Quarterly Report for Quarter Ending September 30, 2024 (Form 10-Q)

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:

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our goals and strategies;

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

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expected changes in our revenue, costs or expenditures;

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growth of and competition trends in our industry;

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

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

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

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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:

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our ability to acquire new customers or retain existing customers;

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our ability to access capital needed for operations including purchasing raw materials;

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our ability to offer competitive product pricing;

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our ability to broaden product offerings;

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industry demand and competition; and

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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:

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

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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);

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

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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, 2023
		Amount				% of Revenues				Amount				% of Revenues
Revenues
Products		$	1,269,373				100.00	%		$	2,239,556				99.73	%
Advertising			-				-				5,999				0.27	%
Total revenues			1,269,373				100.00	%			2,245,555				100.00	%
Cost of revenues
Products			751,317				59.19	%			1,408,646				62.73	%
Advertising			-				-				522				0.02	%
Total cost of revenues			751,317				59.19	%			1,409,168				62.75	%
Gross profit			518,056				40.81	%			836,387				37.25	%
Operating expenses
General and administrative			428,554				33.76	%			1,174,348				52.30	%
Compensation - administrative			570,126				44.91	%			1,907,195				84.93	%
Professional services			422,842				33.31	%			348,598				15.52	%
Consulting fees - related parties			-				-				19,139				0.85	%
Depreciation and amortization expense			300,636				23.68	%			303,538				13.52	%
Total operating expenses			1,722,158				135.67	%			3,752,818				167.12	%
Operating loss			(1,204,102	)			(94.86	)%			(2,916,431	)			(129.88	)%
Other income (expense)
Other income (expense)			(179,536	)			(14.14	)%			19,820				0.88	%
Gain on debt extinguishment			194,114				15.29	%			16,021				0.71	%
Interest expense			(2,046,324	)			(161.21	)%			(1,105,289	)			(49.22	)%
Total other income (expense)			(2,031,746	)			(160.06	)%			(1,069,448	)			(47.63	)%
Loss from continuing operations			(3,235,848	)			(254.92	)%			(3,985,879	)			(177.50	)%
Loss from discontinued operations			(30	)			(0.00	)%			(358,228	)			(15.95	)%
Net loss		$	(3,235,878	)			(254.92	)%		$	(4,344,107	)			(193.45	)%

Revenues. 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.

Cost of revenues. 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.

Gross profit. 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.

General and administrative expenses. 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.

Compensation - administrative. 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.

Professional services. 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.

Consulting fees - related parties. 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.

Depreciation and amortization. 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.

Total other expense. 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.

Loss from discontinued operations. 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.

Net loss. 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, 2023
		Amount				% of Revenues				Amount				% of Revenues
Revenues
Products		$	2,625,965				100.00	%		$	4,824,906				93.03	%
Advertising			115				-				361,470				6.97	%
Total revenues			2,626,080				100.00	%			5,186,376				100.00	%
Cost of revenues
Products			1,494,279				56.90	%			3,389,788				65.36	%
Advertising			-				-				279,037				5.38	%
Total cost of revenues			1,494,279				56.90	%			3,668,825				70.74	%
Gross profit			1,131,801				43.10	%			1,517,551				29.26	%
Operating expenses
General and administrative			1,390,638				52.95	%			3,580,098				69.03	%
Compensation - administrative			1,460,524				55.62	%			4,527,332				87.29	%
Professional services			1,566,484				59.65	%			1,568,896				30.25	%
Consulting fees - related parties			-				-				46,686				0.90	%
Impairment of intangible assets			-				-				466,737				9.00	%
Depreciation and amortization expense			946,888				36.06	%			700,723				13.51	%
Total operating expenses			5,364,534				204.28	%			10,890,472				209.98	%
Operating loss			(4,232,733	)			(161.18	)%			(9,372,921	)			(180.72	)%
Other income (expense)
Other income (expense)			(241,298	)			(9.19	)%			324,672				6.26	%
Gain on debt extinguishment			286,510				10.91	%			205,727				3.97	%
Gain on sale of subsidiaries			(132,491	)			(5.05	)%			-				-
Interest expense			(4,112,464	)			(156.60	)%			(3,028,915	)			(58.40	)%
Total other income (expense)			(4,199,743	)			(159.92	)%			(2,498,516	)			(48.17	)%
Loss from continuing operations			(8,432,476	)			(321.11	)%			(11,871,437	)			(228.90	)%
Income (loss) from discontinued operations			89,403				3.40	%			(976,982	)			(18.84	)%
Net loss		$	(8,343,073	)			(317.70	)%		$	(12,848,419	)			(247.73	)%

Revenues. 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.

Cost of revenues. 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.

Gross profit. 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.

General and administrative expenses. 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.

Compensation - administrative. 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.

Professional services. 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.

Consulting fees - related parties. 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.

Impairment of intangible assets. 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.

Depreciation and amortization. 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.

Total other expense. 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.

Net loss. 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 September 30,
		2024				2023
Net cash used in operating activities		$	(516,784	)		$	(5,952,710	)
Net cash used in investing activities			(5,343	)			-
Net cash provided by financing activities			403,069				5,897,604
Net change in cash			(119,058	)			(55,106	)
Cash and cash equivalents at beginning of period			154,666				60,790
Cash and cash equivalents at end of period		$	35,608			$	5,684

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		$	1,547,135
Original issue discount secured subordinated note			131,714
Acquisition notes - related party			141,193
Promissory notes and cash advances			539,818
Promissory note - related party			250,000
Revolving lines of credit			2,219
Equipment financing loan			133,230
EIDL loan			300,000
PPP loans			197,457
			3,242,766
Debt issuance costs			(3,589	)
Debt, net			3,239,177
Debt, current			2,223,820
Debt issuance costs, current			(2,657	)
Current portion of debt, net			2,221,163
Debt, non-current			1,018,946
Debt issuance costs, non-current			(932	)
Non-current portion of debt, net		$	1,018,014

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.