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. OverviewFitLife Brands, Inc. (the "Company") is a national provider of innovative and proprietary nutritional supplements for health-conscious consumers marketed under the following brand names: (i) NDS Nutrition,PMD Sports , SirenLabs, CoreActive, Nutrology, and Metis Nutrition (together, "NDS Products"); and (ii) iSatori,BioGenetic Laboratories , and Energize (together, the "iSatori Products"). The Company distributes the NDS Products principally through franchisedGeneral Nutrition Centers, Inc. ("GNC") stores located both domestically and internationally and, with the launch of Metis Nutrition, through corporate GNC stores inthe United States . The iSatori Products are sold through more than 17,000 retail locations, which include specialty, mass, and online.FitLife Brands is headquartered inOmaha, 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 over-the-counter market. Recent Developments Filing of Form 15 OnJuly 18, 2022 , the Company filed a Form 15-12G (the "Form 15") with theSecurities and Exchange Commission (the "SEC") whereby, under Rule 12g-4(a)(1), the Company certified the deregistration of its Common Stock under Section 12(g) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and terminated its duty to file reports under Sections 13 and 15(d) of the Exchange Act. OnOctober 14, 2022 , the Company withdrew the Form 15 and has returned to current filer status.
Restatement of Financial Statements
OnAugust 24, 2022 , the Audit Committee of the Board of Directors (the "Audit Committee") of the Company was advised byWeaver and Tidwell, L.L.P. ("Weaver"), its registered independent public accounting firm as of the date, that the Company's previously issued financial statements included in its Annual Reports on Form 10-K for the years endedDecember 31, 2019 and 2020, and each of the interim financial statements for the quarterly periods in 2019, 2020 and 2021 included in its Quarterly Reports on Form 10-Q for the periods endingMarch 31, 2019 ,June 30, 2019 ,September 30, 2019 ,March 31, 2020 ,June 30, 2020 ,September 30, 2020 ,March 31, 2021 andJune 30, 2021 (collectively, the "Restated Periods") should be restated to correct historical errors related to the recognition of revenue, and should therefore no longer be relied upon (the "Restatement"). The Restatement followed the determination that the revenue associated for all customers with standard FOB destination terms, as reported in the Company's prior period consolidated financial statements, was incorrectly recognized at the time of shipment instead of when the performance obligation was satisfied upon delivery. In addition, the accounting treatment related to the recognition of corresponding accounts receivables, inventory and expensing of cost of goods sold was also restated. The Company's errors in the misapplication of revenue recognition resulted in certain errors recorded in various account balances in the Company's consolidated balance sheets, statements of operations, statements of stockholders' equity, statement of cash flows, and the related notes to the consolidated financial statements (collectively referred to as the consolidated financial statements) for the Restated Periods. The Company restated the financial statements for the Restated Periods in its comprehensive Annual Report on Form 10-K/A for the fiscal year endedDecember 31, 2020 (the "2020 Form 10K/A"), and a comprehensive Annual Report on Form 10-K for the fiscal year endedDecember 31, 2021 (the "2021 Form 10-K"), which reports were filed with theSEC onOctober 13, 2022 . Forward Stock Split The Board of Directors of the Company (the "Board") approved a forward stock split of the Company's authorized, issued and outstanding shares of Common Stock, at a ratio of 4-for-1 (the "Forward Split"). The Forward Split was effective as ofDecember 2, 2021 and began trading on such basis onDecember 8, 2021 . Prior to the Forward Split, the Company was authorized to issue 15.0 million shares of Common Stock. As a result of the Forward Split, the Company is now authorized to issue 60.0 million shares of Common Stock. The Forward Split did not have any effect on the stated par value of the Common Stock and did not affect the Company's authorized preferred stock. All references in this Quarterly Report to number of common shares, price per share and weighted average number of shares outstanding have been adjusted to reflect the Forward Split on a retroactive basis as of the earliest period presented, unless otherwise noted. -13-
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Table of Contents Share Repurchase Plan OnFebruary 1, 2021 , the Board approved an additional amendment to the previously authorized share repurchase program initially approved by the Board onAugust 16, 2019 , as amended onSeptember 23, 2019 andNovember 6, 2019 ("Share Repurchase Program"). Under the terms of the amendment, the Company is authorized to repurchase up to$5.0 million of the Company's Common Stock, warrants to purchase shares of the Company's Common Stock ("Warrants"), and other securities issued by the Company ("Securities") over the 24 months following the Board approval date ofFebruary 1, 2021 at a purchase price, in the case of Common Stock, equal to the fair market value of the Company's Common Stock on the date of purchase, and in the case ofWarrants and Securities , at a purchase price determined by management, with the exact date and amount of such purchases to be determined by management. During the nine months endedSeptember 30, 2022 , the Company did not repurchase any Securities under the Share Repurchase Program. Under the Share Repurchase Program, the Company may purchase$3,170,000 of Securities as ofSeptember 30, 2022 . COVID-19 Pandemic The COVID-19 pandemic has had an effect on the Company's employees, business and operations and those of its customers, vendors and business partners. In this respect, the temporary or permanent closure of some of our retail partners' store locations and the stay-at-home orders that occurred early in the pandemic negatively affected our results from operations, although much of the impact has been offset by an increase in revenue attributable to online sales, and increased sales during the more recent quarters. Our future financial position and operating results could be materially and adversely affected in the event that a resurgence of COVID-19 cases leads to new stay-at-home orders and/or further disruptions in both our supply chain and manufacturing lead-times, which could lower demand for the Company's products and/or prevent the Company from producing and delivering its products in a timely manner, although the extent of these effects cannot be determined at this time. The Company expects to continue to assess the evolving impact of the COVID-19 pandemic and intends to make adjustments to its business and operations accordingly. Inflation The Company has experienced inflationary pressure with regard to the procurement of many of its products. Thus far, the Company has been able to offset the impact of inflation through price increases to its customers. In the future, however, further inflationary pressure could adversely affect the Company's operating performance if market conditions no longer permit the Company to pass through price increases to its customers. Results of Operations Comparison of the three months endedSeptember 30, 2022 to the three months endedSeptember 30, 2021 Three months ended September September Change Change 30, 2022 30, 2021 ($) (%) (Unaudited) Revenue$ 8,314,000 $ 6,705,000 $ 1,609,000 24 % Cost of goods sold 5,070,000 3,760,000 1,310,000 35 % Gross profit 3,244,000 2,945,000 299,000 10 % Gross margin percentage 39.0 % 43.9 % Operating expenses: Selling, general and administrative 1,686,000 1,496,000 190,000 13 % Depreciation and amortization 17,000 18,000 (1,000 ) (6 )% Total operating expenses 1,703,000 1,514,000 189,000 12 % Income from operations 1,541,000 1,431,000 110,000 8 % Other income 43,000 7,000 36,000 NM % Provision for income tax (364,000 ) (313,000 ) (51,000 ) 16 % Net income$ 1,220,000 $ 1,125,000 $ 95,000 8 % Revenue. Revenue for the three months endedSeptember 30, 2022 increased 24% to$8,314,000 as compared to$6,705,000 for the three months endedSeptember 30, 2021 . Revenue for the three months endedSeptember 30, 2022 compared to the prior period reflects increased demand from both wholesale and online channels. Online revenue during the three months endedSeptember 30, 2022 and 2021 was approximately 26% and 25% of total revenue, respectively. Due to the ongoing shift to online purchasing by consumers, e-commerce sales have accounted for a growing percentage of our domestic revenue. Although no assurances can be given, management believes that online revenue will continue to increase in subsequent periods relative to prior comparable periods given management's focus on higher margin online sales. -14-
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Table of Contents Cost of Goods Sold. Cost of goods sold for the three months endedSeptember 30, 2022 increased to$5,070,000 as compared to$3,760,000 for the three months endedSeptember 30, 2021 . This 35% increase is principally attributable to higher revenue, partially offset by increased product procurement cost due to inflationary pressures. Gross Profit. Gross profit for the three months endedSeptember 30, 2022 was$3,244,000 compared to$2,945,000 for the three months endedSeptember 30, 2021 . The increase in gross profit is principally attributable to higher revenue. Gross margin as a percentage of sales for the three months endedSeptember 30, 2022 decreased to 39.0% from 43.9% for the comparable period last year. The decrease in gross margin is primarily attributable to higher product costs associated with disruptions in the supply chain. Product costs have largely stabilized in recent months and, for certain ingredients, have begun to decline. We expect that the recent margin pressure will be temporary as production costs decline and as higher-margin online sales become a larger percentage of the Company's total revenue. Selling, General and Administrative Expense. Selling, general and administrative expense for the three months endedSeptember 30, 2022 increased to$1,686,000 as compared to$1,496,000 for the three months endedSeptember 30, 2021 . The increase in selling, general and administrative expense was primarily due to$220,000 of non-recurring expenses relating to the Company's Restatement effort. Depreciation and Amortization Expense. Depreciation and amortization expense for the three months endedSeptember 30, 2022 decreased to$17,000 as compared to$18,000 for the three months endedSeptember 30, 2021 . Net Income. We generated net income of$1,220,000 for the three-month period endedSeptember 30, 2022 as compared to net income of$1,125,000 for the three months endedSeptember 30, 2021 . The increase in net income for the three-month period endedSeptember 30, 2022 compared to the same period in 2021 was primarily attributable to a combination of higher revenue, partially offset by increased general and administrative expense resulting from costs associated with the Company's Restatement. Comparison of the nine months endedSeptember 30, 2022 to the nine months endedSeptember 30, 2021 Nine months ended September 30, September 30, Change Change 2022 2021 ($) (%) (Unaudited) Revenue$ 23,433,000 $ 20,710,000 $ 2,723,000 13 % Cost of goods sold 13,587,000 11,289,000 2,298,000 20 % Gross profit 9,846,000 9,421,000 425,000 5 % Gross margin percentage 42.0 % 45.5 % Operating expenses: Selling, general and administrative 4,834,000 4,655,000 179,000 4 % Depreciation and amortization 49,000 41,000 8,000 20 % Total operating expenses 4,883,000 4,696,000 187,000 4 % Income from operations 4,963,000 4,725,000 238,000 5 % Other income 59,000 471,000 (412,000 ) NM % Provision for income tax (1,066,000 ) (1,034,000 ) (32,000 ) 3 % Net income$ 3,956,000 $ 4,162,000 $ (206,000 ) (5 )% Revenue. Revenue for the nine months endedSeptember 30, 2022 increased 13% to$23,433,000 as compared to$20,710,000 for the nine months endedSeptember 30, 2021 . Revenue for the nine months endedSeptember 30, 2022 compared to the prior period reflects increased sales through both our wholesale and online channels. Online revenue during the nine months endedSeptember 30, 2022 and 2021 was approximately 26% and 24% of total revenue, respectively. Although no assurances can be given, management believes that online revenue will continue to increase in subsequent periods relative to prior comparable periods given management's focus on higher margin online sales. Cost of Goods Sold. Cost of goods sold for the nine months endedSeptember 30, 2022 increased to$13,587,000 as compared to$11,289,000 for the nine months endedSeptember 30, 2021 . This 20% increase is principally attributable to higher revenue. Gross Profit. Gross profit for the nine months endedSeptember 30, 2022 was$9,846,000 compared to$9,421,000 for the nine months endedSeptember 30, 2021 . The increase in gross profit is principally attributable to higher revenue. Gross margin as a percentage of sales for the nine months endedSeptember 30, 2022 decreased to 42.0% from 45.5% for the comparable period last year. The decrease in gross margin is primarily attributable to higher product costs associated with disruptions in the supply chain. Product costs have largely stabilized in recent months and, for certain ingredients, have begun to decline. We expect that the recent margin pressure will be temporary as production costs decline and as higher-margin online sales become a larger percentage of the Company's total revenue. -15-
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Table of Contents Selling, General and Administrative Expense. Selling, general and administrative expense for the nine months endedSeptember 30, 2022 increased to$4,834,000 as compared to$4,655,000 for the nine months endedSeptember 30, 2021 . The increase in selling, general and administrative expense was primarily due to Restatement and Merger and Acquisition (M&A) related expenses. Depreciation and Amortization Expense. Depreciation and amortization expense for the nine months endedSeptember 30, 2022 increased to$49,000 as compared to$41,000 for the nine months endedSeptember 30, 2021 . The increase is primarily attributable to the amortization of intangibles acquired in the Nutrology acquisition. Net Income. We generated net income of$3,956,000 for the nine months endedSeptember 30, 2022 as compared to net income of$4,162,000 for the nine months endedSeptember 30, 2021 . The decrease in net income for the nine months endedSeptember 30, 2022 compared to the same period in 2021 was primarily attributable to increased general and administrative expense resulting from M&A activities and Restatement-related costs during the nine months endedSeptember 30, 2022 , as well as forgiveness of the PPP Loan (as defined in "Liquidity and Capital Resources" below), that occurred during the first nine months of 2021. Non-GAAP Measures The financial presentation below contains certain financial measures not in accordance with accounting principles generally accepted inthe United States ("GAAP"), defined by theSEC as "non-GAAP financial measures", including non-GAAP EBITDA and adjusted non-GAAP 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, non-GAAP EBITDA excludes interest, income taxes, and depreciation and amortization. Adjusted non-GAAP EBITDA excludes, in addition to interest, taxes, depreciation and amortization, stock-based compensation, M&A/integration expenses, Restatement-related costs and non-recurring gains or losses. 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 For the nine months ended September 30, September 30, 2022 2021 2022 2021 (Unaudited) (Unaudited) (Unaudited) (Unaudited) Net income$ 1,220,000 $ 1,125,000 $ 3,956,000 $ 4,162,000 Interest income, net (43,000 ) (7,000 ) (59,000 ) (18,000 ) Provision for income taxes 364,000 313,000 1,066,000 1,034,000 Depreciation and amortization 17,000 18,000 49,000 41,000 EBITDA 1,558,000 1,449,000 5,012,000 5,219,000 Non-cash and non-recurring adjustments Stock compensation expense 91,000 107,000 295,000 345,000 M&A/integration expenses 6,000 109,000 214,000 204,000 Restatement-related costs 220,000 - 275,000 - Non-recurring gains - - - (453,000 ) Adjusted EBITDA$ 1,875,000 $ 1,665,000 $ 5,796,000 $ 5,315,000 -16-
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Table of Contents
Liquidity and Capital Resources
At
of liquidity at
OnSeptember 24, 2019 , the Company entered into a Revolving Line of Credit Agreement (the "Line of Credit Agreement") withMutual of Omaha Bank (the "Lender"), subsequently acquired byCIT Bank N.A ., providing the Company with a$2.5 million revolving line of credit (the "Line of Credit"). The Line of Credit allows 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 is secured by all assets of the Company. Advances drawn under the Line of Credit bear interest at an annual rate of the one-month SOFR rate plus 2.75%, and each advance will be payable on the Maturity Date with the interest on outstanding advances payable monthly. The Company may, at its option, 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. No borrowings are outstanding as ofSeptember 30, 2022 . OnSeptember 20, 2022 , the Company and the Lender amended the Line of Credit Agreement to extend the Maturity Date toDecember 23, 2022 . All other terms of the Line of Credit Agreement remain unchanged. OnApril 27, 2020 , the Company received proceeds from a loan in the amount of$449,700 from its lender,CIT Bank, N.A . (the "PPP Lender"), pursuant to approval by theU.S. Small Business Administration (the "SBA") for the PPP Lender to fund the Company's request for a loan under the SBA's Paycheck Protection Program ("PPP Loan") created as part of the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") administered by the SBA (the "Loan Agreement"). In accordance with the requirements of the CARES Act, the Company used the proceeds from the PPP Loan primarily for payroll costs, covered rent payments, and covered utilities during the eight-week period commencing on the date of loan approval. The PPP Loan was scheduled to mature onApril 27, 2022 , had a 1.0% interest rate, and was subject to the terms and conditions applicable to all loans made pursuant to the Paycheck Protection Program as administered by the SBA under the CARES Act. The Company was informed by the PPP Lender and the SBA that the full balance of the PPP Loan, including accrued interest, was forgiven onJanuary 15, 2021 . The Company has historically financed its operations primarily through cash flow from operations and equity and debt financings. The Company has also provided for its cash needs by issuing Common Stock, options and warrants for certain operating costs, including consulting and professional fees. The Company currently anticipates that cash derived from operations and existing cash resources, along with available borrowings under the Line of Credit, will be sufficient to provide for the Company's liquidity for the next twelve months. The Company is dependent on cash flow from operations and amounts available under the Line of Credit to satisfy its working capital requirements. No assurances can be given that cash flow from operations and/or the Line of Credit will be sufficient to provide for the Company's liquidity for the next twelve months. Should the Company be unable to generate sufficient revenue in the future to achieve positive cash flow from operations, and/or should capital be unavailable under the terms of the Line of Credit, additional working capital will be required. Management currently has no intention to raise additional working capital through the sale of equity or debt securities and believes that the cash flow from operations and available borrowings under the Line of Credit will provide sufficient capital necessary to operate the business over the next twelve months. In the event the Company fails to achieve positive cash flow from operations, additional capital is unavailable under the terms of the Line of Credit, and management is otherwise unable to secure additional working capital through the issuance of equity or debt securities, the Company's business would be materially and adversely harmed. Cash Provided by Operations. Cash provided by operating activities for the nine months endedSeptember 30, 2022 was$5,003,000 , as compared to cash provided by operations of$3,200,000 for the nine months endedSeptember 30, 2021 . The increase in cash provided by operating activities is primarily attributable to the company's efforts in 2021 to increase inventory levels to ensure availability of products due to global supply chain constraints resulting from the COVID-19 pandemic.
Cash Used in Investing Activities. There was no cash used in investing
activities for the nine months ended
Nutrology.
Cash Provided by (Used in) Financing Activities. Cash provided by financing activities for the nine months endedSeptember 30, 2022 was$29,000 as compared to cash used in financing activities of$390,000 during the nine months endedSeptember 30, 2021 . -17-
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Table of Contents
Critical Accounting Policies and Estimates
Our discussion and analysis of financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these 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 consolidated financial statements. TheSEC 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 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, allowance for deferred tax assets and 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.Goodwill InJanuary 2017 , theFinancial Accounting Standards Board (the "FASB") issued Accounting Standards Update ("ASU") 2017-04, Intangibles -Goodwill and Other (Topic 350): Simplifying the Accounting for Goodwill Impairment ("ASU 2017-04"). ASU 2017-04 removes Step 2 of the goodwill impairment test, which required a hypothetical purchase price allocation. A goodwill impairment will now be the amount by which a reporting unit's carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. ASU 2017-04 also eliminated the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test. The Company adopted ASU 2017-04 onJanuary 1, 2020 and applied the requirements prospectively. While we have concluded that a triggering event did not occur during the three months endedSeptember 30, 2022 , a worsening of the severity of the COVID-19 pandemic could result in future goodwill impairment charges. We will continue to monitor the effects of the COVID-19 pandemic's impact on our business, and review for impairment indicators as necessary in the upcoming months. Revenue Recognition
The Company’s revenue is comprised of sales of nutritional supplements to
consumers, primarily through GNC stores.
The Company accounts for revenues in accordance with FASB Accounting Standards
Codification ("ASC") Topic 606, Revenue from Contracts with Customers ("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, which is also when control is transferred. Revenue is measured as
the amount of consideration we expect to receive in exchange for transferring
the products to a customer.
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Table of Contents 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. Control of products we sell transfers to customers upon shipment or delivery from our facilities 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, the Company allows for returns within 30 days of purchase. 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 theU.S. Food and Drug Administration . 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 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.
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.
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