INTEGRATED BIOPHARMA INC

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share amounts)

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts)

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF STOCKHOLDERS’** EQUITY**

FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 2025 AND 2024

FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 2025:

FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 2024:

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Note1. 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, 1995under the name Chem International, Inc., on December 5, 2000,changed its name to Integrated Health Technologies, Inc. and on January 29, 2003changed 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 hadno products available for sale and AgroLabs hadno sales of its branded products in thethree andnine months ended* March 31, 2025and2024.*

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 InterimFinancial *** 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 Rule8-03 of Regulation S-X of the Securities and Exchange Commission (“SEC”) and therefore donot 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 Form10-K for the fiscal year ended* June 30, 2024 (“Form10*-K”), as filed with the SEC. The* June 30, 2024balance sheet was derived from audited financial statements, but doesnot* include all disclosures required by GAAP. The preparation of the unaudited condensed consolidated 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 thethree andnine months ended* March 31, 2025arenot* necessarily indicative of the results for the full fiscal year ending* June 30, 2025*or for any other period.

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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 condensed 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:

**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.

For thethree months ended* March 31, 2025and2024,* the Company had federal income tax expense of $415 and $81, respectively and state income tax benefit, net of approximately $248 and $14, respectively. For thenine months ended* March 31, 2025and2024,* the Company had a federal income tax expense of $651 and $11, respectively and state income tax benefit, net of approximately $170 and $1, respectively. In thenine months ended* March 31, 2025,*we released the valuation allowance on our state net operating losses as they became available to offset current state taxable income.

***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 condensed balance sheets. Finance leases are included in right-of-use asset, current portion of financed lease obligation, and financed lease obligation on the condensed consolidated balance sheets.

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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.

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 werenot included in the computation of weighted average diluted common shares outstanding as the effect of doing so would be anti-dilutive for thethree andnine months ended* March 31, 2025and2024:*

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 condensed consolidated financial statements and disclosures.

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 condensed consolidated financial statements and disclosures.

In* November 2024,the FASB issued ASU2024*-03 (updated ASU2025-01 issued in* January 2025),Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic220*-40): Disaggregation of Income Statement Expenses, which requires the disaggregation of certain expense captions into specified categories in disclosures within the notes to the financial statements to provide enhanced transparency into the expense captions presented on the face of the income statement. The guidance is effective for the Company’s annual periods beginning* July 1, 2027,on a prospective basis, with a retrospective option, and early adoption is permitted. The Company is currently evaluating the impact of adopting ASU2024*-03.

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Note2. Inventories**

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

Note3. Property and Equipment, net**

Property and equipment, net consists of the following:

Depreciation and amortization expense recorded on property and equipment was $76 and $77 for thethree months and $247 and $232 fornine months ended* March 31, 2025and2024,* respectively. Additionally, the Company disposed of property of $60 and $85 in thenine months ended* March 31, 2025and2024,* respectively and in thethree months ended* March 31, 2024,had a gain on disposals of fixed assets of $1. In thenine* months ended* March 31, 2025and2024,* the Company recognized a permanent impairment of $28 and a net loss on disposal of fixed assets of $1, respectively.

Note4. Senior Credit Facility and Lines of Credit**

As of* April 15, 2025,the Company paid off its outstanding obligations under its Senior Credit Facility, terminating the Credit Facility and entered into a Loan Agreement (the “Loan Agreement”) with PNC Bank, National Association (“PNC”). As of March 31, 2025and June 30, 2024,*the Company hadno debt outstanding under its Senior Credit Facility.

Loan Agreement

The Loan Agreement provides a committed revolving line of credit under which the Borrower* mayrequest and PNC will make advances to the Borrower from time to time until April 5, 2026, (the "Expiration Date"), in an aggregate amount outstanding at any timenot* to exceed $4,000 (the "Line of Credit") and a Convertible Equipment Line of Credit in an aggregate amount outstanding at any timenot to exceed $500 (the "Convertible ELOC"). Advances under the Convertible ELOC will be used for the purchase of equipment and/or vehicles.

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The Line of Credit bears interest at a rate per annum which is equal to the sum of (A) Dailyone-month SOFR plus (B)250 basis points (2.50%). Accrued interest will be due and payable on the same day of each month, beginning with the payment due on* May 15, 2025.*The outstanding principal balance and any accrued but unpaid interest shall be due and payable on the Expiration Date.

Prior to any Conversion Date, amounts outstanding under the Convertible ELOC will bear interest at a rate per annum (the "Daily Rate”) equal to the sum of (i) Dailyone-month SOFR plus (ii)250 basis points (2.50%) and from and after the Conversion Date, amounts outstanding under this Convertible ELOC will bear interest for the remaining term at either: (i) a rate per annum equal to the Daily Rate; or (ii) a fixed rate of interest per annum as offered to the Borrower by PNC in its sole discretion and agreed upon in writing between the Borrower and PNC.

The Company also entered into a Reimbursement Agreement for Standby and Commercial Letter(s) of Credit whereby, from time to time, the Borrower* mayrequest the issuance ofone* or more letters of credit (each a "Credit"). The Credit bears interest at the same rate as the Line of Credit under the Loan Agreement as described above.

In addition, in connection with the Loan Agreement, the Company and MDC (collectively, the "Grantors") each entered into a Security Agreement with PNC, pursuant to which each of the Grantors assigned and granted to PNC, as secured party, a continuing lien on and security interest in all right, title and interest of such Grantor in, to, and under all of the assets of such Grantor.

Senior Credit Facility

On* April 15, 2025,the Company, MDC, AgroLabs, IHT, IHT Properties Corp. (“IHT Properties”) and Vitamin Factory (collectively, the “Borrowers”) terminated 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,** March 16, 2023and May 9, 2024.*

The Amended Loan Agreement provided for a total of $5,000 in senior secured financing (the “Senior Credit Facility”) as follows: (i) discretionary advances (“Revolving Advances”) based on eligible accounts receivable and (ii) eligible inventory in the maximum amount of $5,000 (the “Revolving Credit Facility”). The Senior Credit Facility was secured by all assets of the Borrowers, including, without limitation, machinery and equipment, and real estate owned by IHT Properties. Revolving Advances bore interest at PNC’s Base Rate (7.50% and 8.50% as of* March 31, 2025and June 30, 2024,*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 was payable at the interest rate then applicable plus 2%. The Senior Credit Facility was paid off on* April 15, 2025,prior to its maturity date of May 15, 2026 (*the “Senior Maturity Date”).

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

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The Revolving Advances were subject to the terms and conditions set forth in the Amended Loan Agreement and were made in aggregate amounts at any time equal to the lesser of (x) $5,000 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 reasonably deemed 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 shares of common stock that it owned of iBio, Inc.; (ii) a Mortgage and Security Agreement with PNC and IHT Properties; and (iii) an Environmental Indemnity Agreement with PNC.

Note5. Significant Risks and Uncertainties**

(a) Major Customers. In thethree months ended* March 31, 2025and2024,* approximately 85% and 90%, respectively, of consolidated net sales were derived fromtwo customers. Thesetwo customers are in the Company’s Contract Manufacturing Segment and represented approximately 58% and 31% and 72% and 20% in thethree months ended* March 31, 2025and2024,* respectively of the Contract Manufacturing Segment net sales. In thenine months ended* March 31, 2025and2024,* approximately 83% and 90% of consolidated net sales, respectively, were derived from the sametwo customers and net sales to thesetwo customers represented approximately 62% and 26% and 73% and 21% of net sales of the Contract Manufacturing Segment net sales in thenine months ended* March 31, 2025and2024,* respectively. Accounts receivable from thesetwo major customers represented approximately 74% and 84% of total net accounts receivable as of* March 31, 2025and June 30, 2024,respectively. Two other customers in the Other Nutraceutical Segment, whilenot* significant customers of the Company’s consolidated net sales, represented approximately 40% and 20% and 40% and 23% of net sales of the Other Nutraceutical Segment in thethree months ended* March 31, 2025and2024,* respectively. In thenine months ended* March 31, 2025and2024,* three customers represented 38%,26% and 12% and 43%,10% and 10%, of net sales of the Other Nutraceutical Segment, respectively.

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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 than10% of net sales.

(b) Other Business Risks. Approximately 78% of 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 slight negative impact in its margins due to inflation and tightened labor markets as the Company strives to increase prices to customers as its operating costs increase. 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* mayalso 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.

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Note6. Leases and other Commitments and Contingencies**

***(a) Leases.***The Company has operating and finance leases for its corporate and sales offices, warehousing and packaging facilities and certain machinery and equipment, including office equipment. The Company’s leases have remaining terms of less than 1 year to less than 5 years.

The components of lease expense for thethree months ended* March 31, 2025and2024,* were as follows:

The components of lease expense for thenine months ended* March**31,2024* and2024, 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 of lease (the “Second Lease Amendment”) with Vitamin Realty for its office and warehouse space in New Jersey increasing its rentable square footage from an aggregate of 74,898 square feet to 76,161 square feet and extending the expiration date to* January 31, 2026.This Second Lease Amendment 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 of the lease (the “Third Lease Amendment”) with Vitamin Realty, increasing its rentable square footage to 116,175. The Third Lease Amendment provides 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.*

Rent expense and lease amortization costs for thethree months ended* March 31, 2025and2024* on this lease were $348 and $332 respectively, and for thenine months ended* March 31, 2025and2024* were $1,000 and $974, respectively, and are included in cost of sales and selling and administrative expenses in the accompanying Condensed Consolidated Statements of Operations. As of* March 31, 2025and June 30, 2024,the Company hadno current obligations to Vitamin Realty. Additionally, the Company has operating lease obligations of $689 and $1,289 with Vitamin Realty as noted in the accompanying Condensed Consolidated Balance Sheet as of March 31, 2025and June 30, 2024,*respectively.

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Other Operating Lease Liabilities. The Company has entered into certain non-cancelable operating lease agreements expiring up through* May* 9, 2027 related to office equipment.

As of* March 31, 2025,*the Company’s RSUs, lease obligations and remaining cash commitment on these leases were as follows:

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

As of* March 31, 2025and June 30, 2024,*the Company’s weighted average discount rate and remaining term on operating lease liabilities were approximately 5.27% and 5.00% and 1.5 years and 2.0 years, respectively.

Financed Lease Obligation. On* March 27, 2025,the Company entered into a financing lease obligation with ByLine Financial Group in the amount of $41. The monthly payments commenced on May 1, 2025in the amount of $1 and matures on April 1, 2030.The ROU related to this finance lease obligation is included in ROUs on the accompanying Condensed Consolidated Balance Sheet as of March 31, 2025.*

The Company’s finance lease obligation with LEAF Capital Funding LLC matured on* August 15, 2024.The ROU asset related to the finance lease obligation is included in Property and equipment, net in the accompanying Condensed Consolidated Balance Sheet as of June 30, 2024.*

As of* March 31, 2025and June 30, 2024,*the Company’s weighted average discount rate for the outstanding finance lease obligations of $41 and $7 was 5.9% and 0%, respectively and the remaining term on the finance lease obligation was approximately 5.2 and 0.2 years, respectively.

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Supplemental cash flows information related to leases for thenine months ended* March 31, 2025,*is as follows:

Supplemental cash flows information related to leases for thenine months ended* March 31, 2024,*is as follows:

Maturities of operating lease liabilities as of* March 31, 2025*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.

Note7. Related Party Transactions**

Information related to related party transactions are disclosed in Note6(a). Leases for related party lease transactions.

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Note8. Equity Transactions and Stock-Based Compensation**

In* December 2024,*the Board of Directors authorized the issuance of up to 490,000 stock options to Company officers and employees. The Company issued 490,000 stock options with an exercise price ranging from $0.31 to $0.34, vesting over three years, with expiration terms often years from the date of grant.

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

For thethree andnine months ended* March 31, 2025and2024,* the Company incurred stock-based compensation expenses of $44 and $61, and $141 and $193, respectively. The Company expects to record additional stock-based compensation of $241 over the remaining vesting periods of approximatelyone tothree years for all non-vested stock options.

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 thenine months ended* March 31, 2025:*

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 thenine months ended* March 31, 2025*follows:

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Note9. 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 intotwo reportable segments as follows: Contract Manufacturing, and Other Nutraceutical Businesses. International sales, concentrated primarily in Europe, for thethree months ended* March 31, 2025and2024* were $3,228 and $1,980, respectively and for thenine months ended* March 31, 2025and2024* were $7,768 and $5,245, respectively.

Financial information relating to thethree months ended* March 31, 2025and2024* operations by business segment and disaggregated revenues was as follows:

Financial information relating to thenine months ended* March 31, 2025and2024* operations by business segment and disaggregated revenues was as follows:

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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 nine months ended March 31, 2025, our net sales from operations increased by $2,607 to approximately $40,178 from approximately $37,571 in the nine months ended March 31, 2024, or approximately 7%. Our net sales in the Contract Manufacturing Segment increased by $1,862 or approximately 5%, and our Other Nutraceuticals Segment increased by $745 or approximately 2%. Net sales increased in our Contract Manufacturing Segment primarily due to increased sales volumes to customers other than our two major customers, of $1,970, offset by a net decrease of $108 from our two major customers. Net sales in the nine months ended March 31, 2025 were higher by approximately $745 from the nine months ended March 31, 2024 in our Other Nutraceuticals Segment, primarily due to increased sales for MDC Warehousing and CII in the amounts of $660 and $80, respectively. The increase was due to a new major customer in this segment, which represented 38% in the nine months ended March 31, 2025 compared to no sales in the three months ended March 31, 2024. This customer replaced a customer that had represented 14% in the nine months ended March 31, 2024. The loss of any of these customers could have a significant adverse impact on our financial condition and results of operations.

For the nine months ended March 31, 2025, we had operating income of approximately $1,431, an increase of approximately $1,582 from the operating loss of approximately $151 for the nine months ended March 31, 2024. Our profit margins increased from approximately 6.9% of net sales in the nine months ended March 31, 2024 to approximately 10.2% of net sales in the nine months ended March 31, 2025, primarily as a result of the increased sales of $2,607 with the cost of sales increasing $1,114. Our consolidated selling and administrative expenses were approximately the same, $2,662 and $2,751 in the nine months ended March 31, 2025 and 2024, respectively, a decrease of $89.

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 slight negative impact in its margins due to inflation and tightened labor markets as we strive to increase prices to customers as our operating costs increase. We may not be able to timely increase our selling prices to our customer 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.

Critical Accounting Estimates

There have been no changes to our critical accounting estimates in the three months ended March 31, 2025. 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 Nine Months Ended March 31, 2025 compared to the Nine Months Ended March 31, 2024

**Sales, net.**Sales, net, for the nine months ended March 31, 2025 and 2024 were $40,178 and $37,571, respectively, an increase of 6.9%, and were comprised of the following:

In the nine months ended March 31, 2025 and 2024, a significant portion of our consolidated net sales, approximately 83% and 90%, was concentrated among two customers in our Contract Manufacturing Segment, Life Extension and Herbalife. Life Extension and Herbalife represented approximately 62% and 26% and 73% and 21%, respectively, of our Contract Manufacturing Segment’s net sales in the nine months ended March 31, 2025 and 2024, respectively.

The increase in net sales of approximately $2,607 in the nine months ended March 31, 2025 was the result of increased sales in both of our segments. Our Contract Manufacturing Segment increase of $1,862 from the nine months ended March 31, 2024 was primarily from existing and new customers other than our two major customers of $1,970, which was offset by a net decrease of $108 with our two major customers. The increase in our Other Nutraceuticals Segment of $745, was primarily due to MDC Warehousing replacing one of its major customers that represented 14% in the nine months ended March 31, 2024, with one that represented 38% in the nine months ended March 31, 2025. This segment’s three major customers represented 38%, 26% and 12% in the nine months ended March 31, 2025 compared to 14%, 43% and 10% in the nine months ended March 31, 2024.

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 $1,114 to $36,085 for the nine months ended March 31, 2025, as compared to $34,971 for the nine months ended March 31, 2024, or approximately 3.2%. Cost of sales decreased as a percentage of sales to 89.8% for the nine months ended March 31, 2025 as compared to 93.1% for the nine months ended March 31, 2024. The increase of $1,114 in the cost of goods sold amount is from increased manufacturing costs and other cost of goods sold expense of $929 and $185 in our Contract Manufacturing Segment and Other Nutraceuticals Segment, respectively. 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, $2,662 and $2,751, in the nine months ended March 31, 2025 and 2024, respectively, a decrease of $89. As a percentage of sales, net, selling and administrative expenses were approximately 6.6% and 7.3% in the nine months ended March 31, 2025 and 2024, respectively. We had an increase in professional fees of $50, from increased legal fees of $29, audit fees of $12 and other consulting fees of $8, offset by decreases in stock compensation expense of $53, salary and employee benefits of $24 and all other selling and administrative expenses of $62.

Other income, net.

Other income, net for the nine months ended March 31, 2025 and 2024, was approximately $36 and $5, respectively and was composed of:

In the nine months ended March 31, 2025, we recognized a permanent impairment in our machinery and equipment of $28 offset by a gain on disposal of assets of $34 compared to a loss on disposal of machinery and equipment of $1 in the nine months ended March 31, 2024. Interest income, net increased by $24 due to our increased cash position earning interest to cover our financing costs related to the Credit Facility.

Income tax expense, net. For the nine months ended March 31, 2025 and 2024, we had a state income tax benefit of approximately $170 and $1, respectively and federal income tax expense of $651 and $11, in the nine months ended March 31, 2025 and 2024, respectively. In the nine months ended March 31, 2025, we released the valuation allowance on our state net operating losses as they became available to offset current state taxable income.

Net income (loss). Our net income for the nine months ended March 31, 2025 was approximately $986 compared to a net loss of approximately $156 in the nine months ended March 31, 2024. The change of approximately $1,142 was primarily the result of increased operating income of $1,582, offset by the increase income tax expense of $471.

For the Three Months Ended March 31, 2025 compared to the Three Months Ended March 31, 2024

**Sales, net.**Sales, net, for the three months ended March 31, 2025 and 2024 were $13,947 and $13,147, respectively, an increase of 6.1%, and are comprised of the following:

For the three months ended March 31, 2025 and 2024, a significant portion of our consolidated net sales, approximately 85% and 90%, respectively, were concentrated among two customers, Life Extension and Herbalife, in our Contract Manufacturing Segment. Life Extension and Herbalife, represented approximately 58% and 31% and 72% and 20%, respectively, of our Contract Manufacturing Segment’s net sales in the three months ended March 31, 2025 and 2024, respectively.

The increase in net sales of approximately $800 in the three months ended March 31, 2025, was primarily the result of increased net sales in our Contract Manufacturing Segment of $709 primarily due to increased sales volumes to Herbalife and Life Extension of $414 and to customers other than our two major customers in the amount of $295 and an increase of sales in the other Nutraceuticals Segment of $91 compared to the year ago comparable period.

Revenues in the three months ended March 31, 2025 were higher than the three months ended March 31, 2024 in our Other Nutraceuticals Segment by $91, primarily due to increased sales in MDC Warehousing in the amount of $128. Two other customers in the Other Nutraceutical Segment, while not significant customers of consolidated net sales, represented approximately 40%, and 20% and 40%, and 23%, respectively, of net sales of the Other Nutraceutical Segment in the three months ended March 31, 2025 and 2024, 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 $497 to $12,396 for the three months ended March 31, 2025, as compared to $11,899 for the three months ended March 31, 2024 or approximately 4%. Cost of sales decreased as a percentage of sales to 88.9% for the three months ended March 31, 2025 as compared to 90.5% for the three months ended March 31, 2024. 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 March 31, 2025 and 2024, approximately $812 and $893, respectively. As a percentage of sales, net, selling and administrative expenses were approximately 5.8% and 6.8% in the three months ended March 31, 2025 and 2024, respectively. The decrease of $81 was primarily from decreases in salaries and employee benefits of $21, stock compensation expense of $16, other warehouse expense of $28 and all other operating expenses of $16.

Other income (expense), net. ** **Other income (expense), net was approximately $39 for the three months ended March 31, 2025 compared to $(3) for the three months ended March 31, 2024, and is composed of:

In the three months ended March 31, 2025 and 2024, we had a gain on disposal of assets $34 and a gain on disposals of machinery of $1, respectively.

Income tax expense, net. For the three months ended March 31, 2025 and 2024, we had federal income tax expense of $415 and $81, respectively and state income tax benefit, net of approximately $248 and $14, in the three months ended March 31, 2025 and 2024, respectively. In the three months ended March 31, 2025, we released the valuation allowance on our state net operating losses as they became available to offset current state taxable income.

Net income. Our net income for the three months ended March 31, 2025 and 2024 was approximately $611 and $285, respectively. The increase of approximately $326 was primarily the result of increased operating income and other income, net of $384 and $42, respectively, offset by the increase income tax expense of $100.

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:

At March 31, 2025, our working capital was approximately $13,565, an increase of $1,813 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 $671 and a decrease in our current liabilities of $1,142. The decrease in current liabilities was primarily from shipping against customer deposits and fulfilling our obligations under the customer purchase orders.

Operating Activities

Net cash provided by operating activities of $1,474 in the nine months ended March 31, 2025 includes net income of approximately $986. 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 $2,564. Net cash provided by our operations in the nine months ended March 31, 2025 was offset by cash used in our working capital assets and liabilities in the amount of approximately $1,090 and was primarily the result of an increases in our accounts receivable of $412 and prepaid expenses and other assets of $152, the decrease in operating lease obligations of $69 and accounts payable and other liabilities of $1,024 offset by a decrease in inventory of $1,167.

Net cash provided by operating activities of $1,129 in the nine months ended March 31, 2024 includes net loss of approximately $156. 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 $963. Net cash provided from operations in the nine months ended March 31, 2024 included cash from our working capital assets and liabilities in the amount of approximately $166 and was primarily the result of decreases in our accounts payable and accrued expenses and other liabilities of $2,029 offset by, increases accounts receivable, inventories and other current assets of $208, $908 and $77, respectively, and the decrease in operating lease obligations of $672.

Investing Activities

Cash used in investing activities of $201 and $407 in the nine months ended March 31, 2025 and 2024, respectively, was for the purchase of machinery and equipment.

Financing Activities

Cash provided by financing activities was approximately $11 for the nine months ended March 31, 2025, 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 $18 for the nine months ended March 31, 2024, and was primarily from principal payments under our financed lease obligations of $31, offset by proceeds from exercises of stock options of $13.

As of March 31, 2025, we had cash of $2,961, funds available under our credit lines of approximately $5,000 and working capital of approximately $13,565. We had operating income of $986 in the nine months ended March 31, 2025, which included non-cash expenses of $1,579 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 credit facilities in place of $4,500 with PNC (Note 4. Senior Credit Facility and Lines of Credit to the Condensed Consolidated Financial Statements in Item 1 in this Quarterly Report), will support our working capital requirements at least through the period ending May 14, 2026.

Our current total annual commitments at March 31, 2025 for long term non-cancelable leases of approximately $672 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 nine months ended March 31, 2025 and 2024 were approximately $201 and $407, respectively. The Company has budgeted approximately $500 for capital expenditures for fiscal year 2025. The total amount is expected to be funded from lease financing and cash provided from the Company’s operations.

Off-Balance Sheet Arrangements

The Company has no off-balance sheet arrangements.

Recent Accounting Pronouncements

None.

Impact of Inflation

The Company 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.