Integrated Biopharma Inc 10-Q for FY2025 Q2
Integrated Biopharma Inc (INBP)
About this 10-Q
Integrated Biopharma Inc filed this 10-Q on February 13, 2025, covering the quarter ended December 31, 2024 (FY2025 Q2).
Headline figures
Quarter ended December 31, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $12.61M
- up 9.6% from $11.51M a year earlier
- Net income
- $116K
- compared with a net loss of $382K a year earlier
- Diluted EPS
- $0.00
- compared with -$0.01 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 and Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
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.
| Smaller reporting company | ||||||
| Large accelerated filer ☐ | Accelerated filer ☐ | | Emerging growth 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 February 13, 2025, there were
INTEGRATED BIOPHARMA, INC. AND SUBSIDIARIES
FORM 10-Q QUARTERLY REPORT
For the Three Months Ended December 31, 2024
INDEX
| Page |
||
| Part I. Financial Information |
||
| Item 1. |
Condensed Consolidated Statements of Operations for the Three and Six Months Ended December 31, 2024 and 2023 (unaudited) |
2 |
| Condensed Consolidated Balance Sheets as of December 31, 2024 and June 30, 2024 (unaudited) |
3 |
|
| Condensed Consolidated Statement of Stockholders’ Equity for the Three and Six Months Ended December 31, 2024 and 2023 (unaudited) |
4 |
|
| Condensed Consolidated Statements of Cash Flows for the Six Months Ended December 31, 2024 and 2023 (unaudited) |
5 |
|
| Notes to Condensed Consolidated Financial Statements (unaudited) |
6 |
|
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
17 |
| Item 3. |
Quantitative and Qualitative Disclosures about Market Risk |
24 |
| Item 4. |
Controls and Procedures |
24 |
| Part II. Other Information |
||
| Item 1. |
Legal Proceedings |
24 |
| Item 1A. |
Risk Factors |
24 |
| Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds |
25 |
| Item 3. |
Defaults Upon Senior Securities |
25 |
| Item 4. |
Mine Safety Disclosure |
25 |
| Item 5. |
Other Information |
25 |
| Item 6. |
Exhibits |
25 |
| Other |
||
| Signatures |
26 |
|
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, as amended (the “Exchange Act”), the Private Securities Litigation Reform Act of 1995 (the “PSLRA”) or in releases made by the Securities and Exchange Commission (“SEC”), all as may be amended from time to time. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause the actual results, performance or achievements of Integrated BioPharma, Inc. and its subsidiaries (collectively, the “Company”) or industry results, to differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, changes in general economic and business conditions; loss of market share through competition; introduction of competing products by other companies; the timing of regulatory approval and the introduction of new products by the Company; changes in industry capacity; pressure on prices from competition or from purchasers of the Company's products; regulatory changes in the pharmaceutical manufacturing industry and nutraceutical industry; regulatory obstacles to the introduction of new technologies or products that are important to the Company; availability of qualified personnel; the loss of any significant customers or suppliers; inflation (including those caused by tariffs) and tightened labor markets; the impact of the war in Ukraine; the impact of the Israel-Hamas war, 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, 2024 (“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 OPERATIONS
(in thousands, except share and per share amounts)
(Unaudited)
| Three months ended |
Six months ended |
|||||||||||||||
| December 31, |
December 31, |
|||||||||||||||
| 2024 |
2023 | 2024 | 2023 | |||||||||||||
| Sales, net |
$ | $ | $ | $ | ||||||||||||
| Cost of sales |
||||||||||||||||
| Gross profit |
||||||||||||||||
| Selling and administrative expenses |
||||||||||||||||
| Operating income (loss) |
( |
) | ( |
) | ||||||||||||
| Other income (expense), net |
||||||||||||||||
| Interest income, net |
||||||||||||||||
| Other income, net |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Other income (expense), net |
( |
) | ( |
) | ||||||||||||
| Income (loss) before income taxes |
( |
) | ( |
) | ||||||||||||
| Income tax expense (benefit), net |
( |
) | ( |
) | ||||||||||||
| Net income (loss) |
$ | $ | ( |
) | $ | $ | ( |
) | ||||||||
| Basic net income (loss) per common share |
$ | $ | ) | $ | $ | ) | ||||||||||
| Diluted net income (loss) 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 unaudited condensed consolidated financial statements.
INTEGRATED BIOPHARMA, INC. AND ITS SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(in thousands, except share and per share amounts)
(Unaudited)
| December 31, | June 30, | |||||||
| 2024 | 2024 | |||||||
| 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: | ||||||||
| Accounts payable | $ | $ | ||||||
| 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 (Note 6) | ||||||||
| Stockholders' Equity : | ||||||||
| Common Stock, $ par value; shares authorized; | ||||||||
| and shares issued, respectively, 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 unaudited condensed consolidated financial statements.
INTEGRATED BIOPHARMA, INC. AND ITS SUBSIDIARIES
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF STOCKHOLDERS’ EQUITY
FOR THE THREE AND SIX MONTHS ENDED DECEMBER 31, 2024 AND 2023
(in thousands, except share and per share amounts)
(Unaudited)
FOR THE THREE AND SIX MONTHS ENDED DECEMBER 31, 2024:
| Total |
||||||||||||||||||||||||||||
| Common Stock |
Additional |
Accumulated |
Treasury Stock |
Stockholders' |
||||||||||||||||||||||||
| Shares |
Par Value |
Paid-in-Capital |
Deficit |
Shares |
Cost |
Equity |
||||||||||||||||||||||
| Balance, July 1, 2024 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | |||||||||||||||||||
| Stock compensation expense for employee stock options |
- | - | ||||||||||||||||||||||||||
| Net income |
- | - | ||||||||||||||||||||||||||
| Balance, September 30, 2024 |
( |
) | ( |
) | ||||||||||||||||||||||||
| Stock compensation for employee stock options |
- | - | ||||||||||||||||||||||||||
| Shares issued upon exercise of stock options | ||||||||||||||||||||||||||||
| Net income |
- | - | ||||||||||||||||||||||||||
| Balance, December 31, 2024 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | |||||||||||||||||||
FOR THE THREE AND SIX MONTHS ENDED DECEMBER 31, 2023:
| Common Stock |
Additional |
Accumulated |
Treasury Stock |
Total Stockholders' |
||||||||||||||||||||||||
| Shares |
Par Value |
Paid-in-Capital |
Deficit |
Shares |
Cost |
Equity |
||||||||||||||||||||||
| Balance, July 1, 2023 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | |||||||||||||||||||
| Stock compensation expense for employee stock options |
- | - | ||||||||||||||||||||||||||
| Shares issued upon exercise of stock options | ||||||||||||||||||||||||||||
| Net loss |
- | ( |
) | - | ( |
) | ||||||||||||||||||||||
| Balance, September 30, 2023 |
( |
) | ( |
) | ||||||||||||||||||||||||
| Stock compensation expense for employee stock options |
- | - | ||||||||||||||||||||||||||
| Net loss |
- | ( |
) | - | ( |
) | ||||||||||||||||||||||
| Balance, December 31, 2023 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | |||||||||||||||||||
See accompanying notes to unaudited 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)
| Six months ended |
||||||||
| December 31, |
||||||||
| 2024 |
2023 |
|||||||
| Cash flows provided by operating activities: |
||||||||
| Net income (loss) |
$ | $ | ( |
) | ||||
| Adjustments to reconcile net income (loss) 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 |
( |
) | ||||||
| Impairment charge on equipment | ||||||||
| Other, net |
||||||||
| Changes in operating assets and liabilities: |
||||||||
| Decrease (increase) in: |
||||||||
| Accounts receivable, net |
||||||||
| Inventories |
) | ( |
) | |||||
| Other assets |
( |
) | ( |
) | ||||
| Security deposits and other assets | ( |
) | ||||||
| (Decrease) increase in: |
||||||||
| Accounts payable |
||||||||
| Accrued expenses and other liabilities |
( |
) | ( |
) | ||||
| Operating lease obligations |
( |
) | ( |
) | ||||
| Net cash provided by (used in) operating activities |
( |
) | ||||||
| Cash flows from investing activities: |
||||||||
| Purchase of property and equipment |
( |
) | ( |
) | ||||
| Net cash used in investing activities |
( |
) | ( |
) | ||||
| Cash flows from financing activities: |
||||||||
| Proceeds from exercise of employee stock options |
||||||||
| Repayments under finance lease obligations |
( |
) | ( |
) | ||||
| Net cash provided by (used in) financing activities |
( |
) | ||||||
| Net increase (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: |
||||||||
| Acquisition of right-of-use assets, net | $ | $ |
See accompanying notes to unaudited 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. Nature of Operations, Principles of Consolidation and Basis of Presentation of Interim Financial Statements
Nature of Operations
Integrated BioPharma, Inc., a Delaware corporation (together with its subsidiaries, 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 and Luxembourg. The Company was originally incorporated in the state of Delaware on August 31, 1995 under the name Chem International, Inc., on December 5, 2000, changed its name to Integrated Health Technologies, Inc. and on January 29, 2003 changed its name to Integrated BioPharma, Inc. The Company restated its certificate of incorporation in Delaware in June 2006. 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 distributed healthful nutritional products for sale through major mass market, grocery and drug and vitamin retailers under the following brands: Peaceful Sleep, and Wheatgrass and other products introduced into the market using the AgroLabs name (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. (“MDC Warehousing”), a service provider for warehousing and fulfilment services and (v) Chem International, Inc., a distributor of certain raw materials for DSM Nutritional Products LLC. The Vitamin Factory had no products available for sale and AgroLabs had
Principles of Consolidation
The accompanying condensed consolidated financial statements for the interim periods are unaudited and include the accounts of Company. Intercompany transactions and accounts have been eliminated in consolidation.
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, 2024 (“Form 10-K”), as filed with the SEC. The June 30, 2024 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 and six months ended December 31, 2024 are not necessarily indicative of the results for the full fiscal year ending June 30, 2025 or for any other period.
INTEGRATED BIOPHARMA, INC. AND ITS SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
(Unaudited)
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 December 31, 2024 and 2023, the Company had federal income tax expense of $
Leases. The Company determines 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 its consolidated balance sheets. Finance leases are included in property and equipment, current portion of long term debt, and long-term debt obligation on the condensed consolidated statement of financial condition.
INTEGRATED BIOPHARMA, INC. AND ITS SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
(Unaudited)
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.
The Company has lease agreements with lease and non-lease components, which are generally accounted for separately. For certain equipment leases, such as vehicles, the Company accounts 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.
The following options and potentially dilutive shares for stock options were not included in the computation of weighted average diluted common shares outstanding as the effect of doing so would be anti-dilutive for the three and six months ended December 31, 2024 and 2023:
| Three Months Ended | Six Months Ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Anti-dilutive stock options | ||||||||||||||||
| Total anti-dilutive shares | ||||||||||||||||
Accounting Pronouncements Not Yet Adopted
In November 2023, FASB issued ASU 2023-07 - Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires public entities with a single reportable segment to provide all the disclosures required by this standard and all existing segment disclosures in Topic 280 on an interim and annual basis, including new requirements to disclose significant segment expenses that are regularly provided to the CODM and included within the reported measure(s) of a segment's profit or loss, the amount and composition of any other segment items, the title and position of the CODM, and how the CODM uses the reported measure(s) of a segment's profit or loss to assess performance and decide how to allocate resources. The guidance is effective for our annual period beginning July 1, 2024, and interim periods thereafter, applied retrospectively with early adoption permitted. The Company is currently evaluating the impact of adoption of this standard on its consolidated financial statements and disclosures.
In December 2023, the FASB issued ASU 2023-09 - Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires public entities to provide greater disaggregation within their annual rate reconciliation, including new requirements to present reconciling items on a gross basis in specified categories, disclose both percentages and dollar amounts, and disaggregate individual reconciling items by jurisdiction and nature when the effect of the items meet a quantitative threshold. The guidance also requires disaggregating the annual disclosure of income taxes paid, net of refunds received, by federal (national), state, and foreign taxes, with separate presentation of individual jurisdictions that meet a quantitative threshold. The guidance is effective for the Company's annual periods beginning July 1, 2025 on a prospective basis, with a retrospective option, and early adoption is permitted. The Company is currently evaluating the impact of adoption of this standard on its consolidated financial statements and disclosures.
INTEGRATED BIOPHARMA, INC. AND ITS SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
(Unaudited)
Note 2. Inventories
Inventories are stated at the lower of cost or net realizable value using the first-in, first-out method and consist of the following:
| December 31, | June 30, | |||||||
| 2024 | 2024 | |||||||
| Raw materials | $ | $ | ||||||
| Work-in-process | ||||||||
| Finished goods | ||||||||
| Total | $ | $ | ||||||
Note 3. Property and Equipment, net
Property and equipment, net consists of the following:
| December 31, | June 30, | |||||||
| 2024 | 2024 | |||||||
| Land and building | $ | $ | ||||||
| Leasehold improvements | ||||||||
| Machinery and equipment | ||||||||
| Less: Accumulated depreciation and amortization | ( | ) | ( | ) | ||||
| Total | $ | $ | ||||||
Depreciation and amortization expense recorded on property and equipment was $
Note 4. Senior Credit Facility
As of December 31, 2024 and June 30, 2024, the Company had
On May 9, 2024, 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, May 15, 2019, June 28, 2019 and March 16, 2023.
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 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) $
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 shares of common stock that it owned of iBio, Inc.; (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. In the three months ended December 31, 2024 and 2023, approximately
.
The loss of any of these customers could have an adverse effect on the Company’s operations. Major customers are those customers who account for more than 10% of net sales.
(b) Other Business Risks. Approximately
INTEGRATED BIOPHARMA, INC. AND ITS SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
(Unaudited)
The Company has seen a negative impact in its margins due to inflation and tightened labor markets. The Company may not be able to timely increase its selling prices to its customer resulting from price increases from its suppliers due to various economic factors, including tariffs and other inflationary costs, labor and shipping costs and its own increases in shipping, labor and other operating costs. The Company’s results of operations may also be affected by economic conditions, including tariffs and other inflationary pressures, that can impact consumer disposable income levels and spending habits, thereby reducing the orders it may receive from the Company’s significant customers.
The Company continues to experience minimal supply chain disruptions relating to fuel refinery and transportation issues as it pertains to shipping. These issues first arose as result of the COVID-19 pandemic and other geo-political events. Additionally, the East Coast port strike threatened the supply of goods and continued to threaten up to the settlement date of January 8, 2025. In the interim U.S. shippers steered clear of the East and Gulf Coast ports amid worries that the dockworkers at these ports would go on strike again.
During the first calendar quarter 2022, the war in Ukraine affected the Company’s customer’s business operations in Ukraine and Russia, resulting in the cancelation of some future orders. The war resulted in the imposition of sanctions by the United States, the United Kingdom, and the European Union, that affect the cross-border operations of businesses operating in Russia. In addition, many multinational companies ceased or suspended their operations in Russia. Therefore, the ability to continue operations in Russia by the Company’s customers is uncertain.
Additionally, the current Israel-Hamas war in the Middle East could negatively impact the sales and margins of the Company. Certain customers sell into Israel and the Company sources certain raw materials from Israel. If the Israel-Hamas war carries on for a significant time frame, it could have a negative impact on the sales and margins of the Company if the Company is unable to replace these sales with other sales and/or obtain the same raw materials at substantially the same price as currently paid.
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 December 31, 2024 and 2023, were as follows:
| Three months ended December 31, | ||||||||||||||||||||||||
| 2024 | 2023 | |||||||||||||||||||||||
| Related Party - Vitamin Realty | Other Leases | Totals | Related Party - Vitamin Realty | Other Leases | Totals | |||||||||||||||||||
| Operating lease costs | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Finance Lease Costs: | ||||||||||||||||||||||||
| Amortization of right-of use assets | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Total finance lease cost | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
INTEGRATED BIOPHARMA, INC. AND ITS SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
(Unaudited)
The components of lease expense for the six months ended December 31,2024 and 2023, were as follows:
| Six months ended December 31, | ||||||||||||||||||||||||
| 2024 | 2023 | |||||||||||||||||||||||
| 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 | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Total finance lease cost | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
Rent and lease amortization costs are included in cost of sales and selling and administrative expenses in the accompanying Condensed Consolidated Statements of Operations.
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 and lease amortization costs for the three months ended December 31, 2024 and 2023 on this lease was $
Other Operating Lease Liabilities. The Company has entered into certain non-cancelable operating lease agreements expiring up through May, 2027, related to office equipment.
INTEGRATED BIOPHARMA, INC. AND ITS SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
(Unaudited)
As of December 31, 2024, 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 lease | $ | $ | $ | $ | ||||||||||||
| Warehouse lease | ||||||||||||||||
| Transportation lease | ||||||||||||||||
| Office equipment leases | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
As of June 30, 2024, 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 lease | $ | $ | $ | $ | ||||||||||||
| Warehouse lease | ||||||||||||||||
| Transportation lease | ||||||||||||||||
| Office equipment leases | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
As of December 31, 2024 and June 30, 2024, the Company’s weighted average discount rate and remaining term on operating lease liabilities were approximately
Financed Lease Obligation.
As of June 30, 2024, the Company’s weighted average discount rate for the outstanding finance lease obligation of $
Supplemental cash flows information related to leases for the six months ended December 31, 2024, 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 six months ended December 31, 2023, 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 | ||||||||||||
Maturities of operating lease liabilities as of December 31, 2024 were as follows:
| Operating | Related Party | |||||||||||
| Year ending | Lease | Operating Lease | ||||||||||
| June 30, | Commitments | Commitment | Total | |||||||||
| 2025, remaining | $ | $ | $ | |||||||||
| 2026 | ||||||||||||
| 2027 | ||||||||||||
| 2028 | ||||||||||||
| Total minimum lease payments | ||||||||||||
| Imputed interest | ( | ) | ( | ) | ( | ) | ||||||
| Total | $ | $ | $ | |||||||||
(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
Information related to related party transactions are disclosed in Note 6(a). Leases for related party lease transactions.
Note 8. Equity Transactions and Stock-Based Compensation
In December 2024, the Board of Directors authorized the issuance of up to
Additionally, in August 2024, the Board of Directors authorized the issuance of
For the three and six months ended December 31, 2024 and 2023, the Company incurred stock-based compensation expense of $
INTEGRATED BIOPHARMA, INC. AND ITS SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
(Unaudited)
The Company used the following assumptions to calculate the fair value of the stock option grants using the Black-Scholes option pricing model on the measurement date during the six months ended December 31, 2024:
| Risk Free Interest Rate | % | |||
| Volatility | % | |||
| Term | 7.5 to 10 years | |||
| Dividend Rate | % | |||
| Closing Price of Common Stock | ||||
The Company calculates expected volatility for a stock-based grant based on historic daily stock price observations of its common stock during the period immediately preceding the grant that is equal in length to the expected term of the grant. The expected term of the options is estimated based on the Company’s historical exercise rate and forfeiture rates are estimated based on employment termination experience. The risk free interest rate is based on U.S. Treasury yields for securities in effect at the time of grants with terms approximating the term of the grants. The assumptions used in the Black-Scholes option valuation model are highly subjective, and can materially affect the resulting valuations.
A summary of the Company’s stock option activity, and related information for the six months ended December 31, 2024 follows:
| Weighted | ||||||||
| Average | ||||||||
| Exercise | ||||||||
| Options | Price | |||||||
| Outstanding as of June 30, 2024 | $ | |||||||
| Granted | ||||||||
| Exercised | ( | ) | ||||||
| Terminated | ( | ) | ||||||
| Expired | ( | ) | ||||||
| Outstanding as of December 31, 2024 | $ | |||||||
| Exercisable at December 31, 2024 | $ | |||||||
Note 9. 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. International sales, concentrated primarily in Europe, for the three months ended December 31, 2024 and 2023 were $
INTEGRATED BIOPHARMA, INC. AND ITS SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
(Unaudited)
Financial information relating to the three months ended December 31, 2024 and 2023 operations by business segment and disaggregated revenues was as follows:
| Sales, Net | Segment | ||||||||||||||||||||||||
| U.S. | International | Gross | Capital | ||||||||||||||||||||||
| Customers | Customers | Total | Profit (loss) | Depreciation | Expenditures | ||||||||||||||||||||
| Contract Manufacturing | 2024 | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| 2023 | |||||||||||||||||||||||||
| Other Nutraceutical Businesses | 2024 | ||||||||||||||||||||||||
| 2023 | |||||||||||||||||||||||||
| Total Company | 2024 | ||||||||||||||||||||||||
| 2023 | |||||||||||||||||||||||||
Financial information relating to the six months ended December 31, 2024 and 2023 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 | 2024 | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| 2023 | |||||||||||||||||||||||||
| Other Nutraceutical Businesses | 2024 | ||||||||||||||||||||||||
| 2023 | |||||||||||||||||||||||||
| Total Company | 2024 | ||||||||||||||||||||||||
| 2023 | |||||||||||||||||||||||||
| Total Assets as of | ||||||||
| December 31, | June 30, | |||||||
| 2024 | 2024 | |||||||
| 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, 2024.
The Company is engaged primarily in the business of manufacturing, distributing, marketing and sales of vitamins, nutritional supplements and herbal products. The Company’s customers are located primarily in the United States and Luxembourg.
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, 2024.
For the six months ended December 31, 2024, our net sales from operations increased by $1,807 to approximately $26,231 from approximately $24,424 in the six months ended December 31, 2023, or approximately 7%. Our net sales in the Contract Manufacturing Segment increased by $1,153 or approximately 5%, and our Other Nutraceuticals Segment increased by $654. Net sales increased in our Contract Manufacturing Segment primarily due to increased sales volumes to customers other than our two major customers, of $1,675, offset by a net decrease of $521 from our two major customers. Net sales in the six months ended December 31, 2024 were higher by approximately $654 from the six months ended December 31, 2023 in our Other Nutraceuticals Segment, primarily due to increased sales for MDC Warehousing and CII in the amounts of $542 and $118, respectively. The increase was from a new major customer in this segment, which represented 51% in the six months ended December 31, 2024 compared to no sales in the three months ended December 31, 2023. This customer replaced a customer that had represented 14% in the six months ended December 31, 2023. The loss of any of these customers could have a significant adverse impact on our financial condition and results of operations.
For the six months ended December 31, 2024, we had operating income of approximately $692, an increase of approximately $1,198 from the operating loss of approximately $506 for the six months ended December 31, 2023. Our profit margins increased from approximately 5.5% of net sales in the six months ended December 31, 2023 to approximately 9.7% of net sales in the six months ended December 31, 2024, primarily as a result of the increased sales of $1,807 with the cost of sales increasing $617. Our consolidated selling and administrative expenses were approximately the same, $1,850 and $1,858 in the six months ended December 31, 2024 and 2023, respectively, a decrease of $8.
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. We believe that this focus will produce a reduction of the reliance on our two significant customers in our fiscal year ending June 30, 2025.
We have seen a negative impact in our margins due to inflation and tightened labor markets. We may not be able to timely increase our selling prices to our customers resulting from price increases from our suppliers due to various economic factors, including tariffs and other inflationary costs, labor and shipping costs and our own increases in shipping, labor and other operating costs. Our results of operations may also be affected by economic conditions, including tariffs and other inflationary pressures, that can impact consumer disposable income levels and spending habits, thereby reducing the orders we may receive from our significant customers.
We continue to experience minimal supply chain disruptions relating to fuel refinery and transportation issues as it pertains to shipping. These issues first arose as result of the COVID-19 pandemic and other geo-political events. Additionally, the East Coast port strike threatened the supply of goods and continued to threaten up to the settlement date of January 8, 2025. In the interim U.S. shippers steered clear of the East and Gulf Coast ports amid worries that the dockworkers at these ports would go on strike again.
During the first quarter of calendar 2022, the war in Ukraine affected our customer’s business operations in Ukraine and Russia, resulting in the cancelation of some future orders. The war resulted in the imposition of sanctions by the United States, the United Kingdom, and the European Union, that affect the cross-border operations of businesses operating in Russia. In addition, many multinational companies ceased or suspended their operations in Russia. Therefore, the ability to continue operations in Russia by our customers is uncertain.
Additionally, the current Israel-Hamas war in the Middle East could negatively impact our sales and margins. Certain of our customers sell into Israel and we source certain raw materials from Israel. If the Israel-Hamas war carries on for a significant time frame, it could have a negative impact on our sales and margins if we are unable to replace these sales with other sales and/or obtain the same raw materials at substantially the same price as currently paid.
Critical Accounting Estimates
There have been no changes to our critical accounting estimates in the three months ended December 31, 2024. Critical accounting estimates made in accordance with our accounting policies are regularly discussed by management with our Audit Committee. Those estimates are discussed under “Critical Accounting Estimates” 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, 2024.
Results of Operations (in thousands, except share and per share amounts)
Our results from operations in the following table, sets forth the income statement data of our results as a percentage of net sales for the periods indicated:
| For the three months |
For the six months |
|||||||||||||||
| ended December 31, |
ended December 31, |
|||||||||||||||
| 2024 |
2023 |
2024 |
2023 |
|||||||||||||
| Sales, net |
100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||
| Costs and expenses: |
||||||||||||||||
| Cost of sales |
90.7 | % | 95.5 | % | 90.3 | % | 94.5 | % | ||||||||
| Selling and administrative |
7.7 | % | 8.4 | % | 7.1 | % | 7.6 | % | ||||||||
| 98.4 | % | 103.9 | % | 97.4 | % | 102.1 | % | |||||||||
| Income (loss) from operations |
1.6 | % | (3.9% | ) | 2.6 | % | (2.1% | ) | ||||||||
| Other income (expense), net |
||||||||||||||||
| Interest income (expense) |
0.1 | % | 0.0 | % | 0.1 | % | 0.0 | % | ||||||||
| Other income (expense), net |
(0.2% | ) | (0.0% | ) | (0.1% | ) | (0.0% | ) | ||||||||
| Other income (expense), net |
(0.1% | ) | 0.0 | % | (0.0% | ) | 0.0 | % | ||||||||
| Income (loss) before income taxes |
1.5 | % | (3.9% | ) | 2.5 | % | (2.1% | ) | ||||||||
| Income tax expense (benefit), net |
0.6 | % | (0.7% | ) | 1.2 | % | (0.2% | ) | ||||||||
| Net income (loss) |
0.9 | % | (3.2% | ) | 1.3 | % | (1.9% | ) | ||||||||
For the Six Months Ended December 31, 2024 compared to the Six Months Ended December 31, 2023
Sales, net. Sales, net, for the six months ended December 31,2024 and 2023 were $26,231 and $24,424, respectively, an increase of 7.4%, and were comprised of the following:
| Six months ended |
Dollar |
Percentage |
||||||||||||||
| December 31, |
Change |
Change |
||||||||||||||
| 2024 |
2023 |
2024 vs 2023 |
2024 vs 2023 |
|||||||||||||
| (amounts in thousands) |
||||||||||||||||
| Contract Manufacturing: |
||||||||||||||||
| US Customers |
$ | 20,103 | $ | 20,252 | $ | (149 | ) | (0.7% | ) | |||||||
| International Customers |
4,540 | 3,238 | 1,302 | 40.2 | % | |||||||||||
| Net sales, Contract Manufacturing |
24,643 | 23,490 | 1,153 | 4.9 | % | |||||||||||
| Other Nutraceuticals: |
||||||||||||||||
| US Customers |
1,588 | 907 | 681 | 75.1 | % | |||||||||||
| International Customers |
- | 27 | (27 | ) | (100.0% | ) | ||||||||||
| Net sales, Other Nutraceuticals |
1,588 | 934 | 654 | (27.6% | ) | |||||||||||
| Total net sales |
$ | 26,231 | $ | 24,424 | $ | 1,807 | 7.4 | % | ||||||||
In the six months ended December 31,2024 and 2023, a significant portion of our consolidated net sales, approximately 82% and 90%, were concentrated among two customers in our Contract Manufacturing Segment, Life Extension and Herbalife. Life Extension and Herbalife represented approximately 64% and 23% and 70% and 23%, respectively, of our Contract Manufacturing Segment’s net sales in the six months ended December 31,2024 and 2023, respectively.
The increase in net sales of approximately $1,807 in the six months ended December 31, 2024 was the result of increased sales in both of our segments. Our Contract Manufacturing Segment increase of $1,153, from the six months ended December 31, 2023 was primarily from existing and new customers other than our two major customers of $1,675, which was offset by a net decrease of $521 with our two major customers. The increase in our Other Nutraceuticals Segment of $654, was primarily due to MDC Warehousing replacing one of its major customers that represented 14% in the six months ended December 31, 2023, with one that represented 51% in the six months ended December 31, 2024. This segment's two major customers represented 51% and 22% in the six months ended December 31, 2024 compared to 0% and 43% in the three months ended December 31, 2023.
The loss of any of these customers could have a significant adverse impact on our financial condition and results of operations.
Cost of sales. Cost of sales increased by approximately $559 to $23,689 for the six months ended December 31, 2024, as compared to $23,072 for the six months ended December 31, 2023 or approximately 2.7%. Cost of sales decreased as a percentage of sales to 90.3% for the six months ended December 31, 2024 as compared to 94.5% for the six months ended December 31, 2023. The increase of $617 in the cost of goods sold amount is from increased manufacturing costs of $700 and $126 in our Contract Manufacturing Segment and Other Nutraceuticals Segment, respectively, offset by a decrease of $209 in other cost of goods in our Contract Manufacturing Segment. The decrease in the cost of goods sold as a percentage of net sales, was primarily the result of the increase in net sales in both segments used to offset the increased manufacturing costs and the cost of sales in the Other Nutraceutical Segment.
Selling and Administrative Expenses. Our selling and administrative expenses were approximately the same, $1,850 and $1,858, in the six months ended December 31, 2024 and 2023, respectively, a decrease of $8. As a percentage of sales, net, selling and administrative expenses were approximately 7.1% and 7.6% in the six months ended December 31, 2024 and 2023, respectively. We had an increase in professional fees of $43, from increased legal fees of $29, audit fees of $8 and other consulting fees of $6, offset by a decrease in stock compensation expense of $36 and all other selling and administrative expenses of $15.
Other income (expense), net. Other income (expense), net was approximately $(3) for the six months ended December 31, 2024 compared to $8 for the six months ended December 31, 2023, and was composed of:
| Six months ended |
||||||||
| December 31, |
||||||||
| 2024 |
2023 |
|||||||
| (dollars in thousands) |
||||||||
| Interest income, net |
$ | 25 | $ | 10 | ||||
| Other expense, net |
(28 | ) | (2 | ) | ||||
| Other income (expense), net |
$ | (3 | ) | $ | 8 | |||
In the six months ended December 31, 2024, we recognized a permanent impairment in our machinery and equipment of $28 compared to a loss on disposal of machinery and equipment of $2 in the six months ended December 31, 2023.
Income tax expense (benefit), net. For the six months ended December 31, 2024 and 2023, we had a state income tax provision of approximately $78 and $13, respectively and federal income tax expense of $236 and a federal income benefit of $70, in the six months ended December 31, 2024 and 2023, respectively.
Net income (loss). Our net income for the six months ended December 31, 2024 was approximately $375 compared to a net loss of approximately $441 in the six months ended December 31, 2023. The change of approximately $816 was primarily the result of increased operating income of $1,198, offset by the increase income tax expense of $371.
For the Three Months Ended December 31, 2024 compared to the Three Months Ended December 31, 2023
Sales, net. Sales, net, for the three months ended December 31, 2024 and 2023 were $12,614 and $11,509, respectively, an increase of 9.6%, and are comprised of the following:
| Three months ended |
Dollar |
Percentage |
||||||||||||||
| December 31, |
Change |
Change |
||||||||||||||
| 2024 |
2023 |
2024 vs 2023 |
2024 vs 2023 |
|||||||||||||
| (amounts in thousands) |
||||||||||||||||
| Contract Manufacturing: |
||||||||||||||||
| US Customers |
$ | 9,315 | $ | 9,424 | $ | (109 | ) | (1.2% | ) | |||||||
| International Customers |
2,355 | 1,629 | 726 | 44.6 | % | |||||||||||
| Net sales, Contract Manufacturing |
11,670 | 11,053 | 617 | 5.6 | % | |||||||||||
| Other Nutraceuticals: |
||||||||||||||||
| US Customers |
944 | 429 | 515 | 120.0% | ||||||||||||
| International Customers |
- | 27 | (27 | ) | (100.0% | ) | ||||||||||
| Net sales, Other Nutraceuticals |
944 | 456 | 488 | 107.0 | % | |||||||||||
| Total net sales |
$ | 12,614 | $ | 11,509 | $ | 1,105 | 9.6 | % | ||||||||
For the three months ended December 31, 2024 and 2023, a significant portion of our consolidated net sales, approximately 79% and 89%, respectively, were concentrated among two customers, Life Extension and Herbalife, in our Contract Manufacturing Segment. Life Extension and Herbalife, represented approximately 60% and 26% and 70% and 23%, respectively, of our Contract Manufacturing Segment’s net sales in the three months ended December 31, 2024 and 2023, respectively.
The increase in net sales of approximately $1,105 in the three months ended December 31, 2024, was primarily the result of increased net sales in our Contract Manufacturing Segment of $617 primarily due to increased sales volumes to customers other than our two major customers in the amount of $899, offset by a net decrease in sales to Herbalife and Life Extension of $282 and an increase of sales in the other Nutraceuticals Segment of $488 compared to the year ago comparable period.
Revenues in the three months ended December 31, 2024 were higher than the three months ended December 31, 2023 in our Other Nutraceuticals Segment by $488, primarily due to increased sales in MDC Warehousing in the amount of $439. Two other customers in the other Nutraceutical Segment, while not significant customers of the Company’s consolidated net sales, represented approximately 58%, and 17% and 0%, and 40%, respectively, of net sales of the Other Nutraceutical Segment in the three months ended December 31, 2024 and 2023, respectively.
The loss of any of these customers could have a significant adverse impact on our financial condition and results of operations.
Cost of sales. Cost of sales increased by approximately $454 to $11,443 for the three months ended December 31, 2024, as compared to $10,989 for the three months ended December 31, 2023 or approximately 4%. Cost of sales decreased as a percentage of sales to 90.7% for the three months ended December 31, 2024 as compared to 95.5% for the three months ended December 31, 2023. The decrease in the cost of goods sold as a percentage of net sales, was primarily the result of increased net sales used to offset the fixed manufacturing overhead.
Selling and Administrative Expenses. Selling and administrative expenses were substantially the same in each of the three months ended December 31, 2024 and 2023, approximately $969 and $972, respectively. As a percentage of sales, net, selling and administrative expenses were approximately 7.7% and 8.4% in the three months ended December 31, 2024 and 2023, respectively. The decrease of $3 was primarily from an increase in professional fees of $35, primarily increased legal expenses of $23 and other professional fees of $12, offset by a decrease in all other selling and administrative expenses of $20, primarily from a decrease in stock compensation expense of $18.
Other income (expense), net. Other income (expense), net was approximately $(17) for the three months ended December 31, 2024 compared to $0 for the three months ended December 31, 2023, and is composed of:
| Three months ended |
||||||||
| December 31, |
||||||||
| 2024 |
2023 |
|||||||
| (dollars in thousands) |
||||||||
| Interest income, net |
$ | 11 | $ | 2 | ||||
| Other income (expense), net |
(28 | ) | (2 | ) | ||||
| Other income (expense), net |
$ | (17 | ) | $ | - | |||
In the three months ended December 31, 2024 and 2023, we had a permanent impairment on machinery and equipment of $28 and a loss on disposals of machinery of $2, respectively.
Income tax expense (benefit), net. For the three months ended December 31, 2024 and 2023, we had federal income tax expense of $46 and federal income tax benefits of $76, respectively and state income tax expense, net of approximately $23 and $6, in the three months ended December 31, 2024 and 2023, respectively.
Net income (loss). Our net income for the three months ended December 31, 2024 was approximately $116 compared to a net loss of approximately $382 in the three months ended December 31, 2023. The change of approximately $498 was primarily the result of increased operating income of $654, offset by the increase income tax expense of $139.
Seasonality
The nutraceutical business can be seasonal. Due to our current customer base in our contract manufacturing segment, we have not experienced a seasonality impact on our sales volumes as we had seen in the past. In the past we had experienced some seasonality in the December quarters based on the demands of our customer base at the time.
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 six months ended |
||||||||
| December 31, |
||||||||
| 2024 |
2023 |
|||||||
| (dollars in thousands) |
||||||||
| Net cash provided by (used in) operating activities |
$ | 858 | $ | (514 | ) | |||
| Net cash used in investing activities |
$ | (85 | ) | $ | (62 | ) | ||
| Net cash provided by (used in) financing activities |
$ | 11 | $ | (8 | ) | |||
| Cash at end of period |
$ | 2,461 | $ | 732 | ||||
At December 31, 2024, our working capital was approximately $12,578, an increase of $826 from our working capital of $11,752 at June 30, 2024. The increase in our working capital was the result of an increase in our current assets of $278 and a decrease in our current liabilities of $548.
Operating Activities
Net cash provided by operating activities of $858 in the six months ended December 31, 2024 includes net income of approximately $375. 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 $1,391. Net cash provided by our operations in the six months ended December 31, 2024 was offset by cash used in our working capital assets and liabilities in the amount of approximately $533 and was primarily the result of an increase in our prepaid expenses and other assets of $124, the decrease in operating lease obligations of $468 and accounts payable and other liabilities of $560 offset by decreases in accounts receivable of $440 and inventory of $178.
Net cash used in operating activities of $514 in the six months ended December 31, 2023 includes net loss of approximately $441. 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 $232. Net cash used in our operations in the six months ended December 31, 2023 included cash from our working capital assets and liabilities in the amount of approximately $746 and was primarily the result of an increase in our inventory of $1,888 and the decrease in operating lease obligations of $446 offset by an increase in accounts payable of $1,039 and the decrease in accounts receivable of $778.
Investing Activities
Cash used in investing activities of $85 and $62 in the six months ended December 31, 2024 and 2023, respectively, was for the purchase of machinery and equipment.
Financing Activities
Cash provided by financing activities was approximately $11 for the six months ended December 31, 2024, and was primarily from proceeds from exercises of stock options of $18, offset by principal payments under our financed lease obligations of $7.
Cash used in financing activities was approximately $8 for the six months ended December 31, 2023, and was primarily from principal payments under our financed lease obligations of $21, offset by proceeds from exercises of stock options of $13.
As of December 31, 2024, we had cash of $2,461, funds available under our revolving credit facility of approximately $5,140 and working capital of approximately $12,578. We had operating income of $692 in the six months ended December 31, 2024, which included non-cash expenses of $267 such as amortization, depreciation and employee stock compensation expense. After taking into consideration our interim results and current projections, management believes that operations, together with the revolving credit facility will support our working capital requirements at least through the period ending February 13, 2026.
Our current total annual commitments at December 31, 2024 for long term non-cancelable leases of approximately $660 consists of obligations under operating leases for office and warehouse facilities and operating and finance lease obligations for the rental of machinery, transportation and office equipment.
Capital Expenditures
The Company's capital expenditures for the six months ended December 31,2024 and 2023 were approximately $85 and $62, respectively. The Company has budgeted approximately $500 for capital expenditures for fiscal year 2025. The total amount is expected to be funded from 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 may not be able to timely increase its selling prices to its customer resulting from price increases from its suppliers due to various economic factors, including tariffs and other inflationary factors, labor and shipping costs and its own increases in shipping, labor and other operating costs. The Company’s results of operations may also be affected by economic conditions, including tariffs and other inflationary pressures, that can impact consumer disposable income levels and spending habits, thereby reducing the orders it may receive from the Company’s significant customers.
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 December 31, 2024, 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 December 31, 2024 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, 2024.
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
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: February 13, 2025 | By: /s/ Christina Kay |
| Christina Kay, | |
| Co-Chief Executive Officer | |
| Date: February 13, 2025 | By: /s/ Riva Sheppard |
| Riva Sheppard, | |
| Co-Chief Executive Officer | |
| By: /s/ Dina L. Masi | |
| Date: February 13, 2025 | Dina L. Masi, |
| Chief Financial Officer & Senior Vice President | |
Exhibit 31.1
Certification of Co-Chief Executive Officers
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
We, Christina Kay and Riva Sheppard each certify that:
1. I have reviewed this quarterly report on Form 10-Q of Integrated BioPharma, Inc.;
|
2. |
Based on our knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
|
2. |
Based on our knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
|
4. |
The registrant's other certifying officer and we are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
|
a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
c) |
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|
d) |
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth quarter, in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
|
5. |
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
|
a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
|
b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
| Date: February 13, 2025 | By: /s/ Christina Kay |
| Name: Christina Kay, | |
| Title: Co-Chief Executive Officer | |
| (Co-Principal Executive Officer) | |
| By: /s/ Riva Sheppard | |
| Name: Riva Sheppard, | |
| Title: Co-Chief Executive Officer | |
| (Co-Principal Executive Officer) |
Exhibit 31.2
Certification of Chief Financial Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Dina L. Masi, certify that:
|
1. |
I have reviewed this quarterly report on Form 10-Q of Integrated BioPharma, Inc.; |
|
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
|
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
|
4. |
The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
|
a. |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
b. |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
c. |
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|
d. |
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth quarter, in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
|
5. |
The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
|
a. |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
|
b. |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
| Date: February 13, 2025 | By: /s/ Dina L. Masi |
| Name: Dina L. Masi | |
| Title: Chief Financial Officer & Senior Vice President | |
| (Principal Financial Officer) |
Exhibit 32.1
CERTIFICATION OF PERIODIC REPORT
As adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 2024 of Integrated BioPharma, Inc. (the “Company”) as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Christina Kay and Riva Sheppard, Co-Chief Executive Officers of Integrated BioPharma, Inc. certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that to their knowledge:
|
1. |
the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and |
|
2. |
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
This certification accompanies the Report pursuant to Section 906 of Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.
A signed original of this written statement has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
| Dated: February 13, 2025 | By: /s/ Christina Kay |
| Name: Christina Kay, | |
| Title: Co-Chief Executive Officer | |
| (Co-Principal Executive Officer) | |
| By: /s/ Riva Sheppard | |
| Name: Riva Sheppard, | |
| Title: Co-Chief Executive Officer | |
| (Co-Principal Executive Officer) |
Exhibit 32.2
CERTIFICATION OF PERIODIC REPORT
As adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 2024 of Integrated BioPharma, Inc. (the “Company”) as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Dina L. Masi, the Senior Vice President and Chief Financial Officer of Integrated BioPharma, Inc. certifies, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that to her knowledge:
|
1. |
the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and |
|
2. |
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
This certification accompanies the Report pursuant to Section 906 of Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.
A signed original of this written statement has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
| February 13, 2025 | By: /s/ Dina L. Masi |
| Name: Dina L. Masi | |
| Title: Chief Financial Officer & Senior Vice President | |
| (Principal Financial Officer) |