10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

____________

FORM 10-Q

☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2018

OR

☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from             to

Commission File Number 001-31668

INTEGRATED BIOPHARMA, INC.

(Exact name of registrant, as specified in its charter)

Delaware 22-2407475

(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

225 Long Ave., Hillside, New Jersey	07205
(Address of principal executive offices)	(Zip Code)

(888) 319-6962

(Registrant’s telephone number, including Area Code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes X    No ____

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes X    No ____

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer  ☐   Emerging growth company ☐   Smaller reporting company ☑

If an emerging growth company, indicate by check mark is the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes       No __X__

As of November 9, 2018, there were 29,365,943 shares of common stock, $0.002 par value per share (“Common Stock”), of the registrant outstanding.

INTEGRATED BIOPHARMA, INC. AND SUBSIDIARIES

FORM 10-Q QUARTERLY REPORT

For the Three Months Ended September 30, 2018

INDEX

		Page
	Part I. Financial Information
Item 1.	Condensed Consolidated Statements of Operations for the Three Months Ended September 30, 2018 and 2017 (unaudited)	2
	Condensed Consolidated Balance Sheets as of September 30, 2018 and June 30, 2018 (unaudited)	3
	Condensed Consolidated Statement of Stockholders’ (Deficiency) Equity for the three months ended September 30, 2018 (unaudited)	4
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended September 30, 2018 and 2017 (unaudited)	5
	Notes to the Condensed Consolidated Financial Statements (unaudited)	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	24
Item 4.	Controls and Procedures	24
	Part II. Other Information
Item 1.	Legal Proceedings	25
Item 1A.	Risk Factors	25
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	25
Item 3.	Defaults Upon Senior Securities	25
Item 4.	Mine Safety Disclosure	25
Item 5.	Other Information	25
Item 6.	Exhibits	26
	Other
Signatures		27

Cautionary Statement Regarding Forward-Looking Statements

Certain statements in this Quarterly Report on Form 10-Q may constitute “forward-looking” statements as defined in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), Section 21E of the Securities Act of 1934, as amended (the “Exchange Act”), the Private Securities Litigation Reform Act of 1995 (the “PSLRA”) or in releases made by the Securities and Exchange Commission (“SEC”), all as may be amended from time to time. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause the actual results, performance or achievements of Integrated BioPharma, Inc. and its subsidiaries (collectively, the “Company”) or industry results, to differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, changes in general economic and business conditions; loss of market share through competition; introduction of competing products by other companies; the timing of regulatory approval and the introduction of new products by the Company; changes in industry capacity; pressure on prices from competition or from purchasers of the Company's products; regulatory changes in the pharmaceutical manufacturing industry and nutraceutical industry; regulatory obstacles to the introduction of new technologies or products that are important to the Company; availability of qualified personnel; the loss of any significant customers or suppliers; and other factors both referenced and not referenced in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2018 (“Form 10-K”), as filed with the SEC. Statements that are not historical fact are forward-looking statements. Forward-looking statements can be identified by, among other things, the use of forward-looking language, such as the words, “plan”, “believe”, “expect”, “anticipate”, “intend”, “estimate”, “project”, “may”, “will”, “would”, “could”, “should”, “seeks”, or “scheduled to”, or other similar words, or the negative of these terms or other variations of these terms or comparable language, or by discussion of strategy or intentions. These cautionary statements are being made pursuant to the Securities Act, the Exchange Act and the PSLRA with the intention of obtaining the benefits of the “safe harbor” provisions of such laws. The Company cautions investors that any forward-looking statements made by the Company are not guarantees or indicative of future performance. Important assumptions and other important factors that could cause actual results to differ materially from those forward-looking statements with respect to the Company, include, but are not limited to, the risks and uncertainties affecting its businesses described in Item 1 of the Company’s Form 10-K and in other securities filings by the Company.  Although the Company believes that its plans, intentions and expectations reflected in or suggested by such forward-looking statements are reasonable, actual results could differ materially from a projection or assumption in any of the forward-looking statements.  The Company’s future financial condition and results of operations, as well as any forward-looking statements, are subject to change and inherent risks and uncertainties. The forward-looking statements contained in this Quarterly Report on Form 10-Q are made only as of the date hereof and the Company does not have or undertake any obligation to update or revise any forward-looking statements whether as a result of new information, subsequent events or otherwise, unless otherwise required by law.

-1-

ITEM 1. FINANCIAL STATEMENTS

INTEGRATED BIOPHARMA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except for share and per share amounts)
(Unaudited)
	Three months ended
	September 30,
	2018			2017
Sales, net	$	10,304		$	9,770
Cost of sales		9,085			8,765
Gross profit		1,219			1,005
Selling and administrative expenses		814			794
Operating income		405			211
Other income (expense), net:
Interest expense		(200	)		(233	)
Change in fair value of derivative liabilities		9			(118	)
Impairment on investment in iBio, Inc.		-			(83	)
Total other expense, net		(191	)		(434	)
Income (loss) before income taxes		214			(223	)
Income tax expense (benefit), net		55			(44	)
Net income (loss)	$	159		$	(179	)
Basic net income (loss) per common share	$	0.01		$	(0.01	)
Diluted net income (loss) per common share	$	0.01		$	(0.01	)
Weighted average common shares outstanding - basic		27,218,786			21,135,174
Add:   Equivalent shares outstanding - Stock Options		744,818			-
Shares issuable upon conversion of Convertible Debt - CD Financial, LLC		-			-
Weighted average common shares outstanding - diluted		27,963,604			21,135,174

See accompanying notes to condensed consolidated financial statements.

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INTEGRATED BIOPHARMA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except for share and per share amounts)
(Unaudited)
	September 30,			June 30,
	2018			2018
Assets
Current Assets:
Cash	$	365		$	228
Accounts receivable, net		3,381			3,796
Inventories		9,600			7,741
Other current assets		387			389
Total current assets		13,733			12,154
Property and equipment, net		1,604			1,651
Operating lease right-of-use assets		65			-
Operating lease right-of-use assets - Vitamin Realty, LLC		3,561			-
Deferred tax assets, net		640			671
Security deposits and other assets		121			92
Total Assets	$	19,724		$	14,568
Liabilities and Stockholders' Equity (Deficiency):
Current Liabilities:
Advances under revolving credit facility	$	4,699		$	4,894
Accounts payable (includes $77 and $141 due to related party)		6,044			4,184
Accrued expenses and other current liabilities		982			1,060
Current portion of long term debt, net		851			773
Current portion - Subordinated convertible note, net - CD Financial, LLC		-			5,269
Total current liabilities		12,576			16,180
Operating lease liabilities		65			-
Operating lease liabilities - Vitamin Realty, LLC		3,569			-
Long term debt, net		3,319			3,624
Total liabilities		19,529			19,804
Commitments and Contingencies
Stockholders' Equity (Deficiency):
Common Stock, $0.002 par value; 50,000,000 shares authorized;
29,400,843 and 21,170,074 shares issued, respectively
29,365,943 and 21,135,174 shares outstanding, respectively		59			42
Additional paid-in capital		50,028			44,773
Accumulated deficit		(49,793	)		(49,952	)
Less: Treasury stock, at cost, 34,900 shares		(99	)		(99	)
Total Stockholders' Equity (Deficiency)		195			(5,236	)
Total Liabilities and Stockholders' Equity (Deficiency)	$	19,724		$	14,568

See accompanying notes to condensed consolidated financial statements.

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INTEGRATED BIOPHARMA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' (DEFICIENCY) EQUITY
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2018
(in thousands, except shares)
															Total Stockholders'
	Common Stock				Additional		Accumulated			Treasury Stock					(Deficiency)
	Shares		Par Value		Paid-in-Capital		Deficit			Shares		Cost			Equity
Balance, June 30, 2018		21,170,074	$	42	$	44,773	$	(49,952	)		34,900	$	(99	)	$	(5,236	)
Shares issued upon conversion of
CD Financial, LLC Convertible Note, net		8,230,769		17		5,255		-			-		-			5,272
Net income		-		-		-		159			-		-			159
Balance, September 30, 2018		29,400,843	$	59	$	50,028	$	(49,793	)		34,900	$	(99	)	$	195

See accompanying notes to condensed consolidated financial statements.

-4-

INTEGRATED BIOPHARMA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, except share and per share amounts)
(Unaudited)
	Three months ended
	September 30,
	2018			2017
Cash flows provided by operating activities:
Net income (loss)	$	159		$	(179	)
from operating activities:
Depreciation and amortization		91			100
Accretion of financing instruments and other non cash interest		17			26
Stock based compensation		-			4
Change in deferred tax assets		31			(54	)
Impairment on investment in iBio, Inc.		-			83
Change in fair value of derivative liabilities		(9	)		118
Changes in operating assets and liabilities:
Decrease (increase) in:
Accounts receivable		415			1,347
Inventories		(1,858	)		603
Other current assets		8			35
Operating lease right of use assets		112			-
Security deposits and other assets		(52	)		(48	)
(Decrease) increase in:
Accounts payable		1,861			(455	)
Accrued expenses and other liabilities		(70	)		24
Operating lease liabilities		(112	)		-
Net cash provided by operating activities		593			1,604
Cash flows from investing activities:
Purchase of property and equipment		(18	)		(107	)
Cash contribution in AgroSport LLC		(8	)		-
Net cash used in investing activities		(26	)		(107	)
Cash flows from financing activities:
Advances under revolving credit facility		10,204			9,997
Repayments of advances under revolving credit facility		(10,400	)		(10,768	)
Repayments under term note payables		(184	)		(544	)
Repayments under capitalized lease obligations		(50	)		(30	)
Net cash used in financing activities		(430	)		(1,345	)
Net increase in cash		137			152
Cash at beginning of period		228			132
Cash at end of period	$	365		$	284

Supplemental disclosures of cash flow information:
Interest paid	$	201	$	198
Income taxes paid	$	2	$	-

See accompanying notes to condensed consolidated financial statements.

-5-

INTEGRATED BIOPHARMA, INC. AND ITS SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 (in thousands, except share and per share amounts)

(Unaudited)

Note 1. Principles of Consolidation and Basis of Presentation

Basis of Presentation of Interim Financial Statements

The accompanying condensed consolidated financial statements for the interim periods are unaudited and include the accounts of Integrated BioPharma, Inc., a Delaware corporation (together with its subsidiaries, the “Company”). The interim condensed consolidated financial statements have been prepared in conformity with Rule 8-03 of Regulation S-X of the Securities and Exchange Commission (“SEC”) and therefore do not include information or footnotes necessary for a complete presentation of financial position, results of operations and cash flows in conformity with accounting principles generally accepted in the United States of America. However, all adjustments (consisting only of normal recurring adjustments) which are, in the opinion of management, necessary for a fair presentation of the financial position and operating results for the periods presented have been included. These condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto, together with Management’s Discussion and Analysis of Financial Condition and Results of Operations, contained in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2018 (“Form 10-K”), as filed with the SEC. The June 30, 2018 balance sheet was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America. The results of operations for the three months ended September 30, 2018 are not necessarily indicative of the results for the full fiscal year ending June 30, 2019 or for any other period.

Nature of Operations

The Company is engaged primarily in manufacturing, distributing, marketing and sales of vitamins, nutritional supplements and herbal products. The Company’s customers are located primarily in the United States, Luxembourg and Canada. The Company was previously known as Integrated Health Technologies, Inc. and, prior to that, as Chem International, Inc. The Company was reincorporated in its current form in Delaware in 1995. The Company continues to do business as Chem International, Inc. with certain of its customers and certain vendors.

The Company’s business segments include: (a) Contract Manufacturing operated by InB:Manhattan Drug Company, Inc. (“MDC”), which manufactures vitamins and nutritional supplements for sale to distributors, multilevel marketers and specialized health-care providers; (b) Branded Proprietary Products operated by AgroLabs, Inc. (“AgroLabs”), which distributes healthful nutritional products for sale through major mass market, grocery and drug and vitamin retailers, under the following brands: Naturally Noni, Peaceful Sleep, Green Envy, FiberCal, Wheatgrass and other products which are being introduced into the market (these are referred to as our branded proprietary nutraceutical business and/or products); and (c) Other Nutraceutical Businesses which includes the operations of (i) The Vitamin Factory (the “Vitamin Factory”), which sells private label MDC products, as well as our AgroLabs products, through the Internet, (ii) IHT Health Products, Inc. (“IHT”) a distributor of fine natural botanicals, including multi minerals produced under a license agreement, (iii) MDC Warehousing and Distribution, Inc., a service provider for warehousing and fulfilment services and (iv) Chem International, Inc. (“Chem”), a distributor of certain raw materials for DSM Nutritional Products LLC.

Accounting Policies

Accounting Pronouncements Recently Adopted

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers”, Topic 606. This update affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets, unless those contracts are within the scope of other standards. The guidance in this update supersedes the revenue recognition requirements in Topic 605, Revenue Recognition and most industry-specific guidance.

-6-

INTEGRATED BIOPHARMA, INC. AND ITS SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 (in thousands, except share and per share amounts)

(Unaudited)

The core principle of the guidance is that an entity should recognize revenue to illustrate the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new guidance also includes a cohesive set of disclosure requirements that will provide users of financial statements with comprehensive information about the nature, amount, timing, and uncertainty of revenue and cash flows arising from a reporting organization’s contracts with customers.  During 2016, the FASB issued several accounting updates (ASU No. 2016-08, 2016-10 and 2016-12) to clarify implementation guidance and correct unintended application of the guidance. The standard allows for either “full retrospective” adoption, meaning the standard is applied to all of the periods presented, or “modified retrospective” adoption, meaning the standard is applied only to the most current period presented in the financial statements.  This new guidance was effective for the Company beginning on July 1, 2018, and Note 8 provides the related disaggregated revenue disclosures.  The adoption of this standard using the modified retrospective approach did not have a material impact on the Company’s revenue recognition accounting policy or its Condensed Consolidated Financial Statements.

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments – Overall, (Subtopic 825-10) “Recognition and Measurement of Financial Assets and Financial Liabilities”, which addresses certain aspects of recognition, measurement, presentation and disclosure of financial instruments. Under this guidance, companies have to measure equity investments, except those accounted for under the equity method, at fair value and recognize changes in fair value in net income. The adoption of this standard on July 1, 2018, by Company did not have a material effect on its Condensed Consolidated Financial Statements.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), a new standard related to leases to increase transparency and comparability among organizations by requiring the recognition of right-of-use (“ROU”) assets and lease liabilities on the balance sheet. Most prominent among the changes in the standard is the recognition of ROU assets and lease liabilities by lessees for those leases classified as operating leases under current U.S. GAAP. Under the standard, disclosures are required to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. We will be required to recognize and measure leases existing at, or entered into after, the beginning of the earliest comparative period presented using a modified retrospective approach, with certain practical expedients available.

The standard will be effective for us beginning July 1, 2019, with early adoption permitted. We elected to early adopt the standard effective July 1, 2018. We elected the available practical expedients on adoption. In preparation for adoption of the standard, we have implemented internal controls and key system functionality to enable the preparation of financial information. The standard had a material impact on our consolidated balance sheets, but did not have a material impact on our consolidated income statements. The most significant impact was the recognition of ROU assets and lease liabilities for operating leases, while our accounting for capital leases remained substantially unchanged.

-7-

INTEGRATED BIOPHARMA, INC. AND ITS SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 (in thousands, except share and per share amounts)

(Unaudited)

Adoption of this standard resulted in the recognition of additional ROU assets and lease liabilities for operating leases and had the following impact to the reported results as of June 30, 2018 on our condensed consolidated financial statements:

Consolidated Statement of Financial Condition	As Reported		New Lease Standard Adjustment		As Adjusted
Operating lease right-of-use assets	$	-	$	69	$	69
Operating lease right-of-use assets - Vitamin Realty, LLC		-		3,668		3,668
Operating lease liabilities		-		69		69
Operating lease liabilities - Vitamin Realty, LLC		-		3,677		3,677
Current portion of long term debt, net		773		-		773
Long term debt, net		3,624		-		3,624
Current portion - Subordinated convertible
note, net - CD Financial, LLC		5,269		-		5,269

In August, 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments,” which clarifies how certain cash receipts and payments are to be presented in the statement of cash flows. The guidance was effective for the Company on July 1, 2018 and did not have a material impact on the Company’s Condensed Consolidated Financial Statements.

Aside from the adoption of ASUs, as described above and the Leases policy described below, there have been no material changes during fiscal year 2019 in the Company’s significant accounting policies to those previously disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2018.

Significant Accounting Policies

Sales.  The Company recognizes sales revenue, net of estimated sales returns and allowances, at the time it sells its products to the customer.  The timing of a sale is determined when the product’s title and risk of loss transfers to the customer.  The Company’s sales policy requires the customer to provide the Company with purchase orders with agreed upon selling prices and shipping terms.

Other Income.  The Company recognizes revenue from service transactions at the time the service is performed and collection from the counter party is expected. Generally, revenue from services is classified as a component of other income (expense), net in the Company's Condensed Consolidated Statements of Operations when it relates to professional services and in sales, net when it relates to warehousing and distribution services.

Leases. We determine if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets, other current liabilities, and operating lease liabilities on our consolidated balance sheets. Finance leases are included in property and equipment, current portion of long term debt, and long-term debt obligation on our consolidated statement of financial condition.  

Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. The operating lease ROU asset also includes any lease payments made and excludes lease incentives and initial direct costs incurred. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.

We have lease agreements with lease and non-lease components, which are generally accounted for separately. For certain equipment leases, such as vehicles, we account for the lease and non-lease components as a single lease component.

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INTEGRATED BIOPHARMA, INC. AND ITS SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 (in thousands, except share and per share amounts)

(Unaudited)

Earnings Per Share. Basic earnings per common share amounts are based on weighted average number of common shares outstanding. Diluted earnings per share amounts are based on the weighted average number of common shares outstanding, plus the incremental shares that would have been outstanding upon the assumed exercise of all potentially dilutive stock options, warrants and convertible debt, subject to anti-dilution limitations using the treasury stock method and if converted method.

The following options and potentially dilutive shares for convertible note payable (See Note 4. Senior Credit Facility, Subordinated Convertible Note, net - CD Financial, LLC and other Long Term Debt) were not included in the computation of weighted average diluted common shares outstanding as the effect of doing so would be anti-dilutive for the three months ended September 30, 2018 and 2017:

	Three Months Ended
	September 30,
	2018		2017
Anti-dilutive stock options		150,000		2,692,017
Anti-dilutive shares for convertible notes payable		-		8,230,769
Total anti-dilutive shares		150,000		10,922,786

Additionally, in the three months ended September 30, 2018, the 8,230,769 common shares underlying the convertible note were potentially dilutive and therefore included in the diluted earnings per share calculation on a proportionate basis prior to the conversion into common shares of the Company as of July 24, 2018 and the results were antidilutive. (See Note 4. Senior Credit Facility, Subordinated Convertible Note, net - CD Financial, LLC and other Long Term Debt).

Note 2. Inventories

Inventories are stated at the lower of cost or net realizable value using the first-in, first-out method and consist of the following:

	September 30,		June 30,
	2018		2018
Raw materials	$	6,409	$	4,179
Work-in-process		2,131		2,207
Finished goods		1,060		1,355
Total	$	9,600	$	7,741

-9-

INTEGRATED BIOPHARMA, INC. AND ITS SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 (in thousands, except share and per share amounts)

(Unaudited)

Note 3. Property and Equipment, net

Property and equipment, net consists of the following:

	September 30,			June 30,
	2018			2018
Land and building	$	1,250		$	1,250
Leasehold improvements		1,268			1,268
Machinery and equipment		5,931			5,917
Transportation equipment		6			6
		8,455			8,441
Less: Accumulated depreciation
and amortization		(6,851	)		(6,790	)
Total	$	1,604		$	1,651

Depreciation and amortization expense recorded on property and equipment for the three months ended September 30, 2018 and 2017 was $66 and $75, respectively.

Note 4. Senior Credit Facility, Subordinated Convertible Note, net - CD Financial, LLC and other Long Term Debt

As of September 30, 2018 and June 30, 2018, the Company had the following debt outstanding:

	Principal Amount						Interest Rate			Maturity Date
	As of    September 30, 2018			As of             June 30, 2018
Revolving advances under Senior Credit
Facility with PNC Bank, National Association	$	4,699		$	4,894			5.25	%	2/19/2020
Installment Note with PNC Bank		1,511			1,672			5.75	%	2/19/2020
Installment Note with PNC Equipment Finance		78			101			4.57	%	7/29/2019
Promissory Note with CD Financial, LLC		1,714			1,714			6.00	%	2/29/2020
Promissory Note with Vitamin Realty, LLC		686			686			4.00	%	2/29/2020
Capitalized lease obligations		220			269			3.86% -9.26%		3/17/2019-12/8/2020
Total outstanding debt		8,908			9,336
Less: Revolving Advances		(4,699	)		(4,894	)
Prepaid financing costs		(39	)		(45	)
Current portion of long term debt, net		(851	)		(773	)
Long term debt, net	$	3,319		$	3,624
Convertible Note payable - CD Financial, LLC	$	-		$	5,350			6.00	%	7/24/2018
Less: Discount for embedded derivative		-			(66	)
Prepaid financing costs		-			(15	)
Convertible Note payable, net - CD Financial, LLC	$	-		$	5,269

 

-10-

INTEGRATED BIOPHARMA, INC. AND ITS SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 (in thousands, except share and per share amounts)

(Unaudited)

SENIOR CREDIT FACILITY

On February 19, 2016, the Company, MDC, AgroLabs, IHT, IHT Properties Corp. (“IHT Properties”) and Vitamin Factory (collectively, the “Borrowers”) amended the Revolving Credit, Term Loan and Security Agreement (the “Amended Loan Agreement”) with PNC Bank, National Association as agent and lender (“PNC”) and the other lenders party thereto entered into on June 27, 2012.

The Amended Loan Agreement provides for a total of $11,422 in senior secured financing (the “Senior Credit Facility”) as follows: (i) discretionary advances (“Revolving Advances”) based on eligible accounts receivable and eligible inventory in the maximum amount of $8,000 (the “Revolving Credit Facility”) and (ii) a term loan in the amount of $3,422 (the “Term Loan”). The Senior Credit Facility is secured by all assets of the Borrowers, including, without limitation, machinery and equipment, real estate owned by IHT Properties, and common stock of iBio owned by the Company. Revolving Advances bear interest at PNC’s Base Rate or the Eurodollar Rate, at Borrowers’ option, plus 2.75% (5.25% and 5.00% as of September 30 and June 30, 2018, respectively). The Term Loan bears interest at PNC’s Base Rate or the Eurodollar Rate, at Borrowers’ option, plus 3.25% (5.75% and 5.50% as of September 30 and June 30, 2018, respectively). Upon and after the occurrence of any event of default under the Amended Loan Agreement, and during the continuation thereof, interest shall be payable at the interest rate then applicable plus 2%. The Senior Credit Facility matures on February 19, 2020 (the “Senior Maturity Date”).

The principal balance of the Revolving Advances is payable on the Senior Maturity Date, subject to acceleration, based upon a material adverse event clause, as defined, subjective accelerations for borrowing base reserves, as defined or upon the occurrence of any event of default under the Amended Loan Agreement or earlier termination of the Amended Loan Agreement pursuant to the terms thereof. The Term Loan shall be repaid in eighty-four (84) consecutive monthly installments of principal, the first eighty-three (83) of which shall be in the amount of $41, commencing on the first business day of March, 2016, and continuing on the first business day of each month thereafter, with a final payment of any unpaid balance of principal and interest payable on the Senior Maturity Date. The foregoing is subject to customary mandatory prepayment provisions and acceleration upon the occurrence of any event of default under the Amended Loan Agreement or earlier termination of the Amended Loan Agreement pursuant to the terms thereof.

The Revolving Advances are subject to the terms and conditions set forth in the Amended Loan Agreement and are made in aggregate amounts at any time equal to the lesser of (x) $8.0 million or (y) an amount equal to the sum of: (i) up to 85%, subject to the provisions in the Amended Loan Agreement, of eligible accounts receivables (“Receivables Advance Rate”), plus (ii) up to the lesser of (A) 75%, subject to the provisions in the Amended Loan Agreement, of the value of the eligible inventory (“Inventory Advance Rate” and together with the Receivables Advance Rate, collectively, the “Advance Rates”), (B) 85% of the appraised net orderly liquidation value of eligible inventory (as evidenced by the most recent inventory appraisal reasonably satisfactory to PNC in its sole discretion exercised in good faith) and (C) the inventory sublimit in the aggregate at any one time (“Inventory Advance Rate” and together with the Receivables Advance Rate, collectively, the “Advance Rates”), minus (iii) the aggregate Maximum Undrawn Amount of all outstanding Letters of Credit, minus (iv) such reserves as PNC may reasonably deem proper and necessary from time to time.

The Amended Loan Agreement contains customary mandatory prepayment provisions, including, without limitation the requirement to use any sales proceeds from the sale of iBio Stock to repay the Term Loan and to prepay the outstanding amount of the Term Note in an amount equal to twenty-five percent (25%) of Excess Cash Flow for each fiscal year commencing with the fiscal year ended June 30, 2016, payable upon delivery of the financial statements to PNC referred to in and required by the Amended Loan Agreement for such fiscal year but in any event not later than one hundred twenty (120) days after the end of each such fiscal year, which amount shall be applied ratably to the outstanding principal installments of the Term Loan in the inverse order of the maturities thereof.

-11-

INTEGRATED BIOPHARMA, INC. AND ITS SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 (in thousands, except share and per share amounts)

(Unaudited)

The Amended Loan Agreement also contains customary representations and warranties, covenants and events of default, including, without limitation, (i) a fixed charge coverage ratio maintenance requirement and (ii) an event of default tied to any change of control as defined in the Amended Loan Agreement. As of September 30, 2018, the Company was in compliance with the fixed charge coverage ratio maintenance requirement and with the required annual payments of 25% of the Excess Cash Flow for each fiscal year commencing with the fiscal year ended June 30, 2016.

In connection with the Senior Credit Facility, PNC and CD Financial entered into the Intercreditor and Subordination Agreement (the “Intercreditor Agreement”), which was acknowledged by the Borrowers, pursuant to which, among other things, (a) the lien of CD Financial on assets of the Borrowers is subordinated to the lien of PNC on such assets during the effectiveness of the Senior Credit Facility, and (b) priorities for payment of the debt for the Company and its subsidiaries (as described in this Note 4) are established.

In addition, in connection with the Senior Credit Facility, the following loan documents were executed: (i) a Stock Pledge Agreement with PNC, pursuant to which the Company pledged to PNC the iBio Stock; (ii) a Mortgage and Security Agreement with PNC with IHT Properties; and (iii) an Environmental Indemnity Agreement with PNC.

CD FINANCIAL, LLC

On June 27, 2012, the Company also entered into an Amended and Restated Securities Purchase Agreement (the “CD SPA”) with CD Financial, which amended and restated the Securities Purchase Agreement, dated as of February 21, 2008, between the Company and CD Financial, pursuant to which the Company issued to CD Financial a 9.5% Convertible Senior Secured Note in the original principal amount of $4,500 (the “Original CD Note”). Pursuant to the CD SPA, the Company issued to CD Financial (i) the Amended and Restated Convertible Promissory Note in the principal amount of $5,350 (the “CD Convertible Note”) and (ii) the Promissory Note in the principal amount of $1,714 (the “Liquidity Note”, and collectively with the CD Convertible Note, the “CD Notes”). The CD Notes had an original maturity date of July 7, 2017, however, on February 19, 2016, the CD Notes were amended to extend the maturity date thereof to February 29, 2020.

The CD Notes are secured by all assets of the Borrowers, including, without limitation, machinery and equipment, real estate owned by IHT Properties, and iBio Stock owned by the Company. The CD Notes bear interest at an annual rate of 6% and have a default rate of 10%.

The CD Convertible Note is convertible at the option of CD Financial into common stock of the Company at a conversion price of $0.65 per share, subject to customary adjustments including conversion price protection provisions.

Pursuant to the terms of the Amended Loan Agreement and the Intercreditor Agreement, during the effectiveness of the Senior Credit Facility, (i) the principal of the CD Convertible Note may not be repaid, (ii) the principal of the Liquidity Note may only be repaid if certain conditions under the Amended Loan Agreement are satisfied, and (iii) interest in respect of the CD Notes may only be paid if certain conditions under the Intercreditor Agreement are satisfied.

The CD SPA contains customary representations and warranties, covenants and events of default, including, without limitation, an event of default tied to any change of control as defined in the CD SPA.

In connection with the CD SPA, the Borrowers entered into an Amended and Restated Security Agreement and Amended and Restated Subsidiary Guaranty.

 

-12-

INTEGRATED BIOPHARMA, INC. AND ITS SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 (in thousands, except share and per share amounts)

(Unaudited)

On July 31, 2018, the Company authorized the issuance of 8,230,769 shares of the Company’s common stock (“Common Shares”) to CD Financial. The Common Shares were issued upon the exercise by CD Financial of its conversion right pursuant to the CD SPA and in accordance with Section 3 (b) of the CD Convertible Note. The CD Convertible Note was convertible at the option of CD Financial into Common Shares at a conversion price of $0.65 per share, subject to customary adjustments. CD Financial exercised its conversion right with respect to the entire principal amount due under the CD Convertible Note. The Common Shares issued to CD Financial were issued at a conversion price of $0.65 per Common Share.

As of June 30, 2018, the related embedded derivative liability with respect to conversion price protection provisions on the CD Convertible Note had an estimated fair value of $9 and as of September 30, 2018 had been extinguished in connection with the above described conversion exercise by CD Financial on July 24, 2018. 

The Liquidity Note issued under the CD SPA remains outstanding.

OTHER LONG TERM DEBT

Related Party Debt. On June 27, 2012, MDC and the Company entered into a promissory note with Vitamin Realty Associates, LLC (“Vitamin Realty”) in the principal amount of approximately $686 (the “Vitamin Note”). The principal amount of the Vitamin Note represents the aggregate amount of unpaid, past due rent owing by MDC under the Lease Agreement, dated as of January 10, 1997, between MDC, as lessor, and Vitamin Realty, as landlord, pertaining to the real property located at 225 Long Avenue, Hillside, New Jersey. (See Note 6. Commitments and Contingencies (a) Leases – Related Parties Leases). The Vitamin Note matures on February 29, 2020, as amended on February 19, 2016. The Vitamin Note accrues interest at an annual rate of 4% per annum. Interest in respect of the Vitamin Note is payable on the first business day of each calendar month. Pursuant to the terms of the Amended Loan Agreement, during the effectiveness of the Senior Credit Facility, the Vitamin Note may only be repaid or prepaid if certain conditions set forth in the Amended Loan Agreement are satisfied.

Note 5. Significant Risks and Uncertainties

(a) Major Customers. For the three months ended September 30, 2018 and 2017, approximately 89% and 91% of consolidated net sales, respectively, were derived from two customers. These two customers are in the Company’s Contract Manufacturing Segment and represent approximately 61% and 29% and 63% and 32% in the three months ended September 30, 2018 and 2017, respectively. Accounts receivable from these two major customers represented approximately 89% and 87% of total net accounts receivable as of September 30 and June 30, 2018, respectively.  The loss of any of these customers could have an adverse effect on the Company’s operations. Major customers are those customers who account for more than 10% of net sales.

(b) Other Business Risks. Approximately 67% of the Company’s employees are covered by a union contract and are employed in its New Jersey facilities. The contract was renewed on September 1, 2018 and will expire on August 31, 2021.

 Note 6. Leases and other Commitments and Contingencies

(a) Leases.  The Company has operating and finance leases for its corporate and sales offices, warehousing and packaging facilities and certain machinery and equipment, including office equipment.  The Company’s leases have remaining terms of less than 1 year to less than 8 years.

-13-

INTEGRATED BIOPHARMA, INC. AND ITS SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 (in thousands, except share and per share amounts)

(Unaudited)

The components of lease expense for the three months ended September 30, 2018 were as follows:

	Related Party - Vitamin Realty		Other Leases		Totals
Operating lease costs	$	-	$	19	$	19
Finance Operating Lease Costs:
Amortization of right-of use assets	$	107	$	5	$	112
Interest on operating lease liabilities		35		1		36
Total finance lease cost	$	142	$	6	$	148

Operating Lease Liabilities

Related Party Operating Lease Liabilities. Warehouse and office facilities are leased from Vitamin Realty, which is 100% owned by the Company’s chairman, Chief Executive Officer and major stockholder and certain of his family members, who are also executive officers and directors of the Company. On January 5, 2012, MDC entered into a second amendment of lease (the “Second Lease Amendment”) with Vitamin Realty for its office and warehouse space in New Jersey increasing its rentable square footage from an aggregate of 74,898 square feet to 76,161 square feet and extending the expiration date to January 31, 2026. This Second Lease Amendment provides for minimum annual rental payments of $533, plus increases in real estate taxes and building operating expenses. On May 19, 2014, AgroLabs entered into an Amendment to the lease agreement entered into on January 5, 2012, with Vitamin Realty for an additional 2,700 square feet of warehouse space in New Jersey, the term of which was to expire on January 31, 2019 to extend the expiration date to January 1, 2024. This additional lease provides for minimum lease payments of $27 with annual increases plus the proportionate share of operating expenses.

Rent expense, lease amortization costs and interest expense for the three months ended September 30, 2018 and 2017 on these leases were $202 and $201 respectively, and are included in cost of sales, selling and administrative expenses and interest expense in the accompanying Condensed Consolidated Statements of Operations. As of September 30, 2018 and June 30, 2018, the Company had outstanding current obligations to Vitamin Realty of $763 and $827, respectively, included in accounts payable, accrued expenses and other liabilities and long term debt in the accompanying Condensed Consolidated Balance Sheet. Additionally, the Company has operating lease obligations of $3,569 with Vitamin Realty as noted in the accompany Condensed Consolidated Balance Sheet.

Other Operating Lease Liabilities. The Company has entered into certain non-cancelable operating lease agreements expiring up through May, 2023, related to machinery and equipment and office equipment.

-14-

INTEGRATED BIOPHARMA, INC. AND ITS SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 (in thousands, except share and per share amounts)

(Unaudited)

As of September 30, 2018, the Company’s right-of-use assets, lease obligations and remaining cash commitment on these leases is as follows:

	Right-of-use Assets		Operating Lease Obligations		Remaining Cash Commitment
Vitamin Realty Leases	$	3,561	$	3,569	$	4,092
Machinery and equipment leases		34		34		36
Office equipment leases		31		31		33
	$	3,626	$	3,634	$	4,161

The Company’s weighted average discount rate and remaining term on lease liabilities is approximately 3.76% and 7.1 years, respectively.

Supplemental cash flows information related to leases for the three months ended September 30, 2018 is as follows:

	Related Party - Vitamin Realty		Other Leases		Totals
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	-	$	19	$	19
Operating cash flows from finance leases		94		5		99
Financing cash flows from capital lease obligations		-		50		50

The Company did not enter into any lease commitments in the three months ended September 30, 2018.

Maturities of operating lease liabilities as of September 30, 2018 were as follows:

				Related Party
Year ending	Operating Lease			Operating Lease
June 30,	Commitment			Commitment			Total
2019, remaining	$	18		$	424		$	442
2020		22			565			587
2021		21			565			586
2022		8			565			573
2023		-			565			565
2024		-			564			564
Thereafter		-			844			844
Total minimum lease payments		69			4,092			4,161
Imputed interest		(4	)		(523	)		(527	)
Total	$	65		$	3,569		$	3,634

Total rent expense, lease amortization costs and interest expense, including real estate taxes and maintenance charges, was approximately $239 and $242 for the three months ended September 30, 2018 and 2017, respectively. Rent and lease amortization and interest expense is included in cost of sales, selling and administrative expenses and interest expense in the accompanying Condensed Consolidated Statements of Operations.

-15-

INTEGRATED BIOPHARMA, INC. AND ITS SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 (in thousands, except share and per share amounts)

(Unaudited)

(b) Legal Proceedings.

The Company is subject, from time to time, to claims by third parties under various legal theories. The defense of such claims, or any adverse outcome relating to any such claims, could have a material adverse effect on the Company’s liquidity, financial condition and cash flows.

(c) Other Claims. 

On May 15, 2012, Cedarburg Pharmaceuticals, Inc. ("Cedarburg") sent the Company a letter (the "Demand Letter") setting forth a demand for indemnification under the Stock Purchase Agreement, dated March 17, 2009 (the "Cedarburg SPA"), by and among Cedarburg, InB: Hauser Pharmaceutical Services, Inc., InB: Paxis Pharmaceuticals, Inc. and the Company. In the Demand Letter, Cedarburg demanded payment by the Company of $600 in respect of the Company's indemnification obligations under the Cedarburg SPA. In addition, in the Demand Letter, Cedarburg informed the Company that there are also environmental issues pending which may lead to additional costs to Cedarburg which will likely be in excess of $300.

On May 30, 2012, the Company sent a letter responding to the Demand Letter and setting forth the Company’s position that it has no obligation to indemnify Cedarburg as demanded. On June 18, 2012, Cedarburg responded to the Company’s letter and, on July 27, 2012, the Company sent another letter to Cedarburg reiterating its position that the Company has no obligation to indemnify Cedarburg as demanded. On December 18, 2012, Cedarburg responded to the Company’s letter and, on January 15, 2013, the Company sent another letter to Cedarburg reiterating its position that the Company has no obligation to indemnify Cedarburg as demanded. As of November 9, 2018, the Company has not received any further communication from Cedarburg with respect to its demand for indemnification as set forth in the Demand Letter. The Company intends to vigorously contest Cedarburg's demand as set forth in the Demand Letter.

Note 7. Related Party Transactions

See Note 4. Senior Credit Facility, Subordinated Convertible Note, net - CD Financial, LLC and other Long Term Debt for related party securities and debt transactions.

See Note 6(a). Leases for related party lease transactions.

Note 8. Segment Information and Disaggregated Revenue

The basis for presenting segment results generally is consistent with overall Company reporting. The Company reports information about its operating segments in accordance with GAAP which establishes standards for reporting information about a company’s operating segments.

The Company has divided its operations into three reportable segments as follows: Contract Manufacturing, Branded Proprietary Products and Other Nutraceutical Businesses. The international sales, concentrated primarily in Europe and Canada, for the three months ended September 30, 2018 and 2017 were $1,239 and $1,658, respectively.

-16-

INTEGRATED BIOPHARMA, INC. AND ITS SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 (in thousands, except share and per share amounts)

(Unaudited)

Financial information relating to the three months ended September 30, 2018 and 2017 operations by business segment and disaggregated revenues are as follows:

			Sales, Net						Segment
			U.S.		International				Gross				Capital
			Customers		Customers		Total		Profit		Depreciation		Expenditures
Contract	2018	$	8,655	$	1,197	$	9,852	$	1,083	$	65	$	18
Manufacturing	2017		7,822		1,583		9,405		835		74		93
Branded Proprietary	2018		71		7		78		21		-		-
Products	2017		19		11		30		32		1		13
Other Nutraceutical	2018		339		35		374		115		1		-
Businesses	2017		271		64		335		138		-		1
Total	2018		9,065		1,239		10,304		1,219		66		18
Company	2017		8,112		1,658		9,770		1,005		75		107

	Total Assets as of
	September 30,		June 30,
	2018		2018
Contract Manufacturing	$	17,339	$	12,200
Branded Proprietary Products		665		543
Other Nutraceutical Businesses		1,715		1,825
Total Company	$	19,724	$	14,568

-17-

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANICAL CONDITION AND RESULTS OF OPERATION (dollars in thousands)

Certain statements set forth under this caption constitute “forward-looking statements.” See “Disclosure Regarding Forward-Looking Statements” on page 1 of this Quarterly Report on Form 10-Q for additional factors relating to such statements. The following discussion should also be read in conjunction with the condensed consolidated financial statements of the Company and Notes thereto included herein and the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2018.

The Company is engaged primarily in the manufacturing, distributing, marketing and sales of vitamins, nutritional supplements and herbal products. The Company’s customers are located primarily in the United States, Luxembourg and Canada.

Business Outlook

Our future results of operations and the other forward-looking statements contained in this Quarterly Report on Form 10-Q, including this MD&A, involve a number of risks and uncertainties—in particular, the statements regarding our goals and strategies, new product introductions, plans to cultivate new businesses, future economic conditions, revenue, pricing, gross margin and costs, competition, the tax rate, and potential legal proceedings. We are focusing our efforts to improve operational efficiency and reduce spending that may have an impact on expense levels and gross margin. In addition to the various important factors discussed above, a number of other important factors could cause actual results to differ significantly from our expectations. See the risks described in “Risk Factors” in the Company's Annual Report on Form 10-K for the fiscal year ended Jun 30, 2018.

For the three months ended September 30, 2018, our net sales from operations increased by $534 to approximately $10,304 from approximately $9,770 in the three months ended September 30, 2017. Substantially all the increase in net sales was from the Contract Manufacturing Segment of $447, while our other two segments, Branded Proprietary Products Segment and Other Nutraceuticals Segment, had increased sales of $48 and $39, respectively. Net sales increased in our Contract Manufacturing Segment by $447 primarily due to increased sales volumes to Life Extension in the amount of $368 and to our other customers of net $88. For the three months ended September 30, 2018, we had operating income of approximately $405, an increase of approximately $194 from operating income of approximately $211 for the three months ended September 30, 2017. Our profit margins increased from approximately 10% of net sales in the three months ended September 30, 2017 to approximately 12% of net sales in the three months ended September 30, 2018, primarily as a result of the increased sales in our Contract Manufacturing Segment of approximately $447. Our consolidated selling and administrative expenses at increased approximately $20 or approximately 3% in the three months ended September 30, 2018 compared to the three months ended September 30, 2017.

During the three months ended September 30, 2018, CD Financial, LLC (“CD Financial”), exercised its conversion right pursuant to the CD SPA and in accordance with Section 3 (b) of the CD Convertible Note in the principal amount of approximately $5,350.  The CD Convertible Note was convertible at the option of CD Financial into Common Shares at a conversion price of $0.65 per share, subject to customary adjustments. CD Financial exercised its conversion right with respect to the entire principal amount due under the CD Convertible Note. The Common Shares were issued to CD Financial at a conversion price of $0.65 per Common Share, resulting in the Company issuing 8,230,769 Common Shares to CD Financial.  As a result of this conversion, the Company’s total stockholders’ deficiency of $5,236 as of June 30, 2018 was offset by the converted value of the CD Convertible Note of $5,272 in the three months ended September 30, 2018, resulting in total stockholders’ equity of $36 without taking into account any other changes to the Company’s stockholders’ accounts or transactions.  Additionally, the conversion results in annual cost savings of approximately $321 relating to the interest component of the CD Convertible Note.  The remaining debt discount and issuance costs of $78 and the extinguished underlying derivative liability associated with the CD Convertible Note was charged to additional paid in capital due to the significant ownership by CD Financial in the Company.

-18-

Critical Accounting Policies and Estimates

There have been no changes to our critical accounting policies in the three months ended September 30, 2018, except as disclosed in Note 1. Principles of Consolidation and Basis of Presentation of the Condensed Financial Statements of the Company contained in this Quarterly Report on Form 10-Q.  Critical accounting policies and the significant estimates made in accordance with them are regularly discussed by management with our Audit Committee. Those policies are discussed under “Critical Accounting Policies” in our “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Item 7 of our Annual Report on Form 10-K for the year ended June 30, 2018 and in Note 1. Principles of Consolidation and Basis of Presentation of the Condensed Financial Statements of the Company contained in this Quarterly Report on Form 10-Q.

Results of Operations (in thousands, except share and per share amounts)

Our results from operations in the following table, sets forth the income statement data of our results as a percentage of net sales for the periods indicated:

	For the three months
	ended September 30,
	2018			2017
Sales, net		100.0	%		100.0	%
Costs and expenses:
Cost of sales		88.2	%		89.7	%
Selling and administrative		7.9	%		8.1	%
		96.1	%		97.8	%
Operating income		3.9	%		2.2	%
Other expense, net
Interest expense		(1.9%	)		(2.4%	)
Impairment charge on investment in iBio, Inc.		0.0	%		(0.8%	)
Change in fair value of derivative liabilities		0.1	%		(1.2%	)
Other expense, net		(1.8%	)		(4.4%	)
Income before income taxes		2.1	%		(2.2%	)
Income tax (benefit) expense, net		0.5	%		(0.4%	)
Net income		1.6	%		(1.8%	)

-19-

For the Three Months Ended September 30, 2018 compared to the Three Months Ended September 30, 2017

Sales, net. Sales, net, for the three months ended September 30, 2018 and 2017 were $10.3 million and $9.8 million, respectively, an increase of 5.5%, and are comprised of the following:

	Three months ended				Dollar			Percentage
	September 30,				Change			Change
	2018		2017		2018 vs 2017			2018 vs 2017
	(amounts in thousands)
Contract Manufacturing:
US Customers	$	8,655	$	7,822	$	833			10.6	%
International Customers		1,197		1,583		(386	)		(24.4%	)
Net sales, Contract Manufacturing		9,852		9,405		447			4.8	%
Branded Nutraceutical Products:
US Customers		71		19		52			273.7	%
International Customers		7		11		(4	)		(36.4%	)
Net sales, Branded Nutraceutical Products		78		30		48			160.0	%
Other Nutraceuticals:
US Customers		339		271		68			25.1	%
International Customers		35		64		(29	)		(45.3%	)
Net sales, Other Nutraceuticals		374		335		39			11.6	%
Total net sales	$	10,304	$	9,770	$	534			5.5	%

For the three months ended September 30, 2018 and 2017, a significant portion of our consolidated net sales, approximately 89% and 91%, respectively, were concentrated among two customers in our Contract Manufacturing Segment, Life Extension and Herbalife. Life Extension and Herbalife represented approximately 61% and 29% and 63% and 32%, respectively, of our Contract Manufacturing Segment’s net sales in the three months ended September 30, 2018 and 2017, respectively. The loss of any of these customers could have a significant adverse impact on our financial condition and results of operations.

The increase in net sales of approximately $534 was primarily the result of:

● Net sales increased in our Contract Manufacturing Segment by $447 primarily due to increased sales volumes to Life Extension in the amount of $368 and to our other customers of net $79.

● Net sales in our Branded Nutraceutical Segment increased by approximately $48 in the three months ended September 30, 2018, primarily as the result of an initial sale to PriceSmart in the amount of $37.

Cost of sales. Cost of sales increased by approximately $320 to $9,085 for the three months ended September 30, 2018, as compared to $8,765 for the three months ended September 30, 2017 or approximately 4%. Cost of sales decreased as a percentage of sales to 88.2% for the three months ended September 30, 2018 as compared to 89.7% for the three months ended September 30, 2017. The increase in the cost of goods sold amount is consistent with the increased net sales of approximately 6%.

Selling and Administrative Expenses. There was an increase in selling and administrative expenses of $20, approximately 3% in the three months ended September 30, 2018 as compared to the three months ended September 30, 2017. As a percentage of sales, net, selling and administrative expenses was approximately 8% in each of the three months ended September 30, 2018 and 2017. The increase was primarily from increases (i) in salaries and employees benefits of approximately $29, as the result of: (a) replacing our headcount with higher salaried employees ($5); (b) an increase in employee benefits due to the change in personnel and an increase in premiums ($6) and; (c) an increase in our vacation pay liability ($14); and (ii) in professional and consulting fees of approximately $14 primarily as the result of outsourcing our information technology function beginning in April 2018.  These increases were partially offset by an aggregate decrease of approximately $24 in other components (excluding consulting and professional fees and salaries and employee benefits) of our selling and administrative expenses.

-20-

Other income (expense), net. Other income (expense), net was approximately $191 for the three months ended September 30, 2018 compared to $434 for the three months ended September 30, 2017, and is composed of:

	Three months ended
	September 30,
	2018			2017
	(dollars in thousands)
Interest expense	$	(200	)	$	(233	)
Change in fair value of derivative liabilities		9			(118	)
Impairment on investment in iBio, Inc.		-			(83	)
Other income (expense), net	$	(191	)	$	(434	)

The change in fair value of derivative liabilities in the three months ended September 30, 2017 was attributable to the change in the closing trading price of the Company's stock, as traded on the OTC Bulletin Board, from $0.19 as of June 30, 2017 to $0.22 as of September 30, 2017.  The closing trading price is one of the variables used to calculate the estimated fair value of our derivative liabilities associated with the underlying derivative instrument.  During the three month period ended September 30, 2018, the derivative liability was extinguished, resulting in the carrying value as of June 30, 2018 of $9 to be compared to a value of $0 as of September 30, 2018, as the related derivative liability is no longer outstanding, resulting in a change of $9 for the three months ended September 30, 2018.

In the three months ended September 30, 2017 we determined that there was an impairment on the carrying value of our investment in iBio, Inc. in the amount of approximately $83 resulting from the decline in the closing trading price of their common stock on the NYSE American Exchange for the three month period ended September 30, 2017 and continuing into the month ended October 31, 2017.

Our interest expense for the three months ended September 30, 2018 decreased by $33 from the three month period ended September 30, 2017 primarily as the result of CD Financial exercising its conversion right to convert the $5,350 CD Convertible Note to equity on July 24, 2018, an interest savings of $61, offset in part, by the adoption of ASU 2016-02 on July 1, 2018, which classifies a portion of the operating lease payments as interest.  Accordingly, in the three month period ended September 30, 2018, we incurred an interest cost of $35 on our operating lease liabilities.

Federal and state income tax (benefit) expense, net. For the three months ended September 30, 2018 and 2017, we had state income tax expense, net of approximately $27 and $10, respectively and a federal income tax expense of $73 in the three months ended September 30, 2018 and a federal income tax benefit of $28 in the three months ended September 30, 2017. We continue to maintain a reserve on our deferred tax assets as it has been determined that based upon past losses, the Company’s past liquidity concerns and the current economic environment, it is “more likely than not” the that Company’s deferred tax assets may not be fully realized.

Net income (loss). Our net income for the three months ended September 30, 2018 was $159 compared to a net loss of $179 in the three months ended September 30, 2017, a change of $293. The change in net income was the primarily the result of increased operating income of $194 and decreases in other expenses of $243, offset by an increase in federal and state income taxes of $99.

-21-

Seasonality

The nutraceutical business tends to be seasonal. We have found that in our first fiscal quarter ending on September 30th of each year, orders for our branded proprietary nutraceutical products usually slow (absent the addition of new customers or a new product launch with a significant first time order), as buyers in various markets may have purchased sufficient inventory to carry them through the summer months. Conversely, in our second fiscal quarter, ending on December 31st of each year, orders for our products increase as the demand for our branded nutraceutical products, as well as sales orders from our customers in our contract manufacturing segment, seem to increase in late December to early January as consumers become health conscious as they enter the new year.

The Company believes that there are other non-seasonal factors that also may influence the variability of quarterly results including, but not limited to, general economic and industry conditions that affect consumer spending, changing consumer demands and current news on nutritional supplements. Accordingly, a comparison of the Company’s results of operations from consecutive periods is not necessarily meaningful, and the Company’s results of operations for any period are not necessarily indicative of future periods.

Liquidity and Capital Resources

The following table sets forth, for the periods indicated, the Company’s net cash flows used in operating, investing and financing activities, its period end cash and cash equivalents and other operating measures:

	For the three months ended
	September 30,
	2018			2017
	(dollars in thousands)
Net cash provided by operating activities	$	593		$	1,604
Net cash used in investing activities	$	(26	)	$	(107	)
Net cash used in financing activities	$	(430	)	$	(1,345	)
Cash at end of period	$	365		$	284

At September 30, 2018 our working capital was approximately $1,157 and at June 30, 2018, we had a working capital deficit of $4,026. The increase of $1,579 in our current assets and a decrease in our current liabilities of $3,604, resulted in a net increase in our working capital of $5,183 since June 30, 2018.

Operating Activities

Net cash provided by operating activities of $593 in the three months ended September 30, 2018, includes net income of approximately $159. After excluding the effects of non-cash expenses, including depreciation and amortization, and changes in the fair value of derivative liabilities and deferred tax assets, the adjusted cash provided from operations before the effect of the changes in working capital components was $289. Net cash provided in our operations in the three months ended September 30, 2018 from our working capital assets and liabilities in the amount of approximately $304 was primarily the result of cash provided from a decrease in our accounts receivable of $415 and an aggregate increase accounts payable, accrued expenses and other liabilities of $1,791, offset in part, by an increase in inventories of approximately $1,858.

Net cash provided by operating activities of $1,604 in the three months ended September 30, 2017, includes a net loss of approximately $179. After excluding the effects of non-cash expenses, including depreciation and amortization, and changes in the fair value of derivative liabilities, deferred tax assets and impairment charge on our investment in iBio, Inc., the adjusted cash provided from operations before the effect of the changes in working capital components was $98. Net cash provided in our operations in the three months ended September 30, 2017 from our working capital assets and liabilities in the amount of approximately $1,506 was primarily the result of decreases in accounts receivable and inventories of $1,347 and $603, respectively, offset by a net increase in accounts payable and accrued expenses and other liabilities of approximately $431.

-22-

Investing Activities

Cash used in investing activities in the three months ended September 30, 2018 and 2017, of approximately $26 and $107, respectively, was used primarily for the purchase of machinery and equipment of $18 and $107, respectively.

Financing Activities

Cash used in financing activities was approximately $430 for the three months ended September 30, 2018, and was from repayments of advances under our revolving credit facility of $10,400 and principal payments under our term notes in the amount of $184, offset by advances under our revolving credit facility offset of approximately $10,204.

Cash used in financing activities was approximately $1,345 for the three months ended September 30, 2017, and was from repayments of advances under our revolving credit facility of $10,768 and principal payments under our term notes in the amount of $544 offset by advances under our revolving credit facility offset of approximately $9,997.

As of September 30, 2018, we had cash of $365, funds available under our revolving credit facility of approximately $1,577 and working capital of approximately $1,157. Our working capital includes $4,699 outstanding under our revolving line of credit which is not due until February 2020 but classified as current due to a subjective acceleration clause that could cause the advances to become currently due. (See Note 4 to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q). Additionally, we had income from operations of approximately $405 in the three months ended September 30, 2018 and going forward we will have an annual interest cost savings of approximately $321 as a result of the conversion of the CD Convertible Note into equity at the election of CD Financial in July 2018. After taking into consideration our interim results and current projections, management believes that operations, together with the revolving credit facility will support our working capital requirements at least through the period ending November 9, 2019.

Our total annual commitments at September 30, 2018 for long term non-cancelable leases of approximately $565 consists of obligations under operating leases for facilities and operating lease agreements for the rental of warehouse equipment, office equipment and automobiles.

On May 15, 2012, Cedarburg Pharmaceuticals, Inc. ("Cedarburg") sent us a letter (the "Demand Letter") setting forth a demand for indemnification under the Stock Purchase Agreement, dated March 17, 2009 (the "Cedarburg SPA"), by and among Cedarburg, InB: Hauser Pharmaceutical Services, Inc., InB: Paxis Pharmaceuticals, Inc. and the Company. In the Demand Letter, Cedarburg demanded payment by us of $600 in respect of the Company's indemnification obligations under the Cedarburg SPA. In addition, in the Demand Letter, Cedarburg informed us that there are also environmental issues pending which may lead to additional costs to Cedarburg which will likely be in excess of $300.

On May 30, 2012, we sent a letter responding to the Demand Letter and setting forth our position that we have no obligation to indemnify Cedarburg as demanded. On June 18, 2012, Cedarburg responded to our letter and, on July 27, 2012, we sent another letter to Cedarburg reiterating our position that we have no obligation to indemnify Cedarburg as demanded. On December 18, 2012, Cedarburg responded to our letter and, on January 15, 2013, we sent another letter to Cedarburg reiterating our position that we have no obligation to indemnify Cedarburg as demanded. As of November 9, 2018, we have not received any further communication from Cedarburg with respect to its demand for indemnification as set forth in the Demand Letter. We intend to vigorously contest Cedarburg's demand as set forth in the Demand Letter.

-23-

Capital Expenditures

The Company's capital expenditures for the three months ended September 30, 2018 and 2017 were approximately $18 and $107, respectively. The Company has budgeted approximately $500 for capital expenditures for fiscal year 2019. The total amount is expected to be funded from lease financing and cash provided from the Company’s operations.

Off-Balance Sheet Arrangements

The Company has no off-balance sheet arrangements.

Recent Accounting Pronouncements

None.

Impact of Inflation

The Company does not believe that inflation has significantly affected its results of operations.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

Item 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed by the Company in the reports it files or submits under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized, and reported within the time periods specified by the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to provide reasonable assurance that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, the Company has evaluated the effectiveness of its disclosure controls and procedures (as such term is defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) as of September 30, 2018, and, based upon this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that these controls and procedures are effective in providing reasonable assurance of compliance.

Changes in Internal Control over Financial Reporting

No change in our internal control over financial reporting occurred during the three months ended September 30, 2018 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

-24-

PART II – OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

From time to time, we may become involved in various lawsuits and legal proceedings that arise in the ordinary course of business. However, litigation is subject to inherent uncertainties and an adverse result in these or other matters may arise from time to time that may harm our business.  We are currently not aware of any such legal proceedings or claims that we believe will have a material adverse effect on our business, financial condition or operating results.

Item 1A. Risk Factors

Not Applicable.

Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Recent Sales of Unregistered Securities

On July 31, 2018, the Company issued 8,230,769 Common Shares to CD Financial, LLC (“CD Financial”). The Common Shares were issued upon the exercise by CD Financial of its conversion right pursuant to the CD SPA and in accordance with Section 3 (b) of the CD Convertible Note in the principal amount of approximately $5,350. The CD Convertible Note was convertible at the option of CD Financial into Common Shares at a conversion price of $0.65 per share, subject to customary adjustments. CD Financial exercised its conversion right with respect to the entire principal amount due under the CD Convertible Note. The Common Shares issued to CD Financial were issued at a conversion price of $0.65 per Common Share.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

During the quarter ended September 30, 2018, neither we nor any “affiliated purchaser,” as that term is defined in Rule 10b-18(a)(3) under the Exchange Act, purchased any of our registered equity securities.

Item 3. DEFAULTS UPON SENIOR SECURITIES

None.

Item 4. MINE SAFETY DISCLOSURE

Not Applicable.

Item 5. OTHER INFORMATION

None.

-25-

Item 6. EXHIBITS

(a)     Exhibits

Exhibit

Number

31.1	Certification of pursuant to Section 302 of Section 302 of the Sarbanes-Oxley Act of 2002 by Chief Executive Officer.
31.2	Certification of pursuant to Section 302 of Section 302 of the Sarbanes-Oxley Act of 2002 by Chief Financial Officer.
32.1	Certification of periodic financial report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by Chief Executive Officer.
32.2	Certification of periodic financial report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by Chief Financial Officer.
101	The following financial information from Integrated BioPharma, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2018, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Statements of Operations for the three months ended September 30, 2018 and 2017, (ii) Condensed Consolidated Balance Sheets as of September 30, 2018 and June 30, 2018, (iii) Condensed Consolidated Statement of Changes in Stockholders’ (Deficit) Equity for the three months ended September 30, 2018, (iv) Condensed Consolidated Statements of Cash Flows for the three months ended September 30, 2018 and 2017, and (iv) the Notes to Condensed Consolidated Financial Statements.

-26-

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

INTEGRATED BIOPHARMA, INC.

Date:     November 9, 2018     By: /s/ E Gerald Kay

      E, Gerald Kay,

      President and Chief Executive Officer

Date:     November 9, 2018     By: /s/ Dina L. Masi

      Dina L. Masi,

       Chief Financial Officer & Senior Vice President

-27-

EX-31.1

Exhibit 31.1

Certification of Chief Executive Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, E. Gerald Kay certify that:

1.         I have reviewed this quarterly report on Form 10-Q of Integrated BioPharma, Inc.;

2.         Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.         Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.         The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting.

5.         The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: November 9, 2018	By: /s/ E. Gerald Kay
	Name: E. Gerald Kay
	Title: President and Chief Executive Officer

EX-31.2

Exhibit 31.2

Certification of Chief Financial Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Dina L. Masi, certify that:

1.         I have reviewed this quarterly report on Form 10-Q of Integrated BioPharma, Inc.;

2.         Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.         Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.         The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting.

5.         The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: November 9, 2018	By: /s/ Dina L. Masi
	Name: Dina L. Masi
	Title: Chief Financial Officer & Senior Vice President

EX-32.1

Exhibit 32.1

CERTIFICATION OF PERIODIC REPORT

As adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report on Form 10-Q for the first quarter ended September 30, 2018 of Integrated BioPharma, Inc. (the “Company”) as filed with the Securities and Exchange Commission on the date hereof (the “Report”), E. Gerald Kay, the President and Chief Executive Officer of Integrated BioPharma, Inc. certifies, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that to his knowledge:

(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

This certification accompanies the Report pursuant to Section 906 of Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

A signed original of this written statement has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

Dated:  November 9, 2018	By: /s/ E. Gerald Kay
	E. Gerald Kay
	President and Chief Executive Officer

EX-32.2

Exhibit 32.2

CERTIFICATION OF PERIODIC REPORT

As adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report on Form 10-Q for the first quarter ended September 30, 2018 of Integrated BioPharma, Inc. (the “Company”) as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Dina L. Masi, the Senior Vice President and Chief Financial Officer of Integrated BioPharma, Inc. certifies, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that to her knowledge:

(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

This certification accompanies the Report pursuant to Section 906 of Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

A signed original of this written statement has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

Dated:  November 9, 2018	By: /s/ Dina L. Masi
	Dina L. Masi
	Chief Financial Officer & Senior Vice President

XML

Document And Entity Information - shares	3 Months Ended
	Sep. 30, 2018	Nov. 09, 2018
Document Information [Line Items]
Entity Registrant Name	INTEGRATED BIOPHARMA INC
Entity Central Index Key	0001016504
Trading Symbol	inbp
Current Fiscal Year End Date	--06-30
Entity Filer Category	Non-accelerated Filer
Entity Current Reporting Status	Yes
Entity Emerging Growth Company	false
Entity Small Business	true
Entity Common Stock, Shares Outstanding (in shares)		29,365,943
Document Type	10-Q
Document Period End Date	Sep. 30, 2018
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q1
Amendment Flag	false

XML

Condensed Consolidated Statements of Operations (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
Sales, net	$ 10,304	$ 9,770
Cost of sales	9,085	8,765
Gross profit	1,219	1,005
Selling and administrative expenses	814	794
Operating income	405	211
Other income (expense), net:
Interest expense	(200)	(233)
Change in fair value of derivative liabilities	9	(118)
Impairment on investment in iBio, Inc.		(83)
Total other expense, net	(191)	(434)
Income (loss) before income taxes	214	(223)
Income tax expense (benefit), net	55	(44)
Net income (loss)	$ 159	$ (179)
Basic net income (loss) per common share (in dollars per share)	$ 0.01	$ (0.01)
Diluted net income (loss) per common share (in dollars per share)	$ 0.01	$ (0.01)
Weighted average common shares outstanding - basic (in shares)	27,218,786	21,135,174
Add: Equivalent shares outstanding - Stock Options (in shares)	744,818
Shares issuable upon conversion of Convertible Debt - CD Financial, LLC (in shares)	8,230,769
Weighted average common shares outstanding - diluted (in shares)	27,963,604	21,135,174

XML

Condensed Consolidated Balance Sheets (Current Period Unaudited) - USD ($) $ in Thousands	Sep. 30, 2018	Jun. 30, 2018
Current Assets:
Cash	$ 365	$ 228
Accounts receivable, net	3,381	3,796
Inventories	9,600	7,741
Other current assets	387	389
Total current assets	13,733	12,154
Property and equipment, net	1,604	1,651
Right-of-use assets	3,626
Deferred tax assets, net	640	671
Security deposits and other assets	121	92
Total Assets	19,724	14,568
Current Liabilities:
Advances under revolving credit facility	4,699	4,894
Accounts payable (includes $77 and $141 due to related party)	6,044	4,184
Accrued expenses and other current liabilities	982	1,060
Current portion of long term debt, net	851	773
Current portion - Subordinated convertible note, net - CD Financial, LLC		5,269
Total current liabilities	12,576	16,180
Operating lease obligations	3,634
Long term debt, net	3,319	3,624
Total liabilities	19,529	19,804
Commitments and Contingencies
Stockholders' Equity (Deficiency):
Common Stock, $0.002 par value; 50,000,000 shares authorized; 29,400,843 and 21,170,074 shares issued, respectively 29,365,943 and 21,135,174 shares outstanding, respectively	59	42
Additional paid-in capital	50,028	44,773
Accumulated deficit	(49,793)	(49,952)
Less: Treasury stock, at cost, 34,900 shares	(99)	(99)
Total Stockholders' Equity (Deficiency)	195	(5,236)
Total Liabilities and Stockholders' Equity (Deficiency)	19,724	14,568
Vitamin Realty LLC [Member]
Current Assets:
Right-of-use assets	3,561
Current Liabilities:
Operating lease obligations	3,569
Unrelated Party [Member]
Current Assets:
Right-of-use assets	65
Current Liabilities:
Operating lease obligations	$ 65

XML

Condensed Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - USD ($) $ in Thousands	Sep. 30, 2018	Jun. 30, 2018
Accounts payable, due to related parties	$ 77	$ 141
Common stock, par value (in dollars per share)	$ 0.002	$ 0.002
Common stock, share authorized (in shares)	50,000,000	50,000,000
Common stock, shares issued (in shares)	29,400,843	21,170,074
Common stock, shares outstanding (in shares)	29,365,943	21,135,174
Treasury stock, shares aquired (in shares)	34,900	34,900

XML

Condensed Consolidated Statements of Stockholders' (Deficiency) Equity (Unaudited) - 3 months ended Sep. 30, 2018 - USD ($) $ in Thousands	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	Treasury Stock [Member]	Total
Balance (in shares) at Jun. 30, 2018	21,170,074			34,900
Balance at Jun. 30, 2018	$ 42	$ 44,773	$ (49,952)	$ (99)	$ (5,236)
CD Financial, LLC Convertible Note, net (in shares)	8,230,769
CD Financial, LLC Convertible Note, net	$ 17	5,255			5,272
Net income (loss)			159		159
Balance (in shares) at Sep. 30, 2018	29,400,843			34,900
Balance at Sep. 30, 2018	$ 59	$ 50,028	$ (49,793)	$ (99)	$ 195

XML

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
Cash flows provided by operating activities:
Net income (loss)	$ 159	$ (179)
from operating activities:
Depreciation and amortization	91	100
Accretion of financing instruments and other non cash interest	17	26
Stock based compensation		4
Change in deferred tax assets	31	(54)
Impairment on investment in iBio, Inc.		83
Change in fair value of derivative liabilities	(9)	118
Changes in operating assets and liabilities:
Accounts receivable	415	1,347
Inventories	(1,858)	603
Other current assets	8	35
Operating lease right of use assets	112
Security deposits and other assets	(52)	(48)
Accounts payable	1,861	(455)
Accrued expenses and other liabilities	(70)	24
Operating lease liabilities	(112)
Net cash provided by operating activities	593	1,604
Cash flows from investing activities:
Purchase of property and equipment	(18)	(107)
Cash contribution in AgroSport LLC	(8)
Net cash used in investing activities	(26)	(107)
Cash flows from financing activities:
Advances under revolving credit facility	10,204	9,997
Repayments of advances under revolving credit facility	(10,400)	(10,768)
Repayments under term note payables	(184)	(544)
Repayments under capitalized lease obligations	(50)	(30)
Net cash used in financing activities	(430)	(1,345)
Net increase in cash	137	152
Cash at beginning of period	228	132
Cash at end of period	365	284
Interest paid	201	198
Income taxes paid	$ 2

XML

Note 1 - Principles of Consolidation and Basis of Presentation

3 Months Ended

Sep. 30, 2018

Notes to Financial Statements

Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]

Note

1.

Principles of Consolidation and Basis of Presentation

Basis of Presentation of Interim Financial Statements

The accompanying condensed consolidated financial statements for the interim periods are unaudited and include the accounts of Integrated BioPharma, Inc., a Delaware corporation (together with its subsidiaries, the “Company”). The interim condensed consolidated financial statements have been prepared in conformity with Rule

8

-

03

of Regulation S-

X

of the Securities and Exchange Commission (“SEC”) and therefore do

not

include information or footnotes necessary for a complete presentation of financial position, results of operations and cash flows in conformity with accounting principles generally accepted in the United States of America. However, all adjustments (consisting only of normal recurring adjustments) which are, in the opinion of management, necessary for a fair presentation of the financial position and operating results for the periods presented have been included. These condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto, together with Management’s Discussion and Analysis of Financial Condition and Results of Operations, contained in the Company’s Annual Report on Form

10

-K for the fiscal year ended

June 30, 2018 (

“Form

10

-K”), as filed with the SEC. The

June 30, 2018

balance sheet was derived from audited financial statements, but does

not

include all disclosures required by accounting principles generally accepted in the United States of America. The results of operations for the

three

months ended

September 30, 2018

are

not

necessarily indicative of the results for the full fiscal year ending

June 30, 2019

or for any other period.

Nature of Operations

The Company is engaged primarily in manufacturing, distributing, marketing and sales of vitamins, nutritional supplements and herbal products. The Company’s customers are located primarily in the United States, Luxembourg and Canada. The Company was previously known as Integrated Health Technologies, Inc. and, prior to that, as Chem International, Inc. The Company was reincorporated in its current form in Delaware in

1995.

The Company continues to do business as Chem International, Inc. with certain of its customers and certain vendors.

The Company’s business segments include: (a) Contract Manufacturing operated by InB:Manhattan Drug Company, Inc. (“MDC”), which manufactures vitamins and nutritional supplements for sale to distributors, multilevel marketers and specialized health-care providers; (b) Branded Proprietary Products operated by AgroLabs, Inc. (“AgroLabs”), which distributes healthful nutritional products for sale through major mass market, grocery and drug and vitamin retailers, under the following brands: Naturally Noni, Peaceful Sleep, Green Envy, FiberCal, Wheatgrass and other products which are being introduced into the market (these are referred to as our branded proprietary nutraceutical business and/or products); and (c) Other Nutraceutical Businesses which includes the operations of (i) The Vitamin Factory (the “Vitamin Factory”), which sells private label MDC products, as well as our AgroLabs products, through the Internet, (ii) IHT Health Products, Inc. (“IHT”) a distributor of fine natural botanicals, including multi minerals produced under a license agreement, (iii) MDC Warehousing and Distribution, Inc., a service provider for warehousing and fulfilment services and (iv) Chem International, Inc. (“Chem”), a distributor of certain raw materials for DSM Nutritional Products LLC.

Accounting Policies

Accounting Pronouncements Recently Adopted

In

May 2014,

the FASB issued ASU

2014

-

09,

“Revenue from Contracts with Customers”, Topic

606.

This update affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets, unless those contracts are within the scope of other standards. The guidance in this update supersedes the revenue recognition requirements in Topic

605,

Revenue Recognition and most industry-specific guidance.

The core principle of the guidance is that an entity should recognize revenue to illustrate the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new guidance also includes a cohesive set of disclosure requirements that will provide users of financial statements with comprehensive information about the nature, amount, timing, and uncertainty of revenue and cash flows arising from a reporting organization’s contracts with customers.  During

2016,

the FASB issued several accounting updates (ASU

No.

2016

-

08,

2016

-

10

and

2016

-

12

) to clarify implementation guidance and correct unintended application of the guidance. The standard allows for either “full retrospective” adoption, meaning the standard is applied to all of the periods presented, or “modified retrospective” adoption, meaning the standard is applied only to the most current period presented in the financial statements.  This new guidance was effective for the Company beginning on

July 1, 2018, 

and Note

8

provides the related disaggregated revenue disclosures.  The adoption of this standard using the modified retrospective approach did

not

have a material impact on the Company’s revenue recognition accounting policy or its Condensed Consolidated Financial Statements.

In

January 2016,

the FASB issued ASU

No.

2016

-

01,

Financial Instruments – Overall, (Subtopic

825

-

10

) “Recognition and Measurement of Financial Assets and Financial Liabilities”, which addresses certain aspects of recognition, measurement, presentation and disclosure of financial instruments. Under this guidance, companies have to measure equity investments, except those accounted for under the equity method, at fair value and recognize changes in fair value in net income. The adoption of this standard on

July 1, 2018,

by Company did

not

have a material effect on its Condensed Consolidated Financial Statements.

In

February 2016,

the FASB issued ASU

No.

2016

-

02,

Leases (Topic

842

), a new standard related to leases to increase transparency and comparability among organizations by requiring the recognition of right-of-use (“ROU”) assets and lease liabilities on the balance sheet. Most prominent among the changes in the standard is the recognition of ROU assets and lease liabilities by lessees for those leases classified as operating leases under current U.S. GAAP. Under the standard, disclosures are required to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. We will be required to recognize and measure leases existing at, or entered into after, the beginning of the earliest comparative period presented using a modified retrospective approach, with certain practical expedients available.

The standard will be effective for us beginning

July 1, 2019,

with early adoption permitted. We elected to early adopt the standard effective

July 1, 2018.

We elected the available practical expedients on adoption. In preparation for adoption of the standard, we have implemented internal controls and key system functionality to enable the preparation of financial information. The standard had a material impact on our consolidated balance sheets, but did

not

have a material impact on our consolidated income statements. The most significant impact was the recognition of ROU assets and lease liabilities for operating leases, while our accounting for capital leases remained substantially unchanged.

Adoption of this standard resulted in the recognition of additional ROU assets and lease liabilities for operating leases and had the following impact to the reported results as of

June 30, 2018

on our condensed consolidated financial statements:

Consolidated Statement of Financial Condition	As Reported		New Lease Standard Adjustment		As Adjusted
Operating lease right-of-use assets	$	-	$	69	$	69
Operating lease right-of-use assets - Vitamin Realty, LLC		-		3,668		3,668
Operating lease liabilities		-		69		69
Operating lease liabilities - Vitamin Realty, LLC		-		3,677		3,677
Current portion of long term debt, net		773		-		773
Long term debt, net		3,624		-		3,624
Current portion - Subordinated convertible
note, net - CD Financial, LLC		5,269		-		5,269

In

August, 2016,

the FASB issued ASU

No.

2016

-

15,

“Statement of Cash Flows (Topic

230

): Classification of Certain Cash Receipts and Cash Payments,” which clarifies how certain cash receipts and payments are to be presented in the statement of cash flows. The guidance was effective for the Company on

July 1, 2018

and did

not

have a material impact on the Company’s Condensed Consolidated Financial Statements.

Aside from the adoption of ASUs, as described above and the Leases policy described below, there have been

no

material changes during fiscal year

2019

in the Company’s significant accounting policies to those previously disclosed in the Company’s Annual Report on Form

10

-K for the fiscal year ended

June 30, 2018.

Significant Accoun

ting P

olicies

Sales. 

The Company recognizes sales revenue, net of estimated sales returns and allowances, at the time it sells its products to the customer.  The timing of a sale is determined when the product’s title and risk of loss transfers to the customer.  The Company’s sales policy requires the customer to provide the Company with purchase orders with agreed upon selling prices and shipping terms.

Other Income. 

The Company recognizes revenue from service transactions at the time the service is performed and collection from the counter party is expected. Generally, revenue from services is classified as a component of other income (expense), net in the Company's Condensed Consolidated Statements of Operations when it relates to professional services and in sales, net when it relates to warehousing and distribution services.

Leases.

We determine if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets, other current liabilities, and operating lease liabilities on our consolidated balance sheets. Finance leases are included in property and equipment, current portion of long term debt, and long-term debt obligation on our consolidated statement of financial condition.  

Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most of our leases do

not

provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. The operating lease ROU asset also includes any lease payments made and excludes lease incentives and initial direct costs incurred. Our lease terms

may

include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.

We have lease agreements with lease and non-lease components, which are generally accounted for separately. For certain equipment leases, such as vehicles, we account for the lease and non-lease components as a single lease component.

Earnings Per Share.

Basic earnings per common share amounts are based on weighted average number of common shares outstanding. Diluted earnings per share amounts are based on the weighted average number of common shares outstanding, plus the incremental shares that would have been outstanding upon the assumed exercise of all potentially dilutive stock options, warrants and convertible debt, subject to anti-dilution limitations using the treasury stock method and if converted method.

The following options and potentially dilutive shares for convertible note payable (See Note

4.

Senior Credit Facility, Subordinated Convertible Note, net - CD Financial, LLC and other Long Term Debt) were

not

included in the computation of weighted average diluted common shares outstanding as the effect of doing so would be anti-dilutive for the

three

months ended

September 30, 2018

and

2017:

	Three Months Ended
	September 30,
	2018		2017
Anti-dilutive stock options		150,000		2,692,017
Anti-dilutive shares for convertible notes payable		-		8,230,769
Total anti-dilutive shares		150,000		10,922,786

Additionally, in the

three

months ended

September 30, 2018,

the

8,230,769

common shares underlying the convertible note were potentially dilutive and therefore included in the diluted earnings per share calculation on a proportionate basis prior to the conversion into common shares of the Company as of

July 24, 2018

and the results were antidilutive. (See Note

4.

Senior Credit Facility, Subordinated Convertible Note, net - CD Financial, LLC and other Long Term Debt).

XML

Note 2 - Inventories

3 Months Ended

Sep. 30, 2018

Notes to Financial Statements

Inventory Disclosure [Text Block]

Note

2

. Inventories

Inventories are stated at the lower of cost or net realizable value using the

first

-in,

first

-out method and consist of the following:

	September 30,		June 30,
	2018		2018
Raw materials	$	6,409	$	4,179
Work-in-process		2,131		2,207
Finished goods		1,060		1,355
Total	$	9,600	$	7,741

XML

Note 3 - Property and Equipment, Net

3 Months Ended

Sep. 30, 2018

Notes to Financial Statements

Property, Plant and Equipment Disclosure [Text Block]

Note

3

. Property and Equipment, net

Property and equipment, net consists of the following:

	September 30,			June 30,
	2018			2018
Land and building	$	1,250		$	1,250
Leasehold improvements		1,268			1,268
Machinery and equipment		5,931			5,917
Transportation equipment		6			6
		8,455			8,441
Less: Accumulated depreciation
and amortization		(6,851	)		(6,790	)
Total	$	1,604		$	1,651

Depreciation and amortization expense recorded on property and equipment for the

three

months ended

September 30, 2018

and

2017

was

$66

and

$75,

respectively.

XML

Note 4 - Senior Credit Facility, Subordinated Convertible Note, Net - CD Financial, LLC and Other Long Term Debt

3 Months Ended

Sep. 30, 2018

Notes to Financial Statements

Debt Disclosure [Text Block]

Note

4

.

Senior Credit Facility, Subordinated Convertible Note, net - CD Financial, LLC and other Long Term Debt

As of

September 30, 2018

and

June 30, 2018,

the Company had the following debt outstanding:

	Principal Amount						Interest Rate			Maturity Date
	As of    September 30, 2018			As of             June 30, 2018
Revolving advances under Senior Credit
Facility with PNC Bank, National Association	$	4,699		$	4,894			5.25	%	2/19/2020
Installment Note with PNC Bank		1,511			1,672			5.75	%	2/19/2020
Installment Note with PNC Equipment Finance		78			101			4.57	%	7/29/2019
Promissory Note with CD Financial, LLC		1,714			1,714			6.00	%	2/29/2020
Promissory Note with Vitamin Realty, LLC		686			686			4.00	%	2/29/2020
Capitalized lease obligations		220			269			3.86% -9.26%		3/17/2019-12/8/2020
Total outstanding debt		8,908			9,336
Less: Revolving Advances		(4,699	)		(4,894	)
Prepaid financing costs		(39	)		(45	)
Current portion of long term debt, net		(851	)		(773	)
Long term debt, net	$	3,319		$	3,624
Convertible Note payable - CD Financial, LLC	$	-		$	5,350			6.00	%	7/24/2018
Less: Discount for embedded derivative		-			(66	)
Prepaid financing costs		-			(15	)
Convertible Note payable, net - CD Financial, LLC	$	-		$	5,269

SENIOR CREDIT FACILITY

On

February 19, 2016,

the Company, MDC, AgroLabs, IHT, IHT Properties Corp. (“IHT Properties”) and Vitamin Factory (collectively, the “Borrowers”) amended the Revolving Credit, Term Loan and Security Agreement (the “Amended Loan Agreement”) with PNC Bank, National Association as agent and lender (“PNC”) and the other lenders party thereto entered into on

June 27, 2012.

The Amended Loan Agreement provides for a total of

$11,422

in senior secured financing (the “Senior Credit Facility”) as follows: (i) discretionary advances (“Revolving Advances”) based on eligible accounts receivable and eligible inventory in the maximum amount of

$8,000

(the “Revolving Credit Facility”) and (ii) a term loan in the amount of

$3,422

(the “Term Loan”). The Senior Credit Facility is secured by all assets of the Borrowers, including, without limitation, machinery and equipment, real estate owned by IHT Properties, and common stock of iBio owned by the Company. Revolving Advances bear interest at PNC’s Base Rate or the Eurodollar Rate, at Borrowers’ option, plus

2.75%

(

5.25%

and

5.00%

as of

September 30

and

June 30, 2018,

respectively). The Term Loan bears interest at PNC’s Base Rate or the Eurodollar Rate, at Borrowers’ option, plus

3.25%

(

5.75%

and

5.50%

as of

September 30

and

June 30, 2018,

respectively). Upon and after the occurrence of any event of default under the Amended Loan Agreement, and during the continuation thereof, interest shall be payable at the interest rate then applicable plus

2%.

The Senior Credit Facility matures on

February 19, 2020 (

the “Senior Maturity Date”).

The principal balance of the Revolving Advances is payable on the Senior Maturity Date, subject to acceleration, based upon a material adverse event clause, as defined, subjective accelerations for borrowing base reserves, as defined or upon the occurrence of any event of default under the Amended Loan Agreement or earlier termination of the Amended Loan Agreement pursuant to the terms thereof. The Term Loan shall be repaid in

eighty-four

(

84

) consecutive monthly installments of principal, the

first

eighty-three

(

83

) of which shall be in the amount of

$41,

commencing on the

first

business day of

March, 2016,

and continuing on the

first

business day of each month thereafter, with a final payment of any unpaid balance of principal and interest payable on the Senior Maturity Date. The foregoing is subject to customary mandatory prepayment provisions and acceleration upon the occurrence of any event of default under the Amended Loan Agreement or earlier termination of the Amended Loan Agreement pursuant to the terms thereof.

The Revolving Advances are subject to the terms and conditions set forth in the Amended Loan Agreement and are made in aggregate amounts at any time equal to the lesser of (

x

)

$8.0

million or (y) an amount equal to the sum of: (i) up to

85%,

subject to the provisions in the Amended Loan Agreement, of eligible accounts receivables (“Receivables Advance Rate”), plus (ii) up to the lesser of (A)

75%,

subject to the provisions in the Amended Loan Agreement, of the value of the eligible inventory (“Inventory Advance Rate” and together with the Receivables Advance Rate, collectively, the “Advance Rates”), (B)

85%

of the appraised net orderly liquidation value of eligible inventory (as evidenced by the most recent inventory appraisal reasonably satisfactory to PNC in its sole discretion exercised in good faith) and (C) the inventory sublimit in the aggregate at any

one

time (“Inventory Advance Rate” and together with the Receivables Advance Rate, collectively, the “Advance Rates”), minus (iii) the aggregate Maximum Undrawn Amount of all outstanding Letters of Credit, minus (iv) such reserves as PNC

may

reasonably deem proper and necessary from time to time.

The Amended Loan Agreement contains customary mandatory prepayment provisions, including, without limitation the requirement to use any sales proceeds from the sale of iBio Stock to repay the Term Loan and to prepay the outstanding amount of the Term Note in an amount equal to

twenty-five

percent (

25%

) of Excess Cash Flow for each fiscal year commencing with the fiscal year ended

June 30, 2016,

payable upon delivery of the financial statements to PNC referred to in and required by the Amended Loan Agreement for such fiscal year but in any event

not

later than

one hundred twenty

(

120

) days after the end of each such fiscal year, which amount shall be applied ratably to the outstanding principal installments of the Term Loan in the inverse order of the maturities thereof.

The Amended Loan Agreement also contains customary representations and warranties, covenants and events of default, including, without limitation, (i) a fixed charge coverage ratio maintenance requirement and (ii) an event of default tied to any change of control as defined in the Amended Loan Agreement. As of

September 30, 2018,

the Company was in compliance with the fixed charge coverage ratio maintenance requirement and with the required annual payments of

25%

of the Excess Cash Flow for each fiscal year commencing with the fiscal year ended

June 30, 2016.

In connection with the Senior Credit Facility, PNC and CD Financial entered into the Intercreditor and Subordination Agreement (the “Intercreditor Agreement”), which was acknowledged by the Borrowers, pursuant to which, among other things, (a) the lien of CD Financial on assets of the Borrowers is subordinated to the lien of PNC on such assets during the effectiveness of the Senior Credit Facility, and (b) priorities for payment of the debt for the Company and its subsidiaries (as described in this Note

4

) are established.

In addition, in connection with the Senior Credit Facility, the following loan documents were executed: (i) a Stock Pledge Agreement with PNC, pursuant to which the Company pledged to PNC the iBio Stock; (ii) a Mortgage and Security Agreement with PNC with IHT Properties; and (iii) an Environmental Indemnity Agreement with PNC.

CD FINANCIAL, LLC

On

June 27, 2012,

the Company also entered into an Amended and Restated Securities Purchase Agreement (the “CD SPA”) with CD Financial, which amended and restated the Securities Purchase Agreement, dated as of

February 21, 2008,

between the Company and CD Financial, pursuant to which the Company issued to CD Financial a

9.5%

Convertible Senior Secured Note in the original principal amount of

$4,500

(the “Original CD Note”). Pursuant to the CD SPA, the Company issued to CD Financial (i) the Amended and Restated Convertible Promissory Note in the principal amount of

$5,350

(the “CD Convertible Note”) and (ii) the Promissory Note in the principal amount of

$1,714

(the “Liquidity Note”, and collectively with the CD Convertible Note, the “CD Notes”). The CD Notes had an original maturity date of

July 7, 2017,

however, on

February 19, 2016,

the CD Notes were amended to extend the maturity date thereof to

February

29,

2020.

The CD Notes are secured by all assets of the Borrowers, including, without limitation, machinery and equipment, real estate owned by IHT Properties, and iBio Stock owned by the Company. The CD Notes bear interest at an annual rate of

6%

and have a default rate of

10%.

The CD Convertible Note is convertible at the option of CD Financial into common stock of the Company at a conversion price of

$0.65

per share, subject to customary adjustments including conversion price protection provisions.

Pursuant to the terms of the Amended Loan Agreement and the Intercreditor Agreement, during the effectiveness of the Senior Credit Facility, (i) the principal of the CD Convertible Note

may

not

be repaid, (ii) the principal of the Liquidity Note

may

only be repaid if certain conditions under the Amended Loan Agreement are satisfied, and (iii) interest in respect of the CD Notes

may

only be paid if certain conditions under the Intercreditor Agreement are satisfied.

The CD SPA contains customary representations and warranties, covenants and events of default, including, without limitation, an event of default tied to any change of control as defined in the CD SPA.

In connection with the CD SPA, the Borrowers entered into an Amended and Restated Security Agreement and Amended and Restated Subsidiary Guaranty.

 

On

July 31, 2018,

the Company authorized the issuance of

8,230,769

shares of the Company’s common stock (“Common Shares”) to CD Financial. The Common Shares were issued upon the exercise by CD Financial of its conversion right pursuant to the CD SPA and in accordance with Section

3

(b) of the CD Convertible Note. The CD Convertible Note was convertible at the option of CD Financial into Common Shares at a conversion price of

$0.65

per share, subject to customary adjustments. CD Financial exercised its conversion right with respect to the entire principal amount due under the CD Convertible Note. The Common Shares issued to CD Financial were issued at a conversion price of

$0.65

per Common Share.

As of

June 30, 2018,

the related embedded derivative liability with respect to conversion price protection provisions on the CD Convertible Note had an estimated fair value of

$9

and as of

September 30, 2018

had been extinguished in connection with the above described conversion exercise by CD Financial on

July 24, 2018. 

The Liquidity Note issued under the CD SPA remains outstanding.

OTHER LONG TERM DEBT

Related Party Debt.

On

June 27, 2012,

MDC and the Company entered into a promissory note with Vitamin Realty Associates, LLC (“Vitamin Realty”) in the principal amount of approximately

$686

(the “Vitamin Note”). The principal amount of the Vitamin Note represents the aggregate amount of unpaid, past due rent owing by MDC under the Lease Agreement, dated as of

January 10, 1997,

between MDC, as lessor, and Vitamin Realty, as landlord, pertaining to the real property located at

225

Long Avenue, Hillside, New Jersey. (See Note

6.

Commitments and Contingencies (a) Leases – Related Parties Leases). The Vitamin Note matures on

February

29,

2020,

as amended on

February 19, 2016.

The Vitamin Note accrues interest at an annual rate of

4%

per annum. Interest in respect of the Vitamin Note is payable on the

first

business day of each calendar month. Pursuant to the terms of the Amended Loan Agreement, during the effectiveness of the Senior Credit Facility, the Vitamin Note

may

only be repaid or prepaid if certain conditions set forth in the Amended Loan Agreement are satisfied.

XML

Note 5 - Significant Risks and Uncertainties

3 Months Ended

Sep. 30, 2018

Notes to Financial Statements

Concentration Risk Disclosure [Text Block]

Note

5.

Significant Risks and Uncertainties

(

a

) Major Customers.

For the

three

months ended

September 30, 2018

and

2017,

approximately

89%

and

91%

of consolidated net sales, respectively, were derived from

two

customers. These

two

customers are in the Company’s Contract Manufacturing Segment and represent approximately

61%

and

29%

and

63%

and

32%

in the

three

months ended

September 30, 2018

and

2017,

respectively. Accounts receivable from these

two

major customers represented approximately

89%

and

87%

of total net accounts receivable as of

September 30

and

June 30, 2018,

respectively.  The loss of any of these customers could have an adverse effect on the Company’s operations. Major customers are those customers who account for more than

10%

of net sales.

(

b

) Other Business Risks.

Approximately

67%

of the Company’s employees are covered by a union contract and are employed in its New Jersey facilities. The contract was renewed on

September 1, 2018

and will expire on

August 31, 2021.

XML

Note 6 - Leases and Other Commitments and Contingencies

3 Months Ended

Sep. 30, 2018

Notes to Financial Statements

Commitments and Contingencies Disclosure [Text Block]

Note

6.

Leases and other Commitments and Contingencies

(a) Leases. 

The Company has operating and finance leases for its corporate and sales offices, warehousing and packaging facilities and certain machinery and equipment, including office equipment.  The Company’s leases have remaining terms of less than

1

year to less than

8

years.

The components of lease expense for the

three

months ended

September 30, 2018

were as follows:

	Related Party - Vitamin Realty		Other Leases		Totals
Operating lease costs	$	-	$	19	$	19
Finance Operating Lease Costs:
Amortization of right-of use assets	$	107	$	5	$	112
Interest on operating lease liabilities		35		1		36
Total finance lease cost	$	142	$	6	$	148

Operating Lease Liabilities

Related Party

Operating

L

e

ase

Liabilities

.

Warehouse and office facilities are leased from Vitamin Realty, which is

100%

owned by the Company’s chairman, Chief Executive Officer and major stockholder and certain of his family members, who are also executive officers and directors of the Company. On

January 5, 2012,

MDC entered into a

second

amendment of lease (the “Second Lease Amendment”) with Vitamin Realty for its office and warehouse space in New Jersey increasing its rentable square footage from an aggregate of

74,898

square feet to

76,161

square feet and extending the expiration date to

January 31, 2026.

This Second Lease Amendment provides for minimum annual rental payments of

$533,

plus increases in real estate taxes and building operating expenses. On

May 19, 2014,

AgroLabs entered into an Amendment to the lease agreement entered into on

January 5, 2012,

with Vitamin Realty for an additional

2,700

square feet of warehouse space in New Jersey, the term of which was to expire on

January 31, 2019

to extend the expiration date to

January 1, 2024.

This additional lease provides for minimum lease payments of

$27

with annual increases plus the proportionate share of operating expenses.

Rent expense, lease amortization costs and interest expense for the

three

months ended

September 30, 2018

and

2017

on these leases were

$202

and

$201

respectively, and are included in cost of sales, selling and administrative expenses and interest expense in the accompanying Condensed Consolidated Statements of Operations. As of

September 30, 2018

and

June 30, 2018,

the Company had outstanding current obligations to Vitamin Realty of

$763

and

$827,

respectively, included in accounts payable, accrued expenses and other liabilities and long term debt in the accompanying Condensed Consolidated Balance Sheet. Additionally, the Company has operating lease obligations of

$3,569

with Vitamin Realty as noted in the accompany Condensed Consolidated Balance Sheet.

Other

Operating

Lease

Liabilities

.

The Company has entered into certain non-cancelable operating lease agreements expiring up through

May, 2023,

related to machinery and equipment and office equipment.

As of

September 30, 2018,

the Company’s right-of-use assets, lease obligations and remaining cash commitment on these leases is as follows:

	Right-of-use Assets		Operating Lease Obligations		Remaining Cash Commitment
Vitamin Realty Leases	$	3,561	$	3,569	$	4,092
Machinery and equipment leases		34		34		36
Office equipment leases		31		31		33
	$	3,626	$	3,634	$	4,161

The Company’s weighted average discount rate and remaining term on lease liabilities is approximately

3.76%

and

7.1

years, respectively.

Supplemental cash flows information related to leases for the

three

months ended

September 30, 2018

is as follows:

	Related Party - Vitamin Realty		Other Leases		Totals
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	-	$	19	$	19
Operating cash flows from finance leases		94		5		99
Financing cash flows from capital lease obligations		-		50		50

The Company did

not

enter into any lease commitments in the

three

months ended

September 30, 2018.

Maturities of operating lease liabilities as of

September 30, 2018

were as follows:

				Related Party
Year ending	Operating Lease			Operating Lease
June 30,	Commitment			Commitment			Total
2019, remaining	$	18		$	424		$	442
2020		22			565			587
2021		21			565			586
2022		8			565			573
2023		-			565			565
2024		-			564			564
Thereafter		-			844			844
Total minimum lease payments		69			4,092			4,161
Imputed interest		(4	)		(523	)		(527	)
Total	$	65		$	3,569		$	3,634

Total rent expense, lease amortization costs and interest expense, including real estate taxes and maintenance charges, was approximately

$239

and

$242

for the

three

months ended

September 30, 2018

and

2017,

respectively. Rent and lease amortization and interest expense is included in cost of sales, selling and administrative expenses and interest expense in the accompanying Condensed Consolidated Statements of Operations.

(

b

) Legal Proceedings.

The Company is subject, from time to time, to claims by

third

parties under various legal theories. The defense of such claims, or any adverse outcome relating to any such claims, could have a material adverse effect on the Company’s liquidity, financial condition and cash flows.

(c) Other Claims.

On

May 15, 2012,

Cedarburg Pharmaceuticals, Inc. ("Cedarburg") sent the Company a letter (the "Demand Letter") setting forth a demand for indemnification under the Stock Purchase Agreement, dated

March 17, 2009 (

the "Cedarburg SPA"), by and among Cedarburg, InB: Hauser Pharmaceutical Services, Inc., InB: Paxis Pharmaceuticals, Inc. and the Company. In the Demand Letter, Cedarburg demanded payment by the Company of

$600

in respect of the Company's indemnification obligations under the Cedarburg SPA. In addition, in the Demand Letter, Cedarburg informed the Company that there are also environmental issues pending which

may

lead to additional costs to Cedarburg which will likely be in excess of

$300.

On

May 30, 2012,

the Company sent a letter responding to the Demand Letter and setting forth the Company’s position that it has

no

obligation to indemnify Cedarburg as demanded. On

June 18, 2012,

Cedarburg responded to the Company’s letter and, on

July 27, 2012,

the Company sent another letter to Cedarburg reiterating its position that the Company has

no

obligation to indemnify Cedarburg as demanded. On

December 18, 2012,

Cedarburg responded to the Company’s letter and, on

January 15, 2013,

the Company sent another letter to Cedarburg reiterating its position that the Company has

no

obligation to indemnify Cedarburg as demanded. As of

November 9, 2018,

the Company has

not

received any further communication from Cedarburg with respect to its demand for indemnification as set forth in the Demand Letter. The Company intends to vigorously contest Cedarburg's demand as set forth in the Demand Letter.

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Note 7 - Related Party Transactions

3 Months Ended

Sep. 30, 2018

Notes to Financial Statements

Related Party Transactions Disclosure [Text Block]

Note

7.

Related Party Transactions

See Note

4.

Senior Credit Facility, Subordinated Convertible Note, net - CD Financial, LLC and other Long Term Debt for related party securities and debt transactions.

See Note

6

(a). Leases for related party lease transactions.

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Note 8 - Segment Information and Dissaggregated Revenue

3 Months Ended

Sep. 30, 2018

Notes to Financial Statements

Segment Reporting Disclosure [Text Block]

Note

8.

Segment Information and Disaggregated Revenue

The basis for presenting segment results generally is consistent with overall Company reporting. The Company reports information about its operating segments in accordance with GAAP which establishes standards for reporting information about a company’s operating segments.

The Company has divided its operations into

three

reportable segments as follows: Contract Manufacturing, Branded Proprietary Products and Other Nutraceutical Businesses. The international sales, concentrated primarily in Europe and Canada, for the

three

months ended

September 30, 2018

and

2017

were

$1,239

and

$1,658,

respectively.

Financial information relating to the

three

months ended

September 30, 2018

and

2017

operations by business segment and disaggregated revenues are as follows:

			Sales, Net						Segment
			U.S.		International				Gross				Capital
			Customers		Customers		Total		Profit		Depreciation		Expenditures
Contract	2018	$	8,655	$	1,197	$	9,852	$	1,083	$	65	$	18
Manufacturing	2017		7,822		1,583		9,405		835		74		93
Branded Proprietary	2018		71		7		78		21		-		-
Products	2017		19		11		30		32		1		13
Other Nutraceutical	2018		339		35		374		115		1		-
Businesses	2017		271		64		335		138		-		1
Total	2018		9,065		1,239		10,304		1,219		66		18
Company	2017		8,112		1,658		9,770		1,005		75		107

	Total Assets as of
	September 30,		June 30,
	2018		2018
Contract Manufacturing	$	17,339	$	12,200
Branded Proprietary Products		665		543
Other Nutraceutical Businesses		1,715		1,825
Total Company	$	19,724	$	14,568

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Significant Accounting Policies (Policies)

3 Months Ended

Sep. 30, 2018

Accounting Policies [Abstract]

Basis of Accounting, Policy [Policy Text Block]

Basis of Presentation of Interim Financial Statements

The accompanying condensed consolidated financial statements for the interim periods are unaudited and include the accounts of Integrated BioPharma, Inc., a Delaware corporation (together with its subsidiaries, the “Company”). The interim condensed consolidated financial statements have been prepared in conformity with Rule

8

-

03

of Regulation S-

X

of the Securities and Exchange Commission (“SEC”) and therefore do

not

include information or footnotes necessary for a complete presentation of financial position, results of operations and cash flows in conformity with accounting principles generally accepted in the United States of America. However, all adjustments (consisting only of normal recurring adjustments) which are, in the opinion of management, necessary for a fair presentation of the financial position and operating results for the periods presented have been included. These condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto, together with Management’s Discussion and Analysis of Financial Condition and Results of Operations, contained in the Company’s Annual Report on Form

10

-K for the fiscal year ended

June 30, 2018 (

“Form

10

-K”), as filed with the SEC. The

June 30, 2018

balance sheet was derived from audited financial statements, but does

not

include all disclosures required by accounting principles generally accepted in the United States of America. The results of operations for the

three

months ended

September 30, 2018

are

not

necessarily indicative of the results for the full fiscal year ending

June 30, 2019

or for any other period.

Nature of Operations

The Company is engaged primarily in manufacturing, distributing, marketing and sales of vitamins, nutritional supplements and herbal products. The Company’s customers are located primarily in the United States, Luxembourg and Canada. The Company was previously known as Integrated Health Technologies, Inc. and, prior to that, as Chem International, Inc. The Company was reincorporated in its current form in Delaware in

1995.

The Company continues to do business as Chem International, Inc. with certain of its customers and certain vendors.

The Company’s business segments include: (a) Contract Manufacturing operated by InB:Manhattan Drug Company, Inc. (“MDC”), which manufactures vitamins and nutritional supplements for sale to distributors, multilevel marketers and specialized health-care providers; (b) Branded Proprietary Products operated by AgroLabs, Inc. (“AgroLabs”), which distributes healthful nutritional products for sale through major mass market, grocery and drug and vitamin retailers, under the following brands: Naturally Noni, Peaceful Sleep, Green Envy, FiberCal, Wheatgrass and other products which are being introduced into the market (these are referred to as our branded proprietary nutraceutical business and/or products); and (c) Other Nutraceutical Businesses which includes the operations of (i) The Vitamin Factory (the “Vitamin Factory”), which sells private label MDC products, as well as our AgroLabs products, through the Internet, (ii) IHT Health Products, Inc. (“IHT”) a distributor of fine natural botanicals, including multi minerals produced under a license agreement, (iii) MDC Warehousing and Distribution, Inc., a service provider for warehousing and fulfilment services and (iv) Chem International, Inc. (“Chem”), a distributor of certain raw materials for DSM Nutritional Products LLC.

New Accounting Pronouncements, Policy [Policy Text Block]

Accounting Pronouncements Recently Adopted

In

May 2014,

the FASB issued ASU

2014

-

09,

“Revenue from Contracts with Customers”, Topic

606.

This update affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets, unless those contracts are within the scope of other standards. The guidance in this update supersedes the revenue recognition requirements in Topic

605,

Revenue Recognition and most industry-specific guidance.

The core principle of the guidance is that an entity should recognize revenue to illustrate the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new guidance also includes a cohesive set of disclosure requirements that will provide users of financial statements with comprehensive information about the nature, amount, timing, and uncertainty of revenue and cash flows arising from a reporting organization’s contracts with customers.  During

2016,

the FASB issued several accounting updates (ASU

No.

2016

-

08,

2016

-

10

and

2016

-

12

) to clarify implementation guidance and correct unintended application of the guidance. The standard allows for either “full retrospective” adoption, meaning the standard is applied to all of the periods presented, or “modified retrospective” adoption, meaning the standard is applied only to the most current period presented in the financial statements.  This new guidance was effective for the Company beginning on

July 1, 2018, 

and Note

8

provides the related disaggregated revenue disclosures.  The adoption of this standard using the modified retrospective approach did

not

have a material impact on the Company’s revenue recognition accounting policy or its Condensed Consolidated Financial Statements.

In

January 2016,

the FASB issued ASU

No.

2016

-

01,

Financial Instruments – Overall, (Subtopic

825

-

10

) “Recognition and Measurement of Financial Assets and Financial Liabilities”, which addresses certain aspects of recognition, measurement, presentation and disclosure of financial instruments. Under this guidance, companies have to measure equity investments, except those accounted for under the equity method, at fair value and recognize changes in fair value in net income. The adoption of this standard on

July 1, 2018,

by Company did

not

have a material effect on its Condensed Consolidated Financial Statements.

In

February 2016,

the FASB issued ASU

No.

2016

-

02,

Leases (Topic

842

), a new standard related to leases to increase transparency and comparability among organizations by requiring the recognition of right-of-use (“ROU”) assets and lease liabilities on the balance sheet. Most prominent among the changes in the standard is the recognition of ROU assets and lease liabilities by lessees for those leases classified as operating leases under current U.S. GAAP. Under the standard, disclosures are required to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. We will be required to recognize and measure leases existing at, or entered into after, the beginning of the earliest comparative period presented using a modified retrospective approach, with certain practical expedients available.

The standard will be effective for us beginning

July 1, 2019,

with early adoption permitted. We elected to early adopt the standard effective

July 1, 2018.

We elected the available practical expedients on adoption. In preparation for adoption of the standard, we have implemented internal controls and key system functionality to enable the preparation of financial information. The standard had a material impact on our consolidated balance sheets, but did

not

have a material impact on our consolidated income statements. The most significant impact was the recognition of ROU assets and lease liabilities for operating leases, while our accounting for capital leases remained substantially unchanged.

Adoption of this standard resulted in the recognition of additional ROU assets and lease liabilities for operating leases and had the following impact to the reported results as of

June 30, 2018

on our condensed consolidated financial statements:

Consolidated Statement of Financial Condition	As Reported		New Lease Standard Adjustment		As Adjusted
Operating lease right-of-use assets	$	-	$	69	$	69
Operating lease right-of-use assets - Vitamin Realty, LLC		-		3,668		3,668
Operating lease liabilities		-		69		69
Operating lease liabilities - Vitamin Realty, LLC		-		3,677		3,677
Current portion of long term debt, net		773		-		773
Long term debt, net		3,624		-		3,624
Current portion - Subordinated convertible
note, net - CD Financial, LLC		5,269		-		5,269

In

August, 2016,

the FASB issued ASU

No.

2016

-

15,

“Statement of Cash Flows (Topic

230

): Classification of Certain Cash Receipts and Cash Payments,” which clarifies how certain cash receipts and payments are to be presented in the statement of cash flows. The guidance was effective for the Company on

July 1, 2018

and did

not

have a material impact on the Company’s Condensed Consolidated Financial Statements.

Aside from the adoption of ASUs, as described above and the Leases policy described below, there have been

no

material changes during fiscal year

2019

in the Company’s significant accounting policies to those previously disclosed in the Company’s Annual Report on Form

10

-K for the fiscal year ended

June 30, 2018.

Revenue from Contract with Customer [Policy Text Block]

Sales. 

The Company recognizes sales revenue, net of estimated sales returns and allowances, at the time it sells its products to the customer.  The timing of a sale is determined when the product’s title and risk of loss transfers to the customer.  The Company’s sales policy requires the customer to provide the Company with purchase orders with agreed upon selling prices and shipping terms.

Other Income [Policy Text Block]

Other Income. 

The Company recognizes revenue from service transactions at the time the service is performed and collection from the counter party is expected. Generally, revenue from services is classified as a component of other income (expense), net in the Company's Condensed Consolidated Statements of Operations when it relates to professional services and in sales, net when it relates to warehousing and distribution services.

Lessee, Leases [Policy Text Block]

Leases.

We determine if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets, other current liabilities, and operating lease liabilities on our consolidated balance sheets. Finance leases are included in property and equipment, current portion of long term debt, and long-term debt obligation on our consolidated statement of financial condition.  

Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most of our leases do

not

provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. The operating lease ROU asset also includes any lease payments made and excludes lease incentives and initial direct costs incurred. Our lease terms

may

include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.

We have lease agreements with lease and non-lease components, which are generally accounted for separately. For certain equipment leases, such as vehicles, we account for the lease and non-lease components as a single lease component.

Earnings Per Share, Policy [Policy Text Block]

Earnings Per Share.

Basic earnings per common share amounts are based on weighted average number of common shares outstanding. Diluted earnings per share amounts are based on the weighted average number of common shares outstanding, plus the incremental shares that would have been outstanding upon the assumed exercise of all potentially dilutive stock options, warrants and convertible debt, subject to anti-dilution limitations using the treasury stock method and if converted method.

The following options and potentially dilutive shares for convertible note payable (See Note

4.

Senior Credit Facility, Subordinated Convertible Note, net - CD Financial, LLC and other Long Term Debt) were

not

included in the computation of weighted average diluted common shares outstanding as the effect of doing so would be anti-dilutive for the

three

months ended

September 30, 2018

and

2017:

	Three Months Ended
	September 30,
	2018		2017
Anti-dilutive stock options		150,000		2,692,017
Anti-dilutive shares for convertible notes payable		-		8,230,769
Total anti-dilutive shares		150,000		10,922,786

Additionally, in the

three

months ended

September 30, 2018,

the

8,230,769

common shares underlying the convertible note were potentially dilutive and therefore included in the diluted earnings per share calculation on a proportionate basis prior to the conversion into common shares of the Company as of

July 24, 2018

and the results were antidilutive. (See Note

4.

Senior Credit Facility, Subordinated Convertible Note, net - CD Financial, LLC and other Long Term Debt).

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Note 1 - Principles of Consolidation and Basis of Presentation (Tables)

3 Months Ended

Sep. 30, 2018

Notes Tables

Schedule of New Accounting Pronouncements and Changes in Accounting Principles [Table Text Block]

Consolidated Statement of Financial Condition	As Reported		New Lease Standard Adjustment		As Adjusted
Operating lease right-of-use assets	$	-	$	69	$	69
Operating lease right-of-use assets - Vitamin Realty, LLC		-		3,668		3,668
Operating lease liabilities		-		69		69
Operating lease liabilities - Vitamin Realty, LLC		-		3,677		3,677
Current portion of long term debt, net		773		-		773
Long term debt, net		3,624		-		3,624
Current portion - Subordinated convertible
note, net - CD Financial, LLC		5,269		-		5,269

Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share [Table Text Block]

	Three Months Ended
	September 30,
	2018		2017
Anti-dilutive stock options		150,000		2,692,017
Anti-dilutive shares for convertible notes payable		-		8,230,769
Total anti-dilutive shares		150,000		10,922,786

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Note 2 - Inventories (Tables)

3 Months Ended

Sep. 30, 2018

Notes Tables

Schedule of Inventory, Current [Table Text Block]

	September 30,		June 30,
	2018		2018
Raw materials	$	6,409	$	4,179
Work-in-process		2,131		2,207
Finished goods		1,060		1,355
Total	$	9,600	$	7,741

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Note 3 - Property and Equipment, Net (Tables)

3 Months Ended

Sep. 30, 2018

Notes Tables

Property, Plant and Equipment [Table Text Block]

	September 30,			June 30,
	2018			2018
Land and building	$	1,250		$	1,250
Leasehold improvements		1,268			1,268
Machinery and equipment		5,931			5,917
Transportation equipment		6			6
		8,455			8,441
Less: Accumulated depreciation
and amortization		(6,851	)		(6,790	)
Total	$	1,604		$	1,651

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Note 4 - Senior Credit Facility, Subordinated Convertible Note, Net - CD Financial, LLC and Other Long Term Debt (Tables)

3 Months Ended

Sep. 30, 2018

Notes Tables

Schedule of Debt [Table Text Block]

	Principal Amount						Interest Rate			Maturity Date
	As of    September 30, 2018			As of             June 30, 2018
Revolving advances under Senior Credit
Facility with PNC Bank, National Association	$	4,699		$	4,894			5.25	%	2/19/2020
Installment Note with PNC Bank		1,511			1,672			5.75	%	2/19/2020
Installment Note with PNC Equipment Finance		78			101			4.57	%	7/29/2019
Promissory Note with CD Financial, LLC		1,714			1,714			6.00	%	2/29/2020
Promissory Note with Vitamin Realty, LLC		686			686			4.00	%	2/29/2020
Capitalized lease obligations		220			269			3.86% -9.26%		3/17/2019-12/8/2020
Total outstanding debt		8,908			9,336
Less: Revolving Advances		(4,699	)		(4,894	)
Prepaid financing costs		(39	)		(45	)
Current portion of long term debt, net		(851	)		(773	)
Long term debt, net	$	3,319		$	3,624
Convertible Note payable - CD Financial, LLC	$	-		$	5,350			6.00	%	7/24/2018
Less: Discount for embedded derivative		-			(66	)
Prepaid financing costs		-			(15	)
Convertible Note payable, net - CD Financial, LLC	$	-		$	5,269

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Note 6 - Leases and Other Commitments and Contingencies (Tables)

3 Months Ended

Sep. 30, 2018

Notes Tables

Lease, Cost [Table Text Block]

	Related Party - Vitamin Realty		Other Leases		Totals
Operating lease costs	$	-	$	19	$	19
Finance Operating Lease Costs:
Amortization of right-of use assets	$	107	$	5	$	112
Interest on operating lease liabilities		35		1		36
Total finance lease cost	$	142	$	6	$	148

Leases and Remaining Commitments [Table Text Block]

	Right-of-use Assets		Operating Lease Obligations		Remaining Cash Commitment
Vitamin Realty Leases	$	3,561	$	3,569	$	4,092
Machinery and equipment leases		34		34		36
Office equipment leases		31		31		33
	$	3,626	$	3,634	$	4,161

Supplemental Cash Flow Information, Leases [Table Text Block]

	Related Party - Vitamin Realty		Other Leases		Totals
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	-	$	19	$	19
Operating cash flows from finance leases		94		5		99
Financing cash flows from capital lease obligations		-		50		50

Lessee, Operating Lease, Liability, Maturity [Table Text Block]

				Related Party
Year ending	Operating Lease			Operating Lease
June 30,	Commitment			Commitment			Total
2019, remaining	$	18		$	424		$	442
2020		22			565			587
2021		21			565			586
2022		8			565			573
2023		-			565			565
2024		-			564			564
Thereafter		-			844			844
Total minimum lease payments		69			4,092			4,161
Imputed interest		(4	)		(523	)		(527	)
Total	$	65		$	3,569		$	3,634

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Note 8 - Segment Information and Dissaggregated Revenue (Tables)

3 Months Ended

Sep. 30, 2018

Notes Tables

Schedule of Segment Reporting Information, by Segment [Table Text Block]

			Sales, Net						Segment
			U.S.		International				Gross				Capital
			Customers		Customers		Total		Profit		Depreciation		Expenditures
Contract	2018	$	8,655	$	1,197	$	9,852	$	1,083	$	65	$	18
Manufacturing	2017		7,822		1,583		9,405		835		74		93
Branded Proprietary	2018		71		7		78		21		-		-
Products	2017		19		11		30		32		1		13
Other Nutraceutical	2018		339		35		374		115		1		-
Businesses	2017		271		64		335		138		-		1
Total	2018		9,065		1,239		10,304		1,219		66		18
Company	2017		8,112		1,658		9,770		1,005		75		107

Reconciliation of Assets from Segment to Consolidated [Table Text Block]

	Total Assets as of
	September 30,		June 30,
	2018		2018
Contract Manufacturing	$	17,339	$	12,200
Branded Proprietary Products		665		543
Other Nutraceutical Businesses		1,715		1,825
Total Company	$	19,724	$	14,568

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Note 1 - Principles of Consolidation and Basis of Presentation (Details Textual) - shares	3 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
Incremental Common Shares Attributable to Conversion of Debt Securities, Total	8,230,769

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Note 1 - Principles of Consolidation of Basis of Presentation - Adjustment to Financial Statement From Adoption of ASU 2016-02 (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Jul. 01, 2018	Jun. 30, 2018
Operating lease right-of-use assets	$ 3,626
Operating Lease, Liability, Noncurrent	3,634
Current portion of long term debt, net	851	$ 773	$ 773
Long term debt, net	8,908	3,624	9,336
Current portion - Subordinated convertible note, net - CD Financial, LLC		5,269	5,269
Vitamin Realty LLC [Member]
Operating lease right-of-use assets	3,561	3,668
Operating Lease, Liability, Noncurrent	3,569	3,677
Unrelated Party [Member]
Operating lease right-of-use assets	65	69
Operating Lease, Liability, Noncurrent	$ 65	69
Accounting Standards Update 2016-02 [Member]
Current portion of long term debt, net			773
Long term debt, net			3,624
Current portion - Subordinated convertible note, net - CD Financial, LLC			5,269
Accounting Standards Update 2016-02 [Member] | Vitamin Realty LLC [Member]
Operating lease right-of-use assets		3,668
Operating Lease, Liability, Noncurrent		3,677
Accounting Standards Update 2016-02 [Member] | Unrelated Party [Member]
Operating lease right-of-use assets		69
Operating Lease, Liability, Noncurrent		$ 69

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Note 1 - Principles of Consolidation and Basis of Presentation - Antidilutive Securities Excluded From Weighted Average Diluted Common Shares Outstanding (Details) - shares	3 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
Anti-dilutive securities (in shares)	150,000	10,922,786
Employee Stock Option [Member]
Anti-dilutive securities (in shares)	150,000	2,692,017
Convertible Debt Securities [Member]
Anti-dilutive securities (in shares)		8,230,769

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Note 2 - Inventories - Inventories (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Jun. 30, 2018
Raw materials	$ 6,409	$ 4,179
Work-in-process	2,131	2,207
Finished goods	1,060	1,355
Total	$ 9,600	$ 7,741

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Note 3 - Property and Equipment, Net (Details Textual) - USD ($) $ in Thousands	3 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
Depreciation, Total	$ 66	$ 75

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Note 3 - Property and Equipment, Net - Property and Equipment, Net (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Jun. 30, 2018
Property and equipment, gross	$ 8,455	$ 8,441
Less: Accumulated depreciation and amortization	(6,851)	(6,790)
Total	1,604	1,651
Land and Building [Member]
Property and equipment, gross	1,250	1,250
Leasehold Improvements [Member]
Property and equipment, gross	1,268	1,268
Machinery and Equipment [Member]
Property and equipment, gross	5,931	5,917
Transportation Equipment [Member]
Property and equipment, gross	$ 6	$ 6

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Note 4 - Senior Credit Facility, Subordinated Convertible Note, Net - CD Financial, LLC and Other Long Term Debt (Details Textual) - USD ($) $ / shares in Units, $ in Thousands	Jul. 31, 2018	Feb. 19, 2016	Sep. 30, 2018	Jun. 30, 2018	Jun. 27, 2012	Feb. 21, 2008
Debt Instrument, Periodic Payment, Total		$ 41
CD Financial LLC [Member]
Debt Instrument, Convertible, Conversion Price	$ 0.65
Stock Issued During Period, Shares, Conversion of Convertible Securities	8,230,769
CD Financial LLC [Member]
Debt Instrument, Interest Rate, Stated Percentage					6.00%	9.50%
Debt Instrument, Face Amount						$ 4,500
Convertible Notes Payable, Total					$ 5,350
Debt Instrument, Convertible, Conversion Price					$ 0.65
Embedded Derivative, Fair Value of Embedded Derivative Liability				$ 9
CD Financial LLC [Member] | Default Rate [Member]
Debt Instrument, Interest Rate, Stated Percentage					10.00%
Vitamin Realty LLC [Member]
Debt Instrument, Face Amount					$ 686
Revolving Credit Facility [Member] | Eurodollar [Member]
Line of Credit Facility, Interest Rate at Period End			5.25%	5.00%
Term Loan [Member] | Eurodollar [Member]
Debt Instrument, Basis Spread on Variable Rate		3.25%
Line of Credit Facility, Interest Rate at Period End			5.75%	5.50%
Amended Loan Agreement [Member]
Senior Notes, Total		$ 11,422
Loans Payable, Noncurrent, Total		$ 3,422
Line of Credit Facility Covenant Prepayment Provisions Percentage of Excess Cash flow		25.00%	25.00%
Amended Loan Agreement [Member] | Revolving Credit Facility [Member]
Line of Credit Facility, Maximum Borrowing Capacity		$ 8,000
Amended Loan Agreement [Member] | Revolving Credit Facility [Member] | Eurodollar [Member]
Debt Instrument, Basis Spread on Variable Rate		2.75%
Term Loan [Member] | Scenario Event of Default [Member]
Debt Instrument, Interest Rate, Increase (Decrease)		2.00%
Number of Consecutive Monthly Installments		84
Number of Consecutive Monthly Installments, Fixed Amount		83
Revolving Advances [Member]
Line of Credit Facility Covenant Maximum Aggregate Revolving Advance		$ 8,000
Line of Credit Facility Covenant Aggregate Revolving Advance Receivables Advance Rate		85.00%
Line of Credit Facility Covenant Aggregate Revolving Advance Inventory Advance Rate		75.00%
Promissory Note [Member] | CD Financial LLC [Member]
Debt Instrument, Face Amount					$ 1,714
E. Gerald Kay [Member] | Vitamin Realty LLC [Member]
Debt Instrument, Interest Rate, Stated Percentage		4.00%

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Note 4 - Senior Credit Facility, Subordinated Convertible Note, Net - CD Financial, LLC and Other Long Term Debt - Debt Outstanding (Details) - USD ($) $ in Thousands	3 Months Ended
	Sep. 30, 2018	Jul. 01, 2018	Jun. 30, 2018
Capitalized lease obligations	$ 220		$ 269
Total outstanding debt	8,908	$ 3,624	9,336
Prepaid financing costs	(39)		(45)
Current portion of long term debt, net	(851)	$ (773)	(773)
Long term debt, net	$ 3,319		3,624
Convertible Debt [Member]
Interest Rate	6.00%
Maturity Date	Jul. 24, 2018
Notes Payable			5,350
Prepaid financing costs			(15)
Less: Discount for embedded derivative			(66)
Convertible Note payable, net - CD Financial, LLC			5,269
Minimum [Member]
Capitalized lease obligations, interest rate	3.86%
Capitalized lease obligations, maturity start date	Mar. 17, 2019
Maximum [Member]
Capitalized lease obligations, interest rate	9.26%
Capitalized lease obligations, maturity end date	Dec. 08, 2020
Revolving Advances [Member]
Line of Credit Facility	$ 4,699		4,894
Interest Rate	5.25%
Maturity Date	Feb. 19, 2020
Less: Revolving Advances	$ (4,699)		(4,894)
Installment Note with PNC Bank [Member]
Interest Rate	5.75%
Maturity Date	Feb. 19, 2020
Notes Payable	$ 1,511		1,672
PNC Equipment Finance LLC [Member]
Interest Rate	4.57%
Maturity Date	Jul. 29, 2019
Notes Payable	$ 78		101
CD Financial LLC [Member]
Interest Rate	6.00%
Maturity Date	Feb. 29, 2020
Notes Payable	$ 1,714		1,714
Vitamin Realty LLC [Member]
Interest Rate	4.00%
Maturity Date	Feb. 29, 2020
Notes Payable	$ 686		$ 686

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Note 5 - Significant Risks and Uncertainties (Details Textual)	3 Months Ended		12 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Jun. 30, 2018
Sales Revenue, Net [Member] | Customer Concentration Risk [Member]
Number of Major Customers	2
Sales Revenue, Net [Member] | Customer Concentration Risk [Member] | Contract Manufacturing [Member]
Number of Major Customers	2
Sales Revenue, Net [Member] | Customer Concentration Risk [Member] | Two Customers [Member]
Concentration Risk, Percentage	89.00%	91.00%
Sales Revenue, Net [Member] | Customer Concentration Risk [Member] | Major Customer 1 [Member] | Contract Manufacturing [Member]
Concentration Risk, Percentage	61.00%	63.00%
Sales Revenue, Net [Member] | Customer Concentration Risk [Member] | Major Customer 1 [Member] | Branded Nutraceutical [Member]
Concentration Risk, Percentage		10.00%
Sales Revenue, Net [Member] | Customer Concentration Risk [Member] | Major Customer 2 [Member] | Contract Manufacturing [Member]
Concentration Risk, Percentage	29.00%	32.00%
Accounts Receivable [Member] | Customer Concentration Risk [Member]
Number of Major Customers	2
Accounts Receivable [Member] | Customer Concentration Risk [Member] | Two Customers [Member]
Concentration Risk, Percentage	89.00%		87.00%
Number of Employees, Geographic Area [Member] | Unionized Employees Concentration Risk [Member]
Concentration Risk, Percentage	67.00%

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Note 6 - Leases and Other Commitments and Contingencies (Details Textual) $ in Thousands			3 Months Ended
	May 19, 2014 USD ($) ft²	Jan. 05, 2012 USD ($) ft²	Sep. 30, 2018 USD ($)	Sep. 30, 2017 USD ($)	Jul. 01, 2018 USD ($)	Jun. 30, 2018 USD ($)	May 15, 2012 USD ($)
Operating Leases, Rent Expense, Net, Total			$ 239	$ 242
Operating Lease, Liability, Noncurrent			$ 3,634
Lessee, Operating Lease, Discount Rate			3.76%
Operating Lease, Weighted Average Remaining Lease Term			7 years 36 days
Stock Purchase Agreement [Member]
Loss Contingency, Estimate of Possible Loss							$ 600
Environmental Issues [Member]
Loss Contingency, Estimate of Possible Loss							$ 300
Manhattan Drug Company [Member]
Payments for Rent		$ 533
AgroLabs [Member]
Area of Real Estate Property | ft²	2,700
Payments for Rent	$ 27
Chairman, Chief Executive Office and Major Stockholder [Member]
Percent of Ownership for Warehouse and Office Facilities Leased			100.00%
Vitamin Realty LLC [Member]
Operating Leases, Rent Expense, Net, Total			$ 202	$ 201
Accrued Rent			763			$ 827
Operating Lease, Liability, Noncurrent			$ 3,569		$ 3,677
Minimum [Member]
Lessee, Lease, Term of Contract			1 year
Minimum [Member] | Manhattan Drug Company [Member]
Area of Real Estate Property | ft²		74,898
Maximum [Member]
Lessee, Lease, Term of Contract			8 years
Maximum [Member] | Manhattan Drug Company [Member]
Area of Real Estate Property | ft²		76,161

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Note 6 - Leases and Other Commitments and Contingencies - Lease Expense (Details) $ in Thousands	3 Months Ended
	Sep. 30, 2018 USD ($)
Operating lease costs	$ 19
Amortization of right-of use assets	112
Interest on operating lease liabilities	36
Total finance lease cost	148
Unrelated Party [Member]
Operating lease costs	19
Amortization of right-of use assets	5
Interest on operating lease liabilities	1
Total finance lease cost	6
Vitamin Realty LLC [Member]
Operating lease costs
Amortization of right-of use assets	107
Interest on operating lease liabilities	35
Total finance lease cost	$ 142

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Note 6 - Leases and Other Commitments and Contingencies - Leases and Commitments (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Jul. 01, 2018	Jun. 30, 2018
Right-of-use assets	$ 3,626
Operating lease obligations	3,634
Remaining cash commitment	4,161
Machinery and Equipment Leases [Member]
Right-of-use assets	34
Operating lease obligations	34
Remaining cash commitment	36
Office Equipment Leases [Member]
Right-of-use assets	31
Operating lease obligations	31
Remaining cash commitment	33
Vitamin Realty LLC [Member]
Right-of-use assets	3,561	$ 3,668
Operating lease obligations	3,569	$ 3,677
Remaining cash commitment	$ 4,092

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Note 6 - Leases and Other Commitments and Contingencies - Supplemental Cash Flow Information (Details) - USD ($) $ in Thousands	3 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
Operating cash flows from operating leases	$ 19
Operating cash flows from finance leases	99
Financing cash flows from capital lease obligations	50	$ 30
Unrelated Party [Member]
Operating cash flows from operating leases	19
Operating cash flows from finance leases	5
Financing cash flows from capital lease obligations	50
Vitamin Realty LLC [Member]
Operating cash flows from operating leases
Operating cash flows from finance leases	94
Financing cash flows from capital lease obligations

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Note 6 - Leases and Other Commitments and Contingencies - Minimum Rental Commitment for Long-term Non-cancelable Leases (Details) $ in Thousands	Sep. 30, 2018 USD ($)
2019, remaining	$ 442
2020	587
2021	586
2022	573
2023	565
2024	564
Thereafter	844
Total minimum lease payments	4,161
Imputed interest	(527)
Total	3,634
Vitamin Realty LLC [Member]
2019, remaining	424
2020	565
2021	565
2022	565
2023	565
2024	564
Thereafter	844
Total minimum lease payments	4,092
Imputed interest	(523)
Total	3,569
Unrelated Party [Member]
2019, remaining	18
2020	22
2021	21
2022	8
2023
2024
Thereafter
Total minimum lease payments	69
Imputed interest	(4)
Total	$ 65

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Note 8 - Segment Information and Dissaggregated Revenue (Details Textual) $ in Thousands	3 Months Ended
	Sep. 30, 2018 USD ($)	Sep. 30, 2017 USD ($)
Number of Reportable Segments	3
Revenues, Total	$ 10,304	$ 9,770
Europe and Canada [Member]
Revenues, Total	$ 1,239	$ 1,658

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Note 8 - Segment Information - Operations by Business Segment (Details) - USD ($) $ in Thousands	3 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
Sales, net	$ 10,304	$ 9,770
Gross Profit	1,219	1,005
Depreciation	66	75
Capital Expenditures	18	107
UNITED STATES
Sales, net	9,065	8,112
International Customers [Member]
Sales, net	1,239	1,658
Contract Manufacturing [Member]
Sales, net	9,852	9,405
Gross Profit	1,083	835
Depreciation	65	74
Capital Expenditures	18	93
Contract Manufacturing [Member] | UNITED STATES
Sales, net	8,655	7,822
Contract Manufacturing [Member] | International Customers [Member]
Sales, net	1,197	1,583
Branded Proprietary Products [Member]
Sales, net	78	30
Gross Profit	21	32
Depreciation		1
Capital Expenditures		13
Branded Proprietary Products [Member] | UNITED STATES
Sales, net	71	19
Branded Proprietary Products [Member] | International Customers [Member]
Sales, net	7	11
Other Nutraceutical Business [Member]
Sales, net	374	335
Gross Profit	115	138
Depreciation	1
Capital Expenditures		1
Other Nutraceutical Business [Member] | UNITED STATES
Sales, net	339	271
Other Nutraceutical Business [Member] | International Customers [Member]
Sales, net	$ 35	$ 64

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Note 8 - Segment Information - Total Assets (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Jun. 30, 2018
Total Assets	$ 19,724	$ 14,568
Contract Manufacturing [Member]
Total Assets	17,339	12,200
Branded Proprietary Products [Member]
Total Assets	665	543
Other Nutraceutical Business [Member]
Total Assets	$ 1,715	$ 1,825