Integrated Biopharma Inc 10-Q for FY2022 Q1
Integrated Biopharma Inc (INBP)
About this 10-Q
Integrated Biopharma Inc filed this 10-Q on November 10, 2021, covering the quarter ended September 30, 2021 (FY2022 Q1).
Headline figures
Quarter ended September 30, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $12.75M
- down 16.0% from $15.17M a year earlier
- Net income
- $516K
- down 50.4% from net income of $1.04M a year earlier
- Diluted EPS
- $0.02
- down 33.3% from $0.03 a year earlier
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
____________
FORM
For the quarterly period ended
OR
For the transition period from to
Commission File Number
INTEGRATED BIOPHARMA, INC.
(Exact name of registrant, as specified in its charter)
| (State or other jurisdiction of | (I.R.S. Employer |
| incorporation or organization) | Identification No.) |
| (Address of principal executive offices) | (Zip Code) |
(
(Registrant’s telephone number, including Area Code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Exchange Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
| None | None | None |
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 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.
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 such files).
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 ☐ | | 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
As of November 10, 2021, there were
INTEGRATED BIOPHARMA, INC. AND SUBSIDIARIES
FORM 10-Q QUARTERLY REPORT
For the Three Months Ended September 30, 2021
INDEX
| Page |
||
| Part I. Financial Information |
||
| Item 1. |
Condensed Consolidated Statements of Income for the Three Months Ended September 30, 2021 and 2020 (unaudited) |
2 |
| Condensed Consolidated Balance Sheets as of September 30, 2021 and June 30, 2021 (unaudited) |
3 |
|
| Condensed Consolidated Statement of Stockholders’ Equity for the Three Months Ended September 30, 2021 and 2020 (unaudited) |
4 |
|
| Condensed Consolidated Statements of Cash Flows for the Three Months Ended September 30, 2021 and 2020 (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 |
16 |
| Item 3. |
Quantitative and Qualitative Disclosures about Market Risk |
22 |
| Item 4. |
Controls and Procedures |
22 |
| Part II. Other Information |
||
| Item 1. |
Legal Proceedings |
22 |
| Item 1A. |
Risk Factors |
22 |
| Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds |
23 |
| Item 3. |
Defaults Upon Senior Securities |
23 |
| Item 4. |
Mine Safety Disclosure |
23 |
| Item 5. |
Other Information |
23 |
| Item 6. |
Exhibits |
23 |
| Other |
||
| Signatures |
24 |
|
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 Exchange Act of 1934, (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; the impact of the COVID-19 pandemic; 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, 2021 (“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 their businesses described in Item 1A of the Company’s Form 10-K and in other filings by the Company with the SEC. 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 its 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.
ITEM 1. FINANCIAL STATEMENTS
INTEGRATED BIOPHARMA, INC. AND ITS SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except share and per share amounts)
(Unaudited)
| Three months ended |
||||||||
| September 30, |
||||||||
| 2021 |
2020 |
|||||||
| Sales, net |
$ | $ | ||||||
| Cost of sales |
||||||||
| Gross profit |
||||||||
| Selling and administrative expenses |
||||||||
| Operating income |
||||||||
| Other income (expense), net: |
||||||||
| Interest expense |
( |
) | ( |
) | ||||
| Realized gain on sale of investment in iBio Stock |
||||||||
| Unrealized loss on investment in iBio Stock |
( |
) | ( |
) | ||||
| Other income, net |
||||||||
| Total other expense, net |
( |
) | ( |
) | ||||
| Income before income taxes |
||||||||
| Income tax expense, net |
||||||||
| Net income |
$ | $ | ||||||
| Basic net income per common share |
$ | $ | ||||||
| Diluted net income per common share |
$ | $ | ||||||
| Weighted average common shares outstanding - basic |
||||||||
| Add: Equivalent shares outstanding - Stock Options |
||||||||
| Weighted average common shares outstanding - diluted |
||||||||
See accompanying notes to condensed consolidated financial statements.
INTEGRATED BIOPHARMA, INC. AND ITS SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
(Unaudited)
| September 30, | June 30, | |||||||
| 2021 | 2021 | |||||||
| Assets | ||||||||
| Current Assets: | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Inventories | ||||||||
| Other current assets | ||||||||
| Total current assets | ||||||||
| Property and equipment, net | ||||||||
| Operating lease right-of-use assets (includes and with a related party) | ||||||||
| Deferred tax assets, net | ||||||||
| Security deposits and other assets | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities and Stockholders' Equity: | ||||||||
| Current Liabilities: | ||||||||
| Advances under revolving credit facility | $ | $ | ||||||
| Accounts payable (includes and due to related party) | ||||||||
| Accrued expenses and other current liabilities | ||||||||
| Current portion of long term debt, net | ||||||||
| Current portion of operating lease liabilities (includes and with a related party) | ||||||||
| Total current liabilities | ||||||||
| Operating lease liabilities (includes and with a related party) | ||||||||
| Total liabilities | ||||||||
| Commitments and Contingencies | ||||||||
| Stockholders' Equity : | ||||||||
| Common Stock, par value; shares authorized; and shares issued and and and shares outstanding, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Less: Treasury stock, at cost, shares | ( | ) | ( | ) | ||||
| Total Stockholders' Equity | ||||||||
| Total Liabilities and Stockholders' Equity | $ | $ | ||||||
See accompanying notes to condensed consolidated financial statements.
INTEGRATED BIOPHARMA, INC. AND ITS SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE THREE MONTH PERIODS ENDED SEPTEMBER 30, 2021 AND 2020
(in thousands, except share and per share amounts)
(Unaudited)
| FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2021: |
||||||||||||||||||||||||||||
| Total |
||||||||||||||||||||||||||||
| Common Stock |
Additional |
Accumulated |
Treasury Stock |
Stockholders' |
||||||||||||||||||||||||
| Shares |
Par Value |
Paid-in-Capital |
Deficit |
Shares |
Cost |
Equity |
||||||||||||||||||||||
| Balance, July 1, 2021 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | |||||||||||||||||||
| Stock compensation expense for employee stock options |
- | - | ||||||||||||||||||||||||||
| Shares issued upon exercise of stock options |
||||||||||||||||||||||||||||
| Net income |
- | - | ||||||||||||||||||||||||||
| Balance, September 30, 2021 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | |||||||||||||||||||
| FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2020: |
||||||||||||||||||||||||||||
| Common Stock |
Additional |
Accumulated |
Treasury Stock |
Total Stockholders' |
||||||||||||||||||||||||
| Shares |
Par Value |
Paid-in-Capital |
Deficit |
Shares |
Cost |
Equity |
||||||||||||||||||||||
| Balance, July 1, 2020 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | |||||||||||||||||||
| Stock compensation expense for employee stock options |
- | - | ||||||||||||||||||||||||||
| Net income |
- | - | ||||||||||||||||||||||||||
| Balance, September 30, 2020 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | |||||||||||||||||||
See accompanying notes to condensed consolidated financial statements.
INTEGRATED BIOPHARMA, INC. AND ITS SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, except share and per share amounts)
(Unaudited)
| Three months ended |
||||||||
| September 30, |
||||||||
| 2021 |
2020 |
|||||||
| Cash flows provided by operating activities: |
||||||||
| Net income |
$ | $ | ||||||
| Adjustments to reconcile net income to net cash from operating activities: |
||||||||
| Depreciation and amortization |
||||||||
| Amortization of operating lease right-of-use assets |
||||||||
| Stock based compensation |
||||||||
| Change in deferred tax assets |
( |
) | ||||||
| Realized gain on sale of investment in iBio Stock |
( |
) | ||||||
| Unrealized loss on investment in iBio Stock |
||||||||
| Other, Net |
||||||||
| Changes in operating assets and liabilities: |
||||||||
| Decrease (increase) in: |
||||||||
| Accounts receivable, net |
||||||||
| Inventories |
( |
) | ( |
) | ||||
| Other current assets |
( |
) | ( |
) | ||||
| Security deposits and other assets |
( |
) | ||||||
| (Decrease) increase in: |
||||||||
| Accounts payable |
||||||||
| Accrued expenses and other liabilities |
( |
) | ||||||
| Operating lease obligations |
( |
) | ( |
) | ||||
| Net cash provided by operating activities |
||||||||
| Cash flows from investing activities: |
||||||||
| Purchase of property and equipment |
( |
) | ( |
) | ||||
| Proceeds from sale of iBio Stock |
||||||||
| Net cash (used in) provided by investing activities |
( |
) | ||||||
| Cash flows from financing activities: |
||||||||
| Advances under revolving credit facility |
||||||||
| Proceeds from exercise of stock options |
||||||||
| Repayments of advances under revolving credit facility |
( |
) | ( |
) | ||||
| Repayments under term note payables |
( |
) | ( |
) | ||||
| Repayments under finance lease obligations |
( |
) | ||||||
| Net cash used in financing activities |
( |
) | ( |
) | ||||
| Net decrease in cash |
( |
) | ( |
) | ||||
| Cash at beginning of period |
||||||||
| Cash at end of period |
$ | $ | ||||||
| Supplemental disclosures of cash flow information: |
||||||||
| Interest paid |
$ | $ | ||||||
| Income taxes paid |
$ | $ | ||||||
| Supplemental disclosures of non-cash flow transactions: |
||||||||
| Amount owed on purchase of property and equipment |
$ | $ | ||||||
See accompanying notes to condensed consolidated financial statements.
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 (“GAAP”). 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, 2021 (“Form 10-K”), as filed with the SEC. The June 30, 2021 balance sheet was derived from audited financial statements, but does not include all disclosures required by GAAP. The preparation of the unaudited condensed financial statements in conformity with these accounting principles requires management to make estimates and assumptions that affect the amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the period. Ultimate results could differ from the estimates of management. The results of operations for the three months ended September 30, 2021 are not necessarily indicative of the results for the full fiscal year ending June 30, 2022 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 Manhattan Drug Company, Inc. (“MDC”), which manufactures vitamins and nutritional supplements for sale to distributors, multilevel marketers and specialized health-care providers and (b) Other Nutraceutical Businesses which includes the operations of (i) AgroLabs, Inc. (“AgroLabs”), which distributes healthful nutritional products for sale through major mass market, grocery and drug and vitamin retailers, under the following brands: Peaceful Sleep, Wheatgrass and other products which are being introduced into the market (these are referred to as our branded products), (ii) The Vitamin Factory (the “Vitamin Factory”), which sells private label MDC products, as well as our AgroLabs products, through the Internet, (iii) IHT Health Products, Inc. (“IHT”) a distributor of fine natural botanicals, including multi minerals produced under a license agreement, (iv) MDC Warehousing and Distribution, Inc., a service provider for warehousing and fulfillment services and (v) Chem International, Inc. (“Chem”), a distributor of certain raw materials for DSM Nutritional Products LLC.
Accounting Policies
Accounting Pronouncements Recently Adopted
On August 28, 2018, the Financial Accounting Standards Board (“FASB”) issued ASU 2018-13, Fair Value Measurement: Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement (Topic 820), which changes the fair value measurement disclosure requirements of ASC 820.
INTEGRATED BIOPHARMA, INC. AND ITS SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
(Unaudited)
This ASU removes certain disclosure requirements regarding the amounts and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy and the policy for timing of transfers between the levels. This ASU also adds disclosure requirements regarding unrealized gains and losses included in Other Comprehensive Income for recurring Level 3 fair value measurements and the range and weighted average of unobservable inputs used in Level 3 fair value measurements. ASU 2018-13 is effective for the fiscal year beginning July 1, 2021, including interim periods therein. Early adoption is permitted for any eliminated or modified disclosures upon issuance of ASU 2018-13. This new guidance did not have a material impact on the Company’s Condensed Consolidated Financial Statements.
Aside from the adoption of ASUs, as described above, there have been no material changes during fiscal year 2021 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, 2021.
Significant Accounting Policies
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:
| ● | identification of the promised goods or services in the contract; |
| ● | determination of whether the promised goods or serves are performance obligations including whether they are distinct in the context of the contract; |
| ● | measurement of the transaction price, including the constraint on variable consideration; |
| ● | allocation of the transaction price to the performance obligations based on estimated selling prices; and |
| ● | recognition of revenue when (or as) the Company satisfies each performance obligation. A performance obligation is a promise to transfer a distinct good or service to the customer and is the unit of account in ASC 606. |
Income Taxes. The Company accounts for income taxes using the asset and liability method. Accordingly, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in the tax rate is recognized in income or expense in the period that the change is effective. Tax benefits are recognized when it is probable that the deduction will be sustained. A valuation allowance is established when it is more likely than not that all or a portion of a deferred tax asset will not be realized. For the three months ended September 30, 2021 and 2020, we had a net federal income tax benefit of $
INTEGRATED BIOPHARMA, INC. AND ITS SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
(Unaudited)
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, subject to anti-dilution limitations using the treasury stock method.
In each of the three months ended September 30, 2021 and 2020, there were
On November 3, 2021, there were
Note 2. Inventories
Inventories are stated at the lower of cost or net realizable value using the first-in, first-out method and consist of the following:
| September 30, |
June 30, |
|||||||
| 2021 |
2021 |
|||||||
| Raw materials |
$ | $ | ||||||
| Work-in-process |
||||||||
| Finished goods |
||||||||
| Total |
$ | $ | ||||||
INTEGRATED BIOPHARMA, INC. AND ITS SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
(Unaudited)
Note 3. Property and Equipment, net
Property and equipment, net consists of the following:
| September 30, | June 30, | |||||||
| 2021 | 2021 | |||||||
| Land and building | $ | $ | ||||||
| Leasehold improvements | ||||||||
| Machinery and equipment | ||||||||
| Transportation equipment | ||||||||
| Less: Accumulated depreciation and amortization | ( | ) | ( | ) | ||||
| Total | $ | $ | ||||||
Depreciation and amortization expense recorded on property and equipment for the three months ended September 30, 2021 and 2020 was $
Note 4. Senior Credit Facility
As of September 30, 2021 and June 30, 2021, the Company had the following debt outstanding:
| Principal Amount | |||||||||||||
| As of September 30, 2021 | As of June 30, 2021 | Interest Rate | Maturity Date | ||||||||||
| Revolving advances under Senior Credit | |||||||||||||
| Facility with PNC Bank, National Association | $ | $ | % | 5/15/2024 | |||||||||
| Installment Note with PNC Bank | % | 5/15/2024 | |||||||||||
| Total outstanding debt | |||||||||||||
| Less: Revolving Advances | ( | ) | ( | ) | |||||||||
| Prepaid financing costs | ( | ) | ( | ) | |||||||||
| Current portion of long term debt, net | ( | ) | ( | ) | |||||||||
| Long term debt, net | $ | $ | |||||||||||
On May 15, 2019, 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, as amended on February 19, 2016.
The Amended Loan Agreement provides for a total of $
INTEGRATED BIOPHARMA, INC. AND ITS SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
(Unaudited)
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
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 (84) consecutive monthly installments of principal, the first (83) of which shall be in the amount of $
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) $
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 (
INTEGRATED BIOPHARMA, INC. AND ITS SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
(Unaudited)
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.
Note 5. Significant Risks and Uncertainties
(a) Major Customers. For the three months ended September 30, 2021 and 2020, approximately
(b) Other Business Risks. Approximately
The continued global outbreak of COVID-19, or coronavirus, has the potential to cause a disruption in the Company’s supply chain. Most of these 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 the materials, which will cause the price of the materials to increase. These and other disruptions would likely impact the Company’s sales and operating results. If the Company is unable to obtain the necessary materials to produce a supplement within the Company’s standard lead times, it may delay the production and shipment of those supplements, thereby shifting the timing of recognizing the resulting sale to the Company’s customers. Transportation continues to be a factor in obtaining materials in a timely manner. A shortage of containers is making it difficult for suppliers abroad to get materials to the United States.
Additionally, a disruption in the supply chain for personal protection equipment (“PPE”) and cleaning supplies used in our manufacturing facilities could have an adverse effect on our operations. 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, adopted by The U.S. Department of Labor Occupational Safety and Health Administration, we are required to provide the PPE for our employees to wear while working. The inability to obtain timely PPE and cleaning supplies may result in temporary closures of impacted production areas until the needed supplies are obtained.
In addition to supply chain issues resulting from the COVID-19 pandemic, we are experiencing supply chain disruptions relating to fuel refinery and transportation issues as it pertains to the production of plastics. This is impacting the supply and demand of bottles and caps, key components in our Contract Manufacturing Segment. Transportation, in general, continues to be an issue in the delay of receiving materials and our ability to meet promised delivery dates to our customers in the Contract Manufacturing Segment.
INTEGRATED BIOPHARMA, INC. AND ITS SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
(Unaudited)
Furthermore, the significant outbreak of this contagious disease 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 the Company’s products and impact the Company’s operating results.
The Company does not currently anticipate any negative impact to its margins resulting from the coronavirus outbreak, however; if the Company is unable to obtain the necessary materials to produce a supplement within its standard lead times or the necessary safety and cleaning supplies it may delay the production and shipment of those supplements to its customers, thereby shifting the timing of recognizing the resulting sale to its customers.
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
The components of lease expense for the three months ended September 30, 2021 and 2020, were as follows:
| 2021 | 2020 | |||||||||||||||||||||||
| Related Party - Vitamin Realty | Other Leases | Totals | Related Party - Vitamin Realty | Other Leases | Totals | |||||||||||||||||||
| Operating lease costs | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Finance Operating Lease Costs: | ||||||||||||||||||||||||
| Amortization of right-of use assets | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Interest on operating lease liabilities | ||||||||||||||||||||||||
| Total finance lease cost | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
Operating Lease Liabilities
Related Party Operating Lease Liabilities. Warehouse and office facilities are leased from Vitamin Realty Associates, LLC (“Vitamin Realty”), which is
Rent expense, lease amortization costs and interest expense for the three months ended September 30, 2021 and 2020 on these leases were $
INTEGRATED BIOPHARMA, INC. AND ITS SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
(Unaudited)
Other Operating Lease Liabilities. The Company has entered into certain non-cancelable operating lease agreements expiring up through May, 2023, related to machinery and equipment and office equipment.
As of September 30, 2021, the Company’s right-of-use assets, lease obligations and remaining cash commitment on these leases were as follows:
| Right-of-use Assets | Current Portion of Operating Lease Obligations | Operating Lease Obligations | Remaining Cash Commitment | |||||||||||||
| Vitamin Realty Leases | $ | $ | $ | $ | ||||||||||||
| Machinery and equipment leases | ||||||||||||||||
| Office equipment leases | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
As of June 30, 2021, the Company’s ROU assets, lease obligations and remaining cash commitment on these leases were as follows:
| Right-of-use Assets | Current Portion Operating Lease Obligations | Operating Lease Obligations | Remaining Cash Commitment | |||||||||||||
| Vitamin Realty Leases | $ | $ | $ | $ | ||||||||||||
| Machinery and equipment leases | ||||||||||||||||
| Office equipment leases | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
As of September 30, and June 30, 2021, the Company’s weighted average discount rate is approximately
Supplemental cash flows information related to leases for the three months ended September 30, 2021, 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 | $ | $ | $ | |||||||||
| Operating cash flows from finance leases | ||||||||||||
| Financing cash flows from finance lease obligations | ||||||||||||
INTEGRATED BIOPHARMA, INC. AND ITS SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
(Unaudited)
Supplemental cash flows information related to leases for the three months ended September 30, 2020, 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 | $ | $ | $ | |||||||||
| Operating cash flows from finance leases | ||||||||||||
| Financing cash flows from finance lease obligations | ||||||||||||
The Company did not enter into any lease commitments in the three months ended September 30, 2021.
Maturities of operating lease liabilities as of September 30, 2021 were as follows:
| Year | Operating | Related Party | ||||||||||
| ending | Lease | Operating Lease | ||||||||||
| June 30, | Commitment | Commitment | Total | |||||||||
| 2022, remaining | $ | $ | $ | |||||||||
| 2023 | ||||||||||||
| 2024 | ||||||||||||
| 2025 | ||||||||||||
| 2026 | ||||||||||||
| Total minimum lease payments | ||||||||||||
| Imputed interest | ( | ) | ( | ) | ( | ) | ||||||
| Total | $ | $ | $ | |||||||||
Total rent expense, lease amortization costs and interest expense, including real estate taxes and maintenance charges, was approximately $
(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 6(a). Leases for related party lease transactions.
INTEGRATED BIOPHARMA, INC. AND ITS SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
(Unaudited)
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 reportable segments as follows: Contract Manufacturing, and Other Nutraceutical Businesses. The international sales, concentrated primarily in Europe and Canada, for the three months ended September 30, 2021 and 2020 were $
Financial information relating to the three months ended September 30, 2021 and 2020 operations by business segment and disaggregated revenues was as follows:
| Sales, Net | Segment | ||||||||||||||||||||||||
| U.S. | International | Gross | Capital | ||||||||||||||||||||||
| Customers | Customers | Total | Profit | Depreciation | Expenditures | ||||||||||||||||||||
| Contract Manufacturing | 2021 | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| 2020 | |||||||||||||||||||||||||
| Other Nutraceutical Businesses | 2021 | ||||||||||||||||||||||||
| 2020 | |||||||||||||||||||||||||
| Total Company | 2021 | ||||||||||||||||||||||||
| 2020 | |||||||||||||||||||||||||
| Total Assets as of | ||||||||
| September 30, | June 30, | |||||||
| 2021 | 2021 | |||||||
| Contract Manufacturing | $ | $ | ||||||
| Other Nutraceutical Businesses | | |||||||
| Total Company | $ | $ | ||||||
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, 2021.
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 “Management’s Discussion and Analysis of Financial Condition and Results of Operation”, 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, 2021.
For the three months ended September 30, 2021, our net sales from operations decreased by $2,421 to approximately $12,751 from approximately $15,172 in the three months ended September 30, 2020. Our net sales in the Contract Manufacturing Segment decreased by $2,451, offset by an increase in our Other Nutraceuticals Segment of $30. Net sales decreased in our Contract Manufacturing Segment primarily due to decreased sales volumes to Life Extension and Herbalife in the amount of $2,245 and $100, respectively. Revenues in the quarter ended September 30, 2020 were higher than the quarter ended September 30, 2021 due to increased safety stock and consumer demands required by our customers during the height of the COVID-19 pandemic. We also believe the fear of slowdowns in production due to the pandemic were contributing factors in our three-month revenues ended September 30, 2020. For the three months ended September 30, 2021, we had operating income of approximately $585, a decrease of approximately $924 from operating income of approximately $1,509 for the three months ended September 30, 2020. Our profit margins decreased from approximately 15.6% of net sales in the three months ended September 30, 2020 to approximately 11.2% of net sales in the three months ended September 30, 2021, primarily as a result of the decreased sales in our Contract Manufacturing Segment of approximately $2,451. Our consolidated selling and administrative expenses decreased by approximately $25 or approximately 3% in the three months ended September 30, 2021 compared to the three months ended September 30, 2020.
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 continued global outbreak of COVID-19, or coronavirus, has the potential to cause a disruption in our supply chain. Most of these 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 the materials, which will cause the price of the materials to increase. These and other disruptions would likely impact our sales and operating results. If we are unable to obtain the necessary materials to produce a supplement within our standard lead times, it may delay the production and shipment of those supplements, thereby shifting the timing of recognizing the resulting sale to our customers. Transportation continues to be a factor in obtaining materials in a timely manner. A shortage of containers is making it difficult for suppliers abroad to get materials to the United States.
Additionally, a disruption in the supply chain for personal protection equipment (“PPE”) and cleaning supplies used in our manufacturing facilities could have an adverse effect on our operations. 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, adopted by The U.S. Department of Labor Occupational Safety and Health Administration, we are required to provide the PPE for our employees to wear while working. The inability to obtain timely PPE and cleaning supplies may result in temporary closures of impacted production areas until the needed supplies are obtained.
In addition to supply chain issues resulting from the COVID-19 pandemic, we are experiencing supply chain disruptions relating to fuel refinery and transportation issues as it pertains to the production of plastics. This is impacting the supply and demand of bottles and caps, key components in our Contract Manufacturing Segment. Transportation, in general, continues to be an issue in the delay of receiving materials and our ability to meet promised delivery dates to our customers in our Contract Manufacturing Segment.
Furthermore, the significant outbreak of this contagious disease 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 the Company’s products and impact our operating results.
We do not currently anticipate any negative impact to our margins resulting from the coronavirus outbreak, however; if we are unable to obtain the necessary materials to produce a supplement within our standard lead times or the necessary safety and cleaning supplies it may delay the production and shipment of those supplements to our customers, thereby shifting the timing of recognizing the resulting sale to our customers.
Critical Accounting Policies and Estimates
There have been no changes to our critical accounting policies in the three months ended September 30, 2021, 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, 2021 and in Note 1. Principles of Consolidation and Basis of Presentation of the Condensed Financial Statements of the Company contained in this Quarterly Report on Form 10-Q.
Results of Operations (in thousands, except share and per share amounts)
Our results from operations in the following table, sets forth the income statement data of our results as a percentage of net sales for the periods indicated:
| For the three months |
||||||||
| ended September 30, |
||||||||
| 2021 |
2020 |
|||||||
| Sales, net |
100.0 | % | 100.0 | % | ||||
| Costs and expenses: |
||||||||
| Cost of sales |
88.8 | % | 84.4 | % | ||||
| Selling and administrative |
6.6 | % | 5.7 | % | ||||
| 95.4 | % | 90.1 | % | |||||
| Operating income |
4.6 | % | 9.9 | % | ||||
| Other income (expense), net |
||||||||
| Interest expense |
(0.2% | ) | (0.5% | ) | ||||
| Realized gain on sale of investment in iBio, Stock |
- | 0.4 | % | |||||
| Unrealized loss in investment in iBio Stock |
(0.2% | ) | (0.2% | ) | ||||
| Other income, net |
0.0 | % | 0.1 | % | ||||
| Other expense, net |
(0.4% | ) | (0.2% | ) | ||||
| Income before income taxes |
4.2 | % | 9.7 | % | ||||
| Income tax expense, net |
0.2 | % | 2.8 | % | ||||
| Net income |
4.0 | % | 6.9 | % | ||||
For the Three Months Ended September 30, 2021 compared to the Three Months Ended September 30, 2020
Sales, net. Sales, net, for the three months ended September 30, 2021 and 2020 were $12,751 and $15,172, respectively, a decrease of 16.0%, and are comprised of the following:
| Three months ended |
Dollar |
Percentage |
||||||||||||||
| September 30, |
Change |
Change |
||||||||||||||
| 2021 |
2020 |
2021 vs 2020 |
2021 vs 2020 |
|||||||||||||
| (amounts in thousands) |
||||||||||||||||
| Contract Manufacturing: |
||||||||||||||||
| US Customers |
$ | 10,145 | $ | 13,324 | $ | (3,179 | ) | (23.9% | ) | |||||||
| International Customers |
2,190 | 1,462 | 728 | 49.8 | % | |||||||||||
| Net sales, Contract Manufacturing |
12,335 | 14,786 | (2,451 | ) | (16.6% | ) | ||||||||||
| Other Nutraceuticals: |
||||||||||||||||
| US Customers |
386 | 381 | 5 | 1.3 | % | |||||||||||
| International Customers |
30 | 5 | 25 | 500.0 | % | |||||||||||
| Net sales, Other Nutraceuticals |
416 | 386 | 30 | 7.8 | % | |||||||||||
| Total net sales |
$ | 12,751 | $ | 15,172 | $ | (2,421 | ) | (16.0% | ) | |||||||
For the three months ended September 30, 2021 and 2020, a significant portion of our consolidated net sales, approximately 91% and 92%, respectively, were concentrated among two customers, Life Extension and Herbalife, in our Contract Manufacturing Segment. Life Extension and Herbalife, represented approximately 65% and 29% and 69% and 25%, respectively, of our Contract Manufacturing Segment’s net sales in the three months ended September 30, 2021 and 2020, respectively. Revenues in the quarter ended September 30, 2020 were higher than the quarter ended September 30, 2021 due to increased safety stock and consumer demands required by our customers during the height of the COVID-19 pandemic. We also believe the fear of slowdowns in production due to the pandemic were contributing factors in our three-month revenues ended September 30, 2020. The loss of any of these customers could have a significant adverse impact on our financial condition and results of operations.
The decrease in net sales of approximately $2,421 was primarily the result of decreased net sales in our Contract Manufacturing Segment of $2,451 primarily due to decreased sales volumes to Life Extension and Herbalife in the amounts of $2,245 and $100, respectively.
Cost of sales. Cost of sales decreased by approximately $1,472 to $11,327 for the three months ended September 30, 2021, as compared to $12,799 for the three months ended September 30, 2020 or approximately 11.5%. Cost of sales increased as a percentage of sales to 88.8% for the three months ended September 30, 2021 as compared to 84.4% for the three months ended September 30, 2020. The 11.5% decrease in the cost of goods sold amount is consistent with the decrease in net sales of approximately 16%. The increase in the cost of goods sold as a percentage of net sales, was primarily the result of the decreased net sales available to offset the fixed manufacturing overhead.
Selling and Administrative Expenses. Selling and administrative expenses decreased by approximately $25, approximately 3% in the three months ended September 30, 2021 from $864 to $839 in the three months ended September 30, 2020. As a percentage of sales, net, selling and administrative expenses were approximately 6.6% and 5.7% in the three months ended September 30, 2021 and 2020, respectively.
Other income (expense), net. Other income (expense), net was approximately $46 for the three months ended September 30, 2021 compared to $41 for the three months ended September 30, 2020, and is composed of:
| Three months ended |
||||||||
| September 30, |
||||||||
| 2021 |
2020 |
|||||||
| (dollars in thousands) |
||||||||
| Interest expense |
$ | (32 | ) | $ | (76 | ) | ||
| Realized gain on sale of investment in iBio Stock |
- | 56 | ||||||
| Unrealized loss on investment in iBio Stock |
(20 | ) | (29 | ) | ||||
| Other income |
6 | 8 | ||||||
| Other expense, net |
$ | (46 | ) | $ | (41 | ) | ||
Our interest expense for the three months ended September 30, 2021 decreased by $44 from the three month period ended September 30, 2020, primarily as the result of lower average daily balances outstanding under the Senior Credit Facility with PNC Bank in the three month period ended September 30, 2021 from the three month period ended September 30, 2020.
In the three months ended September 30, 2020, we sold 16,000 shares of iBio Stock for a gain of $56 with no such sales in the three months ended September 30, 2021. Also, in the three months ended September 30, 2021, and 2020, we had unrealized losses on the remaining iBio Stock of approximately $20 and $29, respectively.
Federal and state income tax expense, net. For the three months ended September 30, 2021 and 2020, we had a net federal income tax benefit of $38 and a deferred income tax expense of $273, respectively and state income tax expense, net of approximately $61 and $154, in the three months ended September 30, 2021 and 2020, respectively. The net federal benefit of $38 in the three months ended September 30, 2021, includes the release of $128 of the allowance on deferred tax assets. 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, it is “more likely than not” that the Company’s deferred tax assets may not be fully realized.
Net income. Our net income for the three months ended September 30, 2021 and 2020 was approximately $516 and $1,041, respectively. The decrease of approximately $525 was primarily the result of decreased operating income of $924 offset by the decrease in income taxes of $403.
Seasonality
The nutraceutical business can be seasonal. Due to our current customer base in our contract manufacturing segment, our fiscal quarter ending December 31st each year tends to be more than our average quarterly volume for the other three fiscal quarters in the fiscal year. This increase is based on their forecast of their customer base.
The Company believes that there are non-seasonal factors that may influence the variability of quarterly results including, but not limited to, general economic and industry conditions that affect consumer spending, changing consumer demands and current news on nutritional supplements. Accordingly, a comparison of the Company’s results of operations from consecutive periods is not necessarily meaningful, and the Company’s results of operations for any period are not necessarily indicative of future periods.
Liquidity and Capital Resources
The following table sets forth, for the periods indicated, the Company’s net cash flows used in operating, investing and financing activities, its period end cash and cash equivalents and other operating measures:
| For the three months ended |
||||||
| September 30, |
||||||
| 2021 |
2020 |
|||||
| (dollars in thousands) |
||||||
| Net cash provided by operating activities |
$ | 2,101 | $ | 1,918 | ||
| Net cash (used in) provided by investing activities |
$ | (131 | ) | $ | 43 | |
| Net cash used in financing activities |
$ | (2,123 | ) | $ | (1,994 | ) |
| Cash at end of period |
$ | 57 | $ | 369 | ||
At September 30, 2021, our working capital was approximately $9,282, an increase of $520 from our working capital of $8,762 at June 30, 2021. The increase in our working capital was the result of our current liabilities decreasing by of $1,535 and was offset by a decrease in our current assets of $1,014. The decrease in the current assets is primarily from a decrease in accounts receivable, net of $1,975 offset by an increase in inventories of $927 and the decrease in current liabilities was primarily the result of the decrease in our senior credit facility in the amount of $2,121, offset by an increase accounts payable and accrued expenses and other current liabilities of $587.
Operating Activities
Net cash provided by operating activities of $2,101 in the three months ended September 30, 2021 includes net income of approximately $516. After excluding the effects of non-cash expenses, including depreciation and amortization, and changes in deferred tax assets, the adjusted cash provided from operations before the effect of the changes in working capital components was $748. Net cash provided by our operations in the three months ended September 30, 2021 from our working capital assets and liabilities in the amount of approximately $1,353 was primarily the result of cash provided from a decrease in our accounts receivable of $1,975 and an aggregate increase in accounts payable, accrued expenses and other liabilities of $632, offset in part, by increases in inventories of approximately $927 and prepaid and other assets of $202.
Net cash provided by operating activities of $1,918 in the three months ended September 30, 2020 includes net income of approximately $1,041. After excluding the effects of non-cash expenses, including depreciation and amortization, and changes in deferred tax assets, the adjusted cash provided from operations before the effect of the changes in working capital components was $1,507. Net cash provided by our operations in the three months ended September 30, 2020 from our working capital assets and liabilities in the amount of approximately $411 was primarily the result of cash provided from a decrease in our accounts receivable of $652 and an aggregate increase in accounts payable, accrued expenses and other liabilities of $2,745, offset in part, by increases in inventories of approximately $2,655 and prepaid and other assets of $211.
Investing Activities
Cash used in investing activities in the three months ended September 30, 2021 of approximately $131 was from the purchase of machinery and equipment. Cash provided by investing activities in the three months ended September 30, 2020 of approximately $43 was from proceeds of $96 from the sale of iBio Stock offset by the purchase of machinery and equipment of $53.
Financing Activities
Cash used in financing activities was approximately $2,123 for the three months ended September 30, 2021, and was primarily from repayments of advances under our revolving credit facility of $14,830 and principal payments under our term notes in the amount of $1,326, offset by advances under our revolving credit facility of approximately $14,029.
Cash used in financing activities was approximately $1,994 for the three months ended September 30, 2020, and was primarily from repayments of advances under our revolving credit facility of $15,144 and principal payments under our term notes in the amount of $734, offset by advances under our revolving credit facility of approximately $13,921.
As of September 30, 2021, we had cash of $57, funds available under our revolving credit facility of approximately $4,257 and working capital of approximately $9,283. Our working capital includes $1,373 outstanding under our revolving line of credit which is not due until May 2024 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 $585 in the three months ended September 30, 2021. After taking into consideration our interim results and current projections, management believes that operations, together with the revolving credit facility will support our working capital requirements at least through the period ending November 10, 2022.
Our total annual commitments at September 30, 2021 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 three months ended September 30, 2021 and 2020 were approximately $131 and $53, respectively. The Company has budgeted approximately $500 for capital expenditures for fiscal year 2022. The total amount is expected to be funded from lease financing and cash provided from the Company’s operations.
Off-Balance Sheet Arrangements
The Company has no off-balance sheet arrangements.
Recent Accounting Pronouncements
None.
Impact of Inflation
The Company does not believe that inflation has significantly affected its results of operations.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
Item 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed by the Company in the reports it files or submits under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized, and reported within the time periods specified by the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to provide reasonable assurance that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is accumulated and communicated to management, including the Co-Chief Executive Officers and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Under the supervision and with the participation of management, including the Co-Chief Executive Officers and Chief Financial Officer, the Company has evaluated the effectiveness of its disclosure controls and procedures (as such term is defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) as of September 30, 2021, and, based upon this evaluation, the Co-Chief Executive Officers and Chief Financial Officer have concluded that these controls and procedures are effective in providing reasonable assurance of compliance.
Changes in Internal Control over Financial Reporting
No change in our internal control over financial reporting occurred during the three months ended September 30, 2021 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
There have been no material changes to the risk factors set forth in our Annual Report on Form 10-K for the fiscal year ended June 30, 2021.
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
None
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 |
||
| 31.2 |
||
| 32.1 |
||
| 32.2 |
||
| 101.INS*** | Inline XBRL Instance | furnished herewith |
| 101.SCH*** | Inline XBRL Taxonomy Extension Schema | furnished herewith |
| 101.CAL*** | Inline XBRL Taxonomy Extension Calculation | furnished herewith |
| 101.DEF*** | Inline XBRL Taxonomy Extension Definition | furnished herewith |
| 101.LAB*** | Inline XBRL Taxonomy Extension Labels | furnished herewith |
| 101.PRE*** | Inline XBRL Taxonomy Extension Presentation | furnished herewith |
| 104 |
Cover Page Interactive Date File (formatted as Inline XBRL and contained in Exhibit 101) |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
INTEGRATED BIOPHARMA, INC.
| Date: November 10, 2021 | By: /s/ Christina Kay |
| Christina Kay, | |
| Co-Chief Executive Officer | |
| Date: November 10, 2021 | By: /s/ Riva Sheppard |
| Riva Sheppard, | |
| Co-Chief Executive Officer | |
| Date: November 10, 2021 | By: /s/ Dina L. Masi |
| Dina L. Masi, | |
| Chief Financial Officer & Senior Vice President |