Smart for Life Reports 34.25% Revenue Decline in Q2 2024

Smart for Life, Inc. reported a significant decline in financial performance for the second quarter of 2024, with total revenues falling to $877,799, a decrease of 34.25% from $1,334,980 in the same period of 2023. The company's nutraceutical product sales accounted for the majority of this revenue, dropping by 33.72% to $877,799, primarily due to cash constraints that hindered the procurement of raw materials. The company did not generate any revenue from its digital marketing segment during this quarter, compared to $10,616 in the previous year, as it shifted focus away from affiliate network management.

The cost of revenues also decreased significantly, down 53.82% to $471,715, reflecting the reduced sales volume. This led to a gross profit of $406,084, which represented an increase in gross margin percentage to 46.26% from 23.48% in the prior year. Operating expenses, however, remained high at $1,442,835, although this was a substantial reduction from $4,040,780 in the previous year, primarily due to decreased general and administrative costs and a reduction in headcount.

For the six months ending June 30, 2024, Smart for Life reported total revenues of $1,356,707, down 53.87% from $2,940,822 in the same period of 2023. The company experienced a net loss of $5,107,195, an improvement from the $8,504,311 loss reported in the prior year. The decrease in losses was attributed to lower operating expenses and a positive contribution from discontinued operations, which generated a net income of $89,433 compared to a loss of $618,755 in the previous year.

Operationally, Smart for Life has undergone significant changes, including the reclassification of its subsidiary Ceautamed as a discontinued operation following an asset sale agreement. The company has also been actively restructuring its operations, including a recent sale and leaseback agreement for its manufacturing facility. As of June 30, 2024, the company reported a working capital deficiency of approximately $9.7 million, raising concerns about its ability to continue as a going concern without additional capital.

Looking ahead, Smart for Life's management has indicated that the company will need to secure additional financing to support its operations and growth strategy. The company is exploring various avenues for raising capital, including potential equity placements and debt financing. However, there is no assurance that these efforts will be successful, which could materially impact the company's financial condition and operational capabilities.