Recent Sales of Unregistered Securities

On July 31, 2018, the Company authorized the issuance of 8,230,769 shares of the Company’s 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 in the principal amount of approximately $5.4 million.  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.None.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

During the quarter ended June 30, 2018,2020, 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 common stock or other securities.

Item 6. Selected Financial Data and Supplementary Data

Not applicable.We are a smaller reporting company, as defined by Rule 12b-2 of the Exchange Act, and are not required to provide the in the information required under this item.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (dollars in thousands).

Certain statements set forth under this caption constitute “forward-looking statements.” See “Cautionary Statement Regarding Forward-Looking Statements” on page 3 of this Annual Report on Form 10-K for additional factors relating to such statements.

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

Our financial results are substantially dependent on net sales. Net sales are partly dependent on the mix of contract manufactured products our branded proprietary liquid nutraceuticals and other nutraceutical sales, which are difficult to forecast. The varied sales pricing among our products and promotional support in the form of consumer coupons and other sales price allowances, along with the mix of products sold, affects the average selling price that we will realize and has a large impact on our revenue and gross margins in the operations of AgroLabs.

Net sales in our operations of AgroLabs is also affected by: the timing of new product introductions and the demand for and market acceptance of our products; actions taken by our competitors, including new product offerings and introductions, marketing programs and pricing pressures, and our response to such actions; our ability to respond quickly to consumer tastes and needs; and the availability of sufficient raw materials and production lead-time from suppliers to meet demand. Factors that could cause demand to be different from our expectations include: customer acceptance of our productspricing for and our competitors' products;competitors’ pricing; changes in customer order patterns, including order returns;patterns; changes in the level of inventory at customers; and changes in business and economic conditions, including conditions in the credit market that could affect consumer confidence and result in lower than expected demand for our manufactured products and to a lesser extent, our other nutraceutical business products.

We believe that we have the product offerings, established and developing business relationships, facilities, personnel, product offerings, and competitive and financial resources in place for business success; however, future revenue, costs, gross margins, and profits are all influenced by a number of factors, including those discussed above, all of which are inherently difficult to forecast.  Except as otherwise noted, all dollar amounts below are “in thousands”.

For the fiscal year ended June 30, 2018, our net sales from operations decreased by $3,244 to approximately $43,710 from approximately $46,954 in our fiscal year ended June 30, 2017. In the fiscal year ended June 30, 2018,2020, our net sales from operations increased by $2,792 to approximately $52,769 from approximately $49,977 in the fiscal year ended June 30, 2019. In the fiscal year ended June 30, 2020, our gross profit of $4,988 wasincreased by approximately $1,679 less than it was$505 to $6,727 from approximately $6,222 for the fiscal year ended June 30, 2017 of approximately $6,667, as a result of our cost of goods sold decreasing by approximately $1,565.2019. Our profit margins decreasedincreased by 2.8%0.3% in the fiscal year ended June 30, 2018,2020, from 14.2%12.4% to 11.4%12.7% primarily as a result of the shift in the major customer base due to Life Extension representing 69%increased sales volume in the fiscal year ended June 30, 20182020 compared to 56% in the fiscal year ended June 30, 20172019 coupled with less net sales from Herbalife and other customers in our Contract Manufacturing Segment. This change in the concentration in the customer sales to Life Extension results in lower net margins on higherincreased sales dollars dueused to offset the higher cost of the trademarked raw materials, which limits the ability to negotiate pricing, used in thefixed manufacturing of the product mix sold to Life Extension.overhead costs. We had consolidated selling and administrative expenses of approximately $3,294$3,468 and $3,480$3,518 in the fiscal years ended June 30, 20182020 and 2017,2019, respectively. The slight decrease in the consolidated selling and administrative expenses of $186$50 was primarily from the decreases in two non-cash items, stock compensation expense lower by $85 and depreciation and amortization of $39 and decreases in travel and entertainment of $30 and marketing of $24, offset in part, from higher salary and benefit costs of $99 for the year from a decreasean increase in our headcount. Forheadcount and general increases in wages and employee benefits. In the fiscal years ended June 30, 20182020 and 2017,2019, we had operating income of approximately $1,694$3,259 and $3,187,$2,704, respectively. Our current year results are significantly lower than the prior year due to the decline in net sales of 7%, or $3,244 offset by the decrease in the cost of goods sold of 4% or $1,565. Our results were in line with our expectations for the fiscal year ended June 30, 2018.

Our revenue from our two significant customers in our Contract Manufacturing Segment is dependent on their demand within their respective distribution channels for the products we manufacture for them.  As in any competitive market, our ability to match or beat other contract manufacturers pricing for the same items may also alter our outlook and the ability to maintain or increase revenues.  We will continue to focus on our core businesses and push forward in maintaining our cost structure in line with our sales and expanding our customer base.

The COVID-19, or coronavirus outbreak, has the potential to cause a disruption in our supply chain. Currently, some of our suppliers of certain materials used in the production of our supplements are located in China and other impacted countries or other states within the United States. Most materials may be obtained from more than one supplier. However, due to port closures and other restrictions resulting from the coronavirus outbreak throughout the world, these suppliers, located both inside and outside of the United States, may have limited supply of such materials, which will cause the price of such materials to increase. As of September 23, 2020, we have had delays, however; have not experienced a significant disruption in the supply chain for our raw materials. We have taken measures to secure some surplus stock and have informed our customers who may be affected of the potential price increase. In addition, the significant outbreak of this contagious diseases in the human population has resulted in a widespread health crisis that could adversely affect the economies and financial markets of many countries, resulting in an economic downturn that could affect demand for our branded product segment,products and impact our operating results.

While, as of September 23, 2020, we haven’t experienced a major disruption in the supply chain for our manufactured products, we have, however, seen a disruption in the supply chain for personal protection equipment (“PPE”) and cleaning supplies used in our manufacturing facilities in accordance with our standard operating procedures and the updated guidelines issued by the Centers for Disease Control and Prevention (the “CDC”) for personal safety. The U.S. Department of Labor Occupational Safety and Health Administration has adopted the CDC guidelines and as such we are developing new customer relationships focused onrequired to provide the international markets in Canada, MexicoPPE for our employees to wear while working. When we have obtained the out of stock items, such as face masks, gloves and Asia. We have found that these relationships have taken longerother protective personal items, the cost of such items were substantially higher than anticipated to result in product sales as the international regulatory requirements are unique to each market and can change beforehistorical costs. This may impact our future gross margins. Additionally, if we are ableunable to obtain cleaning supplies, we may have to temporarily close onareas of production until the needed supplies are obtained.

We do not currently anticipate any sales transactions and such regulatory requirements also result in additional time to clear customs. We are also developing new products to include branded products for solid dosage and in powder format which will be manufactured by MDC and sold using our AgroLabs brand ornegative impact to our customer contacts developed through sellingmargins resulting from the coronavirus outbreak, however; if we are unable to obtain the necessary materials to produce a supplement within our branded product understandard lead times or the customer’s labels. We believe that this will increase salesnecessary PPE and further leverage our fixed manufacturingcleaning supplies, it may delay the production and selling costs in eachshipment of these segments as we diversify our branded product offeringsthose supplements, thereby shifting the timing of recognizing the resulting sale to our existing and developing customers. While this sale cycle continues to take longer than management had anticipated, we expect these relationships to contribute to our sales in the fiscal year ending June 30, 2019.

Additionally,While our facilities have remained open during the State of New Jersey lockdown as an essential business, there can be no assurances that we expectwill continue to benefit fromoperate if the business relationship in connection withGovernor of New Jersey should modify or issue new executive orders prohibiting our AgroSport LLC equity investment.  On June 1, 2018, we partnered with a business manager experienced in marketing consumer brands and the contract manufacturer of the AgroSport product line and are workingfacilities to expand our online presence in the sports nutrition as well as cross over and leverage the branding of AgroSport to our broad based nutritional supplements for AgroLabs.   AgroLabs contributed the AgroSport product line to AgroSport LLC in exchange for a one third interest in AgroSport LLC.  The contribution included our website www.agrosport.com, all trademarks and all tangible and other intangible assets associated with the AgroSport product line and a future capital contribution commitment of $10.remain open.

Critical Accounting Policies and Estimates

Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. The most significant estimates include:

●     sales returns and allowances;

●     trade marketing and merchandising;

●    allowance for doubtful accounts;

●     inventory valuation;

●     valuation and recoverability of long-lived and intangible assets;

●     income taxes and valuation allowances on deferred income taxes; and

●     accruals for, and the probability of, the outcome of current litigation, if any.

On a continual basis, management reviews its estimates utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions. After such reviews, and if deemed appropriate, those estimates are adjusted accordingly. Actual results could differ from those estimates.

Allowances for Doubtful Accounts and Sales Returns

Our management makes judgments as to its ability to collect outstanding receivables and provides allowances for the portion of receivables for which collection becomes doubtful. Provisions are made based upon a specific review of all significant outstanding amounts. We continuously monitor payments from our customers and maintain allowances for estimated losses for doubtful accounts in the period they become known.

If the historical data we use to calculate the allowance provided for doubtful accounts does not reflect the future ability to collect outstanding receivables, additional provisions for doubtful accounts may be needed and the future results of operations could be materially affected. In recording any additional allowances, a respective charge against income is reflected in the general and administrative expenses,expenses; and would reduce the operating results in the period in which the increase is recorded.

Our return policy in our contract manufacturing business is to only accept returns for defective products. If defective products are returned, our agreement with our customers is to cure the defect and re-ship the product. Based on this policy, when the product is shipped we make an estimate of any potential returns or allowances. With respect to our branded proprietary nutraceutical products, our return policy is also to accept returns for defective products and re-ship replacement items for the damaged product. In most instances, the damaged goods are a small portion of the overall order and we instruct our customer to dispose of the damaged product and we issue them a credit for the dollar amount of the damaged goods plus any cost of disposal. We also estimate and make allowances at the time of shipment.

In the event we have an item that is discontinued in our customers retail stores, we work with our buyer and broker on the sell through and/or return such discontinued item. We make estimates of this event at both the time of shipment and at the time of the notice from our customer that our item has been discontinued, compare this to our recorded sales allowances and record any adjustments based upon the updated knowledge of a known return.

If the historical data we use to calculate the sales allowance for sales returns and other allowances does not reflect the amounts previously recorded, additional provisions for sales allowance may be needed and the future results of operations could be materially affected. In recording any additional sales allowances, a respective charge against income is reflected in net sales, and would reduce the profit margins and operating results in the period in which the increase is recorded.

Trade Marketing and Merchandising

In order to support the Company’s proprietary nutraceutical product lines, various promotional activities are conducted through the retail trade, distributors or directly with consumers, including in-store display and product placement programs, feature price discounts, coupons, and other similar activities. The Company regularly reviews and revises, when it deems necessary, estimates of costs to the Company for these promotional programs based on estimates of what will be redeemed by the retail trade, distributors, or consumers. These estimates are made using various techniques, including historical data on performance of similar promotional programs. Differences between estimated expense and actual performance are generally not material and are recognized as a change in management’s estimate in a subsequent period. Our total promotional expenditures, including amounts classified as a reduction of net sales, represent less than 1% of consolidated net sales in the financial statements contained in this Annual Report on Form 10-K, for each of the fiscal years ended June 30, 2018 and 2017.

Inventory Valuation

Inventories are stated at the lower of cost or net realizable value, which reflects management’s estimates of net realizable value. Cost is determined using the first-in, first-out method. As a result of our inventory being manufactured primarily on a purchase order basis, the quantity of both raw materials and finished goods inventory provides for minimal risk of potential overstock or obsolescence.

Mail and Internet order inventory is expiration date sensitive. Accordingly, we review this inventory, consider sales levels (by SKU), term to expiration date, potential for retesting to extend expiration date, and evaluate potential for obsolescence or overstock.

Long Lived Assets

Purchased intangibles consisting of patents and unpatented technological expertise, license fees and trade names purchased as part of business acquisitions are presented net of related accumulated amortization and are being amortized on a straight-line basis over the remaining useful lives of such intangibles.

We record impairment losses on other intangiblelong lived assets when events and circumstances indicate that such assets might be impaired and the estimated fair value of any such asset is less than its recorded amount. The Company reviews the value of its long-lived assets for impairment whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable or that the useful lives of these assets are no longer appropriate. Conditions that would necessitate an impairment assessment include material adverse changes in operations, significant adverse differences in actual results in comparison with initial valuation forecasts prepared at the time of acquisition, a decision to abandon certain acquired products, services, or marketplaces, or other significant adverse changes that would indicate the carrying amount of the recorded asset might not be recoverable. Tests for impairment or recoverability are performed at least annually and require significant management judgment and the use of estimates which the Company believes are reasonable and appropriate at the time of the impairment test. Future unanticipated events affecting cash flows and changes in market conditions could affect such estimates and result in the need for an impairment charge. The Company also re-evaluates the periods of amortization to determine whether circumstances warrant revised estimates of current useful lives. No impairment losses were identified in the fiscal years ended June 30, 20182020 or 2017.2019.

Income Taxes

Deferred Taxes

The Company accounts for income taxes with an asset-and-liability approach that requires the recognition of deferred tax assets for the expected tax consequences and events that have been recognized in the Company’s financial statements or tax returns.

Prior to the fiscal year ended June 30, 2017, we recorded a valuation reserve in the amount equal to 100% of ourrecords deferred tax assets and liabilities generatedfor the estimated future tax effects of temporary differences between tax bases of assets and liabilities and amounts reported in the accompanying consolidated balance sheets, as well as operating losses and tax credit carry-forwards. The Company measures deferred tax assets and liabilities using enacted tax rates expected to be applied to taxable periods ended through June 30, 2016. Our management,income in the years in which those temporary differences are expected to be recovered or settled. The Company reduces deferred tax assets by a valuation allowance if, based on the then current factors relating to our past results of operations, determined thatavailable evidence, it is more likely than not that wethese benefits will not have future federal taxable income which would allow usbe realized.

The Company uses a recognition threshold and measurement attribute for financial statement recognition and measurement of tax positions taken or expected to realize our net deferredbe taken in a tax assets in the near future. In the fiscal year ended June 30, 2017, management determined, that forreturn. For those benefits to be recognized, a portion of our deferred tax assets, based on more recent financial results and past taxable income, that it isposition must be more likely than not that certain of our deferred tax assets willto be realized. Accordingly, management released the valuation reserves relating to those deferred tax assets.  This resulted in the recognition of deferred tax benefits in the fiscal years ended June 30, 2018 and 2017 in the amount of approximately $823 and $185, respectively.sustained upon examination by taxing authorities.

General Litigation

From time to time, the Company is a defendant or plaintiff in various legal actions which arise in the normal course of business. As such, the Company is required to assess the likelihood of any adverse outcomes to these matters as well as potential ranges of probable losses. A determination of the amount of the provision required for these commitments and contingencies, if any, which would be charged to earnings, is made after careful analysis of each matter. The provision may change in the future due to new developments or changes in circumstances. Changes in the provision could increase or decrease the Company’s earnings in the period the changes are made. In the opinion of management, after consultation with legal counsel, the ultimate resolution of these matters cannot be determined at this time as to the whether there could be material adverse effect on our financial condition or results of operations.

Revenue Recognition

The Company recognizes product sales revenue, the prices of which are fixed and determinable, when title and risk of loss have transferred to the customer, when estimated provisions for product returns, rebates, charge-backs and other sales allowances are reasonably determinable, and when collectability is reasonably assured. Accruals for these items are presented in the consolidated financial statements as reductions to sales.

The Company’s net sales represent gross sales invoiced to customers, less certain related charges for discounts, returns, rebates, charge-backs and other allowances. Cost of sales includes the cost of raw materials and all labor and overhead associated with the manufacturing and packaging of the products. Gross margins are affected by, among other things, changes in the relative sales mix among our products and valuation and/or charge off of slow moving, expired or obsolete inventories. To perform revenue recognition for arrangements within the scope of ASC 606, the Company performs the following five steps:

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

The following table sets forth the income statement data of the Company as a percentage of net sales for the periods indicated:

Year ended June 30, 20182020 Compared to the Year ended June 30, 20172019

Sales, net. Net sales for the fiscal year ended June 30, 20182020 and 20172019 were $43,710$52,769 and $46,954,$49,977, respectively, a decreasean increase of $3,244$2,792 or 6.9%5.6%. The decreaseincrease is comprised of the following:

For each of

In the fiscal years ended June 30, 20182020 and 2017,2019, a significant portion of our consolidated net sales, approximately 92% and 91%, respectively, were concentrated among two customers, Life Extension and Herbalife, customers in our Contract Manufacturing Segment. Life Extension and Herbalife represented approximately 69% and 26% and 56% and 39%, respectively, of our Contract Manufacturing Segment’s net sales in the each of the fiscal years ended June 30, 20182020 and 2017, respectively.

Costco Wholesale Corporation (“Costco”) and BJ's Wholesale Club ("BJ's") (customers2019. Innophos (a customer of our BrandedOther Nutraceutical Products Segment)Businesses), while not a significant customerscustomer of our consolidated net sales, represented approximately 37%10% and 11% and 64% and 0% respectively,13% of the BrandedOther Nutraceutical Products SegmentBusinesses net sales in the fiscal years ended June 30, 20182020 and 2017,2019, respectively. The loss of any of these customers could have a significant adverse impact on our financial condition and results of operations.

The decreaseincrease in net sales of approximately $3,244$2,792 was primarily the result of:

Cost of sales. Cost of sales decreasedincreased by $1,565$2,287 to $38,722$46,042 for the fiscal year ended June 30, 2018,2020, as compared to $40,287$43,755 for the fiscal year ended June 30, 2017, a decrease2019, an increase of approximately 4%5.2%. Cost of sales as a percentage of sales was approximately 89%87% and 86%88% for the fiscal years ended June 30, 20182020 and 2017,2019, respectively. The decreaseincrease in the cost of goods sold amount of approximately 4%5% is consistent with the decreasedincrease in net sales of approximately 7%6%. The increasedecrease in the cost of goods sold as a percentage of net sales, was primarily the result of the increased net sales used to Life Extension as a percentage of total sales in our Contract Manufacturing Segment. The cost of the raw materials for the Life Extension finished goods, on average, cost more per bottle than goods produced for our other customers in the Contract Manufacturing Segment as Life Extension tends to use raw materials with trademarked characteristics which limits the ability to negotiate pricing. Secondarily, the cost of sales increased as a percentage of sales, net as a result ofoffset the fixed manufacturing costs in our Contract Manufacturing Segment decreasing by approximately 5% from the comparable period a year ago, while our sales decreased by approximately 7%.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.sales.

Selling and Administrative Expenses. There was a decrease in selling and administrative expenses of $186$50 or approximately 5.3%1.4% in the fiscal year ended June 30, 20182020 as compared to the fiscal year ended June 30, 2017.2019. As a percentage of sales, net, selling and administrative expenses were approximately 7.5%6.6% and 7.4%7.0% for the fiscal year ended June 30, 20182020 and 2017,2019, respectively. The decrease in selling and administrative expenses was primarily thefrom decreases in (i) in non-cash expenses of $125, (a) $85 related to employee stock compensation expense as a result of decreased salariesissuing stock options in May 2019 with immediate vesting for a portion of the option grant ($131 recorded in the fiscal year ended June 30, 2019) with no grant of options in the fiscal year ended June 30, 2020 and employee benefits of approximately $188. Salaries(b) $39 from reduced depreciation and employee benefits decreasedamortization costs primarily lower as thea result of reduced headcountthe reduce monthly amortization of intangible assets to $0 for the fiscal year ended June 30, 2020 compared to $34 in the Branded Nutraceutical Segmentfiscal year ended June 30, 2019, (ii) selling costs of two$24 due to the reduced sales support staff and two other office support staff in our Contract Manufacturing Segment. The change in headcount wasproduct offerings of the AgroLab’s branded product, and (iii) travel and entertainment of $30 as a result of travel and entertainment restrictions imposed by both state and federal governments relating to the COVID-19 pandemic.

These decreases were offset in part by increases in (i) salaries and employees benefits of approximately $99, as the result of increased headcount and employee benefit costs and (ii) professional and consulting fees of $61 including retainer fees for other staff members who were assigned the duties from the resulting staff reductions.

two new employees of $37, and increased general legal and consulting of $15 and $9, respectively.

Other expense, net. Other expense, net was approximately $689$171 for the fiscal year ended June 30, 20182020 compared to $1,331$662 for the fiscal year ended June 30, 2017,2019, and is composed of:

Our interest expense forin the fiscal year ended June 30, 2018, was approximately $15 more than the fiscal year ended June 30, 2017. The increase in interest expense was primarily the result of an increase in interest rates of 0.75%2020 decreased by $233 from the fiscal year ended June 30, 2017 to2019, primarily resulting from the payoff of the related party debt, also on May 15, 2019, in the aggregate amount of $2,400 resulting in reduce interest costs in the fiscal year ended June 30, 20182020 of approximately $147 and from the decrease in the interest rates on our Senior Credit Facility (See Note 5 toresulting from rate cuts in the consolidated financial statements includedfederal funds borrowing rates of 2.00% and a 0.25% rate reduction in this Annual Reportthe refinancing with PNC Bank on Form 10-K), representing an increaseMay 15, 2019 (total savings of approximately $39 on the outstanding balance under the Revolving Advances, offset by a decrease in interest on the Term Note of $22 resulting from the monthly principal payments under the Term Note and the 25% of the Excess Cash Flow payment for the fiscal year ended June 30, 2017 made in September 2017.

The variance in the change in fair value of derivative liability from the fiscal year ended June 30, 2017 to the fiscal year ended June 30, 2018 was mainly the result of the change in the volatility of the closing trading price of our common stock from 98.11% as of June 30, 2017 to 51.30% as of June 30, 2018 and the decreased closing trading price of our common stock from $0.19 as of June 30, 2017 to $0.15 as of June 30, 2018. The volatility of the closing trading price of our common stock and the closing trading price are two of the variables used to calculate the estimated fair value of our derivative liabilities associated with the underlying derivative instrument.$79).

In the fiscal year ended June 30, 20182020, we determined that there wassold 60,000 shares of iBio Stock for a gain of $72 with no such sales in the fiscal year ended June 30, 2019. Also, in the fiscal year ended June 30, 2020, we had an impairmentunrealized gain on the carrying valueremaining iBio Stock of ourapproximately $103 compared to an unrealized loss of $23 on investment in iBio, Inc. in the amount of approximately $358 resulting from the decline in the closing trading price of their common stock on the NYSE American Exchange from $3.90 per share as offiscal year ended June 30, 2017 (as adjusted for a 10 for 1 reverse stock split) to $0.90 per share as of June 30, 2018.2019.

In the fiscal years ended June 30, 20182020 and 2017,2019, we had earnedother income of $8$47 and $43,$79, respectively from providing back office and operational support for a start-up company which sells over the counter pharmaceutical and nutraceuticalunrelated entities that sell consumer products through retail and internet basedinternet-based outlets. The balance of other income in the fiscal year ended June 30, 20182019 was offset primarily from gainsthe loss of (i) $88$97 from the investment in AgroSport LLC ("AGS") recognized ondue to the exchangeunsuccessful lunch of certain assets relating to AgroSportthe business plan for a 33 1/3 percent interest in AGS and (ii) $5 from the disposal of fixed assets.AGS.

Federal and state income tax, net. For the fiscal years ended June 30, 2018 and 2017, we had a current state tax expense of approximately $170 and $306, respectively. In the fiscal year ended June 30, 2018,2020, we hadreleased a portion of the valuation reserves for the deferred tax assets related to our federal alternative minimum taxesnet operating losses in the amount of approximately $4 and a net deferred income tax expense$1,890. Management determined that the amount of approximately $152, resulting in a net income tax expense of $326.

the release was more likely than not to be realized by the Company. In the fiscal year ended June 30, 2017,2020 and 2019, the we had federal alternative minimumdeferred income taxes of approximately $30$549 and a net deferred income$621, respectively and current state tax benefitexpense of approximately $823, resulting in a net tax benefit of $490. $369 and $287, 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” that the Company’s deferred tax assets may not be fully realized.

The decreaseincrease in the state tax expense from 20172019 to 20182020 was the result of decreasedincreased taxable income for MDC, 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 current year federal income tax expense includes a one-time charge for the changepurposes and an increase in the effective federal tax rate from 34% as of December 31, 2017 to 21% as of January 1, 2018 and other tax changes as a result of the Tax Cuts and Jobs Act enacted on December 22, 2017, which resulted in a net decrease to our deferred tax assets of $202.for MDC by 2.5%.

Net income. Our net income for the fiscal year ended June 30, 20182020 and 20172019 was approximately $679$4,108 and $2,346,$1,688, respectively. The decreaseincrease of approximately $1,667$2,420 was primarily the result of decreasedincreased operating income of $1,493.$555, decreased interest cost of $233 and the resulting increase in income tax benefit of $1,374.

Liquidity and and Capital Resources

The following table sets forth, for the periods indicated, the Company’s net cash flows provided by or used in operating, investing and financing activities:

At June 30, 2018,2020 and 2017,2019, the Company had working capital deficit of approximately $4,026$2,382 and working capital of $1,396,$1,726, respectively. Our current assets decreasedincreased by $397$2,382 and current liabilities increased by approximately $5,025$746 from June 30, 20172019 to June 30, 2018.2020. The increase in the current liabilities wasassets is primarily from increases in accounts receivable and inventories in the resultamount of $5,269 of the CD Convertible Note classified as current due to the receipt of a conversion notice in July 2018$1,068 and the subsequent conversion of the entire CD Convertible Note to common shares of the Company at $0.65 on July 31, 2018. (See Note 5 to the consolidated financial statements included in this Annual Report on Form 10-K).$1,282, respectively.

Operating Activities

Net cash provided by operating activities of $1,168$1,339 in the fiscal year ended June 30, 20182020 includes net income of approximately $679.$4,108. After excluding the effects of non-cash expenses, including depreciation and amortization, compensation expense for employee stock options, accretion of financial instruments, changes in deferred tax assets and unrealized gains on investments, the adjusted cash used in operations before the effect of the changes in working capital components was an increase of approximately $3,448. Cash in the amount of approximately $2,109 from our working capital assets and liabilities was used in our operating activities and was primarily the result of increases in inventories of approximately $1,282, accounts receivable of $1,082, other assets of $7 and decreases in operating lease obligations of $462 offset, in part, by increases in accounts payable and accrued expenses and other liabilities of approximately $724.

Net cash provided by operating activities of $328 in the fiscal year ended June 30, 2019 includes net income of approximately $1,688. After excluding the effects of non-cash expenses, including depreciation and amortization, compensation expense for employee stock options, accretion of financial instruments, release of accounts payable no longer owed and changes in the fair value of derivative liabilities and the impairment charge on our intangible assets, changes in deferred tax assets, the adjusted cash used in operations before the effect of the changes in working capital components was an increase of approximately $1,111.$2,758. Cash in the amount of approximately $57 from our working capital assets and liabilities was provided from our operating activities and was primarily the result of an increase in inventories of approximately $96 and decreases in accounts payable and accrued expenses and other liabilities of approximately $126, offset in part by a decreases in accounts receivable of $182 and prepaid expenses of $97.

Net cash provided by operating activities of $397 in the fiscal year ended June 30, 2017 includes net income of approximately $2,346. After excluding the effects of non-cash expenses, including depreciation and amortization, compensation expense for employee stock options, accretion of financial instruments, release of accounts payable no longer owed and changes in the fair value of derivative liabilities and the impairment charge on our intangible assets, changes in deferred tax assets, the adjusted cash used in operations before the effect of the changes in working capital components was an increase of approximately $2,532. Cash in the amount of approximately $2,135$2,430 from our working capital assets and liabilities was used in our operating activities and was primarily the result of an increaseincreases in inventories of approximately $1,077, accounts receivable of approximately $884$593, other assets of $73 and decreases in operating lease obligations of $454 and accounts payable and accrued expenses and other liabilities of approximately $1,319, offset in part by a decrease in inventory of $111.$233. 

Investing Activities

Cash used in investing activities was used for the purchase of machinery and equipment for approximately $247$214 and $327$414 in the fiscal years ended June 30, 20182020 and 2017,2019, respectively and in the fiscal year ended June 30, 2019, the use of cash of $8 for expenses related to the investment in AGS, offset in the fiscal year ended June 30, 20182020 by proceeds received from the sale of fixed assets of $6,$3 and $101 from the sale of iBio, Stock, a net use of cash approximately $242.$110 and $422, respectively.

Financing Activities

Cash used in financing activities was approximately $830$1,302 for the fiscal year ended June 30, 20182020 and consists of; (i) 47,213 received from advances under our revolving credit facility; (ii) $1,639 received from PNC Bank under the PPP of the CARES Act (See Note 5 to the consolidated financial statements included in this Annual Report on Form 10-K); and (iii) $7 received from the exercise of employee stock options, offset in part by (i) repayments under our revolving credit facility of $40,945$49,001 (See Note 5 to the consolidated financial statements included in this Annual Report on Form 10-K), (ii) repayments of principal under our term notes in the amount of $959$966 (See Note 5 to the consolidated financial statements included in this Annual Report on Form 10-K) and (iii) repayments of $233$194 under our capitalizedfinanced lease obligations, offset in part by $41,164obligations.

Cash provided from financing activities was approximately $341 for the fiscal year ended June 30, 2019 and consists of; (i) $48,937 received from advances under our revolving credit facilityfacility; (ii) $2,400 received from amending our Term Note with PNC Bank; and $143(iii) $233 received from a sale leaseback transaction with First American Equipment Finance (See Note 5 to the consolidated financial statements included in this Annual Report on Form 10-K).

Cash used, offset in financing activities was approximately $333 for the fiscal year ended June 30, 2017 and consists of;part by (i) repayments under our revolving credit facility of $44,919$47,997 (See Note 5 to the consolidated financial statements included in this Annual Report on Form 10-K), (ii) repayments of principal under our term notes in the amount of $829$3,023 (See Note 5 to the consolidated financial statements included in this Annual Report on Form 10-K) and (iii) repayments of $131$233 under our capitalizedfinanced lease obligations, offset in part by $45,385 received from advances under our revolving credit facility and $158 received from a sale leaseback transaction with First American Equipment Finance (See Note 5 to the consolidated financial statements included in this Annual Report on Form 10-K).obligations.

As of June 30, 2018,2020, we had cash of approximately $228,$402, funds available under our revolving credit facility of approximately $1,039$2,741 and working capital deficit of $4,026.$3,362. Our working capital deficit includes approximately $4,894$4,046 outstanding under our revolving line of credit which is not due until February 2020May 2024 but classified as current due to a subjective acceleration clause that could cause the advances to become currently due and $5,269 of the CD Convertible Note classified as current 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 on July 31, 2018.due. (See Note 5 to the consolidated financial statements included in this Annual Report on Form 10-K). Furthermore, we had income from operations of approximately $1,694$3,259 in the fiscal year ended June 30, 20182020 and net income of approximately $679.$4,108. After taking into consideration our interim results and current projections, management believes that operations, together with the revolving credit facility and equipment financing will support our working capital requirements at least through the twelve monthtwelve-month period ending September 12, 2019.23, 2021.

Our total annual commitments at June 30, 20182020 for long term non-cancelable leases of approximately $607$587 consists of obligations under operating leases for facilities and operating lease agreements for the rental of warehouse equipment and office equipment and automobiles.equipment.

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

On May 30, 2012, we sent a letter responding to the Demand Letter and setting forth our position that we have no obligation to indemnify Cedarburg as demanded. On June 18, 2012, Cedarburg responded to our letter and, on July 27, 2012, we sent another letter to Cedarburg reiterating our position that we have no obligation to indemnify Cedarburg as demanded. On December 18, 2012, Cedarburg responded to our letter and, on January 15, 2013, we sent another letter to Cedarburg reiterating our position that we have no obligation to indemnify Cedarburg as demanded. As of September 12, 2018, we have not received any further communication from Cedarburg with respect to its demand for indemnification as set forth in the Demand Letter. We intend to vigorously contest Cedarburg's demand as set forth in the Demand Letter.

Capital Expenditures

The Company's capital expenditures in the fiscal years ended June 30, 20182020 and 20172019 were approximately $300 ($53 funded with capitalized lease financing)$214 and $327,$414, respectively. The Company has budgeted approximately $350$475 for capital expenditures for the fiscal 2019.year ending June 30, 2021. The total amount is expected to be funded from cash provided from the Company’s operations and from lease financing.

Off-Balance Sheet Arrangements

The Company has no off-balance sheet arrangements.

Impact of Inflation

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

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Not applicable toThe Company is a smaller reporting companies.company, as defined by Rule 12b-2 of the Exchange Act, and is not required to provide the information required under this item.

Item 8. Financial Statements and Supplementary Data

For a list of financial statements filed as part of this Annual Report on Form 10-K, see the index to consolidated financial statements on pagePage 31.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Not Applicable

Item 9A. 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 (the “Exchange Act”) is recorded, processed, summarized, and reported within the time periods specified by the Commission’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 ChiefCo-Chief Executive OfficerOfficers and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Under the supervision and with the participation of management, including the ChiefCo-Chief Executive OfficerOfficers 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 June 30, 2018,2020, and, based upon this evaluation, the ChiefCo-Chief Executive OfficerOfficers 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

Under the supervision and with the participation of management, including the ChiefCo-Chief Executive OfficerOfficers and Chief Financial Officer, the Company has evaluated changes in internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended June 30, 20182020 and have concluded that no change has materially affected, or is reasonably likely to materially affect, internal control over financial reporting.

Management’s Annual Report On Internal Control Over Financial Reporting

The Company’s management is responsible for establishing and maintaining an adequate system of internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Our internal control system was designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes, in accordance with generally accepted accounting principles. Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with policies and procedures may deteriorate.

The Company’s management, including the ChiefCo-Chief Executive OfficerOfficers and Chief Financial Officer, has conducted an evaluation of the effectiveness of its internal control over financial reporting as of June 30, 20182020 based on the framework in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission from 1992. Based on that evaluation, management concluded that our internal control over financial reporting was effective as of June 30, 2018.2020.

This Annual Report on Form 10-K does not include an attestation report of Friedman, LLP, the Company’s independent registered public accounting firm, regarding internal control over financial reporting.  Since the Company is neither a “larger accelerated filer” nor an “accelerated filer”, as defined in SEC rules, the Company is exempt pursuant to Section 989G of the Dodd-Frank Wall Street Reform and Consumer Protection Act from the requirement that management’s report in this Form 10-K be attested to by the Company’s independent registered public accounting firm.

Item 9B. Other Information

None.

PART III

Item 10. Directors, Executive Officers and Corporate Governance of the Registrant.

Incorporated by reference from the Company’s Proxy Statement for Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission within 120 days after the close of the fiscal year ended June 30, 2018.2020.

Item 11. Executive Compensation

Incorporated by reference from the Company’s Proxy Statement for Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission within 120 days after the close of the fiscal year ended June 30, 2018.2020.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Incorporated by reference from the Company’s Proxy Statement for Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission within 120 days after the close of the fiscal year ended June 30, 2018.2020.

Item 13. Certain Relationships and Related Transactions and Director Independence

Incorporated by reference from the Company’s Proxy Statement for Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission within 120 days after the close of the fiscal year ended June 30, 2018.2020.

Item 14. Principal Accountant Fees and Services

Incorporated by reference from the Company’s Proxy Statement for Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission within 120 days after the close of the fiscal year ended June 30, 2018.2020.

PART IV

Item 15. Exhibits and Financial Statement Schedules

(2) An index of exhibits incorporated by reference or filed with this Annual Report on Form 10-K is provided below.

__________________________

Item 16. Form 10-K Summary

None.

Item 8: Financial Statements

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

.  .  .  .  .  .  .  .

Report of Independent Registered Public Accounting Firm

TheTo the Board of Directors and Stockholders of

Integrated BioPharma, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Integrated BioPharma, Inc. and Subsidiaries (the “Company”), as of June 30, 20182020 and 2017,2019, and the related consolidated statements of operations,income, changes in stockholders’ deficiencyequity (deficiency) and cash flows for each of the fiscal years then ended, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of June 30, 20182020 and 2017,2019, and the results of theirits operations and theirits cash flows for each of the fiscal years then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on thesethe Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform an audit of its internal control over financial reporting.  As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purposedpurpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statement presentation.statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Friedman LLP

We have served as the Company’s auditor since 2009

East Hanover, New Jersey

September 12, 2018

23, 2020

See accompanying notes to consolidated financial statements.