10-Q - FTLF - Equibles

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES<br>EXCHANGE ACT OF 1934<br><br><br><br><br><br>For<br>the quarterly period ended March 31, 2020
☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES<br>EXCHANGE ACT<br><br><br><br><br><br>For<br>the transition period from N/A to N/A
---	---

Commission File No. 000-52369

FITLIFE BRANDS, INC.

(Name of small business issuer as specified in its charter)

Nevada	20-3464383
(State<br>or other jurisdiction of incorporation)	(IRS<br>Employer Identification No.)

5214 S. 136th Street, Omaha, NE 68137

(Address of principal executive offices)

(402) 991-5618

(Issuer’s telephone number)

(Former name, former address and former fiscal year, if changed since last report)

Securities registered under Section 12(b) of the Exchange Act: None

Securities registered pursuant to Section 12(g) of the Exchange Act:

Common Stock, par value $0.01 per share

Indicate by check mark whether the Registrant (1) has filed all reports required by Section 13 or 15(d) of the Securities Exchange Act of 1934 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 ☒ 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 shorter period that the registrant was required to submit such files). Yes ☒ 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<br>accelerated filer	☐	Accelerated<br>filer	☐
Non–Accelerated<br>filer	☒	Small<br>reporting company	☒
		Emerging<br>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 is a shell company (as defined in Rule 12b–2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

As of May 14, 2020, a total of 1,060,033 shares of the Registrant’s Common Stock, par value $0.01 per share, were issued and outstanding.

FITLIFE BRANDS, INC.

INDEX TO FORM 10-Q FILING

FOR THE QUARTER ENDED MARCH 31, 2020

TABLE OF CONTENTS

		PAGE
PART<br>I - FINANCIAL INFORMATION
Item 1.	Condensed<br>Consolidated Financial Statements (unaudited)
	Condensed<br>Consolidated Balance Sheets (unaudited)	1
	Condensed<br>Consolidated Statements of Operations (unaudited)	2
	Condensed<br>Consolidated Statements of Stockholders’ Equity<br>(unaudited)	3
	Condensed<br>Consolidated Statements of Cash Flows (unaudited)	4
	Notes to Condensed<br>Consolidated Financial Statements (unaudited)	5
Item 2.	Management’s<br>Discussion & Analysis of Financial Condition and Results of<br>Operations	15
Item 3.	Quantitative and<br>Qualitative Disclosures About Market Risk	19
Item 4.	Controls and<br>Procedures	20
PART<br>II - OTHER INFORMATION
Item 1.	Legal<br>Proceedings	21
Item 1A.	Risk<br>Factors	21
Item 2.	Unregistered Sales<br>of Equity Securities and Use of Proceeds	21
Item 3.	Defaults Upon<br>Senior Securities	21
Item 5.	Other<br>Information	21
Item 6.	Exhibits	21

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Special Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q (“Quarterly Report”), including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 2 of Part I of this report, includes forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance, or achievements expressed or implied by forward-looking statements.

In some cases, you can identify forward-looking statements by terminology such as “may”, “should”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential”, “proposed”, “intended”, or “continue” or the negative of these terms or other comparable terminology. You should read statements that contain these words carefully, because they discuss our expectations about our future operating results or our future financial condition or state other “forward-looking” information. There may be events in the future that we are not able to accurately predict or control. Before you invest in our securities, you should be aware that the occurrence of any of the events described in this Quarterly Report could substantially harm our business, results of operations and financial condition, and that upon the occurrence of any of these events, the trading price of our securities could decline and you could lose all or part of your investment. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, growth rates, levels of activity, performance or achievements. We are under no duty to update any of the forward-looking statements after the date of this Quarterly Report to conform these statements to actual results.

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PART I

FINANCIAL INFORMATION

Item 1. Financial Statements

FITLIFE BRANDS, INC.
CONDENSED<br>CONSOLIDATED BALANCE SHEETS
ASSETS:	December<br>31,
	2019

CURRENT<br>ASSETS
Cash	$265,000
Accounts<br>receivable, net of allowance of doubtful accounts, 33,000 and<br>27,000 respectively	2,366,000
Inventories,<br>net of allowance for obsolescence of 130,000 and 130,000,<br>respectively	2,998,000
Prepaid<br>expenses and other current assets	72,000
Total<br>current assets	5,701,000
Property and<br>equipment, net	136,000
Right of use asset,<br>net of amortization, 241,000 and 226,000<br>respectively	254,000
Goodwill	225,000
Security<br>deposits	10,000
TOTAL<br>ASSETS	$6,326,000
LIABILITIES AND<br>STOCKHOLDERS' EQUITY:
CURRENT<br>LIABILITIES:
Accounts<br>payable	$2,010,000
Accrued<br>expense and other liabilities	464,000
Product<br>returns	256,000
Lease<br>liability - current portion	46,000
Line<br>of credit	-
Total<br>current liabilities	2,776,000
LONG-TERM LEASE<br>LIABILITY, net of current portion	208,000
TOTAL<br>LIABILITIES	2,984,000
STOCKHOLDERS'<br>EQUITY:
Preferred<br>stock, 0.01 par value, 10,000,000 shares authorized, none<br>outstanding
as<br>of March 31, 2020 and December 31, 2019
Common<br>stock, .01 par value, 15,000,000 shares authorized; 1,060,033 and<br>1,054,516
issued<br>and outstanding as of March 31, 2020 and December 31, 2019<br>respectively	12,000
Treasury<br>stock, 210,631 and 198,731 shares, respectively	(1,619,000)
Additional<br>paid-in capital	32,055,000
Accumulated<br>deficit	(27,106,000)
Total<br>stockholders' equity	$3,342,000
TOTAL<br>LIABILITIES AND STOCKHOLDERS' EQUITY	$6,326,000

All values are in US Dollars.

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

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FITLIFE BRANDS, INC.
CONDENSED<br>CONSOLIDATED STATEMENTS OF OPERATIONS
FOR<br>THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019
	Three months<br>ended
---	---	---
	March<br>31
	2020	2019
	(Unaudited)
Revenue	$6,151,000	$5,878,000
Cost of goods<br>sold	3,414,000	3,337,000
Gross<br>profit	2,737,000	2,541,000
OPERATING<br>EXPENSES:
General<br>and administrative	733,000	774,000
Selling<br>and marketing	671,000	550,000
Depreciation<br>and amortization	12,000	15,000
Total<br>operating expenses	1,416,000	1,339,000
OPERATING<br>INCOME	1,321,000	1,202,000
OTHER EXPENSES<br>(INCOME)
Interest<br>expense	4,000	15,000
Gain<br>on settlement	(70,000)	-
Total<br>other expenses (income)	(66,000)	15,000
NET<br>INCOME	1,387,000	1,187,000
PROVISION FOR<br>INCOME TAXES	(41,000)	-
NET<br>INCOME	1,428,000	1,187,000
NET INCOME<br>AVAILABLE TO COMMON SHAREHOLDERS	$1,428,000	$1,187,000
NET INCOME PER<br>SHARE AVAILABLE TO COMMON SHAREHOLDERS:
Basic	$1.36	$1.07
Diluted	$1.27	$0.94
Basic<br>weighted average common shares	1,051,752	1,111,943
Diluted<br>weighted average common shares	1,126,303	1,268,526

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

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FITLIFE BRANDS, INC.
CONDENSED<br>CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR<br>THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019

(Unaudited)

						Additional
	Series<br>A Preferred		Common<br>Stock		Treasury	Paid-in	Accumulated
	Shares	Amount	Shares	Amount	Stock	Capital	Deficit	Total
THREE MONTHS ENDED<br>MARCH 31, 2020
DECEMBER 31,<br>2019	-	$-	1,054,516	$12,000	$(1,619,000)	$32,055,000	$(27,106,000)	$3,342,000
Fair value of<br>common stock issued for services	-	-	417	-	-	16,000	-	16,000
Repurchase of common<br>stock	-	-	(11,900)	-	(171,000)	-	-	(171,000)
Exercise of stock<br>options	-	-	17,000	-	-	71,000	-	71,000
Fair value of<br>vested common shares and options issued for services	-	-	-	-	-	12,000	-	12,000
Net<br>income	-	-	-	-	-	-	1,428,000	1,428,000
MARCH 31,<br>2020	-	$-	1,060,033	$12,000	$(1,790,000)	$32,154,000	$(25,678,000)	$4,698,000
THREE MONTHS ENDED<br>MARCH 31, 2019
DECEMBER 31,<br>2018	600	$-	1,111,943	$11,000	$-	$32,107,000	$(29,804,000)	$2,314,000
Fair value of<br>common stock issued for services	-	-	2,009	-	-	23,000	-	23,000
Fair value of<br>vested common shares and options issued for services	-	-	-	-	-	26,000	-	26,000
Net<br>income	-	-	-	-	-	-	1,187,000	1,187,000
MARCH 31,<br>2019	600	$-	1,113,952	$11,000	$-	$32,156,000	$(28,617,000)	$3,550,000

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

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FITLIFE<br>BRANDS, INC.
CONDENSED<br>CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR<br>THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019
	Three<br>months ended<br><br><br>March<br>31
	2020	2019
	(Unaudited)
CASH FLOWS FROM<br>OPERATING ACTIVITIES:
Net<br>income	$1,428,000	$1,187,000
Adjustments<br>to reconcile net income to net cash provided by (used in) operating<br>activities:
Depreciation<br>and amortization	12,000	15,000
Allowance<br>for doubtful accounts	6,000	(4,000)
Allowance<br>for inventory obsolescence	-	12,000
Common<br>stock issued for services	16,000	23,000
Fair<br>value of options issued for services	12,000	26,000
Right<br>of use asset net of amortization and lease liability	2,000	3,000
Changes<br>in operating assets and liabilities:
Accounts<br>receivable - trade	(2,332,000)	(2,244,000)
Inventories	(25,000)	1,173,000
Prepaid<br>expense	46,000	110,000
Accounts<br>payable	737,000	(321,000)
Accrued<br>interest	4,000	15,000
Accrued<br>liabilities and other liabilities	75,000	20,000
Product<br>returns	20,000	(136,000)
Net<br>cash provided by (used in) operating activities	1,000	(121,000)
CASH FLOWS FROM<br>INVESTING ACTIVITIES:
Net<br>cash provided by investing activities	-	-
CASH FLOWS FROM<br>FINANCING ACTIVITIES:
Proceeds<br>from issuance of notes payable	-	300,000
Proceeds<br>from exercise of stock options	71,000	-
Proceeds<br>from line of credit	2,500,000	-
Repurchases<br>of common stock	(171,000)	-
Net<br>cash provided by financing activities	2,400,000	300,000
CHANGE IN<br>CASH	2,401,000	179,000
CASH, BEGINNING OF<br>PERIOD	265,000	259,000
CASH, END OF<br>PERIOD	$2,666,000	$438,000
Supplemental<br>disclosure operating activities
Cash paid for<br>interest	$-	$15,000
Non-cash<br>investing and financing activities
Recording of lease<br>asset and liability upon adoption of ASU-2016-02	$-	$343,000

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

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FITLIFE BRANDS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019

(Unaudited)

NOTE 1 - DESCRIPTION OF BUSINESS

Summary

FitLife Brands, Inc. (the “Company”) is a national provider of innovative and proprietary nutritional supplements for health-conscious consumers marketed under the brand names NDS Nutrition, PMD Sports, SirenLabs, CoreActive, and Metis Nutrition (together, “NDS Products”). In September 2015, the Company acquired iSatori, Inc. (“iSatori”) and as a result, the Company added three brands to its product portfolio, including iSatori, BioGenetic Laboratories, and Energize (together, “iSatori Products”). The NDS Products are distributed 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 25,000 retail locations, which include specialty, mass, and online.

The Company was incorporated in the State of Nevada on July 26, 2005. In October 2008, the Company acquired the assets of NDS Nutritional Products, Inc., a Nebraska corporation, and moved those assets into its wholly owned subsidiary NDS Nutrition Products, Inc., a Florida corporation (“NDS”). The Company’s NDS Products are sold through NDS and the iSatori Products are sold through iSatori, Inc., a Delaware corporation and a wholly owned subsidiary of the Company.

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”), currently trades under the symbol “FTLF” on the OTC: PINK market.

Recent Developments

Line of Credit Agreement

Advances drawn under the Line of Credit bear interest at an annual rate of the one-month LIBOR rate plus 2.75%, and each advance will be payable on the Maturity Date with the interest on outstanding advances payable monthly. The Company may, at its option, prepay any borrowings under the Line of Credit, in whole or in part at any time prior to the Maturity Date, without premium or penalty.

The Line of Credit Agreement includes customary events of default. If any such event of default occurs, the Lender may declare all outstanding loans under the Line of Credit to be due and payable immediately.

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, most of which have been collected, and in anticipation of an expected negative impact on sales to GNC and our other wholesale customers resulting from the COVID-19 outbreak.

Repayment of Outstanding Notes

On December 26, 2018, the Company issued a line of credit promissory note to Sudbury Capital Fund, LP ("Sudbury") in the principal amount of $600,000 (the “Sudbury Note”), with an initial advance to the Company in the amount of $300,000. In addition, on December 26, 2018, the Company also issued a promissory note to Dayton Judd, the Company’s Chair of the Board and Chief Executive Officer, in the principal amount of $200,000 (the “Judd Note”) (together with the Sudbury Note, the “Notes”).

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The Notes matured on the earlier to occur of a Change in Control of the Company, as defined in the Notes, or December 31, 2019, and required monthly principal and interest payments beginning April 1, 2019, with a final payment of unpaid principal and interest due December 31, 2019. Proceeds from the sale of the Notes, along with existing cash balances, were used to retire all outstanding indebtedness under the terms of a previous credit agreement totaling approximately $590,000 at December 26, 2018.

On September 24, 2019, the Company repaid all outstanding balances due on the Notes in the aggregate principal amount, including accrued but unpaid interest thereon, of $615,000. Mr. Judd is the managing partner of Sudbury. As a result of the repayment of the Notes, the Company terminated its line of credit entered into between the Company and Sudbury on December 26, 2018 providing for maximum borrowings of up to $600,000.

Amendment of 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.

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 quarter ended March 31, 2020, the Company repurchased 11,900 shares of Common Stock, or approximately 1% of the issued and outstanding shares of the Company, through private transactions, as follows:

Trade date	Total number of shares purchased	Average price paid per share	Total number of shares purchased as part of publicly<br>announced programs	Dollar value of shares that<br>may yet be purchased
January<br>2020	11,900	$14.35	11,900	$1,110,917
February<br>2020	-	-	-	$1,110,917
March<br>2020	-	-	-	$1,110,917
Subtotal	11,900	$14.35	11,900

Conversion of Series A Preferred Stock

On December 23, 2019, Sudbury voluntarily converted its 550 shares of Series A Preferred into Common Stock in accordance with the terms of the Series A Preferred Stock Certificate of Designations. In conjunction with the conversion, the Company issued to Sudbury a total of 123,222 shares of Common Stock and paid accrued dividends of $7,454. Following such conversion, no shares of Series A Preferred remain outstanding, and the Company has no further obligations under the Certificate of Designations, including the obligation to pay preferred dividends.

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NOTE 2 - BASIS OF PRESENTATION

The accompanying interim condensed unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In our opinion, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation are included. Operating results for the three-month period ended March 31, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020. Although management of the Company believes the disclosures presented herein are adequate and not misleading, these interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the footnotes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019, as filed with the Securities and Exchange Commission on March 30, 2020.

NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Company prepares its financial statements in accordance with accounting principles generally accepted in the United States (“GAAP”). Significant accounting policies are as follows:

Principles of Consolidation

The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. Intercompany accounts and transactions have been eliminated in the consolidated condensed financial statements.

Use of Estimates

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. Adjustments made with respect to the use of estimates often relate to improved information not previously available. Uncertainties with respect to such estimates and assumptions are inherent in the preparation of financial statements; accordingly, actual results could differ from these estimates.

These estimates and assumptions also affect the reported amounts of accounts receivable, inventories, goodwill, revenue, costs and expense and valuations of long-term assets, realization of deferred tax assets and fair value of equity instruments issued for services during the reporting period. Management evaluates these estimates and assumptions on a regular basis. Actual results could differ from those estimates.

Basic and Diluted Income (loss) Per Share

Our computation of earnings per share (“EPS”) includes basic and diluted EPS. Basic EPS is measured as the income (loss) available to common stockholders divided by the weighted average common shares outstanding for the period. Diluted income (loss) per share reflects the potential dilution, using the treasury stock method, that could occur if securities or other contracts to issue Common Stock were exercised or converted into Common Stock or resulted in the issuance of Common Stock that then shared in the income (loss) of the Company as if they had been converted at the beginning of the periods presented, or issuance date, if later. In computing diluted income (loss) per share, the treasury stock method assumes that outstanding options and warrants are exercised and the proceeds are used to purchase Common Stock at the average market price during the period. Options and warrants may have a dilutive effect under the treasury stock method only when the average market price of the Common Stock during the period exceeds the exercise price of the options and warrants. Potential common shares that have an antidilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS.

	Three months ended<br><br><br>March 31,
	2020	2019
	(unaudited)
Net<br>income available to common shareholders	$1,428,000	$1,187,000
Weighted<br>average common shares - basic	1,051,752	1,111,943
Dilutive<br>effect of outstanding warrants and stock options	74,551	156,583
Weighted<br>average common shares - diluted	1,126,303	1,268,526
Net<br>income per common share:
Basic	$1.36	$1.07
Diluted	$1.27	$0.94

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Lease

We lease certain corporate office space and office equipment under lease agreements with monthly payments over a period of 36 to 84 months. We determine if an arrangement is a lease at inception. Lease assets are presented as operating lease right-of-use assets and the related liabilities are presented as lease liabilities in our consolidated balance sheets.

Prior to January 1, 2019, the Company accounted for leases under ASC 840, Accounting for Leases. Effective January 1, 2019, the Company adopted the guidance of ASC 842, Leases, which requires an entity to recognize a right-of-use asset and a lease liability for virtually all leases. The Company adopted ASC 842 using a modified retrospective approach. As a result, the comparative financial information has not been updated and the required disclosures prior to the date of adoption have not been updated and continue to be reported under the accounting standards in effect for those periods. The adoption of ASC 842 on January 1, 2019 resulted in the recognition of operating lease right-of-use assets of and, lease liabilities for operating leases of $480,000 and $480,000, respectively. There was no cumulative-effect adjustment to accumulated deficit. See Note 7 for further information regarding the adoption of ASC 842 on the Company’s condensed consolidated financial statements.

Goodwill

In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Accounting for Goodwill Impairment. ASU 2017-04 removes Step 2 of the goodwill impairment test, which required a hypothetical purchase price allocation. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. This update also eliminated the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test. The Company adopted ASU 2017-04 on January 1, 2020 and applied the requirements prospectively. While we have concluded that a triggering event did not occur during the quarter ended March 31, 2020, the prolonged duration and severity of the COVID-19 pandemic could result in future goodwill impairment charges. We will continue to monitor the effects of the COVID-19 pandemic’s impact on our business, and review for impairment indicators as necessary in the upcoming months.

Customer Concentration

Net sales to GNC during the three-month periods ended March 31, 2020 and 2019 were $4,697,000 and $4,864,000, respectively, representing 76% and 82% of total net revenue, respectively.

Gross accounts receivable attributable to GNC as of March 31, 2020 and 2019 were $4,186,000 and $3,692,000, respectively, representing 91% and 91% of the Company’s total accounts receivable balance, respectively.

For the quarters ended March 31, 2020 and 2019, online sales accounted for 14% and 10% of the Company’s net revenue, respectively.

Revenue Recognition

The Company’s revenue is comprised of sales of nutritional supplements to consumers, primarily through GNC stores.

The Company accounts for revenues in accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers. 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 or services to our customers based on written sales terms, which is also when control is transferred. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring the products or services to a customer.

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All products sold by the Company are distinct individual products and consist of nutritional supplements and related supplies. 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. Other than promotional activities, which can vary from time to time but nevertheless are entirely within the Company’s control, contracts with customers contain no incentives or discounts that could cause revenue to be allocated or adjusted over time.

Control of products we sell transfers to customers upon shipment from our facilities, 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. Payment 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 less than 5% of products are returned, 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.

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.

Income Taxes

As of December 31, 2019, the Company had federal net operating loss (“NOL”) carryforwards available to offset future taxable income of approximately $26.6 million, subject to Internal Revenue Service (“IRS”) statutory limitations. To the extent the Company reports federal taxable income for 2020, such income will be eliminated by net operating losses. This reduction in deferred tax assets would be offset by a corresponding reduction in the deferred tax asset valuation allowance resulting in no federal income tax expense. Accordingly, no federal income tax expense is recorded for the quarter ended March 31, 2020 based on anticipated utilization of net operating loss carryforwards.

During the quarter ended March 31, 2020, the Company received a tax refund of $41,000 relating to a portion of the Company’s alternative minimum tax carryforward, which became refundable as a result of the 2017 Tax Cuts and Jobs Act.

The Company accounts for income taxes using the asset and liability method, whereby deferred tax assets are recognized for deductible temporary differences, and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized before the Company is able to realize their benefits, or that future deductibility is uncertain. Authoritative guidance issued by the ASC Topic 740 – Income Taxes requires that a valuation allowance be established when it is more likely than not that all or a portion of deferred tax assets will not be realized. As a result of the limitations related to Internal Revenue Code and the Company’s lack of a prolonged history of profitable operations, the Company recorded a 100% valuation allowance against its net deferred tax assets as of March 31, 2020 and December 31, 2019.

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment.

Recent Accounting Pronouncements

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 are not believed by management to have a material impact on the Company’s present or future financial statements.

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NOTE 4 – INVENTORIES

The Company’s inventories as of March 31, 2020 and December 31, 2019 were as follows:

	March 31,<br><br><br>2020	December 31,
	(unaudited)	2019
Finished<br>goods	$2,669,000	$2,688,000
Components	484,000	440,000
Allowance<br>for obsolescence	(130,000)	(130,000)
Total	$3,023,000	$2,998,000

NOTE 5 - PROPERTY AND EQUIPMENT

The Company’s fixed assets as of March 31, 2020 and December 31, 2019 were as follows:

	March 31,<br><br><br>2020	December 31,
	(unaudited)	2019
Equipment	$902,000	$902,000
Accumulated<br>depreciation	(778,000)	(766,000)
Total	$124,000	$136,000

Depreciation expense for the three months ended March 31, 2020 and 2019 was $12,000 and $15,000, respectively.

NOTE 6 – NOTES PAYABLE

Notes Payable – Related Parties

On December 26, 2018, the Company issued a line of credit promissory note to Sudbury Capital Fund, LP, an entity controlled by Dayton Judd, the Company’s Chief Executive Officer and Chair of the Board, in the principal amount of $600,000, with an initial advance to the Company in the amount of $300,000 which was outstanding at December 31, 2018. During the three months ended March 31, 2019, an additional $300,000 was advanced to the Company, resulting in aggregate borrowings of $600,000. In addition, on December 26, 2018, the Company also issued a promissory note to Mr. Judd in the principal amount of $200,000. On September 24, 2019, the Company repaid all outstanding balances due under the terms of the Notes in the aggregate principal amount, including accrued but unpaid interest thereon, of $615,000. As a result of the repayment of the Notes, the Company terminated its line of credit entered into between the Company and Sudbury on December 26, 2018 providing for maximum borrowings of up to $600,000.

Line of Credit – Mutual of Omaha Bank

On March 20, 2020, the Lender advanced the Company $2.5 million under the Line of Credit, which amount was repaid on April 29, 2020. The advance was intended to provide the Company with additional liquidity given the uncertainty regarding the timing of collection of certain accounts receivable, most of which have been collected, and in anticipation of an expected negative impact on sales to GNC and our other wholesale customers resulting from the COVID-19 outbreak.

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NOTE 7 - RIGHT OF USE ASSETS AND LIABILITIES

In prior years, the Company entered into several non-cancellable leases for its office facilities and equipment. The lease agreements range from 36 months to 84 months, and require monthly payments ranging between $200 and $7,000 through October 2024. On January 1, 2019, the Company adopted Topic 842, Leases which requires a lessee to record a right-of-use asset and a corresponding lease liability at the inception of the lease initially measured at the present value of the lease payments. The Company classified the leases as operating leases and determined that the fair value of the lease assets and liability at the inception of the leases was $480,000 using a discount rate of 9%.

During the three months ended March 31, 2020, the Company made payments of $20,000 towards the lease liability. As of March 31, 2020, lease liability amounted to $240,000. Topic 842 requires recognition in the statement of operations of a single lease cost, calculated so that the cost of the lease is allocated over the lease term, generally on a straight-line basis. Rent expense, including real estate taxes, for the three months ended March 31, 2020 was $22,000. The right-of-use asset at March 31, 2020 was $239,000, net of amortization of $241,000.

	Three months ended
Lease<br>Cost	March 31, 2020
	(unaudited)
Operating<br>lease cost (included in general and administrative in the Company's<br>unaudited
and<br>condensed consolidated statement of operations)	$22,000
Other<br>information
Cash<br>paid for amounts included in the measurement of lease liabilities<br>for the first quarter 2020	$-
Weighted<br>average remaining lease term - operating leases (in<br>years)	4.56
Average<br>discount rate - operating leases	9%
Operating<br>leases	At<br><br><br>March 31, 2020
---	---
Long-term<br>right-of-use assets	$239,000
Short-term<br>operating lease liabilities	$44,000
Long-term<br>operating lease liabilities	196,000
Total<br>operating lease liabilities	$240,000
Year ending	Operating leases
---	---
2020<br>(remaining 9 months)	47,000
2021	67,000
2022	67,000
2023	61,000
2024	51,000
Less:<br>Imputed interest/present value discount	(53,000)
Present<br>value of lease liabilities	$240,000

NOTE 8 - EQUITY

Common Stock

a.	Common<br>Stock Issued for Services

The Company is authorized to issue 15.0 million shares of Common Stock of which 1,060,033 shares of Common Stock were issued and outstanding as of March 31, 2020.

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In July 2018, in connection with the appointment of Mr. Dayton Judd as Chief Executive Officer, the Company granted Mr. Judd an aggregate of 45,000 shares of restricted Common Stock, which include vesting conditions subject to the achievement of certain market prices of the Company’s Common Stock. Such shares are also subject to forfeiture in the event Mr. Judd resigns from his position or is terminated by the Company. As the vesting of the 45,000 shares of restricted Common Stock is subject to certain market conditions, pursuant to current accounting guidelines, the Company determined the fair value to be $105,000, computed using Monte Carlo simulations on a binomial model with the assistance of a valuation specialist using a derived service period of nine years. During the three months ended March 31, 2020, the Company recorded compensation expense of $12,000 to amortize the fair value of these shares of restricted Common Stock based upon the prorated derived service period.

During the three-month period ended March 31, 2019, the Company issued 2,009 shares of Common Stock with a fair value of $11,000 to employees and directors for services rendered. The shares were valued at their respective dates of issuance.

During the three-month period ended March 31, 2020, the Company issued 417 shares of Common Stock with a fair value of $4,000 to directors for services rendered. The shares were valued at their respective date of issuance.

b.	Share<br>Repurchase Program

On August 16, 2019, the Company's Board authorized management to repurchase up to $500,000 of the Company's Common Stock over the next 24 months, 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 Preferred, and 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.

During the three-month period ended March 31, 2020, the Company repurchased 11,900 shares of Common Stock, or approximately 1% of the issued and outstanding shares of the Company, through private transactions for the aggregate purchase price of $171,000. The Company is accounting for these shares as treasury stock.

c.	Reverse/Forward<br>Split

On April 11, 2019, the Company filed two Certificates of Change with the Secretary of State of the State of Nevada, the first to effect a reverse stock split of both the Company’s issued and outstanding and authorized Common Stock, at a ratio of 1-for-8,000, and the second to effect a forward stock split of both the Company’s issued and outstanding and authorized Common Stock at a ratio of 800-for-1. The Reverse/Forward Split became effective, and the Company’s Common Stock began trading on a post-split basis, on Tuesday, April 16, 2019.

The Company did not issue any fractional shares as a result of the Reverse/Forward Split. Holders of fewer than 8,000 shares of the Common Stock immediately prior to the Reverse/Forward Split received cash in lieu of fractional shares based on the 5-day volume weighted average price of the Company’s Common Stock immediately prior to the Reverse/Forward Split, which was $0.57 per pre-split share. As a result, such holders ceased to be stockholders of the Company. Holders of more than 8,000 shares of Common Stock immediately prior to the Reverse/Forward Split did not receive fractional shares; instead any fractional shares resulting from the Reverse/Forward Split were rounded up to the next whole share.

As a result of the Reverse/Forward Split, the number of shares of Company Common Stock authorized for issuance under the Company’s Articles of Incorporation, as amended, was decreased from 150,000,000 shares to 15,000,000 shares. The Reverse/Forward Split did not affect the Company’s preferred stock, nor did it affect the par value of the Company’s Common Stock.

The share and per share amounts included in these unaudited interim condensed consolidated financial statements and footnotes have been retroactively adjusted to reflect the 1-for-10 aspect of the Reverse/Forward Split as if it occurred as of the earliest period presented.

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Options

Information regarding options outstanding as of March 31, 2020 is as follows:

			Weighted
		Weighted	Average
	Number<br><br><br>of	Average<br><br><br>Exercise	Remaining<br><br><br>Life
	Options	Price	(Years)
Outstanding,<br>December 31, 2018	154,521	$13.10	5.7
Issued	8,000	6.85
Exercised	-
Forfeited	(13,236)	24.45
Outstanding,<br>December 31, 2019	149,285	$11.76	5.0
Issued	-
Exercised	(17,000)	4.20
Forfeited	(36,500)	19.46
Outstanding,<br>March 31, 2020	95,785	$10.17	6.6
	Outstanding			Exercisable
---	---	---	---	---	---
Exercise<br>Price per Share	Total Number of Options	Weighted Average Remaining Life (Years)	Weighted Average Exercise Price	Number of Vested Options	Weighted Average Exercise Price
$2.80 - $23.00	90,210	6.76	$5.23	66,710	$6.08
$23.10 - $144.34	5,575	3.52	$90.20	5,575	$90.20
	95,785	6.57	$10.17	72,285	$11.20

During the three-month periods ended March 31, 2020 and 2019, the Company recognized compensation expense of $12,000 and $26,000, respectively, to account for the fair value of stock options that vested during the period.

Total intrinsic value of outstanding stock options as of March 31, 2020 amounted to $437,000. Future unamortized compensation expense on the unvested outstanding options at March 31, 2020 amounted to $11,750, which will be recognized through October 2020.

Warrants

Total outstanding warrants to purchase shares of Company Common Stock as of March 31, 2020 and December 31, 2019 amounted to 35,870 shares. Total intrinsic value as of March 31, 2020 amounted to $157,828.

During the period ended March 31, 2020, no warrants were granted and no warrants expired unexercised.

Outstanding	Exercise<br>Price	Issuance<br>Date	Expiration<br>Date	Vesting
35,870	$<br>4.60	11/13/18	11/13/23	Yes

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NOTE 9 – COMMITMENTS AND CONTINGENCIES

Legal Proceedings

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 10 – SUBSEQUENT EVENTS

There are many uncertainties regarding the current coronavirus ("COVID-19") pandemic, and the Company is closely monitoring the impact of the pandemic on all aspects of its business, including how it will impact its services, customers, employees, vendors, and business partners. While the pandemic did not materially adversely affect the Company’s financial results and business operations in the Company’s first fiscal quarter ended March 31, 2020, our future financial position and operating results will likely be materially and adversely affected, although the extent of such affects 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 responses accordingly.

The Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") was enacted on March 27, 2020 in the United States. As previously disclosed in the Company’s Form 8-K filed with the SEC on May 1, 2020, on April 27, 2020, the Company received proceeds from a loan in the amount of approximately $449,700 from its lender, CIT Bank, N.A. (the “Lender”), pursuant to approval by the U.S. Small Business Administration (the “SBA”) for the Lender to fund the Company’s request for a loan under the SBA’s Paycheck Protection Program (“PPP Loan”) created as part of the recently enacted Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) administered by the SBA (the “Loan Agreement”). In accordance with the requirements of the CARES Act, the Company intends to use 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 is scheduled to mature on April 27, 2022, has a 1.00% interest rate, and is 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.

In accordance with the Subsequent Events Topic of the FASB ASC 855, we have evaluated subsequent events, through the filing date and noted no further subsequent events that are reasonably likely to impact the Company’s financial statements.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and the related notes appearing elsewhere in this Quarterly Report. This discussion and analysis may contain forward-looking statements based on assumptions about our future business.

Overview

Recent Developments

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") 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. Advances drawn under the Line of Credit bear interest at an annual rate of the one-month LIBOR rate plus 2.75%, and each advance will be payable on the Maturity Date with the interest on outstanding advances payable monthly. The Company may, at its option, prepay any borrowings under the Line of Credit, in whole or in part at any time prior to the Maturity Date, without premium or penalty. The Line of Credit Agreement includes customary events of default. If any such event of default occurs, the Lender may declare all outstanding loans under the Line of Credit to be due and payable immediately.

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 maintains 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, most of which have been collected, and in anticipation of an expected negative impact on sales to GNC and our other wholesale customers resulting from the COVID-19 outbreak.

Share Repurchase Plan

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Trade date	Total number of shares purchased	Average price paid per share	Total number of shares purchased as part of publicly announced<br>programs	Dollar value of<br>shares that may yet be purchased
January<br>2020	11,900	$14.35	11,900	$1,110,917
February<br>2020	-	-	-	$1,110,917
March<br>2020	-	-	-	$1,110,917
Subtotal	11,900	$14.35	11,900

Results of Operations

Comparison of the three months ended March 31, 2020 to the three months ended March 31, 2019:

	Three months ended
	March 31, 2020	March 31, 2019	Change	%
	(unaudited)
Revenue	$6,151,000	$5,878,000	$273,000	5%
Cost of goods<br>sold	(3,414,000)	(3,337,000)	(77,000)	2%
Gross<br>profit	2,737,000	2,541,000	196,000	8%
Operating<br>expenses	(1,416,000)	(1,339,000)	(77,000)	6%
Income from<br>operations	1,321,000	1,202,000	119,000	10%
Other income<br>(expense)	66,000	(15,000)	81,000	n/a
Provision for<br>income tax	41,000	-	41,000	n/a
Net<br>income	$1,428,000	$1,187,000	$241,000	20%

Net Sales. Revenue for the three months ended March 31, 2020 increased 5% to $6,151,000 as compared to $5,878,000 for the three months ended March 31, 2019. Revenue for the three-month period ended March 31, 2020 compared to the prior three-month period, in part, reflects improvements in our wholesale business and growth in our online direct-to-consumer offering.

Online revenue during the three months ended March 31, 2020 was approximately 14% of total revenue, compared to roughly 10% of total revenue during the same three-month period in 2019. Although no assurances can be given, management believes that online revenue will continue to increase in subsequent periods relative to prior comparable periods given management’s focus on higher margin online sales.

The recent COVID-19 outbreak has created significant economic uncertainty and volatility, which has impacted our business and operations, including those of our third-party suppliers and our wholesale partners. In this regard, the duration and impact of such outbreak on our operating results and financial condition cannot be determined at this time, although management currently anticipates that shelter in place restrictions and the impact of those restrictions on our retail and wholesale partners, including effects on their liquidity and ability to maintain current store counts, will have a material adverse effect on our results from operations beginning in the quarter ending June 30, 2020.

Cost of Goods Sold. Cost of goods sold for the three months ended March 31, 2020 increased to $3,414,000 as compared to $3,337,000 for the three months ended March 31, 2019. The increase during the three-month period is principally attributable to higher revenue.

Gross Profit. Gross profit for the three months ended March 31, 2020 increased to $2,737,000 as compared to $2,541,000 for the three months ended March 31, 2019. The increase during the three-month period is principally attributable to higher revenue.

Gross margin for the three months ended March 31, 2020 increased to 44% compared to 43% during the same period last year. The increase was primarily attributable to product mix and higher online sales volumes.

General and Administrative Expense. General and administrative expense for the three months ended March 31, 2020 decreased to $733,000 as compared to $774,000 for the three months ended March 31, 2019. The decrease in the three-month period ended March 31, 2020 reflects initiatives the Company put in place during 2019 to reduce operating expense.

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Selling and Marketing Expense. Selling and marketing expense for the three months ended March 31, 2020 increased to $671,000 as compared to $550,000 for the three months ended March 31, 2019. The change in the three-month period ended March 31, 2020 reflects management's efforts to make calculated investments in marketing activities in an effort to drive incremental revenue.

Depreciation and Amortization Expense. Depreciation and amortization expense for the three months ended March 31, 2020 decreased to $12,000 as compared to $15,000 for the three months ended March 31, 2019. The decrease was primarily attributable to a reduction in depreciation expense due to certain assets becoming fully depreciated.

Net Income. We generated net income of $1,428,000 for the three-month period ended March 31, 2020 as compared to net income of $1,187,000 for the three months ended March 31, 2019. The increase in net income for the three-month period ended March 31, 2020 compared to the same period in 2019 was primarily attributable to a combination of higher revenue, lower operating expense, reduced interest expense, and legal settlements.

Liquidity and Capital Resources

At March 31, 2020, we had positive working capital of approximately $4,296,000, compared to $2,925,000 at December 31, 2019. Our principal sources of liquidity at March 31, 2020 consisted of $2,666,000 of cash and $4,692,000 of accounts receivable.

The Company has historically financed its operations primarily through cash flow from operations and equity and debt financings. The Company has also provided for its cash needs by issuing Common Stock, options and warrants for certain operating costs, including consulting and professional fees. The Company currently anticipates that cash derived from operations and existing cash resources, along with available borrowings under the new Line of Credit, will be sufficient to provide for the Company’s liquidity for the next twelve months.

The Company is dependent on cash flow from operations and amounts available under the Line of Credit to satisfy its working capital requirements. No assurances can be given that cash flow from operations and/or the Line of Credit will be sufficient to provide for the Company’s liquidity for the next twelve months. Should the Company be unable to generate sufficient revenue in the future to achieve positive cash flow from operations, and/or should capital be unavailable under the terms of the Line of Credit, additional working capital will be required. Management currently has no intention to raise additional working capital through the sale of equity or debt securities and believes that the cash flow from operations and available borrowings under the Line of Credit will provide sufficient capital necessary to operate the business over the next twelve months. In the event the Company fails to achieve positive cash flow from operations, additional capital is unavailable under the terms of the Line of Credit, and management is otherwise unable to secure additional working capital through the issuance of equity or debt securities, the Company’s business would be materially and adversely harmed.

On December 26, 2018, the Company issued a line of credit promissory note to Sudbury Capital Fund, LP, an entity controlled by Dayton Judd, the Company’s Chair of the Board and Chief Executive Officer, in the principal amount of $600,000, with an initial advance to the Company in the amount of $300,000. In addition, on December 26, 2018, the Company also issued a promissory note to Mr. Judd in the principal amount of $200,000. On September 24, 2019, the Company repaid all outstanding balances due on the Notes including accrued but unpaid interest thereon, of $615,000.

On March 20, 2020, our Lender advanced the Company $2.5 million under the Line of Credit, which amounts were repaid on April 29, 2020. The advance was intended to provide the Company with additional liquidity given the uncertainty regarding the timing of collection of certain accounts receivable, most of which have been collected, and in anticipation of an expected negative impact on sales to GNC and our other wholesale customers resulting from the COVID-19 outbreak.

Cash Provided by (Used in) Operations. Our cash provided by operating activities for the three months ended March 31, 2020 was $1,000, as compared to cash used in operations of $(121,000) for the three months ended March 31, 2019.

Cash Provided by Investing Activities. There was no cash provided by or used in investing activities for the three-month periods ended March 31, 2020 and 2019.

Cash Provided by Financing Activities. Cash provided by financing activities for the three months ended March 31, 2020 was $2,400,000 as compared to cash provided by financing activities of $300,000 during the three months ended March 31, 2019.

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Critical Accounting Policies and Estimates

Our discussion and analysis of financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these consolidated financial statements and related disclosures requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, expense, and related disclosure of contingent assets and liabilities. We evaluate, on an on-going basis, our estimates and judgments, including those related to the useful life of the assets. We base our estimates on historical experience and assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

The methods, estimates and judgments we use in applying our most critical accounting policies have a significant impact on the results that we report in our consolidated financial statements. The SEC considers an entity’s most critical accounting policies to be those policies that are both most important to the portrayal of a company’s financial condition and results of operations and those that require management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about matters that are inherently uncertain at the time of estimation. For a more detailed discussion of the accounting policies of the Company, see Note 3 of the Notes to the Condensed Consolidated Financial Statements included in this Quarterly Report, “Summary of Significant Accounting Policies”.

We believe the following critical accounting policies, among others, require significant judgments and estimates used in the preparation of our consolidated financial statements.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“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. Adjustments made with respect to the use of estimates often relate to improved information not previously available. Uncertainties with respect to such estimates and assumptions are inherent in the preparation of financial statements; accordingly, actual results could differ from these estimates.

These estimates and assumptions also affect the reported amounts of accounts receivable, inventories, goodwill, revenue, costs and expense and valuations of long-term assets, allowance for deferred tax assets and equity instruments issued for services during the reporting period. Management evaluates these estimates and assumptions on a regular basis. Actual results could differ from those estimates.

Goodwill

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Revenue Recognition

The Company’s revenue is comprised of sales of nutritional supplements to consumers, primarily through GNC stores.

Recent Accounting Pronouncements

See Note 3 of the Condensed Consolidated Financial Statements included in this Quarterly Report for a description of recent accounting pronouncements believed by management to have a material impact on our present or future financial statements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our business is currently conducted principally in the United States. As a result, our financial results are not materially affected by factors such as changes in foreign currency exchange rates or economic conditions in foreign markets. We do not engage in hedging transactions to reduce our exposure to changes in currency exchange rates although, as the geographical scope of our business broadens, we may do so in the future.

Our exposure to risk for changes in interest rates relates primarily to any borrowings under our existing Line of Credit, and our investments in short-term financial instruments. As of March 31, 2020, the Company owed $2.5 million under its existing Line of Credit.

Investments of our existing cash balances in both fixed rate and floating rate interest earning instruments carry some interest rate risk. The fair value of fixed rate securities may fall due to a rise in interest rates, while floating rate securities may produce less income than expected if interest rates fall. Partly as a result of this, our future interest income will vary due to changes in interest rates and we may suffer losses in principal if we are forced to sell securities that have fallen in estimated fair value due to changes in interest rates. However, as substantially all of our cash equivalents consist of bank deposits and short-term money market instruments, we do not expect any material change with respect to our net income as a result of an interest rate change.

We do not hold any derivative instruments and do not engage in any hedging activities.

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ITEM 4. CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that such information is accumulated and communicated to our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Our disclosure controls and procedures were designed to provide reasonable assurance that the controls and procedures would meet their objectives. As required by SEC Rule 13a-15(b), our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level.

Our Chief Executive Officer and Chief Financial Officer are responsible for establishing and maintaining adequate internal control over our financial reporting. In order to evaluate the effectiveness of internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act, management has conducted an assessment, including testing, using the criteria in Internal Control — Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Our system of internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Management has used the framework set forth in the report entitled Internal Control-Integrated Framework published by the COSO to evaluate the effectiveness of our internal control over financial reporting. Based on this assessment, our Chief Executive Officer and Chief Financial Officer have concluded that our internal control over financial reporting was effective as of March 31, 2020. This Quarterly Report does not include an attestation report of the Company's independent registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company's independent registered public accounting firm pursuant to rules of the SEC that permit the Company to provide only management's report in this annual report. There has been no change in our internal controls over financial reporting during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

(b) Changes in Internal Controls Over Financial Reporting

There have been no changes in our internal controls over financial reporting or in other factors that could materially affect, or are reasonably likely to affect, our internal controls over financial reporting during the quarter ended March 31, 2020. There have not been any significant changes in the Company’s critical accounting policies identified since the Company filed its Annual Report on Form 10-K for the year ended December 31, 2019.

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Table of Contents

PART II

OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

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’ directors or officers in their capacities as such, in which an adverse decision could have a material adverse effect.

ITEM 1A. RISK FACTORS

Our results of operations and financial condition are subject to numerous risks and uncertainties described in our Annual Report on Form 10-K for our fiscal year ended December 31, 2019, filed on March 30, 2020. You should carefully consider these risk factors in conjunction with the other information contained in this Quarterly Report. Should any of these risks materialize, our business, financial condition and future prospects could be negatively impacted.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES

Trade date	Total<br>number of shares purchased	Average<br>price paid per share	Total<br>number of shares purchased as part of publicly announced<br>programs	Dollar<br>value of shares that may yet be purchased
January<br>2020	11,900	$14.35	11,900	$1,110,917
February<br>2020	-	-	-	$1,110,917
March<br>2020	-	-	-	$1,110,917
Subtotal	11,900	$14.35	11,900

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

There were no defaults upon senior securities during the three-month period ended March 31, 2020.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

31.1	Certification of<br>Chief Executive Officer Pursuant to Section 302 of the<br>Sarbanes-Oxley Act.
31.2	Certification of<br>Chief Financial Officer Pursuant to Section 302 of the<br>Sarbanes-Oxley Act.
32.1	Certification of<br>Chief Executive Officer Pursuant to Section 906 of the<br>Sarbanes-Oxley Act.
32.2	Certification of<br>Chief Financial Officer Pursuant to Section 906 of the<br>Sarbanes-Oxley Act.
101.INS	XBRL<br>Instance Document
101.SCH	XBRL<br>Taxonomy Extension Schema
101.CAL	XBRL<br>Taxonomy Extension Calculation Linkbase
101.DEF	XBRL<br>Taxonomy Extension Definition Linkbase
101.LAB	XBRL<br>Taxonomy Extension Label Linkbase
101.PRE	XBRL<br>Taxonomy Extension Presentation Linkbase

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Table of Contents

SIGNATURES

Pursuant to the requirements of 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, thereunto duly authorized.

Registrant<br><br><br><br><br><br>Date:<br>May 15, 2020	FitLife Brands, Inc.<br><br><br><br><br><br>By: /s/ Dayton<br>Judd
	Dayton<br>Judd
	Chief<br>Executive Officer and Chair<br><br><br>(Principal<br>Executive Officer)
Registrant<br><br><br><br><br><br>Date:<br>May 15, 2020	FitLife Brands, Inc.<br><br><br><br><br><br>By: /s/ Susan<br>Kinnaman
---	---
	Susan<br>Kinnaman
	Chief<br>Financial Officer<br><br><br>(Principal<br>Financial Officer)

-22-

ex31-1

Exhibit 31.1

Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 and pursuant to Rule 13a-14(a) and Rule 15d-14 under the Securities Exchange Act of 1934

I, Dayton Judd, Chief Executive Officer of the Company, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of FitLife<br>Brands, Inc.;
2.	Based on my knowledge, this report does not contain any untrue<br>statement of a material fact or omit to state a material fact<br>necessary to make the statements made, in light of the<br>circumstances under which such statements were made, not misleading<br>with respect to the period covered by this report;
---	---
3.	Based on my knowledge, the financial statements, and other<br>financial information included in this report, fairly present in<br>all material respects the financial condition, results of<br>operations and cash flows of the registrant as of, and for, the<br>periods presented in this report;
---	---
4.	The registrant's other certifying officer(s) and I are responsible<br>for establishing and maintaining disclosure controls and procedures<br>(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and<br>internal control over financial reporting (as defined in Exchange<br>Act Rules 13a-15(f) and 15d-15(f)) for the registrant and<br>have:
---	---
a.	Designed such disclosure controls and procedures, or caused such<br>disclosure controls and procedures to be designed under our<br>supervision, to ensure that material information relating to the<br>registrant, including its consolidated subsidiaries, is made known<br>to us by others within those entities, particularly during the<br>period in which this report is being prepared;
---	---
b.	Designed such internal control over financial reporting, or caused<br>such internal control over financial reporting to be designed under<br>our supervision, to provide reasonable assurance regarding the<br>reliability of financial reporting and the preparation of financial<br>statements for external purposes in accordance with generally<br>accepted accounting principles;
c.	Evaluated the effectiveness of the registrant’s disclosure<br>and procedures and presented in this report our conclusions about<br>the effectiveness of the disclosure controls and procedures, as of<br>the end of the period covered by this report based on such<br>evaluations: and
---	---
d.	Disclosed in this report any change in the registrant's internal<br>control over financial reporting that occurred during the<br>registrant's most recent fiscal quarter that has materially<br>affected, or is reasonably likely to materially affect, the<br>registrant's internal control over financial reporting;<br>and
---	---
5.	The registrant's other certifying officer(s) and I have disclosed,<br>based on our most recent evaluation of internal control over<br>financial reporting, to the registrant's auditors and the audit<br>committee of the registrant's board of directors (or persons<br>performing the equivalent functions):
---	---
a.	All significant deficiencies and material weaknesses in the design<br>or operation of internal control over financial reporting which are<br>reasonably likely to adversely affect the registrant's ability to<br>record, process, summarize and report financial information;<br>and
---	---
b.	Any fraud, whether or not material, that involves management or<br>other employees who have a significant role in the registrant's<br>internal control over financial reporting.
---	---
Registrant<br><br><br><br><br><br>Date: May 15, 2020	FitLife Brands, Inc.<br><br><br><br><br><br>By: <br>/s/ Dayton<br>Judd
---	---
	Dayton<br>Judd
	Chief Executive Officer and Chair<br><br><br>(Principal Executive Officer)

ex31-2

Exhibit 31.2

I, Susan Kinnaman, Chief Financial Officer of the Company, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of FitLife<br>Brands, Inc.;
2.	Based on my knowledge, this report does not contain any untrue<br>statement of a material fact or omit to state a material fact<br>necessary to make the statements made, in light of the<br>circumstances under which such statements were made, not misleading<br>with respect to the period covered by this report;
---	---
3.	Based on my knowledge, the financial statements, and other<br>financial information included in this report, fairly present in<br>all material respects the financial condition, results of<br>operations and cash flows of the registrant as of, and for, the<br>periods presented in this report;
---	---
4.	The registrant's other certifying officer(s) and I are responsible<br>for establishing and maintaining disclosure controls and procedures<br>(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and<br>internal control over financial reporting (as defined in Exchange<br>Act Rules 13a-15(f) and 15d-15(f)) for the registrant and<br>have:
---	---
a.	Designed such disclosure controls and procedures, or caused such<br>disclosure controls and procedures to be designed under our<br>supervision, to ensure that material information relating to the<br>registrant, including its consolidated subsidiaries, is made known<br>to us by others within those entities, particularly during the<br>period in which this report is being prepared;
---	---
b.	Designed such internal control over financial reporting, or caused<br>such internal control over financial reporting to be designed under<br>our supervision, to provide reasonable assurance regarding the<br>reliability of financial reporting and the preparation of financial<br>statements for external purposes in accordance with generally<br>accepted accounting principles;
---	---
c.	Evaluated the effectiveness of the registrant’s disclosure<br>and procedures and presented in this report our conclusions about<br>the effectiveness of the disclosure controls and procedures, as of<br>the end of the period covered by this report based on such<br>evaluations: and
---	---
d.	Disclosed in this report any change in the registrant's internal<br>control over financial reporting that occurred during the<br>registrant's most recent fiscal quarter that has materially<br>affected, or is reasonably likely to materially affect, the<br>registrant's internal control over financial reporting;<br>and
---	---
5.	The registrant's other certifying officer(s) and I have disclosed,<br>based on our most recent evaluation of internal control over<br>financial reporting, to the registrant's auditors and the audit<br>committee of the registrant's board of directors (or persons<br>performing the equivalent functions):
---	---
a.	All significant deficiencies and material weaknesses in the design<br>or operation of internal control over financial reporting which are<br>reasonably likely to adversely affect the registrant's ability to<br>record, process, summarize and report financial information;<br>and
---	---
b.	Any fraud, whether or not material, that involves management or<br>other employees who have a significant role in the registrant's<br>internal control over financial reporting.
---	---
Registrant<br><br><br><br><br><br>Date: May 15, 2020	FitLife Brands, Inc.<br><br><br><br><br><br>By: /s/ Susan<br>Kinnaman
---	---
	Susan Kinnaman
	Chief Financial Officer<br><br><br>(Principal Financial Officer)

ex32-1

Exhibit 32.1

CERTIFICATIONS PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

(18 U.S.C. SECTION 1350)

In connection with the Quarterly Report of FitLife Brands, Inc. (the "Company") on Form 10-Q for the period ending March 31, 2020, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Dayton Judd, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Sec. 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all<br>material respects, the financial condition and result of operations<br>of the Company.
Registrant<br><br><br><br><br><br>Date: May 15, 2020	FitLife Brands, Inc.<br><br><br><br><br><br>By: /s/ Dayton<br>Judd
---	---
	Dayton Judd
	Chief Executive Officer and Chair<br><br><br>(Principal Executive Officer)

ex32-2

Exhibit 32.2

CERTIFICATIONS PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

(18 U.S.C. SECTION 1350)

In connection with the Quarterly Report of FitLife Brands, Inc. (the "Company") on Form 10-Q for the period ending March 31, 2020, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Susan Kinnaman, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Sec. 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all<br>material respects, the financial condition and result of operations<br>of the Company.
Registrant<br><br><br><br><br><br>Date: May 15, 2020	FitLife Brands, Inc.<br><br><br><br><br><br>By: /s/ Susan<br>Kinnaman
---	---
	Susan Kinnaman
	Chief Financial Officer<br><br><br>(Principal Financial Officer)