FitLife Brands(US:FTLF)2022-10-13 16:00Financial Performance - Revenue for the three months ended March 31, 2022, was $7,455,000, representing a 33.2% increase from $5,599,000 in the same period of 2021[15] - Gross profit for the same period was $3,272,000, up from $2,795,000, indicating a gross margin improvement[15] - Net income for Q1 2022 was $1,290,000, compared to $1,405,000 in Q1 2021, reflecting a decrease of 8.2%[15] - Operating income for Q1 2022 was $1,596,000, compared to $1,261,000 in Q1 2021, reflecting a 26.6% increase[15] - For the three months ended March 31, 2022, net income available to common shareholders was $1,290,000, a decrease of 8.2% from $1,405,000 in the same period of 2021[39] - Basic earnings per share (EPS) for Q1 2022 was $0.28, down from $0.33 in Q1 2021, while diluted EPS decreased to $0.26 from $0.30[39] - Net sales to GNC accounted for 70% of total net revenue in Q1 2022, up from 63% in Q1 2021, indicating a growing reliance on this customer[45] - Online sales represented 26% of the Company's net revenue in Q1 2022, a slight decrease from 29% in Q1 2021[45] - Cash provided by operating activities for the three months ended March 31, 2022 was $1,134,000, compared to $289,000 for the same period in 2021, indicating a significant increase in cash flow[116] Assets and Liabilities - Total current assets increased to $20,009,000 as of March 31, 2022, from $17,684,000 at the end of 2021, a growth of 7.5%[13] - Cash at the end of Q1 2022 was $11,060,000, up from $9,897,000 at the end of 2021, marking a 11.7% increase[20] - Total liabilities rose to $4,722,000 as of March 31, 2022, compared to $4,161,000 at the end of 2021, an increase of 13.5%[13] - As of March 31, 2022, the total inventory amounted to $7,095,000, an increase of 8.8% from $6,520,000 as of December 31, 2021[60] - The allowance for obsolescence for inventory increased to $92,000 as of March 31, 2022, compared to $56,000 as of December 31, 2021[60] - The Company has a $2.5 million line of credit with CIT Bank, with no advances outstanding as of March 31, 2022[62][63] - As of March 31, 2022, the company had positive working capital of approximately $15,377,000, an increase from $13,626,000 at December 31, 2021[108] Expenses - Cost of goods sold for the three months ended March 31, 2022 increased 49% to $4,183,000 from $2,804,000 in the prior year[98] - Gross profit for the three months ended March 31, 2022 was $3,272,000, up from $2,795,000 in the same period last year, with a gross margin decrease to 43.9% from 49.9%[99] - General and administrative expenses increased to $982,000 for the three months ended March 31, 2022, compared to $857,000 in the prior year, primarily due to increased legal and consulting expenses[100] - Selling and marketing expenses rose to $680,000 for the three months ended March 31, 2022, compared to $669,000 in the same period last year[101] Stock and Shareholder Information - The Company approved a forward stock split at a ratio of 4-for-1, increasing the authorized shares from 15.0 million to 60.0 million[28] - The Company has authorized a share repurchase program of up to $5.0 million, with $3,170,000 available for additional purchases as of March 31, 2022[90][91] Tax and Financial Obligations - The Company recorded a federal income tax expense of $309,000 for Q1 2022, primarily due to the utilization of federal net operating loss carryforwards[52] - As of March 31, 2022, the Company had approximately $13.7 million in federal net operating loss carryforwards available to offset future taxable income[53] - The Company received a Paycheck Protection Program loan of $449,700, which was fully forgiven on January 15, 2021[65] Internal Controls and Compliance - The company identified material weaknesses in its internal control over financial reporting, leading to the need for restatements of financial statements for the years ended December 31, 2019 and 2020, as well as interim financial statements for various quarterly periods[144] - The management concluded that the internal control system was not effective as of March 31, 2022, due to deficiencies in control environment, risk oversight, control activities, information processing, and monitoring activities[144] - The company has engaged expert accounting consultants to assess and improve its control environment since March 2022, and hired a new CFO in August 2022 with extensive public company experience[153] - Management is developing a checklist based on the COSO Framework to assess the design and operational effectiveness of entity-level and activity-level controls[154] - The company is committed to remediating identified material weaknesses and will share assessments and remedial actions with the Audit Committee and independent auditors on a quarterly basis[154] Market and Operational Impact - The COVID-19 pandemic has impacted the Company's operations, but online sales have increased, offsetting some negative effects[32] - The Company expects to continue assessing the impact of the COVID-19 pandemic on its business and make necessary adjustments[32] - The company has not experienced significant payment delays from customers, with less than 5% of products returned[132] - The company does not engage in hedging transactions to reduce exposure to changes in currency exchange rates[135] - Management is not aware of any material changes to the risk factors previously discussed in the Annual Report for the fiscal year ended December 31, 2021[158]