10-K
1
ftlf_10k.htm
ANNUAL REPORT
ftlf_10k
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM 10-K
[X]
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 2020
OR
[
] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission
File Number: 000-52369
FITLIFE BRANDS, INC.
(Exact
name of Registrant as specified in its charter)
(State of Incorporation) (IRS Employer Identification No.)
5214 S. 136th Street, Omaha, NE 68137
(Address
of principal executive offices)
(402)
991-5618
(Registrant’s
telephone number)
Securities registered under Section 12(b) of the Exchange
Act:
None
Securities registered under Section 12(g) of the Exchange
Act:
Common Stock, $0.01 par value per share
Indicate
by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act. Yes
[ ] No [X]
Indicate
by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the
Act. Yes [ ] No [X]
Indicate
by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended, during the preceding
12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X]
No [ ]
Indicate
by check mark whether the registrant has submitted electronically
every Interactive Data File required to be submitted pursuant to
Rule 405 of Regulation S-T (§232.405 of this chapter) during the
preceding 12 months (or for such a shorter period that the
registrant was required to submit such files). Yes [X]
No [ ]
Indicate
by check mark whether the registrant is a large accelerated filer,
an accelerated filer, a non-accelerated filer, smaller reporting
company or emerging growth company. See definitions of “large
accelerated filer,” “accelerated filer,”
“smaller reporting company” and "emerging growth
company" in Rule 12b-2 of the Exchange Act.:
Large accelerated filer ☐ Accelerated filer ☐
Non–Accelerated filer ☒ Small reporting company ☒
Emerging growth company ☐
If an
emerging growth company, indicate by check mark if the registrant
has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided
pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant has filed a report on and
attestation to its management’s assessment of the
effectiveness of its internal control over financial reporting
under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b))
by the registered public accounting firm that prepared or issued
its audit report. ☐ Yes ☒ No
Indicate
by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Act). ☐ Yes
☒ No
The
aggregate market value of the voting and non-voting common equity
held by non-affiliates computed by reference to the price at which
the common equity was last sold, or the average bid and asked price
of such common equity, as of the last business day of the
registrant’s most recently completed second fiscal quarter,
was $5,120,383.
As of
March 26, 2021, there were 1,090,818 shares of common stock, $0.01
par value per share, issued and outstanding.
FITLIFE BRANDS, INC.
FORM 10-K ANNUAL REPORT
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2020 and 2019
TABLE OF CONTENTS
PAGE
PART I
ITEM 1. Business 1
ITEM 1A. Risk Factors 8
ITEM 1B. Unresolved Staff Comments 12
ITEM 2. Properties 12
ITEM 3. Legal Proceedings 12
ITEM 4. Mine Safety Disclosures 12
PART II
ITEM 6. Selected Financial Data 14
ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk 20
ITEM 8. Consolidated Financial Statements and Supplementary Data 20
ITEM 9A. Controls and Procedures 21
ITEM 9B. Other Information 21
PART III
ITEM 10. Directors, Executive Officers, and Corporate Governance 22
ITEM 11. Executive Compensation 22
ITEM 14. Principal Accountant Fees and Services 22
PART IV
ITEM 15. Exhibits and Financial Statement Schedules 23
SIGNATURES 25
CERTIFICATIONS
Exhibit 31 – Certification pursuant to Rule 13a-14(a) and 15d-14(a)
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Table of Contents
Forward Looking Statements — Cautionary Language
This Annual Report on Form 10-K (the “Annual Report”)
contains various “forward looking statements” within
the meaning of Section 21E of the Securities Exchange Act of 1934,
as amended, regarding future events or the future financial
performance of the Company that involve risks and uncertainties.
Certain statements included herein, including, without limitation,
statements related to anticipated cash flow sources and uses, and
words including but not limited to “anticipates”,
“believes”, “plans”, “expects”,
“future” and similar statements or expressions,
identify forward looking statements. Any forward-looking statements
herein are subject to certain risks and uncertainties in the
Company’s business, including but not limited to, reliance on
key customers and competition in its markets, market demand,
product performance, technological developments, maintenance of
relationships with key suppliers, difficulties of hiring or
retaining key personnel and any changes in current accounting
rules, all of which may be beyond the control of the Company. The
Company’s actual results could differ materially from those
anticipated in these forward-looking statements as a result of
certain factors, including those set forth herein.
This Annual Report, quarterly reports on Form 10-Q, current reports
on Form 8-K and other documents filed with the SEC include
additional factors, which could impact FitLife Brands, Inc.’s
business and financial performance. Moreover, FitLife Brands, Inc.
operates in a rapidly changing and competitive environment. New
risks emerge from time to time and it is not possible for
management to predict all such risks. Further, it is not possible
to assess the impact of all risks on FitLife Brands, Inc.’s
business or the extent to which any factor, or combination of
factors, may cause actual results to differ materially from those
contained in any forward-looking statements. Given these risks and
uncertainties, investors should not place undue reliance on
forward-looking statements as a prediction of actual results. In
addition, FitLife Brands, Inc. disclaims any obligation to update
any forward-looking statements to reflect events or circumstances
that occur after the date of the report.
Use of Market and Industry Data
This
Report includes market and industry data that we have obtained from
third party sources, including industry publications, as well as
industry data prepared by our management on the basis of its
knowledge of and experience in the industries in which we operate
(including our management’s estimates and assumptions
relating to such industries based on that knowledge). Management
has developed its knowledge of such industries through its
experience and participation in these industries. While our
management believes the third-party sources referred to in this
Report are reliable, neither we nor our management have
independently verified any of the data from such sources referred
to in this Report or ascertained the underlying economic
assumptions relied upon by such sources. Furthermore, references in
this Report to any publications, reports, surveys or articles
prepared by third parties should not be construed as depicting the
complete findings of the entire publication, report, survey or
article. The information in any such publication, report, survey or
article is not incorporated by reference in this
Report.
Forecasts
and other forward-looking information obtained from these sources
involve risks and uncertainties and are subject to change based on
various factors, including those discussed in sections entitled
“Forward-Looking Statements,” “Item 1A. Risk
Factors” and “Item 7. Management’s Discussion and
Analysis of Financial Condition and Results of Operations” in
this Report.
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Table of Contents
PART I
ITEM 1. BUSINESS
As used
in this Annual Report, “we”, “us”, “our”, “FitLife”, “FitLife Brands”, the
“Company” or
“our company”
refers to FitLife Brands, Inc. and all of its
subsidiaries.
Overview
FitLife Brands, Inc. (the
“Company”) is a national provider of innovative and
proprietary nutritional supplements for health-conscious consumers
marketed under the following brand names: (i) NDS Nutrition, PMD
Sports, SirenLabs, Core Active, and Metis Nutrition (together,
“NDS
Products”); and (ii)
iSatori, BioGenetic Laboratories, and Energize (together, the
"iSatori
Products"). The Company
distributes the NDS Products principally through franchised General
Nutrition Centers, Inc. (“GNC”) stores located both domestically and
internationally, and, with the launch of Metis Nutrition, through
corporate GNC stores in the United States. The iSatori
Products are sold through more than 17,000 retail locations, which
include specialty, mass, and online.
FitLife Brands is headquartered in Omaha,
Nebraska. For more information on the Company, please go towww.fitlifebrands.com.
The Company’s common stock currently trades under the symbol
“FTLF” on the OTC: PINK market.
Recent Developments
Share Repurchase Plan
On August 16, 2019, the Company's Board of
Directors (the "Board") authorized management to repurchase up to
$500,000 of the Company's Common Stock over the next 24 months (the
"Share
Repurchase Program"), which
Share Repurchase Program was previously reported on the Company's
Current Report on Form 8-K filed August 20, 2019. On September 23,
2019, the Board approved an amendment to the Company’s Share
Repurchase Program to increase the repurchase of up to $1,000,000
of the Company's Common Stock, its Series A Convertible Preferred
Stock, par value $0.01 per share ("Series A
Preferred"), and warrants to
purchase shares of the Company's Common Stock ("Warrants"), over the next 24 months, at a purchase price,
in the case of Common Stock, equal to the fair market value of the
Company's Common Stock on the date of purchase, and in the case of
Series A Preferred and Warrants, at a purchase price determined by
management, with the exact date and amount of such purchases to be
determined by management.
On
November 6, 2019, the Company’s Board of Directors amended
the previously approved Share Repurchase Program to increase the
amount of authorized repurchases to $2.5 million. All other
terms of the Share Repurchase Program remain
unchanged.
Subsequent to the
end of the fiscal year, on February 1, 2021, the Board approved an
additional amendment to the previously authorized Share Repurchase
Program. Under the terms of the amendment, the Company is
authorized to repurchase up to $5.0 million of securities issued by
the Company.
The
Company intends to conduct its Share Repurchase Program in
accordance with all applicable securities laws and regulations,
including Rule 10b-18 of the Securities Exchange Act of 1934, as
amended. Repurchases may be made at management's discretion from
time to time in the open market or through privately negotiated
transactions. The Company may suspend or discontinue the Share
Repurchase Program at any time, and may thereafter reinstitute
purchases, all without prior announcement.
During
the year ended December 31, 2020, the Company repurchased 11,900
shares of Common Stock under the Share Repurchase Program, or
approximately 1% of the issued and outstanding shares of the
Company’s Common Stock, through private transactions, as
follows:
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Table of Contents
COVID-19 Pandemic
The
COVID-19 pandemic has had an effect on the Company’s
employees, business and operations during the fiscal year ended
December 31, 2020, and those of its customers, vendors and business
partners. In this respect, the temporary or permanent closure of
some of our retail partners’ store locations and the
stay-at-home orders that occurred early in the pandemic negatively
affected our results from operations, although much of the impact
has been offset by an increase in revenue attributable to online
sales, and increased sales during the more recent quarters. Our
future financial position and operating results could be materially
and adversely affected in the event that a resurgence of COVID-19
cases leads to new stay-at-home orders and/or disruptions in both
our supply chain and manufacturing lead-times, which could lower
demand for the Company’s products and/or prevent the Company
from producing and delivering its products in a timely manner,
although the extent of these effects cannot be determined at this
time. The Company expects to continue to assess the evolving impact
of the COVID-19 pandemic and intends to make adjustments to its
business and operations accordingly.
CARES Act
The Coronavirus Aid, Relief, and Economic Security
Act ("CARES
Act") was enacted on March 27,
2020 in the United States. On April 27, 2020, the Company received
proceeds from a loan in the amount of $449,700 from its lender, CIT
Bank, N.A. (the “PPP Lender”), pursuant to approval by the U.S. Small
Business Administration (the “SBA”) for the PPP Lender to fund the
Company’s request for a loan under the SBA’s Paycheck
Protection Program (“PPP Loan”) created as part of the CARES ACT
administered by the SBA (the “Loan
Agreement”). In
accordance with the requirements of the CARES Act, the Company used
the proceeds from the PPP Loan primarily for payroll costs, covered
rent payments, and covered utilities during the eight-week period
commencing on the date of loan approval. The PPP Loan was scheduled
to mature on April 27, 2022, had a 1.0% interest rate, and was
subject to the terms and conditions applicable to all loans made
pursuant to the Paycheck Protection Program as administered by the
SBA under the CARES Act. Subsequent to the end of the fiscal year,
the Company was informed by the PPP Lender and the SBA that the
full balance of the PPP Loan, including accrued interest, was
forgiven on January 15, 2021.
The
CARES Act permits employers to defer payment of the employer
portion of payroll taxes owed on wages paid through December 31,
2020 for a period of up to two years. Through December 31, 2020,
the Company has deferred payment of $77,000, which amount has been
expensed and is included in accrued liabilities.
Line of Credit Agreement
On September 24, 2019, the Company entered into a
Revolving Line of Credit Agreement (the "Line of Credit
Agreement") with Mutual of
Omaha Bank (the "Lender"), subsequently acquired by CIT
Bank, providing the Company with a $2.5 million revolving line of
credit (the "Line of
Credit"). The Line of Credit
allows the Company to request advances thereunder and to use the
proceeds of such advances for working capital purposes until
September 23, 2020 (the “Maturity
Date”), unless renewed at
maturity upon approval by the Company’s Board of Directors
and the Lender. The Line of Credit is secured by all assets of the
Company. See Note 5 of the Footnotes to the Financial Statements
included elsewhere in this Annual Report. On March 20, 2020, the
Company drew on the Line of Credit in an amount equal to $2.5
million (the "Advance"), which Advance was repaid on April 29, 2020.
The Company elected to borrow such amounts to ensure it maintained
ample financial flexibility in light of the spread of the novel
coronavirus ("COVID-19"). The Advance was intended to provide the
Company with additional liquidity given the uncertainty regarding
the timing of collection of certain accounts receivable and in
anticipation of an expected negative impact on sales to GNC and our
other wholesale customers resulting from the COVID-19
outbreak.
On
August 4, 2020, the Company and the Lender amended the Line of
Credit Agreement to extend the Maturity Date to September 23, 2021.
The amendment also added a LIBOR floor of 75 bps to the Line of
Credit Agreement. All other terms of the Line of Credit remain
unchanged.
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Table of Contents
Industry
Overview
We
compete principally in the nutrition industry. The Nutrition
Business Journal categorizes the industry in the following
segments:
●
Natural
& Organic Foods (products such as cereals, milk, non-dairy
beverages and frozen meals);
●
Functional
Foods (products with added ingredients or fortification
specifically for health or performance purposes);
●
Natural
& Organic Personal Care and Household Products;
and
●
Supplements
(products focused on sports nutrition and weight
management).
Management believes
that the following factors drive growth in the nutrition
industry:
●
The
general public’s awareness and understanding of the
connection between diet and health;
●
The
aging population in the Company’s markets who tend to use
more nutritional supplements as they age;
●
Increasing
healthcare costs and the consequential trend toward preventative
medicine and non-traditional medicines; and
●
Product
introductions in response to new scientific studies.
Our Products
The
Company currently focuses its sales and marketing efforts on its
full line of sports, weight loss and general nutrition products
that are currently marketed and sold both nationally and
internationally. The Company currently markets more than 75
different NDS Products to more than 750 GNC franchise locations
located in the United States, as well as to additional franchise
locations in other countries, all of which are distributed
primarily through GNC’s distribution system. In addition,
following the launch of Metis Nutrition, we distribute products
through more than 1,600 corporate GNC stores in the United States.
We sell iSatori Products through more than 17,000 specialty, mass,
and online retail locations. A complete product list is available
on our website at fitlifebrands.com.
NDS Products
The
Company’s NDS Products include:
●
NDS
– Innovative weight loss, general health and sports nutrition
supplements – examples include Censor, Cardio Cuts and
LipoRUSH XT;
●
PMD
– Precision sports nutrition formulations for professional
muscular development – examples include Amplify XL, Pump Fuel
and Flex Stack;
●
Siren
Labs – Weight loss and sports nutrition performance enhancing
supplements for fitness enthusiasts – examples include
Isolate, Ultrakarbs, NeuroLean, and Vaso-Vol;
●
Metis
Nutrition – Multifaceted men’s health and weight loss
formulations, including JXT5 and PyroStim.
NDS
Products also include innovative diet, health and sports nutrition
supplements and related products marketed through its Core Active
Nutrition product line (“Core Active”). Core Active
products, which are sold exclusively online, provide essential
support for accelerated fitness and nutrition goals.
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Table of Contents
iSatori
Products
iSatori
Products include scientifically engineered nutritional products
that are sold online as well as through multiple retail partners.
iSatori Products
include:
●
Sports
Nutritionals: Products including Bio-Active Peptides
(Bio-GroTM), advanced creatine powder (Creatine A5X), and a
natural testosterone booster (Isa-TestGFTM);
●
Energy
Products: iSatori’s energy supplement, Energize, designed to
safely boost energy through a combination of time-released
caffeine, vitamins, and herbal formulations;
●
Meal
Replacements: protein-based products related to health nutrition
and performance, including iSatori’s 100% Bio-Active Whey, a
premium protein blend with Bio-Active Peptides; and
●
Weight
Loss Products: iSatori’s weight loss products are principally
sold under the BioGenetic Laboratories brand and include Forskolin
Lean & ToneTM and hCG Alternative, as well as
iSatori’s thermogenic, LIPO-DREXTM with C3G nutrient
partitioning technology.
Manufacturing, Sources and Availability of Raw
Materials
All of
the Company’s products are manufactured by FDA-regulated
contract manufacturers within the United States and Canada. Each
contract manufacturer is required by the Company to abide by
current Good Manufacturing Practices (“cGMPs”) to ensure quality and
consistency, and to manufacture its products according to the
Company’s strict specifications, and nearly all our contract
manufacturers are certified through a governing body such as the
NPA (“Natural Products
Association”) or NSF International. In most cases,
contract manufacturers purchase the raw materials based on the
Company’s specifications; however, from time to time, the
Company will license particular raw material ingredients and supply
its own source to the manufacturer. Once produced, in addition
to in-house testing performed by the contract manufacturer, the
Company may also perform independent analysis and testing. The
contract manufacturer either ships the finished product to one of
our fulfillment centers or directly to our customers. The
Company has implemented vendor qualification programs for all of
its suppliers and manufacturers, including analytical testing of
purchased products. As part of the vendor program, the Company also
periodically inspects vendors’ facilities to monitor quality
control and assurance procedures.
Product
Reformulations and New Product Identification
From
time to time we reformulate existing products to address market
developments and trends, and to respond to customer
requests. We also continually expand our product line through
the development of new products. New product ideas are derived from
a number of sources including trade publications, scientific and
health journals, consultants, distributors, and other third
parties. Prior to reformulating existing products or introducing
new products, we investigate product formulations as they relate to
regulatory compliance and other issues. We introduced a total of 32
new products during the year ended December 31, 2020, which
included 12 completely new products, and 20 product reformulations
and flavor extensions, and 11 new products during the year ended
December 31, 2019, which included 6 completely new products, and 5
product reformulations and flavor extensions.
Management
continually assesses and analyzes developing market trends to
detect and proactively address what they believe are areas of unmet
or growing demand that represent an opportunity for the Company
and, where deemed appropriate, attempt to introduce new products
and/or packaging solutions in direct response to meet that
demand.
Sales, Marketing and Distribution
NDS Products
NDS
Products are sold through more than 750 GNC franchise locations
located throughout the United States. The Company also distributes
NDS Products to additional franchise locations in other countries.
On May 1, 2014, the Company transitioned the majority of its
distribution of NDS Products to GNC’s centralized
distribution platform for all NDS Products, excluding protein
products, which transitioned in mid-September 2014. Prior to the
change, the majority of the Company’s revenue was realized
upon direct shipment of NDS Products to individual franchise
locations. For the years ended December 31, 2020 and 2019, the
majority of NDS Product sales were through GNC’s centralized
distribution platform.
Our
sales and marketing efforts are designed to expand sales of NDS
Products to additional GNC franchise locations both domestically
and internationally. In addition, we have recently relaunched our
Core Active brand as a new online-exclusive brand. The GNC domestic
franchise market remains the core of our operations. Management is
committed to continue to work collaboratively with GNC and its
franchisees to build on our established track records of growth and
innovation.
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Table of Contents
iSatori Products
iSatori
Products are distributed directly to consumers through the
Company's own websites and through other e-commerce platforms such
as Amazon.com, Inc. ("Amazon"), as well as through the specialty,
drug and mass-market distribution channels. iSatori products are
currently sold in over 17,000 retail locations.
In some
cases, iSatori utilizes independent brokers, who work in
conjunction with iSatori’s experienced sales employees and
management to oversee the drug and mass-market channels. iSatori
sells its products to mass-market merchandisers either directly or
through distributors of nutritional supplement products. In
addition to the Company’s online distribution channels for
direct-to-consumer sales, major iSatori customers include
BodyBuilding.com, CVS, GNC, Rite Aid, Vitamin Shoppe, Walgreens and
Wal-Mart.
iSatori’s
core strategy is to build and strengthen brands among consumers
seeking nutritional supplement products with a reputation for
quality and innovation. iSatori utilizes social media campaigns,
coupons, radio, and online advertising, plus cooperative and other
incentive programs, to build consumer awareness and generate trial
and repeat purchases to drive sales revenue. Our marketing team
regularly reviews the media mix for its effectiveness in creating
consumer demand and the highest return on investment
dollars.
Product Returns
We
currently have a 30-day product return policy for NDS Products,
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. Product sold to GNC may be returned from
store shelves or the distribution center in the event the product
is damaged, short dated, expired or recalled. GNC maintains a
customer satisfaction program that 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.
Competition
The
nutrition industry is highly competitive, and the Company has many
competitors that sell products similar to the Company’s
products. Many of the Company’s competitors have
significantly greater financial and human resources than our
own. The Company seeks to differentiate its products and
marketing from its competitors based on product quality, benefits,
and functional ingredients. Patent and trademark applications that
cover new formulas and embody new technologies are pursued whenever