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 December 31, 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 incorporation or organization) (I.R.S. Employer 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 if 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 February 13, 2019, there were 29,565,943 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 and six months ended December 31, 2018

INDEX

		Page
	Part I. Financial Information
Item 1.	Condensed Consolidated Statements of Operations for the three and six months ended December 31, 2018 and 2017 (unaudited)	2
	Condensed Consolidated Balance Sheets as of December 31, 2018 and June 30, 2018 (unaudited)	3
	Condensed Consolidated Statement of Stockholders’ (Deficiency) Equity for the six months ended December 31, 2018 (unaudited)	4
	Condensed Consolidated Statements of Cash Flows for the six months ended December 31, 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	26
Item 4.	Controls and Procedures	26
	Part II. Other Information
Item 1.	Legal Proceedings	26
Item 1A.	Risk Factors	26
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	27
Item 3.	Defaults Upon Senior Securities	27
Item 4.	Mine Safety Disclosure	27
Item 5.	Other Information	27
Item 6.	Exhibits	27
	Other
Signatures		28

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						Six months ended
	December 31,							December 31,
	2018			2017				2018			2017
Sales, net	$	12,001		$	10,800			$	22,305		$	20,570
Cost of sales		10,671			9,752				19,756			18,517
Gross profit		1,330			1,048				2,549			2,053
Selling and administrative expenses		843			850				1,657			1,644
Operating income		487			198				892			409
Other income (expense), net
Interest expense		(190	)		(229	)			(390	)		(462	)
Change in fair value of derivative liabilities		-			185				9			67
Impairment on investment in iBio, Inc.		-			(168	)			-			(251	)
Other income, net		7			4				7			4
Other income (expense), net		(183	)		(208	)			(374	)		(642	)
Income (loss) before income taxes		304			(10	)			518			(233	)
Income tax expense, net		58			338				113			294
Net income (loss)	$	246		$	(348	)		$	405		$	(527	)
Basic net income (loss) per common share	$	0.01		$	(0.02	)		$	0.01		$	(0.02	)
Diluted net income (loss) per common share	$	0.01		$	(0.02	)		$	0.01		$	(0.02	)
Weighted average common shares outstanding - basic		29,392,030			21,135,174				28,305,408			21,135,174
Add:   Equivalent shares outstanding		506,327			-				600,837			-
Shares issuable upon conversion of Convertible Debt - CD Financial, LLC		-			-				-			-
Weighted average common shares outstanding - diluted		29,898,357			21,135,174				28,906,245			21,135,174

See accompanying notes to condensed consolidated financial statements.

2

INTEGRATED BIOPHARMA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except for share and per share amounts)
(Unaudited)
	December 31,			June 30,
	2018			2018
Assets
Current Assets:
Cash	$	45		$	228
Accounts receivable, net		4,517			3,796
Inventories		11,535			7,741
Other current assets		443			389
Total current assets		16,540			12,154
Property and equipment, net		1,806			1,651
Operating lease right-of-use assets		59			-
Operating lease right-of-use assets - Vitamin Realty, LLC		3,454			-
Deferred tax assets, net		659			671
Security deposits and other assets		57			92
Total Assets	$	22,575		$	14,568
Liabilities and Stockholders' Equity (Deficiency):
Current Liabilities:
Advances under revolving credit facility	$	6,326		$	4,894
Accounts payable (includes $68 and $141 due to related party)		7,172			4,184
Accrued expenses and other current liabilities		1,110			1,060
Current portion of long term debt, net		903			773
Current portion - Subordinated convertible note, net - CD Financial, LLC		-			5,269
Total current liabilities		15,511			16,180
Operating lease liabilities		59			-
Operating lease liabilities - Vitamin Realty, LLC		3,462			-
Long term debt, net		3,077			3,624
Total liabilities		22,109			19,804
Commitments and Contingencies
Stockholders' Equity (Deficiency):
Common Stock, $0.002 par value; 50,000,000 shares authorized;
29,600,843 and 21,170,074 shares issued, respectively
29,565,943 and 21,135,174 shares outstanding, respectively		59			42
Additional paid-in capital		50,053			44,773
Accumulated deficit		(49,547	)		(49,952	)
Less: Treasury stock, at cost, 34,900 shares		(99	)		(99	)
Total Stockholders' Equity (Deficiency)		466			(5,236	)
Total Liabilities and Stockholders' Equity (Deficiency)	$	22,575		$	14,568

See accompanying notes to condensed consolidated financial statements.

3

INTEGRATED BIOPHARMA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' (DEFICIENCY) EQUITY
FOR THE SIX MONTHS ENDED DECEMBER 31,
(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 exercise of
employee stock options		200,000		-		24		-			-		-			24
Shares issued upon conversion of  CD
Financial, LLC Convertible Note, net		8,230,769		17		5,256		-			-		-			5,273
Net income		-		-		-		405			-		-			405
Balance, December 31, 2018		29,600,843	$	59	$	50,053	$	(49,547	)		34,900	$	(99	)	$	466

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)
	Six months ended
	December 31,
	2018			2017
Cash flows provided by operating activities:
Net income (loss)	$	405		$	(527	)
Adjustments to reconcile net income (loss) to net cash from operating activities:
Depreciation and amortization		166			182
Accretion of financing instruments and other non cash interest		32			52
Stock based compensation		-			8
Change in deferred tax assets		12			247
Impairment on investment in iBio, Inc.		-			251
Change in fair value of derivative liabilities		(9	)		(67	)
Gain on sale of fixed assets		-			(3	)
Changes in operating assets and liabilities:
Decrease (increase) in:
Accounts receivable		(721	)		(575	)
Inventories		(3,794	)		(413	)
Other current assets		(47	)		(1	)
Operating lease right of use assets		224			-
Security deposits and other assets		(4	)		(19	)
(Decrease) increase in:
Accounts payable		2,989			1,379
Accrued expenses and other liabilities		58			126
Operating lease liabilities		(225	)		-
Net cash (used in) provided by operating activities		(914	)		640
Cash flows from investing activities:
Purchase of property and equipment		(287	)		(210	)
Cash contribution in AgroSport LLC		(7	)		-
Cash proceeds from sale of equipment		-			4
Net cash used in investing activities		(294	)		(206	)
Cash flows from financing activities:
Advances under revolving credit facility		22,899			19,673
Proceeds from sales/lease back of equipment		-			143
Proceeds from exercise of employee stock options		24			-
Repayments of advances under revolving credit facility		(21,467	)		(19,559	)
Repayments under term note payables		(330	)		(669	)
Repayments under capitalized lease obligations		(101	)		(100	)
Net cash provided by (used in) financing activities		1,025			(512	)
Net decrease in cash		(183	)		(78	)
Cash at beginning of period		228			132
Cash at end of period	$	45		$	54

Supplemental disclosures of cash flow information:
Interest paid	$	369	$	394
Income taxes paid	$	123	$	109

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 six months ended December 31, 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

6

INTEGRATED BIOPHARMA, INC. AND ITS SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 (in thousands, except share and per share amounts)

(Unaudited)

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.

8

INTEGRATED BIOPHARMA, INC. AND ITS SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 (in thousands, except share and per share amounts)

(Unaudited)

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 notes 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 and six months ended December 31, 2018 and 2017:

	Three Months Ended				Six Months Ended
	December 31,				December 31,
	2018		2017		2018		2017
Anti-dilutive stock options		150,000		2,496,750		150,000		2,496,750
Anti-dilutive shares for convertible note payable		-		8,230,769		-		8,230,769
Anti-dilutive shares		150,000		10,727,519		150,000		10,727,519

Additionally, in the six months ended December 31, 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:

	December 31,		June 30,
	2018		2018
Raw materials	$	8,194	$	4,179
Work-in-process		2,374		2,207
Finished goods		967		1,355
Total	$	11,535	$	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:

	December 31,			June 30,
	2018			2018
Land and building	$	1,250		$	1,250
Leasehold improvements		1,304			1,268
Machinery and equipment		6,131			5,917
Transportation equipment		6			6
		8,691			8,441
Less: Accumulated depreciation and amortization		(6,885	)		(6,790	)
Total	$	1,806		$	1,651

Depreciation and amortization expense recorded on property and equipment was $66 and $57 for the three months ended December 31, 2018 and 2017, respectively, and $132 for each of the six months ended December 31, 2018 and 2017. Additionally, the Company disposed of fully depreciated property of $38 in each of the six months ended December 31, 2018 and 2017, and sold transportation equipment for a gain of $3 in the six months ended December 31, 2017.

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

As of December 31, 2018 and June 30, 2018, the Company had the following debt outstanding:

	Principal Amount						Interest   Rate			Maturity Date
	December 31, 2018			June 30, 2018
Revolving advances under Senior
Credit Facility with PNC Bank, National Association	$	6,326		$	4,894			5.50	%	2/19/2020
Installment Note with PNC Bank		1,389			1,672			6.00	%	2/19/2020
Installment Note with PNC Equipment Finance		55			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		168			269			3.86% - 9.26	%	2/1/2019 -      12/8/2020
Total outstanding debt		10,338			9,336
Less: Revolving Advances		(6,326	)		(4,894	)
Prepaid financing costs		(32	)		(45	)
Current portion of long term debt, net		(903	)		(773	)
Long term debt, net	$	3,077		$	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%. The Term Loan bears interest at PNC’s Base Rate or the Eurodollar Rate at Borrowers’ option, plus 3.25%.  As of December 31, 2018 and June 30, 2018 the interest rates were as follows:

	December 31,			June 30,
	2018			2018
Revolving Credit Facility:
Base Rate Interest		5.50	%		5.00	%
Eurodollar Rate		5.25375	%		n/a
Term Loan:
Base Rate Interest		6.00	%		5.50	%
Eurodollar Rate		5.75375	%		n/a

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 December 31, 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 December 31, 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.

Capitalized Lease Obligations. On February 1, 2019, the Company entered into a capitalized lease obligation with First American Equipment Finance (“First American”) in the amount of $233, which lease is secured by certain machinery and equipment and matures on February 1, 2021. The Company sold certain machinery, purchased from equipment suppliers other than First American in the aggregate amount of $233, to First American for $233 and leased the sold equipment back from First American for monthly payments in the amount of approximately $10 with an imputed interest rate of 7.28%.

On February 1, 2019, the capitalized lease obligation entered into by the Company on March 17, 2017 with First American in the amount of $158, which lease was secured by certain machinery and equipment, was satisfied with all payments being made under the capitalized lease obligation. The monthly lease payment was approximately $7 and had an imputed interest rate of 3.86%.

Note 5. Significant Risks and Uncertainties

(a) Major Customers. For the three months ended December 31, 2018 and 2017, approximately 93% and 91% of consolidated net sales, respectively, were derived from two customers.  These two customers are in the Company’s Contract Manufacturing Segment and net sales to these two customers represented approximately 75% and 20% in the three months ended December 31, 2018 and 79% and 16% in the three months ended December 31, 2017, respectively.  In each of the six months ended December 31, 2018 and 2017, approximately 91% of consolidated net sales, were derived from the same two customers and net sales to these two customers represented approximately 70% and 24% in the six months ended December 31, 2018 and 71% and 23% of net sales in the six months ended December 31, 2017, respectively.  Accounts receivable from these two major customers represented approximately 90% and 87% of total net accounts receivable as of December 31 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.

13

INTEGRATED BIOPHARMA, INC. AND ITS SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 (in thousands, except share and per share amounts)

(Unaudited)

(b) Other Business Risks. Approximately 69% 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.

The components of lease expense for the three months ended December 31, 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	$	7	$	114
Interest on operating lease liabilities		33		1		34
Total finance lease cost	$	140	$	8	$	148

The components of lease expense for the six months ended December 31, 2018 were as follows:

	Related Party - Vitamin Realty		Other Leases		Totals
Operating lease costs	$	-	$	38	$	38
Finance Operating Lease Costs:
Amortization of right-of use assets	$	214	$	12	$	226
Interest on operating lease liabilities		68		2		70
Total finance lease cost	$	282	$	14	$	296

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 June 1, 2024. This additional lease provides for minimum annual lease payments of $27 with annual increases plus the proportionate share of operating expenses.

14

INTEGRATED BIOPHARMA, INC. AND ITS SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 (in thousands, except share and per share amounts)

(Unaudited)

Rent expense, lease amortization costs and interest expense on these related party leases were $219 and $214 for the three months ended December 31, 2018 and 2017, and $421 and $415 for the six months ended December 31, 2018 and 2017, 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 December 31, 2018 and June 30, 2018, the Company had outstanding current obligations to Vitamin Realty of $761 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 $3,462 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 December 31, 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	$	3,454	$	3,462	$	3,951
Machinery and equipment leases		31		31		33
Office equipment leases		28		28		30
	$	3,513	$	3,521	$	4,014

We have other operating lease agreements with commitments of less than one year or that are not significant and the Company elected the practical expedient option and as such these lease payments are expensed as incurred.

The Company’s weighted average discount rate and remaining term on lease liabilities is approximately 3.76% and 6.9 years, respectively.

Supplemental cash flows information related to leases for the six months ended December 31, 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	$	-	$	37	$	37
Operating cash flows from finance leases		285		12		297
Financing cash flows from capital lease obligations		-		108		108

The Company did not enter into any lease commitments in the six months ended December 31, 2018.

15

INTEGRATED BIOPHARMA, INC. AND ITS SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 (in thousands, except share and per share amounts)

(Unaudited)

Maturities of operating lease liabilities as of December 31, 2018 were as follows:

	Operating			Related Party
Year ending	Lease			Operating Lease
June 30,	Commitment			Commitment			Total
2019, remaining	$	24		$	283		$	307
2020		39			565			604
2021		22			565			587
2022		9			565			574
2023		-			565			565
2024		-			563			563
Thereafter		-			845			845
Total minimum lease payments		94			3,951			4,045
Imputed interest		(4	)		(489	)		(493	)
Total	$	90		$	3,462		$	3,552

Total rent expense, including real estate taxes and maintenance charges, was approximately $256 and $254 and $507 and $496 for the three months and six months ended December 31, 2018 and 2017, respectively. Rent and lease amortization and interest expense are 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.

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 December 31, 2018 and 2017 were $1,274 and $1,248, respectively, and for the six months ended December 31, 2018 and 2017 were $2,513 and $2,906, 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 December 31, 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 Manufacturing	2018	$	10,498	$	1,258	$	11,756	$	1,246	$	66	$	269
	2017		9,159		1,199		10,358		896		55		109
Branded Proprietary Products	2018		48		12		60		21		-		-
	2017		162		10		172		65		1		-
Other Nutraceutical Businesses	2018		181		4		185		63		-		-
	2017		231		39		270		87		1		-
Total Company	2018		10,727		1,274		12,001		1,330		66		269
	2017		9,552		1,248		10,800		1,048		57		109

Financial information relating to the six months ended December 31, 2018 and 2017 operations by business segment are as follows:

		Sales, Net						Segment
		U.S.		International				Gross					Capital
		Customers		Customers		Total		Profit		Depreciation			Expenditures
Contract Manufacturing	2018	$	19,153	$	2,455	$	21,608	$	2,328	$	131	$	$287
	2017		16,981		2,782		19,763		1,731		129		202
Branded Proprietary Products	2018		119		19		138		42		-		-
	2017		181		21		202		97		2		13
Other Nutraceutical Businesses	2018		520		39		559		179		1		-
	2017		502		103		605		225		1		1
Total Company	2018		19,792		2,513		22,305		2,549		132		287
	2017		17,664		2,906		20,570		2,053		132		216

	Total Assets as of
	December 31,		June 30,
	2018		2018
Contract Manufacturing	$	20,141	$	12,200
Branded Proprietary Products		545		543
Other Nutraceutical Businesses		1,889		1,825
Total Company	$	22,575	$	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 June 30, 2018.

For the six months ended December 31, 2018, our net sales from operations increased by $1,735 to approximately $22,305 from approximately $20,570 in the six months ended December 31, 2017.    The increase in net sales was from the Contract Manufacturing Segment with increased net sales of $1,845, offset with decreases in our other two segments, Branded Proprietary Products and Other Nutraceuticals Segment, of $64 and $46, respectively.  Net sales increased in our Contract Manufacturing Segment by $1,845 primarily due to increased sales volumes with our two major customers, Life Extension in the amount of $1,051 and Herbalife in the amount of $674.  For the six months ended December 31, 2018, we had operating income of approximately $2,549, an increase of approximately $496 from operating income of approximately $2,053 for the six months ended December 31, 2017.  Our profit margins increased from approximately 10% of net sales in the six months ended December 31, 2017 to approximately 11% of net sales in the six months ended December 31, 2018, primarily as a result of the increased sales in our Contract Manufacturing Segment of approximately $1,845.  Our consolidated selling and administrative expenses increased by approximately $13 or approximately 0.8% in the six months ended December 31, 2018 compared to the six months ended December 31, 2017.

During the six months ended December 31, 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 six months ended December 31, 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 and six months ended December 31, 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						For the six months
	ended December 31,						ended December 31,
	2018			2017			2018			2017
Sales, net		100.0	%		100.0	%		100.0	%		100.0	%
Costs and expenses:
Cost of sales		89.0	%		90.3	%		88.6	%		90.0	%
Selling and administrative		7.0	%		7.9	%		7.4	%		8.0	%
		96.0	%		98.2	%		96.0	%		98.0	%
Income from operations		4.0	%		1.8	%		4.0	%		2.0	%
Other income (expense), net
Interest expense		(1.6%	)		(2.1%	)		(1.7%	)		(2.2%	)
Change in fair value of derivative liabilities		-			1.7	%		0.0	%		0.3	%
Impairment charge on investment in iBio, Inc.		-			(1.5%	)		-			(1.2%	)
Other income, net		0.1	%		0.0	%		0.0	%		0.0	%
Other income (expense), net		(1.5%	)		(1.9%	)		(1.7%	)		(3.1%	)
Income (loss) before income taxes		2.5	%		(0.1%	)		2.3	%		(1.1%	)
Federal and state income taxes, net		1.3	%		3.1	%		1.0	%		1.5	%
Net income (loss)		1.2	%		(3.2%	)		1.3	%		(2.6%	)

19

For the Six Months Ended December 31, 2018 compared to Six Months Ended December 31, 2017

Sales, net. Sales, net, for the six months ended December 31, 2018 and 2017 were $22.3 million and $20.6 million, respectively, an increase of 8.4%, and are comprised of the following:

	Six months ended				Dollar			Percentage
	December 31,				Change			Change
	2018		2017		2018 vs 2017			2018 vs 2017
	(amounts in thousands)
Contract Manufacturing:
US Customers	$	19,153	$	16,981	$	2,172			12.8	%
International Customers		2,455		2,782		(327	)		(11.8%	)
Net sales, Contract Manufacturing		21,608		19,763		1,845			9.3	%
Branded Nutraceutical Products:
US Customers		119		181		(62	)		(34.3%	)
International Customers		19		21		(2	)		(9.5%	)
Net sales, Branded Nutraceutical Products		138		202		(64	)		(31.7%	)
Other Nutraceuticals:
US Customers		520		502		18			3.6	%
International Customers		39		103		(64	)		(62.1%	)
Net sales, Other Nutraceuticals		559		605		(46	)		(7.6%	)
Total net sales	$	22,305	$	20,570	$	1,735			8.4	%

In each of the six months ended December 31, 2018 and 2017, a significant portion of our consolidated net sales, approximately 91%, were concentrated among two customers in our Contract Manufacturing Segment, Life Extension and Herbalife.  Life Extension and Herbalife represented approximately 70% and 24% in the six months ended December 31, 2018 and 71% and 23%, in the six months ended December 31, 2017, respectively, of our Contract Manufacturing Segment’s net sales.  The loss of either of these customers could have a significant adverse impact on our financial condition and results of operations. 

The increase in net sales was from the Contract Manufacturing Segment with increased net sales of $1,845, offset with decreases in our other two segments, Branded Proprietary Products and Other Nutraceuticals Segment, of $64 and $46, respectively.  Net sales increased in our Contract Manufacturing Segment by $1,845 primarily due to increased sales volumes with our two major customers, Life Extension in the amount of $1,051 and Herbalife in the amount of $674.

Cost of sales.  Cost of sales increased by approximately $1,239 to $19,756 for the six months ended December 31, 2018, as compared to $18,517 for the six months ended December 31, 2017 or approximately 7%.  Cost of sales decreased as a percentage of sales to 88.6% for the six months ended December 31, 2018 as compared to 90.0% for the six months ended December 31, 2017. The increase in the cost of goods sold amount is consistent with the increased net sales of approximately 8%.  The decrease in the cost of goods sold as a percentage of net sales, was primarily the result of the increased net sales used to offset the fixed manufacturing overhead. There were no significant changes in the cost of goods sold in our other two segments other than the decreased sales in each of the other two segments.

20

Selling and Administrative Expenses.  There was an increase in selling and administrative expenses of $13, approximately 0.8% in the six months ended December 31, 2018 as compared to the six months ended December 31, 2017.  As a percentage of sales, net, selling and administrative expenses was approximately 7% and 8% in the six months ended December 31, 2018 and 2017, respectively.  The increase was primarily from increases (i) in salaries and employees benefits of approximately $63, as the result of: (a) replacing our headcount with higher salaried employees, net of a pay structure change for the sales staff ($12); (b) an increase in employee benefits due to the change in personnel and an increase in premiums ($44) and; (c) an increase in our vacation pay liability ($7);  and (ii) in professional and consulting fees of approximately $27 primarily as the result of outsourcing our information technology function beginning in April 2018 and increased legal expenses for our SEC filings.  These increases were partially offset by an aggregate decrease of approximately $78 in other components (excluding consulting and professional fees and salaries and employee benefits) of our selling and administrative expenses including decreases in depreciation and amortization expenses.

Other income (expense), net.  Other income (expense), net was approximately $374 for the six months ended December 31, 2018 compared to $642 for the six months ended December 31, 2017, and is composed of:

	Six months ended
	December 31,
	2018			2017
	(dollars in thousands)
Interest expense	$	(390	)	$	(462	)
Change in fair value of derivative liabilities		9			67
Impairment on investment in iBio, Inc.		-			(251	)
Other income, net		7			4
Other income (expense), net	$	(374	)	$	(642	)

The change in fair value of derivative liabilities in the six months ended December 31, 2017 was mainly the result of the decreased closing trading price of the Company's stock, as traded on the OTC Bulletin Board, from $0.19 as of June 30, 2017 to $0.18 as of December 31, 2017 and the change in the volatility of the closing trading price of our common stock from 98.11% as of June 30, 2017 to 106.00% as of December 31, 2017.  The closing trading price and the volatility of the closing trading price of our common stock are two of the variables used to calculate the estimated fair value of our derivative liabilities associated with the underlying derivative instrument.

During the six month period ended December 31, 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 December 31, 2018, as the related derivative liability is no longer outstanding, resulting in a change of $9 for the six months ended December 31, 2018.

In the six months ended December 31, 2017 we determined that there was an impairment on the carrying value of our investment in iBio, Inc. in the amount of approximately $251 resulting from the decline in the closing trading price of their common stock on the NYSE American Exchange for the six month period ended December 31, 2017 from $0.39 per share as of June 30, 2017 to $0.18 per share as of December 31, 2017.

Our interest expense for the six months ended December 31, 2018 decreased by $72 from the six month period ended December 31, 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 $143, 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 six month period ended December 31, 2018, we incurred an interest cost of $70 on our operating lease liabilities.

Federal and state income tax (benefit) expense, net.  For the six months ended December 31, 2018 and 2017, we had state income tax expense, net of approximately $101 and $44, respectively and deferred federal income tax expense of $12 and $250 in the six months ended December 31, 2018 and 2017, respectively.

The increase in state income tax expense of $57 is the result of the increased net income for MDC and the decrease in the federal income tax expense of $238 is the result of the one-time charge for the change in the effective federal tax rate from 34% as of December 31, 2017 to 21% as of January 1, 2018 which resulted in a decrease to our deferred tax assets of $263 offset by a current federal tax benefit of approximately $13 in the six month period ended December 31, 2017 with no such rate change in the six month period ended December 31, 2018.

21

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” that the Company’s deferred tax assets may not be fully realized. 

Net income (loss). Our net income for the six months ended December 31, 2018 was $405 compared to a net loss of $527 in the six months ended December 31, 2017, a change of $932.  The change in net income was primarily the result of increased operating income of $483 and decreases in other expenses of $268 and in federal and state income taxes of $181.

For the Three Months Ended December 31, 2018 compared to the Three Months Ended December 31, 2017

Sales, net. Sales, net, for the three months ended December 31, 2018 and 2017 were $12.0 million and $10.8 million, respectively, an increase of 11.1%, and are comprised of the following:

	Three months ended				Dollar			Percentage
	December 31,				Change			Change
	2018		2017		2018 vs 2017			2018 vs 2017
	(amounts in thousands)
Contract Manufacturing:
US Customers	$	10,498	$	9,159	$	1,339			14.6	%
International Customers		1,258		1,199		59			4.9	%
Net sales, Contract Manufacturing		11,756		10,358		1,398			13.5	%
Branded Nutraceutical Products:
US Customers		48		162		(114	)		(70.4%	)
International Customers		12		10		2			20.0	%
Net sales, Branded Nutraceutical Products		60		172		(112	)		(65.1%	)
Other Nutraceuticals:
US Customers		181		231		(50	)		(21.6%	)
International Customers		4		39		(35	)		(89.7%	)
Net sales, Other Nutraceuticals		185		270		(85	)		(31.5%	)
Total net sales	$	12,001	$	10,800	$	1,201			11.1	%

For the three months ended December 31, 2018 and 2017 a significant portion of our consolidated net sales, approximately 93% and 91%, respectively, were concentrated among two customers, Life Extension and Herbalife, customers in our Contract Manufacturing Segment.  Life Extension and Herbalife represented approximately 75% and 20% in the three months ended December 31, 2018 and 79% and 16%, in the three months ended December 31, 2017, respectively, of our Contract Manufacturing Segment’s net sales.  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 $1,201 was primarily the result of net sales increasing in our Contract Manufacturing Segment of $1,398 primarily due to increased sales volumes to one of our major customers, Herbalife of approximately $720 and Life Extension of approximately $683, in the three months ended December 31, 2018, compared to the comparable prior period.

Cost of sales.  Cost of sales increased by $919, approximately 9%, to $10,671 for the three months ended December 31, 2018, as compared to $9,752 for the three months ended December 31, 2017.  Cost of sales decreased as a percentage of sales to 89% for the three months ended December 31, 2018 as compared to 90.3% for the three months ended December 31, 2017.  The increase in the cost of goods sold amount is consistent with the increased net sales of approximately 11%.  The decrease in the cost of goods sold as a percentage of net sales, was primarily the result of the increased net sales used to offset the fixed manufacturing overhead. There were no significant changes in the cost of goods sold in our other two segments other than the decreased sales in each of the other two segments.

22

Selling and Administrative Expenses.  There was a slight decrease in selling and administrative expenses of $7 in the three months ended December 31, 2018 as compared to the three months ended December 31, 2017, less than 1.0%.  As a percentage of sales, net, selling and administrative expenses were approximately 7% and 8% for the three months ended December 31, 2018 and 2017, respectively.  The decrease was due to an increase in salaries and employees benefits of approximately $37, as the result of replacing an administrative staff with a higher paid individual; offset, in part, by a decrease of approximately $20 in amortization as the result of intangible assets being fully amortized in October 2018.  No other expense within our selling and administrative expenses changed by more than $15.

Other income (expense), net. Other income (expense), net was approximately $183 and $207 for the three months ended December 31, 2018 and 2017, respectively, and is composed of:

	Three months ended
	December 31,
	2018			2017
	(dollars in thousands)
Interest expense	$	(190	)	$	(229	)
Change in fair value of derivative instruments		-			185
Impairment charge on investment in iBio, Inc.		-			(168	)
Other income, net		7			4
Other income (expense), net	$	(183	)	$	(208	)

The variance in the change in fair value of derivative liabilities from the three months ended December 31, 2017 to the three months ended December 31, 2018 was the result of the extinguishment of the derivative instrument upon the conversion of the related debt to common stock in July 2018 (See Note 4 to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q). 

Our interest expense for the three months ended December 31, 2018 decreased by $39 from the three month period ended December 31, 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 (See Note 4 to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q), an interest savings of $94.  This decrease was offset in part, by increased amounts outstanding under our revolving credit facility along with increased interest rates on the senior debt of 1.0% from December 31, 2017 to December 31, 2018 coupled with 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 December 31, 2018, we incurred additional interest cost on our senior debt of $24 and an interest cost of $34 on our operating lease liabilities.

In the three months ended December 31, 2017 we determined that there was an impairment on the carrying value of our investment in iBio, Inc. in the amount of approximately $0.2 million resulting from the decline in the closing trading price of their common stock on the NYSE American Exchange from $0.32 per share as of September 30, 2017 to $0.18 per share as of December 31, 2017.  There was no such impairment charge in the three months ended December 31, 2018.

Federal and state income tax, net. For the three months ended December 31, 2018 and 2017, we had state income tax expense of approximately $74 and $34, respectively, and federal income tax benefit of $16 and federal income tax expense of $304, respectively. We continue to maintain a reserve on a portion of 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, that it is “more likely than not” the Company’s deferred tax assets may not be fully realized. The state tax expense is the result of MDC using all of its state net operating losses in the fiscal year ended 2013 tax period.  All of our other subsidiaries still have adequate net operating losses for state income tax purposes to absorb any taxable income for state tax purposes.

The increase in state income tax expense of $40 is the result of the increased net income for MDC and the decrease in the federal income tax expense of $320 is the result of the one-time charge for the change in the effective federal tax rate from 34% as of December 31, 2017 to 21% as of January 1, 2018, which resulted in a decrease to our deferred tax assets of $263 and a current federal tax expense of approximately $41 in the three month period ended December 31, 2017 compared to no such changes in the three month period ended December 31, 2018.

23

Net income (loss). We had net income for the three months ended December 31, 2018 of $246 compared to a net loss for the three months ended December 31, 2017 of approximately $348.  The change to net income from a net loss of approximately $594 was primarily the result of increased operating income of $289 and decreases in other expenses of $25 and federal and state income taxes, net of $280.

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 six months ended
	December 31,
	2018			2017
	(dollars in thousands)
Net cash (used in) provided by operating activities	$	(914	)	$	640
Net cash used in investing activities	$	(294	)	$	(206	)
Net cash provided by (used in) financing activities	$	1,025		$	(512	)
Cash at end of period	$	45		$	54

At December 31, 2018 our working capital was approximately $1,029 and at June 30, 2018, we had a working capital deficit of $4,026. The increase of $4,386 in our current assets and a decrease in our current liabilities of $669, resulted in a net increase in our working capital of $5,055 since June 30, 2018.  The decrease in the current liabilities was primarily the result of $5,269 of the CD Convertible Note, classified as current as of June 30, 2018 due to the receipt of a conversion notice in July 2018, and the subsequent conversion of the entire CD Convertible Note to common shares of the Company at $0.65 per share on July 31, 2018.

Operating Activities

Net cash used in operating activities of $914 in the six months ended December 31, 2018, includes net income of approximately $405.  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 $606. Net cash used in our operations in the six months ended December 31, 2018 from our working capital assets and liabilities in the amount of approximately $1,520 was primarily the result of cash used in our accounts receivable of $721 and inventories of $3,794 offset, in part, with an aggregate increase in accounts payable, accrued expenses and other liabilities of $3,047.

24

Net cash provided by operating activities of $640 in the six months ended December 31, 2017, includes a net loss of approximately $527. After excluding the effects of non-cash expenses, including depreciation and amortization, and changes in the fair value of derivative liabilities, the adjusted cash provided from operations before the effect of the changes in working capital components was $143. Cash was provided by operations from our working capital assets and liabilities in the amount of approximately $497 and was primarily the result of a net increase in accounts payable and accrued expenses and other liabilities of approximately $1,505 offset, in part, by increases in accounts receivable of $575 and inventories of $413.

Investing Activities

Cash used in investing activities in the six months ended December 31, 2018 and 2017, of approximately $294 and $206, respectively, was used primarily for the purchase of machinery and equipment of $287 and $210, respectively.

Financing Activities

Cash provided by financing activities was approximately $1,025 for the six months ended December 31, 2018, and was from advances under our revolving credit facility of $22,899, offset in part, by repayments of advances under our revolving credit facility of $21,467, principal payments under our term notes in the amount of $330 and payments under capitalized lease obligations of $101.

Cash used in financing activities was approximately $512 for the six months ended December 31, 2017, and was from $19,673 of advances under our revolving credit facility and $143 in proceeds received in a sales-lease back financing for machinery and equipment in our Contract Manufacturing Segment, offset in part, by repayments of advances under our revolving credit facility of $19,559 and repayments of principal under our term notes in the amount of $669.

As of December 31, 2018, we had cash of $45, funds available under our revolving credit facility of approximately $1,059 and working capital of approximately $1,029. Our working capital includes $6,326 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 $892 in the six months ended December 31, 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 February 13, 2020.

Our total annual commitments at December 31, 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.

Capital Expenditures

The Company's capital expenditures for the six months ended December 31, 2018 and 2017 were approximately $287 and $216, 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.

25

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 December 31, 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 and six months ended December 31, 2018 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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

26

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

Recent Sales of Unregistered Securities

None

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

During the quarter ended December 31, 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.

Item 6. EXHIBITS

(a)     Exhibits

Exhibit

Number

31.1	Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by Chief Executive Officer.
31.2	Certification pursuant to 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 unaudited financial information from Integrated BioPharma, Inc.’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2018, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Statements of Operations for the three and six months ended December 31, 2018 and 2017, (ii) Condensed Consolidated Balance Sheets as of December 31, 2018 and June 30, 2018, (iii) Condensed Consolidated Statement of Changes in Stockholders’ (Deficit) Equity for the six months ended December 31, 2018, (iv) Condensed Consolidated Statements of Cash Flows for the six months ended December 31, 2018 and 2017, and (iv) the Notes to Condensed Consolidated Financial Statements.

27

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:   February 13, 2019	By: /s/ E Gerald Kay
	E, Gerald Kay,
	President and Chief Executive Officer

Date:   February 13, 2019	By: /s/ Dina L. Masi
	Dina L. Masi,
	Chief Financial Officer & Senior Vice President

28

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:  February 13, 2019	By:          /s/ E. Gerald Kay
	Name:     E. Gerald Kay
	Title:       President and Chief Executive Officer

EX-31.2

Exhibit 31.2

Certification of Chief Executive 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:  February 13, 2019	By:          /s/ Dina L, Masi
	Name:     Dina L.Masi
	Title:       Chief Financial Officer and 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 second quarter ended December 31, 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.
 

Date:  February 13, 2019	By:          /s/ E. Gerald Kay
	Name:     E. Gerald Kay
	Title:       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 second quarter ended December 31, 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.
 

Date:  February 13, 2019	By:          /s/ Dina L, Masi
	Name:     Dina L.Masi
	Title:       Chief Financial Officer and Senior Vice President

XML

Document And Entity Information - shares	6 Months Ended
	Dec. 31, 2018	Feb. 13, 2019
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)		29,565,943
Document Type	10-Q
Document Period End Date	Dec. 31, 2018
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q2
Amendment Flag	false

XML

Condensed Consolidated Statements of Operations (Unaudited) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2018	Dec. 31, 2017
Sales, net	$ 12,001	$ 10,800	$ 22,305	$ 20,570
Cost of sales	10,671	9,752	19,756	18,517
Gross profit	1,330	1,048	2,549	2,053
Selling and administrative expenses	843	850	1,657	1,644
Operating income	487	198	892	409
Other income (expense), net
Interest expense	(190)	(229)	(390)	(462)
Change in fair value of derivative liabilities		185	9	67
Impairment on investment in iBio, Inc.		(168)		(251)
Other income, net	7	4	7	4
Other income (expense), net	(183)	(208)	(374)	(642)
Income (loss) before income taxes	304	(10)	518	(233)
Income tax expense, net	58	338	113	294
Net income (loss)	$ 246	$ (348)	$ 405	$ (527)
Basic net income (loss) per common share (in dollars per share)	$ 0.01	$ (0.02)	$ 0.01	$ (0.02)
Diluted net income (loss) per common share (in dollars per share)	$ 0.01	$ (0.02)	$ 0.01	$ (0.02)
Weighted average common shares outstanding - basic (in shares)	29,392,030	21,135,174	28,305,408	21,135,174
Add: Equivalent shares outstanding (in shares)	506,327		600,837
Shares issuable upon conversion of Convertible Debt - CD Financial, LLC (in shares)
Weighted average common shares outstanding - diluted (in shares)	29,898,357	21,135,174	28,906,245	21,135,174

XML

Condensed Consolidated Balance Sheets (Current Period Unaudited) - USD ($) $ in Thousands	Dec. 31, 2018	Jun. 30, 2018
Current Assets:
Cash	$ 45	$ 228
Accounts receivable, net	4,517	3,796
Inventories	11,535	7,741
Other current assets	443	389
Total current assets	16,540	12,154
Property and equipment, net	1,806	1,651
Right-of-use assets	3,513
Deferred tax assets, net	659	671
Security deposits and other assets	57	92
Total Assets	22,575	14,568
Current Liabilities:
Advances under revolving credit facility	6,326	4,894
Accounts payable (includes $68 and $141 due to related party)	7,172	4,184
Accrued expenses and other current liabilities	1,110	1,060
Current portion of long term debt, net	903	773
Current portion - Subordinated convertible note, net - CD Financial, LLC		5,269
Total current liabilities	15,511	16,180
Operating lease obligations	3,521
Long term debt, net	3,077	3,624
Total liabilities	22,109	19,804
Commitments and Contingencies
Stockholders' Equity (Deficiency):
Common Stock, $0.002 par value; 50,000,000 shares authorized; 29,600,843 and 21,170,074 shares issued, respectively 29,565,943 and 21,135,174 shares outstanding, respectively	59	42
Additional paid-in capital	50,053	44,773
Accumulated deficit	(49,547)	(49,952)
Less: Treasury stock, at cost, 34,900 shares	(99)	(99)
Total Stockholders' Equity (Deficiency)	466	(5,236)
Total Liabilities and Stockholders' Equity (Deficiency)	22,575	14,568
Vitamin Realty LLC [Member]
Current Assets:
Right-of-use assets	3,454
Current Liabilities:
Operating lease obligations	3,462
Unrelated Party [Member]
Current Assets:
Right-of-use assets	59
Current Liabilities:
Operating lease obligations	$ 59

XML

Condensed Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - USD ($) $ in Thousands	Dec. 31, 2018	Jun. 30, 2018
Accounts payable, due to related parties	$ 68	$ 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)	29,600,843	21,170,074
Common stock, shares outstanding (in shares)	29,565,943	21,135,174
Treasury stock, shares aquired (in shares)	34,900	34,900

XML

Condensed Consolidated Statements of Stockholders' (Deficiency) Equity (Unaudited) - 6 months ended Dec. 31, 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)
Shares issued upon exercise of employee stock options (in shares)	200,000
Shares issued upon exercise of employee stock options		24			24
Shares issued upon conversion of CD Financial, LLC Convertible Note, net (in shares)	8,230,769
Shares issued upon conversion of CD Financial, LLC Convertible Note, net	$ 17	5,256			5,273
Net income (loss)			405		405
Balance (in shares) at Dec. 31, 2018	29,600,843			34,900
Balance at Dec. 31, 2018	$ 59	$ 50,053	$ (49,547)	$ (99)	$ 466

XML

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	6 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Cash flows provided by operating activities:
Net income (loss)	$ 405	$ (527)
Adjustments to reconcile net income (loss) to net cash from operating activities:
Depreciation and amortization	166	182
Accretion of financing instruments and other non cash interest	32	52
Stock based compensation		8
Change in deferred tax assets	12	247
Impairment on investment in iBio, Inc.		251
Change in fair value of derivative liabilities	(9)	(67)
Gain on sale of fixed assets		(3)
Changes in operating assets and liabilities:
Accounts receivable	(721)	(575)
Inventories	(3,794)	(413)
Other current assets	(47)	(1)
Operating lease right of use assets	224
Security deposits and other assets	(4)	(19)
Accounts payable	2,989	1,379
Accrued expenses and other liabilities	58	126
Operating lease liabilities	(225)
Net cash (used in) provided by operating activities	(914)	640
Cash flows from investing activities:
Purchase of property and equipment	(287)	(210)
Cash contribution in AgroSport LLC	(7)
Cash proceeds from sale of equipment		4
Net cash used in investing activities	(294)	(206)
Cash flows from financing activities:
Advances under revolving credit facility	22,899	19,673
Proceeds from sales/lease back of equipment		143
Proceeds from exercise of employee stock options	24
Repayments of advances under revolving credit facility	(21,467)	(19,559)
Repayments under term note payables	(330)	(669)
Repayments under capitalized lease obligations	(101)	(100)
Net cash provided by (used in) financing activities	1,025	(512)
Net decrease in cash	(183)	(78)
Cash at beginning of period	228	132
Cash at end of period	45	54
Supplemental disclosures of cash flow information:
Interest paid	369	394
Income taxes paid	$ 123	$ 109

XML

Note 1 - Principles of Consolidation and Basis of Presentation

6 Months Ended

Dec. 31, 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

six

months ended

December 31, 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 notes 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

and

six

months ended

December 31, 2018

and

2017:

	Three Months Ended				Six Months Ended
	December 31,				December 31,
	2018		2017		2018		2017
Anti-dilutive stock options		150,000		2,496,750		1 50,000		2,496,750
Anti-dilutive shares for convertible note payable		-		8,230,769		-		8,230,769
Anti-dilutive shares		150 ,000		10,727,519		1 50,000		10,727,519

Additionally, in the 

six

months ended

December 31, 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

6 Months Ended

Dec. 31, 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:

	December 31,		June 30,
	2018		2018
Raw materials	$	8,194	$	4,179
Work-in-process		2,374		2,207
Finished goods		967		1,355
Total	$	11,535	$	7,741

XML

Note 3 - Property and Equipment, Net

6 Months Ended

Dec. 31, 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:

	December 31,			June 30,
	2018			2018
Land and building	$	1,250		$	1,250
Leasehold improvements		1,304			1,268
Machinery and equipment		6,131			5,917
Transportation equipment		6			6
		8,691			8,441
Less: Accumulated depreciation and amortization		(6,885	)		(6,790	)
Total	$	1,806		$	1,651

Depreciation and amortization expense recorded on property and equipment was

$66

and

$57

for the

three

months ended

December 31, 2018

and

2017,

respectively, and

$132

for each of the

six

months ended

December 31, 2018

and

2017.

Additionally, the Company disposed of fully depreciated property of

$38

in each of the

six

months ended

December 31, 2018 and 2017,

and sold transportation equipment for a gain of

$3

in the

six

months ended

December 31, 2017.

XML

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

6 Months Ended

Dec. 31, 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

December 31, 2018

and

June 30, 2018,

the Company had the following debt outstanding:

	Principal Amount						Interest   Rate			Maturity Date
	December 31, 2018			June 30, 2018
Revolving advances under Senior
Credit Facility with PNC Bank, National Association	$	6,326		$	4,894			5.50	%	2/19/2020
Installment Note with PNC Bank		1,389			1,672			6.00	%	2/19/2020
Installment Note with PNC Equipment Finance		55			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		168			269			3.86% - 9.26	%	2/1/2019 -      12/8/2020
Total outstanding debt		10,338			9,336
Less: Revolving Advances		(6,326	)		(4,894	)
Prepaid financing costs		(32	)		(45	)
Current portion of long term debt, net		(903	)		(773	)
Long term debt, net	$	3,077		$	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%.

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

3.25%.

  As of December

31,

2018

and June

30,

2018

the interest rates were as follows:

	December 31,			June 30,
	2018			2018
Revolving Credit Facility:
Base Rate Interest		5.50	%		5.00	%
Eurodollar Rate		5.25375	%		n/a
Term Loan:
Base Rate Interest		6.00	%		5.50	%
Eurodollar Rate		5.75375	%		n/a

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

December 31, 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

December 31, 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.

Capitalized Lease Obligations.

On

February 1, 2019,

the Company entered into a capitalized lease obligation with First American Equipment Finance (“First American”) in the amount of

$233,

which lease is secured by certain machinery and equipment and matures on

February 1, 2021.

The Company sold certain machinery, purchased from equipment suppliers other than First American in the aggregate amount of

$233,

to First American for

$233

and leased the sold equipment back from First American for monthly payments in the amount of approximately

$10

with an imputed interest rate of

7.28%.

On

February 1, 2019,

the capitalized lease obligation entered into by the Company on

March 17, 2017

with First American in the amount of

$158,

which lease was secured by certain machinery and equipment, was satisfied with all payments being made under the capitalized lease obligation. The monthly lease payment was approximately

$7

and had an imputed interest rate of

3.86%.

XML

Note 5 - Significant Risks and Uncertainties

6 Months Ended

Dec. 31, 2018

Notes to Financial Statements

Concentration Risk Disclosure [Text Block]

Note

5.

Significant Risks and Uncertainties

(

a) Major Customers.

For the

three

months ended

December 31, 2018

and

2017,

approximately

93%

and

91%

of consolidated net sales, respectively, were derived from

two

customers.  These

two

customers are in the Company’s Contract Manufacturing Segment and net sales to these

two

customers represented approximately

75%

and

20%

in the

three

months ended December

31,

2018

and

79%

and

16%

in the

three

months ended

December 31, 201

7,

respectively.  In each of the

six

months ended

December 31, 2018

and

2017,

approximately

91%

of consolidated net sales, were derived from the same

two

customers and net sales to these

two

customers represented approximately

70%

and

24%

in the

six

months ended December

31,

2018

and

71%

and

23%

of net sales in the

six

months ended

December 31, 201

7,

respectively.  Accounts receivable from these

two

major customers represented approximately

90%

and

87%

of total net accounts receivable as of

December 31

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

69%

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

6 Months Ended

Dec. 31, 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

December 31, 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	$	7	$	114
Interest on operating lease liabilities		33		1		34
Total finance lease cost	$	140	$	8	$	148

The components of lease expense for the 

six

months ended

December 31, 2018

were as follows:

	Related Party - Vitamin Realty		Other Leases		Totals
Operating lease costs	$	-	$	38	$	38
Finance Operating Lease Costs:
Amortization of right-of use assets	$	214	$	12	$	226
Interest on operating lease liabilities		68		2		70
Total finance lease cost	$	282	$	14	$	296

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

June 1, 2024.

This additional lease provides for minimum annual lease payments of

$27

with annual increases plus the proportionate share of operating expenses.

Rent expense, lease amortization costs and interest expense on these related party leases were

$219

and

$214

for the

three

months ended

December 31, 2018

and

2017,

and

$421

and

$415

for the

six

months ended

December 31, 2018

and

2017,

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

December 31, 2018

and

June 30, 2018,

the Company had outstanding current obligations to Vitamin Realty of

$761

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

$3,462

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

December 31, 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	$	3,454	$	3,462	$	3,951
Machinery and equipment leases		31		31		33
Office equipment leases		28		28		30
	$	3,513	$	3,521	$	4,014

We have other operating lease agreements with commitments of less than

one

year or that are

not

significant and the Company elected the practical expedient option and as such these lease payments are expensed as incurred.

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

3.76%

and

6.9

years, respectively.

Supplemental cash flows information related to leases for the

six

months ended

December 31, 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	$	-	$	37	$	37
Operating cash flows from finance leases		285		12		297
Financing cash flows from capital lease obligations		-		108		108

The Company did

not

enter into any lease commitments in the

six

months ended

December 31, 2018.

Maturities of operating lease liabilities as of

December 31, 2018

were as follows:

	Operating			Related Party
Year ending	Lease			Operating Lease
June 30,	Commitment			Commitment			Total
2019, remaining	$	24		$	283		$	307
2020		39			565			604
2021		22			565			587
2022		9			565			574
2023		-			565			565
2024		-			563			563
Thereafter		-			845			845
Total minimum lease payments		94			3,951			4,045
Imputed interest		(4	)		(489	)		(493	)
Total	$	90		$	3,462		$	3,552

Total rent expense, including real estate taxes and maintenance charges, was approximately

$256

and

$254

and

$507

and

$496

for the

three

months and

six

months ended

December 31, 2018

and

2017,

respectively. Rent and lease amortization and interest expense are 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.

XML

Note 7 - Related Party Transactions

6 Months Ended

Dec. 31, 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.

XML

Note 8 - Segment Information and Dissaggregated Revenue

6 Months Ended

Dec. 31, 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

December 31, 2018

and

2017

were

$1,274

and

$1,248,

respectively, and for the

six

months ended

December 31, 2018

and

2017

were

$2,513

and

$2,906,

respectively.

Financial information relating to the

three

months ended

December 31, 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 Manufacturing	2018	$	10,498	$	1,258	$	11,756	$	1,246	$	66	$	269
	2017		9,159		1,199		10,358		896		55		109
Branded Proprietary Products	2018		48		12		60		21		-		-
	2017		162		10		172		65		1		-
Other Nutraceutical Businesses	2018		181		4		185		63		-		-
	2017		231		39		270		87		1		-
Total Company	2018		10,727		1,274		12,001		1,330		66		269
	2017		9,552		1,248		10,800		1,048		57		109

Financial information relating to the

six

months ended

December 31, 2018

and

2017

operations by business segment are as follows:

		Sales, Net						Segment
		U.S.		International				Gross					Capital
		Customers		Customers		Total		Profit		Depreciation			Expenditures
Contract Manufacturing	2018	$	19,153	$	2,455	$	21,608	$	2,328	$	131	$	$287
	2017		16,981		2,782		19,763		1,731		129		202
Branded Proprietary Products	2018		119		19		138		42		-		-
	2017		181		21		202		97		2		13
Other Nutraceutical Businesses	2018		520		39		559		179		1		-
	2017		502		103		605		225		1		1
Total Company	2018		19,792		2,513		22,305		2,549		132		287
	2017		17,664		2,906		20,570		2,053		132		216

	Total Assets as of
	December 31,		June 30,
	2018		2018
Contract Manufacturing	$	20,141	$	12,200
Branded Proprietary Products		545		543
Other Nutraceutical Businesses		1,889		1,825
Total Company	$	22,575	$	14,568

XML

Significant Accounting Policies (Policies)

6 Months Ended

Dec. 31, 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

six

months ended

December 31, 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 notes 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

and

six

months ended

December 31, 2018

and

2017:

	Three Months Ended				Six Months Ended
	December 31,				December 31,
	2018		2017		2018		2017
Anti-dilutive stock options		150,000		2,496,750		1 50,000		2,496,750
Anti-dilutive shares for convertible note payable		-		8,230,769		-		8,230,769
Anti-dilutive shares		150 ,000		10,727,519		1 50,000		10,727,519

Additionally, in the 

six

months ended

December 31, 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 1 - Principles of Consolidation and Basis of Presentation (Tables)

6 Months Ended

Dec. 31, 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				Six Months Ended
	December 31,				December 31,
	2018		2017		2018		2017
Anti-dilutive stock options		150,000		2,496,750		1 50,000		2,496,750
Anti-dilutive shares for convertible note payable		-		8,230,769		-		8,230,769
Anti-dilutive shares		150 ,000		10,727,519		1 50,000		10,727,519

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Note 2 - Inventories (Tables)

6 Months Ended

Dec. 31, 2018

Notes Tables

Schedule of Inventory, Current [Table Text Block]

	December 31,		June 30,
	2018		2018
Raw materials	$	8,194	$	4,179
Work-in-process		2,374		2,207
Finished goods		967		1,355
Total	$	11,535	$	7,741

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Note 3 - Property and Equipment, Net (Tables)

6 Months Ended

Dec. 31, 2018

Notes Tables

Property, Plant and Equipment [Table Text Block]

	December 31,			June 30,
	2018			2018
Land and building	$	1,250		$	1,250
Leasehold improvements		1,304			1,268
Machinery and equipment		6,131			5,917
Transportation equipment		6			6
		8,691			8,441
Less: Accumulated depreciation and amortization		(6,885	)		(6,790	)
Total	$	1,806		$	1,651

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

6 Months Ended

Dec. 31, 2018

Notes Tables

Schedule of Debt [Table Text Block]

	Principal Amount						Interest   Rate			Maturity Date
	December 31, 2018			June 30, 2018
Revolving advances under Senior
Credit Facility with PNC Bank, National Association	$	6,326		$	4,894			5.50	%	2/19/2020
Installment Note with PNC Bank		1,389			1,672			6.00	%	2/19/2020
Installment Note with PNC Equipment Finance		55			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		168			269			3.86% - 9.26	%	2/1/2019 -      12/8/2020
Total outstanding debt		10,338			9,336
Less: Revolving Advances		(6,326	)		(4,894	)
Prepaid financing costs		(32	)		(45	)
Current portion of long term debt, net		(903	)		(773	)
Long term debt, net	$	3,077		$	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

Schedule of Debt Interest Rates [Table Text Block]

	December 31,			June 30,
	2018			2018
Revolving Credit Facility:
Base Rate Interest		5.50	%		5.00	%
Eurodollar Rate		5.25375	%		n/a
Term Loan:
Base Rate Interest		6.00	%		5.50	%
Eurodollar Rate		5.75375	%		n/a

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

6 Months Ended

Dec. 31, 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	$	7	$	114
Interest on operating lease liabilities		33		1		34
Total finance lease cost	$	140	$	8	$	148

	Related Party - Vitamin Realty		Other Leases		Totals
Operating lease costs	$	-	$	38	$	38
Finance Operating Lease Costs:
Amortization of right-of use assets	$	214	$	12	$	226
Interest on operating lease liabilities		68		2		70
Total finance lease cost	$	282	$	14	$	296

Leases and Remaining Commitments [Table Text Block]

	Right-of-use Assets		Operating Lease Obligations		Remaining Cash Commitment
Vitamin Realty Leases	$	3,454	$	3,462	$	3,951
Machinery and equipment leases		31		31		33
Office equipment leases		28		28		30
	$	3,513	$	3,521	$	4,014

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	$	-	$	37	$	37
Operating cash flows from finance leases		285		12		297
Financing cash flows from capital lease obligations		-		108		108

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

	Operating			Related Party
Year ending	Lease			Operating Lease
June 30,	Commitment			Commitment			Total
2019, remaining	$	24		$	283		$	307
2020		39			565			604
2021		22			565			587
2022		9			565			574
2023		-			565			565
2024		-			563			563
Thereafter		-			845			845
Total minimum lease payments		94			3,951			4,045
Imputed interest		(4	)		(489	)		(493	)
Total	$	90		$	3,462		$	3,552

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Note 8 - Segment Information and Dissaggregated Revenue (Tables)

6 Months Ended

Dec. 31, 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 Manufacturing	2018	$	10,498	$	1,258	$	11,756	$	1,246	$	66	$	269
	2017		9,159		1,199		10,358		896		55		109
Branded Proprietary Products	2018		48		12		60		21		-		-
	2017		162		10		172		65		1		-
Other Nutraceutical Businesses	2018		181		4		185		63		-		-
	2017		231		39		270		87		1		-
Total Company	2018		10,727		1,274		12,001		1,330		66		269
	2017		9,552		1,248		10,800		1,048		57		109

		Sales, Net						Segment
		U.S.		International				Gross					Capital
		Customers		Customers		Total		Profit		Depreciation			Expenditures
Contract Manufacturing	2018	$	19,153	$	2,455	$	21,608	$	2,328	$	131	$	$287
	2017		16,981		2,782		19,763		1,731		129		202
Branded Proprietary Products	2018		119		19		138		42		-		-
	2017		181		21		202		97		2		13
Other Nutraceutical Businesses	2018		520		39		559		179		1		-
	2017		502		103		605		225		1		1
Total Company	2018		19,792		2,513		22,305		2,549		132		287
	2017		17,664		2,906		20,570		2,053		132		216

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

	Total Assets as of
	December 31,		June 30,
	2018		2018
Contract Manufacturing	$	20,141	$	12,200
Branded Proprietary Products		545		543
Other Nutraceutical Businesses		1,889		1,825
Total Company	$	22,575	$	14,568

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Note 1 - Principles of Consolidation and Basis of Presentation (Details Textual)	6 Months Ended
	Dec. 31, 2018 shares
Common Shares Included in Calculation of Diluted EPS Attributable to Conversion of Debt Securities	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	Dec. 31, 2018	Jul. 01, 2018	Jun. 30, 2018
Operating lease right-of-use assets	$ 3,513
Operating lease liabilities	3,521
Current portion of long term debt, net	903	$ 773	$ 773
Long term debt, net	10,338	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	3,454	3,668
Operating lease liabilities	3,462	3,677
Unrelated Party [Member]
Operating lease right-of-use assets	59	69
Operating lease liabilities	$ 59	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 liabilities		3,677
Accounting Standards Update 2016-02 [Member] | Unrelated Party [Member]
Operating lease right-of-use assets		69
Operating lease liabilities		$ 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		6 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2018	Dec. 31, 2017
Anti-dilutive securities (in shares)	150,000	10,727,519	150,000	10,727,519
Employee Stock Option [Member]
Anti-dilutive securities (in shares)	150,000	2,496,750	150,000	2,496,750
Convertible Debt Securities [Member]
Anti-dilutive securities (in shares)		8,230,769		8,230,769

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Note 2 - Inventories - Inventories (Details) - USD ($) $ in Thousands	Dec. 31, 2018	Jun. 30, 2018
Raw materials	$ 8,194	$ 4,179
Work-in-process	2,374	2,207
Finished goods	967	1,355
Total	$ 11,535	$ 7,741

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Note 3 - Property and Equipment, Net (Details Textual) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2018	Dec. 31, 2017
Depreciation, Total	$ 66	$ 57	$ 132	$ 132
Property, Plant and Equipment, Disposals			38	38
Gain (Loss) on Disposition of Property Plant Equipment, Total				3
Transportation Equipment [Member]
Gain (Loss) on Disposition of Property Plant Equipment, Total				$ 3

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Note 3 - Property and Equipment, Net - Property and Equipment, Net (Details) - USD ($) $ in Thousands	Dec. 31, 2018	Jun. 30, 2018
Property and equipment, gross	$ 8,691	$ 8,441
Less: Accumulated depreciation and amortization	(6,885)	(6,790)
Total	1,806	1,651
Land and Building [Member]
Property and equipment, gross	1,250	1,250
Leasehold Improvements [Member]
Property and equipment, gross	1,304	1,268
Machinery and Equipment [Member]
Property and equipment, gross	6,131	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					6 Months Ended
	Feb. 01, 2019	Jul. 31, 2018	Mar. 17, 2017	Feb. 19, 2016	Dec. 31, 2018	Dec. 31, 2017	Jun. 30, 2018	Jun. 27, 2012	Feb. 21, 2008
Capital Lease Obligations, Total					$ 168		$ 269
Sale Leaseback Transaction, Net Proceeds, Financing Activities, Total						$ 143
CD Financial LLC [Member]
Debt Instrument, Convertible, Conversion Price		$ 0.65
Stock Issued During Period, Shares, Conversion of Convertible Securities		8,230,769
First American Equipment Finance [Member]
Capital Lease Obligations, Total			$ 158
Sale Leaseback Transaction, Monthly Rental Payments			$ 7
Sale Leaseback Transaction, Imputed Interest Rate			3.86%
First American Equipment Finance [Member] | Subsequent Event [Member]
Capital Lease Obligations, Total	$ 233
Sale Leaseback Transaction, Net Proceeds, Financing Activities, Total	233
Sale Leaseback Transaction, Monthly Rental Payments	$ 10
Sale Leaseback Transaction, Imputed Interest Rate	7.28%
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
Term Loan [Member] | Eurodollar [Member]
Debt Instrument, Basis Spread on Variable Rate				3.25%
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
Debt Instrument, Periodic Payment, Total				$ 41
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	6 Months Ended
	Dec. 31, 2018	Jul. 01, 2018	Jun. 30, 2018
Capitalized lease obligations	$ 168		$ 269
Total outstanding debt	10,338	$ 3,624	9,336
Prepaid financing costs	(32)		(45)
Current portion of long term debt, net	(903)	$ (773)	(773)
Long term debt, net	$ 3,077		3,624
Minimum [Member]
Capitalized lease obligations, interest rate	3.86%
Capitalized lease obligations, maturity start date	Feb. 01, 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	$ 6,326		4,894
Interest Rate	5.50%
Maturity Date	Feb. 19, 2020
Less: Revolving Advances	$ (6,326)		(4,894)
Installment Note with PNC Bank [Member]
Interest Rate	6.00%
Maturity Date	Feb. 19, 2020
Notes Payable	$ 1,389		1,672
PNC Equipment Finance LLC [Member]
Interest Rate	4.57%
Maturity Date	Jul. 29, 2019
Notes Payable	$ 55		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
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

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Note 4 - Senior Credit Facility, Subordinated Convertible Note, Net - CD Financial, LLC and Other Long Term Debt - Interest Rates (Details)	Dec. 31, 2018	Jun. 30, 2018
Revolving Credit Facility [Member] | Base Rate [Member]
Base Rate Interest	5.50%	5.00%
Revolving Credit Facility [Member] | Eurodollar [Member]
Base Rate Interest	5.25375%
Term Loan [Member] | Base Rate [Member]
Base Rate Interest	6.00%	5.50%
Term Loan [Member] | Eurodollar [Member]
Base Rate Interest	5.75375%

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Note 5 - Significant Risks and Uncertainties (Details Textual)	3 Months Ended		6 Months Ended		12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2018	Dec. 31, 2017	Jun. 30, 2018
Sales Revenue, Net [Member] | Customer Concentration Risk [Member]
Number of Major Customers	2	2
Sales Revenue, Net [Member] | Customer Concentration Risk [Member] | Contract Manufacturing [Member]
Number of Major Customers	2	2		2
Sales Revenue, Net [Member] | Customer Concentration Risk [Member] | Two Customers [Member]
Concentration Risk, Percentage	93.00%	91.00%	91.00%	91.00%
Sales Revenue, Net [Member] | Customer Concentration Risk [Member] | Major Customer 1 [Member] | Contract Manufacturing [Member]
Concentration Risk, Percentage	75.00%	79.00%	70.00%	71.00%
Sales Revenue, Net [Member] | Customer Concentration Risk [Member] | Major Customer 2 [Member] | Contract Manufacturing [Member]
Concentration Risk, Percentage	20.00%	16.00%	24.00%	23.00%
Accounts Receivable [Member] | Customer Concentration Risk [Member]
Number of Major Customers			2	2	2
Accounts Receivable [Member] | Customer Concentration Risk [Member] | Two Customers [Member]
Concentration Risk, Percentage			90.00%		87.00%
Number of Employees, Geographic Area [Member] | Unionized Employees Concentration Risk [Member]
Concentration Risk, Percentage			69.00%

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Note 6 - Leases and Other Commitments and Contingencies (Details Textual) $ in Thousands			3 Months Ended		6 Months Ended
	May 19, 2014 USD ($) ft²	Jan. 05, 2012 USD ($) ft²	Dec. 31, 2018 USD ($)	Dec. 31, 2017 USD ($)	Dec. 31, 2018 USD ($)	Dec. 31, 2017 USD ($)
Operating Leases, Rent Expense, Net, Total			$ 256	$ 254	$ 507	$ 496
Lessee, Operating Lease, Discount Rate			3.76%		3.76%
Operating Lease, Weighted Average Remaining Lease Term			6 years 328 days		6 years 328 days
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			$ 1
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) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended
	Dec. 31, 2018	Dec. 31, 2018
Operating lease costs	$ 19	$ 38
Amortization of right-of use assets	114	226
Interest on operating lease liabilities	34	70
Total finance lease cost	148	296
Unrelated Party [Member]
Operating lease costs	19	38
Amortization of right-of use assets	7	12
Interest on operating lease liabilities	1	2
Total finance lease cost	8	14
Vitamin Realty LLC [Member]
Operating lease costs
Amortization of right-of use assets	107	214
Interest on operating lease liabilities	33	68
Total finance lease cost	$ 140	$ 282

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Note 6 - Leases and Other Commitments and Contingencies - Leases and Commitments (Details) - USD ($) $ in Thousands	Dec. 31, 2018	Jul. 01, 2018	Jun. 30, 2018
Right-of-use assets	$ 3,513
Operating lease obligations	3,521
Remaining cash commitment	4,014
Machinery and Equipment Leases [Member]
Right-of-use assets	31
Operating lease obligations	31
Remaining cash commitment	33
Office Equipment Leases [Member]
Right-of-use assets	28
Operating lease obligations	28
Remaining cash commitment	30
Vitamin Realty LLC [Member]
Right-of-use assets	3,454	$ 3,668
Operating lease obligations	3,462	$ 3,677
Remaining cash commitment	$ 3,951

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Note 6 - Leases and Other Commitments and Contingencies - Supplemental Cash Flow Information (Details) $ in Thousands	6 Months Ended
	Dec. 31, 2018 USD ($)
Operating cash flows from operating leases	$ 37
Operating cash flows from finance leases	297
Financing cash flows from capital lease obligations	108
Unrelated Party [Member]
Operating cash flows from operating leases	37
Operating cash flows from finance leases	12
Financing cash flows from capital lease obligations	108
Vitamin Realty LLC [Member]
Operating cash flows from operating leases
Operating cash flows from finance leases	285
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	Dec. 31, 2018 USD ($)
2019, remaining	$ 307
2020	604
2021	587
2022	574
2023	565
2024	563
Thereafter	845
Total minimum lease payments	4,045
Imputed interest	(493)
Total	3,552
Vitamin Realty LLC [Member]
2019, remaining	283
2020	565
2021	565
2022	565
2023	565
2024	563
Thereafter	845
Total minimum lease payments	3,951
Imputed interest	(489)
Total	3,462
Unrelated Party [Member]
2019, remaining	24
2020	39
2021	22
2022	9
2023
2024
Thereafter
Total minimum lease payments	94
Imputed interest	(4)
Total	$ 90

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Note 8 - Segment Information and Dissaggregated Revenue (Details Textual) $ in Thousands	3 Months Ended		6 Months Ended
	Dec. 31, 2018 USD ($)	Dec. 31, 2017 USD ($)	Dec. 31, 2018 USD ($)	Dec. 31, 2017 USD ($)
Number of Reportable Segments			3
Revenue from Contract with Customer, Including Assessed Tax	$ 12,001	$ 10,800	$ 22,305	$ 20,570
Europe and Canada [Member]
Revenue from Contract with Customer, Including Assessed Tax	$ 1,274	$ 1,248	$ 2,513	$ 2,906

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Note 8 - Segment Information - Operations by Business Segment (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2018	Dec. 31, 2017
Sales, net	$ 12,001	$ 10,800	$ 22,305	$ 20,570
Gross Profit	1,330	1,048	2,549	2,053
Depreciation	66	57	132	132
Capital Expenditures	269	109	287	216
Contract Manufacturing [Member]
Sales, net	11,756	10,358	21,608	19,763
Gross Profit	1,246	896	2,328	1,731
Depreciation	66	55	131	129
Capital Expenditures	269	109	287	202
Branded Proprietary Products [Member]
Sales, net	60	172	138	202
Gross Profit	21	65	42	97
Depreciation		1		2
Capital Expenditures				13
Other Nutraceutical Business [Member]
Sales, net	185	270	559	605
Gross Profit	63	87	179	225
Depreciation		1	1	1
Capital Expenditures				1
UNITED STATES
Sales, net	10,727	9,552	19,792	17,664
UNITED STATES | Contract Manufacturing [Member]
Sales, net	10,498	9,159	19,153	16,981
UNITED STATES | Branded Proprietary Products [Member]
Sales, net	48	162	119	181
UNITED STATES | Other Nutraceutical Business [Member]
Sales, net	181	231	520	502
Non-US [Member]
Sales, net	1,274	1,248	2,513	2,906
Non-US [Member] | Contract Manufacturing [Member]
Sales, net	1,258	1,199	2,455	2,782
Non-US [Member] | Branded Proprietary Products [Member]
Sales, net	12	10	19	21
Non-US [Member] | Other Nutraceutical Business [Member]
Sales, net	$ 4	$ 39	$ 39	$ 103

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Note 8 - Segment Information - Total Assets (Details) - USD ($) $ in Thousands	Dec. 31, 2018	Jun. 30, 2018
Total Assets	$ 22,575	$ 14,568
Contract Manufacturing [Member]
Total Assets	20,141	12,200
Branded Proprietary Products [Member]
Total Assets	545	543
Other Nutraceutical Business [Member]
Total Assets	$ 1,889	$ 1,825