Acquisition and Strategy - The company is acquiring Purely Optimal Nutrition Inc. for a total purchase price of $11,965,966.10, which includes $7,859,579.66 in cash and $4,106,386.44 in newly issued preferred stock[217]. - The purchase price is based on a six times multiple of an estimated EBITDA of $1,467,073.35 for the twelve-month period ending November 30, 2023[218]. - The company has executed a buy-and-build strategy with multiple acquisitions, including 100% of GSP Nutrition Inc., a sports nutrition company[216]. - The company has a vertically integrated structure, focusing on proprietary product development and profitable acquisitions[211]. Financial Performance - Total revenues decreased by $1,126,934, or 70.18%, to $478,907 for the three months ended March 31, 2024, compared to $1,605,841 for the same period in 2023[230]. - Revenues from the nutraceutical business decreased by $782,194, or 62.03%, to $478,792, primarily due to cash constraints affecting the ability to purchase raw materials[231]. - Revenues from the digital marketing business decreased by $344,740, or 99.97%, to $115, attributed to a shift in focus from affiliate network management[232]. - Total cost of revenues decreased by $966,831, or 78.09%, to $271,247, directly related to the decrease in revenues[233]. - Gross profit decreased by $160,103, or 43.53%, to $207,660, with gross profit as a percentage of revenues increasing to 43.36% from 22.90%[236]. - General and administrative expenses decreased by $352,498, or 35.43%, to $642,346, with expenses as a percentage of revenues rising to 134.13%[237]. - Total other expenses netted $993,880 for the three months ended March 31, 2024, compared to $1,339,893 for the same period in 2023[242]. - Net loss decreased by $1,388,142, or 32.40%, to $2,896,174 for the three months ended March 31, 2024, compared to $4,284,316 in 2023[243]. Financial Position and Concerns - As of March 31, 2024, the company had cash of $21,331 and a working capital deficiency of $11.0 million, raising substantial doubt about its ability to continue as a going concern[245]. - The company had total debt of $7,075,498 as of March 31, 2024, with a current portion of $3,980,486[252]. Management and Accounting - Management's estimates and assumptions significantly impact reported amounts of assets, liabilities, revenues, and expenses[255]. - The company regularly evaluates its estimates based on historical industry experience and reasonable assumptions[255]. - Critical accounting policies may materially affect reported financial position, results of operations, or cash flows[256]. - There are no applicable quantitative and qualitative disclosures about market risk[257]. Market Position and Outlook - The company is positioned as an emerging growth company under the JOBS Act, allowing it to rely on certain exemptions from disclosure requirements[225]. - The company’s financial performance is influenced by its ability to acquire and retain customers, competitive pricing, and market conditions[224]. - The company’s future outlook includes expectations regarding demand for its products and competition trends in the industry[209].
Smart for Life(SMFL) - 2024 Q1 - Quarterly Report