SEC Form 10-Q filed by FitLife Brands Inc.

PART I

FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS 

 

FITLIFE BRANDS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

 

 

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

 

 

FITLIFE BRANDS, INC. 

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(In thousands, except per share data)

(Unaudited)

 

 

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

 

 

FITLIFE BRANDS, INC. 

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(In thousands)

(Unaudited)

 

 

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

 

 

FITLIFE BRANDS, INC. 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

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

 

 

FITLIFE BRANDS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2025 and 2024

(In thousands, except per share data)

(Unaudited)

 

 

NOTE 1 - DESCRIPTION OF BUSINESS

 

FitLife Brands, Inc. (the “Company”) is a provider of innovative and proprietary nutritional supplements and wellness products for health-conscious consumers marketed under the following brand names: (i) NDS Nutrition, PMD Sports, SirenLabs, Core Active, Nutrology, and Metis Nutrition (together, “NDS Products”); (ii) iSatori, BioGenetic Laboratories, and Energize (together, the "iSatori Products"); (iii) Dr. Tobias, All Natural Advice, and Maritime Naturals, (together, the “MRC Products”); and (iv) MusclePharm (“MusclePharm”).

 

The Company distributes the NDS Products principally through franchised General Nutrition Centers, Inc. (“GNC”) stores located both domestically and internationally and, with the launch of Metis Nutrition, through corporate GNC stores in the U.S. The iSatori Products are sold through retail locations, which include specialty and mass, as well as online directly to the end consumer. The Company distributes the MRC Products primarily online through e-commerce platforms, such as Amazon, directly to the end consumer. MusclePharm’s products are sold to both wholesale customers as well as online through various e-commerce platforms directly to the end consumer.

 

FitLife Brands is headquartered in Omaha, Nebraska. For more information on the Company, please go to www.fitlifebrands.com. The Company’s common stock, par value $0.01 per share (“Common Stock”), trades under the symbol “FTLF” on the Nasdaq Capital Market. 

 

 

NOTE 2 - BASIS OF PRESENTATION

 

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In our opinion, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation are included. Operating results for the three-month period ended March 31, 2025 are not necessarily indicative of the results that may be expected for the year ending December 31, 2025. Although management of the Company believes the disclosures presented herein are adequate and not misleading, these interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the footnotes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, filed with the Securities and Exchange Commission (the “SEC”) on March 27, 2025. 

 

 

NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

The Company prepares its financial statements in accordance with accounting principles generally accepted in the U.S. (“GAAP”). Significant accounting policies are as follows:

 

Principles of Consolidation

 

The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. Intercompany accounts and transactions have been eliminated in the condensed consolidated financial statements.

 

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Foreign Currency Translation

 

The functional currency of the Company is the U.S. dollar (“USD”). The functional currency of the Company’s Canadian subsidiaries is the Canadian dollar (“CAD”). The assets and liabilities of the Company’s foreign subsidiaries are translated into U.S. dollars using end-of-period exchange rates. Changes in reported amounts of assets and liabilities of foreign subsidiaries that occur as a result of changes in exchange rates between foreign subsidiaries’ functional currencies and the U.S. dollar are included in foreign currency translation adjustment. Foreign currency translation adjustment is included as a component of stockholders’ equity in the accompanying condensed consolidated balance sheets. Revenue and expense transactions use an average rate prevailing during the period of the related transaction. Transaction gains and losses that arise from exchange rate fluctuations denominated in a currency other than the functional currency of each subsidiary are included in the results of operations as incurred.

 

Use of Estimates and Assumptions

 

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect (i) the reported amounts of assets and liabilities, (ii) the disclosure of contingent assets and liabilities known to exist as of the date the financial statements are published, and (iii) the reported amount of net sales and expense recognized during the periods presented.

 

Those estimates and assumptions include estimates for reserves of uncollectible accounts receivable, allowance for inventory obsolescence, product returns, depreciable lives of property and equipment, allocation of purchase price from business combinations, analysis of impairment of goodwill, realization of deferred tax assets, accruals for potential liabilities and assumptions made in valuing stock instruments issued for services. Management evaluates these estimates and assumptions on a regular basis. Actual results could differ from those estimates.

 

Revenue Recognition

 

The Company’s revenue is comprised of sales of nutritional supplements and wellness products to consumers.

 

The Company accounts for revenue in accordance with FASB ASC 606, Revenue from Contracts with Customers (“ASC 606”). The underlying principle of ASC 606 is to recognize revenue to depict the transfer of goods or services to customers at the amount expected to be collected. ASC 606 creates a five-step model that requires entities to exercise judgment when considering the terms of contract(s), which includes (1) identifying the contract(s) or agreement(s) with a customer, (2) identifying our performance obligations in the contract or agreement, (3) determining the transaction price, (4) allocating the transaction price to the separate performance obligations, and (5) recognizing revenue as each performance obligation is satisfied. Under ASC 606, revenue is recognized when performance obligations under the terms of a contract are satisfied, which occurs for the Company upon shipment or delivery of products to our customers based on written sales terms. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring the products to a customer.

 

All products sold by the Company are distinct individual products and consist of nutritional supplements and wellness products. The products are offered for sale solely as finished goods, and there are no performance obligations required post-shipment for customers to derive the expected value from them.

 

The Company’s products are also sold on e-commerce platforms including Amazon. For these transactions, the Company evaluated principal versus agent considerations to determine appropriateness of recording distribution and platform fees paid to third-party e-commerce companies as an expense or as a reduction of revenue. The Company records distribution and platform fees to cost of goods sold in the consolidated statements of income and comprehensive income. Distribution and platform fees are not recorded as a reduction of revenue because the Company (1) owns the goods before they are transferred to the customer, (2) can direct Amazon, similar to other third-party logistics providers, to return the Company’s inventory to any location specified by the Company, (3) has the responsibility to make customers whole following any returns made by customers directly to Logistic Providers and the Company retains the back-end inventory risk, (4) is subject to credit risk (i.e., credit card chargebacks), (5) establishes prices of its products, (6) can determine who fulfills the goods to the customer (Amazon or the Company) and (7) can limit quantities or stop selling the goods at any time. Based on these considerations, the Company is the principal in this arrangement. Advertising fees paid to Amazon are recorded in advertising and marketing expense in the consolidated statements of income and comprehensive income.

 

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The Company disaggregates revenue into distribution channels, geographical regions, and collections of brands (Legacy FitLife and recently acquired brands). The Company determines that disaggregating revenue into these categories achieves the disclosure objective to depict how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors.

 

Online revenue, which consists of revenue generated from sales on the Company’s own websites as well as third-party e-commerce platforms such as Amazon, for the quarter ended March 31, 2025 was approximately 67% of net revenue, compared to 65% of net revenue during the same period in the prior year. Wholesale revenue for the quarter ended March 31, 2025 was approximately 33% of net revenue compared to 35% during the same period in the prior year.

 

Sales to customers in the U.S. were approximately 96% during the three months ended March 31, 2025 and 2024, with the balance of sales for the same respective periods being to customers primarily in Canada.

 

The Company provides limited financial performance metrics for three collections of brands—Legacy FitLife (consists of nine brands), MRC (consists of three brands), and MusclePharm (one brand). These collections of brands do not meet the definition of operating segments and are not managed as such.

 

		Three months ended March 31,
		2025				2024
		(Unaudited)				(Unaudited)
Legacy FitLife		$	7,299			$	6,961
MRC			6,674				7,493
MusclePharm			1,963				2,095
Total Revenue		$	15,936			$	16,549

 

Control of products we sell transfers to customers upon shipment from our facilities or delivery to our customers, and the Company’s performance obligations are satisfied at that time. Shipping and handling activities are performed before the customer obtains control of the goods and therefore represent a fulfillment activity rather than promised goods to the customer. Payments for sales are generally made by check, credit card, or wire transfer. Historically the Company has not experienced any significant payment delays from customers.

 

For direct-to-consumer sales, the Company allows for returns within 30 days of purchase. Our wholesale customers, such as GNC, may return purchased products to the Company under certain circumstances, which include expired or soon-to-be-expired products located in GNC corporate stores or at any of its distribution centers, and products that are subject to a recall or that contain an ingredient or ingredients that are subject to a recall by the U.S. Food and Drug Administration (“FDA”).

 

A right of return does not represent a separate performance obligation, but because customers are allowed to return products, the consideration to which the Company expects to be entitled is variable. Upon evaluation of returns, the Company determined that product returns are immaterial, and therefore believes it is probable that such returns will not cause a significant reversal of revenue in the future. We assess our contracts and the reasonableness of our conclusions on a quarterly basis.

 

Customer and Vendor Concentration

 

Total net sales to GNC during the three months ended March 31, 2025 and 2024 were 16% and 25% of total revenue for the three months ended March 31, 2025 and 2024, respectively.

 

Accounts receivable attributable to GNC as of March 31, 2025 and December 31, 2024 represented 43% and 35% of the Company’s total accounts receivable balance, respectively.

 

As of March 31, 2025 and December 31, 2024, there was one vendor who accounted for 65% and 59% of the Company's consolidated accounts payable, respectively.

 

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For the three months ended March 31, 2025, there were two vendors who accounted for 54% and 12% of the Company's inventory-related purchases. For the three months ended March 31, 2024, there were two vendors who accounted for 42% and 27% of the Company's inventory-related purchases.

 

Cash, Cash Equivalents, and Restricted Cash

 

The Company considers all highly liquid investments with an original maturity from the date of purchase of three months or less to be cash equivalents. The Company has approximately $53 in short-term interest-earning accounts pledged as collateral for financing arrangements at March 31, 2025, currently limited to business credit cards.

 

Leases

 

We lease certain corporate office space and office equipment under lease agreements with monthly payments over a period of 36 to 84 months. We determine if an arrangement is a lease at inception. Leased assets are presented as operating lease right-of-use assets and the related liabilities are presented as lease liabilities in our condensed consolidated balance sheets.

 

Goodwill

 

The Company has determined that it has a single reporting unit for purposes of performing its goodwill impairment test. The Company reviews goodwill for impairment on an annual basis or whenever events or changes in circumstances indicate the carrying value may not be recoverable. The Company first assesses qualitative factors to determine whether it is more-likely-than-not that the fair value of the reporting unit is less than the carrying amount as a basis for determining whether it is necessary to perform an impairment test. If the qualitative assessment warrants further analysis, the Company compares the fair value of the reporting unit to its carrying value. The fair value of the reporting unit is determined using the market approach. The Company determines the amount of a potential goodwill impairment by comparing the fair value of the reporting unit with its carrying amount. To the extent the carrying value of a reporting unit exceeds its fair value, a goodwill impairment charge is recognized.

 

As the Company uses the market approach to determine fair value of the reporting unit, the price of its Common Stock is an important component of the fair value calculation. If the Company’s stock price experiences significant price fluctuations, this will impact the fair value of the reporting unit, which can lead to potential impairment in future periods.

 

Based on management’s assessment, there were no indicators of impairment at March 31, 2025 or December 31, 2024. 

 

Intangible and Long-lived Assets

 

Intangible assets are recorded at cost and amortized using the straight-line method over their estimated useful lives. The Company regularly reviews the carrying value and estimated lives of its long-lived assets and intangible assets to determine whether indicators of impairment may exist which warrant adjustments to carrying values or estimated useful lives. The determinants used for this evaluation include management’s estimate of the asset’s ability to generate positive income from operations and positive cash flow in future periods as well as the strategic significance of the assets to the Company’s business objectives. Should an impairment exist, the impairment loss would be measured based on the excess of the carrying amount of the long-lived asset group over the asset’s fair value.

 

Based on management’s assessment, there were no indicators of impairment for intangible assets as of March 31, 2025, and December 31, 2024.

 

Acquisitions and Business Combinations

 

The Company allocates the fair value of purchase consideration to the tangible assets acquired, liabilities assumed, and separately identified intangible assets acquired based on their estimated fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. Such valuations require management to make significant estimates and assumptions, especially with respect to intangible assets. Significant estimates in valuing certain intangible assets include, but are not limited to, future expected cash flows from acquired trademarks and trade names, useful lives, and discount rates. Management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. During the measurement period, which is the period needed to gather all information necessary to make the purchase price allocation, not to exceed one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings.

 

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Income Taxes

 

Provision for income taxes consists of current and deferred tax expense. Current tax expense is the expected tax payable on the taxable income for the year using tax rates enacted in the countries where the Company and its subsidiaries operate and generate taxable income. The Company accounts for income taxes using the asset and liability method, whereby deferred tax assets are recognized for deductible temporary differences and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets may also result from unused losses and other deductions carried forward. An assessment of the probability that a deferred tax asset will be recovered is made prior to any deferred tax asset being recognized. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized, or that future deductibility is uncertain.

 

The income tax provision for interim periods is determined using an estimate of the annual effective tax rate, adjusted for discrete items, if any, that are taken into account in the relevant period. Each quarter, the estimate of the annual effective tax rate is updated, and if the estimated effective tax rate changes, a cumulative adjustment is made. There is potential for volatility of the effective tax rate due to several factors, including changes in the mix of the pre-tax income and the jurisdictions to which it relates. The effective income tax rate was 25.8% and 27.2% for the three months ended March 31, 2025 and 2024, respectively.

 

Net Income Per Share

 

Basic net income per share is computed by dividing net income by the weighted average number of common shares outstanding for the period. Diluted earnings per share is computed by dividing the net income available to common stockholders by the weighted average number of common shares outstanding plus the number of additional common shares that would have been outstanding if all dilutive potential common shares had been issued using the treasury stock method. Potential common shares are excluded from the computation when their effect is antidilutive. The dilutive effect of potentially dilutive securities is reflected in diluted net income per share if the exercise prices were lower than the average fair market value of common shares during the reporting period.

 

Basic and diluted weighted-average shares outstanding and antidilutive options that were excluded from diluted weighted average shares outstanding are as follows:

 

		Three months ended March 31,
		2025				2024
Basic weighted average shares outstanding			9,213				9,196
Dilutive effect of potential common shares			713				864
Diluted weighted average shares outstanding			9,926				10,060

 

Fair Value Measurements

 

The Company uses various inputs in determining the fair value of its investments and measures these assets on a recurring basis. Financial assets recorded at fair value in the balance sheets are categorized by the level of objectivity associated with the inputs used to measure their fair value. FASB ASC Topic 820, Fair Value, establishes a three-level valuation hierarchy for the use of fair value measurements based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date:

 

●

Level 1 – Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

 

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	●	Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means.
	●	Level 3 – Inputs that are both significant to the fair value measurement and unobservable. These inputs rely on management’s own assumptions about the assumptions that market participants would use in pricing the asset or liability. The unobservable inputs are developed based on the best information available in the circumstances and may include the Company’s own data.

 

The carrying amounts of financial assets and liabilities, such as cash and cash equivalents, restricted cash, accounts receivable and accounts payable, approximate their fair values because of the short maturity of these instruments. The carrying value of the term loans approximate their fair value based on the market interest rates of these loans.

 

Segment Information

 

The Company’s Chief Executive Officer is the chief operating decision maker (“CODM”) and evaluates performance and makes operating decisions about allocating resources based on financial data presented on a consolidated basis. Because the CODM evaluates financial performance on a consolidated basis, the Company has determined that it operates as a single reportable segment composed of the financial results of FitLife Brands, Inc.

 

Recently Adopted Accounting Pronouncements

 

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosure (“ASC 280”), which is intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expense categories that are regularly provided to the chief operating decision maker and included in each reported measure of a segment’s profit or loss. The update also requires all annual disclosures about a reportable segment’s profit or loss and assets to be provided in interim periods and for entities with a single reportable segment to provide all the disclosures required by ASC 280, including the significant segment expense disclosures. This standard became effective for the Company on January 1, 2024. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements but has resulted in additional disclosures within the footnotes of the consolidated financial statements.

 

Recently Issued Accounting Pronouncements

 

In November 2024, FASB issued ASU 2024-03 Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40) Disaggregation of Income Statement Expenses (“ASU 2024-03”). The guidance in ASU 2024-03 requires public business entities to disclose in the notes to the financial statements, among other things, specific information about certain costs and expenses including purchases of inventory; employee compensation; and depreciation and amortization expense for each caption on the income statement where such expenses are included. The update is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted, and the amendments may be applied prospectively to reporting periods after the effective date or retrospectively to all periods presented in the financial statements. We are currently evaluating the provisions of this guidance and assessing the potential impact on our financial statement disclosures.

 

Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company’s present or future financial statements.

 

 

NOTE 4 – INVENTORIES

 

The Company’s inventory is carried at the lower of cost or net realizable value using the first-in, first-out (“FIFO”) method. The Company evaluates the need to record adjustments for inventory on a regular basis. Company policy is to evaluate all inventories including components and finished goods for all of its product offerings across all of the Company’s operating subsidiaries.

 

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The Company recognizes an allowance for obsolescence for expiring, excess, and slow-moving inventory. To calculate the allowance, the Company analyzes sales projections for each stock-keeping unit (“SKU”) relative to the remaining shelf life of the product. The value of any finished goods inventory projected to expire prior to sale is included in the allowance.

 

The total allowance for expiring, excess and slow-moving inventory items as of March 31, 2025 and December 31, 2024 amounted to $76 and $100, respectively. The Company’s inventories as of March 31, 2025 and December 31, 2024 were as follows:

 

		March 31, 2025				December 31, 2024
		(Unaudited)
Finished goods		$	10,881			$	10,348
Components			1,326				826
Allowance for obsolescence			(76	)			(100	)
Total		$	12,131			$	11,074

 

 

NOTE 5 - PROPERTY AND EQUIPMENT

 

The Company had property and equipment as of March 31, 2025 and December 31, 2024 as follows:

 

		March 31, 2025				December 31, 2024
		(Unaudited)
Equipment		$	988			$	964
Accumulated depreciation			(899	)			(889	)
Total		$	89			$	75

 

Depreciation expense for the three months ended March 31, 2025 and 2024 was $10 and $26, respectively.

 

 

NOTE 6 – CREDIT AGREEMENT

 

Debt obligations consisted of the following:

 

		March 31,2025				December 31, 2024
		(Unaudited)
Term Loan A		$	5,000			$	5,625
Term Loan B			7,000				7,500
Line of Credit			-				-
Unamortized debt issuance costs			(64	)			(75	)
Total		$	11,936			$	13,050
Current			(4,500	)			(4,500	)
Long term		$	7,436			$	8,550

 

Credit Agreements – First Citizens Bank

 

On February 23, 2023, the Company entered into an Amended and Restated Credit Agreement (the “Prior Credit Agreement”) with First Citizens Bank (the “Bank”), amending and restating that certain Credit Agreement, dated September 24, 2019, between the Company and the Bank. Pursuant to the Prior Credit Agreement, the Bank provided the Company with a term loan for the principal amount of $12,500 (“Term Loan A”), and a revolving line of credit of $3,500 (the “Line of Credit”, and collectively with the Term Loans, the “Loan”). The Company used the proceeds from the Loan to fund the acquisition of MRC and for general working capital purposes.

 

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Second Amended and Restated Credit Agreement

 

On October 10, 2023, the Company entered into a Second Amended and Restated Credit Agreement (the “Credit Agreement”) with the Bank, amending and restating the Credit Agreement between the Company and the Bank. Pursuant to the Credit Agreement, the Bank provided the Company with an additional Term Loan (“Term Loan B”, and together with Term Loan A, the “Term Loans”) for the principal amount of $10,000 and extended the Line of Credit of $3.5 million to December 23, 2024. The Company used the proceeds from Term Loan B to fund the acquisition of the MusclePharm assets and for general working capital purposes.

 

First Amendment to Second Amended and Restated Credit Agreement

 

On December 19, 2024, the Company entered into the First Amendment to the Amended Credit Agreement (the “Amended Credit Agreement”) to extend the Line of Credit to April 30, 2026.

 

Term Loans A and B – Pursuant to the Amended Credit Agreement, the Term Loans accrue interest at a per annum rate equal to the greater of 3.50% or 2.75% above the one-month secured overnight financing rate ("SOFR") published for such day by the Federal Reserve Bank of New York. The Company shall make quarterly payments of principal plus accrued interest on the Term Loans until the principal balances are fully amortized. Quarterly principal payments for Term Loan A and Term Loan B are $625 and $500, respectively. The Company may prepay amounts borrowed under the Term Loans, in whole or in part, with accrued interest to the date of such prepayment on the amount prepaid, by written notice to Bank at least one business day prior to the proposed prepayment. During the first quarter of 2024, the Company made a voluntary prepayment on Term Loan A of $2,500, and as such, Term Loan A will fully amortize in February 2027. Term Loan B will fully amortize in October 2028. 

 

Line of Credit – Also pursuant to the Amended Credit Agreement, outstanding advances under the Line of Credit (“Advances”) will accrue interest at a per annum rate equal to the greater of 3.50% or 2.75% above the one-month SOFR, and the Company will pay the interest on the Advances monthly, with all principal and any accrued interest on outstanding Advances being due and payable in full on the Line of Credit maturity date. The Company may prepay amounts borrowed under the Line of Credit, in whole or in part with accrued interest to the date of such prepayment on the amount prepaid, by written notice to Bank at least one business day prior to the proposed prepayment. 

 

The Amended Credit Agreement contains customary events of default (each an “Event of Default”), which upon the occurrence of an Event of Default, among other things, interest will accrue at the Applicable Rate plus 2% per annum, and the Bank may declare all obligations, with interest thereon, immediately due and payable. The Amended Credit Agreement further contains customary representations and warranties of the Company; customary indemnification provisions whereby the Company will indemnify Bank for certain losses arising out of inaccuracies in, or breaches of, the representations, warranties and covenants of the Company, and certain other matters; and customary affirmative and negative covenants, including covenants to maintain a Fixed Charge Coverage Ratio (as defined in the Amended Credit Agreement) of not less than 1.25 to 1.00 as tested quarterly on a trailing twelve-month basis, a Funded Debt to EBITDA Ratio (as defined in the Amended Credit Agreement) of not more than 2.50 to 1.00 as tested quarterly on a trailing twelve-month basis, and to the extent the Term Loans still have a balance as of June 30, 2025 and a Cash Flow Leverage threshold (as defined in the Amended Credit Agreement) of at least 1.15 is not met, the Company will be required to make a prepayment on the Term Loans equal to 50% of the Excess Cash Flow (as defined in the Amended Credit Agreement). The Company was in compliance with all covenants as of March 31, 2025 and December 31, 2024.

 

The borrowings outstanding on the Term Loans were $12,000 and $13,125 as of March 31, 2025 and December 31, 2024, respectively.

 

There was no outstanding balance on the Line of Credit as of March 31, 2025 and December 31, 2024.

 

Maturities of the Company's Term Loans are as follows:

 

Year ending
2025 (nine months)			3,375
2026			4,500
2027			2,625
2028			1,500
Total balance outstanding as of March 31, 2025		$	12,000

 

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NOTE 7 - EQUITY

 

The Company is authorized to issue 120,000 shares of Common Stock, $0.01 par value per share, of which 9,383 and 9,210 shares of Common Stock were issued and outstanding as of March 31, 2025 and December 31, 2024, respectively.

 

Stock Split

 

On February 7, 2025, the Company effected a 2-for-1 stock split of its Common Stock and proportionately increased the number of authorized shares of Common Stock to 120,000. All share and per share information throughout this Quarterly Report on Form 10-Q has been retroactively adjusted to reflect the stock split as of the earliest period presented. The shares of Common Stock retain a par value of $0.01 per share. Accordingly, an amount equal to the par value of the additional shares issued in the stock split was reclassified from additional paid-in capital in excess of par value to Common Stock. 

 

Share Repurchase Program

 

On March 17, 2023, the Board approved the extension of the Company’s previously authorized share repurchase program, initially approved by the Board on August 16, 2019, as amended on September 23, 2019, November 6, 2019 and February 1, 2021 (“Share Repurchase Program”). Under the extended and amended Share Repurchase Program, the Board authorized management to repurchase up to $5,000 of the Company's Common Stock over a period of 24 months, at a purchase price equal to the fair market value of the Company's Common Stock on the date of purchase, with the exact date and amount of such purchases to be determined by management (the “2023 Share Repurchase Program”).

 

During the three months ended March 31, 2025 and 2024, the Company did not repurchase any Common Stock under the 2023 Share Repurchase Program. As of March 31, 2025, the Company may purchase $5,000 of Common Stock under the 2023 Share Repurchase Program.

 

Options

 

Information regarding options outstanding as of March 31, 2025 is as follows:

 

						Weighted average				Weighted average remaining
		Number of options				exercise price				life (years)
Outstanding, December 31, 2023			969			$	3.41				4.5
Issued			22				16.63
Exercised			(14	)			1.25
Forfeited			-				-
Outstanding, December 31, 2024			977			$	3.74				3.5
Issued			-				-
Exercised			(173	)			3.69
Forfeited			-				-
Outstanding, March 31, 2025			804			$	3.75				3.7

 

Outstanding																		Exercisable
Exercise price per share						Total number of options				Weighted average remaining life (years)				Weighted average exercise price				Number of vested options				Weighted average exercise price
$	0.35	-	2.38				542				3.9			$	0.77				542			$	0.77
$	7.83	-	16.92				262				3.5			$	9.93				162			$	9.49
							804				3.7			$	3.75				704			$	2.77

 

The closing stock price for the Company’s stock on March 31, 2025 was $12.10, resulting in an intrinsic value of outstanding options of $6,812.

 

During the three months ended March 31, 2025, 173 stock options were exercised pursuant to the terms of the option agreements.  As a result, the Company received cash proceeds of $638, of which $259 was received in March 2025 and the remaining $379 was received in April 2025 and reported as part of Prepaid and Other Current Assets in the accompanying Balance Sheet.

 

During the three-month periods ended March 31, 2025 and 2024, the Company recognized stock-based compensation expense of $107 and $102, respectively, related to stock options. As of March 31, 2025, there is $334 of unamortized compensation expense related to stock options. 

 

-13-

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NOTE 8 – COMMITMENTS AND CONTINGENCIES

 

We are currently not involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of the Company or any of its subsidiaries, threatened against or affecting the Company, our Common Stock, any of our subsidiaries or of the Company’s or our subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.

 

NOTE 9 – SEGMENT INFORMATION

 

The Company operates and manages its business as one reportable operating segment dedicated to providing innovative and proprietary nutritional supplements and wellness products for health-conscious consumers.  The measure of segment assets is reported on the consolidated balance sheet as total assets. In addition, the Company manages its business activities on a consolidated basis.

 

The Company’s CODM allocates resources and assesses financial performance based upon financial data presented at the consolidated level.  The CODM uses net income as the sole measure of segment profit. 

 

Significant segment expenses include cost of goods sold, advertising and marketing, merger and acquisition related and other expense, which are all presented on the consolidated statements of income and comprehensive income.  Employee compensation and benefits is also a significant segment expense.  Operating expense includes all remaining costs necessary to operate our business, including external professional services, insurance and other administrative expenses.  The following table presents the significant segment expenses and other segment items regularly reviewed by our CODM:

 

		Three months ended March 31,
		2025				2024
Cost of goods sold		$	9,062			$	9,262
Employee compensation and benefits			1,537				1,493
Advertising and marketing			1,053				1,228
Operating expense			994				1,051
Merger and acquisition related			332				134
Total operating expense		$	3,916			$	3,906
Interest and other expense		$	239			$	414

 

The following table summarizes sales to customers by geographic regions:

 

		Three months ended March 31,
		2025				2024
United States		$	15,304			$	15,844
Rest of world			632				705
Total revenue		$	15,936			$	16,549

 

 

NOTE 10 – SUBSEQUENT EVENTS

 

Share Repurchase Program

 

On August 16, 2019, the Company approved a share repurchase program, pursuant to which the Board authorized management to repurchase up to $500,000 of the Company's Common Stock over the subsequent 24 months (the "Share Repurchase Program"). The Share Repurchase Program was amended September 23, 2019 to increase the repurchase amount to $1,000,000; further amended on November 6, 2019 to increase the repurchase amount to $2,500,000 over the subsequent 24 months; further amended on February 1, 2021 to increase the repurchase amount to up to $5,000,000 over the subsequent 24 months; and extended on March 17, 2023 to repurchase up to $5,000,000 of the Company's Common Stock over the subsequent 24 months.

 

On May 13, 2025, the Board approved a further extension of the Share Repurchase Program. Under the extended and amended Share Repurchase Program, the Board authorized management to repurchase up to $5,000,000 of the Company's Common Stock over the subsequent 24 months, at a purchase price equal to the fair market value of the Company's Common Stock on the date of purchase, with the exact date and amount of such purchases to be determined by management.

 

 

-14-

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ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and the related notes appearing elsewhere in this Quarterly Report on Form 10-Q (this "Quarterly Report"). This discussion and analysis may contain forward-looking statements based on assumptions about our future business. Unless otherwise stated, all dollar amounts are in thousands, except per share data.

 

Overview

 

FitLife Brands, Inc. (the “Company”) is a provider of innovative and proprietary nutritional supplements and wellness products for health-conscious consumers marketed under the following brand names: (i) NDS Nutrition, PMD Sports, SirenLabs, Core Active, Nutrology, and Metis Nutrition (together, “NDS Products”); (ii) iSatori, BioGenetic Laboratories, and Energize (together, the "iSatori Products"); (iii) Dr. Tobias, All Natural Advice, and Maritime Naturals, each acquired as a result of the acquisition of Mimi’s Rock Corp. (“MRC”) on February 28, 2023 (together, the “MRC Products"); and (iv) MusclePharm, which was acquired on October 10, 2023 as a result of the acquisition of substantially all of the assets of MusclePharm Corporation (“MusclePharm”).

 

The Company distributes the NDS Products principally through franchised General Nutrition Centers, Inc. (“GNC”) stores located both domestically and internationally and, with the launch of Metis Nutrition, through corporate GNC stores in the U.S. The iSatori Products are sold through retail locations, which include specialty and mass, as well as online directly to the end consumer. The Company distributes the MRC Products primarily online through e-commerce platforms, such as Amazon, directly to the end consumer. MusclePharm’s products are sold to both wholesale customers as well as online through various e-commerce platforms directly to the end consumer.

 

FitLife Brands is headquartered in Omaha, Nebraska. For more information on the Company, please go to www.fitlifebrands.com. The Company’s common stock, par value $0.01 per share (“Common Stock”), trades under the symbol “FTLF” on the Nasdaq Capital Market. 

 

Recent Developments

 

Stock Split

 

On February 7, 2025, the Company effected a 2-for-1 stock split of its Common Stock and proportionately increased the number of authorized shares of Common Stock. All share and per share information throughout this Quarterly Report on Form 10-Q have been retroactively adjusted to reflect the stock split. The shares of Common Stock retain a par value of $0.01 per share. Accordingly, an amount equal to the par value of the additional shares issued in the stock split was reclassified from additional paid-in capital in excess of par value to Common Stock.

 

Results of Operations

 

Comparison of the three months ended March 31, 2025 to the three months ended March 31, 2024

 

		Three months ended
		March 31, 2025				March 31, 2024				Change ($)				Change (%)
		(Unaudited)
Revenue		$	15,936				16,549			$	(613	)			(4	)%
Cost of goods sold			9,062				9,262				(200	)			(2	)%
Gross profit			6,874				7,287				(413	)			(6	)%
Gross margin			43.1	%			44.0	%
Advertising and marketing			1,053				1,228				(175	)			(14	)%
Selling, general and administrative (“SG&A”)			2,512				2,508				4				0	%
Merger and acquisition related			332				134				198				148	%
Depreciation and amortization			19				36				(17	)			(47	)%
Total operating expense			3,916				3,906				10				0	%
Operating income			2,958				3,381				(423	)			(13	)%
Other expense, net			239				414				(175	)			(42	)%
Provision for income tax			701				807				(106	)			(13	)%
Net income			2,018				2,160			$	(142	)			(7	)%

 

 

Revenue. Revenue for the three months ended March 31, 2025 decreased 4% to $15,936 as compared to $16,549 for the three months ended March 31, 2024. The decrease in revenue for the three months ended March 31, 2025 compared to the prior period is primarily due to lower MRC sales, partially offset by an increase in Legacy FitLife revenue.

 

Legacy FitLife revenue for the three months ended March 31, 2025 was $7,299, a 5% increase compared to $6,961 for the three months ended March 31, 2024, driven by an 11% increase in online revenue and a 2% increase in wholesale revenue..

 

MRC revenue for the three months ended March 31, 2025 was $6,674, an 11% decrease compared to $7,493 for the three months ended March 31, 2024.

 

MusclePharm revenue for the three months ended March 31, 2025 was $1,963, a 6% decrease compared to $2,095 for the three months ended March 31, 2024.

 

Online revenue for the quarter ended March 31, 2025 was approximately 67% of total net revenue, compared to 65% of total net revenue for the quarter ended March 31, 2024. 

 

Sales to customers in the U.S. were approximately 96% during the quarters ended March 31, 2025 and 2024, respectively, with the balance of sales to customers primarily in Canada.

 

Cost of Goods Sold. Cost of goods sold for the three months ended March 31, 2025 decreased to $9,062 as compared to $9,262 for the three months ended March 31, 2024. This 2% decrease is primarily due to a decrease in revenue attributable to MRC.

 

Gross Profit. Gross profit for the three months ended March 31, 2025 decreased to $6,874 as compared to $7,287 for the three months ended March 31, 2024. This 6% decrease in gross profit is principally attributable to lower gross profit from MRC and MusclePharm, partially offset by an increase from Legacy FitLife. 

 

Gross Margin. Gross margin for the three months ended March 31, 2025 decreased to 43.1% from 44.0% for the comparable prior period. The decrease in gross margin is primarily attributable to lower margins from both MRC and MusclePharm, partially offset by higher margins from Legacy FitLife.

 

Advertising and Marketing. Advertising and marketing expense for the three months ended March 31, 2025 decreased to $1,053 as compared to $1,228 for the same period of the prior year. The 14% decrease is the result of targeted efforts to optimize the efficiency of the Company’s advertising spend.

 

SG&A. SG&A expense for the three months ended March 31, 2025 was essentially flat relative to the same period of 2024.

 

Merger and Acquisition Related. Merger and acquisition related expense increased to $332 during the quarter ended March 31, 2025 compared to $134 for the same period of 2024.

 

Net Income. We generated net income of $2,018 for the three months ended March 31, 2025 as compared to net income of $2,160 for the three months ended March 31, 2024. The decrease in net income for the three months ended March 31, 2025 compared to the same period in 2024 was primarily attributable to lower revenue and gross profit from MRC and MusclePharm, partially offset by higher revenue and gross profit from Legacy FitLife, as well as a decrease in operating expense driven by lower advertising spend and lower interest expense due to the lower debt balances carried by the Company.

 

 

Supplemental Discussion of Performance of Acquired Brands

 

One of the primary metrics used by management to evaluate the performance of the Company’s brands is contribution, a non-GAAP financial measure which management defines as gross profit less advertising and marketing expenditures. Other companies may also report contribution as a performance metric, but their definition or calculation of contribution may differ from the Company’s. Management believes that contribution, as defined by the Company, is a particularly relevant performance metric since it incorporates the gross profit associated with a specific brand or collection of brands as well as the advertising and marketing expenditures associated with the same brand or brands. With limited exceptions, other operating expenses incurred by the Company are generally not allocable to a specific brand or collection of brands.  Management intends to provide this level of disclosure for no more than two years following a transaction, after which the performance of acquired brands will be reported as part of Legacy FitLife results.

 

Other than for MusclePharm, the numbers in the contribution tables presented below represent the performance of a collection of brands. Legacy FitLife consists of nine brands and MRC consists of three brands. These collections of brands do not meet the definition of operating segments and are not managed as such.

 

Legacy FitLife
(Unaudited)		2024																2025
		Q1				Q2				Q3				Q4				Q1
Wholesale revenue		$	4,506			$	4,224			$	3,859			$	3,210			$	4,585
Online revenue			2,455				2,578				2,443				2,112				2,714
Total revenue			6,961				6,802				6,302				5,322				7,299
Gross profit			2,928				3,006				2,684				2,115				3,254
Gross margin			42.1	%			44.2	%			42.6	%			39.7	%			44.6	%
Advertising and marketing			80				94				70				59				85
Contribution		$	2,848			$	2,912			$	2,614			$	2,056			$	3,169
Contribution as a % of revenue			40.9	%			42.8	%			41.5	%			38.6	%			43.4	%

 

For the first quarter of 2025, Legacy FitLife revenue increased 5% compared to the same period last year, driven by an 11% increase in online revenue and a 2% increase in wholesale revenue compared to the first quarter of 2024. As previously disclosed, during the fourth quarter of 2024, a commercial dispute with GNC, the Company’s largest customer, resulted in the Company rejecting all purchase orders from GNC beginning on December 1, 2024.  However, any product that was ordered by GNC prior to December 1, 2024 continued to be shipped and was all received by GNC prior to the end of December 2024. In early January 2025, the Company began selling and shipping product directly to its GNC franchisee customers.  On January 23, 2025, the Company and GNC settled their commercial dispute and the Company immediately began accepting purchase orders from GNC, with shipments to the GNC distribution centers beginning approximately two weeks later.  The Company continued shipping directly to GNC franchisees until the GNC distribution centers were restocked.  Subsequent to the distribution centers being restocked during February 2025, in the event GNC distribution centers do not have adequate inventory to fulfill franchisee orders of the Company’s products, the Company may make shipments directly to GNC franchisees in order to ensure continued availability of the Company’s products on store shelves.

 

For the first quarter of 2025, gross margin increased to 44.6% from 42.1% during the same period last year. Contribution as a percentage of revenue increased to 43.4% from 40.9% over the same time period.

 

Mimi's Rock (MRC)
(Unaudited)		2024																2025
		Q1				Q2				Q3				Q4				Q1
Wholesale revenue		$	94			$	90			$	71			$	40			$	63
Online revenue			7,399				7,371				7,139				6,832				6,611
Total revenue			7,493				7,461				7,210				6,872				6,674
Gross profit			3,520				3,597				3,441				3,350				3,030
Gross margin			47.0	%			48.2	%			47.7	%			48.7	%			45.4	%
Advertising and marketing			1,062				1,071				929				803				794
Contribution		$	2,458			$	2,526			$	2,512			$	2,547			$	2,236
Contribution as a % of revenue			32.8	%			33.9	%			34.8	%			37.1	%			33.5	%

 

 

For the first quarter of 2025, MRC revenue decreased 11% compared to the same period in 2024. Over the same time period, gross profit decreased 14% and contribution decreased 9%.

 

For the first quarter of 2025, MRC gross margin decreased to 45.4% from 47.0% during the same period last year.

 

Revenue for the largest MRC brand, Dr. Tobias, decreased 11% in the first quarter of 2025 while revenue for the skin care brands, Maritime Naturals and All Natural Advice, declined 14%, or 9% on a constant currency basis, in the same period compared to the first quarter of 2024.

 

The decrease in gross profit for the MRC brands is primarily the result of lower sales. The decrease in gross margin is primarily driven by the change in product mix within the Dr. Tobias brand. The year-over-year increase in contribution as a percentage of revenue for the MRC brands is a function of the optimization of the advertising spend across all MRC brands.

 

MusclePharm
(Unaudited)		2024																2025
		Q1				Q2				Q3				Q4				Q1
Wholesale revenue		$	1,117			$	1,388			$	1,231			$	1,689			$	658
Online revenue			978				1,279				1,234				1,130				1,305
Total revenue			2,095				2,667				2,465				2,819				1,963
Gross profit			839				977				876				747				590
Gross margin			40.0	%			36.6	%			35.5	%			26.5	%			30.1	%
Advertising and marketing			86				161				94				117				174
Contribution		$	753			$	816			$	782			$	630			$	416
Contribution as a % of revenue			35.9	%			30.6	%			31.7	%			22.3	%			21.2	%

 

For the first quarter of 2025, MusclePharm revenue decreased 6% compared to the same period in 2024, with wholesale revenue decreasing 41% and online revenue increasing 33%.

 

As previously disclosed, in an effort to drive revenue growth, the Company is making targeted investments in advertising and promotion in both the wholesale and online channels. During the fourth quarter of 2024, the Company offered additional promotional incentives to certain wholesale partners in an effort to drive incremental growth for the MusclePharm brand.  The decrease in wholesale revenue during the first quarter was primarily due to one of our wholesale customers that took advantage of the Company’s promotional investment during the fourth quarter of 2024 without increasing their sell-through of the product, which has affected their reorder volumes.

 

The Company anticipates that the increased promotional efforts will continue for the foreseeable future.  As a result of these investments, gross margin and contribution margin as a percent of revenue may fluctuate materially from quarter to quarter.

 

In mid-March 2025, the Company launched the new MusclePharm Pro Series, a collection of premium sports nutrition products, in a pilot in high-volume Vitamin Shoppe stores (consisting of approximately 60% of Vitamin Shoppe’s nationwide store base). If the pilot effort is successful, the Pro Series is anticipated to be added to the assortment in all Vitamin Shoppe stores and will be exclusive to Vitamin Shoppe for a period of 12 months.

 

In addition, the Company is exploring additional new product launches and continues to have productive discussions with a number of potential new wholesale partners.

 

FitLife Consolidated
(Unaudited)		2024																2025
		Q1				Q2				Q3				Q4				Q1
Wholesale revenue		$	5,717			$	5,702			$	5,161			$	4,939			$	5,306
Online revenue			10,832				11,228				10,816				10,074				10,630
Total revenue			16,549				16,930				15,977				15,013				15,936
Gross profit			7,287				7,580				7,001				6,212				6,874
Gross margin			44.0	%			44.8	%			43.8	%			41.4	%			43.1	%
Advertising and marketing			1,228				1,326				1,093				979				1,053
Contribution		$	6,059			$	6,254			$	5,908			$	5,233			$	5,821
Contribution as a % of revenue			36.6	%			36.9	%			37.0	%			34.9	%			36.5	%

 

 

For the first quarter of 2025 for the Company overall, revenue decreased 4%, gross profit decreased 6%, and contribution decreased 4% compared to the first quarter of 2024.

 

Gross margin decreased to 43.1% during the first quarter of 2025 compared to 44.0% during the first quarter of last year. Contribution as a percentage of revenue decreased slightly to 36.5% compared to 36.6% during the first quarter of last year

 

Non-GAAP Measures

 

The financial presentation below contains certain financial measures not in accordance with GAAP, defined by the SEC as “non-GAAP financial measures”, including EBITDA and adjusted EBITDA. These measures may be different from non-GAAP financial measures used by other companies. The presentation of this financial information, which is not prepared under any comprehensive set of accounting rules or principles, is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in this Quarterly Report in accordance with GAAP.

 

As presented below, EBITDA excludes interest, foreign exchange gains and losses, income taxes, and depreciation and amortization. Adjusted EBITDA excludes—in addition to interest, foreign exchange losses, taxes, depreciation and amortization—stock-based compensation and merger and acquisition related expense. The Company believes the non-GAAP measures provide useful information to both management and investors by excluding certain expense and other items that may not be indicative of its core operating results and business outlook. The Company believes that the inclusion of non-GAAP measures in the financial presentation below allows investors to compare the Company’s financial results with the Company’s historical financial results and is an important measure of the Company’s comparative financial performance.

 

		For the three months ended March 31,
		2025				2024
		(Unaudited)				(Unaudited)
Net income		$	2,018			$	2,160
Interest expense			244				414
Interest income			(26	)			(5	)
Foreign exchange loss			21				5
Provision for income taxes			701				807
Depreciation and amortization			19				36
EBITDA			2,977				3,417
Non-cash and non-recurring adjustments
Stock compensation expense			107				102
Merger and acquisition related expense			332				134
Adjusted EBITDA		$	3,416			$	3,653

 

Liquidity and Capital Resources

 

As of March 31, 2025, the Company had positive working capital of $8,463 compared to $6,832 at December 31, 2024. Our principal sources of liquidity at March 31, 2025 consisted of $5,994 of cash and $2,693 of accounts receivable. The increase in working capital is principally attributable to positive operating cash flows during the three months ended March 31, 2025.

 

On September 24, 2019, the Company entered into a line of credit agreement with Mutual of Omaha Bank (the “Lender”), subsequently acquired by CIT Bank N.A., then acquired by First Citizens Bank & Trust Company, providing the Company with a $2.5 million revolving line of credit (the “Line of Credit”). The Line of Credit allows the Company to request advances thereunder and to use the proceeds of such advances for working capital purposes until the maturity date, or unless renewed at maturity upon approval by the Company’s Board and the Lender. The Line of Credit is secured by all assets of the Company.

 

 

On September 20, 2022, the Company and the Lender amended the Line of Credit Agreement to extend the maturity date to December 23, 2022. On December 19, 2022, the Company and the Lender amended the Line of Credit agreement to increase the Line of Credit to $3.5 million and extend the maturity date to December 23, 2023.

 

On February 23, 2023, the Company and the Lender amended the Line of Credit Agreement (the “Prior Credit Agreement”) providing the Company with a term loan for the principal amount of $12.5 million (“Term Loan A”). All other terms of the Credit Agreement remain unchanged. All of the proceeds from Term Loan A were used for the acquisition of MRC.

 

On October 10, 2023, the Company entered into a Second Amended and Restated Credit Agreement (the “Credit Agreement”) with the Lender, amending and restating the Credit Agreement between the Company and the Lender. Pursuant to the Credit Agreement, the Lender provided the Company with an additional term loan (“Term Loan B”, and together with Term Loan A, the “Term Loans”) for the principal amount of $10,000 and extended the Line of Credit of $3.5 million to December 23, 2024. The Company used the proceeds from Term Loan B to fund the acquisition of the MusclePharm assets.

 

On December 19, 2024, the Company entered into the First Amendment to the Amended Credit Agreement (the “Amended Credit Agreement”) to extend the $3.5 million Line of Credit to April 30, 2026. Pursuant to the Amended Credit Agreement, the Line of Credit accrues interest at an annual rate equal to the greater of 3.50% or the one-month secured overnight financing rate (“SOFR”) rate plus 2.75%, and each advance will be payable on the maturity date with the interest on outstanding advances payable monthly. The Company may, at its option, prepay any borrowings under the Line of Credit, in whole or in part at any time prior to the maturity date, without premium or penalty.

 

Also pursuant to the Amended Credit Agreement, the Term Loans accrue interest at an annual rate equal to the greater of 3.50% or the one-month SOFR rate plus 2.75%, and principal plus accrued interest will be payable quarterly in June, September, December, and March, in amounts sufficient to fully amortize the Term Loans through February 28, 2028 in the case of Term Loan A and through October 10, 2028 in the case of Term Loan B. The Company may prepay amounts borrowed under the Term Loans, in whole or in part with accrued interest to the date of such prepayment on the amount prepaid, by written notice to the Lender at least one business day prior to the proposed prepayment.

 

The Amended Credit Agreement contains customary events of default (each an “Event of Default”), which upon the occurrence of an Event of Default, as defined in the Amended Credit Agreement, among other things, interest will accrue at the applicable rate plus 2% per annum, and the Lender may declare all obligations, with interest thereon, immediately due and payable. The Amended Credit Agreement further contains customary representations and warranties of the Company; customary indemnification provisions whereby the Company will indemnify Lender for certain losses arising out of inaccuracies in, or breaches of, the representations, warranties and covenants of the Company, and certain other matters; and customary affirmative and negative covenants, including covenants to maintain a Fixed Charge Coverage Ratio (as defined in the Amended Credit Agreement) of not less than 1.25 to 1.00 as tested quarterly on a trailing twelve-month basis, starting with the fiscal quarter ending December 31, 2023, a Funded Debt to EBITDA Ratio (as defined in the Amended Credit Agreement) of not more than 2.50 to 1.00 as tested quarterly on a trailing twelve-month basis, starting with the fiscal quarter ending March 31, 2024, and to the extent the Term Loans still have a balance as of June 30, 2025 and a Cash Flow Leverage threshold (as defined in the Amended Credit Agreement) of at least 1.15 is not met, the Company will be required to make a prepayment on the Term Loans equal to 50% of the Excess Cash Flow (as defined in the Amended Credit Agreement). The Company was in compliance with all covenants as of March 31, 2025.

 

As of March 31, 2025, the borrowings outstanding on the Term Loans and the Line of Credit were $12,000 and $0, respectively.

 

The Company has historically financed its operations primarily through cash flow from operations and equity and debt financings. The Company currently anticipates that cash derived from operations and existing cash reserves, along with available borrowings under the Line of Credit, will be sufficient to provide for the Company’s liquidity for the next twelve months.

 

 

The Company is dependent on cash flow from operations and amounts available under the Line of Credit to satisfy its working capital requirements. No assurances can be given that cash flow from operations and/or the Line of Credit will be sufficient to provide for the Company’s liquidity for the next twelve months. Should the Company be unable to generate sufficient revenue in the future to achieve positive cash flow from operations, and/or should capital be unavailable under the terms of the Line of Credit, additional working capital will be required. Management currently has no intention to raise additional working capital through the sale of equity or debt securities and believes that the cash flow from operations and available borrowings under the Line of Credit will provide sufficient capital necessary to operate the business over the next twelve months. In the event the Company fails to achieve positive cash flow from operations, additional capital is unavailable under the terms of the Line of Credit, and management is otherwise unable to secure additional working capital through the issuance of equity or debt securities, the Company’s business would be materially and adversely harmed.

 

Cash Provided by Operating Activities. Cash provided by operating activities for the three months ended March 31, 2025 was $2,328 compared to cash provided by operating activities of $5,036 for the three months ended March 31, 2024. The decrease in cash provided by operating activities was primarily due to increases in working capital.

 

Cash Used in Investing Activities. Cash used in investing activities for the three months ended March 31, 2025 and 2024 was $24 and $10, respectively.

 

Cash Used in Financing Activities. Cash used in financing activities for the three months ended March 31, 2025 was $866 compared to cash used in financing activities of $3,625 during the three months ended March 31, 2024. The decrease in cash used in financing activities is primarily due to the voluntary debt repayment made by the Company during the first quarter of 2024.

 

Critical Accounting Policies and Estimates

 

Our discussion and analysis of financial condition and results of operations is based upon our condensed consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these condensed consolidated financial statements and related disclosures requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, expense, and related disclosure of contingent assets and liabilities. We evaluate, on an on-going basis, our estimates and judgments, including those related to the useful life of the assets. We base our estimates on historical experience and assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

 

The methods, estimates and judgments we use in applying our most critical accounting policies have a significant impact on the results that we report in our condensed consolidated financial statements. The SEC considers an entity’s most critical accounting policies to be those policies that are both most important to the portrayal of a company’s financial condition and results of operations and those that require management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about matters that are inherently uncertain at the time of estimation. For a more detailed discussion of the accounting policies of the Company, see Note 3 of the Notes to the Condensed Consolidated Financial Statements included in this Quarterly Report, “Summary of Significant Accounting Policies”.

 

We believe the following critical accounting policies, among others, require significant judgments and estimates used in the preparation of our consolidated financial statements.

 

Use of Estimates and Assumptions

 

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect (i) the reported amounts of assets and liabilities, (ii) the disclosure of contingent assets and liabilities known to exist as of the date the financial statements are published, and (iii) the reported amount of net sales and expense recognized during the periods presented.

 

Those estimates and assumptions include estimates for reserves of uncollectible accounts receivable, allowance for inventory obsolescence, product returns, depreciable lives of property and equipment, allocation of purchase price from business combinations, analysis of impairment of goodwill, realization of deferred tax assets, accruals for potential liabilities and assumptions made in valuing stock instruments issued for services. Management evaluates these estimates and assumptions on a regular basis. Actual results could differ from those estimates.

 

 

Goodwill and Intangibles

 

In accordance with FASB ASC 350, Intangibles-Goodwill and Other, we review goodwill and indefinite lived intangible assets for impairment at least annually or whenever events or circumstances indicate a potential impairment. Our impairment testing is performed annually at December 31 (our fiscal year end). Impairment of goodwill and indefinite lived intangible assets is determined by comparing the fair value of our reporting units to the carrying value of the underlying net assets in the reporting units. If the fair value of a reporting unit is determined to be less than the carrying value of its net assets, goodwill is deemed impaired and an impairment loss is recognized to the extent that the carrying value of goodwill exceeds the difference between the fair value of the reporting unit and the fair value of its other assets and liabilities.

 

Management concluded that a triggering event did not occur during the three months ended March 31, 2025. We will continue to review for impairment indicators as necessary in future periods.

 

Revenue Recognition

 

The Company’s revenue is comprised of sales of nutritional supplements and wellness products to consumers.

 

The Company accounts for revenue in accordance with FASB ASC 606. The underlying principle of ASC 606 is to recognize revenue to depict the transfer of goods or services to customers at the amount expected to be collected. ASC 606 creates a five-step model that requires entities to exercise judgment when considering the terms of contract(s), which includes (1) identifying the contract(s) or agreement(s) with a customer, (2) identifying our performance obligations in the contract or agreement, (3) determining the transaction price, (4) allocating the transaction price to the separate performance obligations, and (5) recognizing revenue as each performance obligation is satisfied. Under ASC 606, revenue is recognized when performance obligations under the terms of a contract are satisfied, which occurs for the Company upon shipment or delivery of products to our customers based on written sales terms. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring the products to a customer. 

 

All products sold by the Company are distinct individual products and consist of nutritional supplements and wellness products. The products are offered for sale solely as finished goods, and there are no performance obligations required post-shipment for customers to derive the expected value from them.

 

The Company’s products are also sold on e-commerce platforms including Amazon. For these transactions, the Company evaluated principal versus agent considerations to determine appropriateness of recording distribution and platform fees paid to third-party e-commerce companies as an expense or as a reduction of revenue. The Company records distribution and platform fees to cost of goods sold in the condensed consolidated statements of income and comprehensive income. Distribution and platform fees are not recorded as a reduction of revenue because the Company (1) owns the goods before they are transferred to the customer,   (2) can direct Amazon, similar to other third-party logistics providers, to return the Company’s inventory to any location specified by the Company, (3) has the responsibility to make customers whole following any returns made by customers directly to Logistic Providers and the Company retains the back-end inventory risk, (4) is subject to credit risk (i.e., credit card chargebacks), (5) establishes prices of its products, (6) can determine who fulfills the goods to the customer (Amazon or the Company) and (7) can limit quantities or stop selling the goods at any time. Based on these considerations, the Company is the principal in this arrangement. Advertising fees for Amazon are recorded in advertising and marketing expense in the condensed consolidated statements of income and comprehensive income. 

 

The Company disaggregates revenue into geographical regions and distribution channels. The Company determines that disaggregating revenue into these categories achieves the disclosure objective to depict how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors. 

 

Online revenue during the three months ended March 31, 2025 was approximately 67% of total revenue, compared to 65% for the three months ended March 31, 2024. 

 

Sales to customers in the U.S. were approximately 96% during the three months ended March 31, 2025 and 2024, respectively, with the balance of sales for the same respective periods being to customers primarily in Canada.

 

Control of products we sell transfers to customers upon shipment from our facilities or delivery to our customers, and the Company’s performance obligations are satisfied at that time. Shipping and handling activities are performed before the customer obtains control of the goods and therefore represent a fulfillment activity rather than promised goods to the customer. Payments for sales are generally made by check, credit card, or wire transfer. Historically the Company has not experienced any significant payment delays from customers.

 

 

For direct-to-consumer sales, the Company allows for returns within 30 days of purchase. Our wholesale customers, such as GNC, may return purchased products to the Company under certain circumstances, which include expired or soon-to-be-expired products located in GNC corporate stores or at any of its distribution centers, and products that are subject to a recall or that contain an ingredient or ingredients that are subject to a recall by the FDA.

 

A right of return does not represent a separate performance obligation, but because customers are allowed to return products, the consideration to which the Company expects to be entitled is variable. Upon evaluation of returns, the Company determined that product returns are immaterial, and therefore believes it is probable that such returns will not cause a significant reversal of revenue in the future. We assess our contracts and the reasonableness of our conclusions on a quarterly basis.

 

Recent Accounting Pronouncements

 

See Note 3 of the Condensed Consolidated Financial Statements included in this Quarterly Report for a description of recent accounting pronouncements believed by management to have a material impact on our present or future financial statements.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Our business is conducted principally in the U.S. However, due to the MRC acquisition in 2023, the Company now has more exposure to fluctuations in foreign currencies. As a result, our financial results may be materially affected by factors such as changes in foreign currency exchange rates or economic conditions in foreign markets.

 

Foreign Currency

 

The Company has not entered into any foreign currency hedging transactions during the three months ended March 31, 2025.

 

Interest Rates

 

Our exposure to risk for changes in interest rates relates primarily to borrowings under the Amended Credit Agreement (which includes the Term Loans as well as our Line of Credit), and our investments in short-term financial instruments. As of March 31, 2025 the Company had $12,000 outstanding on the Term Loans and $0 under its Line of Credit.

 

Investments of our cash balances in both fixed-rate and floating-rate interest-earning instruments carry some interest rate risk. The fair value of fixed-rate securities may fall due to a rise in interest rates, while floating-rate securities may produce less income than expected if interest rates fall. Partly as a result of this, our future interest income will vary due to changes in interest rates and we may suffer losses in principal if we are forced to sell securities that have fallen in estimated fair value due to changes in interest rates. However, as substantially all of our cash equivalents consist of bank deposits and short-term money market instruments, we do not expect any material change with respect to our net income as a result of an interest rate change.

 

ITEM 4. CONTROLS AND PROCEDURES

 

a.

Evaluation of disclosure controls and procedures.    Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, an evaluation of the effectiveness of the design and operations of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as of March 31, 2025 was completed. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer believe that our disclosure controls and procedures are effective to ensure that information required to be disclosed in the reports submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, including to ensure that information required to be disclosed by the Company is accumulated and communicated to management, including the principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

 

 

	b.	Changes in Internal Control Over Financial Reporting    There were no additional changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the three months ended March 31, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
	c.	Inherent Limitations on the Effectiveness of Controls    Management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control systems are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in a cost-effective control system, no evaluation of internal control over financial reporting can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been or will be detected.   These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of a simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

 

 

PART II

OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

We currently are not involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of the Company or any of its subsidiaries, threatened against or affecting the Company, our Common Stock, any of our subsidiaries or of the Company’s or our subsidiaries’ directors or officers in their capacities as such, in which an adverse decision could have a material adverse effect.

 

ITEM 1A. RISK FACTORS

 

Our results of operations and financial condition are subject to numerous risks and uncertainties described in our comprehensive Annual Report on Form 10-K for our fiscal year ended December 31, 2024, filed with the SEC on March 27, 2025. Management is not aware of any material changes to the risk factors discussed in Part 1, Item 1A, of the Annual Report on Form 10-K for the year ended December 31, 2024. You should carefully consider these risk factors in conjunction with the other information contained in this Quarterly Report. Should any of these risks materialize, our business, financial condition and future prospects could be negatively impacted.

 

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

 

None.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

There were no defaults upon senior securities during the three-month period ended March 31, 2025.

 

 

ITEM 5. OTHER INFORMATION

 

In the three months ended March 31, 2025, no directors or officers adopted or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.

 

ITEM 6. EXHIBITS

 

31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act.
31.2	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act.
32.1	Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act.
32.2	Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act.
101.INS	Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL 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 (embedded within the Inline XBRL Document and included in Exhibit 101)

 

 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934 the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Registrant	FitLife Brands, Inc.
Date: May 15, 2025	By:	/s/ Dayton Judd
		Dayton Judd
		Chief Executive Officer and Chair (Principal Executive Officer)

 

Registrant	FitLife Brands, Inc.
Date: May 15, 2025	By:	/s/ Jakob York
		Jakob York
		Chief Financial Officer (Principal Financial Officer)