FITLIFE BRANDS, INC. - Quarter Report: 2021 March (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 March 31, 2021

☐	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 May 13, 2021, a total of 1,095,690 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 MARCH 31, 2021

TABLE OF CONTENTS

		PAGE
PART I - FINANCIAL INFORMATION		1

Item 1.	Condensed Consolidated Financial Statements (unaudited)	1

	Condensed Consolidated Balance Sheets (unaudited)	1
	Condensed Consolidated Statements of Operations (unaudited)	2
	Condensed Consolidated Statements of Stockholders’ Equity (unaudited)	3
	Condensed Consolidated Statements of Cash Flows (unaudited)	4
	Notes to Condensed Consolidated Financial Statements (unaudited)	5

Item 2.	Management’s Discussion & Analysis of Financial Condition and Results of Operations	14

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	20

Item 4.	Controls and Procedures	21

PART II - OTHER INFORMATION		22

Item 1.	Legal Proceedings	22

Item 1A.	Risk Factors	22

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	22

Item 3.	Defaults Upon Senior Securities	22

Item 5.	Other Information	22

Item 6.	Exhibits	22

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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.

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PART I

FINANCIAL INFORMATION

Item 1. Financial Statements

FITLIFE BRANDS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

ASSETS:	March 31,	December 31,
	2021	2020
	(Unaudited)
CURRENT ASSETS
Cash	$6,625,000	$6,336,000
Accounts receivable, net of allowance of doubtful accounts of $60,000 and $51,000, respectively	2,372,000	2,044,000
Inventories, net of allowance for obsolescence of $25,000 and $56,000, respectively	4,738,000	3,401,000
Income tax receivable	40,000	40,000
Prepaid expenses and other current assets	22,000	52,000
Total current assets	13,797,000	11,873,000

Property and equipment, net	90,000	98,000
Right of use asset, net of amortization of $285,000 and $272,000, respectively	195,000	208,000
Goodwill	225,000	225,000
Deferred tax asset	4,042,000	4,370,000
TOTAL ASSETS	$18,349,000	$16,774,000

LIABILITIES AND STOCKHOLDERS' EQUITY:

CURRENT LIABILITIES:
Accounts payable	$3,410,000	$3,246,000
Accrued expense and other liabilities	590,000	498,000
Product returns	304,000	335,000
Lease liability - current portion	52,000	50,000
Total current liabilities	4,356,000	4,129,000

Long-term lease liability, net of current portion	144,000	158,000
PPP loan	-	453,000
TOTAL LIABILITIES	4,500,000	4,740,000

STOCKHOLDERS' EQUITY:
Preferred stock, $0.01 par value, 10,000,000 shares authorized, none outstanding
as of March 31, 2021 and December 31, 2020
Common stock, $.01 par value, 15,000,000 shares authorized; 1,090,818 and 1,060,818
issued and outstanding as of March 31, 2021 and December 31, 2020, respectively	12,000	12,000
Treasury stock, 210,631 and 210,631 shares, respectively	(1,790,000)	(1,790,000)
Additional paid-in capital	32,335,000	32,204,000
Accumulated deficit	(16,708,000)	(18,392,000)
TOTAL STOCKHOLDERS' EQUITY	13,849,000	12,034,000

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$18,349,000	$16,774,000

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

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FITLIFE BRANDS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020

(Unaudited)

	Three months ended
	March 31,
	2021	2020


Revenue	$6,158,000	$6,151,000
Cost of goods sold	3,081,000	3,414,000
Gross profit	3,077,000	2,737,000

OPERATING EXPENSES:
General and administrative	857,000	733,000
Selling and marketing	669,000	671,000
Depreciation and amortization	8,000	12,000
Total operating expenses	1,534,000	1,416,000
OPERATING INCOME	1,543,000	1,321,000

OTHER EXPENSES (INCOME)
Interest expense (income)	(6,000)	4,000
Gain on settlement	-	(70,000)
Gain on debt forgiveness	(453,000)	-
Total other expenses (income)	(459,000)	(66,000)

PRE-TAX NET INCOME	2,002,000	1,387,000

PROVISION (BENEFIT) FOR INCOME TAXES	318,000	(41,000)

NET INCOME	$1,684,000	$1,428,000

NET INCOME PER SHARE
Basic	$1.56	$1.36
Diluted	$1.43	$1.27
Basic weighted average common shares	1,076,651	1,051,752
Diluted weighted average common shares	1,174,666	1,126,303

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

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FITLIFE BRANDS, INC.

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020

(Unaudited)

				Additional
	Common Stock		Treasury	Paid-in	Accumulated
	Shares	Amount	Stock	Capital	Deficit	Total

THREE MONTHS ENDED MARCH 31, 2021

DECEMBER 31, 2020	1,060,818	$12,000	$(1,790,000)	$32,204,000	$(18,392,000)	$12,034,000

Repurchase of common stock	-	-	-	-	-	-
Exercise of stock options	-	-	-	-	-	-
Stock-based compensation	30,000	-	-	131,000	-	131,000
Net income	-	-	-	-	1,684,000	1,684,000

MARCH 31, 2021	1,090,818	$12,000	$(1,790,000)	$32,335,000	$(16,708,000)	$13,849,000

THREE MONTHS ENDED MARCH 31, 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	417	-	-	16,000	-	16,000
Repurchase of common stock	(11,900)	-	(171,000)	-	-	(171,000)
Exercise of stock options	17,000	-	-	71,000	-	71,000
Stock-based compensation	-	-	-	12,000	-	12,000
Net income	-	-	-	-	1,428,000	1,428,000

MARCH 31, 2020	1,060,033	$12,000	$(1,790,000)	$32,154,000	$(25,678,000)	$4,698,000

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

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FITLIFE BRANDS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020

(Unaudited)

	Three months ended March 31,
	2021	2020

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$1,684,000	$1,428,000
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization	8,000	12,000
Right of use asset amortization	14,000	16,000
Allowance for doubtful accounts	9,000	6,000
Allowance for inventory obsolescence	(31,000)	-
Fair value of stock and options issued for services	131,000	28,000
Forgiveness of PPP loan	(453,000)	-
Changes in operating assets and liabilities:
Accounts receivable - trade	(337,000)	(2,332,000)
Inventories	(1,307,000)	(25,000)
Deferred tax asset	328,000	-
Prepaid expense	30,000	46,000
Accounts payable	164,000	737,000
Lease liability	(12,000)	(14,000)
Accrued interest	-	4,000
Accrued liabilities and other liabilities	92,000	75,000
Product returns	(31,000)	20,000
Net cash provided by operating activities	289,000	1,000

CASH FLOWS FROM INVESTING ACTIVITIES:
Net cash provided by investing activities	-	-

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options	-	71,000
Proceeds from line of credit	-	2,500,000
Repurchases of common stock	-	(171,000)
Net cash provided by financing activities	-	2,400,000

CHANGE IN CASH	289,000	2,401,000
CASH, BEGINNING OF PERIOD	6,336,000	265,000
CASH, END OF PERIOD	$6,625,000	$2,666,000

Supplemental disclosure operating activities
Cash paid for interest	$-	$-
Cash paid (refunded) for income taxes	$(10,000)	$-

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

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FITLIFE BRANDS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020

(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 following brand names: (i) NDS Nutrition, PMD Sports, SirenLabs, CoreActive, and Metis Nutrition (together, “NDS Products”); and (ii) iSatori, BioGenetic Laboratories, and Energize (together, the "iSatori Products"). 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 United States. The iSatori Products are sold through more than 17,000 retail locations, which include specialty, mass, and online.

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 OTCQX market.

Recent Developments

Nutrology Asset Purchase

Subsequent to the end of the quarter, on April 7, 2021, the Company purchased substantially all of the assets of Triple Impact Corporation, a New Jersey corporation doing business as Nutrology, a nutritional supplement company catering to consumers who prioritize all-natural and plant-based nutritional supplements.

Tax Benefits Preservation Plan

On February 26, 2021, the board of directors (the “Board”) of the Company declared a dividend distribution of one right (a “Right”) for each outstanding share of Common Stock to stockholders of record at the close of business on February 26, 2021 (the “Record Date”). Each Right entitles its holder, under the circumstances described below, to purchase from the Company one one-thousandth of a share of Series B Junior Participating Preferred Stock of the Company, par value $0.01 per share (the “Series B Preferred”), at an exercise price of $100.00 per Right, subject to adjustment. The description and terms of the Rights are set forth in the tax benefits preservation plan (the “Tax Benefits Preservation Plan”), dated as of February 26, 2021, between the Company and Colonial Stock, as rights agent (and any successor rights agent, the “Rights Agent”).

The Company adopted the Tax Benefits Preservation Plan in order to protect shareholder value against a possible limitation on the Company’s ability to use its Net Operating Losses (“NOLs”) and certain other tax benefits to reduce potential future U.S. federal income tax obligations. The NOLs are a valuable asset to the Company, which may inure to the benefit of the Company and its stockholders. However, if the Company experiences an “ownership change,” as defined in Section 382 of the Internal Revenue Code (“IRC”), its ability to fully utilize the NOLs and certain other tax benefits will be substantially limited and the timing of the usage of the NOLs and such other benefits could be substantially delayed, which could significantly impair the value of those assets. Generally, an “ownership change” occurs if the percentage of the Company’s stock owned by one or more of its “five-percent shareholders” (as such term is defined in Section 382 of the IRC) increases by more than 50 percentage points over the lowest percentage of stock owned by such stockholder or stockholders at any time over a three-year period. The Tax Benefits Preservation Plan is intended to prevent against such an “ownership change” by deterring any person or group from acquiring beneficial ownership of 4.9% or more of the Company’s securities.

Share Repurchase Plan

On February 1, 2021, the Board approved an additional amendment to the previously authorized 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”). Under the terms of the amendment, the Company is authorized to repurchase up to $5.0 million of the Company's Common Stock, warrants to purchase shares of the Company's Common Stock ("Warrants"), and other securities issued by the Company ("Securities") 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 Warrants and Securities, at a purchase price determined by management, with the exact date and amount of such purchases to be determined by management.

During the three months ended March 31, 2021, the Company did not repurchase any Securities under the Share Repurchase Program

Trade date	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

January 2021	-	$-	-	$1,110,917
February 2021	-	$-	-	$3,610,917
March 2021	-	$-	-	$3,610,917
Subtotal	-	$-	-

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COVID-19 Pandemic

The COVID-19 pandemic has had an effect on the Company’s employees, business and operations 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 more recent quarters. 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 was scheduled to mature on April 27, 2022, had a 1.0% interest rate, and was 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 was informed by the PPP Lender and the SBA that the full balance of the PPP Loan, including accrued interest, was forgiven on January 15, 2021.

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 December 31, 2020, the Company deferred payment of $77,000, 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 March 31, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021. 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, 2020, as filed with the Securities and Exchange Commission ("SEC") on March 26, 2021.

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.

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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 March 31,
	2021	2020
	(unaudited)
Net income available to common shareholders	$1,684,000	$1,428,000
Weighted average common shares - basic	1,076,651	1,051,752
Dilutive effect of outstanding warrants and stock options	98,015	74,551
Weighted average common shares - diluted	1,174,666	1,126,303

Net income per common share:
Basic	$1.56	$1.36
Diluted	$1.43	$1.27

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.

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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 March 31, 2021, 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 March 31, 2021 and 2020 were $4,075,000 and $4,697,000, respectively, representing 66% and 76% of total net revenue, respectively.

Gross accounts receivable attributable to GNC as of March 31, 2021 and 2020 were $1,992,000 and $4,186,000, respectively, representing 87% and 91% of the Company’s total accounts receivable balance, respectively.

For the three months ended March 31, 2021 and 2020, online sales accounted for 26% and 14% 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.

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. 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.

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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.

Income Taxes

During the quarter ended March 31, 2021, the Company recorded a federal income tax expense of $328,000 and a state income tax benefit of $10,000. 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.

The Company recorded a 100% valuation allowance against its net deferred tax assets as of March 31, 2020. During the fourth quarter of fiscal 2020, the Company determined that it is more likely than not that it will be able to utilize the majority of its net operating loss carryforwards. The release of a substantial portion of the reserve against the Company’s deferred tax assets resulted in an income tax benefit of $4,370,000 for 2020, and a corresponding increase in net income of the same amount.

As of March 31, 2021, the Company had federal net operating loss (“NOL”) carryforwards available to offset future taxable income of approximately $20.0 million, resulting in a deferred tax asset of approximately $4.2 million. A valuation allowance of $537,000 has been recorded to reflect the portion of such deferred tax asset that is not expected to be realized under IRS statutory limitations.

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, or that future deductibility is uncertain.

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.

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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 March 31, 2021 and December 31, 2020 amounted to $25,000 and $56,000, respectively. The Company’s inventories as of March 31, 2021 and December 31, 2020 were as follows:

	March 31,
	2021	December 31,
	(unaudited)	2020
Finished goods	$4,148,000	$2,789,000
Components	615,000	668,000
Allowance for obsolescence	(25,000)	(56,000)
Total	$4,738,000	$3,401,000

NOTE 5 - PROPERTY AND EQUIPMENT

The Company’s fixed assets as of March 31, 2021 and December 31, 2020 were as follows:

	March 31,
	2021	December 31,
	(unaudited)	2020
Equipment	$902,000	$902,000
Accumulated depreciation	(812,000)	(804,000)
Total	$90,000	$98,000

Depreciation expense for the three months ended March 31, 2021 and 2020 was $8,000 and $12,000, respectively.

NOTE 6 – NOTES PAYABLE

Line of Credit – CIT Bank

On September 24, 2019, the Company entered into a Revolving Line of Credit Agreement (the “Line of Credit Agreement”) with Mutual of Omaha Bank, (the “Lender”), subsequently acquired by CIT Bank N.A., providing the Company with a $2.5 million 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, 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 Agreement remain unchanged.

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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 PPP 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 was scheduled to mature on April 27, 2022, had a 1.0% interest rate, and was 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 was informed by the PPP Lender and the SBA that the full balance of the PPP Loan, including accrued interest, was forgiven on January 15, 2021.

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 three months ended March 31, 2021, the Company made payments resulting in a $12,000 reduction in the lease liability. As of March 31, 2021, lease liability amounted to $196,000. 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 three months ended March 31, 2021 was $16,000. The right-of-use asset at March 31, 2021 was $195,000, net of amortization of $285,000.

	Three months ended
Lease Cost	March 31, 2021
Operating lease cost (included in general and administrative in the Company's unaudited and consolidated statement of operations)	$16,000

Other information
Cash paid for amounts included in the measurement of lease liabilities for the third quarter of 2021	$0
Weighted average remaining lease term - operating leases (in years)	3.6
Average discount rate - operating leases	9%

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

Operating leases	At March 31, 2021
Long-term right-of-use assets	$195,000
Short-term operating lease liabilities	$52,000
Long-term operating lease liabilities	144,000
Total operating lease liabilities	$196,000

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

Year ending	Operating leases
2021 (remaining 3 months)	$50,000
2022	67,000
2023	61,000
2024	51,000
Less: Imputed interest/present value discount	(33,000)
Present value of lease liabilities	$196,000

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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 1,090,818 shares of Common Stock were issued and outstanding as of March 31, 2021.

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 three months ended March 31, 2021, the Company recorded compensation expense of $3,000 to amortize the fair value of these shares of restricted Common Stock based upon the prorated derived service period. As of March 31, 2021, there was no unearned compensation to be amortized as a compensation cost associated with the grant of these shares.

In February 2021, the Company granted Mr. Judd an aggregate of 40,000 restricted share units (“RSUs”). Each RSU converts into one share of the Company’s Common Stock upon vesting. The RSUs vest as follows: (1) 10,000 shares at such date that the 30-day volume-weighted average price of Common Stock meets or exceeds $30, (ii) 10,000 shares at such date that the 30-day volume-weighted average price of Common Stock meets or exceeds $36, (iii) 10,000 shares at such date that the 30-day volume-weighted average price of Common Stock meets or exceeds $42, and (iv) 10,000 shares at such date that the 30-day volume-weighted average price of Common Stock meets or exceeds $48. The RSUs are subject to forfeiture in the event Mr. Judd resigns from his position or is terminated by the Company. As the vesting of the RSUs is subject to certain market conditions, pursuant to current accounting guidelines, the Company determined the fair value to be $666,000, computed using Monte Carlo simulations on a binomial model with the assistance of a valuation specialist. During the quarter ended March 31, 2021, the Company expensed $64,000 as a compensation cost. As of March 31, 2021, there was $602,000 of unamortized compensation expense associated with the grant of the RSUs.

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, and on February 1, 2021, the Company’s Board of Directors amended previously approved Share Repurchase Program to increase the amount of authorized repurchases to purchase up to $5.0 million. All other terms of the Share Repurchase Program remain unchanged.

During the three-month period ended March 31, 2021, the Company repurchased no shares of Common Stock. The Company is accounting for repurchased shares as treasury stock.

Options

Information regarding options outstanding as of March 31, 2021 is as follows:

	Number of	Weighted Average Exercise	Weighted Average Remaining Life
	Options	Price	(Years)
Outstanding, December 31, 2019	149,285	$11.76	5.0
Issued	-
Exercised	(17,000)	4.20
Forfeited	(36,500)	19.46
Outstanding, December 31, 2020	95,785	$10.17	5.8
Issued	32,000	20.13
Exercised	-
Forfeited	(3,000)	13.90
Outstanding, March 31, 2021	124,785	$12.64	5.5

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	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	119,210	5.7	$9.01	95,210	$6.20
$23.10-144.34	5,575	2.5	$90.20	5,575	$90.20
	124,785	5.5	$12.64	100,785	$10.85

During the three-month periods ended March 31, 2021 and 2020, the Company recognized compensation expense of $68,000 and $12,000, respectively, to account for the fair value of stock options that vested during the period.

Total intrinsic value of outstanding stock options as of March 31, 2021 amounted to $2,800,000. As of March 31, 2021 there is $119,000 of unamortized compensation expense.

Warrants

Total outstanding warrants to purchase shares of Company Common Stock as of March 31, 2021 and December 31, 2020 amounted to 35,870 shares. Total intrinsic value as of March 31, 2021 amounted to $1,001,000.

During the period ended March 31, 2021, 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

Nutrology Asset Purchase

Repurchase of Company Securities

In April, 2021, the Company, pursuant to its Share Repurchase Plan, repurchased approximately $443,000 of its Securities, as follows: (i) 12,710 in-the-money options were repurchased from Company employees for approximately $186,000; and (ii) 9,023 shares of Common Stock were repurchased from a member of the Company’s Board of Directors for approximately $257,000.

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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.

Overview

FitLife Brands, Inc. (the “Company”) is a national provider of innovative and proprietary nutritional supplements for health-conscious consumers marketed under the following brand names: (i) NDS Nutrition, PMD Sports, SirenLabs, CoreActive, and Metis Nutrition (together, “NDS Products”); and (ii) iSatori, BioGenetic Laboratories, and Energize (together, “iSatori Products”). 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 United States. The iSatori Products are sold through more than 17,000 retail locations, which include specialty, mass, and online.

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 OTCQX market.

Recent Developments

Nutrology Asset Purchase

Tax Benefits Preservation Plan

The Company adopted the Tax Benefits Preservation Plan in order to protect shareholder value against a possible limitation on the Company’s ability to use its net operating losses (“NOLs”) and certain other tax benefits to reduce potential future U.S. federal income tax obligations. The NOLs are a valuable asset to the Company, which may inure to the benefit of the Company and its stockholders. However, if the Company experiences an “ownership change,” as defined in Section 382 of the Internal Revenue Code (the “IRC”), its ability to fully utilize the NOLs and certain other tax benefits will be substantially limited and the timing of the usage of the NOLs and such other benefits could be substantially delayed, which could significantly impair the value of those assets. Generally, an “ownership change” occurs if the percentage of the Company’s stock owned by one or more of its “five-percent shareholders” (as such term is defined in Section 382 of the IRC) increases by more than 50 percentage points over the lowest percentage of stock owned by such stockholder or stockholders at any time over a three-year period. The Tax Benefits Preservation Plan is intended to prevent against such an “ownership change” by deterring any person or group from acquiring beneficial ownership of 4.9% or more of the Company’s securities.

Share Repurchase Plan

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 (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. On February 1, 2021, the Board approved an additional amendment to the previously authorized Share Repurchase Program. Under the terms of the amendment, the Company is authorized to repurchase up to $5.0 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.

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During the three months ended March 31, 2021, the Company repurchased no shares of Common Stock.

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

January 2021	-	$-	-	$1,110,917
February 2021	-	$-	-	$3,610,917
March 2021	-	$-	-	$3,610,917
Subtotal	-	$-	-

COVID-19 Pandemic

The COVID-19 pandemic has had an effect on the Company’s employees, business and operations 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 recently enacted CARES Act administered by the SBA (the “Loan Agreement”). In accordance with the requirements of the CARES Act, the Company intends to use 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 was 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 was informed by the PPP Lender and the SBA that the full amount of principal and accrued interest of the PPP Loan was forgiven on January 15, 2021.

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Results of Operations

Comparison of the three months ended March 31, 2021 to the three months ended March 31, 2020

	Three months ended
	March 31, 2021	March 31, 2020	Change	%
	(unaudited)
Revenue	$6,158,000	$6,151,000	$7,000	0%
Cost of goods sold	(3,081,000)	(3,414,000)	333,000	-10%
Gross profit	3,077,000	2,737,000	340,000	12%
Operating expenses	(1,534,000)	(1,416,000)	(118,000)	8%
Income from operations	1,543,000	1,321,000	222,000	17%
Other income (expense)	459,000	66,000	393,000
Provision for income tax	(318,000)	41,000	(359,000)
Net income	$1,684,000	$1,428,000	$256,000	18%

Net Sales. Revenue for the three months ended March 31, 2021 was approximately flat at $6,158,000 as compared to $6,151,000 for the three months ended March 31, 2020. The Company believes that a portion of the revenue that historically would have been received during the first quarter shifted into the fourth quarter of 2020.

Online revenue during the three months ended March 31, 2021 was approximately 26% and 14% of total revenue, respectively.

Cost of Goods Sold. Cost of goods sold for the three months ended March 31, 2021 decreased to $3,081,000 as compared to $3,414,000 for the three months ended March 31, 2020. The decrease in cost of goods sold during the three-month period ended March 31, 2021 is primarily attributable to a greater percentage of the Company’s revenue coming from online sales.

Gross Profit. Gross profit for the three months ended March 31, 2021 increased to $3,077,000 as compared to $2,737,000 for the three months ended March 31, 2020. The increase during the three-month period is principally attributable to a greater mix of online sales.

Gross margin for the three months ended March 31, 2021 increased to 50.0% compared to 44.5% during the same period last year.

General and Administrative Expense. General and administrative expense for the three months ended March 31, 2021 increased to $857,000 as compared to $733,000 for the three months ended March 31, 2020. The increase in the three-month period ended March 31, 2021 primarily reflects compensation expense of $131,000 related to options and RSUs issued during the quarter.

Selling and Marketing Expense. Selling and marketing expense for the three months ended March 31, 2021 was roughly flat at $669,000 as compared to $671,000 for the three months ended March 31, 2020.

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Depreciation and Amortization Expense. Depreciation and amortization expense for the three months ended March 31, 2021 decreased to $8,000 as compared to $12,000 for the three months ended March 31, 2020. The decrease in the three-month period was primarily attributable to a reduction in depreciation expense due to certain assets becoming fully depreciated.

Net Income. We generated net income of $1,684,000 for the three-month period ended March 31, 2021 as compared to net income of $1,428,000 for the three months ended March 31, 2020. The increase in net income for the three-month period ended March 31, 2021 is primarily due to higher gross margins driven by an increase in online sales and the forgiveness of the Company’s PPP loan, partially offset by an increased provision for income tax.

Non-GAAP Measures

The financial presentation below contains certain financial measures defined as “non-GAAP financial measures” by the SEC, including non-GAAP EBITDA and adjusted non-GAAP 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 Annual Report in accordance with GAAP.

As presented below, non-GAAP EBITDA excludes interest, income taxes, and depreciation and amortization. Adjusted non-GAAP EBITDA excludes, in addition to interest, taxes, depreciation and amortization, equity-based compensation and non-recurring gains or losses. 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,
	2021	2020
	(Unaudited)	(Unaudited)
Net income	$1,684,000	$1,428,000
Interest expense (income)	(6,000)	4,000
Provision for income taxes	318,000	(41,000)
Depreciation and amortization	8,000	12,000
EBITDA	2,004,000	1,403,000
Non-cash and non-recurring adjustments
Stock compensation expense	131,000	28,000
Non-recurring losses (gains)	(453,000)	(70,000)
Adjusted EBITDA	$1,682,000	$1,361,000

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Liquidity and Capital Resources

At March 31, 2021, we had positive working capital of approximately $9,441,000, compared to $7,744,000 at December 31, 2020. Our principal sources of liquidity at March 31, 2021 consisted of $6,625,000 of cash and $2,372,000 of accounts receivable.

On September 24, 2019, the Company entered into a Revolving Line of Credit Agreement (the “Line of Credit Agreement”) with Mutual of Omaha Bank (the “Lender”), subsequently acquired by CIT Bank N.A., 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 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 was scheduled to mature on April 27, 2022, had a 1.0% interest rate, and was 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 Company was informed by the PPP Lender and the SBA that the full amount balance of the PPP Loan, including accrued interest, was forgiven on January 15, 2021.

The Company has historically financed its operations primarily through cash flow from operations and equity and debt financings. The Company has also provided for its cash needs by issuing Common Stock, options and warrants for certain operating costs, including consulting and professional fees. The Company currently anticipates that cash derived from operations and existing cash resources, along with available borrowings under the new 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.

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Cash Provided by Operations. Our cash provided by operating activities for the three months ended March 31, 2021 was $289,000, as compared to cash provided by operations of $1,000 for the three months ended March 31, 2020.

Cash Provided by Investing Activities. There was no cash provided by or used in investing activities for the three-month periods ended March 31, 2021 and 2020.

Cash Provided by Financing Activities. Cash provided by financing activities for the three months ended March 31, 2021 was $0 as compared to cash provided by financing activities of $2,400,000 during the three months ended March 31, 2020.

Critical Accounting Policies and Estimates

Our discussion and analysis of financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"). The preparation of these 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 consolidated financial statements. The Securities and Exchange Commission (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

These estimates and assumptions also affect the reported amounts of accounts receivable, inventories, goodwill, revenue, costs and expense and valuations of long-term assets, allowance for deferred tax assets and 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.

Goodwill

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Revenue Recognition

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

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 currently conducted principally in the United States. As a result, our financial results are not materially affected by factors such as changes in foreign currency exchange rates or economic conditions in foreign markets. We do not engage in hedging transactions to reduce our exposure to changes in currency exchange rates although, as the geographical scope of our business broadens, we may do so in the future.

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Our exposure to risk for changes in interest rates relates primarily to any borrowings under our existing Line of Credit, and our investments in short-term financial instruments. As of March 31, 2021, the Company had a zero balance under its existing Line of Credit.

Investments of our existing 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.

We do not hold any derivative instruments and do not engage in any hedging activities.

ITEM 4. CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Our disclosure controls and procedures were designed to provide reasonable assurance that the controls and procedures would meet their objectives. As required by SEC Rule 13a-15(b), our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level.

Our Chief Executive Officer and Chief Financial Officer are responsible for establishing and maintaining adequate internal control over our financial reporting. In order to evaluate the effectiveness of internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act, management has conducted an assessment, including testing, using the criteria in Internal Control — Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Our system of internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Management has used the framework set forth in the report entitled Internal Control-Integrated Framework published by the COSO to evaluate the effectiveness of our internal control over financial reporting. Based on this assessment, our Chief Executive Officer and Chief Financial Officer have concluded that our internal control over financial reporting was effective as of March 31, 2021. This Quarterly Report does not include an attestation report of the Company's independent registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company's independent registered public accounting firm pursuant to rules of the SEC that permit the Company to provide only management's report in this Quarterly Report. There has been no change in our internal controls over financial reporting during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

(b) Changes in Internal Controls Over Financial Reporting

The Company's Chief Executive Officer and Chief Financial Officer have determined that there have been no changes in our internal controls over financial reporting or in other factors that could materially affect, or are reasonably likely to affect, our internal controls over financial reporting during the quarter ended March 31, 2021. There have not been any significant changes in the Company’s critical accounting policies identified since the Company filed its Annual Report on Form 10-K for the year ended December 31, 2020.

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PART II

OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

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’ 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 Annual Report on Form 10-K for our fiscal year ended December 31, 2020, filed on March 26, 2021. 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

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

There were no defaults upon senior securities during the three-month period ended March 31, 2021.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

3.1		Certified of Designation, Preferences and Rights of Series B Junior Participating Preferred Stock of FitLife Brands, Inc. (incorporated by reference to Exhibit 3.1 filed with the Current Report on Form 8-K on March 4, 2021).
4.1		Tax Benefit Preservation Plan, dated February 26, 2021, by and between FitLife Brands, Inc. and Colonial Stock Transfer Company, Inc. (incorporated by reference to Exhibit 4.1 filed with the Current Report on Form 8-K on March 4, 2021).
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		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema
101.CAL		XBRL Taxonomy Extension Calculation Linkbase
101.DEF		XBRL Taxonomy Extension Definition Linkbase
101.LAB		XBRL Taxonomy Extension Label Linkbase
101.PRE		XBRL Taxonomy Extension Presentation Linkbase

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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 Date: May 14, 2021	FitLife Brands, Inc. By: /s/ Dayton Judd
	Dayton Judd
	Chief Executive Officer and Chair (Principal Executive Officer)

Registrant Date: May 14, 2021	FitLife Brands, Inc. By: /s/ Susan Kinnaman
	Susan Kinnaman
	Chief Financial Officer (Principal Financial Officer)

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