FTLF 10-K Annual Report Dec. 31, 2020

FITLIFE BRANDS, INC.

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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

[ ] 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)

Nevada		20-3464383
(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

T ABLE 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 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	13
ITEM 6.	Selected Financial Data	14
ITEM 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14
ITEM 7A.	Quantitative and Qualitative Disclosures About Market Risk	20
ITEM 8.	Consolidated Financial Statements and Supplementary Data	20
ITEM 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	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 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	22
ITEM 13.	Certain Relationships and Related Transactions, and Director Independence	22
ITEM 14.	Principal Accountant Fees and Services	22

PART IV

ITEM 15.	Exhibits and Financial Statement Schedules	23
ITEM 16.	Form 10-K Summary	24

SIGNATURES		25

CERTIFICATIONS
Exhibit 31 – Certification pursuant to Rule 13a-14(a) and 15d-14(a)
Exhibit 32 – Certification pursuant to 18 U.S.C 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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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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P ART I

ITEM 1. B USINESS

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 to www.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.

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.

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

Subtotal	11,900	$ 14.35	11,900

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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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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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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-Gro™), advanced creatine powder (Creatine A5X), and a natural testosterone booster (Isa-TestGF™);

●

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 & Tone™ and hCG Alternative, as well as iSatori’s thermogenic, LIPO-DREX™ 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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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 possible. While we cannot assure that such measures will block competitive products, we believe our continued emphasis on innovation and new product development targeted at the needs of the consumer will enable the Company to effectively compete in the marketplace.

Regulatory Matters

Our business is subject to varying degrees of regulation by a number of government authorities in the U.S., including the Federal Drug Administration (“ FDA ”), the Federal Trade Commission (“ FTC ”), the Consumer Product Safety Commission, the U.S. Department of Agriculture, and the Environmental Protection Agency. Various agencies of the states and localities in which we operate and in which our products are sold also regulate our business, such as the California Department of Health Services, Food and Drug Branch. The areas of our business that these and other authorities regulate include, among others:

●

product claims and advertising;

●

product labels;

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product ingredients; and

●

how we manufacture, package, distribute, import, export, sell, and store our products.

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The FDA, in particular, regulates the formulation, manufacturing, packaging, storage, labeling, promotion, distribution and sale of vitamins and other nutritional supplements in the U.S., while the FTC regulates marketing and advertising claims. In August 2007, a new rule issued by the FDA went into effect requiring companies that manufacture, package, label, distribute or hold nutritional supplements to meet cGMPs to ensure such products are of the quality specified and are properly packaged and labeled. We are committed to meeting or exceeding the standards set by the FDA and believe we are currently operating within the FDA mandated cGMPs.

The FDA also regulates the labeling and marketing of dietary supplements and nutritional products, including the following:

●

the identification of dietary supplements or nutritional products and their nutrition and ingredient labeling;

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requirements related to the wording used for claims about nutrients, health claims, and statements of nutritional support;

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labeling requirements for dietary supplements or nutritional products for which “high potency” and “antioxidant” claims are made;

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notification procedures for statements on dietary supplements or nutritional products; and

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premarket notification procedures for new dietary ingredients in nutritional supplements.

The Dietary Supplement Health and Education Act of 1994 (“ DSHEA ”) revised the provisions of the Federal Food, Drug and Cosmetic Act (“ FDCA ”) concerning the composition and labeling of dietary supplements, and defined dietary supplements to include vitamins, minerals, herbs, amino acids and other dietary substances used to supplement diets. DSHEA generally provides a regulatory framework to help ensure safe, quality dietary supplements and the dissemination of accurate information about such products. The FDA is generally prohibited from regulating active ingredients in dietary supplements as drugs unless product claims, such as claims that a product may heal, mitigate, cure or prevent an illness, disease or malady, trigger drug status.

DSHEA also permits statements of nutritional support to be included in labeling for nutritional supplements without FDA premarket approval. These statements must be submitted to the FDA within 30 days of marketing and must bear a label disclosure that includes the following: “This statement has not been evaluated by the FDA. This product is not intended to diagnose, treat, cure, or prevent any disease.” These statements may describe a benefit related to a nutrient deficiency disease, the role of a nutrient or nutritional ingredient intended to affect the structure or function in humans, the documented mechanism by which a nutrient or dietary ingredient acts to maintain such structure or function, or the general well-being from consumption of a nutrient or dietary ingredient, but may not expressly or implicitly represent that a nutritional supplement will diagnose, cure, mitigate, treat or prevent a disease. An entity that uses a statement of nutritional support in labeling must possess scientific evidence substantiating that the statement is truthful and not misleading. If the FDA determines that a particular statement of nutritional support is an unacceptable drug claim or an unauthorized version of a disease claim for a food product, or if the FDA determines that a particular claim is not adequately supported by existing scientific data or is false or misleading, we will be prevented from using the claim.

In addition, DSHEA provides that so-called “third-party literature”, for example a reprint of a peer-reviewed scientific publication linking a particular nutritional ingredient with health benefits, may be used in connection with the sale of a nutritional supplement to consumers without the literature being subject to regulation as labeling. Such literature must not be false or misleading; the literature may not promote a particular manufacturer or brand of nutritional supplement; the literature must present a balanced view of the available scientific information on the nutritional supplement; if displayed in an establishment, the literature must be physically separate from the nutritional supplement; and the literature may not have appended to it any information by sticker or any other method. If the literature fails to satisfy each of these requirements, we may be prevented from disseminating it with our products, and any dissemination could subject our products to regulatory action as an illegal drug. Moreover, any written or verbal representation by us that would associate a nutrient in a product that we sell with an effect on a disease will be deemed evidence of intent to sell the product as an unapproved new drug, a violation of the FDCA.

In December 2006, the Dietary Supplement and Nonprescription Drug Consumer Protection Act (“ DSNDCPA ”) was passed, which further revised the provisions of the FDCA. Under the act, manufacturers, packers or distributors whose name appears on the product label of a dietary supplement or nonprescription drug are required to include contact information on the product label for consumers to use in reporting adverse events associated with the product’s use and are required to notify the FDA of any serious adverse event report within 15 business days of receiving such report. Events reported to the FDA would not be considered an admission from a company that its product caused or contributed to the reported event. We are committed to meeting or exceeding the requirements of the DSNDCPA.

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We are also subject to a variety of other regulations in the U.S., including those relating to bioterrorism, taxes, labor and employment, import and export, the environment, and intellectual property. All of these regulations require significant financial and operational resources to ensure compliance, and we cannot assure that we will always be in compliance despite our best efforts to do so.

Our operations outside the U.S. are similarly regulated by various agencies and entities in the countries in which we operate and in which our products are sold. The regulations of these countries may conflict with those in the U.S. and may vary from country to country. The sale of our products in certain European countries is subject to the rules and regulations of the European Union, which may be interpreted differently among the countries within the European Union. In other markets outside the U.S., we may be required to obtain approvals, licenses or certifications from a country’s ministry of health or comparable agency before we begin operations or the marketing of products in that country. Approvals or licenses may be conditioned on the reformulation of our products for a particular market or may be unavailable for certain products or product ingredients. These regulations may limit our ability to enter certain markets outside the U.S. Similar to the costs of regulatory compliance in the U.S., foreign regulations require significant financial and operational resources to ensure compliance, and we cannot assure that we will always be in compliance despite our best efforts to do so. Our failure to maintain regulatory compliance within and outside the U.S. could impact our ability to sell our products, and thus, materially impact our financial position and results of operations.

Patents, Trademarks and Proprietary Rights

The Company regards intellectual property, including its trademarks, service marks, website URLs (domains) and other proprietary rights, as valuable assets and part of its brand equity. The Company believes that protecting such intellectual property is crucial to its business strategy. The Company pursues registration of the registrable trademarks, service marks and patents, associated with its key products in the United States, Canada, Europe and other places it distributes its products.

The Company formulates its products using proprietary ingredient formulations, flavorings and delivery systems. To further protect its product formulations and flavors, the Company enters into agreements with manufacturers that provide exclusivity to certain products formulations and delivery technologies. When appropriate, the Company will seek to protect its research and development efforts by filing patent applications for proprietary product technologies or ingredient combinations. We have abandoned or not pursued efforts to register certain other patents and marks identifying other items in our product line for various reasons, including the inability of some names to qualify for registration or patent applications to qualify for patent protection, and due to our abandonment of certain such products. All trademark registrations are protected for a period of ten years and then are renewable thereafter if still in use.

Employees

We had 23 and 28 full-time employees as of December 31, 2020 and 2019, respectively. In addition, the Company retains consultants for certain services on an as-needed basis. We consider our employee relations to be good.

Cost of Compliance with Environmental Laws

We have not incurred any costs associated with compliance with environmental regulations, nor do we anticipate any future costs associated with environmental compliance; however, no assurances can be given that we will not incur such costs in the future.

Available Information

As a public company, we are required to file our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements on Schedule 14A and other information (including any amendments) with the Securities and Exchange Commission (the “ SEC ”). The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. You can find our SEC filings at the SEC’s website at www.sec.gov .

Our Internet address is www.fitlifebrands.com . Information contained on our website is not part of this Annual Report. Our SEC filings (including any amendments) will be made available free of charge on www.fitlifebrands.com , as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.

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ITEM 1A - R isk Factors

An investment in our securities involves a high degree of risk. You should carefully consider the following information about these risks, together with the other information contained in this Annual Report, before investing in our securities. If any of the events anticipated by the risks described below occur, our results of operations and financial condition could be adversely affected, which could result in a decline in the market price of our securities, causing you to lose all or part of your investment.

Risk Factors Relating to our Business and Industry

The Company was profitable during the years ended December 31, 2020 and 2019. However, we may not be able to achieve sustained profitability. Our failure to sustain profitability or effectively manage growth could result in net losses, and therefore negatively affect our financial condition.

In the event of any decrease in sales, if we are not able to maintain growth, or if we are unable to effectively manage our growth, we may not be able to sustain profitability, and may incur net losses in the future, and those net losses could be material. In the event we incur net losses, our financial condition could be negatively affected, and such affect could be material.

We are currently dependent on sales to GNC for a substantial portion of our total sales.

Sales to GNC’s centralized distribution platform, including indirect distribution of product to domestic and international franchisees, accounted for approximately 71% and 75% of our total sales for the years ended December 31, 2020 and 2019, respectively. GNC’s franchisees are not required to carry our products. In the event GNC ceases purchasing products from us, or otherwise reduces its purchases, our total revenue will be negatively impacted, and such impact could be material. Moreover, the transition to GNC’s centralized distribution system has had the effect of concentrating the majority of our accounts receivable with a single payor. Prior to the transition, we collected receivables directly from over 300 franchisees. Although the acquisition of iSatori has reduced the percentage of total accounts receivable attributable to GNC, we anticipate that GNC will continue to represent a substantial portion of all accounts receivable for the foreseeable future. In the event that our sales to GNC decrease, our results from operations will be negatively affected, and such effect may be material.

Our ability to materially increase sales is largely dependent on the ability to increase sales of product to our wholesale partners as well as directly to the end consumer. We may invest significant amounts in these expansions with little success, and if we are unable to maintain good relationships with our existing customers and e-commerce platforms, our business could suffer.

We currently are focusing our marketing efforts on increasing the sale of products to GNC, both domestically and internationally, as well as increasing the number of retailers selling iSatori Products. In addition, we are focused on increasing our direct-to-consumer revenue through e-commerce platforms such as Amazon. We may not be able to successfully increase sales through these channels. Moreover, unilateral decisions could be taken by our distributors, customers, or third-party e-commerce platforms such as Amazon, to discontinue carrying all or any of our products that they are carrying or selling at any time, which would cause our business to suffer. The inability to sell our products through e-commerce platforms, including Amazon, would materially impact our sales and operating results.

In addition, although we continued efforts to expand international distribution for our products in the years ended December 31, 2020 and 2019, we cannot assure that any further efforts to sell our products outside the United States will result in material increased revenue. We may need to overcome significant regulatory and legal barriers in order to continue to sell our products internationally, and we cannot give assurances as to whether we will be able to comply with such regulatory or legal requirements.

We are affected by extensive laws, governmental regulations, administrative determinations, court decisions and similar constraints, which can make compliance costly and subject us to enforcement actions by governmental agencies.

The formulation, manufacturing, packaging, labeling, holding, storage, distribution, advertising and sale of our products are affected by extensive laws, governmental regulations and policies, administrative determinations, court decisions and similar constraints at the federal, state and local levels, both within the United States and in any country where we conduct business. There can be no assurance that we or our wholesale partners will be in compliance with all of these regulations. A failure by us or our wholesale partners to comply with these laws and regulations could lead to governmental investigations, civil and criminal prosecutions, administrative hearings and court proceedings, civil and criminal penalties, injunctions against product sales or advertising, civil and criminal liability for the Company and/or its principals, bad publicity, and tort claims arising out of governmental or judicial findings of fact or conclusions of law adverse to the Company or its principals. In addition, the adoption of new regulations and policies or changes in the interpretations of existing regulations and policies may result in significant new compliance costs or discontinuation of product sales, and may adversely affect the marketing of our products, resulting in decreases in revenue.

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We are currently dependent on a limited number of independent suppliers and manufacturers of our products, which may affect our ability to deliver our products in a timely manner. If we are not able to ensure timely product deliveries, potential distributors and customers may not order our products, and our revenue may decrease.

We rely on a limited number of third parties to supply and manufacture our products. Our products are manufactured on a purchase order basis only, and manufacturers can terminate their relationships with us at will. These third-party manufacturers may be unable to satisfy our supply requirements, manufacture our products on a timely basis, fill and ship our orders promptly, provide services at competitive costs, or offer reliable products and services. The failure to meet any of these critical needs would delay or reduce product shipment and adversely affect our revenue, as well as jeopardize our relationships with our distributors and customers. In the event any of our third-party manufacturers were to become unable or unwilling to continue to provide us with products in required volumes and at suitable quality levels, we would be required to identify and obtain acceptable replacement manufacturing sources. There is no assurance that we would be able to obtain alternative manufacturing sources on a timely basis. Additionally, our third-party manufacturers source the majority of the raw materials for our products and, if we were to use alternative manufacturers, we may not be able to duplicate the exact taste and consistency profile of the product from the original manufacturer. An extended interruption in the supply of our products would likely result in decreased product sales and a corresponding decline in revenue. We believe that we can meet our current supply and manufacturing requirements with our current suppliers and manufacturers or with available substitute suppliers and manufacturers. Historically, we have not experienced any material delays or disruptions to our business caused by difficulties in obtaining our products from manufacturers.

COVID-19 could affect our sales and disrupt our operations and could have a material adverse impact on us.

The coronavirus (COVID-19) that was reported to have surfaced in Wuhan, China in December 2019 and that has now spread to other countries, including the U.S., could adversely impact our operations or those of our third-party suppliers, as well as our sales to wholesale partners. In addition, we rely on raw material suppliers located within and outside the U.S. who source their materials from China, among other countries. The extent to which the coronavirus impacts our operations, those of our third-party suppliers or our wholesale partners will depend on future developments, which are highly uncertain and cannot be predicted with confidence. If the public avoids public spaces, including retail stores, or if we, or any of our third-party suppliers encounter any disruptions to our or their respective operations, facilities or stores, or if our wholesale partners’ retail stores were to partially or fully close due to the coronavirus, which has previously occurred in the case of certain GNC locations, then we or they may be prevented or delayed from effectively operating our or their business, respectively, and the manufacture, supply, distribution and sale of our products and our financial results could be adversely affected.

We are dependent on our third-party manufacturers to supply our products in the compositions we require, and we do not independently analyze each production lot of our products. Any errors in our product manufacturing could result in product recalls, significant legal exposure, and reduced revenue and the loss of distributors.

Although we require that our manufacturers verify the accuracy of the contents of our products, we do not have the expertise or personnel to monitor the production of products by these third parties. We rely primarily, with limited independent verification, on certificates of analysis regarding product content provided by our third-party suppliers and limited safety testing by them. We cannot be assured that these outside manufacturers will continue to reliably supply products to us in the compositions we require. Errors in the manufacture of our products could result in product recalls, significant legal exposure, adverse publicity, decreased revenue, and loss of distributors and endorsers.

We face significant competition from existing suppliers of products similar to ours. If we are not able to compete with these companies effectively, we may not be able to maintain profitability.

We face intense competition from numerous resellers, manufacturers and wholesalers of nutritional supplements similar to ours, including retail, online and mail-order providers. Many of our competitors have longer operating histories, more-established brands in the marketplace, revenue significantly greater than ours and better access to capital than we have. We anticipate that these competitors may use their resources to engage in various business activities that could result in reduced sales of our products. Companies with greater capital and research capabilities could re-formulate existing products or formulate new products that could gain wide marketplace acceptance, which could have a negative effect on our future sales. In addition, aggressive advertising and promotion by our competitors may require us to compete by lowering prices or by increasing our marketing expenditures, and the economic viability of our operations likely would be diminished.

Adverse publicity associated with our products, ingredients, or those of similar companies, could adversely affect our sales and revenue.

Our customers’ perception of the safety and quality of our products or even similar products distributed by others can be significantly influenced by national media attention, publicized scientific research or findings, product liability claims, and other publicity concerning our products or similar products distributed by others. Adverse publicity, whether or not accurate, that associates consumption of our products or any similar products with illness or other adverse effects, will likely diminish the public’s perception of our products. Claims that any products are ineffective, inappropriately labeled or have inaccurate instructions as to their use, could have a material adverse effect on the market demand for our products, including reducing our sales and revenue.

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The efficiency of nutritional supplement products is supported by limited conclusive clinical studies, which could result in less market acceptance of these products and lower revenue or lower growth rates in revenue.

Our nutritional supplement products are made from various ingredients, including vitamins, minerals, amino acids, herbs, botanicals, fruits, berries, and other substances for which there is a long history of human consumption. However, there is little long-term experience with human consumption of certain product ingredients or combinations of ingredients in concentrated form. Although we believe that all of our products fall within the generally known safe limits for daily doses of each ingredient contained within them, nutrition science is imperfect. Moreover, some people have peculiar sensitivities or reactions to nutrients commonly found in certain foods and may have similar sensitivities or reactions to nutrients contained in our products. Furthermore, nutrition science is subject to change based on new research. New scientific evidence may disprove the efficacy of our products or prove our products to have effects not previously known. We could be adversely affected by studies that may assert that our products are ineffective or harmful to consumers, or if adverse effects are associated with a competitor’s similar products.

Our products may not meet health and safety standards or could become contaminated.

We do not have control over the third parties involved in the manufacturing of our products and their compliance with government health and safety standards. Even if our products meet these standards, they could otherwise become contaminated. A failure to meet these standards or contamination could occur in our operations or those of our distributors or suppliers. This could result in expensive production interruptions, recalls and liability claims. Moreover, negative publicity could be generated from false, unfounded or nominal liability claims or limited recalls. Any of these failures or occurrences could negatively affect our business and financial performance.

The sale of our products involves product liability and related risks that could expose us to significant insurance and loss expense.

We face an inherent risk of exposure to product liability claims if the use of our products results in, or is believed to have resulted in, illness or injury. Most of our products contain combinations of ingredients, and there is little long-term experience with the effect of these combinations. In addition, interactions of these products with other products, prescription medicines and over-the-counter drugs have not been fully explored or understood and may have unintended consequences. Although our third-party manufacturers perform tests in connection with the formulations of our products, these tests are not designed to evaluate the inherent safety of our products.

Although we maintain product liability insurance, it may not be sufficient to cover all product liability claims, and any claims that may arise could have a material adverse effect on our business. The successful assertion or settlement of an uninsured claim, a significant number of insured claims or a claim exceeding the limits of our insurance coverage would harm us by adding further costs to our business and by diverting the attention of our senior management from the operation of our business. Even if we successfully defend a liability claim, the uninsured litigation costs and adverse publicity may be harmful to our business.

Any product liability claim may increase our costs and adversely affect our revenue and operating income. Moreover, liability claims arising from a serious adverse event may increase our costs through higher insurance premiums and deductibles and may make it more difficult to secure adequate insurance coverage in the future. In addition, our product liability insurance may fail to cover future product liability claims, which, if adversely determined, could subject us to substantial monetary damages.

If the products we sell do not have the healthful effects intended, our business may suffer.

In general, our products sold consist of nutritional supplements that are classified in the United States as “dietary supplements”, which do not currently require approval from the FDA or other regulatory agencies prior to sale. Although many of the ingredients in such products are vitamins, minerals, herbs and other substances for which there is a long history of human consumption, our products often contain innovative ingredients or combinations of ingredients. Although we believe such products and the combinations of ingredients in them are safe when taken as directed by us, there is little long-term experience with human or other animal consumption of certain of these ingredients or combinations thereof in concentrated form. The products could have certain side effects if not taken as directed or if taken by a consumer that has certain medical conditions. Furthermore, there can be no assurance that any of the products, even when used as directed, will have the effects intended or will not have harmful side effects.

A slower growth rate in the nutritional supplement industry could lessen our sales and make it more difficult for us to sustain consistent growth.

The nutritional supplement industry has been growing at a strong pace over the past ten years. However, any reported medical concerns with respect to ingredients commonly used in nutritional supplements could negatively impact the demand for our products. Additionally, low-carb products, liquid meal replacements and similar competing products addressing changing consumer tastes and preferences could affect the market for certain categories of supplements. All these factors could have a negative impact on our sales growth.

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Our U.S. Net Operating Loss ("NOL") carryforwards may expire or could be substantially limited if we experience an ownership change as defined in the Internal Revenue Code (“IRC”) or if changes are made to the IRC.

We have significant U.S. NOL carryforwards. Under federal tax laws, we can carry forward and use our NOLs to reduce our future U.S. taxable income and tax liabilities until such NOL carryforwards expire in accordance with the IRC of 1986, as amended. Our NOL carryforwards provide a benefit to us, if fully utilized, of significant future tax savings. However, our ability to use these tax benefits in future years will depend upon the amount of our federal and state taxable income. If we do not have sufficient federal and state taxable income in future years to use the benefits before they expire, we will permanently lose the benefit of the NOL carryforwards.

Additionally, Section 382 and Section 383 of the IRC provide an annual limitation on our ability to utilize our NOL carryforwards, as well as certain built-in losses, against the future U.S. taxable income in the event of a change in ownership, as defined under the IRC. While we have implemented a stockholder’s right plan to protect our NOL carryforwards, there is no assurance that we will not experience a change in ownership in the future as a result of changes in our stock ownership, and any such subsequent changes in ownership for purposes of the IRC could further limit our ability to use our NOL carryforwards.

If other changes are made to the IRC, they could impact our ability to utilize our NOLs. Accordingly, any such occurrences could adversely affect our financial condition, operating results and cash flows.

Compliance with changing corporate governance regulations and public disclosures may result in additional risks and exposures.

Changing laws, regulations and standards relating to corporate governance and public disclosure, including the Sarbanes-Oxley Act of 2002 and new regulations from the SEC, have created uncertainty for public companies such as ours. These laws, regulations, and standards are subject to varying interpretations in many cases and as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. As a result, our efforts to comply with evolving laws, regulations, and standards have resulted in, and are likely to continue to result in, increased expense and significant management time and attention.

Loss of key personnel could impair our ability to operate.

Our success depends on hiring, retaining and integrating senior management and skilled employees. We are currently dependent on certain current key employees, who are vital to our ability to grow our business and maintain profitability. As with all personal service providers, our officers can terminate their relationship with us at will. Our inability to retain these individuals may result in a reduced ability to operate our business.

Risk Factors Relating to Our Common Stock

A limited trading market currently exists for our Common Stock, and we cannot assure you that an active market will ever develop, or if developed, will be sustained.

There is currently a limited trading market for our Common Stock on the OTC: PINK marketplace, and an active trading market may not develop. Consequently, we cannot assure you when and if an active trading market in our Common Stock will be established, or whether any such market will be sustained or sufficiently liquid to enable holders of shares of our Common Stock to liquidate their investment in the Company.

The price of our securities could be subject to wide fluctuations and your investment could decline in value.

The market price of the securities of a company such as ours with little name recognition in the financial community and without significant revenue can be subject to wide price swings. For example, the closing price of our Common Stock has ranged from a high of $21.60 to a low of $7.70 during the year ending December 31, 2020. The market price of our securities may be subject to wide changes in response to quarterly variations in operating results, announcements of new products by us or our competitors, reports by securities analysts, volume trading, or other events or factors. In addition, the financial markets have experienced significant price and volume fluctuations for a number of reasons, including the failure of certain companies to meet market expectations. These broad market price swings, or any industry-specific market fluctuations, may adversely affect the market price of our securities.

Companies that have experienced volatility in the market price of their stock have been the subject of securities class action litigation. If we were to become the subject of securities class action litigation, it could result in substantial costs and a significant diversion of our management’s attention and resources.

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We may issue preferred stock with rights senior to the common stock.

Our Articles of Incorporation authorize the issuance of up to 10.0 million shares of preferred stock in the aggregate. Currently, 1,000 shares of Series A Preferred Stock, par value $0.01 per share, are authorized (the “ Series A Preferred ”) and, therefore, could be issued without shareholder approval. For purposes of enacting its Tax Benefits Preservation Plan, dated February 26, 2021, by and between the Company and Colonial Stock (the " Tax Benefits Plan "), the Company's transfer agent, the Company has designating a new class of Preferred Stock as Series B Junior Participating Preferred Stock, par value $0.01, which shall have rights, powers, and preferences similar to those of the Company's Common Stock. However, the rights and preferences of any class or series of preferred stock, were we to designate or issue additional shares of preferred stock, would be established by our Board of Directors in its sole discretion and may have dividend, voting, liquidation and other rights and preferences that are senior to the rights of our Common Stock.

You should not rely on an investment in our Common Stock for the payment of cash dividends.

We have never paid cash dividends on our Common Stock and do not anticipate paying any cash dividends in the foreseeable future. You should not make an investment in our Common Stock if you require dividend income. Any return on investment in our Common Stock would only come from an increase in the market price of our stock, which is uncertain and unpredictable.

Our Chair of the Board of Directors, Chief Executive Officer and significant shareholder may have certain personal interests that may affect the Company.

Due to the securities held by Sudbury Capital Fund, LP (" Sudbury ") and Dayton Judd, the Company’s Chair of the Board and Chief Executive Officer, Mr. Judd may be deemed to be the beneficial owner of a majority of the Company’s outstanding voting securities. Consequently, Mr. Judd individually, and together with Sudbury, as stockholders acting together, can significantly influence all matters requiring approval by our stockholders, including the election of directors and significant corporate transactions, such as mergers or other business transactions requiring shareholder approval. This concentration of ownership may have effects such as delaying or preventing a change in control of the Company that may be favored by other shareholders or preventing transactions in which shareholders might otherwise recover a premium for their shares over current market prices. In addition, as a result of Mr. Judd’s position as Chair of the Board and Chief Executive Officer, he and/or Sudbury may have the ability to exert influence over both the actions of the Board of Directors, as well as the execution of management’s plans.

SHOULD ONE OR MORE OF THE FOREGOING RISKS OR UNCERTAINTIES MATERIALIZE, OR SHOULD THE UNDERLYING ASSUMPTIONS PROVE INCORRECT, ACTUAL RESULTS MAY DIFFER SIGNIFICANTLY FROM THOSE ANTICIPATED, BELIEVED, ESTIMATED, EXPECTED, INTENDED OR PLANNED.

ITEM 1B. U NRESOLVED STAFF COMMENTS

None.

ITEM 2. P ROPERTIES

The Company, including its subsidiaries, leases its headquarters in Omaha, Nebraska. Management believes that the Company's site is adequate to support the business and suitable for present purposes, and the property and equipment have been well maintained.

ITEM 3. L EGAL 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 4. M INE SAFETY DISCLOSURES

None.

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P ART II

ITEM 5. M ARKET FOR REGISTRANT’S COMMON STOCK, RELATED STOCKHOLDER MATTERS AND ISSUERS PURCHASES OF EQUITY SECURITIES

Our Common Stock is traded in the over-the-counter market, and quoted on the OTC: PINK market under the symbol “FTLF”.

As of December 31, 2020, there were 1,060,818 shares of Common Stock outstanding, and there were 34 shareholders of record of the Company’s Common Stock in addition to an undetermined number of holders whose shares are held in “street name.”

The following table sets forth for the periods indicated the high and low closing prices for our Common Stock.

	High	Low
Fiscal Year 2020
First Quarter (January - March 2020)	$ 14.75	$ 7.70
Second Quarter (April - June 2020)	$ 12.25	$ 9.00
Third Quarter (July - September 2020)	$ 14.96	$ 9.91
Fourth Quarter (October - December 2020)	$ 21.60	$ 14.00

	High	Low
Fiscal Year 2019
First Quarter (January - March 2019)	$ 5.65	$ 4.00
Second Quarter (April - June 2019)	$ 10.00	$ 5.40
Third Quarter (July - September 2019)	$ 11.05	$ 8.50
Fourth Quarter (October - December 2019)	$ 14.10	$ 9.69

On March 25, 2021, the closing price of our Common Stock was $24.04 per share .

Recent Sales of Unregistered Securities

No unregistered securities were issued during the fiscal year that were not previously reported in a Quarterly Report on Form 10-Q or Current Report on Form 8-K.

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 of December 31, 2020, we were authorized to repurchase up to $2.5 million, of which approximately $1.1 million remained available.

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. Common Stock repurchase activity under our publicly announced Share Repurchase Program during each quarter of 2020 was as follows:

	Total number of shares purchased	Average price paid per share	Total number of shares purchased as part of publicly announced programs	Dollar value of shares that may yet be purchased
First quarter ended March 31, 2020	11,900	$ 14.35	11,900	$ 1,110,917
Second quarter ended June 30, 2020	-	-	-	1,110,917
Third quarter ended September 30, 2020	-	-	-	1,110,917
Fourth quarter ended December 31, 2020	-	-	-	1,110,917
Subtotal	11,900	$ 14.35	11,900

Transfer Agent

Our transfer agent and registrar for the Common Stock is Colonial Stock Transfer located in Salt Lake City, Utah.

Securities Authorized for Issuance under Equity Compensation Plans

For a discussion of our equity compensation plans, please see Item 12 of this Annual Report.

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ITEM 6. S ELECTED FINANCIAL DATA

Not a required disclosure for Smaller Reporting Companies.

ITEM 7. M ANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OR PLAN OF OPERATION

The following is management’s discussion and analysis of certain significant factors that have affected our financial position and operating results during the periods included in the accompanying consolidated financial statements, as well as information relating to the plans of our current management. This report includes forward-looking statements. Generally, the words “believes”, “anticipates”, “may”, “will”, “should”, “expect”, “intend”, “estimate”, “continue”, and similar expressions or the negative thereof or comparable terminology are intended to identify forward-looking statements. Such statements are subject to certain risks and uncertainties, including the matters set forth in this Annual Report or other reports or documents we file with the Securities and Exchange Commission from time to time, which could cause actual results or outcomes to differ materially from those projected. Undue reliance should not be placed on these forward-looking statements, which speak only as of the date hereof. We undertake no obligation to update these forward-looking statements.

The following discussion and analysis should be read in conjunction with our consolidated financial statements and the related notes thereto and other financial information contained elsewhere in this Annual Report.

Critical Accounting Policies

Use of Estimates and Assumptions

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.

Those estimates and assumptions include estimates for reserves of uncollectible accounts receivable, allowance for product returns, sales returns and incentive programs, allowance for inventory obsolescence, depreciable lives of property and equipment, analysis of impairment of goodwill, realization of deferred tax assets, accruals for potential liabilities and assumptions made in valuing stock instruments issued for services. Management evaluates these estimates and assumptions on a regular basis. Actual results could differ from those estimates.

Accounts Receivable and Allowance for Doubtful Accounts

The Company’s accounts receivable balance is related to trade receivables and are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in its existing accounts receivable. The Company will maintain allowances for doubtful accounts, estimating losses resulting from the inability of its customers to make required payments for products. Accounts with known financial issues are first reviewed and specific estimates are recorded. The remaining accounts receivable balances are then grouped in categories by the amount of days the balance is past due, and the estimated loss is calculated as a percentage of the total category based upon past history. Account balances are charged off against the allowance when it is probable the receivable will not be recovered.

The determination of collectability of the Company’s accounts receivable requires management to make frequent judgments and estimates in order to determine the appropriate amount of allowance needed for doubtful accounts. The Company’s allowance for doubtful accounts is estimated to cover the risk of loss related to accounts receivable. This allowance is maintained at a level we consider appropriate based on historical and other factors that affect collectability. These factors include historical trends of write-offs, recoveries and credit losses; the careful monitoring of customer credit quality; and projected economic and market conditions. Different assumptions or changes in economic circumstances could result in changes to the allowance.

Total allowance for doubtful accounts as of December 31, 2020 and 2019 amounted to $51,000 and $27,000, respectively.

Product Returns, Sales Incentives and Other Forms of Variable Consideration

In measuring revenue and determining the consideration the Company is entitled to as part of a contract with a customer, the Company takes into account the related elements of variable consideration. Such elements of variable consideration include, but are not limited to, product returns and sales incentives, such as markdowns and margin adjustments. For these types of arrangements, the adjustments to revenue are recorded at the later of when (i) the Company recognizes revenue for the transfer of the related products to the customers, or (ii) the Company pays, or promises to pay, the consideration.

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GNC maintains a customer satisfaction program which allows customers to return product to the store for credit or refund. Subject to certain terms and restrictions, GNC may require reimbursement from vendors for unsaleable returned product through either direct payment or credit against a future invoice. We also support a product return policy for iSatori Products, whereby customers can return product for credit or refund. Product returns can and do occur from time to time and can be material.

For the sale of goods with a right of return, the Company estimates variable consideration using the most likely amount method and recognizes revenue for the consideration it expects to be entitled to when control of the related product is transferred to the customers and records a product returns liability for the amount it expects to credit back its customers. Under this method, certain forms of variable consideration are based on expected sell-through results, which requires subjective estimates. These estimates are supported by historical results as well as specific facts and circumstances related to the current period. In addition, the Company recognizes an asset included in Inventories, net and a corresponding adjustment to Cost of Goods Sold for the right to recover goods from customers associated with the estimated returns. The product returns liability and corresponding asset include estimates that directly impact reported revenue. These estimates are calculated based on a history of actual returns, estimated future returns and information provided by customers regarding their inventory levels. Consideration of these factors results in an estimate for anticipated sales returns that reflects increases or decreases related to seasonal fluctuations. In addition, as necessary, product returns liability and the related assets may be established for significant future known or anticipated events. The types of known or anticipated events that are considered, and will continue to be considered, include, but are not limited to, changes in the retail environment and the Company's decision to continue to support new and existing products.

Information for product returns is received on regular basis and adjusted for accordingly. Adjustments for returns are based on factual information and historical trends for both NDS products and iSatori products and are specific to each distribution channel. We monitor, among other things, remaining shelf life and sell-through data on a weekly basis. If we determine there are any risks or issues with any specific products, we accrue sales return allowances based on management’s assessment of the overall risk and likelihood of returns in light of all information available.

Regarding incentives, the Company accrues an estimate of 3% for promotional expense it calls “vendor funded discounts” at the time of sale. The expense is recorded as a contra-revenue account, and the expected incentive costs are never included in accounts receivable. As such, an allowance account for incentives is not required or necessary. Actual incentive costs are reconciled to the estimate on a regular basis.

Total allowance for product returns, sales returns and incentive programs as of December 31, 2020 and 2019 amounted to $335,000 and $256,000, respectively.

Inventory

The Company’s inventory is carried at the lower of cost or net realizable value using the first-in, first-out (“ FIFO ”) method. The Company evaluates the need to record adjustments for inventory on a regular basis. Company policy is to evaluate all inventories including components and finished goods for all of its product offerings across all of the Company’s operating subsidiaries.

Total allowance for expiring, excess and slow-moving inventory items as of December 31, 2020 and 2019 amounted to $56,000 and $130,000, respectively.

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.

There were no impairment charges incurred during the year ended December 31, 2020.

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Revenue Recognition

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

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.

Control of products we sell transfers to customers upon shipment from our facilities or delivery to our customers, and the Company’s performance obligations are satisfied at that time. Shipping and handling activities are performed before the customer obtains control of the goods and therefore represent a fulfillment activity rather than promised goods to the customer. 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.

Stock-Based Compensation.

The Company periodically issues stock options and warrants to employees and non-employees in non-capital raising transactions for services rendered. The Company accounts for stock option and warrant grants issued and vesting to employees based on the authoritative guidance provided by the Financial Accounting Standards Board (“ FASB ”) where the value of the award is measured on the date of grant and recognized as compensation on the straight-line basis over the vesting period.

From prior periods until December 31, 2018, the Company accounted for share-based compensation issued to non-employees and consultants in accordance with the provisions of FASB ASC 505-50, Equity-Based Payments to Non-Employees . Measurement of share-based payment transactions with non-employees is based on the fair value of whichever is more reliably measurable: (a) the goods or services received or (b) the equity instruments issued. The final fair value of the share-based payment transaction is determined at the performance completion date.

In June 2018, the FASB issued ASU 2018-07, Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting (“ASU 2018-07”). The guidance was issued to simplify the accounting for share-based transactions by expanding the scope of ASU 2018-07 from only being applicable to share-based payments to employees to also include share-based payment transactions for acquiring goods and services from nonemployees. As a result, nonemployee share-based transactions are measured by estimating the fair value of the equity instruments at the grant date, taking into consideration the probability of satisfying performance conditions. We adopted ASU 2018-07 on January 1, 2019. The adoption of the standard did not have a material impact on our financial statements for the year ended December 31, 2019 or the previously reported financial statements.

The fair value of the Company’s stock option and warrant grants are estimated using the Black-Scholes option pricing model, which uses certain assumptions related to risk-free interest rates, expected volatility, expected life of the stock options or warrants, and future dividends. Compensation expense is recorded based upon the value derived from the Black-Scholes option pricing model and based on actual experience. The assumptions used in the Black-Scholes option pricing model could materially affect compensation expense recorded in future periods.

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Recent Accounting Pronouncements

See Note 2 of the Notes to the Consolidated Financial Statements included in this Annual Report for a description of recent accounting pronouncements believed by management to have a material impact on our present or future financial statements.

Results of Operations

	December 31, 2020	December 31, 2019	Change	%
Revenue	$ 21,744,000	$ 19,497,000	$ 2,247,000	12 %
Cost of goods sold	(12,350,000 )	(11,436,000 )	(914,000 )	8 %
Gross profit	9,394,000	8,061,000	1,333,000	17 %
General and administrative expense	(3,047,000 )	(3,049,000 )	2,000	0 %
Selling and marketing expense	(2,105,000 )	(2,379,000 )	274,000	-12 %
Depreciation and amortization	(38,000 )	(52,000 )	14,000	-27 %
Total operating expenses	(5,190,000 )	(5,480,000 )	290,000	-5 %
Income from operations	4,204,000	2,581,000	1,623,000	63 %
Other income (expense)	64,000	124,000	(60,000 )	-48 %
Provision for income tax	4,446,000	(7,000 )	4,453,000	n/m
Net income	$ 8,714,000	$ 2,698,000	$ 6,016,000	223 %

Fiscal Year Ended December 31, 2020 Compared to Fiscal Year Ended December 31, 2019

Net Sales. Revenue for the year ended December 31, 2020 increased 12% to $21,744,000 as compared to $19,497,000 for the year ended December 31, 2019. Revenue for the year ended December 31, 2020 compared to the prior year reflects improvements in our wholesale business and growth in our online direct-to-consumer offering. The Company believes that a portion of the revenue growth during the fourth quarter represents an acceleration of purchasing by certain wholesale customers that would typically occur in the first quarter.

Online revenue during the year ended December 31, 2020 was approximately 20% of total revenue, compared to roughly 12% of total revenue during the same twelve-month period in 2019. Due to the ongoing shift to online purchasing by consumers, including additional growth arising from the effects of the COVID-19 pandemic as a result of the shutdown of various retail outlets, e-commerce sales have accounted for a growing percentage of our domestic revenue. We expect this trend to continue at least through most of 2021. 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 Company continually reformulates and introduces new products, as well as seeks to increase both the number of stores and number of approved products that can be sold within the GNC franchise system that comprise its domestic and international distribution footprint. Management also believes that its focus on developing its e-commerce capabilities will drive additional incremental sales in the short-term, while yielding substantial benefits in the longer-term.

Cost of Goods Sold. Cost of goods sold for the year ended December 31, 2020 increased 8% to $12,350,000 as compared to $11,436,000 for the year ended December 31, 2019. This increase is principally attributable to higher revenue.

Gross Profit Margin. Gross profit for the year ended December 31, 2020 increased to $9,394,000 as compared to $8,061,000 for the year ended December 31, 2019. Gross margin for the year ended December 31, 2020 increased to 43.2% from 41.3% for the comparable period last year. The increase in gross profit during the year ended December 31, 2020 is principally attributable to higher revenue and a larger percentage of higher-margin direct-to-consumer sales.

General and Administrative Expense. General and administrative expense for the year ended December 31, 2020 decreased by $2,000 to $3,047,000 as compared to $ 3,049,000 for the year ended December 31, 2019.

Selling and Marketing Expense. Selling and marketing expense for the year ended December 31, 2020 decreased to $2,105,000 as compared to $2,379,000 for the year ended December 31, 2019. This decrease primarily reflects lower sales-related travel expenses due to COVID-19.

Depreciation and Amortization. Depreciation and amortization for the year ended December 31, 2020 decreased to $38,000 from $52,000 during the same period in 2019. The decrease is principally attributable to a reduction in depreciation expense due to certain assets becoming fully depreciated.

Net Income. We generated a net income of $8,714,000 for the year ended December 31, 2020, as compared to a net income of $2,698,000 for the year ended December 31, 2019 . The increase in net income for the year ended December 31, 2020 compared to the same period in 2019 was primarily attributable to a combination of higher revenue, higher gross margins, lower operating expense, and an income tax benefit resulting from removing a substantial portion of the reserve against our deferred tax assets.

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Non-GAAP Measures

The financial presentation below contains certain financial measures defined as “non-GAAP financial measures” by the SEC, including non-GAAP EBITDA and adjusted non-GAAP EBITDA. These measures may be different from non-GAAP financial measures used by other companies. The presentation of this financial information, which is not prepared under any comprehensive set of accounting rules or principles, is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in this Annual Report in accordance with GAAP.

As presented below, non-GAAP EBITDA excludes interest, income taxes, and depreciation and amortization. Adjusted non-GAAP EBITDA excludes, in addition to interest, taxes, depreciation and amortization, equity-based compensation and impairment charges. The Company believes the non-GAAP measures provide useful information to both management and investors by excluding certain expense and other items that may not be indicative of its core operating results and business outlook. The Company believes that the inclusion of non-GAAP measures in the financial presentation below allows investors to compare the Company’s financial results with the Company’s historical financial results and is an important measure of the Company’s comparative financial performance.

	Year Ended December 31,
	2020	2019
	(Unaudited)	(Unaudited)
Net income	$ 8,714,000	$ 2,698,000
Interest expense (net)	6,000	47,000
Provision for income taxes	(4,446,000 )	7,000
Depreciation and amortization	38,000	52,000
EBITDA	4,312,000	2,804,000
Non-cash and non-recurring adjustments
Common stock issued for services	49,000	71,000
Fair value of vested options issued for services	29,000	111,000
Adjusted EBITDA	$ 4,390,000	$ 2,986,000

Liquidity and Capital Resources

As of December 31, 2020, the Company had working capital of $7,744,000, compared to working capital of $2,925,000 at December 31, 2019. Our principal sources of liquidity at December 31, 2020 consisted of $6,336,000 of cash and $2,044,000 of accounts receivable. The increase in working capital is principally attributable to a higher cash balance driven by cash flows from operating activities during fiscal 2020.

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 September 24, 2019, the Company entered into entered into a Line of Credit Agreement with the Lender providing the Company with a $2.5 million revolving 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 the Maturity Date, or unless renewed at maturity upon approval by the Company’s Board 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.

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 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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On April 27, 2020, the Company received proceeds from a loan in the amount of $449,700 from the PPP Lender, pursuant to approval by the SBA for the Lender to fund the Company’s request for the PPP Loan created as part of the recently enacted CARES Act administered by the SBA. 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.The Company did not provide any collateral or guarantees for the PPP Loan, nor did the Company pay any fees to obtain the PPP Loan. Through December 31, 2020, the Company had deferred interest payments of $3,000, which amount had been expensed and included in accrued liabilities.

Subsequent to the end of the fiscal year, the Company was informed by the PPP Lender and the SBA that the full amount balance of the PPP Loan, including accrued interest, was forgiven on January 15, 2021.

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.

Cash Provided by Operating Activities

Net cash provided by operating activities was $5,721,000 during the fiscal year ended December 31, 2020, compared to net cash provided by operating activities of $2,261,000 for the year ended December 31, 2019. The increase in cash provided by operating activities is primarily attributable to higher revenue and gross margins driven particularly by the Company’s growing direct-to-consumer business.

Cash Provided by Investing Activities

Cash provided by investing activities for the fiscal year ended December 31, 2020 was $0 as compared to $0 provided by investing activities during the year ended December 31, 2019.

Cash Used in Financing Activities

Cash provided by financing activities for the year ended December 31, 2020 was $350,000 as compared to cash used in financing of ($2,255,000) during the year ended December 31, 2019. Debt repayments and stock repurchases during 2019 that did not recur in 2020 account for the primary difference.

Off-Balance Sheet Arrangements

Other than contractual obligations incurred in the normal course of business, we do not have any off-balance sheet financing arrangements or liabilities, retained or contingent interests in transferred assets or any obligation arising out of a material variable interest in an unconsolidated entity.

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ITEM 7A. Q UANTITATIVE 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 related primarily to any borrowings under our existing Line of Credit, and our investments in short-term financial instruments. As of December 31, 2020, the Company had a zero balance 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.

ITEM 8. F INANCIAL STATEMENTS

The information required hereunder in this Annual Report is set forth in the financial statements and the notes thereto beginning on Page F-1.

ITEM 9. C HANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

On September 11, 2019, the Audit Committee of the Board of the Company (the “ Audit Committee ”) concluded a review process of independent registered public accounting firms. As a result of this process and following careful deliberation, the Audit Committee recommended, and the Board approved, the dismissal of Weinberg & Company (“ Weinberg ”) as the Company’s independent registered public accounting firm for the year ending December 31, 2019.

The reports of Weinberg regarding the Company’s financial statements for the fiscal years ended December 31, 2017 and 2018 did not contain an adverse opinion or disclaimer of opinion and were not modified as to uncertainty, scope, or accounting principles. During the Company’s fiscal years ended December 31, 2017 and 2018, and the subsequent interim period through June 30, 2019, there were (i) no disagreements with Weinberg on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of Weinberg would have caused Weinberg to make reference to the subject matter of disagreements in connection with its report; and (ii) no “reportable events” as such term is defined in Item 304(a)(1)(v) on Regulation S-K.

The Company provided Weinberg with a copy of the foregoing disclosures and requested that Weinberg furnish the Company with a letter addressed to the Securities and Exchange Commission indicating whether Weinberg agrees with such disclosures. Weinberg's letter, and the announcement of the change in auditors, was included in the Form 8-K filed on September 17, 2019.

Effective September 13, 2019, the Company engaged Weaver and Tidwell, L.L.P. (“ Weaver ”) as its independent registered public accounting firm for the fiscal year ended December 31, 2019.

During the years ended December 31, 2017 and 2018 through to the effective date of Weaver’s appointment on September 13, 2019, the Company did not consult Weaver with respect to the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company’s Consolidated Financial Statements, or any other matters or reportable events as defined in Item 304(a)(2)(i) and (ii) of Regulation S-K.

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ITEM 9A. C ONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures.

Under the supervision and with the participation of our Management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of the design and operations of our disclosure controls and procedures, as defined in Rules 13a-15(c) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, as of December 31, 2020. Based on this evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed in the reports submitted under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, including to ensure that information required to be disclosed by the Company is accumulated and communicated to management, including the principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

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

We are responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes of accounting principles generally accepted in the United States.

This Annual Report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to an exemption for smaller reporting companies under Section 989G of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance of achieving their control objectives.

Our Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of our internal control over financial reporting as of December 31, 2020. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“ COSO ”) in Internal Control—Integrated Framework. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2020, our internal control over financial reporting was effective.

The Company’s Chief Executive Officer and Chief Financial Officer have determined that there have been no changes in the Company’s internal control over financial reporting during the period covered by this report identified in connection with the evaluation described in the above paragraph that have materially affected, or are reasonably likely to materially affect, Company’s internal control over financial reporting.

ITEM 9B. O THER INFORMATION

None.

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P A RT III

ITEM 10. D IRECTORS AND EXECUTIVE OFFICERS

All information regarding directors, executive officers and corporate governance required by this item is incorporated herein by reference to the applicable information in the proxy statement for our 2021 Annual Meeting of Stockholders (“ 2021 Annual Meeting ”), which will be filed with the SEC within 120 days after our fiscal year end of December 31, 2020, and is set forth under “Nominees for Director,” “Corporate Governance Profile,” “Delinquent Section 16(a) Reports” and in other applicable sections in the proxy statement.

ITEM 11. E X ECUTIVE COMPENSATION

The information required by this item is incorporated herein by reference to the applicable information in the proxy statement for our 2021 Annual Meeting and is set forth under “Executive Compensation.”

The information in the section of the proxy statement for our 2021 Annual Meeting captioned “Compensation Committee Report” is incorporated by reference herein but shall be deemed furnished, not filed and shall not be deemed to be incorporated by reference into any filing we make under the Securities Act of 1933 or the Exchange Act.

ITEM 12. S EC URITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

ITEM 13. C ERTAI N RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

ITEM 14. P RI NCIPAL ACCOUNTANT FEES AND SERVICES

The information required by this item is incorporated herein by reference to the proxy statement for our 2021 Annual Meeting and is set forth under “Auditor Fees.”

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P ART IV

ITEM 15. E XHIBITS AND REPORTS

Exhibits

2.1		Agreement and Plan of Merger, by and among the Company, iSatori, Inc., and ISFL Merger Sub, Inc., dated May 18, 2015 (incorporated by reference to Exhibit 2.1 filed with Form 8-K on May 18, 2015).
2.2		Voting and Standstill Agreement dated May 18, 2015 (incorporated by reference to Exhibit 4.1 of Schedule 13D (Commission File No. 005-47773) filed by the Company, Stephen Adelé Enterprises, Inc., Stephen Adelé, RENN Universal Growth Investment Trust, PLC, RENN Global Entrepreneurs Fund, Inc. and Russell Cleveland).
3.1		Articles of Incorporation (incorporated by reference to Exhibit 3.1 filed with Amendment No. 3 to the Company’s Registration Statement on Form SB2 (Commission File No. 333-137170)).
3.2		Amendments to Articles of Incorporation (incorporated by reference to Exhibit 3.2 filed with Amendment No. 3 to the Company’s Registration Statement on Form SB2 (Commission File No. 333-137170)).
3.3		Amended and Restated Bylaws of the Corporation (incorporated by reference to Exhibit 3.1 filed with Form 8-K on January 25, 2018).
3.4		Certificate of Amendment to Articles of Incorporation (incorporated by reference to Exhibit 3.1 filed with Form 8-K on September 13, 2010).
3.5		Certificate of Amendment to Articles of Incorporation to change name to FitLife Brands, Inc. (incorporated by reference to Exhibit 3.1 filed with Form 8-K on October 1, 2013).
3.6		Certificate of Amendment to Articles of Incorporation to effect 1-for-10 reverse split (incorporated by reference to Exhibit 3.1 filed with Form 8-K on October 1, 2013).
3.7		Certificate of Designations, Preferences and Rights of the Series A Convertible Preferred Stock, dated November 13, 2018 (incorporated by reference to Exhibit 3.2 filed with Form 10-Q on November 14, 2018).
3.8		Certificates of Change, dated April 11, 2019 (incorporated by reference to Exhibit 3.1 filed with Form 8-K filed on April 15, 2019).
3.9		Certificate of Designations, Preferences and Rights of the Series B Junior Preferred Stock, dated March 3, 2021 (incorporated by reference to Exhibit 3.1 filed with Form 8-K on March 4, 2021).
4.1		Form of Warrant, dated November 13, 2018 (incorporated by reference to Exhibit 4.1 filed with Form 10-Q on November 14, 2018).
4.2		Tax Benefit Preservation Plan, dated February 26, 2021 (incorporated by reference to Exhibit Form 8-K on March 4, 2021).
1 0.1		Second Amendment to Asset Purchase Agreement (incorporated by reference to Exhibit 10.3 filed with Form 8-K on October 6, 2009).
10.2		Assignment of Name (incorporated by reference to Exhibit 10.6 filed with Form 8-K on October 6, 2009).
10.3		Employment Agreement, dated December 31, 2009, between the Company and John Wilson (incorporated by reference to Exhibit 10.14 filed with Form 10-K on April 15, 2011).

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10.4		Demand Promissory Note (incorporated by reference to Exhibit 10.1 filed with Form 8-K on September 11, 2015).

10.5		Security Agreement by and among the Company, Stephen Adele Enterprises, and Stephen Adele, dated September 11, 2015 (incorporated by reference to Exhibit 10.2 filed with Form 8-K on September 11, 2015).
10.6		Amendment No. 3 to Employment Agreement, dated July 14, 2014 between the Company and John Wilson (incorporated by reference to Exhibit 10.1 filed with Form 8-K on April 26, 2017).
10.7		Amendment No. 1 to Employment Agreement, dated May 1, 2013, by and between the Company and Michael Abrams (incorporated by reference to Exhibit 10.2 filed with Form 8-K on April 26, 2017).
10.8		Loan Modification Agreement, dated August 28, 2017, by and between the Company and U.S. National Bank Association Bank (incorporated by reference to Exhibit 10.1 filed with Form 8-K on August 31, 2017).
10.9		Merchant Agreement by and between NDS Nutrition, Inc., iSatori, Inc., and Compass Bank, d/b/a Commercial Billing Service (incorporated by reference to Exhibit 3.1 filed with Form 8-K on January 25, 2018).
10.10		Continuing Guarantee of FitLife Brands, Inc. (incorporated by reference to Exhibit 3.1 filed with Form 8-K on January 25, 2018).
10.11		Consulting Services Agreement, by and between the Company and Dayton Judd, dated March 13, 2018 (incorporated by reference to Exhibit 10.26 filed with Form 10-K on April 17, 2018).
10.12		Abrams Transition Agreement, dated August 15, 2018 (incorporated by reference to Exhibit 10.1 filed with Form 8-K on September 12, 2018).
10.13		Form of Subscription Agreement, dated November 13, 2018 (incorporated by reference to Exhibit 10.1 filed with Form 10-Q on November 14, 2018).
10.14		Promissory Note issued to Sudbury Capital Fund, LP dated December 26, 2018 (incorporated by reference to Exhibit 10.1 filed with Form 8-K on December 26, 2018).
10.15		Promissory Note issued to Dayton Judd dated December 26, 2018 (incorporated by reference to Exhibit 10.2 filed with Form 8-K on December 26, 2018).
10.16		Employment Agreement, by and between FitLife Brands, Inc. and Patrick Ryan, dated June 13, 2019 (incorporated by reference to Exhibit 10.1 filed with Form 8-K on June 18, 2019).
10.17		2019 Omnibus Incentive Plan (incorporated by reference to Appendix A to the Definitive Proxy Statement on Schedule 14A filed on July 12, 2019).
10.18		Revolving Line of Credit Agreement, dated as of September 24, 2019, between the Company and Mutual of Omaha Bank (incorporated by reference to Exhibit 10.1 filed with Form 8-K on September 26, 2019).
10.19		Note Payable Agreement by and between FitLife Brands, Inc. and CIT Bank, N.A. dated April 27, 2020 (incorporated by reference to Exhibit 10.1 filed with Form 8-K on May 1, 2020).
14.1		Code of Ethics (incorporated by reference to Exhibit 14.1 filed with Form 10-K on March 27, 2009).
16.1		Letter from Tarvaran, Askelson & Company, LLP, dated April 25, 2017 (incorporated by reference to Exhibit 16.1 filed with Form 8-K on April 26, 2017).
16.2		Letter from Weinberg & Company, P.A., dated September 17, 2019 (incorporated by reference to Exhibit 16.1 filed with Form 8-K on September 17, 2019).
21		List of Subsidiaries.
31.1		Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act.
31.2		Certification of Principal Financial and Accounting Officer Pursuant to Section 302 of the Sarbanes-Oxley Act.
32.1		Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act.
32.2		Certification of Chief Accounting Officer Pursuant to Section 906 of the Sarbanes-Oxley Act.

ITEM 16. FORM 10-K S UMMARY

None.

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S IGNATURES

In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, there unto duly authorized.

Registrant Date: March 26, 2021		FitLife Brands, Inc. By: /s/ Dayton Judd
		Dayton Judd
		Chief Executive Officer (Principal Executive Officer)

Date: March 26, 2021		By: /s/ Susan Kinnaman
		Susan Kinnaman
		Chief Financial Officer (Principal Financial Officer)

In accordance with the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the Company and in the capacities and on the dates indicated.

Date: March 26, 2021		By: /s/ Dayton Judd
		Dayton Judd
		Chief Executive Officer and Chair of the Board

Date: March 26, 2021		By: /s/ Grant Dawson
		Grant Dawson
		Director

Date: March 26, 2021		By: /s/ Lewis Jaffe
		Lewis Jaffe
		Director

Date: March 26, 2021		By: /s/ Todd Ordal
		Todd Ordal
		Director

Date: March 26, 2021		By: /s/ Seth Yakatan
		Seth Yakatan
		Director

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ITEM 8. FINANCIAL STATEMENTS

FITLIFE BRANDS, INC.

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		Page

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM		F-1
CONSOLIDATED FINANCIAL STATEMENTS:
Consolidated Balance Sheets at December 31, 2020 and 2019		F-4
Consolidated Statements of Operations for the years ended December 31, 2020 and 2019		F-5
Consolidated Statement of Stockholders’ Equity for the years ended December 31, 2020 and 2019		F-6
Consolidated Statements of Cash Flows for the years ended December 31, 2020 and 2019		F-7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS		F-8

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R EPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders

FitLife Brands, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of FitLife Brands, Inc. and Subsidiaries (the Company) as of December 31, 2020 and 2019, and the related consolidated statements of operations, stockholders’ equity, and cash flows for the years then ended, and the related notes to the consolidated financial statements (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the years then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Product Returns – Management’s Estimate of Product Returns including Discontinued or Expired Product. Refer to Note 2 to the Consolidated Financial Statements

F-1

Critical Accounting Matter Description

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 related elements of variable consideration, including, but not limited to, product returns. The allowance for product returns is based on specific terms and conditions included in the customer agreements, historical experience and management’s expectation of future returns.

We identified management’s estimate of product returns, including discontinued or expired product as a critical audit matter because of the judgments necessary for management to estimate and monitor, among other things, remaining shelf life, sell-through data, history of actual and estimated future returns, and information provided by customers regarding their inventory levels. The types of arrangements and complexity of information required a high degree of auditor judgment and an increased extent of effort when performing audit procedures to audit management’s estimates and evaluating the results of those procedures.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to management’s estimate of product returns included the following:

●

We obtained an understanding of the design and implementation of management’s controls and evaluated management’s review of the inputs used and assumptions applied in the product returns calculation.

●

To assess the reasonableness of the product returns estimate, we performed procedures that included, among others, testing management’s historical return rate calculation and the completeness and accuracy of sales and product returns data used in the calculation. We evaluated the historical accuracy of management’s estimate, read contracts and performed direct inquiries with management to identify any terms or conditions not included in customer contracts that could impact the estimate. We performed revenue cutoff testing to assess if there were unusual patterns at period end not considered in the Company’s analyses, performed lookback analyses using actual historical data to evaluate the forecasted amounts, which included testing credits issued and payments made throughout year, assessed subsequent events to determine whether there was any new information that would require adjustment to the estimate , and evaluated overall trends in product returns based on preceding years.

Income taxes - Realizability of Deferred Tax Assets – Refer to Note 8 to the Consolidated Financial Statements

Critical Accounting Matter Description

For the year ended December 31, 2020, the Company recorded a provision (benefit) for income taxes of ($4,446,000), driven primarily by an income tax benefit of ($4,370,000) resulting from the elimination of substantially all of the valuation reserve against the Company’s net operating losses and other deferred tax assets. The carrying amount of deferred tax assets are reviewed at each reporting date and reduced to the extent that it is no longer probable that all or part of the deferred tax assets will be utilized, based on positive and negative evidence, including that sufficient future taxable income will be available.

Management’s analysis of the realizability of its deferred tax assets, including the recognition, measurement, and disclosure of deferred tax assets was significant to our audit because the amounts are material to the consolidated financial statements. Auditing management’s assessment is complex and involves significant judgment as the Company’s ability to generate taxable income sufficient to utilize the assets may be impacted by various economic and industry conditions.

F-2

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to management’s realizability of deferred tax assets included the following:

●

We obtained an understanding of the design and implementation of management’s controls relating to the realizability of deferred tax assets, including projections of future taxable income and the future reversal of existing taxable temporary differences.

●

Among other audit procedures performed, we evaluated the positive and negative evidence in assessing whether the deferred tax assets are more likely than not to be utilized, including evaluating the trends of both the historical financial results and the projected sources of taxable income. Our audit procedures also included testing the calculations of existing temporary book-tax differences, the scheduling of the reversal of existing temporary taxable differences and of the appropriate character of income. We evaluated the assumptions used by the Company to develop projections of future taxable income and tested the completeness and accuracy of the underlying data used in its projections. For example, we compared the projections of future taxable income with the actual results of prior periods as well as management’s consideration of current industry and economic trends.

/s/ Weaver and Tidwell, L.L.P.

We have served as the Company’s auditor since 2019.

Fort Worth, Texas

March 26, 2021

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	FITLIFE BRANDS, INC.
	CONSOLIDATED B ALANCE SHEETS

ASSETS:	December 31,	December 31,
	2020	2019
CURRENT ASSETS
Cash	$ 6,336,000	$ 265,000
Accounts receivable, net of allowance of doubtful accounts, $51,000 and $27,000, respectively	2,044,000	2,366,000
Inventories, net of allowance for obsolescence of $56,000 and $130,000, respectively	3,401,000	2,998,000
Income tax receivable	40,000	-
Prepaid expenses and other current assets	52,000	72,000
Total current assets	11,873,000	5,701,000

Property and equipment, net	98,000	136,000
Right of use asset, net of amortization of $272,000 and $226,000, respectively	208,000	254,000
Goodwill	225,000	225,000
Deferred tax asset	4,370,000	-
Security deposits	-	10,000
TOTAL ASSETS	$ 16,774,000	$ 6,326,000

LIABILITIES AND STOCKHOLDERS' EQUITY:

CURRENT LIABILITIES:
Accounts payable	$ 3,246,000	$ 2,010,000
Accrued expense and other liabilities	498,000	464,000
Product returns	335,000	256,000
Lease liability - current portion	50,000	46,000
Total current liabilities	4,129,000	2,776,000

Long-term lease liability, net of current portion	158,000	208,000
PPP loan	453,000	-
TOTAL LIABILITIES	4,740,000	2,984,000

STOCKHOLDERS' EQUITY:
Preferred stock, $0.01 par value, 10,000,000 shares authorized, none outstanding
as of December 31, 2020 and December 31, 2019
Common stock, $.01 par value, 15,000,000 shares authorized; 1,060,818 and 1,054,516
issued and outstanding as of December 31, 2020 and December 31, 2019, respectively	12,000	12,000
Treasury stock, 210,631 and 198,731 shares, respectively	(1,790,000 )	(1,619,000 )
Additional paid-in capital	32,204,000	32,055,000
Accumulated deficit	(18,392,000 )	(27,106,000 )
TOTAL STOCKHOLDERS' EQUITY	12,034,000	3,342,000

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$ 16,774,000	$ 6,326,000

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

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FITLIFE BRANDS, INC.

CONSOLIDATED STATEMENTS OF O PERATIONS

	Years ended
	December 31,
	2020	2019

Revenue	$ 21,744,000	$ 19,497,000
Cost of goods sold	12,350,000	11,436,000
Gross profit	9,394,000	8,061,000

OPERATING EXPENSES:
General and administrative	3,047,000	3,049,000
Selling and marketing	2,105,000	2,379,000
Depreciation and amortization	38,000	52,000
Total operating expenses	5,190,000	5,480,000
OPERATING INCOME	4,204,000	2,581,000

OTHER EXPENSES (INCOME)
Interest expense	15,000	47,000
Interest income	(9,000 )	-
Gain on settlement	(70,000 )	(171,000 )
Total other expenses (income)	(64,000 )	(124,000 )

PRE-TAX NET INCOME	4,268,000	2,705,000

PROVISION (BENEFIT) FOR INCOME TAXES	(4,446,000 )	7,000

NET INCOME	8,714,000	2,698,000

PREFERRED STOCK DIVIDEND	-	(63,000 )

NET INCOME AVAILABLE TO COMMON SHAREHOLDERS	$ 8,714,000	$ 2,635,000

NET INCOME PER SHARE AVAILABLE TO COMMON SHAREHOLDERS:
Basic	$ 8.23	$ 2.57
Diluted	$ 7.66	$ 2.41
Basic weighted average common shares	1,058,207	1,026,204
Diluted weighted average common shares	1,137,349	1,092,312

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

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FITLIFE BRANDS, INC.

CONSOLIDATED STATEMENT OF STOCKHOLDERS' E QUITY

						Additional
	Series A Preferred		Common Stock		Treasury	Paid-in	Accumulated
	Shares	Amount	Shares	Amount	Stock	Capital	Deficit	Total

YEAR ENDED DECEMBER 31, 2020

DECEMBER 31, 2019	-	$ -	1,054,516	$ 12,000	$ (1,619,000 )	$ 32,055,000	$ (27,106,000 )	$ 3,342,000
Fair value of common stock issued for services	-	-	1,202	-	-	15,000	-	15,000
Repurchase of common stock	-	-	(11,900 )	-	(171,000 )	-	-	(171,000 )
Exercise of stock options	-	-	17,000	-	-	71,000	-	71,000
Stock-based compensation	-	-	-	-	-	63,000	-	63,000
Net income	-	-	-	-	-	-	8,714,000	8,714,000

DECEMBER 31, 2020	-	$ -	1,060,818	$ 12,000	$ (1,790,000 )	$ 32,204,000	$ (18,392,000 )	$ 12,034,000

YEAR ENDED DECEMBER 31, 2019

DECEMBER 31, 2018	600	$ -	1,111,943	$ 11,000	$ -	$ 32,107,000	$ (29,804,000 )	$ 2,314,000
Fair value of common stock issued for services	-	-	18,082	-	-	47,000	-	47,000
Repurchase of preferred and common stock	(50 )	-	(198,731 )	-	(1,619,000 )	(168,000 )	-	(1,787,000 )
Conversion of preferred stock to common stock	(550 )	-	123,222	1,000	-	(1,000 )	-	-
Dividend payments on preferred stock	-	-	-	-	-	(63,000 )	-	(63,000 )
Fair value of vested common shares and options issued for services	-	-	-	-	-	133,000	-	133,000
Net income	-	-	-	-	-	-	2,698,000	2,698,000

DECEMBER 31, 2019	-	$ -	1,054,516	$ 12,000	$ (1,619,000 )	$ 32,055,000	$ (27,106,000 )	$ 3,342,000

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

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FITLIFE BRANDS, INC.

CONSOLIDATED STATEMENTS OF C ASH FLOWS

	Years ended December 31,
	2020	2019
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$ 8,714,000	$ 2,698,000
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization	38,000	52,000
Allowance for doubtful accounts	25,000	17,000
Allowance for inventory obsolescence	(74,000 )	23,000
Common stock issued for services	49,000	71,000
Fair value of options issued for services	29,000	111,000
Right of use asset net of amortization and lease liability	-	(2,000 )
Changes in operating assets and liabilities:
Accounts receivable - trade	297,000	(505,000 )
Inventories	(329,000 )	502,000
Deferred tax asset	(4,370,000 )	-
Prepaid expense	20,000	151,000
Income tax receivable	(40,000 )	-
Security deposit	10,000	-
Accounts payable	1,236,000	(618,000 )
Accrued liabilities and other liabilities	37,000	(50,000 )
Product returns	79,000	(189,000 )
Net cash provided by operating activities	5,721,000	2,261,000

CASH FLOWS FROM INVESTING ACTIVITIES:
Net cash provided by investing activities	-	-

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of notes payable	-	300,000
Proceeds from exercise of stock options	71,000	-
Proceeds from Paycheck Protection Program	450,000	-
Dividend payments on preferred stock	-	(63,000 )
Repurchases of common stock	(171,000 )	(1,524,000 )
Repurchases of preferred stock	-	(168,000 )
Repayments of note payable	-	(800,000 )
Net cash provided by (used in) financing activities	350,000	(2,255,000 )

CHANGE IN CASH	6,071,000	6,000
CASH, BEGINNING OF PERIOD	265,000	259,000
CASH, END OF PERIOD	$ 6,336,000	$ 265,000

Supplemental disclosure operating activities
Cash paid for interest	$ 12,000	$ 47,000

Non-cash investing and financing activities
Recording of lease asset and liability upon adoption of ASU-2016-02	$ -	$ 343,000
Conversion of Series A preferred stock into common stock	$ -	$ 567,000

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

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FITLIFE BRANDS, INC. AND SUBSIDIARIES

N OTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2020 AND 2019

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 following brand names: (i) NDS Nutrition, PMD Sports, SirenLabs, CoreActive, 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 to www.fitlifebrands.com . The Company’s Common Stock currently trades under the symbol “FTLF” on the OTC: PINK market.

Recent Developments

Share Repurchase Plan

	Total number of shares purchased	Average price paid per share	Total number of shares purchased as part of publicly announced programs	Dollar value of shares that may yet be purchased
First quarter ended March 31, 2020	11,900	$ 14.35	11,900	$ 1,110,917
Second quarter ended June 30, 2020	-	-	-	1,110,917
Third quarter ended September 30, 2020	-	-	-	1,110,917
Fourth quarter ended December 31, 2020	-	-	-	1,110,917
Subtotal	11,900	$ 14.35	11,900

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COVID-19 Pandemic

The novel coronavirus (" 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

Line of Credit Agreement

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.

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NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Company prepares its financial statements in accordance with accounting principles generally accepted in the United States of America. Significant accounting policies are as follows:

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and NDS Nutrition Products, Inc. Intercompany accounts and transactions have been eliminated in the consolidated financial statements.

Use of Estimates and Assumptions

Those estimates and assumptions include estimates for reserves of uncollectible accounts receivable, allowance for inventory obsolescence, depreciable lives of property and equipment, analysis of impairment of goodwill, realization of deferred tax assets, accruals for potential liabilities and assumptions made in valuing stock instruments issued for services. Management evaluates these estimates and assumptions on a regular basis. Actual results could differ from those estimates.

Revenue Recognition

The Company’s revenue is comprised of sales of nutritional supplements 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.

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 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.

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Customer Concentration

Total net sales to GNC during 2020 and 2019 were $15,429,000, and $14,795,000, respectively, representing 71% and 75% of total revenue, respectively. Accounts receivable attributable to GNC before adjusting for product return reserves as of December 31, 2020 and 2019 were $2,121,000 and $2,038,000, respectively, representing 89% and 87% of the Company’s total accounts receivable balance, respectively. The loss of this customer would have a material adverse effect on the Company’s business, financial condition, and results of operation.

Accounts Receivable and Allowance for Doubtful Accounts

All of the Company’s accounts receivable balance is related to trade receivables. Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in its existing accounts receivable. The Company will maintain allowances for doubtful accounts, estimating losses resulting from the inability of its customers to make required payments for products. Accounts with known financial issues are first reviewed and specific estimates are recorded. The remaining accounts receivable balances are then grouped into categories by the amount of days the balance is past due, and the estimated loss is calculated as a percentage of the total category based upon past history. Account balances are charged off against the allowance when it is probable that the receivable will not be recovered. We maintain an insurance policy for iSatori Products for international shipments, which protects the Company in the event the international distributor does not or cannot remit payment.

As of December 31, 2020 and 2019, the Company had provided a reserve for doubtful accounts of $51,000 and $27,000, respectively.

Product Returns, Sales Incentives and Other Forms of Variable Consideration

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 product is damaged, short dated, expired or recalled. Information for product returns is received on regular basis and adjusted for accordingly. Adjustments for returns are based on factual information and historical trends for both NDS products and iSatori products and are specific to each distribution channel. We monitor, among other things, remaining shelf life and sell through data on a weekly basis. If we determine there are any risks or issues with any specific products, we accrue sales return allowances based on management’s assessment of the overall risk and likelihood of returns in light of all information available.

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.

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Total allowance for product returns, sales returns and incentive programs as of December 31, 2020 and 2019 amounted to $335,000 and $256,000, respectively.

Cost of Goods Sold

Cost of goods sold is comprised of the costs of products, repacking fees, in-bound freight charges, as well as certain internal transfer costs. Expense not related to the production of our products is classified as operating expense.

Delivery and Handling Expense

Shipping and handling costs are comprised of purchasing and receiving costs, inspection costs, warehousing costs, transfer freight costs, and other costs associated with product distribution and are included as part of operating expense.

Cash and Cash Equivalents

The Company’s cash balances on deposit with banks are guaranteed by the Federal Deposit Insurance Corporation up to $250,000 at December 31, 2020. The Company may be exposed to risk for the amounts of funds held in bank accounts more than the insurance limit. In assessing the risk, the Company’s policy is to maintain cash balances with high-quality financial institutions. The Company had cash balances more than the guarantee during the years ended December 31, 2020 and 2019.

Inventory

Inventory is stated at the lower of cost to purchase and/or manufacture the inventory or the current estimated market value of the inventory. We regularly review our inventory quantities on hand and record a provision for excess and obsolete inventory based primarily on our estimated forecast of product demand and/or our ability to sell the product(s) concerned and production requirements. Demand for our products can fluctuate significantly. Factors that could affect demand for our products include unanticipated changes in consumer preferences, general market conditions or other factors, which may result in cancellations of advance orders or a reduction in the rate of reorders placed by customers. Additionally, our management’s estimates of future product demand may be inaccurate, which could result in an understated or overstated provision required for excess and obsolete inventory.

As of December 31, 2020 and 2019, the aggregate allowance for expiring, slow moving and excess inventory amounted to $56,000 and $130,000, respectively.

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Property and Equipment

Property and equipment is recorded at cost and depreciated over the estimated useful lives of the assets using the straight-line method. The Company amortizes leasehold improvements over the estimated life of these assets or the term of the lease, whichever is shorter. When items are retired or otherwise disposed of, income is charged or credited for the difference between net book value and proceeds realized. Ordinary maintenance and repairs are charged to expense as incurred, and replacements and betterments are capitalized.

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

Asset Category		Depreciation / Amortization Period
Furniture and fixtures		3 years
Office equipment		3 years
Leasehold improvements		5 years

Management regularly reviews property, equipment and other long-lived assets for possible impairment. This review occurs annually or more frequently if events or changes in circumstances indicate the carrying amount of the asset may not be recoverable. Based upon management’s annual assessment, there were no indicators of impairment of the Company’s property and equipment and other long-lived assets as of December 31, 2020 and 2019.

Goodwill and Intangible Assets

Identifiable intangible assets are stated at cost and accounted for based on whether the useful life of the asset is finite or indefinite. Identified intangible assets with finite useful lives are amortized using the straight-line methods over their estimated useful lives, which was originally ten years. Intangible assets with indefinite lives are not amortized to operations, but instead are reviewed for impairment at least annually, or more frequently if there is an indicator of impairment. The Company does not own any indefinite lived intangible assets.

There were no impairment charges incurred during the years ended December 31, 2020 and 2019.

Income Taxes

The Company accounts for income taxes under Financial Accounting Standards Board’s ( “FASB” ) ASC 740 “Income Taxes”. Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recognized for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The deferred tax assets of the Company relate primarily to operating loss carryforwards for federal income tax purposes.

As discussed in more detail in Note 8, during the fourth quarter of fiscal 2020, management determined that it is more likely than not that the Company will be able to utilize the majority of its net operating loss carryforwards. The release of a substantial portion of the reserve against the Company’s deferred tax assets resulted in an income tax benefit of $4,370,000 for 2020, and a corresponding increase in net income of the same amount.

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The Company periodically evaluates its tax positions to determine whether it is more likely than not that such positions would be sustained upon examination by a tax authority for all open tax years, as defined by the statute of limitations, based on their technical merits. The Company accrues interest and penalties, if incurred, on unrecognized tax benefits as components of the income tax provision in the accompanying consolidated statements of operations. As of December 31, 2020, and 2019, the Company has not established a liability for uncertain tax positions.

Net Income Per Share

Basic net income per share is computed by dividing net income by the weighted average number of common shares outstanding for the period. Diluted earnings per share is computed by dividing the net income available to common stockholders by the weighted average number of common shares outstanding plus the number of additional common shares that would have been outstanding if all dilutive potential common shares had been issued using the treasury stock method. Potential common shares are excluded from the computation when their effect is antidilutive. The dilutive effect of potentially dilutive securities is reflected in diluted net income per share if the exercise prices were lower than the average fair market value of common shares during the reporting period.

The following potentially dilutive shares were excluded from the shares used to calculate diluted earnings per share as their inclusion would be anti-dilutive:

	December 31,
	2020	2019
Series A Preferred Stock	-	-
Warrants	-	-
Options	5,575	34,075
Total	5,575	34,075

Fair Value Measurements

The Company uses various inputs in determining the fair value of its investments and measures these assets on a recurring basis. Financial assets recorded at fair value in the balance sheets are categorized by the level of objectivity associated with the inputs used to measure their fair value. ASC 820 establishes a three-level valuation hierarchy for the use of fair value measurements based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date:

●

Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

●

Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means.

●

Level 3 - Inputs that are both significant to the fair value measurement and unobservable. These inputs rely on management's own assumptions about the assumptions that market participants would use in pricing the asset or liability. The unobservable inputs are developed based on the best information available in the circumstances and may include the Company’s own data.

The carrying amounts of financial assets and liabilities, such as cash and cash equivalents, accounts receivable and accounts payable, approximate their fair values because of the short maturity of these instruments. The carrying values of the line of credit, notes payable and long-term financing obligations approximate their fair values due to the fact that the interest rates on these obligations are based on prevailing market interest rates.

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Stock Compensation Expense

From prior periods until December 31, 2018 the Company accounted for share-based compensation issued to non-employees and consultants in accordance with the provisions of FASB ASC 505-50, Equity-Based Payments to Non-Employees . Measurement of share-based payment transactions with non-employees is based on the fair value of whichever is more reliably measurable: (a) the goods or services received or (b) the equity instruments issued. The final fair value of the share-based payment transaction is determined at the performance completion date.

In June 2018, the FASB issued ASU 2018-07, Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting (“ASU 2018-07”). The guidance was issued to simplify the accounting for share-based transactions by expanding the scope of ASU 2018-07 from only being applicable to share-based payments to employees to also include share-based payment transactions for acquiring goods and services from nonemployees. As a result, nonemployee share-based transactions will be measured by estimating the fair value of the equity instruments at the grant date, taking into consideration the probability of satisfying performance conditions. We adopted ASU 2018-07 on January 1, 2019. The adoption of the standard did not have a material impact on our financial statements for the year ended December 31, 2019 or the previously reported financial statements.

Segments

The Company operates in one segment for the distribution of our products. In accordance with the “Segment Reporting” Topic of ASC 280, the Company’s chief operating decision maker has been identified as the Chief Executive Officer, who reviews operating results to make decisions about allocating resources and assessing performance for the entire Company. Existing guidance, which is based on a management approach to segment reporting, establishes requirements to report selected segment information quarterly and to report annually entity-wide disclosures about products and services, major customers, and the countries in which the entity holds material assets and reports revenue. All material operating units qualify for aggregation under “Segment Reporting” due to their similar customer base and similarities in: economic characteristics; nature of products and services; and procurement, manufacturing and distribution processes. Since the Company operates in one segment, all financial information required by “Segment Reporting” can be found in the accompanying consolidated financial statements.

Recently Adopted Accounting Pronouncements

In February 2016, the FASB issued ASU 2016-02, Leases . This update requires the recognition of a right-of-use asset and a corresponding lease liability, initially measured at the present value of the lease payments, for all leases with terms longer than 12 months. For operating leases, the asset and liability will be expensed over the lease term on a straight-line basis, with all cash flows included in the operating section of the statement of cash flows. For finance leases, interest on the lease liability will be recognized separately from the amortization of the right-of-use asset in the statement of comprehensive income and the repayment of the principal portion of the lease liability will be classified as a financing activity while the interest component will be included in the operating section of the statement of cash flows. ASU 2016-02 is effective for annual and interim reporting periods beginning after December 15, 2019.

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

Recently Issued Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The amendments included in ASU 2016-13 require the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Although the new standard, known as the current expected credit loss (CECL) model, has a greater impact on financial institutions, most other organizations with financial instruments or other assets (trade receivables, contract assets, lease receivables, financial guarantees, loans and loan commitments, and held-to-maturity (HTM) debt securities) are subject to the CECL model and will need to use forward-looking information to better evaluate their credit loss estimates. Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses. In addition, the ASU amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. ASU 2016-13 was originally effective for public companies for fiscal years beginning after December 15, 2019. In November of 2019, the FASB issued ASU 2019-10, which delayed the implementation of ASU 2016-13 to fiscal years beginning after December 15, 2022 for smaller reporting companies. The Company is currently evaluating the impact that the adoption of this guidance will have on its consolidated financial statements.

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NOTE 3. INVENTORIES

At December 31, 2020, the value of the Company’s inventory was $3,401,000. At December 31, 2019, the value of the Company’s inventory was $2,998,000.

	December 31,	December 31,
	2020	2019
Finished goods	2,789,000	2,688,000
Components	668,000	440,000
Allowance for obsolescence	(56,000 )	(130,000 )
Total	3,401,000	2,998,000

NOTE 4. PROPERTY AND EQUIPMENT

The Company had fixed assets as of December 31, 2020 and 2019 as follows:

	December 31,	December 31,
	2020	2019
Equipment	902,000	902,000
Accumulated depreciation	(804,000 )	(766,000 )
Total	98,000	136,000

Depreciation expense was $38,000 for the year ended December 31, 2020 compared to $52,000 for the year ended December 31, 2019.

NOTE 5. NOTES PAYABLES

Notes Payable – Related Parties

On December 26, 2018, the Company issued a line of credit promissory note to Sudbury Capital Fund, LP (the “ Sudbury Note ” ) to Sudbury, 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 under the Sudbury Note, resulting in aggregate borrowings of $600,000. In addition, on December 26, 2018, the Company also issued the Judd 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.

Line of Credit – CIT Bank

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Paycheck Protection Program Loan

On April 27, 2020, the Company received proceeds from a loan in the amount of $449,700 from the PPP Lender, pursuant to approval by the SBA for the Lender to fund the Company’s request for the PPP Loan created as part of the recently enacted CARES Act administered by the SBA. 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. The Company did not provide any collateral or guarantees for the PPP Loan, nor did the Company pay any fees to obtain the PPP Loan.

NOTE 6. EQUITY

The Company is authorized to issue 15.0 million shares of Common Stock, $0.01 par value per share, of which 1,060,818 and 1,054,516 shares of Common Stock were issued and outstanding as of December 31, 2020 and 2019, respectively.

Reverse/Forward 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.

Common Stock

During the year ended December 31, 2020, the Company issued 1,202 shares of Common Stock with a fair value of $15,000 to directors for services rendered. The shares were valued at the respective date of issuance. Total stock-based compensation, related to previously issued option and restricted stock grants, was $63,000 for the year ended December 31, 2020. As of December 31, 2020, there was unearned compensation of $3,000 to be amortized as a compensation cost on a straight-line basis through 2021.

During the year ended December 31, 2019, the Company issued 18,082 shares of Common Stock with a fair value of $47,000 to employees and directors for services rendered. The shares were valued at the respective date of issuance. As of December 31, 2019, there was unearned compensation of $36,800 to be amortized as a compensation cost on a straight-line basis through 2020.

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Series A Preferred Stock

The Company is authorized to issue up to 10 million shares of preferred stock, par value $0.01 per share.

During November 2019, the Company repurchased and retired 50 shares of Series A Convertible Preferred Stock. During December 2019, the remaining 550 shares of Series A Convertible Preferred Stock were converted into Common Stock in accordance with the terms of the Certificate of Designations. As a result, no shares of Series A Preferred Stock were outstanding as of December 31, 2020 and 2019.

During 2019, the Company paid $63,000 for preferred dividends.

Options

The following table summarizes option activity:

	Number of Options	Weighted Average Exercise Price	Weighted Average Remaining Life (Years)
Outstanding, December 31, 2018	154,521	$ 13.10	5.7
Issued	8,000	6.85
Exercised	-	-
Forfeited	(13,236 )	24.45
Outstanding, December 31, 2019	149,285	$ 11.76	5.0
Issued	-	-
Exercised	(17,000 )	4.20
Forfeited	(39,500 )	19.04
Outstanding, December 31, 2020	92,785	$ 10.05	5.9

	Outstanding			Exercisable
Exercise Price Per Share	Total Number of Options	Weighted Average Remaining Life (Years)	Weighted Average Exercise Price	Number of Vested Options	Weighted Average Exercise Price

$ 2.80- $23.00	87,210	6.2	$ 4.93	87,210	$ 4.93
$ 23.10 - $144.34	5,575	2.8	$ 90.20	5,575	$ 90.20
	92,785	5.9	$ 10.05	92,785	$ 10.05

The closing stock price for the Company’s stock on December 31, 2020 was $21.60. As such, there was an intrinsic value of outstanding options of $1,454,000.

During the year ended December 31, 2020, the Company did not grant any stock options.

During the year ended December 31, 2020, the Company recognized compensation expense of $29,000 based upon the vesting of outstanding options. As of December 31, 2020, there was $0 of unvested stock compensation that will be recognized as an expense in future periods as the options vest.

During the year ended December 31, 2019, the Company granted stock options to employees for services rendered to purchase 8,000 shares of Company Common Stock. The stock options are exercisable at a price of $6.85 per share, expire in five years and vest as follows: one-third vested immediate upon issuance, and the remainder vest equally in equal annual installments over a period of two years from grant date.

The total fair value of these options at grant date was approximately $38,000, which was determined using the Black-Scholes option pricing model with the following average assumption: stock price of $6.85 per share, expected term of three years, volatility of 108%, dividend rate of 0% and risk-free interest rate of 2.18%. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of measurement corresponding with the expected term of the share option award; the expected term represents the weighted-average period of time that share option awards granted are expected to be outstanding giving consideration to vesting schedules and historical participant exercise behavior; the expected volatility is based upon historical volatility of the Company’s Common Stock; and the expected dividend yield is based on the fact that the Company has not paid dividends in the past and does not expect to pay dividends in the future.

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During the year ended December 31, 2019, the Company recognized compensation expense of $111,000 based upon the vesting of outstanding options. As of December 31, 2019, there was $54,000 of unvested stock compensation to be recognized as an expense in future periods as the options vest.

Warrants

The following table summarizes warrant activity:

	Number of Warrants	Weighted Average Exercise Price	Weighted Average Remaining Life (Years)
Outstanding, December 31, 2018	39,130	$ 4.60
Issued	-	-
Repurchased/retired	(3,260 )	-
Forfeited	-	-
Outstanding, December 31, 2019	35,870	$ 4.60
Issued	-	-
Exercised	-	-
Forfeited	-	-
Outstanding, December 31, 2020	35,870	$ 4.60	2.9

The total intrinsic value of the outstanding warrants as of December 31, 2020 amounted to $610,000.

NOTE 8. INCOME TAXES

The Company had available federal net operating loss carryforwards (“ NOLs ”) of approximately $21.7 million and $25.9 million as of December 31, 2020 and 2019, respectively, to reduce future taxable income. The federal carryforward expires between 2029 through 2037. Due to the restrictions imposed by Internal Revenue Code Section 382 regarding substantial changes in ownership of companies with loss carryforwards, the utilization of the Company’s NOLs may be limited to statutory limits as a result of change in stock ownership. NOLs incurred subsequent to the latest change in control are not subject to the limitations.

Given the Company’s improving profitability over the past three fiscal years, management has concluded that it is more likely than not that the Company will be able to utilize the majority of its NOLs. The Company projects that roughly $2,557,000 of iSatori NOLs will not be able to be utilized prior to their expiration due to the ownership change limitations, which amount remains fully reserved.

For the year ended December 31, 2020, the Company recorded a provision (benefit) for income taxes of ($4,446,000), driven primarily by an income tax benefit of ($4,370,000) resulting from the elimination of a substantial portion of the reserve against the Company’s NOLs and other deferred tax assets. For the year ended December 31, 2019, the Company recorded a provision for income taxes of $7,000 pertaining to various state income taxes.

The Company recognizes tax benefits from uncertain tax positions only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. As of December 31, 2020 and December 31, 2019, the Company did not have a liability for unrecognized tax benefits.

The Company recognizes, as income tax expense, interest and penalties on uncertain tax provisions. As of December 31, 2020, and 2019, the Company has not accrued interest or penalties related to uncertain tax positions. Tax years 2017 through 2020 remain open to examination by the major taxing jurisdictions to which the Company is subject.

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Significant components of the Company’s deferred income tax assets are as follows:

	December 31,
	2020	2019
Net operating loss carryforward	$ 4,557,000	$ 5,579,000
Allowances for sales returns, bad debt and inventory	92,000	87,000
Share based compensation	80,000	94,000
Other	178,000	202,000
Total deferred asset	4,907,000	5,962,000
Valuation allowance	(537,000 )	(5,962,000 )

Net deferred tax asset	$ 4,370,000	$ -

Reconciliation of the effective income tax rate to the U.S. statutory rate is as follows:

	December 31,
	2020	2019
Federal statutory tax rate	21 %	21 %
State tax, net of federal benefit	- %	4 %
	21 %	25 %
Valuation allowance	(123 %)	(25 %)
Effective tax rate	(102 %)	- %

NOTE 9. COMMITMENTS AND CONTINGENCIES

Legal Proceedings

We are currently not involved in any litigation except noted above 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.

Lease Commitments

The Company is headquartered in Omaha, Nebraska and maintains a lease at a cost of approximately $8,000 per month, which lease is currently set to expire in May 2024. The Omaha facility is a total of 11,088 square feet inclusive of approximately 6,179 square feet of on-site warehouse space.

Rent expense for the year ended December 31, 2020 was $67,000, of which $41,000 is included in cost of goods sold and $26,000 is included in operating expense in the accompanying consolidated statement of operations. Rent expense for the year ended December 31, 2019 was $84,000 of which $50,000 was included in cost of goods sold and $34,000 was included in operating expenses.

Minimum annual rental commitments under non-cancelable leases are as follows:

	Lease
Years ending December 31,	Commitment
2021	67,000
2022	67,000
2023	61,000
2024	51,000
Less: Imputed interest/present value discount	(38,000 )
Present value of lease liabilities	$ 208,000

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NOTE 10. SUBSEQUENT EVENTS

Subsequent to the end of the fiscal year, the Company was informed by the PPP Lender and the SBA that the full amount of principal and accrued interest of the PPP Loan was forgiven on January 15, 2021.

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 the Company's Common Stock, warrants to purchase shares of the Company's Common Stock ("Warrants"), and other securities issued by the Company ("Securities") 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 Warrants and Securities, at a purchase price determined by management, with the exact date and amount of such purchases to be determined by management.

On February 26, 2021, the board of directors (the “ Board ”) of the Company declared a dividend distribution of one right (a “ Right ”) for each outstanding share of common stock, par value $0.001 per share to stockholders of record at the close of business on February 26, 2021 (the “ Record Date ”). Each Right entitles its holder, under the circumstances described below, to purchase from the Company one one-thousandth of a share of Series B Junior Participating Preferred Stock of the Company, par value $0.001 per share (the “ Series B Preferred ”), at an exercise price of $100.00 per Right, subject to adjustment. The description and terms of the Rights are set forth in the tax benefits preservation plan (the “ Tax Benefits Preservation Plan ”), dated as of February 26, 2021, between the Company and Colonial Stock, as rights agent (and any successor rights agent, the “ Rights Agent ”).

The Company adopted the Tax Benefits Preservation Plan in order to protect shareholder value against a possible limitation on the Company’s ability to use its NOLs and certain other tax benefits to reduce potential future U.S. federal income tax obligations. The NOLs are a valuable asset to the Company, which may inure to the benefit of the Company and its stockholders. However, if the Company experiences an “ownership change,” as defined in Section 382 of the IRC, its ability to fully utilize the NOLs and certain other tax benefits will be substantially limited and the timing of the usage of the NOLs and such other benefits could be substantially delayed, which could significantly impair the value of those assets. Generally, an “ownership change” occurs if the percentage of the Company’s stock owned by one or more of its “five-percent shareholders” (as such term is defined in Section 382 of the IRC) increases by more than 50 percentage points over the lowest percentage of stock owned by such stockholder or stockholders at any time over a three-year period. The Tax Benefits Preservation Plan is intended to prevent against such an “ownership change” by deterring any person or group from acquiring beneficial ownership of 4.9% or more of the Company’s securities.

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Part I Item 1. Business Item 1A - Risk Factors Item 1B. Unresolved Staff Comments Item 2. Properties Item 3. Legal Proceedings Item 4. Mine Safety Disclosures Part II Item 5. Market For Registrant S Common Stock, Related Stockholder Matters and Issuers Purchases Of Equity Securities Item 6. Selected Financial Data Item 7. Management S Discussion and Analysis Of Financial Condition and Results Of Or Plan Of Operation Item 7A. Quantitative and Qualitative Disclosures About Market Risk Item 8. Financial Statements Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Item 9A. Controls and Procedures Item 9B. Other Information Part III Item 10. Directors and Executive Officers Item 11. Executive Compensation Item 11. Ex Item 12. Security Ownership Of Certain Beneficial Owners and Management Item 12. Sec Item 13. Certain Relationships and Related Transactions, and Director Independence Item 13. Certai Item 14. Principal Accountant Fees and Services Part IV Item 15. Exhibits and Reports Item 16. Form 10-k Summary Note 1. Description Of Business Note 2. Summary Of Significant Accounting Policies Note 3. Inventories Note 4. Property and Equipment Note 5. Notes Payables Note 6. Equity Note 8. Income Taxes Note 9. Commitments and Contingencies Note 10. Subsequent Events

Exhibits

FTLF 10-K Fiscal year ended Dec. 31, 2020

Exhibits