What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2025-03-27 compared with 2024-03-29 · 233 added, 365 removed, 522 unchanged (53% of the section changed)

1 unchanged sentence

(a) Evaluation of Disclosure Controls and Procedures.

In connection with the filing of this Annual Report on Form 10-K for the period ended December 31, 2023, our management, with the participation of our Chief Executive Officer (“ CEO ”) and Chief Financial Officer (“ CFO ”), evaluated the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”).

Management previously determined that our disclosure controls and procedures were ineffective due to certain material weaknesses, as disclosed in our Annual Reports on Form 10-K for the years ended December 31, 2021 and 2022, and in our quarterly reports through the quarter ended March 31, 2023.

Management has implemented measures designed to improve our controls and procedures to remediate the identified material weaknesses (the “ Remediation Plan ”).

As of the year ended December 31, 2023, the Remediation Plan had been implemented and the applicable controls had operated for a sufficient period of time, and therefore management concluded that the newly implemented and enhanced controls were operating effectively.

We will continue to test such controls over time to ensure the adequacy of our controls and procedures.

Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Based on management’s evaluation of our disclosure controls and procedures, our CEO and CFO concluded that our disclosure controls and procedures were effective as of December 31, 2023.

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, an evaluation of the effectiveness of the design and operations of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the " Exchange Act "), as of December 31, 2024 was completed.

Based on this evaluation, our Chief Executive Officer and Chief Financial Officer believe that our disclosure controls and procedures are effective to ensure that information required to be disclosed in the reports submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, including to ensure that information required to be disclosed by the Company is accumulated and communicated to management, including the principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

(b) Management's Annual Report on Internal Control over Financial Reporting.

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Our CEO and CFO have determined that, other than the Remediation Plan described above, there have been no changes in the Company’s internal control over financial reporting during the period covered by this Report identified in connection with the evaluation described in the above paragraph that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

There were no additional changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the year ended December 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

OTHER INFORMATION

On October 3, 2024, Todd Ordal, a member of the Board of Directors of the Company, adopted a trading arrangement for the purchase of the Company’s Common Stock (the “ Trading Plan ”) that is intended to satisfy the affirmative defense conditions of Securities Exchange Act Rule 10b5-1(c).

The Trading Plan has a term of 4 years, expiring on December 31, 2029, and provides for the quarterly purchase of 150 shares Common Stock.

Other than as disclosed above, no officers or directors, as defined in Rule 16a-1(f), adopted and/or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement,” as defined in Regulation S-K Item 408, during the last fiscal quarter.

OTHER INFORMATION

Not applicable.

DIRECTORS AND EXECUTIVE OFFICERS

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333-137170)).

Amendments to Articles of Incorporation (incorporated by reference to Exhibit 3.2 filed with Amendment No.

Amendments to Articles of Incorporation (incorporated by reference to Exhibit 3.1(b) filed with Amendment No.

3 to the Company’s Registration Statement on Form SB-2 (Commission File No.

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Tax Benefit Preservation Plan, dated February 26, 2021 (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on March 4, 2021).

Description of the Registrant’s Securities.

Assignment of Name (incorporated by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K filed on October 6, 2009).

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Term Note, dated February 23, 2023, issued by FitLife Brands, Inc., to First Citizens Bank (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed March 1, 2023).

Security Agreement, dated February 23, 2023, among FitLife Brands, Inc., NDS Nutrition Products, Inc., iSatori, Inc., 1000374984 Ontario, Inc., and First Citizens Bank (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed March 1, 2023).

Amended and Restated Security Agreement, dated February 23, 2023, among FitLife Brands, Inc., NDS Nutrition Products, Inc., iSatori, Inc., 1000374984 Ontario, Inc., and First Citizens Bank (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed March 1, 2023).

Guaranty Agreement, dated February 23, 2023, among NDS Nutrition Products, Inc., iSatori, Inc., 1000374984 Ontario, Inc., and First Citizens Bank (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed March 1, 2023).

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Arrangement Agreement among FitLife Brands Inc., 1000374984 Ontario Inc., and Mimi’s Rock Corp, dated December 4, 2022 (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on December 8, 2022).

Code of Ethics (incorporated by reference to Exhibit 14.1 to the Company’s Annual Report on Form 10-K filed on March 27, 2009).

Letter from Weaver and Tidwell, LLP dated October 17, 2022 (incorporated by reference to Exhibit 16.1 to the Company’s Current Report on Form 8-K filed October 18, 2022).

Code of Ethics (incorporated by reference to Exhibit 14.1 to the Company’s Annual Report on Form 10-K filed on April 22, 2024).

Insider Trading and Unauthorized Disclosure Policy

List of Subsidiaries.

Consent of Weinberg & Company, P.A.

Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act.

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Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act.

FitLife Brands, Inc.

Clawback Policy

Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

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March 27, 2025

/s/ Lewis Jaffe

/s/ Matthew Lingenbrink

Matthew Lingenbrink

March 27, 2025

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and the Board of Directors of FitLife Brands, Inc.

To the Stockholders and the

Board of Directors of FitLife Brands, Inc.

Opinion on the Financial Statements

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Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Acquisition of Mimi’s Rock - Fair Value of Intangible Assets

As described in Note 8 to the consolidated financial statements, the Company acquired Mimi’s Rock for net cash consideration of $17.1 million in 2023, which resulted in the recording of a $7.6 million an intangible asset.

Management recorded the intangible asset acquired at fair value on the date of acquisition using an income approach.

Management applied judgment in estimating the fair value of intangible asset acquired, which included the use of assumptions with respect to future earnings before interest, taxes, depreciation and amortization (EBITDA) margins, revenue growth rates and discount rates.

The principal considerations for our determination that performing procedures relating to the fair value of intangible asset recorded in the acquisition of Mimi’s Rock constituted a critical audit matter are:

(i) there was a high degree of auditor judgment and subjectivity in performing procedures relating to the fair value measurement of intangible assets acquired due to the judgment applied by management when developing the estimate;

(ii) that significant audit effort was required in evaluating the assumptions relating to the estimated fair value of intangible assets, including future EBITDA margins, revenue growth rates, and discount rates;

and (iii) that the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included, among others, (i) reading the purchase agreement;

(ii) testing management’s process for estimating the fair value of intangible assets;

(iii) evaluating the appropriateness of the valuation method given the nature of the asset;

(iv) testing the completeness, accuracy, relevance and reliability of the data used in estimating the fair value of intangible assets;

and (v) evaluating the reasonableness of the significant assumptions used by management.

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Inventory Valuation

As of December 31, 2024, the Company’s inventory totaled $11.1 million.

As explained in Note 2 and 4 to the financial statements, inventories are stated at the lower of cost or net realizable value, with cost determined on a first-in, first-out (“FIFO”) basis.

The Company assesses inventory at each reporting date in order to assert that it is recorded at net realizable value.

In determining net realizable value, management considers historical usage, forecasted demand in relation to inventory on hand, market conditions, expiration dates of inventory and other factors.

We identified the evaluation of slow-moving and obsolete inventories at net realizable value as a critical audit matter because a high degree of auditor judgment and effort was required to evaluate the Company’s ability to sell certain products.

The primary procedures we performed to address this critical audit matter included:

We obtained management’s analysis for estimated excess or obsolete inventories and evaluated the appropriateness of management’s approach;

We tested the age and expiration dates of inventory items based on third party documents;

We developed an independent expectation of the net realizable value of inventory using historic inventory activity and compared our independent expectation to the amount recorded in the financial statements.

We have served as the Company’s auditor from 2018 through 2019, and since October 2023.

Weinberg & Company, P.A.

/s/ Weinberg & Company, P.A.

Los Angeles, California

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(in thousands, except per share amounts)

December 31, 2024

December 31, 2023

CURRENT ASSETS

Cash and cash equivalents

$ 1,139 $ 13,277

Restricted cash

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Total current assets

14,693 23,203

Property and equipment, net

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Deferred tax asset

$ 55,346 $ 25,707

LIABILITIES AND STOCKHOLDERS' EQUITY:

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Accounts payable

$ 3,261 $ 2,995

Accrued expense and other liabilities

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Additional paid-in capital

30,699 30,056

Accumulated deficit

( 3,417 ) ( 8,713 )

Retained earnings (accumulated deficit)

Foreign currency translation adjustment

TOTAL STOCKHOLDERS' EQUITY

27,036 21,388

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$ 55,346 $ 25,707

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

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(in thousands, except per share amounts)

$ 52,700 $ 28,803

Years ended December 31,

Cost of goods sold

31,268 16,769

21,432 12,034

OPERATING EXPENSE:

Advertising and marketing

Selling, general and administrative

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Interest income

( 289 ) ( 121 )

Interest expense

Foreign exchange gain

Total other expense (income)

INCOME BEFORE INCOME TAXES

Total other expense, net

INCOME BEFORE INCOME TAX PROVISION

PROVISION FOR INCOME TAXES

$ 5,296 $ 4,429

NET INCOME PER SHARE

$ 1.18 $ 0.97

$ 1.08 $ 0.89

Basic weighted average common shares

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COMPREHENSIVE INCOME:

$ 5,296 $ 4,429

Foreign currency translation adjustment

Comprehensive income

$ 5,004 $ 4,429

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

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(in thousands)

Foreign currency

YEAR ENDED DECEMBER 31, 2024

JANUARY 1, 2024

4,507 $ 45 $ - $ 30,056 $ ( 8,713 ) $ - $ 21,388

Shares surrendered by former employee

( 61 ) - - - - - -

Exercise of stock options

9 - - 6 - - 6

Exercise of warrants

143 1 - 164 - - 165

Stock-based compensation

- - - 473 - - 473

Comprehensive (loss) income

- - - - - ( 292 ) ( 292 )

- - - - 5,296 - 5,296

Comprehensive loss

DECEMBER 31, 2024

4,598 $ 46 $ - $ 30,699 $ ( 3,417 ) $ ( 292 ) $ 27,036

YEAR ENDED DECEMBER 31, 2023

JANUARY 1, 2023

4,552 $ 46 $ ( 2,087 ) $ 32,529 $ ( 13,142 ) $ - $ 17,346

Repurchase of common stock

( 48 ) ( 1 ) ( 771 ) - - - ( 772 )

Retirement of treasury shares

- - 2,858 ( 2,865 ) - - ( 7 )

Shares surrendered by former employee

Exercise of stock options

3 - - 29 - - 29

Exercise of warrants

Stock-based compensation

- - - 363 - - 363

- - - - 4,429 - 4,429

Comprehensive loss

DECEMBER 31, 2023

4,507 $ 45 $ - $ 30,056 $ ( 8,713 ) $ - $ 21,388

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

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CASH FLOWS FROM OPERATING ACTIVITIES:

$ 5,296 $ 4,429

Adjustments to reconcile net income to net cash provided by operating activities:

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Allowance for inventory obsolescence

Stock compensation expense

Stock-based compensation

Amortization of deferred finance costs

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Changes in operating assets and liabilities:

Accounts receivable - trade

1,026 ( 2,636 )

Accounts receivable

Deferred taxes

Prepaid expense and other assets

Prepaid expense, other assets and sales tax receivable

Right of use asset

Accounts payable

( 2,679 ) 115

Income taxes payable

Lease liability

( 77 ) ( 55 )

Accrued liabilities and other liabilities

Product returns

( 19 ) ( 42 )

Net cash provided by operating activities

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Purchase of property and equipment

Cash paid for acquisition of MRC

Cash paid for acquisition of Mimi’s Rock Corp.

Cash paid for acquisition of MusclePharm assets

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Proceeds from exercise of stock options and warrants

Repurchases of common stock

Borrowings on term loan

Payments on term loan

Borrowings on term loans

Payments on term loans

Net cash provided by (used in) financing activities

20,296 ( 750 )

Foreign currency impact on cash

CHANGE IN CASH AND RESTRICTED CASH

( 11,379 ) 3,380

CASH, BEGINNING OF PERIOD

CASH AND RESTRICTED CASH, BEGINNING OF PERIOD

CASH AND RESTRICTED CASH, END OF PERIOD

$ 1,898 $ 13,277

Supplemental cash flow disclosure

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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 consolidated financial statements.

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FitLife Brands, Inc.

(the “ Company ”) is a national provider of innovative and proprietary nutritional supplements and wellness products for health-conscious consumers marketed under the following brand names:

(the “Company”) is a provider of innovative and proprietary nutritional supplements and wellness products for health-conscious consumers marketed under the following brand names:

(i) NDS Nutrition, PMD Sports, SirenLabs, Core Active, Nutrology, and Metis Nutrition (together, “NDS Products”);

(ii) iSatori, BioGenetic Laboratories, and Energize (together, the "iSatori Products");

and (iii) Dr.

Tobias, All Natural Advice, and Maritime Naturals, (together, the “MRC Products”);

and (iv) MusclePharm.

and (iv) MusclePharm (“MusclePharm”).

The Company distributes the NDS Products principally through franchised General Nutrition Centers, Inc.

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

The iSatori Products are sold through more than 17,000 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 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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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

On February 7, 2025, the Company effected a 2 -for-1 stock split of its Common Stock and proportionately increased the number of authorized shares of Common Stock to 120,000 .

All share and per share information throughout this Annual Report on Form 10-K has been retroactively adjusted to reflect the stock split as of the earliest period presented.

The shares of Common Stock retain a par value of $ 0.01 per share.

Accordingly, an amount equal to the par value of the additional shares issued in the stock split was reclassified from additional paid-in capital in excess of par value to Common Stock.

Acquisition of Mimi ’ s Rock Corp

On December 4, 2022, the Company entered into an Arrangement Agreement with Mimi’s Rock Corp.

(“ MRC ”), pursuant to which the Company agreed to acquire MRC.

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 .

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

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Bankruptcy Code.

The Company acquired substantially all of the assets and assumed none of the liabilities of MusclePharm other than de minimus cure costs relating to certain assumed contracts.

Total consideration for the acquisition was approximately $ 18,500 cash.

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.

Total consideration for the acquisition was approximately $ 18,500 .

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

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Intercompany accounts and transactions have been eliminated in the consolidated financial statements.

FITLIFE BRANDS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED

DECEMBER 31, 2023 AND

(in thousands, except per share amounts)

Foreign Currency Translation

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

The Company accounts for revenue in accordance with FASB ASC 606.

The Company accounts for revenue in accordance with FASB ASC 606 , Revenue from Contracts with Customers (“ASC 606”).

The underlying principle of ASC 606 is to recognize revenue to depict the transfer of goods or services to customers at the amount expected to be collected.

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

Distribution and platform fees are not recorded as a reduction of revenue because the Company:

1 ) owns the goods before they are transferred to the customer, 2 ) can direct Amazon, similar to other third -party logistics providers (“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.

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

FITLIFE BRANDS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED

DECEMBER 31, 2023 AND

(in thousands, except per share amounts)

The Company disaggregates revenue into geographical regions and distribution channels.

Advertising fees paid to Amazon are recorded in advertising and marketing expense in the 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.

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were approximately 95 % and 93 % for the year ended December 31, 2024 and 2023, respectively, with the balance of sales 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.

Years ended December 31,

Legacy FitLife

Total Revenue

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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As of December 31, 2024 and 2023, there was one vendor who accounted for 59 % and 51 % of the Company's consolidated accounts payable, respectively.

For the year ended December 31, 2024, there were two vendors who accounted for 44 % and 28 % of the Company's inventory-related purchases.

For the year ended December 31, 2023, there were three vendors who accounted for 37 %, 30 %, and 10 % of the Company's inventory-related purchases.

For the year ended December 31, 2022, there were two vendors who accounted for 49 % and 18 % of the Company's inventory-related purchases, respectively.

Accounts Receivable and Allowance for Doubtful Accounts

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As of December 31, 2024 and 2023, the Company had provided a reserve for doubtful accounts of $ 41 and $ 17 , respectively.

FITLIFE BRANDS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED

DECEMBER 31, 2023 AND

(in thousands, except per share amounts)

Product Returns, Sales Incentives and Other Forms of Variable Consideration

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Cost of goods sold is comprised of the costs of products, in-bound freight charges, shipping and handling costs, purchase and receiving costs, and commissions paid to Amazon and other online selling platforms.

Other expense not related to the production and distribution of our products is classified as operating expense.

Other expenses not related to the production and distribution of our products is classified as operating expense.

Cash, Cash Equivalents, and Restricted Cash

The Company’s cash balances on deposit with banks are guaranteed by the Federal Deposit Insurance Corporation up to $ 250 at December 31, 2023.

The Company may be exposed to risk for the amounts of funds held in bank accounts more than the insurance limit.

The Company’s cash balances on deposit with banks are guaranteed up to amounts designated by the regulatory frameworks of the jurisdictions in which the accounts are maintained.

The Company may be exposed to risk for the funds held in bank accounts that exceed the insurance limit.

In assessing the risk, the Company’s policy is to maintain cash balances with high-quality financial institutions.

The Company had cash balances more than the guarantee during the years ended December 31, 2023 and 2022.

The Company had cash balances exceeding the guarantee during the years ended December 31, 2024 and 2023.

Management believes that the financial institutions that hold the Company’s cash are financially sound and, accordingly, minimal credit risk exists.

Restricted cash consists of cash on deposit with a financial institution in an interest-bearing account pursuant to a credit card agreement.

FITLIFE BRANDS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED

DECEMBER 31, 2023 AND

(in thousands, except per share amounts)

Inventory is stated at the lower of cost or net realizable value, with costs determined on a first-in, first-out (FIFO) basis.

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Ordinary maintenance and repairs are charged to expense as incurred, and replacements and betterments are capitalized.

The range of estimated useful lives used to calculate depreciation for principal items of property and equipment are as follows:

Asset category

Depreciation / Amortization period (in years)

Furniture and fixtures

Office equipment

Leasehold improvements

Management regularly reviews property, equipment and other long-lived assets for possible impairment.

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Should an impairment exist, the impairment loss would be measured based on the excess of the carrying amount of the long-lived asset group over the asset’s fair value.

FITLIFE BRANDS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED

DECEMBER 31, 2023 AND

(in thousands, except per share amounts)

There were no impairment charges incurred during the years ended December 31, 2023 and 2022.

Based on management’s assessment, there were no indicators of impairment during the years ended December 31, 2024 and 2023.

The Company has determined that it has a single reporting unit for purposes of performing its goodwill impairment test.

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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.

There were no impairment charges incurred during the years ended December 31, 2023 and 2022.

Based on management’s assessment, there were no indicators of impairment during the years ended December 31, 2024 and 2023.

Acquisitions and Business Combinations

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As of December 31, 2024 and 2023, the Company has not established a liability for uncertain tax positions.

FITLIFE BRANDS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED

DECEMBER 31, 2023 AND

(in thousands, except per share amounts)

Net Income Per Share

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The carrying amounts of financial assets and liabilities, such as cash and cash equivalents, restricted cash, accounts receivable and accounts payable, approximate their fair values because of the short maturity of these instruments.

The carrying value of its notes payable approximate their fair value based on the market interest rates of these notes.

FITLIFE BRANDS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED

DECEMBER 31, 2023 AND

(in thousands, except per share amounts)

Stock Compensation Expense

The carrying value of the term loans approximate their fair value based on the market interest rates of these loans.

Stock-Based Compensation

The Company periodically issues restricted share units (“RSUs”), stock options and warrants to employees and non-employees in non-capital raising transactions for services rendered.

Such issuances vest and expire according to the terms established at the issuance date.

Stock-based payments to officers, directors, employees and consultants for acquiring goods and services from nonemployees, which include grants of employee stock options, are recognized in the financial statements based on their grant date fair values in accordance with ASC 718, Compensation-Stock Compensation .

Stock-based payments to officers, directors, employees and consultants for acquiring goods and services from non-employees, which include grants of employee stock options, are recognized in the financial statements based on their grant date fair values in accordance with ASC 718, Compensation-Stock Compensation .

Stock-based payments to officers, directors, and employees, which are generally time vested, are measured at the grant date fair value and compensation cost is recognized on a straight-line basis over the vesting period.

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The assumptions used could materially affect compensation expense recorded in future periods.

The Company operates in one segment for the distribution of our products.

In accordance with FASB ASC Topic 280, Segment Reporting , the Company’s chief operating decision maker has been identified as the Chief Executive Officer, who reviews operating results to make decisions about allocating resources and assessing performance for the entire Company.

Existing guidance, which is based on a management approach to segment reporting, establishes requirements to report selected segment information quarterly and to report annually entity-wide disclosures about products and services, major customers, and the countries in which the entity holds material assets and reports revenue.

All material operating units qualify for aggregation under “Segment Reporting” due to their similar customer base and similarities in:

economic characteristics;

nature of products and services;

and procurement, manufacturing and distribution processes.

Since the Company operates in one segment, all financial information required by “Segment Reporting” can be found in the accompanying consolidated financial statements.

Recent Accounting Pronouncements

In June 2016, the FASB issued ASU 2016 - 13, Financial Instruments – Credit Losses (Topic 326 ):

Measurement of Credit Losses on Financial Instruments (“ ASU 2016 - 13 ”).

The amendments included in ASU 2016 - 13 require the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts.

Although the new standard, known as the current expected credit loss (“ CECL ”) model, has a greater impact on financial institutions, most other organizations with financial instruments or other assets (trade receivables, contract assets, lease receivables, financial guarantees, loans and loan commitments, and held-to-maturity debt securities) are subject to the CECL model and will need to use forward-looking information to better evaluate their credit loss estimates.

Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses.

In addition, ASU 2016 - 13 amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration.

ASU 2016 - 13 was originally effective for public companies for fiscal years beginning after December 15, 2019.

In November of 2019, the FASB issued ASU 2019 - 10, which delayed the implementation of ASU 2016 - 13 to fiscal years beginning after December 15, 2022 for smaller reporting companies.

The Company has adopted this guidance beginning January 1, 2023.

This guidance did not have a significant impact on the Company’s financial statements.

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

Disclosure of Supplier Finance Program Obligations.

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.

Segment Information

The Company’s Chief Executive Officer is the chief operating decision maker (“CODM”) and evaluates performance and makes operating decisions about allocating resources based on financial data presented on a consolidated basis.

Because the CODM evaluates financial performance on a consolidated basis, the Company has determined that it operates as a single reportable segment composed of the financial results of FitLife Brands, Inc (See Note 13).

Recently Adopted Accounting Pronouncements

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

Improvements to Reportable Segment Disclosure , which is intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expense categories that are regularly provided to the chief operating decision maker and included in each reported measure of a segment’s profit or loss.

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

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

Improvements to Reportable Segment Disclosure (“ ASC 280 ”), which is intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expense categories that are regularly provided to the chief operating decision maker and included in each reported measure of a segment’s profit or loss.

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

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

The adoption of this standard did not have a material impact on the Company’s consolidated financial statements but has resulted in additional disclosures within the footnotes of the consolidated financial statements (See Note 13).

Recently Issued Accounting Pronouncements

In November 2024, FASB issued ASU 2024-03 Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40) Disaggregation of Income Statement Expenses.

The guidance in ASU 2024-03 requires public business entities to disclose in the notes to the financial statements, among other things, specific information about certain costs and expenses including purchases of inventory;

employee compensation;

and depreciation and amortization expense for each caption on the income statement where such expenses are included.

The update is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027.

Early adoption is permitted, and the amendments may be applied prospectively to reporting periods after the effective date or retrospectively to all periods presented in the financial statements.

We are currently evaluating the provisions of this guidance and assessing the potential impact on our financial statement disclosures.

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

FITLIFE BRANDS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED

DECEMBER 31, 2023 AND

(in thousands, except per share amounts)

INTANGIBLE ASSETS

2 unchanged sentences

As of December 31, 2024

$ 26,201 $ - $ 26,201 Indefinite

Client relationships

80 ( 55 ) 25 4

70 ( 48 ) 22 4

60 - 60 Indefinite

11 ( 10 ) 1 3

Total identifiable assets

$ 26,422 $ ( 113 ) $ 26,309

As of December 31, 2023

Client relationships

80 ( 34 ) 46 4

70 ( 30 ) 40 4

60 - 60 Indefinite

Total identifiable assets

$ 221 $ ( 71 ) $ 150

Amortization expense was $ 42 for the years ended December 31, 2023 and 2022 .

Amortization expense was $ 38 and $ 42 for the years ended December 31, 2024 and 2023, respectively.

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

December 31, 2024

December 31, 2023

Finished goods

$ 8,292 $ 8,347

Allowance for obsolescence

( 162 ) ( 107 )

$ 9,091 $ 9,105

PROPERTY AND EQUIPMENT

The Company's property and equipment balances as of December 31, 2024 and 2023 were as follows:

December 31, 2024

December 31, 2023

Accumulated depreciation

( 814 ) ( 856 )

Depreciation expense for property and equipment was $ 70 for the year ended December 31, 2024 compared to $ 52 for the year ended December 31, 2023.

FITLIFE BRANDS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED

DECEMBER 31, 2023 AND

(in thousands, except per share amounts)

NOTES PAYABLE

Notes payable consisted of the following:

Term loan A ( 8.21 % as of December 31, 2023) $ 10,625 $ -

Term loan B ( 8.21 % as of December 31, 2023) 9,500 -

December 31, 2024

December 31, 2023

Line of credit

Unamortized debt issuance costs

Current ( 4,500 ) -

Long Term $ 15,509 $ -

Credit Agreements – First Citizens Bank

On February 23, 2023, the Company entered into an Amended and Restated Credit Agreement (the “ Credit Agreement ”) with First Citizens Bank (the “ Bank ”), amending and restating that certain Credit Agreement, dated September 24, 2019, between the Company and the Bank.

Pursuant to the Previous Credit Agreement, the Bank provided the Company with a term loan for the principal amount of $ 12,500 (“ Term Loan A ”), and a revolving line of credit of $ 3,500 (the “ Line of Credit ”, and collectively with the Term Loans, the “ Loan ”).

The Company used the proceeds from the Loan to fund the acquisition of MRC and for general working capital purposes, including those of MRC.

On February 23, 2023, the Company entered into an Amended and Restated Credit Agreement (the “Prior Credit Agreement”) with First Citizens Bank (the “Bank”), amending and restating that certain Credit Agreement, dated September 24, 2019, between the Company and the Bank.

Pursuant to the Prior Credit Agreement, the Bank provided the Company with a term loan for the principal amount of $ 12,500 (“Term Loan A”), and a revolving line of credit of $ 3,500 (the “Line of Credit”, and collectively with the Term Loans, the “Loan”).

The Company used the proceeds from the Loan to fund the acquisition of MRC (discussed in further detail in Note 8) and for general working capital purposes.

Second Amended and Restated Credit Agreement

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 ”) 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 the loan to fund the acquisition of assets of MusclePharm (discussed in further detail in Note 8 ) 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 Applicable Rate 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 Agreement contains customary events of default (each an “ Event of Default ”), which upon the occurrence of an Event of Default, among other things, interest will accrue at the Applicable Rate plus 2 % per annum, and the Bank may declare all obligations, with interest thereon, immediately due and payable.

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

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

Pursuant to the Credit Agreement, the Bank provided the Company with an additional Term Loan (“Term Loan B”, and together with Term Loan A, the “Term Loans”) for the principal amount of $ 10,000 and extended the Line of Credit of $ 3.5 million to December 23, 2024.

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

First Amendment to Second Amended and Restated Credit Agreement

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

Term Loans A and B – Pursuant to the Amended Credit Agreement, the Term Loans accrue interest at a per annum rate equal to the greater of 3.50 % or 2.75 % above the one-month secured overnight financing rate ("SOFR") published for such day by the Federal Reserve Bank of New York.

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

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

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

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

Term Loan B will fully amortize in October 2028.

Line of Credit – Also pursuant to the Amended Credit Agreement, outstanding advances under the Line of Credit (“Advances”) will accrue interest at a per annum rate equal to the greater of 3.50 % or 2.75 % above the one-month SOFR, and the Company will pay the interest on the Advances monthly, with all principal and any accrued interest on outstanding Advances being due and payable in full on the Line of Credit maturity date.

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

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

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

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

and customary affirmative and negative covenants, including covenants to maintain a Fixed Charge Coverage Ratio (as defined in the 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 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 Agreement) of at least 1.15 is not met, the Company will be required to make a prepayment on the Term Loan equal to 50 % of the Excess Cash Flow (as defined in the Agreement).

The Company was in compliance with all covenants as of December 31, 2023.

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

FITLIFE BRANDS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED

DECEMBER 31, 2023 AND

(in thousands, except per share amounts)

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 December 31, 2023, 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 December 31, 2024 and 2023.

The borrowings outstanding on the Term Loans were $ 13,125 and $ 20,125 on December 31, 2024 and 2023, respectively.

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

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

2 unchanged sentences

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 recorded $ 31 and $ 287 of stock compensation expense related to RSUs during the years ended December 31, 2023 and 2022, respectively.

As of December 31, 2023 and 2022, there was $ 0 and $ 31 of unamortized compensation expense associated with the grant of the RSUs.

In February 2021, the Company granted an officer an aggregate of 320 RSUs with a fair value of $ 468 , which was amortized to stock-based compensation over its vesting term.

The Company recorded $ 31 of stock-based compensation related to RSUs during the year ended December 31, 2023.

As of December 31, 2023, there was $ 0 of unamortized stock-based compensation associated with the grant of the RSUs.

Share Repurchase Program

On August 16, 2019, the Company approved a share repurchase program, pursuant to which the Board authorized management to repurchase up to $ 500 of the Company's Common Stock over the subsequent 24 months (the " Share Repurchase Program "), as amended September 23, 2019 to increase the repurchase amount to $ 1 , and include shares of the Company's Common Stock, its Series A Convertible Preferred Stock, par value $ 0.01 per share (" Series A Preferred "), and warrants to purchase shares of the Company's Common Stock (" Warrants ") in the Share Repurchase Program, to be repurchased over the next 24 months, at a purchase price, in the case of Common Stock, equal to the fair market value of the Company's Common Stock on the date of purchase, and in the case of Series A Preferred and Warrants, at a purchase price determined by management, with the exact date and amount of such purchases to be determined by management;

further amended on November 6, 2019 to increase the repurchase amount to $ 2,500 over the subsequent 24 months, and further amended on February 1, 2021 to increase the repurchase amount to up to $ 5,000 over the subsequent 24 months.

On March 17, 2023, the Board approved an extension of the Share Repurchase Program.

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

All other terms of the Share Repurchase Program remain unchanged.

During the year ended December 31, 2023, the Company did not repurchase any shares of the Company’s Common Stock under the Share Repurchase Program.

As of December 31, 2023, the Company may purchase up to $ 5,000 of additional shares of Common Stock under the Share Repurchase Program.

FITLIFE BRANDS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED

DECEMBER 31, 2023 AND

(in thousands, except per share amounts)

Treasury Shares

In January 2022, the Company retired all treasury shares.

All shares repurchased by the Company subsequent to January 2022 were retired immediately upon acquisition.

As of December 31, 2023, there are no shares held in treasury.

On March 17, 2023, the Board approved the extension of the Company’s previously authorized share repurchase program, initially approved by the Board on August 16, 2019, as amended on September 23, 2019, November 6, 2019 and February 1, 2021 (“Share Repurchase Program”).

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

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

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

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

Weighted average

remaining life

exercise price

Outstanding, December 31, 2022

380 $ 3.44 6.2

Outstanding, December 31, 2023

379 $ 3.09 5.3

Outstanding, December 31, 2024

484 $ 6.82 4.5

$ 0.70 - 5.24 349 4.5 $ 2.30 317 $ 2.01

$ 11.55 - 19.20 135 4.6 $ 18.56 42 $ 17.63

484 4.5 $ 6.82 359 $ 3.85

Weighted average

remaining life

Weighted average

exercise price

vested options

Weighted average

exercise price

The closing price for the Company’s Common Stock on December 31, 2024 was $ 16.30 , resulting in an intrinsic value of outstanding options of $ 12,279 .

1 unchanged sentence

The stock options are exercisable at an average price of $ 16.63 per share, expire in five years and primarily vest as follows:

one - third vested immediately upon issuance, and the remainder vest equally in equal annual installments over a period of two years from grant date.

one-fourth vested immediately upon issuance, and the remainder vest equally in equal annual installments over a period of three years from grant date.

The total fair value of these options at grant date was approximately $ 161 , which was determined using the Black-Scholes option pricing model with the following average assumption:

1 unchanged sentence

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;

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

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;

2 unchanged sentences

During the year ended December 31, 2023, the Company granted stock options to employees to purchase 234 shares of Company Common Stock.

The stock options are exercisable at an average price of $ 15.65 per share, expire in five years and vest as follows:

one - fourth vested immediately upon issuance, and the remainder vest equally in equal annual installments over a period of three years from grant date.

The stock options are exercisable at an average price of $ 9.55 per share, expire in five years and primarily vest as follows:

one- third vested immediately upon issuance, and the remainder vest equally in equal annual installments over a period of two years from grant date.

The total fair value of these options at grant date was approximately $ 1,014 , which was determined using the Black-Scholes option pricing model with the following average assumption:

5 unchanged sentences

and 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.

FITLIFE BRANDS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED

DECEMBER 31, 2023 AND

(in thousands, except per share amounts)

The Company recognized $ 442 and $ 76 of stock compensation expense related to the vesting of these options during the years ended December 31, 2023 and 2022, respectively.

As of December 31, 2023, there was $ 740 of unvested stock compensation that will be recognized as an expense in future periods as the options vest.

As of December 31, 2021, 143 warrants at an exercise price of $ 1.15 per share were outstanding.

During the years ended December 31, 2023 and 2022, no warrants were granted and no warrants expired.

The Company recognized $ 459 and $ 442 of stock-based compensation related to the vesting of these options during the years ended December 31, 2024 and 2023, respectively.

As of December 31, 2024, there was $ 442 of unvested stock-based compensation that will be recognized as expense in future periods as the options vest.

During the year ended December 31, 2023, 286 shares of Common Stock were issued for the exercise of all outstanding warrants, resulting in net proceeds to the Company of $ 165 .

Total outstanding warrants to purchase shares of Common Stock as of December 31, 2023 and 2022 amounted to 0 and 143,480 , respectively.

There are no outstanding warrants to purchase shares of Common Stock as of December 31, 2024 and 2023.

ACQUISITION OF MIMI ’ S ROCK CORP

On December 4, 2022, the Company entered into an Arrangement Agreement with Mimi’s Rock Corp.

(“ MRC ”), pursuant to which the Company agreed to acquire all of the equity interests of MRC.

The acquisition closed on February 28, 2023.

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.

The purchase price of $ 17,099 was paid with proceeds from the Term Loan as well as cash on hand.

During the years ended December 31, 2023 and 2022, the Company incurred $ 1,570 and $ 225 , respectively, of transaction-related costs for the acquisition of MRC.

The Company accounted for the acquisition as a business combination under Accounting Standards Codification (“ ASC ”) 805, Business Combinations.

The purchase price of $ 17,099 was paid with proceeds from the Term Loan A as well as cash on hand.

During the year ended December 31, 2023, the Company incurred $ 1,570 of transaction-related costs for the acquisition of MRC.

The Company accounted for the acquisition as a business combination under ASC 805, Business Combinations .

The following table summarizes the allocation of the purchase price based on the fair value of the assets acquired and liabilities assumed on the date of acquisition:

February 28, 2023

Assets acquired:

11 unchanged sentences

Net assets acquired

FITLIFE BRANDS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED

DECEMBER 31, 2023 AND

(in thousands, except per share amounts)

The purchase was intended to augment and diversify the Company’s product offerings and lineup.

1 unchanged sentence

Pro Forma Condensed Combined Financial Information (Unaudited) (In thousands)

The following presents the Company’s unaudited pro forma financial information for the years ended December 31, 2023 and 2022, respectively, giving effect to the acquisition of MRC as if it had occurred at January 1, 2022.

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

Included in the pro forma information is:

fair value adjustment to inventory acquired during the years ended December 31, 2023 and 2022, removal of transaction-related costs related to the acquisition of MRC, removal of the interest costs from MRC’s debt prior to the closing of the acquisition, and interest on borrowings made by the Company based on the projected balance of the Term Loan for the respective periods presented in this pro forma.

$ 57,755 $ 58,457

$ 7,076 $ 4,564

fair value adjustment to inventory acquired during the year ended December 31, 2023, removal of transaction-related costs related to the acquisition of MRC, removal of the interest costs from MRC’s debt prior to the closing of the acquisition, and interest on borrowings made by the Company based on the projected balance of the Term Loan for the respective periods presented in this pro forma.

December 31, 2023

Diluted net income per share

$ 1.47 $ 0.92

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 and net income for the period from February 28, 2023 to December 31, 2023 was $ 24,370 and $ 1,975 , respectively.

ACQUISITION OF MUSCLEPHARM

On October 10, 2023, the Company acquired substantially all of the assets and assumed none of the liabilities other than de minimus cure costs relating to certain assumed contracts of MusclePharm Corporation (“ MusclePharm ”) through an asset purchase transaction under Section 363 of the U.S.

MRC revenue for the year ended December 31, 2024 was $ 29,036 and was $ 24,370 for the period from February 28, 2023 (the acquisition date) to December 31, 2023.

ACQUISITION OF MUSCLEPHARM ASSETS

On October 10, 2023, the Company acquired substantially all of the assets and assumed none of the liabilities other than de minimus cure costs relating to certain assumed contracts of MusclePharm through an asset purchase transaction under Section 363 of the U.S.

Bankruptcy Code.

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

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

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

FITLIFE BRANDS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED

DECEMBER 31, 2023 AND

(in thousands, except per share amounts)

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

The Company accounted for the transaction as an asset acquisition under 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 is tested for impairment on an annual basis.

Components of the total provision for income taxes are as follows:

December 31, 2024

December 31, 2023

Current tax expense (benefit)

$ ( 77 ) $ 199

Deferred tax expense (benefit)

Provision for income taxes

$ 1,707 $ 1,393

The Company is subject to income tax in the U.S., Canada, Germany and Barbados through its wholly owned subsidiaries.

The combined statutory tax rate is 22 % ( 24 % in 2022 )

The provision for income taxes differs from the amount determined by applying the federal statutory rate as follows:

Pre-tax net income

$ 7,003 $ 5,822

Federal income tax rate

22.3 % 24.0 %

The combined federal and state statutory tax rate is 22 % ( 22 % in 2023).

The statutory tax rate in foreign jurisdictions varies by jurisdiction.

During the year ended December 31, 2024, the Company dissolved Thunder Beach Holdings, its Barbados subsidiary, and will no longer be subject to taxes in Barbados.

December 31, 2024

December 31, 2023

Provision for income taxes based on statutory rate

3 unchanged sentences

True up of prior period

Change in valuation allowance

Provision for income taxes

$ 1,707 $ 1,393

FITLIFE BRANDS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED

DECEMBER 31, 2023 AND

(in thousands, except per share amounts)

The tax effects of significant temporary differences and credit and operating loss carryforwards that give rise to the net deferred tax assets and tax liabilities are as follows:

Deferred tax assets (liabilities)

Loss carry forwards

The tax effects of significant temporary differences and credit and operating loss carryforwards in the U.S.

that give rise to the deferred tax asset are as follows:

December 31, 2024

December 31, 2023

Loss carryforwards

Tangible assets

1 unchanged sentence

Provisions and reserves

Deferred tax assets (liabilities)

Valuation allowance

( 4,644 ) ( 537 )

Net deferred tax asset (liability)

$ ( 1,621 ) $ 1,847

Deferred tax assets, net

The tax effects of significant temporary differences and operating loss carryforwards in foreign jurisdictions that give rise to the deferred tax liability are as follows:

December 31, 2024

December 31, 2023

Loss carryforwards

Intangible assets

Valuation allowance

Deferred tax liabilities, net

The Company has assessed the realizability of the net deferred tax assets by considering the relevant positive and negative evidence available to determine whether it is more likely than not that some portion or all of the deferred tax assets will be realized.

In making such a determination, the Company considered all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies, and recent results of operations.

Deferred income taxes have not been recorded on the basis differences for investments in consolidated subsidiaries as these basis differences are indefinitely reinvested or will reverse in a non-taxable manner.

Quantification of the deferred income tax liability, if any, associated with indefinitely reinvested basis differences is not practicable.

As of December 31, 2024, the Company has the following U.S.

2 unchanged sentences

The Canadian non-capital loss carry forwards expire between 2038 and 2044.

$ 101 $ - $ 101

2,923 - 2,923

615 3,224 3,839

- 2,875 2,875

- 2,215 2,215

- 1,838 1,838

- 4,350 4,350

- 1,079 1,079

$ 4,589 $ 15,601 $ 20,190

Utilization of net operating loss carry forwards may be subject to limitations in the event of a change in ownership as defined under U.S.

Year of expiration

Utilization of net operating loss carryforwards in the U.S.

may be subject to limitations in the event of a change in ownership as defined under U.S.

IRC Section 382, and similar state provisions.

An "ownership change" is generally defined as a cumulative change in the ownership interest of significant stockholders of more than 50 percentage points over a three-year period.

Such ownership change could result in a limitation of the Company's ability to reduce future income by net operating loss carry forwards.

The Company acquired a subsidiary in 2015.

In connection with the merger between the Company and one of its subsidiaries in 2015, the Company has evaluated its net operating loss (“NOL”) carryforwards under the provisions of U.S.

IRC Section 382.

The acquisition resulted in an ownership change under Section 382, subjecting the Company’s ability to utilize NOL carryforwards generated prior to the acquisition to an annual limitation.

As of December 31, 2024, the Company has approximately $ 3,845 of federal NOL carryforwards, of which $ 1,545 is subject to the Section 382 limitation.

Based on the annual limitation, management expects that $ 2,300 of these carryforwards may not be fully utilized prior to expiration.

The deferred tax liability relates primarily to intangible assets that are not deductible for tax purposes in the jurisdictions to which they relate.

Quantification of the deferred income tax liability, if any, associated with indefinitely reinvested basis differences is not practicable.

The Company operates in a number of tax jurisdictions and is subject to examination of its income tax returns by tax authorities in those jurisdictions who may challenge any item on these returns.

2 unchanged sentences

As of December 31, 2024, the Company has not recorded any uncertain tax positions or any accrued interest and penalties on the consolidated balance sheet.

During the year ended December 31, 2023, the Company did not record any interest and penalties in the consolidated statement of income and comprehensive income.

FITLIFE BRANDS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED

DECEMBER 31, 2023 AND

(in thousands, except per share amounts)

During the year ended December 31, 2024, the Company recorded an immaterial amount of interest and penalties in the consolidated statement of income and comprehensive income.

COMMITMENTS AND CONTINGENCIES

1 unchanged sentence

There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of the Company or any of its subsidiaries, threatened against or affecting the Company, our Common Stock, any of our subsidiaries or of the Company’s or our subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.

SUBSEQUENT EVENTS

Subsequent to the end of 2023, the Company made a scheduled amortization payment of $ 1,100 on its term loans as well as a voluntary payment of $ 2,500 on its Term Loan A.

RECLASSIFICATIONS

Certain prior year amounts have been reclassified to conform to current presentation.

These reclassifications had no effect on the reported operating income or net income on the Consolidated Statements of Income and Comprehensive Income.

Certain costs previously classified as selling, general and administrative expense have been reclassified to merger and acquisition related expense on the Consolidated Statements of Income and Comprehensive Income.

Certain reclassifications have been made in the Company’s financial statements to conform to current presentation.

Advertising and marketing expense for the year ended December 31, 2023 amounting to $ 4,276 , 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 reported earnings or stockholders’ equity.

SEGMENT INFORMATION

The Company operates and manages its business as one reportable operating segment dedicated to providing innovative and proprietary nutritional supplements and wellness products for health-conscious consumers.

The measure of segment assets is reported on the consolidated balance sheet as total assets.

In addition, the Company manages its business activities on a consolidated basis.

The Company’s CODM allocates resources and assesses financial performance based upon financial data presented at the consolidated level.

The CODM uses net income as the sole measure of segment profit.

Significant segment expenses include cost of goods sold, advertising and marketing, merger and acquisition related and other expense, which are all presented on the consolidated statements of income and comprehensive income.

Employee compensation and benefits is also a significant segment expense.

Operating expense includes all remaining costs necessary to operate our business, including external professional services, insurance and other administrative expenses.

The following table presents the significant segment expenses and other segment items regularly reviewed by our CODM:

Years ended December 31,

Cost of goods sold

Employee compensation and benefits

Advertising and marketing

Operating expense

Merger and acquisition related

Total operating expense

Interest and other expense

The following table summarizes sales to customers by geographic regions:

Years ended December 31,

United States

Rest of world

Total revenue

SUBSEQUENT EVENTS

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

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-K

Item 9A. Controls and Procedures