FITLIFE BRANDS, INC. (FTLF)

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

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and the related notes appearing elsewhere in this Quarterly Report on Form 10-Q (this "Quarterly Report"). This discussion and analysis may contain forward-looking statements based on assumptions about our future business. Unless otherwise stated, all dollar amounts are in thousands, except per share data.

Overview

FitLife Brands, Inc. (the “Company”) is a provider of innovative and proprietary nutritional supplements and wellness products for health-conscious consumers marketed under the following brand names: (i) NDS Nutrition, PMD Sports, SirenLabs, Core Active, Nutrology, and Metis Nutrition (together, the “NDS Products”); (ii) iSatori, BioGenetic Laboratories, and Energize (together, the "iSatori Products"); (iii) Dr. Tobias, All Natural Advice, and Maritime Naturals (together, the “MRC Products"); (iv) MusclePharm; and (v) Irwin Naturals, Applied Nutrition, and Nature’s Secret (together, the “Irwin Products”).

The Company distributes the NDS Products principally through franchised General Nutrition Centers, Inc. (“GNC”) stores located both domestically and internationally. The iSatori Products are sold through retail locations, which include specialty and mass market retailers, as well as online directly to the end consumer. The Company distributes the MRC Products primarily online through e-commerce platforms, such as Amazon.com (“Amazon”), directly to the end consumer. MusclePharm’s products are sold to both wholesale customers as well as online through various e-commerce platforms directly to the end consumer. Irwin Products are sold principally through wholesale channels in mass market and health food store segments, but also online directly to the end consumer.

FitLife Brands is headquartered in Omaha, Nebraska. For more information on the Company, please go to www.fitlifebrands.com. The Company’s common stock, par value $0.01 per share (“Common Stock”), trades under the symbol “FTLF” on the Nasdaq Capital Market.

Recent Developments

Acquisition of Irwin Naturals

On August 8, 2025, the Company acquired substantially all of the assets and assumed certain liabilities of Irwin Naturals and its related affiliates (“Irwin”) through an asset purchase transaction under Section 363 of the U.S. Bankruptcy Code. Total consideration for the acquisition was $42.5 million. Of this amount, $29.75 million was funded using proceeds from a new term loan provided by First-Citizens Bank & Trust Company (the “Bank”), $6.0 million was funded from a new $10.0 million revolving line of credit from the Bank, and the remainder was funded from the Company’s available cash balances.

Stock Split

On February 7, 2025, the Company effected a 2-for-1 stock split of its Common Stock and proportionately increased the number of authorized shares of Common Stock. The shares of Common Stock retain a par value of $0.01 per share. Accordingly, an amount equal to the par value of the additional shares issued in the stock split was reclassified from additional paid-in capital in excess of par value to Common Stock.

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Results of Operations

Comparison of the three months ended June 30, 2026 to the three months ended June 30, 2025

Revenue.  Revenue for the three months ended June 30, 2026 increased 65% to $26,549 compared to $16,127 for the three months ended June 30, 2025. The increase in revenue for the three months ended June 30, 2026 compared to the prior period is primarily due to the acquisition of Irwin, partially offset by declining revenue from Legacy FitLife, as discussed below. The Irwin assets were acquired on August 8, 2025.

Legacy FitLife revenue for the three months ended June 30, 2026 was $12,414, a 23% decrease compared to the previous year, driven by a 19% decline in online revenue primarily attributable to MRC as well as a 31% decrease in wholesale revenue attributable to lower sales to certain retail partners, primarily GNC.

Wholesale revenue during the quarter ended June 30, 2026 was approximately 55% of net revenue, compared to 45% for online channels. Wholesale revenue during the quarter ended June 30, 2025 was 34% of net revenue compared to 66% for online channels during the same period. The decline in the percentage of revenue coming from online sales is primarily due to the acquisition of Irwin, which had minimal online revenue at the time of the acquisition.

Sales to customers in the U.S. were approximately 95% and 96% during the quarters ended June 30, 2026 and 2025, respectively, with the balance of sales to customers primarily in Canada.

Cost of Goods Sold.  Cost of goods sold for the three months ended June 30, 2026 increased to $16,738 as compared to $9,223 for the three months ended June 30, 2025. This 81% increase is primarily due to the increase in revenue from the acquisition of Irwin.

Gross Profit.  Gross profit for the three months ended June 30, 2026 increased to $9,811 as compared to $6,904 for the three months ended June 30, 2025. This 42% increase in gross profit is principally attributable to the acquisition of Irwin, partially offset by lower gross profit from Legacy FitLife.

Gross Margin. Gross margin for the three months ended June 30, 2026 decreased to 37.0% from 42.8% for the comparable prior period. The decrease in gross margin is primarily attributable to the acquisition of Irwin, which historically generated a lower gross margin than FitLife.

Advertising and Marketing. Advertising and marketing expense for the three months ended June 30, 2026 increased to $1,449 as compared to $1,191 for the same period of the prior year. The 22% increase is primarily the result of advertising and marketing expense attributable to Irwin, partially offset by lower advertising and marketing expense attributable to Legacy FitLife.

SG&A. SG&A expense for the three months ended June 30, 2026 increased 91% to $4,755 as compared to $2,485 for the three months ended June 30, 2025. The 91% increase in SG&A is primarily due to the acquisition of Irwin.

Merger and Acquisition Related. Merger and acquisition related expense decreased by $696 during the quarter ended June 30, 2026 compared to $696 for the same period in 2025, driven by non-recurring transaction costs related to the Irwin acquisition during 2025.

Net Income.  We generated net income of $1,950 for the three months ended June 30, 2026 as compared to net income of $1,747 for the three months ended June 30, 2025. The increase in net income for the three months ended June 30, 2026 compared to the same period in 2025 was primarily attributable to the acquisition of Irwin, partially offset by lower gross profit attributable to Legacy FitLife.

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Comparison of the six months ended June 30, 2026 to the six months ended June 30, 2025

Revenue.  Revenue for the six months ended June 30, 2026 increased 62% to $51,874 compared to $32,063 for the six months ended June 30, 2025. The increase in revenue for the six months ended June 30, 2026 compared to the prior period is primarily due to the acquisition of Irwin, partially offset by declining revenue from Legacy FitLife, as discussed below. The Irwin assets were acquired on August 8, 2025.

Legacy FitLife revenue for the six months ended June 30, 2026 was $24,890, a 22% decrease compared to the previous year, driven by an 18% decline in online revenue primarily attributable to MRC as well as a 30% decrease in wholesale revenue attributable to lower sales to certain retail partners, primarily GNC.

Wholesale revenue during the six months ended June 30, 2026 was approximately 55% of net revenue, compared to 45% for online channels for the same period in 2026.  Wholesale revenue during the six months ended June 30, 2025 was 34% of net revenue compared to 66% for online channels during the same period. The decline in the percentage of revenue coming from online sales is primarily due to the acquisition of Irwin, which had minimal online revenue at the time of the acquisition.

Sales to customers in the U.S. were approximately 95% and 96% during the six months ended June 30, 2026 and 2025, respectively, with the balance of sales to customers primarily in Canada.

Cost of Goods Sold.  Cost of goods sold for the six months ended June 30, 2026 increased to $32,546 as compared to $18,285 for the six months ended June 30, 2025. This 78% increase is primarily due to the increase in revenue from the acquisition of Irwin.

Gross Profit.  Gross profit for the six months ended June 30, 2026 increased to $19,328 as compared to $13,778 for the six months ended June 30, 2025. This 40% increase in gross profit is principally attributable to the acquisition of Irwin, partially offset by lower gross profit from Legacy FitLife.

Gross Margin. Gross margin for the six months ended June 30, 2026 decreased to 37.3% from 43.0% for the comparable prior period. The decrease in gross margin is primarily attributable to the acquisition of Irwin, which historically generated a lower gross margin than FitLife.

Advertising and Marketing. Advertising and ma

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ITEM 7.    MANAGEMENT’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. Unless otherwise stated, all dollar amounts are in thousands, except per share data.

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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 inventory obsolescence, product returns, depreciable lives of property and equipment, allocation of purchase price from business combinations, 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

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 number of days the balance is past due, and the estimated loss is recorded based upon management’s assessment of collectability. Account balances are charged off against the allowance when it is probable that the receivable will not be recovered.

As of December 31, 2025 and 2024, the Company had provided a reserve for doubtful accounts of $9 and $41, respectively.

Income Taxes

The Company accounts for income taxes under FASB Accounting Standards Codification (“ASC”) Topic 740, Income Taxes (“ASC 740”). 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. The deferred tax liabilities of the Company relate primarily to intangible assets that are not deductible for tax purposes in the jurisdictions to which they relate.

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 income and comprehensive income. As of December 31, 2025 and 2024, the Company has not established a liability for uncertain tax positions.

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, estimated sales allowances, defective products, product returns and sales incentives, such as markdowns and sales promotions. 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.

With the exception of Irwin, we currently have a 30-day product return policy for direct-to-consumer sales, 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 or e-commerce platforms. Irwin allows for returns within 60 days of purchase for direct-to-consumer sales. Product sold to certain wholesale customers may be returned from store shelves or the distribution center in the event product is damaged, short dated, expired or recalled.

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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. The product returns liability includes 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 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 a regular basis and adjusted for accordingly. Adjustments for returns are based on factual information and historical trends for Company 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.

Total allowance for product returns, sales returns and incentive programs as of December 31, 2025 and 2024 amounted to $1,039 and $564, respectively.

Inventory

Inventory is stated at the lower of cost or net realizable value, with costs determined on a first-in, first-out (FIFO) basis. 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.

Total allowance for expiring, excess and slow-moving inventory items as of December 31, 2025 and 2024 amounted to $247 and $100, respectively.

Goodwill

The Company has determined that it has a single reporting unit for purposes of performing its goodwill impairment test.  The Company reviews goodwill for impairment on an annual basis or whenever events or changes in circumstances indicate the carrying value may not be recoverable. The Company first assesses qualitative factors to determine whether it is more-likely-than-not that the fair value of the reporting unit is less than the carrying amount as a basis for determining whether it is necessary to perform an impairment test. If the qualitative assessment warrants further analysis, the Company compares the fair value of the reporting unit to its carrying value. The fair value of the reporting unit is determined using the market approach.  The Company determines the amount of a potential goodwill impairment by comparing the fair value of the reporting unit with its carrying amount. To the extent the carrying value of a reporting unit exceeds its fair value, a goodwill impairment charge is recognized.

As the Company uses the market approach to determine fair value of the reporting unit, the price of its Common Stock is an important component of the fair value calculation. If the Company’s stock price experiences significant price and volume fluctuations, this will impact the fair value of the reporting unit, which can lead to potential impairment in future periods.

There were no impairment charges incurred during the year ended December 31, 2025.

Revenue Recognition

The Company’s revenue is comprised of sales of nutritional supplements and wellness products to consumers.

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The Company accounts for revenue in accordance with FASB ASC 606. 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

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