Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

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, each acquired as a result of the acquisition of Mimi's Rock Corp. ("MRC") on February 28, 2023 (together, the "MRC Products"); (iv) MusclePharm, which was acquired on October 10, 2023 as a result of the acquisition of substantially all of the assets of MusclePharm Corporation ("MusclePharm"); and (v) Irwin Naturals, Applied Nutrition, and Nature's Secret (together, the "Irwin Products"), each of which was acquired in August 2025.

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, 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.

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 Closing Date"), 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 US Bankruptcy Code. Total consideration for the acquisition before any post-closing adjustments was approximately $42,500. Of this amount, $29,750 was funded using proceeds from a new term loan provided by First-Citizens Bank & Trust Company (the "Bank") and $6,000 was funded from a new $10,000 revolving line of credit from the Bank, with the remainder funded from the Company's available cash balances. The Company is in the process of determining the fair value of the tangible and intangible assets of Irwin and the appropriate accounting for this acquisition.

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. All share and per share information throughout this Quarterly Report on Form 10-Q have been retroactively adjusted to reflect the stock split. 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.

Results of Operations

Comparison of the three months ended September 30, 2025 to the three months ended September 30, 2024

		Three months ended
		September 30, 2025				September 30, 2024				Change ($)				Change (%)
		(Unaudited)
Revenue		$	23,485			$	15,977			$	7,508				47	%
Cost of goods sold			14,749				8,976				5,773				64	%
Gross profit			8,736				7,001				1,735				25	%
Gross margin			37.2	%			43.8	%							(6.6	)%
Advertising and marketing			1,357				1,093				264				24	%
Selling. general and administrative ("SG&A")			4,105				2,645				1,460				55	%
Merger and acquisition related			820				59				761			n/m
Depreciation and amortization			136				22				114			n/m
Total operating expense			6,418				3,819				2,599				68	%
Operating income			2,318				3,182				(864	)			(27	)%
Other expense (income), net			568				286				282				99	%
Provision for income tax			829				770				59				8	%
Net income		$	921			$	2,126			$	(1,205	)			(57	)%

Revenue. Revenue for the three months ended September 30, 2025 increased 47% to $23,485 compared to $15,977 for the three months ended September 30, 2024. The increase in revenue for the three months ended September 30, 2025 compared to the prior period is primarily due to the acquisition of Irwin, as well as an increase in MusclePharm revenue, partially offset by declining revenue from Legacy FitLIfe (which now includes MRC).

Legacy FitLife revenue for the three months ended September 30, 2025 was $12,855, a 5% decrease compared to the previous year, primarily driven by an 8% decrease in online revenue due to a drop in traffic to MRC product listing pages on Amazon, partially offset by a 4% increase in wholesale revenue.

During the three months ended September 30, 2025, MusclePharm generated revenue of $3,809, a 55% increase compared to the same quarter last year, with wholesale revenue more than doubling from the same quarter of the prior year, partially offset by a 3% decrease in online revenue.

Online revenue during the quarter ended September 30, 2025 was approximately 44% of net revenue, compared to 56% for wholesale channels for the same period. Online revenue during the quarter ended September 30, 2024 was 68% of net revenue compared to 32% for wholesale channels during the same period. The change in online and wholesale revenue as a percentage of total revenue during the quarter ended September 30, 2025 compared to the same period of last year is primarily due to the acquisition of Irwin, which generated approximately only 5% of its total revenue from online sales.

Sales to customers in the U.S. were approximately 95% and 96% during the quarters ended September 30, 2025 and 2024, respectively, with the balance of sales to customers primarily in Canada.

Cost of Goods Sold. Cost of goods sold for the three months ended September 30, 2025 increased to $14,749 as compared to $8,976 for the three months ended September 30, 2024. This 64% increase is primarily due to the acquisition of Irwin and includes $392 related to the amortization of the inventory step-up, as well as higher sales from MusclePharm.

Gross Profit. Gross profit for the three months ended September 30, 2025 increased to $8,736 as compared to $7,001 for the three months ended September 30, 2024. The increase in gross profit is principally attributable to the acquisition of Irwin, partially offset by lower gross profit from Legacy FitLife Brands.

Gross Margin. Gross margin for the three months ended September 30, 2025 decreased to 37.2% from 43.8% for the comparable prior period. The decrease in gross margin is primarily attributable to the acquisition of Irwin, which historically generated lower gross margin than FitLife. Gross margin was also adversely affected by $392 of amortization of inventory step-up during the three months ended September 30, 2025, as well as continued promotional investment in MusclePharm. Excluding the amortization of the inventory step-up, gross margin for the three months ended September 30, 2025 would have been 38.9%.

Advertising and Marketing. Advertising and marketing expense for the three months ended September 30, 2025 increased to $1,357 as compared to $1,093 for the same period of the prior year. The 24% increase is due to additional advertising for certain Legacy FitLife brands, as well as incremental spend attributable to Irwin.

SG&A. SG&A expense for the three months ended September 30, 2025 increased 55% to $4,105 as compared to $2,645 for the three months ended September 30, 2024. The increase in SG&A is primarily due to the acquisition of Irwin.

Merger and Acquisition Related. Merger and acquisition related expense increased to $820 during the quarter ended September 30, 2025 compared to $59 for the same period in 2024, driven by transaction costs related to the Irwin acquisition.

Net Income. We generated net income of $921 for the three months ended September 30, 2025 as compared to net income of $2,126 for the three months ended September 30, 2024. The decrease in net income for the nine months ended September 30, 2025 compared to the same period in 2024 was primarily attributable to an increase in acquisition-related expense due to the Irwin acquisition as well as higher income tax expense.

Comparison of the nine months ended September 30, 2025 to the nine months ended September 30, 2024

		Nine months ended
		September 30, 2025				September 30, 2024				Change ($)				Change (%)
		(Unaudited)
Revenue		$	55,548			$	49,456			$	6,092				12	%
Cost of goods sold			33,034				27,588				5,446				20	%
Gross profit			22,514				21,868				646				3	%
Gross margin			40.5	%			44.2	%							(3.7	)%
Advertising and marketing			3,601				3,647				(46	)			(1	)%
Selling, general and administrative ("SG&A")			9,102				7,681				1,421				19	%
Merger and acquisition related			1,848				217				1,631				n/m	%
Depreciation and amortization			169				85				84				99	%
Total operating expense			14,720				11,630				3,090				27	%
Operating income			7,794				10,238				(2,444	)			(24	)%
Other expense, net			947				1,018				(71	)			(7	)%
Provision for income tax			2,161				2,306				(145	)			(6	)%
Net income		$	4,686			$	6,914			$	(2,228	)			(32	)%

Revenue. Revenue for the nine months ended September 30, 2025 increased 12% to $55,548 as compared to $49,456 for the nine months ended September 30, 2024. The increase in revenue for the nine months ended September 30, 2025 compared to the prior period is primarily due to the acquisition of Irwin as well as an increase in MusclePharm sales, partially offset by a decrease in Legacy FitLife revenue (which now includes MRC).

Legacy FitLife revenue for the nine months ended September 30, 2025 was $40,400, a 4% decrease compared to the previous year, driven by a 7% decrease in online revenue partially offset by a 2% increase in wholesale revenue. The decrease in online revenue is primarily due to lower traffic to the MRC product listings on Amazon, partially offset by an increase in online sales for other Legacy FitLife brands.

MusclePharm revenue for the nine months ended September 30, 2025 was $8,327, a 15% increase compared to the same period of last year, driven by a 23% increase in wholesale revenue and a 7% increase in online revenue.

Online revenue and wholesale revenue for the nine months ended September 30, 2025 and 2024, was approximately 56% and 44% of total net revenue, as compared to the previous year of approximately 66% and 34% of total net revenue.

Sales to customers in the U.S. were approximately 95% and 96% during the nine months ended September 30, 2025 and 2024, with the balance of sales to customers primarily in Canada.

Cost of Goods Sold. Cost of goods sold for the nine months ended September 30, 2025 increased to $33,034 as compared to $27,588 for the nine months ended September 30, 2024. This 20% increase is primarily due to the increase in revenue from the acquisition of Irwin, which includes $392 from the amortization of the inventory step-up.

Gross Profit. Gross profit for the nine months ended September 30, 2025 increased to $22,514 as compared to $21,868 for the nine months ended September 30, 2024. The increase in gross profit is principally attributable to the acquisition of Irwin, partially offset by lower gross profit from Legacy FitLife and MusclePharm.

Gross Margin. Gross margin for the nine months ended September 30, 2025 decreased to 40.5% from 44.2% for the comparable prior period. The decrease in gross margin is primarily attributable to the acquisition of Irwin, which historically generated lower gross margin than FitLife. Gross margin was also adversely affected by $392 of amortization of the inventory step-up, as well as continued MusclePharm promotional investment. Excluding the amortization of the inventory step-up, gross margin for the nine months ended September 30, 2025 would have been 41.2%.

Advertising and Marketing. Advertising and marketing expense for the nine months ended September 30, 2025 decreased to $3,601 as compared to $3,647 for the same period of the prior year. The 1% decrease is primarily the result of ongoing efforts to rationalize the Company's advertising spend on less effective advertising campaigns while increasing spend on more effective campaigns.

SG&A. SG&A expense for the nine months ended September 30, 2025 increased to $9,102 as compared to $7,681 for the nine months ended September 30, 2024. The increase in SG&A is primarily due to the acquisition of Irwin.

Merger and Acquisition Related. Merger and acquisition related expense increased to $1,848 during the nine months ended September 30, 2025 compared to $217 for the same period of 2024, driven primarily by transaction costs related to the Irwin acquisition during the first nine months of 2025.

Net Income. We generated net income of $4,686 for the nine months ended September 30, 2025 as compared to net income of $6,914 for the nine months ended September 30, 2024. The decrease in net income for the nine months ended September 30, 2025 compared to the same period in 2024 was primarily attributable to an increase in acquisition-related expense due to the Irwin acquisition.

Supplemental Discussion of Performance of Acquired Brands

One of the primary metrics used by management to evaluate the performance of the Company's brands is contribution, a non-GAAP financial measure which management defines as gross profit less advertising and marketing expenditures. Other companies may also report contribution as a performance metric, but their definition or calculation of contribution may differ from the Company's. Management believes that contribution, as defined by the Company, is a particularly relevant performance metric since it incorporates the gross profit associated with a specific brand or collection of brands as well as the advertising and marketing expense associated with the same brand or brands. With limited exceptions, other operating expense incurred by the Company is generally not allocable to a specific brand or collection of brands. Management intends to provide this level of disclosure for approximately two years following a transaction, after which the performance of acquired brands will be reported as part of Legacy FitLife results.

Other than for MusclePharm, the numbers in the contribution tables presented below represent the performance of a collection of brands. Beginning this quarter, MRC is reported as part of Legacy FitLife results. Legacy FitLife consists of twelve brands. These collections of brands do not meet the definition of operating segments and are not managed as such.

Legacy FitLife
(Unaudited)		2024								2025
		Q3				Q4				Q1				Q2				Q3
Wholesale revenue			3,930				3,250				4,648				4,385				4,076
Online revenue			9,582				8,944				9,325				9,187				8,779
Total revenue			13,512				12,194				13,973				13,572				12,855
Gross profit			6,125				5,465				6,284				6,116				5,788
Gross margin			45.3	%			44.8	%			45.0	%			45.1	%			45.0	%
Advertising and marketing			999				862				879				953				1,135
Contribution			5,126				4,603				5,405				5,163				4,653
Contribution as a % of revenue			37.9	%%			37.7	%			38.7	%			38.0	%			36.2	%

For the third quarter of 2025, Legacy FitLife revenue decreased 5% compared to the same period last year, driven by an 8% decrease in online revenue, partially offset by a 4% increase in wholesale revenue. As previously disclosed, during the fourth quarter of 2024, a commercial dispute with GNC, the Company's largest customer, resulted in the Company rejecting all purchase orders from GNC beginning on December 1, 2024. However, any product that was ordered by GNC prior to December 1, 2024 continued to be shipped and was all received by GNC prior to the end of December 2024.

In early January 2025, the Company began selling and shipping product directly to its GNC franchisee customers. On January 23, 2025, the Company and GNC settled their commercial dispute and the Company immediately began accepting purchase orders from GNC, with shipments to the GNC distribution centers beginning approximately two weeks later. The Company continued shipping directly to GNC franchisees until the GNC distribution centers were restocked. Subsequent to the distribution centers being restocked during February 2025, in the event GNC distribution centers do not have adequate inventory to fulfill franchisee orders of the Company's products, the Company may make shipments directly to GNC franchisees in order to ensure continued availability of the Company's products on store shelves.

For the third quarter of 2025, gross margin decreased to 45.0% from 45.3% during the same period last year. The decrease in gross profit is primarily due to lower revenue from the MRC brands. Contribution as a percentage of revenue decreased to 36.2% from 37.9% over the same time period. The year-over-year decrease in contribution as a percentage of revenue is primarily due to strategically increased advertising spend for certain Legacy FitLife brands.

Revenue for the largest MRC brand, Dr. Tobias, decreased 15% in the third quarter of 2025. Excluding MRC, Legacy FitLife wholesale revenue increased 3% and online revenue increased 14% during the third quarter of 2025 as compared to the same quarter in 2024.

MusclePharm
(Unaudited)		2024								2025
		Q3				Q4				Q1				Q2				Q3
Wholesale revenue			1,231				1,689				658				1,311				2,610
Online revenue			1,234				1,130				1,305				1,244				1,199
Total revenue			2,465				2,819				1,963				2,555				3,809
Gross profit			876				747				590				788				754
Gross margin			35.5	%			26.5	%			30.1	%			30.8	%			19.8	%
Advertising and marketing			94				117				174				238				150
Contribution			782				630				416				550				604
Contribution as a % of revenue			31.7	%			22.3	%			21.2	%			21.5	%			15.9	%

For the third quarter of 2025, MusclePharm revenue increased 55% compared to the same period in 2024, with wholesale revenue increasing 112% and online revenue decreasing 3%. As previously disclosed, in an effort to drive revenue growth, the Company is making targeted investments in advertising and promotion, primarily in the wholesale channel. Beginning in the fourth quarter of 2024, the Company offered additional promotional incentives to certain wholesale partners in an effort to drive incremental growth for the MusclePharm brand. The decrease in wholesale revenue that occurred during the first quarter was primarily due to one of our wholesale customers that took advantage of the Company's promotional investment during the fourth quarter of 2024 without increasing their sell-through of the product, which affected their reorder volumes during the first quarter of 2025.

The Company anticipates that the increased promotional efforts will continue for the foreseeable future. As a result of these investments, gross margin and contribution margin as a percent of revenue may fluctuate materially from quarter to quarter.

Irwin Naturals
(Unaudited)		2025
		Q3
Wholesale revenue			6,510
Online revenue			311
Total revenue			6,821
Gross profit			2,194
Gross margin			32.2	%
Advertising and marketing			72
Contribution			2,122
Contribution as a % of revenue			31.1	%

Irwin's performance for the third quarter of 2025 includes the results of operations for the period from August 9 through September 30. During the quarter, Irwin generated 95% of its revenue from the wholesale channel and 5% from online sales. Excluding the inventory step-up, Irwin's gross margin and contribution as a percentage of revenue would have been 37.9% and 36.9%, respectively.

FitLife Consolidated
(Unaudited)		2024								2025
		Q3				Q4				Q1				Q2				Q3
Wholesale revenue			5,161				4,939				5,306				5,696				13,196
Online revenue			10,816				10,074				10,630				10.431				10,289
Total revenue			15,977				15,013				15,936				16,127				23,485
Gross profit			7,001				6,212				6,874				6,904				8,736
Gross margin			43.8	%			41.4	%			43.1	%			42.8	%			37.2	%
Advertising and marketing			1,093				979				1,053				1,191				1,357
Contribution			5,908				5,233				5,821				5,713				7,379
Contribution as a % of revenue			37.0	%			34.9	%			36.5	%			35.4	%			31.4	%

For the third quarter of 2025 for the Company overall, revenue increased 47%, gross profit increased 25%, and contribution increased 25% compared to the third quarter of 2024.

Gross margin decreased to 37.2% during the third quarter of 2025 compared to 43.8% during the third quarter of last year. Contribution as a percentage of revenue decreased to 31.4% compared to 37.0% during the first quarter of last year. Excluding the inventory step-up of $392, gross margin and contribution as a percentage of revenue would have been 38.9% and 33.1%, respectively.

Non-GAAP Measures

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

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

		For the three months ended September 30,								For the nine months ended September 30,
		2025				2024				2025				2024
		(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)
Net income		$	921			$	2,126			$	4,686			$	6,914
Interest expense			580				326				1,049				1,085
Interest income			(18	)			(19	)			(94	)			(41	)
Foreign exchange gain			(43	)			(21	)			(57	)			(26	)
Provision for income taxes			829				770				2,161				2,306
Depreciation and amortization			136				22				169				85
EBITDA			2,405				3,204				7,914				10,323
Non-cash and non-recurring adjustments
Stock-based compensation			126				141				332				344
Merger and acquisition related			820				59				1,848				217
Amortization of inventory step-up			392				-				392				-
Writeoff of deferred financing costs			49				-				49				-
Restructuring costs			-				184				-				184
Adjusted EBITDA		$	3,792			$	3,588			$	10,535			$	11,068

Liquidity and Capital Resources

As of September 30, 2025, the Company had positive working capital of $4,375, compared to $6,832 at December 31, 2024. Our principal sources of liquidity at September 30, 2025 consisted of $3,512 of cash and $9,640 of accounts receivable. The decrease in working capital is principally attributable to higher current debt balances subsequent to the acquisition of Irwin, which occurred on August 8, 2025.

On September 24, 2019, the Company entered into a line of credit agreement with Mutual of Omaha Bank (the "Lender"), subsequently acquired by CIT Bank N.A., then acquired by First Citizens Bank & Trust Company, providing the Company with a $2.5 million revolving line of credit (the "Line of Credit"). The Line of Credit allowed the Company to request advances thereunder and to use the proceeds of such advances for working capital purposes until the maturity date, or unless renewed at maturity upon approval by the Company's Board and the Lender. The Line of Credit was secured by all assets of the Company.

On September 20, 2022, the Company and the Lender amended the Line of Credit Agreement to extend the maturity date to December 23, 2022. On December 19, 2022, the Company and the Lender amended the Line of Credit agreement to increase the Line of Credit to $3.5 million and extend the maturity date to December 23, 2023.

On February 23, 2023, the Company and the Lender amended the Line of Credit Agreement (the "2023 Credit Agreement") providing the Company with a term loan for the principal amount of $12.5 million ("Term Loan A"). All other terms of the Credit Agreement remain unchanged. All of the proceeds from Term Loan A were used for the acquisition of MRC.

On October 10, 2023, the Company entered into a Second Amended and Restated Credit Agreement (the "Prior Credit Agreement") with the Lender, amending and restating the 2023 Credit Agreement between the Company and the Lender. Pursuant to the Prior Credit Agreement, the Lender provided the Company with an additional term loan ("Term Loan B", and together with Term Loan A, the "Term Loans") for the principal amount of $10,000 and extended the maturity date of the Line of Credit of $3.5 million to December 23, 2024. The Company used the proceeds from Term Loan B to fund the acquisition of the MusclePharm assets.

On December 19, 2024, the Company entered into the First Amendment to the Prior Credit Agreement (the "Amended Prior Credit Agreement") to extend the maturity date of the $3.5 million Line of Credit to April 30, 2026. Pursuant to the Amended Prior Credit Agreement, the Line of Credit accrued interest at an annual rate equal to the greater of 3.50% or the one-month secured overnight financing rate ("SOFR") rate plus 2.75%, and each advance was payable on the maturity date with the interest on outstanding advances payable monthly. The Company was permitted, at its option, to prepay any borrowings under the Line of Credit, in whole or in part at any time prior to the maturity date, without premium or penalty.

On August 8, 2025 (the "Closing Date"), the Company entered into a new credit agreement (the "Credit Agreement") with First-Citizens Bank & Trust Company (the "Bank"). Pursuant to the Credit Agreement, the Bank provided the Company with a five-year term loan in the amount of $40,625 (the "Irwin Term Loan") and a three-year revolving line of credit of up to $10,000 (the "Credit Line", and collectively with the Irwin Term Loan, the "Loan"). The Company used $29,750 from the Irwin Term Loan to complete the purchase of substantially all of the assets of Irwin, and its related affiliates, pursuant to an Asset Purchase and Sale Agreement, and $10,875 to pay off, retire and replace all existing debt of the Company as of the Closing Date.

Pursuant to the Credit Agreement, the Irwin Term Loan accrues interest at a per annum rate equal to 2.50% to 3.00%, based on leverage, above the secured overnight financing rate published by the Federal Reserve Bank of New York for the applicable selected interest period of one, three or six months ("Term SOFR Rate", the Term SOFR Rate together with the aforementioned margin, the "Applicable Rate"). The Company shall make payments of accrued interest on the Irwin Term Loan at the end of each interest period and shall make payments on March 31, June 30, September 30 and December 31, of each calendar year, commencing on December 31, 2025, of principal on the Irwin Term Loan in amounts equal to 3.75% of the then-outstanding principal balance of the Irwin Term Loan for the first eight such payment dates and 5.00% thereafter, in each case plus accrued interest, with all remaining principal and accrued interest on the Irwin Term Loan being due and payable in full on August 8, 2030. Outstanding advances under the Credit Line ("Advances") will accrue interest at the Applicable Rate, and the Company shall make payments of accrued interest on such Advances at the end of each interest period and on the repayment of any Advance with all remaining principal and accrued interest on the Advances being due and payable in full on August 8, 2028.

The Credit Agreement contains customary covenants to maintain a Senior Funded Debt to EBITDA Ratio (as defined in the Credit Agreement) of not more than 2.75 to 1.00 as tested quarterly on a trailing twelve-month basis, starting with the fiscal quarter ending December 31, 2025 and ending with the fiscal quarter ended June 30, 2026, and a Senior Funded Debt to EBITDA Ratio (as defined in the Credit Agreement) of not more than 2.50 to 1.00 as tested quarterly on a trailing twelve-month basis, starting with the fiscal quarter ending September 30, 2026, and to maintain a Fixed Charge Coverage Ratio (as defined in the Credit Agreement) of at least 1.25 to 1.00 as tested on the last day of each fiscal quarter, commencing with the quarter ending December 31, 2025.

As of September 30, 2025, the borrowings outstanding on the Irwin Term Loan and the Line of Credit were $40,625 and $6,000, respectively.

The Company has historically financed its operations primarily through cash flow from operations and equity and debt financings. The Company currently anticipates that cash derived from operations and existing cash reserves, along with available borrowings under the Line of Credit, will be sufficient to provide for the Company's liquidity for the next twelve months.

Cash Provided by Operating Activities. Cash provided by operating activities for the nine months ended September 30, 2025 was $7,195 compared to cash provided by operating activities of $8,653 for the nine months ended September 30, 2024. The decrease in cash provided by operating activities was primarily due to lower net income compared to the same period of 2024.

Cash Used in Investing Activities. Cash used in investing activities for the nine months ended September 30, 2025 and 2024 was $42,537 and $10, respectively. The increase in cash used in investing activities was primarily due to the acquisition of Irwin for $42,500.

Cash Provided by (Used in) Financing Activities. Cash provided by financing activities for the nine months ended September 30, 2025 was $34,009 compared to cash used in financing activities of $5,875 during the nine months ended September 30, 2024. The cash provided was primarily due to the borrowings under the Credit Agreement for the acquisition of Irwin on August 8, 2025.

Critical Accounting Policies and Estimates

Our discussion and analysis of financial condition and results of operations is based upon our condensed consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these condensed consolidated financial statements and related disclosures requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, expense, and related disclosure of contingent assets and liabilities. We evaluate, on an on-going basis, our estimates and judgments, including those related to the useful life of the assets. We base our estimates on historical experience and assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

The methods, estimates and judgments we use in applying our most critical accounting policies have a significant impact on the results that we report in our condensed consolidated financial statements. The SEC considers an entity's most critical accounting policies to be those policies that are both most important to the portrayal of a company's financial condition and results of operations and those that require management's most difficult, subjective or complex judgments, often as a result of the need to make estimates about matters that are inherently uncertain at the time of estimation. For a more detailed discussion of the accounting policies of the Company, see Note 3 of the Notes to the Condensed Consolidated Financial Statements included in this Quarterly Report, "Summary of Significant Accounting Policies".

We believe the following critical accounting policies, among others, require significant judgments and estimates used in the preparation of our consolidated financial statements.

Use of Estimates and Assumptions

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.

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.

Goodwill

In accordance with FASB ASC 350, Intangibles-Goodwill and Other, we review goodwill and indefinite lived intangible assets for impairment at least annually or whenever events or circumstances indicate a potential impairment. Our impairment testing is performed annually at December 31 (our fiscal year end). Impairment of goodwill and indefinite lived intangible assets is determined by comparing the fair value of our reporting units to the carrying value of the underlying net assets in the reporting units. If the fair value of a reporting unit is determined to be less than the carrying value of its net assets, goodwill is deemed impaired and an impairment loss is recognized to the extent that the carrying value of goodwill exceeds the difference between the fair value of the reporting unit and the fair value of its other assets and liabilities.

Management concluded that a triggering event did not occur during the nine months ended September 30, 2025. We will continue to review for impairment indicators as necessary in future periods.

Revenue Recognition

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

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 entities to exercise judgment when considering the terms of contract(s), which includes (1) identifying the contract(s) or agreement(s) with a customer, (2) identifying our performance obligations in the contract or agreement, (3) determining the transaction price, (4) allocating the transaction price to the separate performance obligations, and (5) recognizing revenue as each performance obligation is satisfied. Under ASC 606, revenue is recognized when performance obligations under the terms of a contract are satisfied, which occurs for the Company upon shipment or delivery of products to our customers based on written sales terms. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring the products to a customer.

All products sold by the Company are distinct individual products and consist of nutritional supplements and wellness products. 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.

The Company's products are also sold on e-commerce platforms including Amazon. For these transactions, the Company evaluated principal versus agent considerations to determine appropriateness of recording platform fees paid to Amazon as an expense or as a reduction of revenue. The Company records platform fees paid to Amazon for distribution of Company products to cost of goods sold in the condensed consolidated statements of income and comprehensive income. Distribution and platform fees are not recorded as a reduction of revenue because the Company (1) owns the goods before they are transferred to the customer, (2) can direct Amazon, similar to other third-party logistics providers ("Logistic Providers"), to return the Company's inventory to any location specified by the Company, (3) has the responsibility to make customers whole following any returns made by customers directly to Logistic Providers and the Company retains the back-end inventory risk, (4) is subject to credit risk (i.e., credit card chargebacks), (5) establishes prices of its products, (6) can determine who fulfills the goods to the customer (Amazon or the Company) and (7) can limit quantities or stop selling the goods at any time. Based on these considerations, the Company is the principal in this arrangement.

The Company disaggregates revenue into geographical regions and distribution channels. The Company determines that disaggregating revenue into these categories achieves the disclosure objective to depict how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors.

Online revenue during the quarter ended September 30, 2025 was approximately 44% of net revenue, compared to 56% for wholesale channels for the same period. Online revenue during the quarter ended September 30, 2024 was 68% of net revenue compared to 32% for wholesale channels during the same period in 2024.

Online revenue during the nine months ended September 30, 2025 was approximately 56% of net revenue, compared to 44% for wholesale channels for the same period. Online revenue during the nine months ended September 30, 2024 was approximately 66% of net revenue, compared to 34% for wholesale channels for the same periods.

Sales to customers in the U.S. were approximately 95% during the three months ended September 30, 2025 and 2024, respectively, with the balance of sales for the same respective periods being to customers primarily in Canada.

Sales to customers in the U.S. were approximately 96% during the nine months ended September 30, 2025 and 2024, respectively, with the balance of sales for the same respective periods being to customers primarily in Canada.

Control of products we sell transfers to customers upon shipment from our facilities or delivery to our customers, and the Company's performance obligations are satisfied at that time. Shipping and handling activities are performed before the customer obtains control of the goods and therefore represent a fulfillment activity rather than promised goods to the customer. Payments for sales are generally made by check, credit card, or wire transfer. Historically the Company has not experienced any significant payment delays from customers.

For direct-to-consumer sales, with the exception of Irwin Products, the Company allows for returns within 30 days of purchase. Irwin allows for returns within 60 days of purchase for direct-to-consumer sales. Our wholesale customers, such as GNC, may return purchased products to the Company under certain circumstances, which include expired or soon-to-be-expired products located in GNC corporate stores or at any of its distribution centers, and products that are subject to a recall or that contain an ingredient or ingredients that are subject to a recall by the FDA.

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 product returns are immaterial, 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.

Recent Accounting Pronouncements

See Note 3 of the Condensed Consolidated Financial Statements included in this Quarterly Report for a description of recent accounting pronouncements believed by management to have a material impact on our present or future financial statements.