FitLife Brands, Inc. ("FitLife") FTLF, an international provider of innovative and proprietary nutritional supplements for health conscious consumers marketed under the brand names NDS Nutrition Products™ ("NDS") (www.ndsnutrition.com), PMD® (www.pmdsports.com), SirenLabs® (www.sirenlabs.com), CoreActive® (www.coreactivenutrition.com), Metis Nutrition™ (www.metisnutrition.com), iSatori™ (www.isatori.com), Energize (www.tryenergize.com), and BioGenetic Laboratories, (www.biogeneticlabs.com), today announced results for its fiscal second quarter ended June 30, 2017.
Highlights for the quarter and six months ended June 30, 2017 include:
- End-user demand for our products as measured by product sales at retail remains strong on both unit and dollar levels and compares very favorably to the near-record levels the Company obtained during the first half of 2016. Unit movement at retail is the single most important metric to track and analyze the underlying health and performance of the business as it evidences end consumer demand for the Company's products across all its distribution channels. Several non-recurring events impacted the business for the first six months of 2017 including: i) a $700,000 revenue adjustment associated with a margin support credit memorandum with our largest customer during the first quarter, ii) a $376,000 inventory write-off during the second quarter, iii) $1.3 million in convention related revenue recorded during the second quarter of 2016, and iv) the inventory reduction efforts of our single largest customer, which created an unprecedented and unsustainable divergence between wholesale purchasing activity, from which we recognize revenue, and end-user retail demand for our products, from which we track the strength and sustainability of our business. Despite all of this, demand for the Company's products remain strong, as demonstrated by strong sales at the retail level.
- Total revenue decreased 42% to $5.0 million for the quarter compared to second quarter 2016; the comparison includes $1.3 million in revenue recorded at the GNC Franchise convention in the second quarter of 2016.
- Net loss for the quarter was $0.6 million or ($0.05) per fully diluted share, versus a profit of $1.1 million or $0.09 per share in 2Q16; excluding a write-off for our remaining picamilon inventory of $276,000 and $100,000 related to iSatori, the net loss would have been $0.2 million or ($0.02) per fully diluted share.
- Total operating expenses on a dollar basis declined $550,000 compared to the second quarter 2016.
- Total revenue for the first six months of 2017 was $10.6 million, a decrease of 34.8%; this includes a negative, one-time adjustment of $700,000 related to a margin support credit memorandum with GNC during the first quarter.
- Net loss for the first six months of 2017 was $0.9 million or ($0.08) per share compared to net income of $1.9 million or $0.17 per share last year; Net loss for the six months includes the $700,000 related to a margin support credit memorandum with GNC and $376,000 in inventory write-offs, both of which are non-recurring.
For the second quarter ended June 30, 2017, total revenue was $5.0 million, a 42% decrease over revenue of $8.7 million for the second quarter of 2016. Core FitLife revenue for the quarter was $3.6 million, down 40% from $6.0 million last year. iSatori generated $1.4 million in revenue for the second quarter of 2017 compared to $2.7 million in the same period a year ago. In the second quarter of 2016, the Company attended the annual GNC Franchise Convention and recorded $1.3 million in convention related sales, but elected not to attend the convention this year. The Company expects the convention sales will be made up throughout the remainder of the year. In addition, the Company's largest customer has substantially reduced its average inventory levels creating a divergence between wholesale purchases and product movement at retail. The decline in iSatori revenue was primarily attributable to fewer new product introductions during the first half of the year.
Gross margin was 30.3% for the quarter compared to 44.0% in the same period a year ago. The decline in gross margin was primarily attributable to the write-off of $276,000 related to the Company's remaining picamilon inventory and $100,000 for iSatori inventory. Excluding the $376,000 write-off, gross margin would have been 37.8%. Total operating expenses increased to 40.6% of revenue in the second quarter from 29.9%. The increase as a percentage of revenue is attributable to lower sales levels. On a dollar basis, total operating expenses were down $550,000 relative to last year, led by an approximate $350,000 decline in the General and Administrative category primarily from integration efforts at iSatori.
Second quarter net loss was $0.6 million or ($0.05) per fully diluted share versus net income of $1.1 million or $0.09 per share last year. Excluding the $376,000 inventory write-off, net loss would have been $0.2 million or ($0.02) per fully diluted share for the quarter. The core FitLife business and iSatori each lost approximately $0.3 million. Excluding the picamilon inventory write-off, the core FitLife business would have been approximately breakeven. This write-off represents the last of the Company's picamilon inventory.
For the six months ended June 30, 2017, total revenue declined 34.8% to $10.6 million versus $16.3 million in the same period last year. Year-to-date revenue for 2017 includes a negative, one-time adjustment of $700,000 related to a margin support credit memorandum with GNC. Core FitLife revenue for the six months was $7.7 million, a decrease of 31.4%, including the one-time revenue adjustment. iSatori contributed $2.9 million in revenue for the six-month period versus $5.0 million a year ago.
Net loss for the six months ended June 30 was $0.9 million or ($0.08) per share compared to net income of $1.9 million or $0.17 per share last year. Excluding the one-time revenue adjustment and picamilon write-off, net income would have been approximately $0.2 million for the first half of 2017. The core FitLife business lost $0.4 million during the first six months and iSatori lost $0.4 million. Excluding one-time charges, the core FitLife business would have posted a net income of approximately $0.5 million.
The Company ended the second quarter with $1.4 million in cash, up from $1.3 million at December 31, 2016. At quarter end, total debt decreased to $2.6 million from $2.9 million at the end of 2016. During the first six months of 2017, the Company generated $0.4 million in cash flow from operations compared to $0.2 million over the same period in 2016.
"We continue to face a challenging retail environment in which our customers, and largest distribution partner, are holding substantially less inventory," said John S. Wilson, Chief Executive Officer of FitLife Brands. "As a result, we are seeing a significant divergence between wholesale revenue, which is our revenue, and sales of our products at the retail level. While wholesale revenue is down, our unit movement at retail and retail sales dollars are relatively flat versus a record or near-record year in 2016 in an environment where many of our competitors are facing declines. These are key metrics that we use to evaluate the strength of our business."
"Additionally, during the second quarter we made the strategic decision to forego the 2017 GNC Global Conference/Franchise Convention. This was not an easy decision and we knew that it would negatively affect our year-over-year comparisons. However, it is important to note that these are not lost sales but, rather, a more uniform distribution of orders over the second, third and, to a lesser extent, fourth quarters. We feel that this decision will enable us to strategically re-invest our efforts and resources to both build iSatori, and proactively support and expand opportunities with our GNC franchise partners to the benefit of all parties throughout the remainder of the year."
Products offered by vendors at GNC's annual franchise convention are sold at a deep discount representing the lowest and "best price" of the year. In turn, many franchisees will place large orders to take advantage of the discounts to build inventories and improve store-level margins.
Mr. Wilson continued, "Excluding the one-time items addressed in the release, I am pleased to say that we would have reported positive net income for the first six months of the year despite the challenging operating environment and believe we have the right strategy in place to ensure that the Company is well positioned to benefit when the marketplace becomes more normalized."
About FitLife Brands
FitLife Brands is a marketer and
manufacturer of innovative and proprietary nutritional supplements for
health conscious consumers. FitLife markets over 80 different dietary
supplements to promote sports nutrition, improved performance, weight
loss and general health primarily through domestic and international
GNC® franchise locations. FitLife is headquartered in Omaha, Nebraska.
For more information please visit our new website at www.fitlifebrands.com.
Forward-Looking Statement
Statements in this release that
are forward looking involve known and unknown risks and uncertainties,
which may cause the Company's actual results in future periods to be
materially different from any future performance that may be suggested
in this news release. Such factors may include, but are not limited to:
the ability to of the Company to continue to grow revenue; and the
Company's ability to continue to achieve positive cash flow given the
Company's existing and anticipated operating and other costs. Many of
these risks and uncertainties are beyond the Company's control.
Reference is made to the discussion of risk factors detailed in The
Company's filings with the Securities and Exchange Commission including
its reports on Form 10-K and 10-Q. Readers are cautioned not to place
undue reliance on these forward-looking statements, which speak only as
of the dates on which they are made.
Non-GAAP Financial Measures
This press release includes the
following financial measures defined as "non-GAAP financial measures" by
the Securities and Exchange Commission: non-GAAP net income, non-GAAP
earnings per share. 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 accordance with generally accepted accounting principles.
Reconciliations of these non-GAAP financial measures to the nearest
comparable GAAP measures will be provided upon the completion of the
Company's annual audit.
Non-GAAP net income excludes items such as impairment charges, allowance for doubtful accounts, charges to consolidate and integrate recently acquired businesses, costs of closing corporate facilities, non-cash stock based compensation and other one-time cash and non-cash charges. Non-GAAP EPS excludes items such as non-cash stock based compensation, charges to consolidate and integrate recently acquired businesses, costs for closing corporate facilities, amortization of acquired intangible assets and other one-time cash and non-cash charges. The Company believes the non-GAAP measures provide useful information to both management and investors by excluding certain expenses, gains and losses or net purchases of property and equipment, as the case may be, which may not be indicative of its core operation results and business outlook.
| FITLIFE BRANDS, INC. | ||||||||||
| CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||||
| (Unaudited) | ||||||||||
| ASSETS: | June 30, | December 31, | ||||||||
| 2017 | 2016 | |||||||||
| CURRENT ASSETS | ||||||||||
| Cash | $ | 1,430,372 | $ | 1,293,041 | ||||||
| Accounts receivable, net | 3,676,624 | 2,792,649 | ||||||||
| Security deposits | 24,956 | 24,956 | ||||||||
| Inventory | 2,564,682 | 3,756,716 | ||||||||
| Note receivable, current portion | 2,782 | 2,782 | ||||||||
| Prepaid income tax | 120,000 | 120,000 | ||||||||
| Prepaid expenses and other current assets | 121,674 | 136,014 | ||||||||
| Total current assets | 7,941,090 | 8,126,157 | ||||||||
| PROPERTY AND EQUIPMENT, net | 148,805 | 171,004 | ||||||||
| Note receivable, net of current portion | 48,195 | 52,696 | ||||||||
| Deferred Taxes | 689,000 | 689,000 | ||||||||
| Intangibles assets, net | 6,297,943 | 6,507,505 | ||||||||
| TOTAL ASSETS | $ | 15,125,033 | $ | 15,546,362 | ||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY: | ||||||||||
| CURRENT LIABILITIES: | ||||||||||
| Accounts payable | $ | 2,148,313 | $ | 1,596,748 | ||||||
| Accrued expenses and other liabilities | 669,063 | 539,765 | ||||||||
| Line of credit | 1,950,000 | 1,950,000 | ||||||||
| Term loan agreement, current portion | 554,706 | 544,825 | ||||||||
| Notes payable | 7,004 | 12,700 | ||||||||
| Total current liabilities | 5,329,086 | 4,644,038 | ||||||||
| LONG-TERM DEBT, net of current portion | 89,113 | 369,177 | ||||||||
| TOTAL LIABILITIES | 5,418,199 | 5,013,215 | ||||||||
| CONTINGENCIES AND COMMITMENTS | - | - | ||||||||
| STOCKHOLDERS' EQUITY: | ||||||||||
|
Preferred stock, $0.01 par value, 10,000,000 shares authorized as of June 30, 2017 and December 31, 2016: |
- |
- |
||||||||
|
Preferred stock Series A; 10,000,000 shares authorized; 0 shares issued and outstanding as of June 30, 2017 and December 31, 2016 |
- |
- | ||||||||
|
Preferred stock Series B; 1,000 shares authorized; 0 shares issued and outstanding as of June 30, 2017 and December 31, 2016 |
- | - | ||||||||
|
Preferred stock Series C; 500 shares authorized; 0 shares issued and outstanding as of June 30, 2017 and December 31, 2016 |
- | - | ||||||||
|
Common stock, $.01 par value, 150,000,000 shares authorized; 10,504,472 and 10,483,389 issued and outstanding as of June 30, 2017 and December 31, 2016, respectively |
105,045 | 104,495 | ||||||||
| Subscribed common stock | - | 339 | ||||||||
| Treasury stock | - | (44,416 | ) | |||||||
| Additional paid-in capital | 30,932,797 | 30,919,289 | ||||||||
| Accumulated deficit | (21,331,008 | ) | (20,446,559 | ) | ||||||
| Total stockholders' equity | $ | 9,706,834 | $ | 10,533,148 | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 15,125,033 | $ | 15,546,363 | ||||||
| The accompanying notes are an integral part of these consolidated financial statements | ||||||||||
| FITLIFE BRANDS, INC. | ||||||||||||||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||||||||||
| FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2017 AND 2016 | ||||||||||||||||||||
| (Unaudited) | (Unaudited) | |||||||||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||||||
| June 30 | June 30 | |||||||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||||||
| Revenue | $ | 5,022,338 | $ | 8,662,760 | $ | 10,611,693 | $ | 16,274,989 | ||||||||||||
| Cost of Goods Sold | 3,499,120 | 4,851,166 | 7,167,910 | 9,115,857 | ||||||||||||||||
| Gross Profit | 1,523,218 | 3,811,594 | 3,443,783 | 7,159,132 | ||||||||||||||||
| OPERATING EXPENSES: | ||||||||||||||||||||
| General and administrative | 1,009,934 | 1,356,464 | 2,170,003 | 2,745,671 | ||||||||||||||||
| Selling and marketing | 913,371 | 1,111,129 | 1,860,758 | 2,026,687 | ||||||||||||||||
| Depreciation and amortization | 117,312 | 125,996 | 236,650 | 250,751 | ||||||||||||||||
| Total operating expenses | 2,040,617 | 2,593,589 | 4,267,411 | 5,023,109 | ||||||||||||||||
| OPERATING INCOME (LOSS) | (517,399 | ) | 1,218,005 | (823,628 | ) | 2,136,023 | ||||||||||||||
| OTHER (INCOME) AND EXPENSES | ||||||||||||||||||||
| Interest expense | 29,015 | 27,172 | 55,676 | 56,600 | ||||||||||||||||
| Other expense (income) | 5,145 | (2,203 | ) | 5,145 | (2,767 | ) | ||||||||||||||
| Total other income, net | 34,160 | 24,969 | 60,821 | 53,833 | ||||||||||||||||
| INCOME TAXES | - | 114,000 | - | 189,000 | ||||||||||||||||
| NET INCOME (LOSS) | $ | (551,559 | ) | $ | 1,079,036 | $ | (884,449 | ) | $ | 1,893,190 | ||||||||||
| NET INCOME (LOSS) PER SHARE: | ||||||||||||||||||||
| Basic | $ | (0.05 | ) | $ | 0.10 | $ | (0.08 | ) | $ | 0.18 | ||||||||||
| Diluted | $ | (0.05 | ) | $ | 0.09 | $ | (0.08 | ) | $ | 0.17 | ||||||||||
| Basic weighted average common shares | 10,470,158 | 10,408,264 | 10,455,814 | 10,397,077 | ||||||||||||||||
| Diluted weighted average common shares | 10,470,158 | 11,520,541 | 10,455,814 | 11,459,628 | ||||||||||||||||
| The accompanying notes are an integral part of these consolidated financial statements | ||||||||||||||||||||
| FITLIFE BRANDS, INC. | ||||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||||
| FOR THE SIX MONTHS ENDED JUNE 30, 2017 AND 2016 | ||||||||||
| (Unaudited) | ||||||||||
| 2017 | 2016 | |||||||||
| Net income (loss) | $ | (884,449 | ) | $ | 1,893,190 | |||||
|
Adjustments to reconcile net income (loss) to net cash provided by operating activities: |
||||||||||
| Depreciation and amortization | 236,650 | 250,751 | ||||||||
| Common stock issued for services | 35,000 | 51,331 | ||||||||
| Loss on disposal of assets | 5,144 | - | ||||||||
| Warrants and options issued for services | 23,135 | 27,537 | ||||||||
| Changes in operating assets and liabilities: | ||||||||||
| Accounts receivable | (883,975 | ) | (3,697,593 | ) | ||||||
| Inventory | 1,192,034 | 1,141,061 | ||||||||
| Deferred tax asset | - | 123,879 | ||||||||
| Prepaid income tax | - | 151,000 | ||||||||
| Prepaid expenses | 14,340 | 137,081 | ||||||||
| Note receivable | 4,501 | 5,485 | ||||||||
| Accounts payable | 551,565 | 336,360 | ||||||||
| Accrued expenses and other liabilities | 129,298 | (185,697 | ) | |||||||
| Litigation reserve | - | (95,775 | ) | |||||||
| Income tax payable | - | 38,000 | ||||||||
| Net cash provided by operating activities | 423,243 | 176,610 | ||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||
| Purchase of property and equipment | (10,033 | ) | (21,619 | ) | ||||||
| Long-term investment | - | 2,027 | ||||||||
| Net cash used in investing activities | (10,033 | ) | (19,592 | ) | ||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||
| Proceeds from draw down on credit line | - | 520,000 | ||||||||
| Repayments of term loan and note payable | (275,879 | ) | (269,452 | ) | ||||||
| Net cash provided by (used in) financing activities | (275,879 | ) | 250,548 | |||||||
| INCREASE IN CASH | 137,331 | 407,566 | ||||||||
| CASH, BEGINNING OF PERIOD | 1,293,041 | 1,532,550 | ||||||||
| CASH, END OF PERIOD | $ | 1,430,372 | $ | 1,940,116 | ||||||
| Supplemental disclosure operating activities | ||||||||||
| Cash paid for interest | $ | 55,676 | $ | 56,601 | ||||||
| Non-cash investing and financing activities | ||||||||||
| Cancellation of Treasury Stock | $ | 44,416 | $ | - | ||||||
| The accompanying notes are an integral part of these consolidated financial statements | ||||||||||
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