference to Exhibit 2.3 to the Current Report on Form 8-K filed on April 13, 2023)](https://www.sec.gov/Archives/edgar/data/1851860/000121390023029562/ea176888ex2-3_smartforlife.htm) |
| 3.1 | [Articles of Incorporation of Smart for Life, Inc. (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed on April 13, 2023)](https://www.sec.gov/Archives/edgar/data/1851860/000121390023029562/ea176888ex3-1_smartforlife.htm) |
| 3.2 | [Certificate of Amendment to Articles of Incorporation of Smart for Life, Inc. (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed on April 28, 2023)](https://www.sec.gov/Archives/edgar/data/1851860/000121390023033974/ea177445ex3-1_smartforlife.htm) |
| 3.3 | [Certificate of Change to Articles of Incorporation of Smart for Life, Inc. (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed on August 8, 2023)](https://www.sec.gov/Archives/edgar/data/1851860/000121390023064525/ea183064ex3-1_smartforlife.htm) |
| 3.4 | [Certificate of Change to Articles of Incorporation of Smart for Life, Inc. (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed on November 2, 2023)](https://www.sec.gov/Archives/edgar/data/1851860/000121390023082770/ea187652ex3-1_smartfor.htm) |
| 3.5 | [Certificate of Change to Articles of Incorporation of Smart for Life, Inc. (incorporated by reference to Exhibit 3.5 to the Annual Report on Form 10-K filed on September 20, 2024)](https://www.sec.gov/Archives/edgar/data/1851860/000121390024080709/ea020385801ex3-5_smart.htm) |
| 3.6 | [Certificate of Designation of Series B Preferred Stock (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed on May 30, 2023)](https://www.sec.gov/Archives/edgar/data/1851860/000121390023043695/ea179431ex3-1_smartfor.htm) |
| 3.7 | [Certificate of Designation of Series C Preferred Stock (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed on March 7, 2024)](https://www.sec.gov/Archives/edgar/data/1851860/000121390024020797/ea020138201ex3-1_smartlife.htm) |
| 3.8 | [Bylaws of Smart for Life, Inc. (incorporated by reference to Exhibit 3.3 to the Current Report on Form 8-K filed on April 13, 2023)](https://www.sec.gov/Archives/edgar/data/1851860/000121390023029562/ea176888ex3-3_smartforlife.htm) |
| 4.1 | [Form of Common Stock Purchase Warrant issued on June 3, 2024 (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed on June 7, 2024)](https://www.sec.gov/Archives/edgar/data/1851860/000121390024050809/ea020752701ex4-1_smart.htm) |
| 4.2 | [Form of Placement Agent Common Stock Purchase Warrant issued on June 3, 2024 (incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K filed on June 7, 2024)](https://www.sec.gov/Archives/edgar/data/1851860/000121390024050809/ea020752701ex4-2_smart.htm) |
| 4.3 | [Form of Placement Agent Common Stock Purchase Warrant issued on December 4, 2023 (incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K filed on December 6, 2023)](https://www.sec.gov/Archives/edgar/data/1851860/000121390023093661/ea189622ex4-2_smartfor.htm) |
| 4.4 | [Placement Agent Common Stock Purchase Warrant issued by Smart for Life, Inc. to Charles Worthman on May 31, 2023 (incorporated by reference to Exhibit 4.6 to the Registration Statement on Form S-3 filed on June 5, 2023)](http://www.sec.gov/Archives/edgar/data/1851860/000121390023046196/ea179711ex4-6_smartforlife.htm) |
| 4.5 | [Placement Agent Common Stock Purchase Warrant issued by Smart for Life, Inc. to Craig Schwabe on May 31, 2023 (incorporated by reference to Exhibit 4.7 to the Registration Statement on Form S-3 filed on June 5, 2023)](http://www.sec.gov/Archives/edgar/data/1851860/000121390023046196/ea179711ex4-7_smartforlife.htm) |
| 4.6 | [Placement Agent Common Stock Purchase Warrant issued by Smart for Life, Inc. to Michael Vasinkevich on May 31, 2023 (incorporated by reference to Exhibit 4.8 to the Registration Statement on Form S-3 filed on June 5, 2023)](http://www.sec.gov/Archives/edgar/data/1851860/000121390023046196/ea179711ex4-8_smartforlife.htm) |
| 4.7 | [Placement Agent Common Stock Purchase Warrant issued by Smart for Life, Inc. to Noam Rubinstein on May 31, 2023 (incorporated by reference to Exhibit 4.9 to the Registration Statement on Form S-3 filed on June 5, 2023)](http://www.sec.gov/Archives/edgar/data/1851860/000121390023046196/ea179711ex4-9_smartforlife.htm) |
| 4.8 | [Form of Placement Agent Common Stock Purchase Warrant issued on May 19, 2023 (incorporated by reference to Exhibit 4.3 to the Current Report on Form 8-K filed on May 23, 2023)](https://www.sec.gov/Archives/edgar/data/1851860/000121390023042397/ea179030ex4-3_smartfor.htm) |
| 4.9 | [Placement Agent Common Stock Purchase Warrant issued by Smart for Life, Inc. to H.C. Wainwright & Co., LLC on May 5, 2023 (incorporated by reference to Exhibit 4.2 to the Registration Statement on Form S-3 filed on May 5, 2023)](https://www.sec.gov/Archives/edgar/data/1851860/000121390023036953/ea177884ex4-2_smartforlife.htm) |
| 4.10 | [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)](https://www.sec.gov/Archives/edgar/data/1851860/000121390022078793/ea169907ex4-21_smart.htm) |

---

4.11 [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)](https://www.sec.gov/Archives/edgar/data/1851860/000121390022078793/ea169907ex4-22_smart.htm)

4.12 [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)](https://www.sec.gov/Archives/edgar/data/1851860/000121390022078793/ea169907ex4-23_smart.htm)

4.13 [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)](https://www.sec.gov/Archives/edgar/data/1851860/000121390022078793/ea169907ex4-24_smart.htm)

4.14 [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)](https://www.sec.gov/Archives/edgar/data/1851860/000121390022009014/ea156077ex4-1_smartfor.htm)

4.15 [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)](https://www.sec.gov/Archives/edgar/data/1851860/000121390022002875/fs12022a2ex4-21_smart.htm)

4.16 [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)](https://www.sec.gov/Archives/edgar/data/1851860/000121390022002875/fs12022a2ex4-22_smart.htm)

4.17 [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)](https://www.sec.gov/Archives/edgar/data/1851860/000121390022002875/fs12022a2ex4-20_smart.htm)

4.18 [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)](https://www.sec.gov/Archives/edgar/data/1851860/000121390022002875/fs12022a2ex4-19_smart.htm)

4.19 [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)](https://www.sec.gov/Archives/edgar/data/1851860/000121390022002875/fs12022a2ex4-18_smart.htm)

4.20 [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)](https://www.sec.gov/Archives/edgar/data/1851860/000121390022002875/fs12022a2ex4-17_smart.htm)

4.21 [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)](https://www.sec.gov/Archives/edgar/data/1851860/000121390022005023/fs12022a3ex4-25_smart.htm)

4.22 [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)](https://www.sec.gov/Archives/edgar/data/1851860/000121390022005023/fs12022a3ex4-23_smart.htm)

4.23 [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)](https://www.sec.gov/Archives/edgar/data/1851860/000121390022005023/fs12022a3ex4-24_smart.htm)

4.24 [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)](https://www.sec.gov/Archives/edgar/data/1851860/000121390021065747/fs12021ex4-14_smartforlife.htm)

4.25 [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)](https://www.sec.gov/Archives/edgar/data/1851860/000121390021065747/fs12021ex4-15_smartforlife.htm)

---

| | |
|:---|:---|
| 10.1 | [Securities Purchase Agreement, dated April 3, 2024, among Smart for Life, Inc., Purely Optimal Nutrition Inc., Tan Enterprises, Inc., Avaliant Holdings Corporation, Dannel Tan, Jason Kwan, and Timur Kim (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on April 9, 2024)](http://www.sec.gov/Archives/edgar/data/1851860/000121390024031639/ea020357401ex10-1_smart.htm) |
| 10.2 | [Independent Director Agreement, dated April 18, 2024, between Smart for Life, Inc. and Heather Granato (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on April 24, 2024)](http://www.sec.gov/Archives/edgar/data/1851860/000121390024035814/ea020458601ex10-1_smart.htm) |
| 10.3 | [Indemnification Agreement, dated April 18, 2024, between Smart for Life, Inc. and Heather Granato (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed on April 24, 2024)](http://www.sec.gov/Archives/edgar/data/1851860/000121390024035814/ea020458601ex10-2_smart.htm) |
| 10.4 | [Form of Inducement Letter, dated May 30, 2024 (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on May 31, 2024)](http://www.sec.gov/Archives/edgar/data/1851860/000121390024048180/ea020716301ex10-1_smart.htm) |
| 31.1\* | [Certifications of Principal Executive Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002](ea024488401ex31-1_smart.htm) |
| 31.2\* | [Certifications of Principal Financial and Accounting Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002](ea024488401ex31-2_smart.htm) |
| 32.1\* | [Certifications of Principal Executive Officer and Principal Financial and Accounting Officer furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002](ea024488401ex32-1_smart.htm) |
| 101.INS | 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

\*\* Furnished herewith

**SIGNATURES**

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

---

| | | |
|:---|:---|:---|
| Date: June 11, 2025 | **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 and Principal Financial and Accounting Officer)* | *(Principal Executive Officer and Principal Financial and Accounting Officer)* |

---

 ****

## Exhibit 31.1

**Exhibit 31.1**

**CERTIFICATIONS**

I, Darren C. Minton, certify that:

&nbsp;&nbsp;&nbsp;&nbsp;1. I
have reviewed this quarterly report on Form 10-Q 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: June 11, 2025

---

| |
|:---|
| /s/ Darren C. Minton |
| Darren C. Minton |
| Chief Executive Officer <br> *(Principal Executive Officer)* |

---

## Exhibit 31.2

**Exhibit 31.2**

**CERTIFICATIONS**

I, Darren C. Minton, certify that:

&nbsp;&nbsp;&nbsp;&nbsp;1. I
have reviewed this quarterly report on Form 10-Q 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: June 11, 2025

---

| |
|:---|
| /s/ Darren C. Minton |
| Darren C. Minton |
| Chief Financial Officer<br> *(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 and 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 Quarterly Report on Form 10-Q for the
quarter ended September 30, 2024 (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 June 11, 2025.

---

| |
|:---|
| /s/ Darren C. Minton |
| Darren C. Minton |
| Chief Executive Officer and Chief Financial Officer <br> *(Principal Executive Officer and 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.