FITLIFE BRANDS, INC. 10-K

ITEM 9A. CONTROLS AND PROCEDURES (a) Evaluation of Disclosure Controls and Procedures. 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. We are responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes of accounting principles generally accepted in the United States. This Annual Report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to an exemption for smaller reporting companies under Section 989G of the Dodd-Frank Wall Street Reform and Consumer Protection Act. - 33 - Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance of achieving their control objectives. Our CEO and CFO evaluated the effectiveness of our internal control over financial reporting as of December 31, 2024. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“ COSO ”) in Internal Control—Integrated Framework. Based on this evaluation, our CEO and CFO concluded that, as of December 31, 2024, our internal control over financial reporting was effective. (c) Changes in Internal Controls 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. ITEM 9B. 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. ITEM 9C. OTHER INFORMATION Not applicable. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS In accordance with General Instruction G(3) to Form 10-K, certain information required by this Item is incorporated herein by reference to our definitive proxy statement for our 2025 annual meeting of stockholders to be filed with the SEC. ITEM 11. EXECUTIVE COMPENSATION In accordance with General Instruction G(3) to Form 10-K, certain information required by this Item is incorporated herein by reference to our definitive proxy statement for our 2025 annual meeting of stockholders to be filed with the SEC. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT In accordance with General Instruction G(3) to Form 10-K, certain information required by this Item is incorporated herein by reference to our definitive proxy statement for our 2025 annual meeting of stockholders to be filed with the SEC. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE In accordance with General Instruction G(3) to Form 10-K, certain information required by this Item is incorporated herein by reference to our definitive proxy statement for our 2025 annual meeting of stockholders to be filed with the SEC. ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES In accordance with General Instruction G(3) to Form 10-K, certain information required by this Item is incorporated herein by reference to our definitive proxy statement for our 2025 annual meeting of stockholders to be filed with the SEC. - 34 - PART IV ITEM 15. EXHIBITS AND REPORTS Exhibits 3.1 Articles of Incorporation (incorporated by reference to Exhibit 3.1 filed with Amendment No. 3 to the Company’s Registration Statement on Form SB2 (Commission File No. 333-137170)). 3.2 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. 333-137170)). 3.3 Amended and Restated Bylaws of the Corporation (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on January 25, 2018). 3.4 Certificate of Amendment to Articles of Incorporation (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on September 13, 2010). 3.5 Certificate of Amendment to Articles of Incorporation to change name to FitLife Brands, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on October 1, 2013). 3.6 Certificate of Amendment to Articles of Incorporation to effect 1-for-10 reverse split (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on October 1, 2013). 3.7 Certificate of Designations, Preferences and Rights of the Series A Convertible Preferred Stock, dated November 13, 2018 (incorporated by reference to Exhibit 3.2 to the Company’s Quarterly Report on Form 10-Q filed on November 14, 2018). 3.8 Certificates of Change, dated April 11, 2019 (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on April 15, 2019). 3.9 Certificate of Designations, Preferences and Rights of the Series B Junior Preferred Stock, dated March 3, 2021 (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on March 4, 2021). 3.10 Certificate of Change for FitLife Brands, Inc., effective as of December 2, 2021 (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on December 7, 2021). 4.1 Form of Warrant, dated November 13, 2018 (incorporated by reference to Exhibit 4.1 to the Company’s Quarterly Report on Form 10-Q filed on November 14, 2018). 4.2 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). 4.3 Description of the Registrant’s Securities. 10.1 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). 10.2 Form of Subscription Agreement, dated November 13, 2018 (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed on November 14, 2018). 10.3 Employment Agreement, by and between FitLife Brands, Inc. and Patrick Ryan, dated June 13, 2019 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on June 18, 2019). 10.4 2019 Omnibus Incentive Plan (incorporated by reference to Appendix A to the Definitive Proxy Statement on Schedule 14A filed on July 12, 2019). 10.5 Revolving Line of Credit Agreement, dated as of September 24, 2019, between the Company and Mutual of Omaha Bank (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on September 26, 2019). 10.6 Note Payable Agreement by and between FitLife Brands, Inc. and CIT Bank, N.A. dated April 27, 2020 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on May 1, 2020). 10.7 Amended and Restated Credit Agreement, dated February 23, 2023, between FitLife Brands Inc., and First Citizens Bank (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed March 1, 2023). 10.8 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). 10.9 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). - 35 - 10.10 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). 10.11 Asset Purchase and Sale Agreement by and between MusclePharm Corporation and FitLife Brands, Inc., dated September 7, 2023 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on September 27, 2023). 10.12 Second Amended and Restated Credit Agreement, dated October 10, 2023, by and between FitLife Brands, Inc., and First Citizens Bank (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on October 13, 2023). 10.13 Term B Note, dated October 10, 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 on October 13, 2023). 10.14 Reaffirmation of Guaranty, dated October 10, 2023, by NDS Nutrition Products, Inc., iSatori, Inc., 1000374984 Ontario Inc., and Mimi’s Rock Corp., to and in favor of First Citizens Bank & Trust Company (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on October 13, 2023). 10.15 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). 14.1 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). 19.1 Insider Trading and Unauthorized Disclosure Policy 21 List of Subsidiaries. 23.1 Consent of Weinberg & Company, P.A. 31.1 Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act. 31.2 Certification of Principal Financial and Accounting Officer Pursuant to Section 302 of the Sarbanes-Oxley Act. 32.1 Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act. 97.1 FitLife Brands, Inc. Clawback Policy 101.INS 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 101.SCH Inline XBRL Taxonomy Extension Schema Document 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document 104 Cover Page Interactive Data File (embedded within the Inline XBRL Document and included in Exhibit 101) ITEM 16. FORM 10-K SUMMARY None. - 36 - SIGNATURES In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, there unto duly authorized. Registrant FitLife Brands, Inc. Date: March 27, 2025 By: /s/ Dayton Judd Dayton Judd Chief Executive Officer (Principal Executive Officer) Date: March 27, 2025 By: /s/ Jakob York Jakob York Chief Financial Officer (Principal Financial Officer) In accordance with the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the Company and in the capacities and on the dates indicated. Date: March 27, 2025 By: /s/ Dayton Judd Dayton Judd Chief Executive Officer and Chair of the Board Date: March 27, 2025 By: /s/ Grant Dawson Grant Dawson Director Date: March 27, 2025 By: /s/ Matthew Lingenbrink Matthew Lingenbrink Director Date: March 27, 2025 By: /s/ Todd Ordal Todd Ordal Director Date: March 27, 2025 By: /s/ Seth Yakatan Seth Yakatan Director - 37 - FITLIFE BRANDS, INC. TABLE OF CONTENTS Page REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (Weinberg & Company, PA, PCAOB ID: 572 F-1 CONSOLIDATED FINANCIAL STATEMENTS: Consolidated Balance Sheets at December 31, 2024 and 2023 F-2 Consolidated Statements of Income and Comprehensive Income for the years ended December 31, 2024 and 2023 F-3 Consolidated Statement of Stockholders’ Equity for the years ended December 31, 2024 and 2023 F-4 Consolidated Statements of Cash Flows for the years ended December 31, 2024 and 2023 F-5 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS F-6 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and the Board of Directors of FitLife Brands, Inc. Omaha, NE Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of FitLife Brands, Inc. (the “Company”) as of December 31, 2024 and 2023, the related consolidated statements of operations, stockholders’ equity, and cash flows for the years then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter 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; and ● 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. /s/ Weinberg & Company, P.A. Los Angeles, California March 27, 2025 F-1 FITLIFE BRANDS, INC. CONSOLIDATED BALANCE SHEETS (in thousands, except per share amounts) December 31, 2024 December 31, 2023 ASSETS: CURRENT ASSETS Cash and cash equivalents $ 4,468 $ 1,139 Restricted cash 52 759 Accounts receivable, net of allowance of doubtful accounts of $ 41 and $ 17 , respectively 1,626 2,046 Inventories, net of allowance for obsolescence of $ 100 and $ 162 , respectively 11,074 9,091 Sales tax receivable 25 1,019 Prepaid expense and other current assets 898 639 Total current assets 18,143 14,693 Property and equipment, net 75 137 Right of use asset 412 121 Intangibles, net of amortization of $ 152 and $ 113 , respectively 26,235 26,309 Goodwill 13,022 13,294 Deferred tax asset 644 792 TOTAL ASSETS $ 58,531 $ 55,346 LIABILITIES AND STOCKHOLDERS' EQUITY: CURRENT LIABILITIES: Accounts payable $ 4,067 $ 3,261 Accrued expense and other liabilities 684 1,026 Income taxes payable 1,415 892 Product returns 564 571 Term loan – current portion 4,500 4,500 Lease liability - current portion 81 87 Total current liabilities 11,311 10,337 Term loan, net of current portion and unamortized deferred finance costs 8,550 15,509 Long-term lease liability, net of current portion 331 51 Deferred tax liability 2,213 2,413 TOTAL LIABILITIES 22,405 28,310 STOCKHOLDERS’ EQUITY: Preferred stock, $ 0.01 par value, 10,000 shares authorized, none outstanding as of December 31, 2024 and 2023 - - Common stock, $ 0.01 par value, 120,000 shares authorized; 9,210 and 9,196 issued and outstanding as of December 31, 2024 and 2023, respectively 92 92 Additional paid-in capital 31,129 30,653 Retained earnings (accumulated deficit) 5,567 ( 3,417 ) Foreign currency translation adjustment ( 662 ) ( 292 ) TOTAL STOCKHOLDERS' EQUITY 36,126 27,036 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 58,531 $ 55,346 The accompanying notes are an integral part of these consolidated financial statements. F-2 FITLIFE BRANDS, INC. CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (in thousands, except per share amounts) Years ended December 31, 2024 2023 Revenue $ 64,469 $ 52,700 Cost of goods sold 36,389 31,268 Gross profit 28,080 21,432 OPERATING EXPENSE: Advertising and marketing 4,626 4,276 Selling, general and administrative 9,972 7,885 Merger and acquisition related 255 1,627 Depreciation and amortization 108 94 Total operating expense 14,961 13,882 OPERATING INCOME 13,119 7,550 OTHER EXPENSE (INCOME) Interest income ( 69 ) ( 289 ) Interest expense 1,367 1,025 Foreign exchange gain ( 50 ) ( 189 ) Total other expense, net 1,248 547 INCOME BEFORE INCOME TAX PROVISION 11,871 7,003 PROVISION FOR INCOME TAXES 2,887 1,707 NET INCOME $ 8,984 $ 5,296 NET INCOME PER SHARE Basic $ 0.98 $ 0.59 Diluted $ 0.91 $ 0.54 Basic weighted average common shares 9,197 8,980 Diluted weighted average common shares 9,898 9,810 COMPREHENSIVE INCOME: NET INCOME $ 8,984 $ 5,296 Foreign currency translation adjustment ( 370 ) ( 292 ) Comprehensive income $ 8,614 $ 5,004 The accompanying notes are an integral part of these consolidated financial statements. F-3 FITLIFE BRANDS, INC. CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (in thousands) Common stock Additional paid-in Retained earnings (accumulated Foreign currency translation Shares Amount capital deficit) adjustment Total YEAR ENDED DECEMBER 31, 2024 JANUARY 1, 2024 9,196 $ 92 $ 30,653 $ ( 3,417 ) $ ( 292 ) $ 27,036 Exercise of stock options 14 - 17 - - 17 Stock-based compensation - - 459 - - 459 Comprehensive loss - - - - ( 370 ) ( 370 ) Net income - - - 8,984 - 8,984 DECEMBER 31, 2024 9,210 $ 92 $ 31,129 $ 5,567 $ ( 662 ) $ 36,126 YEAR ENDED DECEMBER 31, 2023 JANUARY 1, 2023 9,014 $ 90 $ 30,011 $ ( 8,713 ) $ - $ 21,388 Shares surrendered by former employee ( 122 ) - - - - - Exercise of stock options 18 - 6 - - 6 Exercise of warrants 286 2 163 - - 165 Stock-based compensation - - 473 - - 473 Comprehensive loss - - - - ( 292 ) ( 292 ) Net income - - - 5,296 - 5,296 DECEMBER 31, 2023 9,196 $ 92 $ 30,653 $ ( 3,417 ) $ ( 292 ) $ 27,036 The accompanying notes are an integral part of these consolidated financial statements. F-4 FITLIFE BRANDS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Years ended December 31, 2024 2023 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 8,984 $ 5,296 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 108 94 Allowance for doubtful accounts 24 ( 33 ) Allowance for inventory obsolescence ( 62 ) 55 Stock-based compensation 459 473 Amortization of deferred finance costs 41 15 Amortization of inventory step-up - 323 Changes in operating assets and liabilities: Accounts receivable 361 ( 882 ) Inventories ( 2,109 ) 1,026 Deferred taxes 148 957 Prepaid expense, other assets and sales tax receivable 692 ( 178 ) Right of use asset 90 83 Accounts payable 866 ( 2,679 ) Income taxes payable 634 ( 356 ) Lease liability ( 107 ) ( 77 ) Accrued liabilities and other liabilities ( 512 ) 122 Product returns ( 7 ) ( 19 ) Net cash provided by operating activities 9,610 4,220 CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment ( 10 ) ( 106 ) Cash paid for acquisition of Mimi’s Rock Corp. - ( 17,099 ) Cash paid for acquisition of MusclePharm assets - ( 18,788 ) Net cash used in investing activities ( 10 ) ( 35,993 ) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from exercise of stock options and warrants 17 171 Borrowings on term loans - 22,500 Payments on term loans ( 7,000 ) ( 2,375 ) Net cash provided by (used in) financing activities ( 6,983 ) 20,296 Foreign currency impact on cash 5 98 CHANGE IN CASH AND RESTRICTED CASH 2,622 ( 11,379 ) CASH AND RESTRICTED CASH, BEGINNING OF PERIOD 1,898 13,277 CASH AND RESTRICTED CASH, END OF PERIOD $ 4,520 $ 1,898 Supplemental cash flow disclosure Cash paid for income taxes $ 2,498 $ 698 Cash paid for interest, net of amounts capitalized $ 1,361 $ 777 Non-cash investing and financing activities Addition to right-of-use assets from new operating lease liabilities $ 386 $ - The accompanying notes are an integral part of these consolidated financial statements. F-5 FITLIFE BRANDS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2024 AND 2023 (in thousands, except per share amounts) NOTE 1. DESCRIPTION OF BUSINESS Summary FitLife Brands, Inc. (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"); (iii) Dr. Tobias, All Natural Advice, and Maritime Naturals, (together, the “MRC Products”); 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 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. For more information on the Company, please go to www.fitlifebrands.com. The Company’s common stock, par value $ 0.01 per share (“Common Stock”), trades under the symbol “FTLF” on the Nasdaq Capital Market. Stock Split 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 February 28, 2023, the Company completed the acquisition of MRC. 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. Acquisition of MusclePharm Assets On October 10, 2023, the Company acquired substantially all of the assets of MusclePharm Corporation (“MusclePharm”) through an asset purchase transaction under Section 363 of the U.S. Bankruptcy Code. Total consideration for the acquisition was approximately $ 18,500 . See Note 9 for additional disclosure regarding the acquisition of MusclePharm. NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Company prepares its financial statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Significant accounting policies are as follows: F-6 Principles of Consolidation The consolidated financial statements include the accounts of the Company and its subsidiaries. Intercompany accounts and transactions have been eliminated in the consolidated financial statements. Foreign Currency Translation The functional currency of the Company is the U.S. dollar. The functional currency of the Company’s Canadian subsidiaries is the Canadian dollar. The assets and liabilities of the Company’s foreign subsidiaries are translated into U.S. dollars using end-of-period exchange rates. Changes in reported amounts of assets and liabilities of foreign subsidiaries that occur as a result of changes in exchange rates between foreign subsidiaries’ functional currencies and the U.S. dollar are included in foreign currency translation adjustment. Foreign currency translation adjustment is included as a component of stockholders’ equity in the accompanying consolidated balance sheets. Revenue and expense transactions use an average rate prevailing during the period of the related transaction. Transaction gains and losses that arise from exchange rate fluctuations denominated in a currency other than the functional currency of each subsidiary are included in the results of operations as incurred. Use of Estimates and Assumptions The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect (i) the reported amounts of assets and liabilities, (ii) the disclosure of contingent assets and liabilities known to exist as of the date the financial statements are published, and (iii) the reported amount of net sales and expense recognized during the periods presented. Those estimates and assumptions include estimates for reserves of uncollectible accounts receivable, allowance for inventory obsolescence, product returns, depreciable lives of property and equipment, allocation of purchase price from business combinations, analysis of impairment of goodwill, realization of deferred tax assets, accruals for potential liabilities and assumptions made in valuing stock instruments issued for services. Management evaluates these estimates and assumptions on a regular basis. Actual results could differ from those estimates. Revenue Recognition 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 , 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. ASC 606 creates a five-step model that requires entities to exercise judgment when considering the terms of contract(s), which includes (1) identifying the contract(s) or agreement(s) with a customer, (2) identifying our performance obligations in the contract or agreement, (3) determining the transaction price, (4) allocating the transaction price to the separate performance obligations, and (5) recognizing revenue as each performance obligation is satisfied. Under ASC 606, revenue is recognized when performance obligations under the terms of a contract are satisfied, which occurs for the Company upon shipment or delivery of products to our customers based on written sales terms. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring the products to a customer. All products sold by the Company are distinct individual products and consist of nutritional supplements and wellness products. The products are offered for sale solely as finished goods, and there are no performance obligations required post-shipment for customers to derive the expected value from them. 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 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 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 paid to Amazon are recorded in advertising and marketing expense in the consolidated statements of income and comprehensive income. F-7 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, which consists of revenue generated from sales on the Company’s own websites as well as third-party e-commerce platforms such as Amazon, for the year ended December 31, 2024 was approximately 67 % of total revenue, compared to roughly 63 % of total revenue during the same twelve-month period in 2023. Sales to customers in the U.S. 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, 2024 2023 Legacy FitLife $ 25,387 $ 28,077 MRC 29,036 24,370 MusclePharm 10,046 253 Total Revenue $ 64,469 $ 52,700 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. Shipping and handling activities are performed before the customer obtains control of the goods and therefore represent a fulfillment activity rather than promised goods to the customer. Payments for sales are generally made by check, credit card, or wire transfer. Historically the Company has not experienced any significant payment delays from customers. For direct-to-consumer sales, the Company allows for returns within 30 days of purchase. Our wholesale customers, such as GNC, may return purchased products to the Company under certain circumstances, which include expired or soon-to-be-expired products located in GNC corporate stores or at any of its distribution centers, and products that are subject to a recall or that contain an ingredient or ingredients that are subject to a recall by the U.S. Food and Drug Administration. A right of return does not represent a separate performance obligation, but because customers are allowed to return products, the consideration to which the Company expects to be entitled is variable. Upon evaluation of returns, the Company determined that product returns are immaterial, and therefore believes it is probable that such returns will not cause a significant reversal of revenue in the future. We assess our contracts and the reasonableness of our conclusions on a quarterly basis. Customer and Vendor Concentration Total net sales to GNC during 2024 and 2023 were 23 % and 33 % of total revenue for the years ended December 31, 2024 and 2023, respectively. Accounts receivable attributable to GNC as of December 31, 2024 and 2023 represented 35 % and 30 % of the Company’s total accounts receivable balance, respectively. 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. F-8 Accounts Receivable and Allowance for Doubtful Accounts All of the Company’s accounts receivable balance is related to trade receivables. Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in its existing accounts receivable. The Company will maintain allowances for doubtful accounts, estimating losses resulting from the inability of its customers to make required payments for products. Accounts with known financial issues are first reviewed and specific estimates are recorded. The remaining accounts receivable balances are then grouped into categories by the number of days the balance is past due, and the estimated loss is recorded based upon management’s assessment of collectability. Account balances are charged off against the allowance when it is probable that the receivable will not be recovered. As of December 31, 2024 and 2023, the Company had provided a reserve for doubtful accounts of $ 41 and $ 17 , respectively. Product Returns, Sales Incentives and Other Forms of Variable Consideration In measuring revenue and determining the consideration the Company is entitled to as part of a contract with a customer, the Company takes into account the related elements of variable consideration. Such elements of variable consideration include, but are not limited to, product returns and sales incentives, such as markdowns and margin adjustments. For these types of arrangements, the adjustments to revenue are recorded at the later of when (i) the Company recognizes revenue for the transfer of the related products to the customers, or (ii) the Company pays, or promises to pay, the consideration. We currently have a 30-day product return policy for direct-to-consumer sales, which allows for a 100% sales price refund for the return of unopened and undamaged products purchased from us online through one of our websites or e-commerce platforms. Product sold to certain wholesale customers may be returned from store shelves or the distribution center in the event product is damaged, short dated, expired or recalled. GNC maintains a customer satisfaction program which allows customers to return product to the store for credit or refund. Subject to certain terms and restrictions, GNC may require reimbursement from vendors for unsaleable returned product through either direct payment or credit against a future invoice. We also support a product return policy for iSatori Products, whereby customers can return product for credit or refund. Product returns can and do occur from time to time and can be material. For the sale of goods with a right of return, the Company estimates variable consideration using the most likely amount method and recognizes revenue for the consideration it expects to be entitled to when control of the related product is transferred to the customers and records a product returns liability for the amount it expects to credit back its customers. Under this method, certain forms of variable consideration are based on expected sell-through results, which requires subjective estimates. These estimates are supported by historical results as well as specific facts and circumstances related to the current period. The product returns liability includes estimates that directly impact reported revenue. These estimates are calculated based on a history of actual returns, estimated future returns and information provided by customers regarding their inventory levels. Consideration of these factors results in an estimate for anticipated sales returns that reflects increases or decreases related to seasonal fluctuations. In addition, as necessary, product returns liability may be established for significant future known or anticipated events. The types of known or anticipated events that are considered, and will continue to be considered, include, but are not limited to, changes in the retail environment and the Company's decision to continue to support new and existing products. Information for product returns is received on a regular basis and adjusted for accordingly. Adjustments for returns are based on factual information and historical trends for Company products and are specific to each distribution channel. We monitor, among other things, remaining shelf life and sell-through data on a weekly basis. If we determine there are any risks or issues with any specific products, we accrue sales return allowances based on management’s assessment of the overall risk and likelihood of returns in light of all information available. Total allowance for product returns, sales returns and incentive programs as of December 31, 2024 and 2023 amounted to $ 564 and $ 571 , respectively. F-9 Cost of Goods Sold 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 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 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 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. Inventory Inventory is stated at the lower of cost or net realizable value, with costs determined on a first-in, first-out (FIFO) basis. We regularly review our inventory quantities on hand and record a provision for excess and obsolete inventory based primarily on our estimated forecast of product demand and/or our ability to sell the product(s) concerned and production requirements. Demand for our products can fluctuate significantly. Factors that could affect demand for our products include unanticipated changes in consumer preferences, general market conditions or other factors, which may result in cancellations of advance orders or a reduction in the rate of reorders placed by customers. Additionally, our management’s estimates of future product demand may be inaccurate, which could result in an understated or overstated provision required for excess and obsolete inventory. As of December 31, 2024 and 2023, the aggregate allowance for expiring, slow moving and excess inventory amounted to $ 100 and $ 162 , respectively. Leases The Company accounts for its leases in accordance with the guidance of ASC 842, Leases . The Company determines whether a contract is, or contains, a lease at inception. Right-of-use assets represent the Company’s right to use an underlying asset during the lease term, and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Right-of-use assets and lease liabilities are recognized at lease commencement based upon the estimated present value of unpaid lease payments over the lease term. The Company uses its incremental borrowing rate based on the information available at lease commencement in determining the present value of unpaid lease payments. Property and Equipment Property and equipment is recorded at cost and depreciated over the estimated useful lives of the assets using the straight-line method. The Company amortizes leasehold improvements over the estimated life of these assets or the term of the lease, whichever is shorter. When items are retired or otherwise disposed of, income is charged or credited for the difference between net book value and proceeds realized. Ordinary maintenance and repairs are charged to expense as incurred, and replacements and betterments are capitalized. Management regularly reviews property, equipment and other long-lived assets for possible impairment. This review occurs annually or more frequently if events or changes in circumstances indicate the carrying amount of the asset may not be recoverable. Based upon management’s annual assessment, there were no indicators of impairment of the Company’s property and equipment and other long-lived assets as of December 31, 2024 and 2023. F-10 Intangible and Long-lived Assets Intangible assets are recorded at cost and amortized using the straight-line method over their estimated useful lives. The Company regularly reviews the carrying value and estimated lives of its long-lived assets and intangible assets to determine whether indicators of impairment may exist which warrant adjustments to carrying values or estimated useful lives. The determinants used for this evaluation include management’s estimate of the asset’s ability to generate positive income from operations and positive cash flow in future periods as well as the strategic significance of the assets to the Company’s business objectives. 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. Based on management’s assessment, there were no indicators of impairment during the years ended December 31, 2024 and 2023. Goodwill The Company has determined that it has a single reporting unit for purposes of performing its goodwill impairment test. The Company reviews goodwill for impairment on an annual basis or whenever events or changes in circumstances indicate the carrying value may not be recoverable. The Company first assesses qualitative factors to determine whether it is more-likely-than-not that the fair value of the reporting unit is less than the carrying amount as a basis for determining whether it is necessary to perform an impairment test. If the qualitative assessment warrants further analysis, the Company compares the fair value of the reporting unit to its carrying value. The fair value of the reporting unit is determined using the market approach. The Company determines the amount of a potential goodwill impairment by comparing the fair value of the reporting unit with its carrying amount. To the extent the carrying value of a reporting unit exceeds its fair value, a goodwill impairment charge is recognized. As the Company uses the market approach to determine fair value of the reporting unit, the price of its Common Stock is an important component of the fair value calculation. If the Company’s stock price experiences significant price and volume fluctuations, this will impact the fair value of the reporting unit, which can lead to potential impairment in future periods. Based on management’s assessment, there were no indicators of impairment during the years ended December 31, 2024 and 2023. Acquisitions and Business Combinations The Company allocates the fair value of purchase consideration to the tangible assets acquired, liabilities assumed, and separately identified intangible assets acquired based on their estimated fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. Such valuations require management to make significant estimates and assumptions, especially with respect to intangible assets. Significant estimates in valuing certain intangible assets include, but are not limited to, future expected cash flows from acquired trademarks and trade names, useful lives, and discount rates. Management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. During the measurement period, which is the period needed to gather all information necessary to make the purchase price allocation, not to exceed one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings. Income Taxes The Company accounts for income taxes under FASB ASC Topic 740, Income Taxes (“ASC 740”). Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recognized for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The deferred tax assets of the Company relate primarily to operating loss carryforwards for federal income tax purposes. The deferred tax liabilities of the Company relate primarily to intangible assets that are not deductible for tax purposes in the jurisdictions to which they relate. The Company periodically evaluates its tax positions to determine whether it is more likely than not that such positions would be sustained upon examination by a tax authority for all open tax years, as defined by the statute of limitations, based on their technical merits. The Company accrues interest and penalties, if incurred, on unrecognized tax benefits as components of the income tax provision in the accompanying consolidated statements of income and comprehensive income. As of December 31, 2024 and 2023, the Company has not established a liability for uncertain tax positions. F-11 Net Income Per Share Basic net income per share is computed by dividing net income by the weighted average number of common shares outstanding for the period. Diluted earnings per share is computed by dividing the net income available to common stockholders by the weighted average number of common shares outstanding plus the number of additional common shares that would have been outstanding if all dilutive potential common shares had been issued using the treasury stock method. Potential common shares are excluded from the computation when their effect is antidilutive. The dilutive effect of potentially dilutive securities is reflected in diluted net income per share if the exercise prices were lower than the average fair market value of common shares during the reporting period. Basic and diluted weighted-average shares outstanding and antidilutive options that were excluded from diluted weighted average shares outstanding are as follows: December 31, 2024 2023 Basic weighted average shares outstanding 9,197 8,980 Dilutive effect of potential common shares 701 830 Diluted weighted average shares outstanding 9,898 9,810 Antidilutive options 22 234 Fair Value Measurements The Company uses various inputs in determining the fair value of its investments and measures these assets on a recurring basis. Financial assets recorded at fair value in the balance sheets are categorized by the level of objectivity associated with the inputs used to measure their fair value. FASB ASC Topic 820, Fair Value , establishes a three-level valuation hierarchy for the use of fair value measurements based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date: ● Level 1 – Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. ● Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means. ● Level 3 – Inputs that are both significant to the fair value measurement and unobservable. These inputs rely on management’s own assumptions about the assumptions that market participants would use in pricing the asset or liability. The unobservable inputs are developed based on the best information available in the circumstances and may include the Company’s own data. 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 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. F-12 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 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. Recognition of compensation expense for non-employees is in the same period and manner as if the Company had paid cash for the services. The fair value of stock-based payments is estimated using the Black-Scholes option-pricing model or other applicable valuation model such as the Monte Carlo valuation pricing model, which uses certain assumptions related to risk-free interest rates, expected volatility, expected life, and future dividends. The assumptions used could materially affect compensation expense recorded in future periods. 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 (“ 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. NOTE 3. INTANGIBLE ASSETS Intangible assets are amortized on a straight-line basis over their estimated useful lives. The following table sets forth the components of the identifiable intangible assets acquired and their estimated useful lives as of December 31, 2024 and 2023. As of December 31, 2024 Gross amount Accumulated amortization Net book value Useful life (years) Brands $ 26,166 $ - $ 26,166 Indefinite Client relationships 80 ( 75 ) 5 4 Formulations 70 ( 66 ) 4 4 Trademarks 60 - 60 Indefinite Website 11 ( 11 ) - 3 Total identifiable assets $ 26,387 $ ( 152 ) $ 26,235 F-13 As of December 31, 2023 Gross amount Accumulated amortization Net book value Useful life (years) Brands $ 26,201 $ - $ 26,201 Indefinite Client relationships 80 ( 55 ) 25 4 Formulations 70 ( 48 ) 22 4 Trademarks 60 - 60 Indefinite Website 11 ( 10 ) 1 3 Total identifiable assets $ 26,422 $ ( 113 ) $ 26,309 Amortization expense was $ 38 and $ 42 for the years ended December 31, 2024 and 2023, respectively. NOTE 4. INVENTORIES The Company’s inventories as of December 31, 2024 and 2023 were as follows: December 31, 2024 December 31, 2023 Finished goods $ 10,348 $ 8,292 Components 826 961 Allowance for obsolescence ( 100 ) ( 162 ) Total $ 11,074 $ 9,091 NOTE 5. 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 Equipment $ 964 $ 951 Accumulated depreciation ( 889 ) ( 814 ) Total $ 75 $ 137 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. NOTE 6. NOTES PAYABLE Notes payable consisted of the following: December 31, 2024 December 31, 2023 Term loan A $ 5,625 $ 10,625 Term loan B 7,500 9,500 Line of credit - - Unamortized debt issuance costs ( 75 ) ( 116 ) Total 13,050 $ 20,009 Current ( 4,500 ) ( 4,500 ) Long term $ 8,550 $ 15,509 F-14 Credit Agreements – First Citizens Bank 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 “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 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. F-15 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: Year ending 2025 4,500 2026 4,500 2027 2,625 2028 1,500 Total balance outstanding as of December 31, 2024 $ 13,125 NOTE 7. EQUITY The Company is authorized to issue 120,000 shares of Common Stock, $ 0.01 par value per share, of which 9,210 and 9,196 shares of Common Stock were issued and outstanding as of December 31, 2024 and 2023, respectively. Common Stock Issued for Services 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 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. F-16 Options Information regarding options outstanding as of December 31, 2024 is as follows: Number of Weighted average Weighted average remaining life options exercise price (years) Outstanding, December 31, 2022 759 $ 1.55 5.3 Issued 234 9.55 Exercised ( 18 ) 0.35 Forfeited ( 6 ) 15.16 Outstanding, December 31, 2023 969 $ 3.41 4.5 Issued 22 16.63 Exercised ( 14 ) 1.25 Forfeited - - Outstanding, December 31, 2024 977 3.74 3.5 Outstanding Exercisable Exercise price per share Total number of options Weighted average remaining life (years) Weighted average exercise price Number of vested options Weighted average exercise price $ 0.35 - 2.62 686 3.5 $ 1.16 686 $ 1.16 $ 5.77 - 16.92 291 3.7 $ 9.84 191 $ 9.41 977 3.5 $ 3.74 877 $ 2.95 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 . During the year ended December 31, 2024, the Company granted stock options to employees to purchase 22 shares of Company Common Stock. The stock options are exercisable at an average price of $ 16.63 per share, expire in five years and primarily 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 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: stock price of $ 16.63 per share, expected term of 5 years, volatility of 45 %, dividend rate of 0 % and risk-free interest rate of 3.4 %. 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 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; the expected volatility is based upon historical volatility of the Company’s Common Stock; 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. 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 $ 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: stock price of $ 9.55 per share, expected term of 5 years, volatility of 45 %, dividend rate of 0 % and risk-free interest rate of 4.1 %. 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; 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. 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. F-17 Warrants 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 . There are no outstanding warrants to purchase shares of Common Stock as of December 31, 2024 and 2023. NOTE 8. ACQUISITION OF MIMI ’ S ROCK CORP 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 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: Accounts receivable $ 250 Inventories 1,166 Prepaid expense and other assets 220 Sales tax receivable 862 Right of use asset 98 Property and equipment 32 Intangible assets 7,630 Goodwill 12,764 Accounts payable and accrued expense ( 2,694 ) Income tax payable ( 651 ) Product returns ( 23 ) Lease liabilities ( 111 ) Deferred tax liabilities ( 2,444 ) Net assets acquired $ 17,099 The purchase was intended to augment and diversify the Company’s product offerings and lineup. Key factors that contributed to the recorded intangible assets and goodwill were the opportunity to complement existing operations of the Company and the opportunity to generate future synergies within the nutritional supplement and wellness business. Pro Forma Condensed Combined Financial Information (Unaudited) (In thousands) 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 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. F-18 Year ended December 31, 2023 Revenue $ 57,755 Net income $ 7,076 Diluted net income per share $ 0.74 The pro forma adjustments do not reflect adjustments for anticipated operating efficiencies that the Company expects to achieve as a result of this acquisition. The pro forma financial information is for informational purposes only and does not purport to present what the Company’s results would actually have been had the transaction actually occurred on the dates presented or to project the combined company’s results of operations or financial position for any future period. MRC revenue for the 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. NOTE 9. 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 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. NOTE 10. INCOME TAXES Components of the total provision for income taxes are as follows: Year ended December 31, 2024 Year ended December 31, 2023 Current tax expense (benefit) Domestic $ 1,165 $ ( 77 ) Foreign 1,570 755 Deferred tax expense (benefit) Domestic 148 1,056 Foreign 4 ( 27 ) Provision for income taxes $ 2,887 $ 1,707 The Company is subject to income tax in the U.S., Canada, Germany and Barbados through its wholly owned subsidiaries. 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. F-19 Year ended Year ended December 31, 2024 December 31, 2023 Provision for income taxes based on statutory rate $ 2,668 1,562 Increase (decrease) resulting from: Non-deductible expenses 806 28 Difference in jurisdictional tax rates ( 401 ) 128 True up of prior period ( 57 ) ( 86 ) Change in valuation allowance ( 179 ) - Other 50 75 Provision for income taxes $ 2,887 $ 1,707 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 807 964 Tangible assets ( 3 ) ( 25 ) Intangible assets ( 331 ) ( 127 ) Provisions and reserves 654 490 Subtotal 1,127 1,302 Valuation allowance ( 483 ) ( 510 ) Deferred tax assets, net $ 644 $ 792 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 $ 3,349 $ 4,134 Intangible assets ( 2,213 ) ( 2,413 ) Subtotal 1,136 1,721 Valuation allowance ( 3,349 ) ( 4,134 ) Deferred tax liabilities, net $ ( 2,213 ) $ ( 2,413 ) 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. As of December 31, 2024, the Company has the following U.S. federal losses carried forward. U.S. federal losses incurred prior to 2018 have a carry forward of 20 years, subsequent losses can be carried forward indefinitely. The Canadian non-capital loss carry forwards expire between 2038 and 2044. Year of expiration U.S. Federal Canada (USD) Total 2034 $ 922 $ - $ 922 2035 2,923 - 2,923 2036 - - - 2037 - - - 2038 - 1,346 1,346 2039 - 3,827 3,827 2040 - 1,988 1,988 2041 - 1,635 1,635 2042 - 1,753 1,753 2043 - 2,069 2,069 2044 - 19 19 Total $ 3,845 $ 12,637 $ 16,482 F-20 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. 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. 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. 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. Because the tax matters challenged by tax authorities are typically complex, the ultimate outcome of these challenges is uncertain. The Company recognizes the effects of uncertain tax positions in the consolidated financial statements after determining that it is more-likely-than- not the uncertain tax positions will be sustained. 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, 2024, the Company recorded an immaterial amount of interest and penalties in the consolidated statement of income and comprehensive income. NOTE 11. COMMITMENTS AND CONTINGENCIES We are currently not involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of the Company or any of its subsidiaries, threatened against or affecting the Company, our Common Stock, any of our subsidiaries or of the Company’s or our subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect. NOTE 12. RECLASSIFICATIONS 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. F-21 NOTE 13. 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, 2024 2023 Cost of goods sold $ 36,389 $ 31,268 Employee compensation and benefits 6,028 5,231 Advertising and marketing 4,626 4,276 Operating expense 4,052 2,748 Merger and acquisition related 255 1,627 Total operating expense $ 14,961 $ 13,882 Interest and other expense $ 1,248 $ 547 The following table summarizes sales to customers by geographic regions: Years ended December 31, 2024 2023 United States $ 61,474 $ 48,990 Rest of world 2,995 3,710 Total revenue $ 64,469 $ 52,700 NOTE 14. 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. F-22