What changed in this filing

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Item 1. Financial Statements

2024-11-14 compared with 2024-08-14 · 195 added, 178 removed, 539 unchanged (41% of the section changed)

3 unchanged sentences

(In thousands, except per share data)

June 30, 2024

September 30, 2024

December 31, 2023

25 unchanged sentences

STOCKHOLDERS’ EQUITY:

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

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

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

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

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

Additional paid-in capital

6 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

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

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023

(In thousands, except per share data)

Three months ended June 30

Six months ended June 30

Three months ended September 30

Nine months ended September 30

Cost of goods sold

10 unchanged sentences

Foreign exchange (gain) loss

Total other expense (income)

Total other expense, net

INCOME BEFORE INCOME TAX PROVISION

9 unchanged sentences

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

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

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023

(In thousands)

Retained earnings (accumulated

THREE MONTHS ENDED JUNE 30, 2024

APRIL 1, 2024

THREE MONTHS ENDED SEPTEMBER 30, 2024

Stock-based compensation

Comprehensive income

JUNE 30, 2024

SIX MONTHS ENDED JUNE 30, 2024

SEPTEMBER 30, 2024

NINE MONTHS ENDED SEPTEMBER 30, 2024

JANUARY 1, 2024

1 unchanged sentence

Comprehensive income

JUNE 30, 2024

THREE MONTHS ENDED JUNE 30, 2023

APRIL 1, 2023

SEPTEMBER 30, 2024

THREE MONTHS ENDED SEPTEMBER 30, 2023

Stock-based compensation

Comprehensive income

JUNE 30, 2023

SIX MONTHS ENDED JUNE 30, 2023

SEPTEMBER 30, 2023

NINE MONTHS ENDED SEPTEMBER 30, 2023

JANUARY 1, 2023

2 unchanged sentences

Comprehensive income

JUNE 30, 2023

SEPTEMBER 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 SIX MONTHS ENDED JUNE 30, 2024 AND 2023

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023

(In thousands)

Six months ended June 30,

Nine months ended September 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

6 unchanged sentences

Changes in operating assets and liabilities:

Accounts receivable - trade

Accounts receivable

Deferred tax asset

Prepaid expense, other current assets and sales tax receivable

Right-of-use asset

Right-of-use assets

Accounts payable

6 unchanged sentences

Cash paid for acquisition of Mimi’s Rock Corp.

Cash deposit paid for the acquisition of MusclePharm assets

Net cash used in investing activities

CASH FLOWS FROM FINANCING ACTIVITIES:

Borrowings on term loans

Payments on term loans

Proceeds from term loans

Net cash provided by (used in) financing activities

6 unchanged sentences

Cash paid for interest, net of amounts capitalized

Non-cash investing and financing activities

Addition to right-of-use assets from new operating lease liabilities

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 AND SIX MONTHS ENDED JUNE 30, 2024 AND 2023

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023

(In thousands, except per share data)

8 unchanged sentences

(“ 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 iSatori Products are sold through retail locations, which include specialty and mass, as well as online directly to the end consumer.

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

7 unchanged sentences

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

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.

Operating results for the three- and nine-month periods ended September 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.

35 unchanged sentences

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

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.

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

The Company disaggregates revenue into distribution channels, geographical regions, and collections of brands (Legacy FitLife and recently acquired brands).

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

Online revenue 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.

Online revenue during the three months ended September 30, 2024 and 2023 was approximately 68 % of net revenue for both periods, compared to 32 % for the wholesale channel for the same periods.

Online revenue during the nine months ended September 30, 2024 and 2023 was approximately 66 % and 62 % of net revenue, compared to 34 % and 38 % 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.

were approximately 95 % and 93 % during the three months ended September 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.

were approximately 96 % and 94 % during the nine months ended September 30, 2024 and 2023, respectively, with the balance of sales for the same respective periods being to customers primarily in Canada.

The Company provides limited financial performance metrics for three collections of brands—Legacy FitLife (consists of nine brands), MRC (consists of three brands), and MusclePharm (one brand).

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

Three months ended

September 30,

Nine months ended

September 30,

Legacy FitLife

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.

9 unchanged sentences

Customer and Vendor Concentration

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.

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

Net sales to GNC during the nine-month periods ended September 30, 2024 and 2023 represent 24 % and 34 % of total net revenue, respectively.

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

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

During the nine months ended September 30, 2024 and 2023, there were two vendors that 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 $ 55 in short-term interest-earning accounts pledged as collateral for financing arrangements at June 30, 2024, currently limited to business credit cards.

The Company has approximately $ 56 in short-term interest-earning accounts pledged as collateral for financing arrangements at September 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.

10 unchanged sentences

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.

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

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

6 unchanged sentences

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.

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

Acquisitions and Business Combinations

16 unchanged sentences

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 24 % and 33 % for the six months ended June 30, 2024 and 2023, respectively.

The effective income tax rate was 25 % and 28 % for the nine months ended September 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 June 30,

Six months ended June 30,

Three months ended September 30,

Nine months ended September 30,

Net income available to common shareholders

21 unchanged sentences

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 for the three and nine months ended September 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

Recently Adopted Accounting Pronouncements

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

1 unchanged sentence

The update also requires all annual disclosures about a reportable segment’s profit or loss and assets to be provided in interim periods and for entities with a single reportable segment to provide all the disclosures required by ASC 280, including the significant segment expense disclosures.

This standard will be effective for the Company on January 1, 2024 and interim periods beginning in fiscal year 2025, with early adoption permitted.

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

This standard became effective for the Company on January 1, 2024.

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

7 unchanged sentences

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 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

The total allowance for expiring, excess and slow-moving inventory items as of September 30, 2024 and December 31, 2023 amounted to $ 86 and $ 162 , respectively.

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

September 30, 2024

December 31, 2023

2 unchanged sentences

NOTE 5 - PROPERTY AND EQUIPMENT

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

June 30, 2024

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

September 30, 2024

December 31, 2023

Accumulated depreciation

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.

Depreciation expense for the three months ended September 30, 2024 and 2023 was $ 15 and $ 11 , respectively.

Depreciation expense for the nine months ended September 30, 2024 and 2023 was $ 57 and $ 33 , respectively.

NOTE 6 – NOTES PAYABLE

Notes payable consisted of the following:

June 30, 2024

September 30, 2024

December 31, 2023

Line of Credit

Unamortized debt issuance costs

6 unchanged sentences

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.

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;

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.

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

Term Loans - 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 ("SOFR") published for such day by the Federal Reserve Bank of New York.

The Company shall make quarterly payments of principal plus accrued interest on the Term Loans until the principal balances are fully amortized.

Quarterly principal payments for Term Loan A and Term Loan B are $ 625 and $ 500 , respectively.

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

Term Loan B will fully amortize in October 2028.

Line of Credit - Also pursuant to the Amended Credit Agreement, outstanding advances under the Line of Credit (“ Advances ”) will accrue interest at a per annum rate equal to 2.75 % above the one-month SOFR, and the Company will pay the interest on the Advances monthly, with all principal and any accrued interest on outstanding Advances being due and payable in full on the Line of Credit maturity date.

The Company may prepay amounts borrowed under the 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.

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

2 unchanged sentences

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 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.

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

The borrowings outstanding on the Term Loans were $ 14,250 and $ 20,125 on September 30, 2024 and December 31, 2023, respectively.

There was no outstanding balance on the Line of Credit as of September 30, 2024 and December 31, 2023.

NOTE 7 - EQUITY

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.

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 September 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 , 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.

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

The Company recorded $ 0 and $ 31 of stock-based compensation related to RSUs during the three and nine months ended September 30, 2023, respectively.

Share Repurchase Program

1 unchanged sentence

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 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

Weighted average

remaining life (years)

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

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

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

average exercise

remaining life

Outstanding, December 31, 2023

Outstanding, June 30, 2024

Outstanding, September 30, 2024

Exercise price

Weighted average

remaining life

2 unchanged sentences

exercise price

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.

The closing stock price for the Company’s stock on September 30, 2024 was $ 32.74 , resulting in an intrinsic value of outstanding options of $ 12,554 .

In August 2024, the Company granted stock options to purchase 10 shares of common stock to employees.

The stock options are exercisable at $ 33.20 per share.

The stock options expire in five years and vest (i) one fourth immediately on the date of grant, and (ii) in three equal annual installments thereafter.

The total fair value of these options at grant date was approximately $ 146 , which was determined using a Black-Scholes option pricing model with the following assumptions:

stock price of $ 33.20 per share, expected term of 5 years, volatility of 45 %, dividend rate of 0 %, and risk-free interest rate of 3.38 %.

The risk-free interest rate is based on the U.S.

Treasury yield curve in effect at the time of measurement corresponding with the expected term of the share option award.

The expected term represents the weighted-average period of time that share option awards granted are expected to be outstanding giving consideration to vesting schedules and historical participant exercise behavior.

The expected volatility is based upon historical volatility of the Company’s Common Stock.

The expected dividend yield is based on the fact that the Company has not paid dividends in the past and does not expect to pay dividends in the future.

During the three-month periods ended September 30, 2024 and 2023, the Company recognized stock-based compensation of $ 141 and $ 21 , respectively, related to stock options.

During the nine-month periods ended September 30, 2024 and 2023, the Company recognized stock-based compensation of $ 344 and $ 63 , respectively, related to stock options.

As of September 30, 2024 there is $ 542 of unamortized stock-based compensation related to stock options.

NOTE 8 – ACQUISITION OF MIMI ’ S ROCK CORP

10 unchanged sentences

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

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.

The following presents the Company’s unaudited pro forma financial information for the nine months ended September 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

Nine months ended

September 30, 2023

Diluted net income per share

1 unchanged sentence

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 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.

MRC revenue for the three months ended September 30, 2024 and 2023 was $ 7,210 and $ 7,202 , respectively.

MRC revenue for the nine months ended September 30, 2024 was $ 22,164 and was $ 17,468 for the period from February 28, 2023 (the acquisition date) to September 30, 2023.

ACQUISITION OF MUSCLEPHARM ASSETS

2 unchanged sentences

Total consideration for the acquisition, including legal expense, amounted to $ 18,788 .

The Company accounted for the transaction as an asset acquisition under Accounting Standards Codification (“ASC”) 805.

The assets acquired consisted of indefinite life intellectual property – brands of $ 18,593 and inventory of $ 195 .

The intangible asset is not amortized and will be tested for impairment on an annual basis.

The Company accounted for the transaction as an asset acquisition under ASC 805.

5 unchanged sentences

NOTE 11 – SUBSEQUENT EVENTS

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 .

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.

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

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(“ 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.

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

The Company distributes the MRC Products primarily online.

16 unchanged sentences

Of this amount, $10,000 was funded using proceeds from a new term loan provided by First Citizens Bank, with the remainder funded from the Company’s available cash balances.

See Note 9 for additional disclosure regarding the acquisition of MusclePharm.

See Note 9 for additional disclosure regarding the acquisition of the MusclePharm assets.

Results of Operations

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

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

Three months ended

June 30, 2024

June 30, 2023

September 30, 2024

September 30, 2023

Cost of goods sold

7 unchanged sentences

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.

Revenue for the three months ended September 30, 2024 increased 15% to $15,977 as compared to $13,902 for the three months ended September 30, 2023.

The increase in revenue for the three months ended September 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 September 30, 2024 was $6,302, a 6% decrease compared to the previous year, driven by a 12% decline in wholesale revenue partially offset by a 4% increase in online revenue.

MRC revenue for the three months ended September 30, 2024 was $7,210, which was approximately flat compared to the previous year.

During the three months ended September 30, 2024, MusclePharm generated revenue of $2,465, of which approximately half was generated from wholesale customers and half from online sales.

Online revenue and wholesale revenue for the quarter ended September 30, 2024 were approximately 68% and 32% of total net revenue, respectively, consistent with the online and wholesale revenue percentages for the same period of 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.

were approximately 95% and 93% during the quarters ended September 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.

Cost of goods sold for the three months ended September 30, 2024 increased to $8,976 as compared to $8,206 for the three months ended September 30, 2023.

This 9% 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 profit for the three months ended September 30, 2024 increased to $7,001 as compared to $5,696 for the three months ended September 30, 2023.

The increase in gross profit is attributable to higher gross profit from both MRC and Legacy FitLife 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.

Gross margin for the three months ended September 30, 2024 increased to 43.8% from 41.0% for the comparable prior period.

The increase in gross margin is primarily attributable to higher margins from both MRC and Legacy FitLife.

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.

Advertising and marketing expense for the three months ended September 30, 2024 decreased to $1,093 as compared to $1,275 for the same period of the prior year.

The 14% 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.

SG&A expense for the three months ended September 30, 2024 increased to $2,645 as compared to $1,897 for the three months ended September 30, 2023.

The increase was primarily due to higher personnel costs (including salaries, benefits, and stock compensation) and higher professional fees.

In addition, the Company incurred non-recurring severance costs of $184.

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

Merger and acquisition related expense increased to $59 during the quarter ended September 30, 2024 compared to $32 for the same period of 2023.

We generated net income of $2,126 for the three months ended September 30, 2024 as compared to net income of $1,696 for the three months ended September 30, 2023.

The increase in net income for the three months ended September 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 and Legacy FitLife, as well as reduced advertising and marketing expense.

Comparison of the nine months ended September 30, 2024 to the nine months ended September 30, 2023

Nine months ended

September 30, 2024

September 30, 2023

Cost of goods sold

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Provision for income tax

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.

Revenue for the nine months ended September 30, 2024 increased 26% to $49,456 as compared to $39,401 for the nine months ended September 30, 2023.

The increase in revenue for the nine months ended September 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 seven months of MRC revenue were included in the Company’s financial statements for the nine months ended September 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.

Legacy FitLife revenue for the nine months ended September 30, 2024 was $20,065, a 9% decrease compared to the previous year, driven by a 15% decline in wholesale revenue partially offset by a 5% increase in online revenue.

MRC revenue for the nine months ended September 30, 2024 was $22,164.

MRC revenue for the period from February 28, 2023 to September 30, 2023 was $17,468.

During the nine months ended September 30, 2024, MusclePharm generated revenue of $7,227, of which approximately half was generated from wholesale customers and half from online sales.

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

Online revenue and wholesale revenue for the nine months ended September 30, 2023 were approximately 62% and 38% of net revenue, respectively.

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.

were approximately 96% and 94% during the nine months ended September 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 six months ended June 30, 2024 increased to $18,612 as compared to $15,125 for the six months ended June 30, 2023.

Cost of goods sold for the nine months ended September 30, 2024 increased to $27,588 as compared to $23,332 for the nine months ended September 30, 2023.

This 18% increase is due to an increase in revenue attributable to the acquisitions of MRC and the MusclePharm assets.

Gross Profit.

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.

Gross profit for the nine months ended September 30, 2024 increased to $21,868 as compared to $16,069 for the nine months ended September 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 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.

Gross margin for the nine months ended September 30, 2024 increased to 44.2% from 40.8% for the comparable prior period.

The increase in gross margin is primarily attributable to higher margins from MRC and Legacy FitLife 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 41.6% during the nine months ended September 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.

Advertising and marketing expense for the nine months ended September 30, 2024 increased to $3,647 as compared to $3,359 for the same period of the prior year.

The 9% increase is primarily due to the full-period impact of MRC advertising and marketing as well as incremental advertising and marketing expense following the acquisition of the MusclePharm assets.

SG&A expense for the nine months ended September 30, 2024 increased to $7,681 as compared to $5,399 for the nine months ended September 30, 2023.

The increase was primarily due to the full-period impact of MRC SG&A as well as higher personnel costs (including salaries, benefits and stock compensation) and higher professional fees.

In addition, the Company incurred non-recurring severance costs of $184.

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.

Merger and acquisition related expense decreased to $217 during the nine months ended September 30, 2024 compared to $1,519 for the same period of 2023, driven primarily by transaction costs related to the MRC acquisition in 2023.

We generated net income of $6,914 for the nine months ended September 30, 2024 as compared to net income of $3,816 for the nine months ended September 30, 2023.

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

Supplemental Discussion of Performance of Acquired Brands

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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.

For the third quarter of 2024, Legacy FitLife revenue declined 6% compared to the same period last year, driven by a 12% decline in wholesale revenue partially offset by a 4% increase in online revenue.

Despite the revenue decline, gross profit and contribution for Legacy FitLife increased.

Gross margin increased from 37.2% during the third quarter of 2023 to 42.6% during the third quarter of 2024.

Contribution as a percentage of revenue increased from 36.0% to 41.5% over the same time period.

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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)

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Contribution as a % of revenue

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

For the third quarter of 2024, MRC revenue was consistent with the same period in 2023.

Over the same time period, gross profit increased 7% and contribution increased 25%.

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%.

For the third quarter of 2024, gross margin increased to 47.7% from 44.5% last year.

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.

Tobias, increased 6% in the third quarter of 2024 while revenue for the skin care brands, Maritime Naturals and All Natural Advice, declined 33% in the same period compared to the third quarter of 2023.

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.

Analysis subsequent to the acquisition determined that, in almost all countries other than Canada and the U.S., 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.

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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%.

MusclePharm revenue decreased 8% sequentially from the second quarter of 2024 to the third quarter of 2024, with wholesale revenue decreasing 11% and online revenue decreasing 4%.

This slower movement is due in part to normal seasonality of sales as well as timing of customer orders in the wholesale channel.

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.

As a result of these investments, gross margin and contribution margin as a percent of revenue may fluctuate from quarter to quarter.

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

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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.

For the Company overall, revenue increased 15%, gross profit increased 23%, and contribution increased 34% compared to the third quarter of 2023.

Gross margin increased to 43.8% compared to 41.0% during the third quarter of last year.

Contribution as a percentage of revenue increased to 37.0% compared to 31.8% during the third quarter of last year.

Non-GAAP Measures

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For the three months ended

For the six months ended

September 30,

For the nine months ended

September 30,

Interest expense

6 unchanged sentences

Merger and acquisition related

Restructuring costs

Amortization of inventory step-up

2 unchanged sentences

Liquidity and Capital Resources

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.

As of September 30, 2024, the Company had positive working capital of $6,044, compared to $4,356 at December 31, 2023.

Our principal sources of liquidity at September 30, 2024 consisted of $4,720 of cash and $2,008 of accounts receivable.

The increase in working capital is principally attributable to positive operating cash flows during the nine months ended September 30, 2024, partially offset by a voluntary paydown of $2,500 on the Term Loans as well as the three scheduled amortization payments totaling $3,375.

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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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 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 was in compliance with all covenants as of September 30, 2024.

As of September 30, 2024, the borrowings outstanding on the Term Loans and the Line of Credit were $14,250 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 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 provided by operating activities for the nine months ended September 30, 2024 was $8,653, as compared to cash provided by operations of $2,772 for the nine months ended September 30, 2023.

The increase in cash provided by operating activities was primarily due to the higher net income achieved in the first nine months of 2024 which was 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 the Company acquired MRC in 2023.

Cash Used in Investing Activities.

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 used in investing activities for the nine months ended September 30, 2024 and 2023 was $10 and $18,984, respectively.

The Company used $10 and $60 for purchases of property and equipment in the nine months ended September 30, 2024 and 2023, respectively.

During the nine-month period ended September 30, 2023, the Company paid $17,099 to acquire MRC and had paid a deposit towards the acquisition of the MusclePharm assets.

Cash Provided by (Used in) Financing Activities.

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.

Cash used in financing activities for the nine months ended September 30, 2024 was $5,875 compared to cash provided by financing activities of $11,250 during the three months ended September 30, 2023.

Critical Accounting Policies and Estimates

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Actual results could differ from those estimates.

Goodwill and Intangibles

In accordance with FASB ASC 350 , Intangibles-Goodwill and Other , we review goodwill and indefinite lived intangible assets for impairment at least annually or whenever events or circumstances indicate a potential impairment.

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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 June 30, 2024.

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

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

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The Company’s products are also sold on e-commerce platforms including Amazon.

For these transactions, the Company evaluated principal versus agent considerations to determine appropriateness of recording platform fees paid to Amazon as an expense or as a reduction of revenue.

The Company records platform fees paid to Amazon for distribution of Company products to cost of goods sold in the condensed consolidated statements of income and comprehensive income.

Platform fees are not recorded as a reduction of revenue because the Company (1) owns the goods before they are transferred to the customer, (2) can direct Amazon, similar to other third-party logistics providers (“ Logistic Providers ”), to return the Company’s inventory to any location specified by the Company, (3) has the responsibility to make customers whole following any returns made by customers directly to Logistic Providers and the Company retains the back-end inventory risk, (4) is subject to credit risk (i.e., credit card chargebacks), (5) establishes prices of its products, (6) can determine who fulfills the goods to the customer (Amazon or the Company) and (7) can limit quantities or stop selling the goods at any time.

For these transactions, the Company evaluated principal versus agent considerations to determine appropriateness of recording distribution and platform fees paid to third-party e-commerce companies as an expense or as a reduction of revenue.

The Company records distribution and platform fees to cost of goods sold in the condensed consolidated statements of income and comprehensive income.

Distribution and platform fees are not recorded as a reduction of revenue because the Company (1) owns the goods before they are transferred to the customer, (2) can direct Amazon, similar to other third-party logistics providers (“ Logistic Providers ”), to return the Company’s inventory to any location specified by the Company, (3) has the responsibility to make customers whole following any returns made by customers directly to Logistic Providers and the Company retains the back-end inventory risk, (4) is subject to credit risk (i.e., credit card chargebacks), (5) establishes prices of its products, (6) can determine who fulfills the goods to the customer (Amazon or the Company) and (7) can limit quantities or stop selling the goods at any time.

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

Advertising fees for Amazon are recorded in selling, general and administrative expenses in the condensed consolidated statements of income and comprehensive income.

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

The Company disaggregates revenue into geographical regions and distribution channels.

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.

Online revenue during the three months ended September 30, 2024 and 2023 was approximately 68% of net revenue for both periods, compared to 32% for the wholesale channel for the same periods.

Online revenue during the nine months ended September 30, 2024 and 2023 was approximately 66% and 62% of net revenue, compared to 34% and 38% 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.

were approximately 95% and 93% during the three months ended September 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.

were approximately 96% and 94% during the nine months ended September 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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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