What changed in this filing

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Item 1. Financial Statements

2024-08-14 compared with 2024-05-14 · 295 added, 155 removed, 422 unchanged (52% of the section changed)

3 unchanged sentences

(In thousands, except per share data)

March 31, 2024

June 30, 2024

December 31, 2023

25 unchanged sentences

STOCKHOLDERS’ EQUITY:

Preferred stock, $ 0.01 par value, 10,000 shares authorized, none outstanding as of March 31, 2024 and December 31, 2023

Preferred stock, $ 0.01 par value, 10,000 shares authorized, none outstanding as of June 30, 2024 and December 31, 2023

Common stock, $ 0.01 par value, 60,000 shares authorized;

4,598 issued and outstanding as of March 31, 2024 and December 31, 2023

4,598 issued and outstanding as of June 30, 2024 and December 31, 2023

Additional paid-in capital

Accumulated deficit

Retained earnings (accumulated deficit)

Foreign currency translation adjustment

4 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2024 AND 2023

(In thousands, except per share data)

Three months ended March 31,

Three months ended June 30

Six months ended June 30

Cost of goods sold

OPERATING EXPENSE:

Advertising and marketing

Selling, general and administrative

Merger and acquisition related expense

Merger and acquisition related

Depreciation and amortization

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CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2024 AND 2023

(In thousands)

THREE MONTHS ENDED MARCH 31, 2024

Retained earnings (accumulated

THREE MONTHS ENDED JUNE 30, 2024

APRIL 1, 2024

Stock-based compensation

Comprehensive income

JUNE 30, 2024

SIX MONTHS ENDED JUNE 30, 2024

JANUARY 1, 2024

1 unchanged sentence

Comprehensive income

MARCH 31, 2024

THREE MONTHS ENDED MARCH 31, 2023

JUNE 30, 2024

THREE MONTHS ENDED JUNE 30, 2023

APRIL 1, 2023

Stock-based compensation

Comprehensive income

JUNE 30, 2023

SIX MONTHS ENDED JUNE 30, 2023

JANUARY 1, 2023

2 unchanged sentences

Comprehensive income

MARCH 31, 2023

JUNE 30, 2023

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

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023

FOR THE SIX MONTHS ENDED JUNE 30, 2024 AND 2023

(In thousands)

Three months ended March 31,

Six months ended June 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

3 unchanged sentences

Allowance for inventory obsolescence

Stock compensation expense

Stock-based compensation

Amortization of deferred financing costs

2 unchanged sentences

Deferred tax asset

Prepaid expense, other assets and sales tax receivable

Prepaid expense, other current assets and sales tax receivable

Right-of-use asset

1 unchanged sentence

Lease liability

Accrued liabilities, other liabilities and income taxes payable

Accrued expense, other liabilities and income taxes payable

Product returns

6 unchanged sentences

Payments on term loans

Borrowings on term loan

Proceeds from term loans

Net cash provided by (used in) financing activities

1 unchanged sentence

CHANGE IN CASH AND RESTRICTED CASH

CASH, BEGINNING OF PERIOD

CASH AND RESTRICTED CASH, BEGINNING OF PERIOD

CASH AND RESTRICTED CASH, END OF PERIOD

Supplemental cash flow disclosure

Cash paid for income taxes

Cash paid for interest, net of amounts capitalized

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

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2024 AND 2023

(In thousands, except per share data)

7 unchanged sentences

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 approximately 16,000 retail locations, which include specialty, mass, and online.

The Company distributes the MRC Products primarily online.

MusclePharm’s products are sold to both wholesale customers as well as online directly to the end consumer.

(“ GNC ”) stores located both domestically and internationally and, with the launch of Metis Nutrition, through corporate GNC stores in the U.S.

The iSatori Products are sold through approximately 16,000 retail locations, which include specialty and mass, as well as online directly to the end consumer.

The Company distributes the MRC Products primarily online through e-commerce platforms, such as Amazon, directly to the end consumer.

MusclePharm’s products are sold to both wholesale customers as well as online through various e-commerce platforms directly to the end consumer.

FitLife Brands is headquartered in Omaha, Nebraska.

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In our opinion, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation are included.

Operating results for the three-month period ended March 31, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023.

Operating results for the three- and six-month periods ended June 30, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024.

Although management of the Company believes the disclosures presented herein are adequate and not misleading, these interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the footnotes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the Securities and Exchange Commission (the “ SEC ”) on March 29, 2024.

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 ”).

The Company prepares its financial statements in accordance with accounting principles generally accepted in the U.S.

Significant accounting policies are as follows:

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Based on these considerations, the Company is the principal in this arrangement.

Advertising fees paid to Amazon are recorded in selling, general and administrative expense in the condensed consolidated statements of income and comprehensive income.

Advertising fees paid to Amazon are recorded in advertising expense in the condensed consolidated statements of income and comprehensive income.

The Company disaggregates revenue into geographical regions and distribution channels.

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

Online revenue for the quarter ended March 31, 2024 was approximately 65 % of net revenue, compared to 47 % of net revenue during the same period in the prior year.

Wholesale revenue for the quarter ended March 31, 2024 was approximately 35 % of net revenue compared to 53 % during the same period in the prior year.

Sales to customers in the United States were approximately 96 % and 97 % during the quarters ended March 31, 2024 and 2023, respectively, with the balance of sales being to customers primarily in Canada.

Online revenue during the three months ended June 30, 2024 and 2023 was approximately 66 % and 67 % of net revenue, respectively, compared to 34 % and 33 % for the wholesale channel for the same periods.

Online revenue during the six months ended June 30, 2024 and 2023 was approximately 66 % and 58 % of net revenue, compared to 34 % and 42 % for the wholesale channel for the same period.

Sales to customers in the U.S.

were approximately 96 % and 93 % during the three months ended June 30, 2024 and 2023, respectively, with the balance of sales for the same respective periods being to customers primarily in Canada.

Sales to customers in the U.S.

were approximately 96 % and 95 % during the six months ended June 30, 2024 and 2023, respectively, with the balance of sales for the same respective periods being to customers primarily in Canada.

Control of products we sell transfers to customers upon shipment from our facilities or delivery to our customers, and the Company’s performance obligations are satisfied at that time.

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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.

Food and Drug Administration (“ FDA ”).

A right of return does not represent a separate performance obligation, but because customers are allowed to return products, the consideration to which the Company expects to be entitled is variable.

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Customer and Vendor Concentration

Net sales to GNC during the three-month periods ended March 31, 2024 and 2023 represent 25 % and 49 % of total net revenue, respectively.

Gross accounts receivable attributable to GNC as of March 31, 2024 and December 31, 2023 represent 28 % and 30 % of the Company’s total accounts receivable balance, respectively.

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

For the quarter ended March 31, 2023 , there were two vendors who accounted for 49 % and 18 % of the Company's inventory-related purchases.

As of March 31, 2024 and December 31, 2023, there was one vendor who accounted for 62 % and 51 % of the Company's consolidated accounts payable, respectively.

Net sales to GNC during the three-month periods ended June 30, 2024 and 2023 represent 23 % and 29 % of total net revenue, respectively.

Net sales to GNC during the six-month periods ended June 30, 2024 and 2023 represent 24 % and 37 % of total net revenue, respectively.

Gross accounts receivable attributable to GNC represented 16 % and 30 % of the Company’s total accounts receivable balance as of June 30, 2024 and December 31, 2023, respectively.

As of June 30, 2024 and December 31, 2023, there was one vendor who accounted for more than 10 % of the Company's consolidated accounts payable.

During the six months ended June 30, 2024 and 2023, there were two vendors who each accounted for over 10 % of the Company’s inventory-related purchases.

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original maturity from the date of purchase of three months or less to be cash equivalents.

The Company has approximately $ 750 in short-term interest-earning accounts pledged as collateral for financing arrangements that are currently limited to business credit cards.

Subsequent to March 31, 2024, the Company reduced the scope of the arrangement for business credit cards in foreign jurisdictions, reducing the collateral pledged to $ 55 (approximately $ 75 CAD).

The Company has approximately $ 55 in short-term interest-earning accounts pledged as collateral for financing arrangements at June 30, 2024, currently limited to business credit cards.

We lease certain corporate office space and office equipment under lease agreements with monthly payments over a period of 36 to 84 months.

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To the extent the carrying value of a reporting unit exceeds its fair value, a goodwill impairment charge is recognized.

As the Company uses the market approach to determine fair value of the reporting unit, the price of its c ommon s tock is an important component of the fair value calculation.

If the Company’s stock price experiences significant price and volume fluctuations, this will impact the fair value of the reporting unit, which can lead to potential impairment in future periods.

Management determined there were no indicators of impairment at March 31, 2024 or December 31, 2023.

The Company will perform their next impairment analysis in December 2024.

As the Company uses the market approach to determine fair value of the reporting unit, the price of its Common Stock is an important component of the fair value calculation.

If the Company’s stock price experiences significant price fluctuations, this will impact the fair value of the reporting unit, which can lead to potential impairment in future periods.

Management determined there were no indicators of impairment at June 30, 2024 or December 31, 2023.

The Company will perform its next impairment analysis in December 2024.

Intangible Assets

The Company has certain intangible assets that were recorded at their fair value at the time of acquisition.

The finite-lived intangible assets consist of client relationships, formulations, and website.

Intangible assets with finite useful lives are amortized using the straight-line method over their estimated useful life.

Intangible assets with indefinite lives, which consist of brands and trademarks, are not amortized but are tested for impairment annually or when indicators of impairment exist.

Factors that management considers in this assessment include macroeconomic conditions, industry and market considerations, overall financial performance (both current and projected), changes in management and strategy, and changes in the composition and carrying amounts of net assets.

If this qualitative assessment indicates that it is more likely than not that the fair value of a reporting unit is less than it’s carrying value, a quantitative assessment is then performed.

The Company noted no indicators of impairment for intangible assets as of June 30, 2024, and December 31, 2023.

Acquisitions and Business Combinations

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There is potential for volatility of the effective tax rate due to several factors, including changes in the mix of the pre-tax income and the jurisdictions to which it relates.

The effective income tax rate was 27.2 % and 73.0 % for the three months ended March 31, 2024 and 2023, respectively.

The effective income tax rate was 24 % and 33 % for the six months ended June 30, 2024 and 2023, respectively.

Net Income Per Share

5 unchanged sentences

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,

Three months ended June 30,

Six months ended June 30,

Net income available to common shareholders

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The Company’s chief operating decision maker is the Chief Executive Officer, who reviews operating results to make decisions about allocating resources and assessing performance for the entire Company.

Reclassifications

Certain reclassifications have been made in the Company’s financial statements.

Advertising and marketing expense for the three and six months ended June 30, 2023 were previously reported as part of selling, general and administrative expense.

Advertising and marketing expense is now segregated and reported separately in the accompanying statement of income and comprehensive income to conform to current period presentation.

These reclassifications had no impact on earnings or stockholders’ equity.

Recently Issued Accounting Pronouncements

In September 2022, the FASB issued ASU 2022-04, Liabilities-Supplier Finance Programs (Subtopic 405-50):

Disclosure of Supplier Finance Program Obligations (“ ASU 2022-04 ”) The ASU requires buyers to disclose information about their supplier finance programs.

Interim and annual requirements include the disclosure of outstanding amounts under the obligations as of the end of the reporting period, and annual requirements include a roll-forward of those obligations for the annual reporting period, as well as a description of payment and other key terms of the programs.

This update is effective for annual periods beginning after December 15, 2022, and interim periods within those fiscal years, except for the requirement to disclose roll-forward information, which is effective for fiscal years beginning after December 15, 2023.

The Company adopted ASU 2022-04 on January 1, 2023, and there was no material impact on our financial statements.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280):

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The updates required by this standard should be applied retrospectively to all periods presented in the financial statements.

The Company does not expect this standard to have a material impact on its results of operations, financial position or cash flows.

The adoption of this standard did not have a material impact on its results of operations, financial position or cash flows.

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

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The Company recognizes an allowance for obsolescence for expiring, excess, and slow-moving inventory.

To calculate the allowance, the Company analyzes sales projections for each SKU relative to the remaining shelf life of the product.

To calculate the allowance, the Company analyzes sales projections for each stock-keeping unit (“ SKU ”) relative to the remaining shelf life of the product.

The value of any finished goods inventory projected to expire prior to sale is included in the allowance.

The total allowance for expiring, excess and slow-moving inventory items as of March 31, 2024 and December 31, 2023 amounted to $ 139 and $ 162 , respectively.

The Company’s inventories as of March 31, 2024 and December 31, 2023 were as follows:

March 31, 2024

The total allowance for expiring, excess and slow-moving inventory items as of June 30, 2024 and December 31, 2023 amounted to $ 69 and $ 162 , respectively.

The Company’s inventories as of June 30, 2024 and December 31, 2023 were as follows:

June 30, 2024

December 31, 2023

2 unchanged sentences

NOTE 5 - PROPERTY AND EQUIPMENT

The Company had property and equipment as of March 31, 2024 and December 31, 2023 as follows:

March 31, 2024

The Company had property and equipment as of June 30, 2024 and December 31, 2023 as follows:

June 30, 2024

December 31, 2023

Accumulated depreciation

Depreciation expense for the three months ended March 31, 2024 and 2023 was $ 26 and $ 9 , respectively.

Depreciation expense for the three months ended June 30, 2024 and 2023 was $ 16 and $ 13 , respectively.

Depreciation expense for the six months ended June 30, 2024 and 2023 was $ 42 and $ 22 , respectively.

NOTE 6 – NOTES PAYABLE

Debt obligations consisted of the following:

March 31, 2024

Notes payable consisted of the following:

June 30, 2024

December 31, 2023

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The Company used the proceeds from Term Loan B to fund the acquisition of assets of MusclePharm (discussed in further detail in Note 9) and for general working capital purposes.

Pursuant to the Amended Credit Agreement, the Term Loans accrue interest at a per annum rate equal to 2.75 % above the one-month secured overnight financing rate published for such day by the Federal Reserve Bank of New York (“ Term SOFR Rate ”);

and the Company shall make payments on March 10th, June 10th, September 10th, and December 10th of each calendar year, of principal plus accrued interest on the Term Loans in amounts sufficient to fully amortize Term Loan A through February 28, 2028 and Term Loan B through October 10, 2028.

and outstanding advances under the Line of Credit (“ Advances ”) will accrue interest at the A pplicable R ate and the Company will pay the interest on the Advances monthly, with all principal and any accrued interest on outstanding Advances being due and payable in full on the Line of Credit maturity date.

During the first quarter of 2024, the Company made an advance payment on Term Loan A of $2,500, and as such, Term Loan A will fully amortize in February 2027.

Also pursuant to the Amended Credit Agreement, outstanding advances under the Line of Credit (“ Advances ”) will accrue interest at the A pplicable R ate and the Company will pay the interest on the Advances monthly, with all principal and any accrued interest on outstanding Advances being due and payable in full on the Line of Credit maturity date.

The Company may prepay amounts borrowed under the Loan, in whole or in part with accrued interest to the date of such prepayment on the amount prepaid, by written notice to Bank at least one business day prior to the proposed prepayment.

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and customary affirmative and negative covenants, including covenants to maintain a Fixed Charge Coverage Ratio (as defined in the Amended Credit Agreement) of not less than 1.25 to 1.00 as tested quarterly on a trailing twelve-month basis, starting with the fiscal quarter ending December 31, 2023, a Funded Debt to EBITDA Ratio (as defined in the Amended Credit Agreement) of not more than 2.50 to 1.00 as tested quarterly on a trailing twelve-month basis, starting with the fiscal quarter ending March 31, 2024, and to the extent the Term Loans still have a balance as of June 30, 2025 and a Cash Flow Leverage threshold (as defined in the Amended Credit Agreement) of at least 1.15 is not met, the Company will be required to make a prepayment on the Term Loans equal to 50 % of the Excess Cash Flow (as defined in the Amended Credit Agreement).

The Company was in compliance with all covenants as of March 31, 2024.

As of March 31, 2024, the borrowings outstanding on the Term Loans and Line of Credit were $ 16,500 and $ 0 , respectively.

The Company was in compliance with all covenants as of June 30, 2024 and December 31, 2023.

As of June 30, 2024, the borrowings outstanding on the Term Loans and Line of Credit were $ 15,375 and $ 0 , respectively.

As of December 31, 2023, the borrowings outstanding on the Term Loans and Line of Credit were $ 20,125 and $ 0 , respectively.

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

2024 (9 months)

Total term loan outstanding as of March 31, 2024

NOTE 7 - EQUITY

The Company is authorized to issue 60.0 million shares of Common Stock, $ 0.01 par value per share, of which 4,598 shares of Common Stock were issued and outstanding as of March 31, 2024 and December 31, 2023.

The Company is authorized to issue 60,000 shares of Common Stock, $ 0.01 par value per share, of which 4,598 shares of Common Stock were issued and outstanding as of June 30, 2024 and December 31, 2023.

Common Stock Issued for Services

In February 2021 , the Company granted an officer an aggregate of 160 restricted share units (“ RSUs ”) with a fair value of $ 468 .

The Company did not record any stock compensation expense related to RSUs during the three months ended March 31, 2024 as the RSU’s fully vested in the prior year.

The Company recorded $ 25 of stock compensation expense related to RSUs during the three months ended March 31, 2023.

In February 2021 , the Company granted an officer an aggregate of 160 restricted share units (“ RSUs ”) with a fair value of $ 468 , which was amortized to stock-based compensation over its vesting term.

The Company did not record any stock-based compensation related to RSUs during the three or six months ended June 30, 2024.

The Company recorded $ 5 and $ 31 of stock-based compensation related to RSUs during the three and six months ended June 30, 2023, respectively.

Share Repurchase Program

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Under the extended and amended Share Repurchase Program, the Board authorized management to repurchase up to $ 5,000 of the Company's Common Stock over a period of 24 months, at a purchase price equal to the fair market value of the Company's Common Stock on the date of purchase, with the exact date and amount of such purchases to be determined by management (the “ 2023 Share Repurchase Program ”).

During the three months ended March 31, 2024 and 2023 , the Company did not repurchase any Common Stock under the 2023 Share Repurchase Program.

As of March 31, 2024 , the Company may purchase $ 5,000 of Common Stock under the 2023 Share Repurchase Program.

Shares Surrendered by Former Employee

During the first quarter of 2023, the Company settled a dispute with a former employee.

As a result of the settlement, the former employee forfeited 61.2 shares of Common Stock to the Company for no consideration, which shares were then immediately cancelled.

Information regarding options outstanding as of March 31, 2024 is as follows:

Number of options

During the six months ended June 30, 2024 and 2023, the Company did not repurchase any Common Stock under the 2023 Share Repurchase Program.

As of June 30, 2024 , the Company may purchase $ 5,000 of Common Stock under the 2023 Share Repurchase Program.

Information regarding options outstanding as of June 30, 2024 is as follows:

Weighted average exercise price

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Outstanding, December 31, 2023

Outstanding, March 31, 2024

Outstanding, June 30, 2024

Exercise price

Weighted average

remaining life (years)

Weighted average

remaining life

exercise price

vested options

Weighted average

exercise price

The closing stock price for the Company’s stock on March 28, 2024 was $ 23.81 , resulting in an intrinsic value of outstanding options of $ 8,228 .

During the three-month periods ended March 31, 2024 and 2023, the Company recognized stock-based compensation expense of $ 102 and $ 17 , respectively, related to stock options.

As of March 31, 2024 there is $ 638 of unamortized compensation expense related to stock options.

The closing stock price for the Company’s stock on June 28, 2024 was $ 33.30 , resulting in an intrinsic value of outstanding options of $ 12,825 .

During the three-month periods ended June 30, 2024 and 2023, the Company recognized stock-based compensation of $ 101 and $ 26 , respectively, related to stock options.

During the six-month periods ended June 30, 2024 and 2023, the Company recognized stock-based compensation of $ 203 and $ 43 , respectively, related to stock options.

As of June 30, 2024 there is $ 537 of unamortized stock-based compensation related to stock options.

NOTE 8 – ACQUISITION OF MIMI ’ S ROCK CORP

On February 28, 2023, the Company acquired all the equity interest of Mimi’s Rock Corp.

( "MRC" ) with the purchase price of $ 17,099 .

On February 28, 2023, the Company acquired all the equity interests of Mimi’s Rock Corp.

( "MRC" ) for the purchase price of $ 17,099 .

MRC is headquartered in Oakville, Ontario, Canada.

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Pro Forma Condensed Combined Financial Information (Unaudited, in thousands)

The following presents the Company’s unaudited pro forma financial information for the quarters ended March 31, 2024 and 2023, respectively, giving effect to the acquisition of MRC as if it had occurred at January 1, 2023.

Included in the pro forma information are adjustments to (1) recognize transaction-related costs related to the acquisition of MRC and fair value adjustment to inventory acquired during the quarter ended March 31, 2023, (2) remove the interest costs from MRC’s debt prior to the closing of the acquisition, and (3) recognize interest expense based on the projected balance of the Term Loan A for the respective periods presented for this pro forma.

Three months ended

March 31, 2023

Net income per share

The following presents the Company’s unaudited pro forma financial information for the three and six months ended June 30, 2023, giving effect to the acquisition of MRC as if it had occurred at January 1, 2023.

Included in the pro forma information are adjustments to (1) remove non-recurring transaction-related costs related to the acquisition of MRC, (2) remove the interest costs from MRC’s debt prior to the closing of the acquisition, and (3) recognize interest expense based on the projected balance of the Term Loan A for the respective periods presented for this pro forma.

Six months ended

June 30, 2023

Diluted net income per share

The pro forma adjustments do not reflect adjustments for anticipated operating efficiencies that the Company expects to achieve as a result of this acquisition.

The pro forma financial information is for informational purposes only and does not purport to present what the Company’s results would actually have been had the transaction actually occurred on the dates presented or to project the combined company’s results of operations or financial position for any future period.

MRC revenue for the three months ended March 31, 2024 was $ 7,493 .

MRC revenue for the period from February 28, 2023 to March 31, 2023 was $ 2,639 .

MRC revenue for the three months ended June 30, 2024 and 2023 was $ 7,461 and $ 7,627 , respectively.

MRC revenue for the six months ended June 30, 2024 was $ 14,954 , and was $ 10,266 for the period from February 28, 2023 (the acquisition date) to June 30, 2023.

ACQUISITION OF MUSCLEPHARM ASSETS

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The assets acquired consist of indefinite life intellectual property – brands with an estimated value of $ 18,593 – and inventory of $ 195 .

The intangible assets, which consist of brands, is not amortized but will be tested for impairment on an annual basis.

The intangible assets, which consist of brands, are not amortized but will be tested for impairment on an annual basis.

NOTE 10 – COMMITMENTS AND CONTINGENCIES

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NOTE 11 – SUBSEQUENT EVENTS

The Company evaluated subsequent events for their potential impact on the condensed consolidated financial statements and disclosures through the date the condensed consolidated financial statements were issued and determined that no subsequent events occurred that were reasonably expected to impact the condensed consolidated financial statements presented herein.

On July 19, 2024, the Company amended and extended the existing lease agreement for its headquarters in Omaha, Nebraska.

The amended lease agreement extends the lease term for an additional six years ( 72 months), commencing on October 1, 2024 through September 30, 2030.

The terms and conditions of the lease extension are substantially similar to the original lease agreement.

As a result of the lease extension, the right-of-use asset and lease liability will be remeasured and are expected to be between $ 380 and $ 400 .

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

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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.

(“ GNC ”) stores located both domestically and internationally and, with the launch of Metis Nutrition, through corporate GNC stores in the U.S.

The iSatori Products are sold through approximately 16,000 retail locations, which include specialty, mass, and online.

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The Company’s common stock, par value $0.01 per share (“ Common Stock ”), trades under the symbol “FTLF” on the Nasdaq Capital Market.

Recent Developments

Recent Acquisitions

Acquisition of Mimi ’ s Rock Corp

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On February 28, 2023, the Company completed the acquisition of MRC.

Total consideration for the acquisition of MRC was $17,099, of which $12,500 was funded using proceeds from a new term loan and $4,599 from the Company’s available cash.

Total consideration for the acquisition of MRC was $17,099, of which $12,500 was funded using proceeds from a term loan provided by First Citizens Bank with the remainder funded from the Company’s available cash.

See Note 8 to the financial statements for additional disclosure regarding the acquisition of MRC.

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Results of Operations

Comparison of the three months ended March 31, 2024 to the three months ended March 31, 2023

Comparison of the three months ended June 30, 2024 to the three months ended June 30, 2023

Three months ended

March 31, 2024

March 31, 2023

June 30, 2024

June 30, 2023

Cost of goods sold

Selling, general and administrative expenses

Merger and acquisition-related costs

Advertising and marketing

general and administrative (“S G&A ”)

Merger and acquisition related

Depreciation and amortization

Total operating expenses

Total operating expense

Operating income

Other expense (income), net

Provision for income tax

Revenue for the three months ended June 30, 2024 increased 15% to $16,930 as compared to $14,760 for the three months ended June 30, 2023.

The increase in revenue for the three months ended June 30, 2024 compared to the prior period is primarily due to the acquisition of the MusclePharm assets, which were acquired on October 10, 2023, partially offset by a decline in legacy FitLife revenue.

Legacy FitLife revenue for the three months ended June 30, 2024 was $6,802, a 5% decrease compared to the previous year, driven by a 10% decline in wholesale revenue partially offset by a 7% increase in online revenue.

MRC revenue for the three months ended June 30, 2024 was $7,461, a 2% decrease compared to the previous year.

During the three months ended June 30, 2024, MusclePharm generated revenue of $2,667, of which approximately half was generated from wholesale customers and half from online sales.

Online revenue and wholesale revenue for the quarter ended June 30, 2024 were approximately 66% and 34% of total net revenue, respectively.

Online revenue and wholesale revenue for the quarter ended June 30, 2023 were approximately 67% and 33% of net revenue, respectively.

Although no assurances can be given, management believes that online revenue will continue to increase in subsequent periods relative to prior comparable periods given management’s focus on higher margin online sales and the acquisition of the MusclePharm assets, which was consummated in the fourth quarter of fiscal 2023.

Sales to customers in the U.S.

were approximately 96% and 93% during the quarters ended June 30, 2024 and 2023, respectively, with the balance of sales to customers primarily in Canada.

Cost of Goods Sold.

Cost of goods sold for the three months ended June 30, 2024 increased to $9,350 as compared to $8,795 for the three months ended June 30, 2023.

This 6% increase is primarily due to an increase in revenue attributable to the acquisition of the MusclePharm assets, partially offset by lower legacy FitLife sales.

Gross Profit.

Gross profit for the three months ended June 30, 2024 increased to $7,580 as compared to $5,965 for the three months ended June 30, 2023.

The increase in gross profit is principally attributable to higher MRC gross profit as well as incremental gross profit from MusclePharm.

Gross Margin .

Gross margin for the three months ended June 30, 2024 increased to 44.8% from 40.4% for the comparable prior period.

The increase in gross margin is primarily attributable to higher margins from MRC as well as the amortization of the fair value step-up to MRC inventory acquired in the first quarter of 2023.

Excluding the $213 impact of the step-up amortization, gross margin would have been 41.9% during the quarter ended June 30, 2023.

Advertising and m arketing.

Advertising and marketing expense for the three months ended June 30, 2024 decreased to $1,326 as compared to $1,457 for the same period of the prior year.

The 9% decrease is the result of targeted efforts to rationalize the Company’s advertising spend on less effective advertising campaigns.

SG&A expense for the three months ended June 30, 2024 increased to $2,528 as compared to $1,786 for the three months ended June 30, 2023.

The increase was due to increased product testing costs required by Amazon, as well as increased professional fees and headcount additions made subsequent to the acquisition of the MusclePharm assets.

Merger and a cquisition r elated.

Merger and acquisition related expense decreased to $24 during the quarter ended June 30, 2024 compared to $115 for the same period of 2023, driven primarily by transaction costs related to the MRC acquisition in the second quarter of 2023.

We generated net income of $2,628 for the three months ended June 30, 2024 as compared to net income of $1,964 for the three months ended June 30, 2023.

The increase in net income for the three months ended June 30, 2024 compared to the same period in 2023 was primarily attributable to incremental revenue and gross profit from MusclePharm, higher gross profit from MRC, as well as reduction in advertising and marketing and acquisition-related expense.

Comparison of the six months ended June 30, 2024 to the six months ended June 30, 2023

Six months ended

June 30, 2024

June 30, 2023

Cost of goods sold

Advertising and marketing

Selling, general and administrative (“S G&A ”)

Merger and acquisition related

Depreciation and amortization

Total operating expense

Operating income

Other expense, net

Provision for income tax

Revenue for the three months ended March 31, 2024 increased 54% to $16,549 as compared to $10,738 for the three months ended March 31, 2023.

The increase in revenue for the three months ended March 31, 2024 compared to the prior period is due to the acquisition of MRC and the MusclePharm assets, partially offset by a decline in legacy FitLife revenue.

MRC was acquired February 28, 2023, and as such only one month of revenue was included in the Company’s financial statements for the three months ended March 31, 2023.

Legacy FitLife revenue for the three months ended March 31, 2024 was $6,961, a 14% decrease compared to the previous year, driven by a 21% decline in wholesale revenue partially offset by a 3% increase in online revenue.

MRC revenue for the three months ended March 31, 2024 was $7,493.

MRC revenue for the period from February 28, 2023 to March 31, 2023 was $2,639.

During the three months ended March 31, 2024, MusclePharm generated revenue of $2.1 million, of which approximately half was generated from wholesale customers and half from online sales.

Online revenue and wholesale revenue for the quarter ended March 31, 2024 were approximately 65% and 35% of total net revenue, respectively.

Online revenue and wholesale revenue for the quarter ended March 31, 2023 were approximately 47% and 53% of net revenue, respectively.

Although no assurances can be given, management believes that online revenue will continue to increase in subsequent periods relative to prior comparable periods given management’s focus on higher margin online sales and the acquisitions of MRC and the MusclePharm assets, which were consummated in the first and fourth quarters of fiscal 2023, respectively.

Sales to customers in the United States were approximately 96% and 97% during the quarters ended March 31, 2024 and 2023, respectively, with the balance of sales to customers primarily in Canada.

Revenue for the six months ended June 30, 2024 increased 31% to $33,479 as compared to $25,498 for the six months ended June 30, 2023.

The increase in revenue for the six months ended June 30, 2024 compared to the prior period is due to the acquisition of MRC and the MusclePharm assets, partially offset by a decline in legacy FitLife revenue.

MRC was acquired February 28, 2023, and as such only four months of MRC revenue were included in the Company’s financial statements for the six months ended June 30, 2023.

MusclePharm was acquired on October 10, 2023.

Legacy FitLife revenue for the six months ended June 30, 2024 was $13,763, a 10% decrease compared to the previous year, driven by a 16% decline in wholesale revenue partially offset by a 4% increase in online revenue.

MRC revenue for the six months ended June 30, 2024 was $14,954.

MRC revenue for the period from February 28, 2023 to June 30, 2023 was $10,266.

During the six months ended June 30, 2024, MusclePharm generated revenue of $4,762, of which approximately half was generated from wholesale customers and half from online sales.

Online revenue and wholesale revenue for the six months ended June 30, 2024 were approximately 66% and 34% of total net revenue, respectively.

Online revenue and wholesale revenue for the six months ended June 30, 2023 were approximately 59% and 41% of net revenue, respectively.

Although no assurances can be given, management believes that online revenue will continue to increase in subsequent periods relative to prior comparable periods given management’s focus on higher margin online sales and the acquisitions of the MusclePharm assets, which was consummated in the fourth quarter of fiscal 2023.

Sales to customers in the U.S.

were approximately 96% and 95% during the six months ended June 30, 2024 and 2023, respectively, with the balance of sales to customers primarily in Canada.

Cost of Goods Sold.

Cost of goods sold for the three months ended March 31, 2024 increased to $9,262 as compared to $6,330 for the three months ended March 31, 2023.

This 46% increase is primarily due to an increase in revenue attributable to the acquisition of MRC.

Cost of goods sold for the six months ended June 30, 2024 increased to $18,612 as compared to $15,125 for the six months ended June 30, 2023.

This 23% increase is due to an increase in revenue attributable to the acquisitions of MRC and the MusclePharm assets.

Gross Profit.

Gross profit for the three months ended March 31, 2024 increased to $7,287 as compared to $4,408 for the three months ended March 31, 2023.

Gross profit for the six months ended June 30, 2024 increased to $14,867 as compared to $10,373 for the six months ended June 30, 2023.

The increase in gross profit is principally attributable to higher MRC gross profit as well as incremental gross profit from MusclePharm.

Gross Margin .

Gross margin for the three months ended March 31, 2024 increased to 44.0% from 41.1% for the comparable prior period.

The increase in gross margin is primarily attributable to higher margins from MRC due to sales mix as well as the amortization of the fair value step-up to MRC inventory acquired in the first quarter of 2023.

Excluding the $110 impact of the step-up amortization, gross margin would have been 42.1% during the quarter ended March 31, 2023.

Selling, General and Administrative Expense.

SG&A expense for the three months ended March 31, 2024 increased to $3,736 as compared to $2,344 for the three months ended March 31, 2023.

The increase was primarily due to the full-quarter impact of MRC SG&A expense.

Merger and Acquisition-Related Costs.

Merger and acquisition-related costs decreased to $134 during the quarter ended March 31, 2024 compared to $1,372 for the same period of 2023, driven primarily by transaction costs related to the MRC acquisition in the first quarter of 2023.

We generated net income of $2,160 for the three-month period ended March 31, 2024 as compared to net income of $156 for the three months ended March 31, 2023.

The increase in net income for the three-month period ended March 31, 2024 compared to the same period in 2023 was primarily attributable to higher revenue and gross profit for MRC, as well as the reduction in acquisition-related costs due to the MRC acquisition that closed during the first three months of 2023.

Gross margin for the six months ended June 30, 2024 increased to 44.4% from 40.7% for the comparable prior period.

The increase in gross margin is primarily attributable to higher margins from MRC as well as the amortization of the fair value step-up to MRC inventory acquired in the first quarter of 2023.

Excluding the $323 impact of the step-up amortization, gross margin would have been 41.9% during the six months ended June 30, 2023.

Advertising and m arketing.

Advertising and marketing expense for the six months ended June 30, 2024 increased to $2,554 as compared to $2,084 for the same period of the prior year.

The 23% increase is primarily due to the full-period impact of MRC advertising and marketing as well as incremental advertising and marketing expense attributable to the acquisition of the MusclePharm assets.

SG&A expense for the six months ended June 30, 2024 increased to $5,036 as compared to $3,502 for the six months ended June 30, 2023.

The increase was due to the full-period impact of MRC SG&A as well as incremental SG&A attributable to the acquisition of MusclePharm assets, increased product testing costs required by Amazon and increased professional fees.

Merger and a cquisition r elated.

Merger and acquisition related expense decreased to $158 during the six months ended June 30, 2024 compared to $1,487 for the same period of 2023, driven primarily by transaction costs related to the MRC acquisition in the second quarter of 2023.

We generated net income of $4,788 for the six months ended June 30, 2024 as compared to net income of $2,120 for the six months ended June 30, 2023.

The increase in net income for the six months ended June 30, 2024 compared to the same period in 2023 was primarily attributable to higher revenue and gross profit for MRC and a reduction in acquisition-related expense due to the MRC acquisition that closed during the first three months of 2023, partially offset by incremental SG&A expense.

Supplemental Discussion of Performance of Acquired Brands

Management frequently receives questions from investors regarding the performance of brands subsequent to their acquisition by the Company.

In an effort to be responsive to these questions, the Company is providing additional disclosure herein.

Management intends to provide this level of disclosure for no more than two years following a transaction, after which the performance of acquired brands will be reported as part of legacy FitLife results.

One of the primary metrics used by management to evaluate the performance of the Company’s brands is contribution, a non-GAAP financial measure which management defines as gross profit less advertising and marketing expenditures.

Other companies may also report contribution as a performance metric, but their definition or calculation of contribution may differ from the Company’s.

Management believes that contribution, as defined by the Company, is a particularly relevant performance metric since it incorporates the gross profit associated with a specific brand or collection of brands as well as the advertising and marketing expenditures associated with the same brand or brands.

With limited exceptions, other operating expenses incurred by the Company are generally not allocable to a specific brand or collection of brands.

Other than for MusclePharm, the numbers in the contribution tables presented below represent the performance of a collection of brands.

Legacy FitLife consists of nine brands and MRC consists of three brands.

These collections of brands do not meet the definition of operating segments and are not managed as such.

Legacy FitLife

Wholesale revenue

Online revenue

Total revenue

Advertising and marketing

Contribution as a % of revenue

For the second quarter of 2024, legacy FitLife revenue declined 5% compared to the same period last year, driven by a 10% decline in wholesale revenue partially offset by 7% increase in online revenue.

Despite the revenue decline, gross profit for legacy FitLife increased slightly and contribution decreased slightly.

Gross margin increased from 42.0% during the second quarter of 2023 to 44.2% during the second quarter of 2024.

Contribution as a percentage of revenue increased from 41.2% to 42.8% over the same time period.

The Company’s wholesale revenue continues to be challenged by declining customer counts in the brick-and-mortar stores of our wholesale partners.

However, at least some of the customers choosing to no longer shop in brick-and-mortar locations continue to purchase legacy FitLife products online, and when a customer buys online the Company earns substantially higher gross profit and contribution.

More specifically, on a year-over-year basis during the second quarter of 2024, wholesale revenue for legacy FitLife declined by $491 and online revenue increased by $160, yet gross profit and contribution were approximately unchanged.

Mimi's Rock (MRC)

Wholesale revenue

Online revenue

Total revenue

Advertising and marketing

Contribution as a % of revenue

For the second quarter of 2024, MRC revenue declined 2% compared to the same period in 2023.

Over the same time period, gross profit increased 21% and contribution increased 61%.

For the second quarter of 2024, gross margin increased to 48.2% from 38.9% last year.

Excluding the impact of the inventory step-up resulting from the acquisition of MRC, gross margin during the quarter ended June 30, 2023 would have been 41.7%.

Revenue for the largest MRC brand—Dr.

Tobias—increased 4% while revenue for the skin care brands—Maritime Naturals and All Natural Advice—declined 37% in the second quarter of 2024.

At the time of the MRC acquisition in 2023, the skin care brands were sold in a number of countries.

Analysis subsequent to the acquisition determined that—in almost all countries other than Canada and the US—the products were being sold at levels resulting in negative contribution.

Even worse, in many of those countries, the products were being sold at negative gross margins.

To optimize performance of the skin care brands, management exited a number of countries and raised prices in other countries.

As a result of these changes, a substantial amount of unprofitable revenue was eliminated.

The substantial year-over-year increase in gross profit for the MRC brands is primarily the result of this optimization of the skin care brands as well as beneficial product mix within the Dr.

Tobias brand.

The substantial year-over-year increase in contribution for the MRC brands is a function of the optimization of the skin care brands, beneficial product mix within the Dr.

Tobias brand, as well as the optimization of advertising spend across all MRC brands.

Wholesale revenue

Online revenue

Total revenue

Advertising and marketing

Contribution as a % of revenue

MusclePharm revenue increased 27% sequentially from the first quarter of 2024 to the second quarter of 2024, with wholesale revenue increasing 24% and online revenue increasing 31%.

In an effort to drive revenue growth, the Company is making targeted investments in advertising and promotion in both the wholesale and online channels.

As a result of these investments, gross margin and contribution margin declined as a percent of revenue, although total gross profit and contribution in dollar terms increased sequentially.

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

FitLife Consolidated

Wholesale revenue

Online revenue

Total revenue

Advertising and marketing

Contribution as a % of revenue

For the Company overall, revenue increased 15%, gross profit increased 27%, and contribution increased 39% compared to the second quarter of 2023.

Gross margin increased to 44.8% compared to 40.4% during the second quarter of last year, or 41.9% excluding the impact of the inventory step-up resulting from the acquisition of MRC.

Contribution as a percentage of revenue increased to 36.9% compared to 30.5% during the second quarter of last year, or 32.0% excluding the impact of the inventory step-up resulting from the acquisition of MRC.

Non-GAAP Measures

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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,

For the three months ended

For the six months ended

Interest expense

Interest income

Foreign exchange (gain) loss

Provision for income taxes

1 unchanged sentence

Non-cash and non-recurring adjustments

Stock compensation expense

Merger and acquisition related expense

Stock-based compensation

Merger and acquisition related

Amortization of inventory step-up

Non-recurring loss on foreign currency forward

Non-recurring loss on foreign currency forward contract

Adjusted EBITDA

Liquidity and Capital Resources

As of March 31, 2024, the Company had positive working capital of $3,164, compared to $4,356 at December 31, 2023.

Our principal sources of liquidity at March 31, 2024 consisted of $3,290 of cash and $2,269 of accounts receivable.

The decrease in working capital is principally attributable to a voluntary paydown of $2,500 on the Term Loans as well as the scheduled amortization payment of $1,125, offset by positive operating cash flows during the three months ended March 31, 2024.

As of June 30, 2024, the Company had positive working capital of $4,711, compared to $4,356 at December 31, 2023.

Our principal sources of liquidity at June 30, 2024 consisted of $3,735 of cash and $2,498 of accounts receivable.

The slight increase in working capital is principally attributable to positive operating cash flows during the six months ended June 30, 2024, partially offset by a voluntary paydown of $2,500 on the Term Loans as well as the two scheduled amortization payments totaling $2,250.

On September 24, 2019, the Company entered into a line of credit agreement with Mutual of Omaha Bank (the “ Lender ”), subsequently acquired by CIT Bank N.A., then acquired by First Citizens Bank & Trust Company, providing the Company with a $2.5 million revolving line of credit (the “ Line of Credit ”).

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All of the proceeds from Term Loan A were used for the acquisition of MRC.

On October 10, 2023, the Company entered into a Second Amended and Restated Credit Agreement (the “ Amended Credit Agreement ”) with the Bank, amending and restating the Credit Agreement between the Company and the Bank.

Pursuant to the Amended Credit Agreement, the Bank provided the Company with an additional term loan (“ Term Loan B ”, and together with Term Loan A, the “ Term Loans ”) for the principal amount of $10,000 and extended the Line of Credit of $3.5 million to December 15, 2024.

On October 10, 2023, the Company entered into a Second Amended and Restated Credit Agreement (the “ Amended Credit Agreement ”) with the Lender, amending and restating the Credit Agreement between the Company and the Lender.

Pursuant to the Amended Credit Agreement, the Lender provided the Company with an additional term loan (“ Term Loan B ”, and together with Term Loan A, the “ Term Loans ”) for the principal amount of $10,000 and extended the Line of Credit of $3.5 million to December 15, 2024.

The Company used the proceeds from Term Loan B to fund the acquisition of the MusclePharm assets.

The Term Loans accrue interest at an annual rate of the one-month SOFR rate plus 2.75%, and principal plus accrued interest will be payable quarterly beginning June 10, 2023 in amounts sufficient to fully amortize the Term Loans through February 28, 2028 in the case of Term Loan A and through October 10, 2028 in the case of Term Loan B.

The Company may prepay amounts borrowed under the Term Loans, in whole or in part with accrued interest to the date of such prepayment on the amount prepaid, by written notice to Bank at least one business day prior to the proposed prepayment.

The Amended Credit Agreement contains customary events of default (each an “ Event of Default ”), which upon the occurrence of an Event of Default, as defined in the Amended Credit Agreement, among other things, interest will accrue at the applicable rate plus 2% per annum, and the Bank may declare all Obligations, with interest thereon, immediately due and payable.

The Company may prepay amounts borrowed under the Term Loans, in whole or in part with accrued interest to the date of such prepayment on the amount prepaid, by written notice to the Lender at least one business day prior to the proposed prepayment.

The Amended Credit Agreement contains customary events of default (each an “ Event of Default ”), which upon the occurrence of an Event of Default, as defined in the Amended Credit Agreement, among other things, interest will accrue at the applicable rate plus 2% per annum, and the Lender may declare all obligations, with interest thereon, immediately due and payable.

The Amended Credit Agreement further contains customary representations and warranties of the Company;

customary indemnification provisions whereby the Company will indemnify Bank for certain losses arising out of inaccuracies in, or breaches of, the representations, warranties and covenants of the Company, and certain other matters;

customary indemnification provisions whereby the Company will indemnify Lender for certain losses arising out of inaccuracies in, or breaches of, the representations, warranties and covenants of the Company, and certain other matters;

and customary affirmative and negative covenants, including covenants to maintain a Fixed Charge Coverage Ratio (as defined in the Amended Credit Agreement) of not less than 1.25 to 1.00 as tested quarterly on a trailing twelve-month basis, starting with the fiscal quarter ending December 31, 2023, a Funded Debt to EBITDA Ratio (as defined in the Amended Credit Agreement) of not more than 2.50 to 1.00 as tested quarterly on a trailing twelve-month basis, starting with the fiscal quarter ending March 31, 2024, and to the extent the Term Loans still have a balance as of June 30, 2025 and a Cash Flow Leverage threshold (as defined in the Amended Credit Agreement) of at least 1.15 is not met, the Company will be required to make a prepayment on the Term Loans equal to 50% of the Excess Cash Flow (as defined in the Amended Credit Agreement).

The Company was in compliance with all covenants as of March 31, 2024.

As of March 31, 2024, the borrowings outstanding on the Term Loans and the Line of Credit were $16,500 and $0, respectively.

The Company was in compliance with all covenants as of June 30, 2024.

As of June 30, 2024, the borrowings outstanding on the Term Loans and the Line of Credit were $15,375 and $0, respectively.

The Company has historically financed its operations primarily through cash flow from operations and equity and debt financings.

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Cash Provided by Operating Activities.

Cash provided by operating activities for the three months ended March 31, 2024 was $5,036 compared to cash provided by operations of $232 for the three months ended March 31, 2023.

The increase in cash provided by operating activities was driven primarily by the acquisition of MRC, which was largely offset by transaction-related costs and other payables and expenses that were accrued at MRC at the time of the acquisition.

Cash provided by operating activities for the six months ended June 30, 2024 was $6,606, as compared to cash provided by operations of $1,794 for the six months ended June 30, 2023.

The increase in cash provided by operating activities was driven primarily by the higher net income achieved in the first six months of 2024 driven by the acquisitions of MRC and the MusclePharm assets, as well as the payment of the transaction-related costs and other payables and expenses that were accrued at MRC at the time of the acquisition during the same period of 2023.

Cash Used in Investing Activities.

Cash used in investing activities for the three months ended March 31, 2024 and 2023 was $10 and $17,099, respectively.

The Company used $10 for purchases of property and equipment in the three months ended March 31, 2024.

During the three-month period ended March 31, 2023, the Company paid $17,099 to acquire MRC.

Cash used in investing activities for the six months ended June 30, 2024 and 2023 was $10 and $17,153, respectively.

The Company used $10 and $54 for purchases of property and equipment in the six months ended June 30, 2024 and 2023, respectively.

During the six-month period ended June 30, 2023, the Company paid $17,099 to acquire MRC.

Cash Provided by (Used in) Financing Activities.

Cash used in financing activities for the three months ended March 31, 2024 was $3,625 compared to cash provided by financing activities of $12,500 during the three months ended March 31, 2023.

Cash used in financing activities for the six months ended June 30, 2024 was $4,750 compared to cash provided by financing activities of $11,875 during the three months ended June 30, 2023.

Critical Accounting Policies and Estimates

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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

Use of Estimates and Assumptions

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

6 unchanged sentences

If the fair value of a reporting unit is determined to be less than the carrying value of its net assets, goodwill is deemed impaired and an impairment loss is recognized to the extent that the carrying value of goodwill exceeds the difference between the fair value of the reporting unit and the fair value of its other assets and liabilities.

Management concluded that a triggering event did not occur during the three months ended March 31, 2024.

Management concluded that a triggering event did not occur during the three months ended June 30, 2024.

We will continue to review for impairment indicators as necessary in future periods.

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Online revenue during the three months ended March 31, 2024 was approximately 65% of net revenue, compared to 35% for the wholesale channel for the same period.

Online revenue during the quarter ended March 31, 2023 was 47% of net revenue compared to 53% for the wholesale channel during the same period in 2023.

Sales to customers in the United States were approximately 96% and 97% during the quarters ended March 31, 2024 and 2023, respectively, with the balance of sales being to customers primarily in Canada.

Online revenue during the quarter ended June 30, 2024 was approximately 66% of net revenue, compared to 34% for wholesale channels for the same period.

Online revenue during the quarter ended June 30, 2023 was 67% of net revenue compared to 33% for wholesale channels during the same period in 2022.

Online revenue during the six months ended June 30, 2024 was approximately 66% of net revenue, compared to 34% for wholesale channels for the same period.

Online revenue during the six months ended June 30, 2023 was 59% of net revenue compared to 41% for wholesale channels during the same period in 2023.

Sales to customers in the U.S.

were approximately 96% and 93% during the three months ended June 30, 2024 and 2023, respectively, with the balance of sales for the same respective periods being to customers primarily in Canada.

Sales to customers in the U.S.

were approximately 96% and 95% during the six months ended June 30, 2024 and 2023, respectively, with the balance of sales for the same respective periods being to customers primarily in Canada.

Control of products we sell transfers to customers upon shipment from our facilities or delivery to our customers, and the Company’s performance obligations are satisfied at that time.

3 unchanged sentences

For direct-to-consumer sales, the Company allows for returns within 30 days of purchase.

Food and Drug Administration.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements