INTEGRATED BIOPHARMA INC

None.

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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

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To the Board of Directors and Stockholders of

Integrated BioPharma, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Integrated BioPharma, Inc. (the “Company”) as of June 30, 2024 and 2023, the related consolidated statements of operations, stockholders’ equity and cash flows for the two years in the period ended June 30, 2024, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2024 and 2023, and the results of its operations and its cash flows for each of the two years in the period ended June 30, 2024, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

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

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

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

Critical Audit Matters

Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters.

/s/Marcum LLP

Marcum LLP

We have served as the Company’s auditor since 2009

East Hanover, New Jersey

September 20, 2024

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Note1. Business**

Integrated BioPharma, Inc., a Delaware corporation (together with its subsidiaries, 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. The Company was originally incorporated in the state of Delaware on* August 31, 1995under 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, 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 sold 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. The Vitamin Factory hadno products available for sale and AgroLabs hadno sales of its branded products in the fiscal years ended* June 30, 2024and2023.*

Note2. Summary of Significant Accounting Policies**

Principles of Consolidation. The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. Intercompany transactions and accounts have been eliminated in consolidation.

***Reclassifications.***Certain prior year amounts have been reclassified to conform to the current year presentation.

Use of Estimates. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that arenot readily apparent from other sources. The most significant estimates include:

● sales returns and allowances;

● allowance for credit losses;

● inventory valuation;

● valuation and recoverability of long-lived assets;

● income taxes and valuation allowance on deferred income taxes, and;

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

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

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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 ASC606, the Company performs the followingfive steps:

Shipping and Handling Costs. Shipping and handling costs were approximately $821 and $1,006 for the fiscal years ended* June 30, 2024and2023,* respectively, and are included in cost of sales in the accompanying Consolidated Statements of Operations.

***Stock-Based Compensation.*The Company hastwo stock-based compensation plans that have outstanding options issued in accordance with such plans. The Company periodically grants stock options to employees and directors in accordance with the provisions of its stock option plans, with the exercise price of the stock options being set at the closing market price of the common stock on the date of grant. Stock based compensation expense is recognized based on the estimated fair value, utilizing a Black-Scholes option pricing model, of the instrument on the date of grant over the requisite vesting period, which is generally three years.

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 thannot that all or a portion of a deferred tax asset willnot be realized.

The Company files a U.S. federal income tax return as well as returns for various states. The Company’s income taxes havenot been examined by any tax authorities for the periods subject to review by such taxing authorities, except for the State of New Jersey tax filings for MDC and CII which were reviewed by the State of New Jersey for the then open tax periods of 2014 through2017 and 2016 to2019, respectively. Uncertain tax positions, if any, taken on our tax returns are accounted for as liabilities for unrecognized tax benefits. The Company recognizes interest and penalties, if any, related to unrecognized tax benefits in general and administrative expenses in the Consolidated Statements of Operations. There wereno liabilities recorded for uncertain tax positions at* June 30, 2024or2023.*

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***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. The ROU assets related to Finance leases are included in property and equipment 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 donot 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.

***Fair Value of Financial Instruments.*Generally accepted accounting principles require disclosing the fair value of financial instruments to the extent practicable for financial instruments which are recognized or unrecognized in the balance sheet. The fair value of the financial instruments disclosed herein isnot necessarily representative of the amount that could be realized or settled, nor does the fair value amount consider the tax consequences of realization or settlement.

In assessing the fair value of financial instruments, the Company uses a variety of methods and assumptions, which are based on estimates of market conditions and risks existing at the time. For certain instruments, including cash and cash equivalents, accounts receivable, accounts payable, and accrued expenses, it was estimated that the carrying amount approximated fair value because of the short maturities of these instruments. All debt is based on current rates at which the Company could borrow funds with similar remaining maturities and approximates fair value.

Accounts Receivable and Allowance for Credit Losses. In the normal course of business, the Company extends credit to customers. Accounts receivable, less the allowance for credit losses, reflect the net realizable value of receivables, and approximate fair value. The Company believes there isno concentration of credit risk with any single customer whose failure or nonperformance would materially affect the Company’s results other than as discussed in Note9(c) – Significant Risks and Uncertainties – Major Customers. On a regular basis, the Company evaluates its accounts receivables and establishes an allowance for credit losses based on a combination of specific customer circumstances, credit conditions, and historical write-offs and collections. The allowance for credit losses as of* June 30, 2024and2023* was $1 and $37, respectively. Accounts receivable are charged off against the allowance after management determines that the potential for recovery is remote.

***Inventories.*Inventories are stated at the lower of cost or net realizable value. Cost is determined using thefirst-in,first-out method. Allowances for obsolete and overstock inventories are estimated based on “expiration dating” of inventory and projection of sales.

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***Property and Equipment.***Property and equipment are recorded at cost and are depreciated using the straight line method over the following estimated useful lives:

Impairment of Long-Lived Assets. Long-lived assets are reviewed for impairment when circumstances indicate that the carrying value of an asset* may**not* be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the assets to the future net cash flows estimated by the Company to be generated by such assets. If such assets are considered to be impaired, the impairment to be recognized is the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of by sale are recorded as held for sale at the lower of carrying value or estimated net realizable value. Tests for impairment or recoverability are performed at least annually and require significant management judgment and the use of estimates which the Company believes are reasonable and appropriate at the time of the impairment test. Future unanticipated events affecting cash flows and changes in market conditions could affect such estimates and result in the need for an impairment charge. The Company also re-evaluates the periods of amortization to determine whether circumstances warrant revised estimates of current useful lives. No impairment losses were identified or recorded in the fiscal years ended* June 30, 2024and2023* on the Company’s long-lived assets.

Investment in iBio, Inc. Prior to the adoption of ASU2016-01 on* July 1, 2018,the Company accounted for its investment in iBio, Inc. (“iBio”) common stock on the cost basis as it retained approximately 6% of its interest in iBio (the “iBio Stock”) at the time of the spin-off of this subsidiary in August 2008.The Company reviewed its investment in iBio for impairment and recorded a loss when there was deemed to be a permanent impairment of the investment. ASU2016*-01, requires equity investments to be measured at fair value and recognize changes in fair value in net income. During the year ended* June 30, 2024and2023,* the Company recognized realized losses of $0 and $35, respectively and unrealized gain of $0 and $27 for the fiscal years ended* June 30, 2024and2023,* respectively. As of* June 30, 2024and2023,* the Company didnot own any iBio Stock.

Accounting Pronouncements Adopted

None

Accounting PronouncementsNot Yet Adopted**

In* November 2023,FASB issued ASU2023*-07 - Segment Reporting (Topic280): 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 Topic280 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.

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In* December 2023,the FASB issued ASU2023*-09 - Income Taxes (Topic740): 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.

Note3. Inventories**

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

Note4. Property and Equipment, net**

Property and equipment consists of the following:

Depreciation and amortization expense was $319 and $351 for the fiscal years ended* June 30, 2024and2023,* respectively. Additionally, the Company disposed of fully depreciated property of $134 and $26 in the fiscal years ended* June 30, 2024and2023,* respectively. The Company also recognized a net loss on disposals of $1 and $0 on property, including property in the aggregate amount of $27 and $0 that werenot fully depreciated and a gain on the sale of equipment of $1 in each of the fiscal years ended* June 30, 2024and2023.*

Note5. Senior Credit Facility**

As of* June 30, 2024and2023,* the Company hadno debt outstanding under its Senior Credit Facility.

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, 2019and March 16, 2023.*

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The Amended Loan Agreement provides for a total of $5,000 ($8,000 as of* June 30, 2023)in senior secured financing (the “Senior Credit Facility”) as follows: (i) discretionary advances (“Revolving Advances”) based on eligible accounts receivable and eligible inventory in the maximum amount of $5,000 ($8,000 as of and June 30, 2023) (the “Revolving Credit Facility”). The Senior Credit Facility is secured by all assets of the Borrowers, including, without limitation, machinery and equipment, and real estate owned by IHT Properties. Revolving Advances bear interest at PNC’s Base Rate (8.50% and 8.25% as of June 30, 2024and2023,* respectively) or the Term SOFR Rate plus the SOFR Adjustment. The Term SOFR Rate, for any day, shall be equal to the secured overnight financing rate as administered by the Federal Reserve Bank of New York (or a successor administrator of the secured overnight financing rate). The SOFR Adjustment is defined as 10 basis points (0.10%).

Upon and after the occurrence of any event of default under the Amended Loan Agreement, and during the continuation thereof, interest shall be payable at the interest rate then applicable plus 2%. The Senior Credit Facility matures on* May 9, 2026 (*the “Senior Maturity Date”).

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

The 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) $5,000 ($8,000 as of* June 30, 2023)or (y) an amount equal to the sum of: (i) up to 85%, subject to the provisions in the Amended Loan Agreement, of eligible accounts receivables (“Receivables Advance Rate”), plus (ii) up to the lesser of (A)75%, subject to the provisions in the Amended Loan Agreement, of the value of the eligible inventory (“Inventory Advance Rate” and together with the Receivables Advance Rate, collectively, the “Advance Rates”), (B)85% of the appraised net orderly liquidation value of eligible inventory (as evidenced by the most recent inventory appraisal reasonably satisfactory to PNC in its sole discretion exercised in good faith) and (C) the inventory sublimit in the aggregate at anyone* time (“Inventory Advance Rate” and together with the Receivables Advance Rate, collectively, the “Advance Rates”), minus (iii) the aggregate Maximum Undrawn Amount, as defined in the Amended Loan Agreement, of all outstanding letters of credit, minus (iv) such reserves as PNC* may*reasonably deem proper and necessary from time to time.

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.

Note6. Interest Expense**

The components of interest expense for the fiscal years ended* June 30, 2024and2023* are presented below:

The weighted average interest rate paid was 5.97% and 5.67% in the fiscal years ended* June 30, 2024and2023,* respectively. As of* June 30, 2024and2023,* the Company had accruedno unpaid interest.

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Note7. Income Taxes**

The components of the provision for income taxes consists of the following:

A reconciliation of the statutory tax rate to the effective tax rate is as follows:

Deferred income taxes reflect the tax effects of temporary differences between the carrying amounts of assets and liabilities for financial accounting purposes and the amounts used for income tax reporting. Significant components of the Company’s net deferred tax assets are as follows:

The Company has net operating losses (“NOL”) of approximately $21,345 for federal purposes which expire beginning in2028, which were federal NOLs generated prior to2018. NOLs generated post2018 have an indefinite life, subject to80% of taxable income, there wereno NOLs generated post2018. State NOL’s of approximately $4,005 expire beginning in2031 through2039. The Company also has capital loss carryforwards of $2,343 of which $271, $1,152 and $920 will expire in2025, 2026 and2028, respectively. The Company files a consolidated U.S. federal income tax return; however, the various state tax returns were filed on a stand-alone basis for the Company and its subsidiaries until the fiscal year ended* June 30, 2021,*which state income tax return are now filed on a combined basis. MDC has fully utilized its state NOL’s resulting in taxable income on a state level basis for the combined group.

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Realization of the NOL carryforwards and other deferred tax temporary differences is contingent on future taxable earnings. The Company’s deferred tax asset was reviewed for expected utilization using a “more likely thannot” approach by assessing the available positive and negative evidence surrounding its recoverability. Accordingly, a valuation allowance has been recorded against the Company’s deferred tax asset, as it was determined based upon past taxable losses and inconsistent taxable income in the past few years, that it was “more likely thannot” that the Company’s deferred tax assets wouldnot be realized.

The Company will continue to assess and evaluate strategies that will enable the deferred tax asset, or portion thereof, to be utilized, and will reduce the valuation allowance appropriately at such time when it is determined that the “more likely thannot” criteria is satisfied.

There wereno significant uncertain tax positions taken, or expected to be taken, in a tax return that would be determined to be an unrecognized tax benefit taken or expected to be taken in a tax return that should have been recorded on the Company’s consolidated financial statements for the year ended* June 30, 2024.Additionally, there wereno interest or penalties outstanding as of or for each of the fiscal years ended June 30, 2024and2023.*

The latestthree years of Federal andfour years of state tax returns filed for the fiscal years ended through* June 30, 2024are currently open. The tax returns for the year ended June 30, 2024will be filed by March 15, 2025.*

Note8. Profit-Sharing Plan**

The Company maintains a profit-sharing plan, which qualifies under Section401(k) of the Internal Revenue Code, covering all nonunion employees meeting age and service requirements. Contributions are determined by matching a percentage of employee contributions. For the fiscal years ended* June 30, 2024and2023,* the Company contributed approximately $80 and $81, respectively, into the plan for the benefit of the eligible employees participating in the plan.

Note9. Significant Risks and Uncertainties**

***(a) Concentrations of Credit Risk-Cash.**The Company maintains balances at several financial institutions. Deposits at each institution are insured by the Federal Deposit Insurance Corporation up to $250. As of June 30, 2024,*the Company had $2,137 in uninsured deposits at these financial institutions.

(b) Concentrations of Credit Risk-Receivables. The Company routinely assesses the financial strength of its customers and, based upon factors surrounding the credit risk of its customers, establishes an allowance for uncollectible accounts and, as a consequence, believes that its accounts receivable credit risk exposure beyond such allowances is limited. The Company doesnot require collateral in relation to its trade accounts receivable credit risk.

(c) Major Customers. In the fiscal years ended* June 30, 2024and2023,* approximately 90% and 89% of consolidated net sales, were derived fromtwo customers. Thesetwo customers are in the Company’s Contract Manufacturing Segment and represent approximately 71% and 23% and 70% and 24%, respectively, of this segment’s net sales in the fiscal years ended* June 30, 2024and2023,* respectively. Accounts receivable from thesetwo major customers represented approximately 84% of total net accounts receivable as of* June 30, 2024and2023.* The loss of any of these customers could have an adverse effect on the Company’s operations. Two other customers in the Other Nutraceutical Segment, whilenot significant customers of the Company’s consolidated net sales, represented approximately 43%, and 14% and 56%, and 16%, respectively, of net sales of the Other Nutraceutical Segment in the fiscal years ended* June 30, 2024and2023,* respectively. Major customers are those customers who account for more than 10% of net sales.

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***(d) Business Risks.*The Company insures its business and assets against insurable risks, to the extent that it deems appropriate, based upon an analysis of the relative risks and costs. The Company believes that the risk of loss from non-insurable events wouldnot have a material adverse effect on the Company’s operations as a whole.

The raw materials used by the Company are primarily commodities and agricultural-based products. Raw materials used by the Company in the manufacture of its nutraceutical products are purchased from independent suppliers. Raw materials are available from numerous sources and the Company believes that it will continue to obtain adequate supplies.

As of* June 30, 2024,approximately 76% the Company’s employees are covered by a union contract and are employed in its New Jersey facilities. The contract was renewed effective September 1, 2022and will expire on August 31, 2026.*

The Company has seen a negative impact in its margins due to inflation, shipping delays 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 inflation, shipping and labor costs and its own increases in shipping, labor and other operating costs. The Company’s results of operations* mayalso be affected by economic conditions, including 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 transportation issues as it pertains to international shipping of certain raw materials used in the Company’s manufacturing process. These issuesfirst arose as result of the COVID-19 pandemic and other geo-political events.

During thefirst quarter of calendar2022, 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.

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Note10. Lease Commitments and Contingencies**

***(a) Leases.***The Company has operating and finance leases for its corporate and sales offices, warehousing and packaging facilities and certain machinery and equipment, including office equipment. The Company’s leases have remaining terms of less than 1 year to less than 7 years.

The components of lease expense for the fiscal year ended* June 30, 2024and2023* were as follows:

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 100% owned by the estate of the Company’s former chairman, and a major stockholder and certain of his family members, who are the Co-Chief Executive Officers and directors of the Company. On* January 5, 2012,MDC entered into asecond* amendment to the lease (the “Second Lease Amendment”) with Vitamin Realty for its office and warehouse space in New Jersey increasing its rentable square footage from an aggregate of 74,898 square feet to 76,161 square feet and extending the expiration date to* January 31, 2026.This Second Lease Amendment provided for minimum annual rental payments of $533, plus increases in real estate taxes and building operating expenses. On July 15, 2022,MDC entered into athird* amendment to the lease (the “Third Lease Amendment”) with Vitamin Realty, increasing its rentable square footage to 116,175. This Third Lease Amendment provided for minimum annual rental payments of $842, plus increases in real estate taxes and the building operating expenses allocation percentage and is effective as of* July 1, 2022.*

On* May 19, 2014,AgroLabs entered into an amendment to the lease agreement entered into on January 5, 2012,with Vitamin Realty for an additional 2,700 square feet of warehouse space in New Jersey, the term of which was to expire on January 31, 2020to extend the expiration date to June 1, 2024.This additional lease provided for minimum lease payments of $27 with annual increases plus the proportionate share of operating expenses. The AgroLabs Lease was mutually terminated on July 15, 2022with an effective date of July 1, 2022.*

Rent expense, lease amortization costs and imputed interest costs on these related party leases were $1,292 and $1,269 for the fiscal years ended* June 30, 2024and2023,* respectively, and are included in cost of sales and selling and administrative expenses in the accompanying Consolidated Statements of Operations. As of* June 30, 2024and2023,* the Company hadno outstanding current obligations to Vitamin Realty. Additionally, as of* June 30, 2024and2023,* the Company has operating lease obligations of $1,289 and $2,061, respectively, with Vitamin Realty as noted in the accompany Consolidated Balance Sheet.

Other Operating Lease Liabilities. The Company has entered into certain non-cancelable operating lease agreements expiring up through* May**2027,* related to machinery and equipment and office equipment.

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As of* June 30, 2024,*the Company’s ROU assets, lease obligations and remaining cash commitment on these leases is as follows:

As of* June 30, 2023,*the Company’s ROU assets, lease obligations and remaining cash commitment on these leases is as follows:

As of* June 30, 2024and2023,* the Company’s weighted average discount rate is 5.00% and 4.41%, for the fiscal years then ended, respectively, and the remaining term on lease liabilities is approximately 2.0 years and 2.9 years, respectively.

Financed Lease Obligation. ** **

On* June 15, 2022,the Company entered into a financed lease obligation with LEAF Capital Funding, LLC in the amount of $85, which lease is secured by certain machinery and equipment and matured on August 15, 2024.The lease payment in the amount of approximately $4 was payable monthly, beginning September 15, 2022*and has a stated interest rate of 0.0%.

As of each* June, 2024and2023,* the Company’s weighted average discount rate for the outstanding finance lease obligation is 0% and the remaining term on finance lease obligation is approximately 0.2 years and 1.2 years, respectively. The ROU asset related to the finance lease obligation is included in Property and equipment, net in the accompanying Consolidated Balance Sheet.

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Supplemental cash flows information related to leases for the fiscal year ended* June 30, 2024*is as follows:

Supplemental cash flows information related to leases for the fiscal year ended* June 30, 2023*is as follows:

In the fiscal year ended* June 30, 2024,*the Company entered into afour year operating lease for transportation equipment with an annual commitment of $21.

Maturities of operating lease liabilities as of* June 30, 2024*were as follows:

(b) Legal Proceedings.

The Company is subject, from time to time, to claims bythird 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.

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Note11. Related Party Transactions**

Information related to related party transactions are disclosed in Note10(a). Leases for related party lease transactions.

Note12. Equity Transactions and Stock-Based Compensation**

Stock Option Plans. The Company has adopted a stock option plan for the granting of options or restricted shares to employees, officers, directors and consultants of the Company that originally provided for the issuance of up to 7,000,000 shares of common stock, at the discretion of the Board of Directors. Subsequent to the adoption, the Board of Directors and stockholders approved additional common stock shares aggregating 6,000,000 to be available for grant, for a total of 13,000,000 shares of common stock reserved for issuance under the Company’s2001 Stock Option Plan, as amended (the “Plan”). The Company also has a1997 Stock Option Plan with 5,000,000 shares of common stock reserved for issuance. Stock option grants* may**not* be priced less than the fair market value of the Company’s common stock at the date of grant. Options granted are generally forten-year periods, except that incentive stock options granted to a10% stockholder (as defined) are limited tofive-year terms. As of* June 30, 2024,*the Company has 6,351,818 shares of common stock remaining under the Plans.

In the fiscal year ended* June 30, 2024,the Board of Directors authorized the issuance of up to 592,500 stock options to Company officers and employees and 200,000 stock options to the Company’s non-executive directors. The Company issued 582,500 stock options with an exercise price ranging from $0.24 to $0.26, vesting over three years, to the officers and employees and 200,000 shares to the non-executive directors with and exercise price of $0.33, vesting overone year, with expiration terms often years from the date of grant. For the fiscal years ended June 30, 2024and2023,* the Company incurred stock-based compensation expense of $252 and $320, respectively. The Company expects to record additional stock-based compensation of $205 over the remaining estimated vesting period of approximatelytwo and half years.

In* August 2024,the Board of Directors authorized the issuance of 200,000 stock options to the non-executive directors of (50,000 each) with an exercise price of $0.18 to $0.20, vesting overone year,25% at the end of each quarter ending September 30, 2024,** December 21, 2024,** March 31, 2025and June 30, 2025.*

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 year ended* June 30, 2024:*

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.

In the fiscal year ended* June 30, 2023,*the Board of Directors authorized the issuance of 738,500 stock options to Company officers, employees and directors with an exercise price of $0.41, $0.45 or $0.33, vesting overone orthree years, with terms of either five orten years.

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In the fiscal years ended* June 30, 2024and2023,* stock options in the aggregate amount of 2,101,683 and 4,376,284 werenot included in the computation of weighted average diluted common shares outstanding as the effect of doing so would have been anti-dilutive.

The intrinsic value of options outstanding and exercisable at* June 30, 2024and2023* was $129 and $461, respectively.

A summary of the Company’s stock option activity, and related information for the years ended* June 30,*follows:

The following table summarizes the range of exercise prices and weighted-average exercise prices for stock options outstanding and exercisable as of* June 30, 2024*under the Company’s stock option plans:

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Note13. Segment Information**

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 intotwo reportable segments; Contract Manufacturing and Other Nutraceutical Businesses. The international sales, concentrated primarily in Europe, for the fiscal years ended* June 30, 2024and2023* were $7,973 and $8,055, respectively.

Financial information relating to the fiscal years ended* June 30, 2024and2023* operations by business segment are as follows:

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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.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons in the capacities and on the dates indicated.

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