Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2018 | Nov. 13, 2018 | |
Document And Entity Information | ||
Entity Registrant Name | FITLIFE BRANDS, INC. | |
Entity Central Index Key | 1,374,328 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2018 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Is Entity's Reporting Status Current? | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Emerging Growth Company | false | |
Entity Small Business | true | |
Entity Common Stock, Shares Outstanding | 11,084,545 | |
Trading Symbol | FTLF | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2,018 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 |
CURRENT ASSETS | ||
Cash | $ 533,000 | $ 1,262,000 |
Accounts receivable, net of allowance of doubtful accounts and productsales returns of $707,000 and $1,264,000, respectively | ||
Accounts receivable, Trade | 686,000 | 1,958,000 |
Accounts receivable, Factored | 2,458,000 | 0 |
Inventories, net of allowance for obsolescence of $7,000 and $49,000, respectively | 2,949,000 | 2,874,000 |
Note receivable, current portion | 0 | 5,000 |
Prepaid expense | 235,000 | 221,000 |
Total current assets | 6,861,000 | 6,320,000 |
PROPERTY AND EQUIPMENT, net | 204,000 | 296,000 |
Goodwill | 225,000 | 225,000 |
Security deposits | 10,000 | 22,000 |
TOTAL ASSETS | 7,300,000 | 6,863,000 |
CURRENT LIABILITIES: | ||
Accounts payable | 2,871,000 | 2,974,000 |
Accrued expense and other liabilities | 593,000 | 612,000 |
Secured payable to factor | 1,950,000 | 0 |
Line of credit | 0 | 1,950,000 |
Term loan agreement, current portion | 0 | 415,000 |
Total current liabilities | 5,414,000 | 5,951,000 |
CONTINGENCIES AND COMMITMENTS | ||
STOCKHOLDERS' EQUITY: | ||
Common stock, $0.01 par value, 150,000,000 shares authorized; 11,084,545 and 10,681,710 issued and outstanding as of September 30, 2018 and December 31, 2017, respectively | 111,000 | 107,000 |
Additional paid-in capital | 31,230,000 | 31,013,000 |
Accumulated deficit | (29,455,000) | (30,208,000) |
Total stockholders' equity | 1,886,000 | 912,000 |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ 7,300,000 | $ 6,863,000 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 |
Statement of Financial Position [Abstract] | ||
Allowance for doubtful accounts | $ 707,000 | $ 1,263,674 |
Allowance for obsolescence | $ 7,000 | $ 49,000 |
STOCKHOLDERS' EQUITY: | ||
Common Stock, Par Value Per Share | $ .01 | $ .01 |
Common Stock, Shares Authorized | 150,000,000 | 150,000,000 |
Common Stock, Shares, Issued | 11,084,545 | 10,681,710 |
Common Stock, Shares, Outstanding | 11,084,545 | 10,681,710 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Income Statement [Abstract] | ||||
Revenue | $ 4,583,000 | $ 4,026,000 | $ 13,576,000 | $ 14,637,000 |
Cost of Goods Sold | 2,831,000 | 2,551,000 | 8,102,000 | 9,719,000 |
Gross Profit | 1,752,000 | 1,475,000 | 5,474,000 | 4,918,000 |
OPERATING EXPENSE: | ||||
General and administrative | 784,000 | 1,030,000 | 2,493,000 | 3,200,000 |
Selling and marketing | 547,000 | 829,000 | 2,070,000 | 2,690,000 |
Depreciation and amortization | 16,000 | 99,000 | 54,000 | 336,000 |
Total operating expense | 1,347,000 | 1,958,000 | 4,617,000 | 6,226,000 |
OPERATING INCOME (LOSS) | 405,000 | (483,000) | 857,000 | (1,308,000) |
OTHER EXPENSE | ||||
Interest expense | 39,000 | 28,000 | 104,000 | 84,000 |
Other expense | 1,000 | 0 | 4,000 | 0 |
Total other expense | 40,000 | 28,000 | 104,000 | 88,000 |
NET INCOME (LOSS) | $ 365,000 | $ (511,000) | $ 753,000 | $ (1,396,000) |
NET INCOME (LOSS) PER SHARE: | ||||
Basic | $ 0.03 | $ (0.05) | $ 0.07 | $ (0.13) |
Diluted | $ 0.03 | $ (0.05) | $ 0.07 | $ (0.13) |
Basic weighted average common shares | 11,007,958 | 10,537,805 | 10,896,589 | 10,483,144 |
Diluted weighted average common shares | 11,007,958 | 10,537,805 | 10,896,589 | 10,483,144 |
CONSOLIDATED STATEMENT OF STOCK
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY - 9 months ended Sep. 30, 2018 - USD ($) | Common Stock | Additional Paid-In Capital | Accumulated Deficit | Total |
Beginning balance, Shares at Dec. 31, 2017 | 10,681,710 | |||
Beginning balance, Amount at Dec. 31, 2017 | $ 106,819 | $ 31,013,043 | $ (30,208,265) | $ 912,000 |
Common stock issued for services, Shares | 402,835 | 402,835 | ||
Common stock issued for services, Amount | $ 4,000 | 132,000 | $ 136,000 | |
Fair value of options issued for services | 85,000 | 85,000 | ||
Net loss | 753,000 | 753,000 | ||
Ending balance, Shares at Sep. 30, 2018 | 11,084,545 | |||
Ending balance, Amount at Sep. 30, 2018 | $ 111,000 | $ 31,230,000 | $ (29,455,000) | $ 1,886,000 |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) | 9 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2017 | |
Statement of Cash Flows [Abstract] | ||
Net income (loss) | $ 753,000 | $ (1,396,000) |
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||
Depreciation and amortization | 54,000 | 336,000 |
Allowance for doubtful accounts and product returns | (557,000) | 0 |
Allowance for inventory obsolescence | (42,000) | 0 |
Common stock issued for services | 136,000 | 82,000 |
Fair value of options issued for services | 85,000 | 33,000 |
Loss on disposal of assets | 34,000 | 5,000 |
Changes in operating assets and liabilities: | ||
Accounts receivable - trade | 1,829,000 | (588,000) |
Accounts receivable - factored | (2,458,000) | 0 |
Inventories | (33,000) | 887,000 |
Prepaid expense | (14,000) | (49,000) |
Customer note receivable | 5,000 | 7,000 |
Security deposit | 12,000 | 0 |
Accounts payable | (103,000) | 880,000 |
Accrued liabilities and other liabilities | (19,000) | 51,000 |
Net cash provided by operating activities | (318,000) | 248,000 |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Purchase of property and equipment | 0 | (20,000) |
Proceeds from sale of assets | 4,000 | 0 |
Net cash used in investing activities | 4,000 | (20,000) |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Repayment of line of credit | (1,950,000) | 0 |
Secured payable to Factor | 1,950,000 | 0 |
Repayment of term loan | (415,000) | (416,000) |
Net cash provided by (used in) financing activities | (415,000) | (416,000) |
CHANGE IN CASH | (729,000) | (188,000) |
CASH, BEGINNING OF PERIOD | 1,262,000 | 1,293,000 |
CASH, END OF PERIOD | 533,000 | 1,105,000 |
Supplemental disclosure operating activities | ||
Cash paid for interest | 104,000 | 84,000 |
Non-cash investing and financing activities | ||
Cancellation of Treasury Stock | $ 0 | $ 44,000 |
DESCRIPTION OF BUSINESS
DESCRIPTION OF BUSINESS | 9 Months Ended |
Sep. 30, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
DESCRIPTION OF BUSINESS | Summary FitLife Brands, Inc. (the “ Company www.ndsnutrition.com www.pmdsports.com www.sirenlabs.com www.coreactivenutrition.com NDS Products iSatori www.isatori.com iSatori Products GNC The Company was incorporated in the State of Nevada on July 26, 2005. In October 2008, the Company acquired the assets of NDS Nutritional Products, Inc., a Nebraska corporation, and moved those assets into its wholly owned subsidiary NDS Nutrition Products, Inc., a Florida corporation (“ NDS The Company is headquartered in Omaha, Nebraska. For more information on the Company, please go to http://www.fitlifebrands.com |
BASIS OF PRESENTATION
BASIS OF PRESENTATION | 9 Months Ended |
Sep. 30, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
BASIS OF PRESENTATION | The accompanying interim condensed unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In our opinion, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation are included. Operating results for the three and nine month periods ended September 30, 2018 are not necessarily indicative of the results that may be expected for the year ending December 31, 2018. Although management of the Company believes the disclosures presented herein are adequate and not misleading, these interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the footnotes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2017, as filed with the Securities and Exchange Commission on April 17, 2018. |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 9 Months Ended |
Sep. 30, 2018 | |
Accounting Policies [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | The Company prepares its financial statements in accordance with accounting principles generally accepted in the United States (“ GAAP Principles of Consolidation The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. Intercompany accounts and transactions have been eliminated in the consolidated condensed financial statements. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect (i) the reported amounts of assets and liabilities, (ii) the disclosure of contingent assets and liabilities known to exist as of the date the financial statements are published, and (iii) the reported amount of net sales and expense recognized during the periods presented. Adjustments made with respect to the use of estimates often relate to improved information not previously available. Uncertainties with respect to such estimates and assumptions are inherent in the preparation of financial statements; accordingly, actual results could differ from these estimates. These estimates and assumptions also affect the reported amounts of accounts receivable, inventories, goodwill, revenue, costs and expense and valuations of long term assets, realization of deferred tax assets and fair value of equity instruments issued for services during the reporting period. Management evaluates these estimates and assumptions on a regular basis. Actual results could differ from those estimates. Basic and Diluted Income (loss) Per Share Our computation of earnings per share (“ EPS Income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the respective periods. Basic and diluted (loss) per common share is the same for periods because all warrants and stock options outstanding are anti-dilutive. At September 30, 2018 and 2017, we excluded the all outstanding options and warrants which entitle the holders thereof to acquire shares of common stock as their effect would have been anti-dilutive. The following securities that were excluded are as follows: September 30, 2018 September 30, 2017 Options 1,392,087 877,725 Warrants - 60,620 Total 1,392,087 938,345 Goodwill The Company had goodwill of $225,000, as of September 30, 2018 and December 31, 2017, respectively, as a result of the acquisition of NDS in October 2008. The Company adopted ASC Topic 350 – Goodwill and Other Intangible Assets As of September 30, 2018 and December 31, 2017, there were no indicators of impairment for the recorded goodwill of $225,000, respectively. Customer Concentration Gross sales prior to reduction for vendor funded discounts and coupons to GNC during the nine month periods ended September 30, 2018 and 2017 were $12,732,000 and $15,569,000, respectively, representing 79% and 81% of total gross revenue, respectively. Gross accounts receivable attributable to GNC as of September 30, 2018 and September 30, 2017 were $3,359,000 and $2,680,000 and 78% of the Company’s total accounts receivable balance, respectively. Revenue Recognition The Company’s revenue is comprised of sales of nutritional supplements to consumers, primarily through GNC stores. In September 2014, the Financial Accounting Standards Board issued Accounting Standards Update No. 2014-09 (ASU No. 2014-09) regarding revenue recognition. The new standard provides authoritative guidance clarifying the principles for recognizing revenue and developing a common revenue standard for U.S. generally accepted accounting principles. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods to customers in an amount that reflects the consideration to which the entity expects to be entitled in the exchange for those goods. The ASU became effective January 1, 2018. Due to the nature of the products sold by the Company, the adoption of the new standard has had no quantitative effect on the financial statements. However, the guidance requires additional disclosures to help users of financial statements better understand the nature, amount, timing, and uncertainty of revenue that is recognized. The Company previously recognized revenue when risk of loss transferred to our customers and collection of the receivable was reasonably assured, which generally occurs when the product is shipped. A product is not shipped without an order from the customer and credit acceptance procedures performed. The Company allows for returns within 30 days of purchase from end-users. Our 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. Under the new guidance, revenue is recognized when control of promised goods is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods. The Company reviews its sales transactions to identify contractual rights, performance obligations, and transaction prices, including the allocation of prices to separate performance obligations, if applicable. Revenue and costs of sales are recognized once products are delivered to the customer’s control and performance obligations are satisfied. 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. We provide a 30-day right of return for our products. 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 substantially 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. Income Taxes As of September 30, 2017, the Company had Federal net operating loss (“ NOL IRS During the nine month period ended September 30, 2018, the Company reported income from operations of $857,000 and net income of $753,000. As a result of the Company’s significant NOL of approximately $28.0 million, which can be utilized starting in fiscal 2018, there was no provision for income tax recorded during the period ended September 30, 2018. The Company accounts for income taxes using the asset and liability method, whereby deferred tax assets are recognized for deductible temporary differences, and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized before the Company is able to realize their benefits, or that future deductibility is uncertain. Authoritative guidance issued by the ASC Topic 740 – Income Taxes In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Recent Accounting Pronouncements In February 2016, the FASB issued ASU No. 2016-02, Leases 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. |
MERCHANT AGREEMENT
MERCHANT AGREEMENT | 9 Months Ended |
Sep. 30, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
MERCHANT AGREEMENT | In December 2017, the Company, through NDS and iSatori (together, the “ Subsidiaries Compass Factor LIBOR Under the terms of the Merchant Agreement, all factored receivables are sold with recourse, which requires the Company to repurchase any receivables, if demanded, not paid on time causing such receivables to be accounted for as a secured financing arrangement and not as a sale of financial assets. Receivables are presented net of allowance for doubtful accounts with the recourse amount potentially due Compass in the event of untimely payment presented under current liabilities as a secured financing obligation. There were no invoices factored under this Merchant Agreement during the year ended December 31, 2017. During the nine-month period ended September 30, 2018, the Company sold to Factor, on a recourse basis, an aggregate of $11,448,000 of invoices, net of credit memos, for cash proceeds of $10,840,000. In addition, the Company also incurred fees and other charges in the aggregate amount of $100,000, which was reflected as part of interest expense in the accompanying statement of operations. As of September 30, 2018, total due from Factor amounted to $508,000, which represents the 20% holdback for invoices it had not yet collected. For financial statement presentation purposes, as the receivables were sold with recourse, the Company reflected the amount due from Factor on the accompanying balance sheet as follows: Accounts Receivable - Factor $ 2,458,000 Secured Payable to Factor (1,950,000 ) Total $ 508,000 |
INVENTORIES
INVENTORIES | 9 Months Ended |
Sep. 30, 2018 | |
Inventory Disclosure [Abstract] | |
INVENTORIES | The Company’s inventories as of September 30, 2018 and December 31, 2017 were as follows: September 30, 2018 (unaudited) December 31, 2017 Finished goods $ 2,446,000 $ 2,511,000 Components 510,000 412,000 Allowance for obsolescence (7,000 ) (49,000 ) Total $ 2,949,000 $ 2,874,000 |
PROPERTY AND EQUIPMENT
PROPERTY AND EQUIPMENT | 9 Months Ended |
Sep. 30, 2018 | |
Property, Plant and Equipment [Abstract] | |
PROPERTY AND EQUIPMENT | The Company’s fixed assets as of September 30, 2018 and December 31, 2017 were as follows: September 30, 2018 (unaudited) December 31, 2017 Equipment $ 902,000 $ 973,000 Accumulated depreciation (698,000 ) (677,000 ) Total $ 204,000 $ 296,000 Depreciation expense for the nine months ended September 30, 2018 and 2017 was $54,000 and $40,000, respectively. |
NOTES PAYABLE
NOTES PAYABLE | 9 Months Ended |
Sep. 30, 2018 | |
Debt Disclosure [Abstract] | |
NOTES PAYABLE | The Company had previously obtained a line of credit (“ LOC Term Note In January 2018, the Company paid U.S. Bank a total of $2,365,000 to settle the outstanding balance of the LOC and the Term Note. As of September 30, 2018, the LOC and Term Note had been fully paid. |
EQUITY
EQUITY | 9 Months Ended |
Sep. 30, 2018 | |
Equity [Abstract] | |
EQUITY | Common Stock The Company is authorized to issue 150 million shares of common stock, $0.01 par value, of which 11,084,545 shares of common stock were issued and outstanding as of September 30, 2018. During the nine-month period ended September 30, 2018, the Company issued 402,835 shares of common stock with a fair value of $128,000 to employees and directors for services rendered. The shares were valued at their respective date of issuances. In July 2018, in connection with the appointment of Mr. Dayton Judd as Chief Executive Officer, the Company granted Mr. Judd an aggregate of 450,000 shares of restricted common stock, which include vesting conditions subject to the achievement of certain market prices of the Company’s common stock. Such shares are also subject to forfeiture in the event Mr. Judd resigns from his position or is terminated by the Company. As the vesting of the 450,000 shares of restricted common stock is subject to certain market conditions, pursuant to current accounting guidelines, the Company determined the fair value to be $105,000, computed using the Monte Carlo simulations on a binomial model with the assistance of a valuation specialist with a derived service period of three years. During the period ended September 30, 2018, the Company recorded compensation expense of $8,000 to amortize the fair value of these restricted common shares based upon the prorated derived service period. Preferred Stock As of September 30, 2018, the Company was authorized to issue 10.0 million shares of Series A Convertible Preferred Stock, $0.01 par value (“ Series A Preferred Series B Preferred Series C Preferred Subsequent to the quarter ended September 30, 2018, the Company filed Certificates of Withdrawal with the Secretary of State of the State of Nevada for the Series A Preferred, Series B Preferred and Series C Preferred, thereby withdrawing each of the series of preferred stock and returning all previously designated shares to their status as authorized preferred stock available for issuance. Subsequent to the filing of the Certificates of Withdrawal, the Company filed a new Certificate of Designations, Preferences and Rights of the Series A Convertible Preferred Stock, $0.01 par value, designating 1,000 shares of the Company’s preferred stock as Series A Convertible Preferred. For additional information regarding the withdrawal of the Series A Preferred, Series B Preferred and Series C Preferred and the creation of the new Series A Convertible Preferred, see Note 10 – Subsequent Events Options As of September 30, 2018 and December 31, 2017, 1,392,087 and 870,284 options to purchase shares of common stock of the Company were issued and outstanding, respectively. Additional information regarding options outstanding as of September 30, 2018 is as follows: Number of Options December 31, 2017 870,284 Granted 705,000 Exercised - Forfeited (183,197 ) September 30, 2018 1,392,087 Vested and exercisable 919,577 During the nine months ended September 30, 2018, the Company granted stock options to an officer to purchase 705,000 shares of Company common stock. The stock options are exercisable at a price of $0.28 per share, expire in ten 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. Total fair value of these options at grant date was approximately $147,000, which was determined using the Black-Scholes Option Pricing model with the following assumption: stock price of $0.28 per share, expected term of six years, volatility of 88%, dividend rate of 0% and risk free interest rate of 2.92%. 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. Outstanding Exercise Price Issuance Date Expiration Date Vesting 705,000 $ 0.28 07/31/18 07/31/28 Yes 211,710 $ 1.39 05/09/16 05/09/21 Yes 40,000 $ 2.20 04/11/14 04/11/19 No 360,000 $ 2.30 02/23/15 02/23/20 No 11,571 $ 3.31 02/16/12 02/16/22 No 13,491 $ 4.62 05/13/15 05/13/25 Yes 21,939 $ 5.89 03/23/15 03/23/25 Yes 8,660 $ 12.13 09/17/13 09/17/23 Yes 2,396 $ 12.99 11/14/12 09/27/22 No 17,320 $ 14.43 01/16/13 11/30/22 No 1,392,087 During the nine-month periods ended September 30, 2018 and 2017, the Company recognized compensation expense of $85,000 and $33,000, respectively, to account for the fair value of stock options that vested during the period. Total intrinsic value of outstanding stock options as of September 30, 208 amounted to $91,000. Future unamortized compensation expense on the unvested outstanding options at September 30, 2018 amounted to $111,000, which will be recognized through May 2020. Warrants Total outstanding warrants to purchase shares of Company common stock as of December 31, 2017 amounted to 60,620 shares. During the period ended September 30, 2018, all 60,620 warrants expired unexercised. As of September 30, 2018, there were no warrants issued and outstanding. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 9 Months Ended |
Sep. 30, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | Legal Proceedings On December 31, 2014, various plaintiffs, individually and on behalf of a purported nationwide and sub-class of purchasers, filed a lawsuit in the U.S. District Court for the Northern District of California, captioned Ryan et al. v. Gencor Nutrients, Inc. et al. Gencor On February 19, 2015, this matter was transferred to the Central District of California to the Honorable Manuel Real. Judge Real had previously issued an order dismissing a similar lawsuit that had been filed by the same lawyer who represents the plaintiffs in the Ryan matter. The United States Court of Appeals reversed part of the dismissal issued by Judge Real and remanded the case back down to the district court for further proceedings. As a result, the parties in the Ryan matter issued a joint status report and that matter is again active. 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. Other than described above, 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. |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 9 Months Ended |
Sep. 30, 2018 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | Creation of a New Series A Convertible Preferred Stock On November 13, 2018, the Company filed a new Certificate of Designations, Preferences and Rights of the Series A Convertible Preferred Stock (the “ Certificate of Designations New Series A Preferred Stated Value Each share of the New Series A Preferred has a liquidation preference equal to the Stated Value plus all accrued and unpaid dividends (the “ Liquidation Preference Conversion Shares Redemption Price provided, however Holders of New Series A Preferred will have the right to vote, on an as-converted basis, with the holders of the Company’s common stock on any matter presented to the Company’s stockholders for their action or consideration. So long as any shares of New Series A Preferred remain outstanding, holders of the Series A Preferred will have the right to elect one director to the Company’s Board of Directors (“ Board Series A Director provided, however In addition, holders of the New Series A Preferred shall have certain piggyback registration rights for the first two years following November 13, 2018, and certain demand registration rights thereafter, as more specifically set forth in the Certificate of Designations. New Series A Preferred Financing On November 13, 2018, the Company entered into subscription agreements (the “ Subscription Agreements “Purchaser Purchasers Units Warrant Offering The Offering resulted in gross proceeds to the Company of $600,000. Purchasers in the Offering included Dayton Judd, the Company’s Chairman and Chief Executive Officer, and Grant Dawson, a director. A portion of the Offering was also sold to an unaffiliated third party. |
SUMMARY OF SIGNIFICANT ACCOUN_2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 9 Months Ended |
Sep. 30, 2018 | |
Summary Of Significant Accounting Policies Policies | |
Principles of Consolidation | The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. Intercompany accounts and transactions have been eliminated in the consolidated condensed financial statements. |
Use of Estimates | The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect (i) the reported amounts of assets and liabilities, (ii) the disclosure of contingent assets and liabilities known to exist as of the date the financial statements are published, and (iii) the reported amount of net sales and expense recognized during the periods presented. Adjustments made with respect to the use of estimates often relate to improved information not previously available. Uncertainties with respect to such estimates and assumptions are inherent in the preparation of financial statements; accordingly, actual results could differ from these estimates. These estimates and assumptions also affect the reported amounts of accounts receivable, inventories, goodwill revenue, costs and expense and valuations of long term assets, realization of deferred tax assets and fair value of equity instruments issued for services during the reporting period. Management evaluates these estimates and assumptions on a regular basis. Actual results could differ from those estimates. |
Basic and Diluted Income (loss) per share | Our computation of earnings per share (“ EPS Income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the respective periods. Basic and diluted (loss) per common share is the same for periods because all warrants and stock options outstanding are anti-dilutive. At September 30, 2018 and 2017, we excluded the all outstanding options and warrants which entitle the holders thereof to acquire shares of common stock as their effect would have been anti-dilutive. The following securities that were excluded are as follows: September 30, 2018 September 30, 2017 Options 1,392,087 877,725 Warrants - 60,620 Total 1,392,087 938,345 |
Goodwill | The Company had goodwill of $225,000, as of September 30, 2018 and December 31, 2017, respectively, as a result of the acquisition of NDS in October 2008. The Company adopted ASC Topic 350 – Goodwill and Other Intangible Assets As of September 30, 2018 and December 31, 2017, there were no indicators of impairment for the recorded goodwill of $225,000, respectively. |
Customer Concentration | Gross sales prior to reduction for vendor funded discounts and coupons to GNC during the nine month periods ended September 30, 2018 and 2017 were $12,732,000 and $15,569,000, respectively, representing 79% and 81% of total gross revenue, respectively. Gross accounts receivable attributable to GNC as of September 30, 2018 and September 30, 2017 were $3,359,000 and $2,680,000 and 78% of the Company’s total accounts receivable balance, respectively. |
Revenue Recognition | The Company’s revenue is comprised of sales of nutritional supplements to consumers, primarily through GNC stores. In September 2014, the Financial Accounting Standards Board issued Accounting Standards Update No. 2014-09 (ASU No. 2014-09) regarding revenue recognition. The new standard provides authoritative guidance clarifying the principles for recognizing revenue and developing a common revenue standard for U.S. generally accepted accounting principles. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods to customers in an amount that reflects the consideration to which the entity expects to be entitled in the exchange for those goods. The ASU became effective January 1, 2018. Due to the nature of the products sold by the Company, the adoption of the new standard has had no quantitative effect on the financial statements. However, the guidance requires additional disclosures to help users of financial statements better understand the nature, amount, timing, and uncertainty of revenue that is recognized. The Company previously recognized revenue when risk of loss transferred to our customers and collection of the receivable was reasonably assured, which generally occurs when the product is shipped. A product is not shipped without an order from the customer and credit acceptance procedures performed. The Company allows for returns within 30 days of purchase from end-users. Our 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. Under the new guidance, revenue is recognized when control of promised goods is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods. The Company reviews its sales transactions to identify contractual rights, performance obligations, and transaction prices, including the allocation of prices to separate performance obligations, if applicable. Revenue and costs of sales are recognized once products are delivered to the customer’s control and performance obligations are satisfied. 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. We provide a 30-day right of return for our products. 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 substantially 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. |
Income taxes | As of September 30, 2017, the Company had Federal net operating loss (“ NOL IRS During the nine month period ended September 30, 2018, the Company reported income from operations of $857,000 and net income of $753,000. As a result of the Company’s significant NOL of approximately $28.0 million, which can be utilized starting in fiscal 2018, there was no provision for income tax recorded during the period ended September 30, 2018. The Company accounts for income taxes using the asset and liability method, whereby deferred tax assets are recognized for deductible temporary differences, and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized before the Company is able to realize their benefits, or that future deductibility is uncertain. Authoritative guidance issued by the ASC Topic 740 – Income Taxes In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. |
Recent Accounting Pronouncements | In February 2016, the FASB issued ASU No. 2016-02, Leases 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. |
SUMMARY OF SIGNIFICANT ACCOUN_3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Table) | 9 Months Ended |
Sep. 30, 2018 | |
Summary Of Significant Accounting Policies Policies | |
Dilutive shares included in EPS | September 30, 2018 September 30, 2017 Options 1,392,087 877,725 Warrants - 60,620 Total 1,392,087 938,345 |
MERCHANT AGREEMENT (Tables)
MERCHANT AGREEMENT (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
MERCHANT AGREEMENT | Accounts Receivable - Factor $ 2,458,000 Secured Payable to Factor (1,950,000 ) Total $ 508,000 |
INVENTORIES (Tables)
INVENTORIES (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Inventories Tables | |
Inventories | September 30, 2018 (unaudited) December 31, 2017 Finished goods $ 2,446,000 $ 2,511,000 Components 510,000 412,000 Allowance for obsolescence (7,000 ) (49,000 ) Total $ 2,949,000 $ 2,874,000 |
PROPERTY AND EQUIPMENT (Tables)
PROPERTY AND EQUIPMENT (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Property And Equipment Tables | |
PROPERTY AND EQUIPMENT | September 30, 2018 (unaudited) December 31, 2017 Equipment $ 902,000 $ 973,000 Accumulated depreciation (698,000 ) (677,000 ) Total $ 204,000 $ 296,000 |
EQUITY (Tables)
EQUITY (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Equity Tables | |
Stock option activity | Number of Options December 31, 2017 870,284 Granted 705,00 Exercised 0 Forfeited (183,197 ) September 30, 2018 1,392,087 Vested and exercisable 919,577 |
Options issued and outstanding | Number of Options December 31, 2017 870,284 Granted 705,00 Exercised 0 Forfeited (183,197 ) September 30, 2018 1,392,087 Vested and exercisable 919,577 |
Warrants issued and outstanding | Outstanding Exercise Price Issuance Date Expiration Date Vesting 705,000 $ 0.28 07/31/18 07/31/28 Yes 211,710 $ 1.39 05/09/16 05/09/21 Yes - $ 1.44 09/29/15 09/29/25 No 40,000 $ 2.20 04/11/14 04/11/19 No 360,000 $ 2.30 02/23/15 02/23/20 No 11,571 $ 3.31 02/16/12 02/16/22 No 13,491 $ 4.62 05/13/15 05/13/25 Yes - $ 5.49 04/08/15 04/08/25 No - $ 5.81 03/05/15 03/05/25 No 21,939 $ 5.89 03/23/15 03/23/25 Yes 8,660 $ 12.13 09/17/13 09/17/23 Yes 2,396 $ 12.99 11/14/12 09/27/22 No 17,320 $ 14.43 01/16/13 11/30/22 No 1,392,087 |
DESCRIPTION OF BUSINESS (Detail
DESCRIPTION OF BUSINESS (Details Narrative) | 9 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2017 | |
Description of Business | ||
State of incorporation | Nevada | |
Date of incorporation | Jul. 26, 2005 | |
iSatori [Member] | ||
Description of Business | ||
Acquisition date | Oct. 1, 2015 |
SUMMARY OF SIGNIFICANT ACCOUN_4
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - shares | 9 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2017 | |
NET INCOME PER SHARE | ||
Potential shares of common stock included in the number of shares outstanding | 1,392,087 | 938,345 |
Stock Option [Member] | ||
NET INCOME PER SHARE | ||
Potential shares of common stock included in the number of shares outstanding | 1,392,087 | 877,725 |
Warrant [Member] | ||
NET INCOME PER SHARE | ||
Potential shares of common stock included in the number of shares outstanding | 0 | 60,620 |
SUMMARY OF SIGNIFICANT ACCOUN_5
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Total sales revenue | $ 4,583,000 | $ 4,026,000 | $ 13,576,000 | $ 14,637,000 |
Sales Revenue Net [Member] | ||||
Concentration risk | 79.00% | 81.00% | ||
Receivable [Member] | ||||
Concentration risk | 88.00% | 78.00% | ||
GNC [Member] | ||||
Total sales revenue | $ 12,732,443 | $ 15,569,430 | ||
Sales receivable | $ 3,358,976 | $ 2,679,885 | $ 3,358,976 | $ 2,679,885 |
MERCHANT AGREEMENT (Details)
MERCHANT AGREEMENT (Details) - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 |
Commitments and Contingencies Disclosure [Abstract] | ||
Accounts receivable, Factored | $ 2,458,000 | $ 0 |
Secured payable to factor | (1,950,000) | |
Due from factor | $ 508,000 |
MERCHANT AGREEMENT (Details Nar
MERCHANT AGREEMENT (Details Narrative) | 9 Months Ended |
Sep. 30, 2018USD ($) | |
Commitments and Contingencies Disclosure [Abstract] | |
Sale of invoices to factor | $ (11,488,000) |
Net proceeds from factored receivables | 10,840,000 |
Factoring expense | 100,000 |
Due from factor | $ 508,000 |
INVENTORIES (Details)
INVENTORIES (Details) - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 |
Inventories | ||
Finished goods | $ 2,446,000 | $ 2,511,260 |
Components | 510,000 | 411,301 |
Allowance for obsolescence | (7,000) | (49,000) |
Total | $ 2,949,000 | $ 2,873,831 |
PROPERTY AND EQUIPMENT (Details
PROPERTY AND EQUIPMENT (Details) - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 |
PROPERTY AND EQUIPMENT | ||
Equipment | $ 902,000 | $ 973,000 |
Accumulated depreciation | (698,000) | (677,000) |
Total | $ 204,000 | $ 296,000 |
PROPERTY AND EQUIPMENT (Detai_2
PROPERTY AND EQUIPMENT (Details Narrative) - USD ($) | 9 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2017 | |
Property And Equipment Details Narrative | ||
Depreciation and amortization expense | $ 54,000 | $ 40,000 |
NOTE PAYABLES (Details Narrativ
NOTE PAYABLES (Details Narrative) - USD ($) | 9 Months Ended | |
Sep. 30, 2018 | Dec. 31, 2017 | |
Note Payables Details | ||
Revolving LOC maximum | $ 3,000,000 | |
Revolving LOC interest rate | 5.00% | |
Revolving LOC maturity date | Dec. 31, 2017 | |
Term loan face amount | $ 2,600,000 | |
Term loan interest rate | 5.00% | |
Term loan maturity date | Aug. 31, 2018 | |
Loan default | $ 2,364,877 |
EQUITY (Details)
EQUITY (Details) | 9 Months Ended |
Sep. 30, 2018shares | |
Equity Details Abstract | |
Number of options outstanding, beginning | 870,284 |
Number of options granted | 705,000 |
Number of options exercised | 0 |
Number of options forfeited/cancelled | (183,197) |
Number of options outstanding, ending | 1,392,087 |
Vested and exercisable | 919,577 |
EQUITY (Details 1)
EQUITY (Details 1) | 9 Months Ended |
Sep. 30, 2018$ / sharesshares | |
Options Issued | 1,392,087 |
Issuance Date | Jan. 16, 2013 |
Expiration Date | Nov. 30, 2022 |
Equity Option [Member] | |
Options Issued | 705,000 |
Exercise price | $ / shares | $ 0.28 |
Issuance Date | Jul. 31, 2018 |
Expiration Date | Jul. 31, 2028 |
StockOption2Member | |
Options Issued | 211,710 |
Exercise price | $ / shares | $ 1.39 |
Issuance Date | May 9, 2016 |
Expiration Date | May 9, 2021 |
StockOption3Member | |
Options Issued | 0 |
Exercise price | $ / shares | $ 1.44 |
Issuance Date | Sep. 29, 2015 |
Expiration Date | Sep. 29, 2025 |
StockOption4Member | |
Options Issued | 40,000 |
Exercise price | $ / shares | $ 2.20 |
Issuance Date | Apr. 11, 2014 |
Expiration Date | Apr. 11, 2019 |
StockOption5Member | |
Options Issued | 360,000 |
Exercise price | $ / shares | $ 2.30 |
Issuance Date | Feb. 23, 2015 |
Expiration Date | Feb. 23, 2020 |
StockOption6Member | |
Options Issued | 11,571 |
Exercise price | $ / shares | $ 3.31 |
Issuance Date | Feb. 16, 2012 |
Expiration Date | Feb. 16, 2022 |
StockOption7Member | |
Options Issued | 13,491 |
Exercise price | $ / shares | $ 4.62 |
Issuance Date | May 13, 2015 |
Expiration Date | May 13, 2025 |
StockOption8Member | |
Options Issued | |
Exercise price | $ / shares | $ 5.49 |
Issuance Date | Apr. 8, 2015 |
Expiration Date | Apr. 8, 2025 |
StockOption9Member | |
Options Issued | 0 |
Exercise price | $ / shares | $ 5.81 |
Issuance Date | Mar. 5, 2015 |
Expiration Date | Mar. 5, 2025 |
StockOption10Member | |
Options Issued | 21,939 |
Exercise price | $ / shares | $ 5.89 |
Issuance Date | Mar. 23, 2015 |
Expiration Date | Mar. 23, 2025 |
StockOption11Member | |
Options Issued | 8,660 |
Exercise price | $ / shares | $ 12.13 |
Issuance Date | Sep. 17, 2013 |
Expiration Date | Sep. 17, 2023 |
StockOption12Member | |
Options Issued | 2,396 |
Exercise price | $ / shares | $ 12.99 |
Issuance Date | Nov. 14, 2012 |
Expiration Date | Sep. 27, 2022 |
StockOption13Member | |
Options Issued | 17,320 |
Exercise price | $ / shares | $ 14.43 |
EQUITY (Details Narrative)
EQUITY (Details Narrative) - USD ($) | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2017 | |
Litigation reserve | |||
Common Stock, Shares Authorized | 150,000,000 | 150,000,000 | |
Common Stock, Shares, Issued | 11,084,545 | 10,681,710 | |
Common Stock, Shares, Outstanding | 11,084,545 | 10,681,710 | |
Common Stock, Par Value Per Share | $ .01 | $ .01 | |
Shares issued for services | 402,835 | ||
Fair value of shares issued for services | $ 128,000 | ||
Restricted shares issued | 450,000 | ||
Fair value of restricted shares issued | $ 105,000 | ||
Restricted shares, compensation expense | $ 8,000 | ||
Preferred Stock, Shares Authorized | 10,000,000 | 10,000,000 | |
Preferred Stock, Par Value Per Share | $ 0.01 | $ 0.01 | |
Number of options outstanding | 1,392,087 | 870,284 | |
Number of options granted | 705,000 | ||
Compensation expense, options | $ 85,000 | $ 33,000 | |
Intrinsic value, options, outstanding | 91,000 | ||
Future unamortized compensation expense, unvested options | $ 111,000 | ||
Warrants outstanding | 0 | 60,620 | |
Warrants expired during period | 60,620 |