FITLIFE BRANDS, INC. - Quarter Report: 2020 September (Form 10-Q)

   

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934   For the quarterly period ended September 30, 2020

 

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT   For the transition period from N/A to N/A

Commission File No. 000-52369

 

FITLIFE BRANDS, INC.

(Name of small business issuer as specified in its charter)

 

Nevada		20-3464383
(State or other jurisdiction of incorporation)		(IRS Employer Identification No.)

                                                                                                         

  5214 S. 136th Street, Omaha, NE 68137

(Address of principal executive offices)

 

 (402) 991-5618

(Issuer’s telephone number)

 

(Former name, former address and former fiscal year, if changed since last report)

 

Securities registered under Section 12(b) of the Exchange Act: None

 

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

Common Stock, par value $0.01 per share

 

Indicate by check mark whether the Registrant (1) has filed all reports required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days:  Yes ☒   No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes ☒    No  ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

 

Large accelerated filer	☐	Accelerated filer	☐
Non–Accelerated filer	☒	Small reporting company	☒
		Emerging growth company	☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b–2 of the Exchange Act).  Yes ☐    No ☒

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

 

As of November 11, 2020, a total of 1,060,644 shares of the Registrant’s Common Stock, par value $0.01 per share, were issued and outstanding.

 

 

 

FITLIFE BRANDS, INC.

 INDEX TO FORM 10-Q FILING

FOR THE QUARTER ENDED SEPTEMBER 30, 2020

 

TABLE OF CONTENTS

 

			PAGE
PART I - FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements (unaudited)		2
	Condensed Consolidated Balance Sheets (unaudited)		2
	Condensed Consolidated Statements of Operations (unaudited)		3
	Condensed Consolidated Statements of Stockholders’ Equity (unaudited)		4
	Condensed Consolidated Statements of Cash Flows (unaudited)		5
	Notes to Condensed Consolidated Financial Statements (unaudited)		6
Item 2.	Management’s Discussion & Analysis of Financial Condition and Results of Operations		16
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		23
Item 4.	Controls and Procedures		23
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings		24
Item 1A.	Risk Factors		24
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		24
Item 3.	Defaults Upon Senior Securities		24
Item 5.	Other Information		24
Item 6.	Exhibits		24

  

 

 

Special Note Regarding Forward-Looking Statements

 

This Quarterly Report on Form 10-Q (“Quarterly Report”), including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 2 of Part I of this report, includes forward-looking statements. These statements 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 forward-looking statements.

 

In some cases, you can identify forward-looking statements by terminology such as “may”, “should”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential”, “proposed”, “intended”, or “continue” or the negative of these terms or other comparable terminology. You should read statements that contain these words carefully, because they discuss our expectations about our future operating results or our future financial condition or state other “forward-looking” information. There may be events in the future that we are not able to accurately predict or control. Before you invest in our securities, you should be aware that the occurrence of any of the events described in this Quarterly Report could substantially harm our business, results of operations and financial condition, and that upon the occurrence of any of these events, the trading price of our securities could decline and you could lose all or part of your investment. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, growth rates, levels of activity, performance or achievements. We are under no duty to update any of the forward-looking statements after the date of this Quarterly Report to conform these statements to actual results.

 

 

 

 

PART I

FINANCIAL INFORMATION 

Item 1.  Financial Statements

 

FITLIFE BRANDS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

 

ASSETS:	September 30,	December 31,
	2020	2019
	(Unaudited)
CURRENT ASSETS
Cash	$4,090,000	$265,000
Accounts receivable, net of allowance of doubtful accounts, $402,000 and $27,000 respectively	2,594,000	2,366,000
Inventories, net of allowance for obsolescence of $67,000 and $130,000, respectively	2,255,000	2,998,000
Income tax receivable	40,000	-
Prepaid expenses and other current assets	57,000	72,000
Total current assets	9,036,000	5,701,000
Property and equipment, net	105,000	136,000
Right of use asset, net of amortization, $261,000 and $226,000 respectively	219,000	254,000
Goodwill	225,000	225,000
Security deposits	-	10,000
TOTAL ASSETS	$9,585,000	$6,326,000
LIABILITIES AND STOCKHOLDERS' EQUITY:
CURRENT LIABILITIES:
Accounts payable	$1,821,000	$2,010,000
Accrued expense and other liabilities	524,000	464,000
Product returns	276,000	256,000
Lease liability - current portion	49,000	46,000
Total current liabilities	2,670,000	2,776,000
Long-term lease liability, net of current portion	171,000	208,000
PPP loan	452,000	-
TOTAL LIABILITIES	3,293,000	2,984,000
STOCKHOLDERS' EQUITY:
Preferred stock, $0.01 par value, 10,000,000 shares authorized, none outstanding as of September 30, 2020 and December 31, 2019
Common stock, $.01 par value, 15,000,000 shares authorized; 1,060,644 and 1,054,516 issued and outstanding as of September 30, 2020 and December 31, 2019 respectively	12,000	12,000
Treasury stock, 210,631 and 198,731 shares, respectively	(1,790,000)	(1,619,000)
Additional paid-in capital	32,195,000	32,055,000
Accumulated deficit	(24,125,000)	(27,106,000)
TOTAL STOCKHOLDERS' EQUITY	6,292,000	3,342,000
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$9,585,000	$6,326,000

 

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

 

 

 

FITLIFE BRANDS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019

 

	Three months ended		Nine months ended
	September 30		September 30
	2020	2019	2020	2019
	(Unaudited)		(Unaudited)
Revenue	$6,923,000	$5,316,000	$15,814,000	$15,812,000
Cost of goods sold	4,061,000	3,063,000	8,896,000	9,163,000
Gross profit	2,862,000	2,253,000	6,918,000	6,649,000
OPERATING EXPENSES:
General and administrative	684,000	782,000	2,419,000	2,352,000
Selling and marketing	509,000	583,000	1,614,000	1,749,000
Depreciation and amortization	9,000	12,000	31,000	40,000
Total operating expenses	1,202,000	1,377,000	4,064,000	4,141,000
OPERATING INCOME	1,660,000	876,000	2,854,000	2,508,000
OTHER EXPENSES (INCOME)
Interest expense	1,000	14,000	14,000	47,000
Interest income	(3,000)	-	(7,000)	-
Gain on settlement	-	(29,000)	(70,000)	(171,000)
Total other expenses (income)	(2,000)	(15,000)	(63,000)	(124,000)
PRE-TAX NET INCOME	1,662,000	891,000	2,917,000	2,632,000
PROVISION FOR INCOME TAXES	17,000	-	(64,000)	7,000
NET INCOME	1,645,000	891,000	2,981,000	2,625,000
PREFERRED STOCK DIVIDEND	-	(19,000)	-	(37,000)
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS	$1,645,000	$872,000	$2,981,000	$2,588,000
NET INCOME PER SHARE AVAILABLE TO COMMON SHAREHOLDERS:
Basic	$1.55	$0.87	$2.82	$2.46
Diluted	$1.45	$0.72	$2.63	$2.08
Basic weighted average common shares	1,060,350	1,001,715	1,057,389	1,053,292
Diluted weighted average common shares	1,134,379	1,207,024	1,132,764	1,241,875

 

 

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

  

 

 

FITLIFE BRANDS, INC.

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019

(Unaudited)

 

						Additional
	Series A Preferred		Common Stock		Treasury	Paid-in	Accumulated
	Shares	Amount	Shares	Amount	Stock	Capital	Deficit	Total
THREE MONTHS ENDED SEPTEMBER 30, 2020
JUNE 30, 2020	-	$-	1,060,033	$12,000	$(1,790,000)	$32,176,000	$(25,770,000)	$4,628,000
Fair value of common stock issued for services	-	-	611	-	-	8,000	-	8,000
Repurchase of common stock	-	-	-	-	-	-	-	-
Exercise of stock options	-	-	-	-	-	-	-	-
Fair value of vested common shares and options issued for services	-	-	-	-	-	11,000	-	11,000
Net income	-	-	-			-	1,645,000	1,645,000
SEPTEMBER 30, 2020	-	$-	1,060,644	$12,000	$(1,790,000)	$32,195,000	$(24,125,000)	$6,292,000
THREE MONTHS ENDED SEPTEMBER 30, 2019
JUNE 30, 2019	600	$-	1,015,120	$11,000	$(566,000)	$32,199,000	$(28,070,000)	$3,574,000
Fair value of common stock issued for services	-	-	401	-	-	4,000	-	4,000
Repurchase of common stock	-	-	(82,216)	-	(819,000)	-	-	(819,000)
Dividend payments on preferred stock	-	-	-	-	-	(19,000)	-	(19,000)
Fair value of vested common shares and options issued for services	-	-	-	-	-	34,000	-	34,000
Net income	-	-	-	-	-	-	891,000	891,000
SEPTEMBER 30, 2019	600	$-	933,305	$11,000	$(1,385,000)	$32,218,000	$(27,179,000)	$3,665,000
NINE MONTHS ENDED SEPTEMBER 30, 2020
DECEMBER 31, 2019	-	$-	1,054,516	$12,000	$(1,619,000)	$32,055,000	$(27,106,000)	$3,342,000
Fair value of common stock issued for services	-		1,028	-	-	34,000	-	34,000
Repurchase of common stock	-	-	(11,900)	-	(171,000)	-	-	(171,000)
Exercise of stock options	-	-	17,000	-	-	71,000	-	71,000
Dividends payments on preferred stock	-	-	-	-	-	-	-	-
Fair value of vested common shares and options issued for services	-	-	-	-	-	35,000	-	35,000
Net income	-	-	-	-	-	-	2,981,000	2,981,000
SEPTEMBER 30, 2020	-	-	1,060,644	$12,000	$(1,790,000)	$32,195,000	$(24,125,000)	$6,292,000
NINE MONTHS ENDED SEPTEMBER 30, 2019
DECEMBER 31, 2018	600	$-	1,111,943	$11,000	$-	$32,107,000	$(29,804,000)	$2,314,000
Fair value of common stock issued for services	-	-	2,816	-	-	43,000	-	43,000
Repurchase of common stock	-	-	(181,454)	-	(1,385,000)	-	-	(1,385,000)
Dividend payments on preferred stock	-	-	-	-	-	(37,000)	-	(37,000)
Fair value of vested common shares and options issued for services	-	-	-	-	-	105,000	-	105,000
Net income	-	-	-	-	-	-	2,625,000	2,625,000
SEPTEMBER 30, 2019	600	$-	933,305	$11,000	$(1,385,000)	$32,218,000	$(27,179,000)	$3,665,000

 

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

 

 

FITLIFE BRANDS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019

 

	Nine months ended September 30
	2020	2019
	(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$2,981,000	$2,625,000
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization	32,000	40,000
Allowance for doubtful accounts	375,000	(166,000)
Allowance for inventory obsolescence	(62,000)	36,000
Common stock issued for services	40,000	55,000
Fair value of options issued for services	29,000	94,000
Right of use asset net of amortization and lease liability	-	66,000
Changes in operating assets and liabilities:
Accounts receivable - trade	(603,000)	(1,572,000)
Inventories	805,000	1,005,000
Prepaid expense	15,000	160,000
Income tax receivable	(40,000)	-
Security deposit	10,000	-
Accounts payable	(189,000)	(595,000)
Accrued interest	1,000	41,000
Accrued liabilities and other liabilities	61,000	(65,000)
Product returns	20,000	-
Net cash provided by operating activities	3,475,000	1,724,000
CASH FLOWS FROM INVESTING ACTIVITIES:
Net cash provided by investing activities	-	-
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of notes payable	-	300,000
Proceeds from exercise of stock options	71,000	-
Proceeds from paycheck protection program	450,000	-
Dividend payments on preferred stock	-	(37,000)
Repurchases of common stock	(171,000)	(889,000)
Repayments of note payable	-	(800,000)
Net cash provided by (used in) financing activities	350,000	(1,426,000)
CHANGE IN CASH	3,825,000	298,000
CASH, BEGINNING OF PERIOD	265,000	259,000
CASH, END OF PERIOD	$4,090,000	$557,000
Supplemental disclosure operating activities
Cash paid for interest	$-	$47,000
Non-cash investing and financing activities
Recording of lease asset and liability upon adoption of ASU-2016-02	$-	$343,000
Accrued liability for stock buyback	$94,000	$496,000

  

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

 

 

 

FITLIFE BRANDS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019

(Unaudited)

 

NOTE 1 - DESCRIPTION OF BUSINESS

 

Summary

 

FitLife Brands, Inc. (the “Company”) is a national provider of innovative and proprietary nutritional supplements for health-conscious consumers marketed under the brand names NDS Nutrition, PMD Sports, SirenLabs, CoreActive, and Metis Nutrition (together, “NDS Products”). In September 2015, the Company acquired iSatori, Inc., a Delaware corporation (“iSatori”) and as a result, the Company added three brands to its product portfolio, including iSatori, BioGenetic Laboratories, and Energize (together, “iSatori Products”). The NDS Products are distributed 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 United States. The iSatori Products are sold through more than 25,000 retail locations, which include specialty, mass, and online.

 

The Company was incorporated in the State of Nevada on July 26, 2005. In October 2008, the Company acquired the assets of NDS Nutritional Products, Inc., a Nebraska corporation, and moved those assets into its wholly owned subsidiary NDS Nutrition Products, Inc., a Florida corporation (“NDS”). The Company’s NDS Products are sold through NDS and the iSatori Products are sold through iSatori, a wholly owned subsidiary of the Company.

   

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 OTC: PINK market.

 

 

 

 

 

 

Share Repurchase Plan 

 

During the three months ended September 30, 2020, the Company did not repurchase any shares of Common Stock pursuant to its share repurchase program initially approved by the Board of Directors (the "Board") on August 16, 2019, as amended on September 23, 2019 and November 6, 2019 (“Share Repurchase Program”). The Share Repurchase Program authorizes the Company to repurchase up to $2.5 million of the Company's Common Stock, its Series A Convertible Preferred Stock, par value $0.01 per share ("Series A Preferred"), and warrants to purchase shares of the Company's Common Stock ("Warrants"), at a purchase price, in the case of Common Stock, equal to the fair market value of the Company's Common Stock on the date of purchase, and in the case of Series A Preferred and Warrants, at a purchase price determined by management, with the exact date and amount of such purchases to be determined by management.

 

During the nine months ended September 30, 2020, the Company repurchased 11,900 shares of Common Stock under the Share Repurchase Program, or approximately 1% of the issued and outstanding shares of the Company’s Common Stock, through private transactions, as follows:

 

	Total number of shares purchased	Average price paid per share	Total number of shares purchased as part of publicly announced programs	Dollar value of shares that may yet be purchased
First quarter ended March 31, 2020	11,900	$14.35	11,900	$1,110,917
Second quarter ended June 30, 2020	-	-	-	1,110,917
Third quarter ended September 30, 2020	-	-	-	1,110,917
Subtotal	11,900	$14.35	11,900

 

COVID-19 Pandemic

 

The COVID-19 pandemic has had an effect on the Company’s employees, business and operations during the nine months ended September 30, 2020, and those of its customers, vendors and business partners. In this respect, the temporary or permanent closure of some of our retail partners’ store locations and the stay-at-home orders that occurred early in the pandemic negatively affected our results from operations, although much of the impact has been offset by an increase in revenue attributable to online sales, and increased sales during the most recent quarter. Our future financial position and operating results could be materially and adversely affected in the event that a resurgence of COVID-19 cases leads to new stay-at-home orders and/or disruptions in both our supply chain and manufacturing lead-times, which could lower demand for the Company’s products and/or prevent the Company from producing and delivering its products in a timely manner, although the extent of these effects cannot be determined at this time. The Company expects to continue to assess the evolving impact of the COVID-19 pandemic and intends to make adjustments to its business and operations accordingly.

 

CARES Act

 

The Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") was enacted on March 27, 2020 in the United States. On April 27, 2020, the Company received proceeds from a loan in the amount of $449,700 from its lender, CIT Bank, N.A. (the “PPP Lender”), pursuant to approval by the U.S. Small Business Administration (the “SBA”) for the PPP Lender to fund the Company’s request for a loan under the SBA’s Paycheck Protection Program (“PPP Loan”) created as part of the CARES ACT administered by the SBA (the “Loan Agreement”). In accordance with the requirements of the CARES Act, the Company used the proceeds from the PPP Loan primarily for payroll costs, covered rent payments, and covered utilities during the eight-week period commencing on the date of loan approval. The PPP Loan is scheduled to mature on April 27, 2022, has a 1.0% interest rate, and is subject to the terms and conditions applicable to all loans made pursuant to the Paycheck Protection Program as administered by the SBA under the CARES Act.

 

The CARES Act permits employers to defer payment of the employer portion of payroll taxes owed on wages paid through December 31, 2020 for a period of up to two years. Through September 30, 2020, the Company has deferred payment of $55,000, which amount has been expensed and is included in accrued liabilities.

 

NOTE 2 - BASIS OF PRESENTATION

 

The accompanying interim condensed unaudited 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 nine-month period ended September 30, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020. Although management of the Company believes the disclosures presented herein are adequate and not misleading, these interim 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, 2019, as filed with the Securities and Exchange Commission ("SEC") on March 30, 2020.

 

 

 

NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

The Company prepares its financial statements in accordance with accounting principles generally accepted in the United States (“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 consolidated condensed financial statements.

  

Use of Estimates

 

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. Adjustments made with respect to the use of estimates often relate to improved information not previously available. Uncertainties with respect to such estimates and assumptions are inherent in the preparation of financial statements; accordingly, actual results could differ from these estimates.

  

These estimates and assumptions also affect the reported amounts of accounts receivable, inventories, goodwill, revenue, costs and expense and valuations of long-term assets, realization of deferred tax assets and fair value of equity instruments issued for services during the reporting period. Management evaluates these estimates and assumptions on a regular basis. Actual results could differ from those estimates.

 

Basic and Diluted Income (loss) Per Share

 

Our computation of earnings per share (“EPS”) includes basic and diluted EPS. Basic EPS is measured as the income (loss) available to common stockholders divided by the weighted average common shares outstanding for the period. Diluted income (loss) per share reflects the potential dilution, using the treasury stock method, that could occur if securities or other contracts to issue Common Stock were exercised or converted into Common Stock or resulted in the issuance of Common Stock that then shared in the income (loss) of the Company as if they had been converted at the beginning of the periods presented, or issuance date, if later. In computing diluted income (loss) per share, the treasury stock method assumes that outstanding options and warrants are exercised and the proceeds are used to purchase Common Stock at the average market price during the period. Options and warrants may have a dilutive effect under the treasury stock method only when the average market price of the Common Stock during the period exceeds the exercise price of the options and warrants. Potential common shares that have an antidilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS.

  

	Three months ended September 30,		Nine months ended September 30,
	2020	2019	2020	2019
Net income available to common shareholders	$1,645,000	$872,000	$2,981,000	$2,588,000
Weighted average common shares - basic	1,060,350	1,001,715	1,057,389	1,053,292
Dilutive effect of outstanding warrants and stock options	74,029	205,309	75,375	188,583
Weighted average common shares - diluted	1,134,379	1,207,024	1,132,764	1,241,875
Net income per common share:
Basic	$1.55	$0.87	$2.82	$2.46
Diluted	$1.45	$0.72	$2.63	$2.08

 

 

 

Lease

         

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.  Lease assets are presented as operating lease right-of-use assets and the related liabilities are presented as lease liabilities in our consolidated balance sheets.

 

Prior to January 1, 2019, the Company accounted for leases under ASC 840, Accounting for Leases.   Effective January 1, 2019, the Company adopted the guidance of ASC 842, Leases, which requires an entity to recognize a right-of-use asset and a lease liability for virtually all leases. The Company adopted ASC 842 using a modified retrospective approach. As a result, the comparative financial information has not been updated and the required disclosures prior to the date of adoption have not been updated and continue to be reported under the accounting standards in effect for those periods. The adoption of ASC 842 on January 1, 2019 resulted in the recognition of operating lease right-of-use assets and lease liabilities for operating leases of $480,000 and $480,000, respectively. There was no cumulative-effect adjustment to accumulated deficit. See Note 7 for further information regarding the adoption of ASC 842 on the Company’s condensed consolidated financial statements.

 

Goodwill

 

In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Accounting for Goodwill Impairment. ASU 2017-04 removes Step 2 of the goodwill impairment test, which required a hypothetical purchase price allocation. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. This update also eliminated the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test. The Company adopted ASU 2017-04 on January 1, 2020 and applied the requirements prospectively. While we have concluded that a triggering event did not occur during the quarter ended September 30, 2020, a worsening of the severity of the COVID-19 pandemic could result in future goodwill impairment charges.  We will continue to monitor the effects of the COVID-19 pandemic’s impact on our business, and review for impairment indicators as necessary in the upcoming months.

 

Customer Concentration

 

Net sales to GNC during the three-month periods ended September 30, 2020 and 2019 were $5,228,000 and $3,981,000, respectively, representing 76% and 75% of total net revenue, respectively. Net sales to GNC during the nine-month periods ended September 30, 2020 and 2019 were $11,138,000 and $12,331,000, respectively, representing 70% and 77% of total net revenue, respectively.

 

Gross accounts receivable attributable to GNC as of September 30, 2020 and 2019 were $2,447,000 and $2,992,000, respectively, representing 84% and 88% of the Company’s total accounts receivable balance, respectively. At September 30, 2020 and December 31, 2019, the allowance for doubtful accounts related to GNC was $354,000 and $0, respectively.

 

For the three months ended September 30, 2020 and 2019, online sales accounted for 17% and 12% of the Company’s net revenue, respectively. For the nine months ended September 30, 2020 and 2019, online sales accounted for 20% and 11% of the Company’s net revenue, respectively.

 

Revenue Recognition

 

The Company’s revenue is comprised of sales of nutritional supplements to consumers, primarily through GNC stores. 

 

The Company accounts for revenues in accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers. 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 or services to our customers based on written sales terms, which is also when control is transferred. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring the products or services to a customer.

 

 

 

All products sold by the Company are distinct individual products and consist of nutritional supplements and related supplies. 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. Other than promotional activities, which can vary from time to time but nevertheless are entirely within the Company’s control, contracts with customers contain no incentives or discounts that could cause revenue to be allocated or adjusted over time.

 

Control of products we sell transfers to customers upon shipment from our facilities, 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. Payment 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.

 

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 less than 5% of products are returned, 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.

 

In measuring revenue and determining the consideration the Company is entitled to as part of a contract with a customer, the Company takes into account the related elements of variable consideration. Such elements of variable consideration include, but are not limited to, product returns and sales incentives, such as markdowns and margin adjustments. For these types of arrangements, the adjustments to revenue are recorded at the later of when (i) the Company recognizes revenue for the transfer of the related products to the customers, or (ii) the Company pays, or promises to pay, the consideration.

  

Income Taxes

 

As of December 31, 2019, the Company had federal net operating loss (“NOL”) carryforwards available to offset future taxable income of approximately $27 million, subject to Internal Revenue Service (“IRS”) statutory limitations. To the extent the Company reports federal taxable income for 2020, such income will be offset by NOLs.  This reduction in deferred tax assets would be offset by a corresponding reduction in the deferred tax asset valuation allowance resulting in no federal income tax expense.

 

During the quarter ended March 31, 2020, the Company received a tax refund of $41,000 relating to a portion of the Company’s alternative minimum tax carryforward, which became refundable as a result of the 2017 Tax Cuts and Jobs Act.

 

During the quarter ended June 30, 2020, the Company recorded an income tax benefit and an income tax receivable of $40,000 related to the Company's 2019 federal tax return. This amount represents the remainder of the Company's alternative minimum tax carryforward.

 

During the quarter ended September 30, 2020, the Company recorded an income tax expense of $17,000 for state taxes.

 

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 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 before the Company is able to realize their benefits, or that future deductibility is uncertain. Authoritative guidance issued by the ASC Topic 740 – Income Taxes requires that a valuation allowance be established when it is more likely than not that all or a portion of deferred tax assets will not be realized. As a result of the limitations related to Internal Revenue Code and the Company’s lack of a prolonged history of profitable operations, the Company recorded a 100% valuation allowance against its net deferred tax assets as of September 30, 2020 and December 31, 2019.

 

 

 

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment.

 

Recent Accounting Pronouncements

 

Recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the SEC 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.

 

Total allowance for expiring, excess and slow-moving inventory items as of September 30, 2020 and December 31, 2019 amounted to $67,000 and $130,000, respectively. The Company’s inventories as of September 30, 2020 and December 31, 2019 were as follows:

 

	September 30,
	2020	December 31,
	(unaudited)	2019
Finished goods	$1,709,000	$2,688,000
Components	613,000	440,000
Allowance for obsolescence	(67,000)	(130,000)
Total	$2,255,000	$2,998,000

 

NOTE 5 - PROPERTY AND EQUIPMENT

 

The Company’s fixed assets as of September 30, 2020 and December 31, 2019 were as follows: 

 

	September 30,
	2020	December 31,
	(unaudited)	2019
Equipment	$902,000	$902,000
Accumulated depreciation	(797,000)	(766,000)
Total	$105,000	$136,000

 

Depreciation expense for the three months ended September 30, 2020 and 2019 was $9,000 and $12,000, respectively. Depreciation expense for the nine months ended September 30, 2020 and 2019 was $31,000 and $40,000, respectively.

 

NOTE 6 – NOTES PAYABLE

 

Notes Payable – Related Parties

 

On December 26, 2018, the Company issued the Sudbury Note to Sudbury, an entity controlled by Dayton Judd, the Company’s Chief Executive Officer and Chair of the Board, in the principal amount of $600,000, with an initial advance to the Company in the amount of $300,000 which was outstanding at December 31, 2018. During the three months ended March 31, 2019, an additional $300,000 was advanced to the Company under the Sudbury Note, resulting in aggregate borrowings of $600,000. In addition, on December 26, 2018, the Company also issued the Judd Note to Mr. Judd in the principal amount of $200,000. On September 24, 2019, the Company repaid all outstanding balances due under the terms of the Notes in the aggregate principal amount, including accrued but unpaid interest thereon, of $615,000. As a result of the repayment of the Notes, the Company terminated its line of credit entered into between the Company and Sudbury on December 26, 2018.

 

Line of Credit – Mutual of Omaha Bank

 

On September 24, 2019, the Company entered into the Line of Credit Agreement with the Lender, providing the Company with a $2.5 million 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, unless renewed at maturity upon approval by the Company’s Board of Directors and the Lender. The Line of Credit is secured by all assets of the Company.

 

 

 

Advances drawn under the Line of Credit bear interest at an annual rate of the one-month LIBOR 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.

 

On March 20, 2020, the Lender advanced the Company $2.5 million under the Line of Credit, which amount was repaid on April 29, 2020. The advance was intended to provide the Company with additional liquidity given the uncertainty regarding the timing of collection of certain accounts receivable and in anticipation of an expected negative impact on sales to GNC and our other wholesale customers resulting from the COVID-19 outbreak.

 

On August 4, 2020, the Company and the Lender amended the Line of Credit Agreement to extend the Maturity Date to September 23, 2021. The amendment also added a LIBOR floor of 75 bps to the Line of Credit Agreement. All other terms of the Line of Credit remain unchanged.

 

Paycheck Protection Program Loan

 

On April 27, 2020, the Company received proceeds from a loan in the amount of $449,700 from the PPP Lender, pursuant to approval by the SBA for the Lender to fund the Company’s request for the PPP Loan created as part of the recently enacted CARES Act administered by the SBA. In accordance with the requirements of the CARES Act, the Company used the proceeds from the PPP Loan primarily for payroll costs, covered rent payments, and covered utilities during the eight-week period commencing on the date of loan approval. The PPP Loan is scheduled to mature on April 27, 2022, has a 1.0% interest rate, and is subject to the terms and conditions applicable to all loans made pursuant to the Paycheck Protection Program as administered by the SBA under the CARES Act.

 

The Company did not provide any collateral or guarantees for the PPP Loan, nor did the Company pay any fees to obtain the PPP Loan. The promissory note provides for customary events of default, including, among others, failure to make a payment when due, cross-defaults under any loan documents with the lender, certain cross-defaults under agreements with third parties, events of bankruptcy or insolvency, certain change of control events, and material adverse changes in the Company’s financial condition. If an event of default occurs, the Lender will have the right to accelerate indebtedness under the PPP Loan and/or pursue other remedies available to the Lender pursuant to the terms of the promissory note.

The Company may apply to the Lender for forgiveness of some or all of the PPP Loan, with the amount which may be forgiven equal to the sum of eligible payroll costs, mortgage interest, covered rent and covered utilities payments, in each case incurred by the Company during the measurement period following the effective date of the promissory note, calculated in accordance with the terms of the CARES Act, Certain reductions in the Company’s payroll costs during the measurement period may reduce the amount of the PPP Loan eligible for forgiveness. The Company intends to apply for full forgiveness of the PPP Loan within 10 months of April 27, 2020, the last day of the loan forgiveness period. There is no guarantee, and the Lender does not make any representation, that the Company will receive forgiveness for any amount of the PPP Loan proceeds received by the Company.

 

NOTE 7 - RIGHT OF USE ASSETS AND LIABILITIES

 

In prior years, the Company entered into several non-cancellable leases for its office facilities and equipment. The lease agreements range from 36 months to 84 months, and require monthly payments ranging between $200 and $7,000 through October 2024. On January 1, 2019, the Company adopted Topic 842, Leases which requires a lessee to record a right-of-use asset and a corresponding lease liability at the inception of the lease initially measured at the present value of the lease payments. The Company classified the leases as operating leases and determined that the fair value of the lease assets and liability at the inception of the leases was $480,000 using a discount rate of 9%.

  

During the nine months ended September 30, 2020, the Company made payments resulting in a $37,000 reduction in the lease liability. As of September 30, 2020, lease liability amounted to $220,000.  Topic 842 requires recognition in the statement of operations of a single lease cost, calculated so that the cost of the lease is allocated over the lease term, generally on a straight-line basis. Rent expense, including real estate taxes, for the nine months ended September 30, 2020 was $59,000.  The right-of-use asset at September 30, 2020 was $219,000, net of amortization of $261,000.

 

	Nine months ended
Lease Cost	September 30, 2020
Operating lease cost (included in general and administrative in the Company's unaudited and consolidated statement of operations)	$59,000
Other information
Cash paid for amounts included in the measurement of lease liabilities for the third quarter of 2020	$-
Weighted average remaining lease term - operating leases (in years)	4.1
Average discount rate - operating leases	9%

 

The supplemental balance sheet information related to leases for the period is as follows:

 

Operating leases	At September 30, 2020
Long-term right-of-use assets	$219,000
Short-term operating lease liabilities	$49,000
Long-term operating lease liabilities	171,000
Total operating lease liabilities	$220,000

 

 

Maturities of the Company's lease liabilities are as follows (in thousands):

 

Year ending	Operating leases
2020 (remaining 3 months)	$ 16,000
2021	67,000
2022	67,000
2023	61,000
2024	51,000
Less: Imputed interest/present value discount	(42,000)
Present value of lease liabilities	$220,000

  

NOTE 8 - EQUITY

 

Common Stock

 

a.	Common Stock Issued for Services

 

The Company is authorized to issue 15.0 million shares of Common Stock of which 1,060,644 shares of Common Stock were issued and outstanding as of September 30, 2020.

 

In July 2018, in connection with the appointment of Mr. Dayton Judd as Chief Executive Officer, the Company granted Mr. Judd an aggregate of 45,000 shares of restricted Common Stock, which include vesting conditions subject to the achievement of certain market prices of the Company’s Common Stock. Such shares are also subject to forfeiture in the event Mr. Judd resigns from his position or is terminated by the Company. As the vesting of the 45,000 shares of restricted Common Stock is subject to certain market conditions, pursuant to current accounting guidelines, the Company determined the fair value to be $105,000, computed using Monte Carlo simulations on a binomial model with the assistance of a valuation specialist using a derived service period of nine years. During the nine months ended September 30, 2020, the Company recorded compensation expense of $29,000 to amortize the fair value of these shares of restricted Common Stock based upon the prorated derived service period.

 

During the three-month period ended September 30, 2020, the Company issued 611 shares of Common Stock with a fair value of $8,000 to directors for services rendered. The shares were valued at their respective dates of issuance.

 

During the nine-month period ended September 30, 2020, the Company issued 1,028 shares of Common Stock with a fair value of $11,000 to directors for services rendered. The shares were valued at their respective date of issuance.

 

b.	Share Repurchase Program

 

On August 16, 2019, the Company's Board authorized management to repurchase up to $500,000 of the Company's Common Stock over the next 24 months, which Share Repurchase Program was previously reported on the Company's Current Report on Form 8-K filed August 20, 2019. On September 23, 2019, the Board approved an amendment to the Company’s Share Repurchase Program to increase the repurchase of up to $1,000,000 of the Company's Common Stock, its Series A Preferred, and Warrants, over the next 24 months, at a purchase price, in the case of Common Stock, equal to the fair market value of the Company's Common Stock on the date of purchase, and in the case of Series A Preferred and Warrants, at a purchase price determined by management, with the exact date and amount of such purchases to be determined by management. On November 6, 2019, the Company’s Board of Directors amended the previously approved Share Repurchase Program to increase the amount of authorized repurchases to $2.5 million.  All other terms of the Share Repurchase Program remain unchanged.

 

During the nine-month period ended September 30, 2020, the Company repurchased 11,900 shares of Common Stock, or approximately 1% of the issued and outstanding shares of the Company, through private transactions for the aggregate purchase price of $171,000. The Company is accounting for these shares as treasury stock.

 

 

 

c.	Reverse/Forward Split

 

On April 11, 2019, the Company filed two Certificates of Change with the Secretary of State of the State of Nevada, the first to effect a reverse stock split of both the Company’s issued and outstanding and authorized Common Stock, at a ratio of 1-for-8,000, and the second to effect a forward stock split of both the Company’s issued and outstanding and authorized Common Stock at a ratio of 800-for-1 (the “Reverse/Forward Split”). The Reverse/Forward Split became effective, and the Company’s Common Stock began trading on a post-split basis, on Tuesday, April 16, 2019.

 

The Company did not issue any fractional shares as a result of the Reverse/Forward Split. Holders of fewer than 8,000 shares of the Common Stock immediately prior to the Reverse/Forward Split received cash in lieu of fractional shares based on the 5-day volume weighted average price of the Company’s Common Stock immediately prior to the Reverse/Forward Split, which was $0.57 per pre-split share. As a result, such holders ceased to be stockholders of the Company. Holders of more than 8,000 shares of Common Stock immediately prior to the Reverse/Forward Split did not receive fractional shares; instead any fractional shares resulting from the Reverse/Forward Split were rounded up to the next whole share.

 

As a result of the Reverse/Forward Split, the number of shares of Company Common Stock authorized for issuance under the Company’s Articles of Incorporation, as amended, was decreased from 150,000,000 shares to 15,000,000 shares. The Reverse/Forward Split did not affect the Company’s Preferred Stock, par value $0.01 per share ("Preferred Stock"), nor did it affect the par value of the Company’s Common Stock.

 

The share and per share amounts included in these unaudited interim condensed consolidated financial statements and footnotes have been retroactively adjusted to reflect the 1-for-10 aspect of the Reverse/Forward Split as if it occurred as of the earliest period presented.

    

Options

  

Information regarding options outstanding as of September 30, 2020 is as follows:

 

	Number of	Weighted Average Exercise	Weighted Average Remaining Life
	Options	Price	(Years)
Outstanding, December 31, 2018	154,521	$13.10	5.7
Issued	8,000	6.85
Exercised	-
Forfeited	(13,236)	24.45
Outstanding, December 31, 2019	149,285	$11.76	5.0
Issued	-
Exercised	(17,000)	4.20
Forfeited	(36,500)	19.46
Outstanding, September 30, 2020	95,785	$10.17	6.1

 

 

	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
$2.80- $23.00	90,210	6.3	$5.23	90,210	$5.23
$23.10 - $144.34	5,575	3.0	$90.20	5,575	$90.20
	95,785	6.1	$10.17	95,785	$10.17

 

 

 

During the nine-month periods ended September 30, 2020 and 2019, the Company recognized compensation expense of $29,000 and $94,000, respectively, to account for the fair value of stock options that vested during the period.

 

Total intrinsic value of outstanding stock options as of September 30, 2020 amounted to $859,000. As of September 30, 2020 there is no unamortized compensation expense.

 

Warrants

 

Total outstanding warrants to purchase shares of Company Common Stock as of September 30, 2020 and December 31, 2019 amounted to 35,870 shares. Total intrinsic value as of September 30, 2020 amounted to $364,000.

 

During the period ended September 30, 2020, no warrants were granted and no warrants expired unexercised.

 

Outstanding	Exercise Price	Issuance Date	Expiration Date	Vesting
35,870	$4.60	11/13/18	11/13/23	Yes

 

NOTE 9 – 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 10 – SUBSEQUENT EVENTS

 

Subsequent to the end of the quarter, the Company received payment of $829,000 from GNC in full satisfaction of its administrative claim relating to FitLife product that was received by GNC in the 20 days preceding its bankruptcy filing. Receivables relating to product delivered more than 20 days prior to the bankruptcy were fully reserved by the Company during the second quarter of 2020. The Company anticipates that any additional recovery from GNC related to its bankruptcy filing will be immaterial.

 

In accordance with the Subsequent Events Topic of the FASB ASC 855, we have evaluated subsequent events through the filing date and noted no further subsequent events that are reasonably likely to impact the Company’s financial statements.

 

 

 

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.

 

Overview

 

FitLife Brands, Inc. (the “Company”) is a national provider of innovative and proprietary nutritional supplements for health-conscious consumers marketed under the brand names NDS Nutrition, PMD Sports, SirenLabs, CoreActive, and Metis Nutrition (together, “NDS Products”). In September 2015, the Company acquired iSatori, Inc., a Delaware corporation (“iSatori”) and as a result, the Company added three brands to its product portfolio, including iSatori, BioGenetic Laboratories, and Energize (together, “iSatori Products”). The NDS Products are distributed 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 United States. The iSatori Products are sold through more than 25,000 retail locations, which include specialty, mass, and online.

 

The Company was incorporated in the State of Nevada on July 26, 2005. In October 2008, the Company acquired the assets of NDS Nutritional Products, Inc., a Nebraska corporation, and moved those assets into its wholly owned subsidiary NDS Nutrition Products, Inc., a Florida corporation (“NDS”). The Company’s NDS Products are sold through NDS and the iSatori Products are sold through iSatori, a wholly owned subsidiary of the Company.

   

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 OTC: PINK market.

 

Recent Developments

 

Share Repurchase Plan

 

On August 16, 2019, the Company's Board of Directors (the "Board") authorized management to repurchase up to $500,000 of the Company's Common Stock over the next 24 months (the "Share Repurchase Program"), which Share Repurchase Program was previously reported on the Company's Current Report on Form 8-K filed August 20, 2019. On September 23, 2019, the Board approved an amendment to the Company’s Share Repurchase Program to increase the repurchase of up to $1,000,000 of the Company's Common Stock, its Series A Convertible Preferred Stock, par value $0.01 per share ("Series A Preferred"), and warrants to purchase shares of the Company's Common Stock ("Warrants"), over the next 24 months, at a purchase price, in the case of Common Stock, equal to the fair market value of the Company's Common Stock on the date of purchase, and in the case of Series A Preferred and Warrants, at a purchase price determined by management, with the exact date and amount of such purchases to be determined by management. On November 6, 2019, the Company’s Board of Directors amended the previously approved Share Repurchase Program to increase the amount of authorized repurchases to $2.5 million.  All other terms of the Share Repurchase Program remain unchanged.

 

The Company intends to conduct its Share Repurchase Program in accordance with all applicable securities laws and regulations, including Rule 10b-18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Repurchases may be made at management's discretion from time to time in the open market or through privately negotiated transactions. The Company may suspend or discontinue the Share Repurchase Program at any time, and may thereafter reinstitute purchases, all without prior announcement.

   

 

 

During the nine months ended September 30, 2020, the Company repurchased 11,900 shares of Common Stock, or approximately 1% of the issued and outstanding shares of the Company, through private transactions, as follows:

 

	Total number of shares purchased	Average price paid per share	Total number of shares purchased as part of publicly announced programs	Dollar value of shares that may yet be purchased
First quarter ended March 31, 2020	11,900	$14.35	11,900	$1,110,917
Second quarter ended June 30, 2020	-	-	-	1,110,917
Third quarter ended September 30, 2020	-	-	-	1,110,917
Subtotal	11,900	$14.35	11,900