Cautionary Statement Regarding Forward-Looking Statements

 

Certain statements in this Quarterly Report on Form 10-Q may constitute “forward-looking” statements as defined in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Private Securities Litigation Reform Act of 1995 (the “PSLRA”) or in releases made by the Securities and Exchange Commission (“SEC”), all as may be amended from time to time. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause the actual results, performance or achievements of Integrated BioPharma, Inc. and its subsidiaries (collectively, the “Company”) or industry results, to differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, changes in general economic and business conditions; the outbreak and continued spread of COVID-19; loss of market share through competition; introduction of competing products by other companies; the timing of regulatory approval and the introduction of new products by the Company; changes in industry capacity; pressure on prices from competition or from purchasers of the Company's products; regulatory changes in the pharmaceutical manufacturing industry and nutraceutical industry; regulatory obstacles to the introduction of new technologies or products that are important to the Company; availability of qualified personnel; the loss of any significant customers or suppliers; and other factors both referenced and not referenced in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2020 (“Form 10-K”), as filed with the SEC. Statements that are not historical fact are forward-looking statements. Forward-looking statements can be identified by, among other things, the use of forward-looking language, such as the words, “plan”, “believe”, “expect”, “anticipate”, “intend”, “estimate”, “project”, “may”, “will”, “would”, “could”, “should”, “seeks”, or “scheduled to”, or other similar words, or the negative of these terms or other variations of these terms or comparable language, or by discussion of strategy or intentions. These cautionary statements are being made pursuant to the Securities Act, the Exchange Act and the PSLRA with the intention of obtaining the benefits of the “safe harbor” provisions of such laws. The Company cautions investors that any forward-looking statements made by the Company are not guarantees or indicative of future performance. Important assumptions and other important factors that could cause actual results to differ materially from those forward-looking statements with respect to the Company, include, but are not limited to, the risks and uncertainties affecting its businesses described in Item 1A of the Company’s Form 10-K and in other securities filings by the Company. Although the Company believes that its plans, intentions and expectations reflected in or suggested by such forward-looking statements are reasonable, actual results could differ materially from a projection or assumption in any of the forward-looking statements. The Company’s future financial condition and results of operations, as well as any forward-looking statements, are subject to change and inherent risks and uncertainties. The forward-looking statements contained in this Quarterly Report on Form 10-Q are made only as of the date hereof and the Company does not have or undertake any obligation to update or revise any forward-looking statements whether as a result of new information, subsequent events or otherwise, unless otherwise required by law.

 

 

 

ITEM 1. FINANCIAL STATEMENTS

 

 

 

 See accompanying notes to condensed consolidated financial statements.

 

 

 

 

 

 See accompanying notes to condensed consolidated financial statements.

 

 

 

 

 

 

 See accompanying notes to condensed consolidated financial statements.

 

 

 

 

  See accompanying notes to condensed consolidated financial statements.

 

INTEGRATED BIOPHARMA, INC. AND ITS SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share amounts)

(Unaudited)

 

 

 

 

 

 

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANICAL CONDITION AND RESULTS OF OPERATION (dollars in thousands)

 

Certain statements set forth under this caption constitute “forward-looking statements.” See “Disclosure Regarding Forward-Looking Statements” on page 1 of this Quarterly Report on Form 10-Q for additional factors relating to such statements. The following discussion should also be read in conjunction with the condensed consolidated financial statements of the Company and Notes thereto included herein and the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2020.

 

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

 

Business Outlook

 

Our future results of operations and the other forward-looking statements contained in this Quarterly Report on Form 10-Q, including this “Management’s Discussion and Analysis of Financial Condition and Results of Operation”, involve a number of risks and uncertainties—in particular, the statements regarding our goals and strategies, new product introductions, plans to cultivate new businesses, future economic conditions, revenue, pricing, gross margin and costs, competition, the tax rate, and potential legal proceedings. We are focusing our efforts to improve operational efficiency and reduce spending that may have an impact on expense levels and gross margin. In addition to the various important factors discussed above, a number of other important factors could cause actual results to differ significantly from our expectations. See the risks described in “Risk Factors” in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2020 and in Part II of this Quarterly Report on Form 10-Q.

 

For the nine months ended March 31, 2021, our net sales from operations increased by $7,267 to approximately $46,501 from approximately $39,234 in the nine months ended March 31, 2020, an increase of 18.5%. Our net sales in the Contract Manufacturing Segment increased by $7,156 and in our Other Nutraceuticals Segment by $111. Net sales increased in our Contract Manufacturing Segment primarily due to increased sales volumes to Life Extension and Herbalife in the amount of $6,152 and $559, respectively. For the nine months ended March 31, 2021, we had operating income of approximately $4,472, an increase of approximately $1,831 from operating income of approximately $2,641 for the nine months ended March 31, 2020. Our profit margins increased from approximately 13.5% of net sales in the nine months ended March 31, 2020 to approximately 15.5% of net sales in the nine months ended March 31, 2021, primarily as a result of the increased sales in our Contract Manufacturing Segment of approximately $7,156. Our consolidated selling and administrative expenses increased by approximately $100 or approximately 3.8% in the nine months ended March 31, 2021 compared to the nine months ended March 31, 2020. Our employee stock compensation expense increased by $118, insurance costs of $24 and we had an increase in expected losses on customer receivables of $22, offset in part, from decreases in professional fees of $36 primarily from decreased legal fees, along with a decrease in travel and entertainment of $44.

 

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

 

The COVID-19, or coronavirus outbreak, has the potential to cause a disruption in our supply chain. Currently, some of our suppliers of certain materials used in the production of our supplements are located in China and other impacted countries or other states within the United States. Most materials may be obtained from more than one supplier. However, due to port closures and other restrictions resulting from the coronavirus outbreak throughout the world, these suppliers, located both inside and outside of the United States, may have limited supply of such materials, which has caused prices of some materials to increase. As of May 13, 2021, we have had delays, however; we have not experienced a significant disruption in the supply chain for our raw materials. We have taken measures to secure some surplus stock and have informed our customers who may be affected of the potential price increase. In addition, the significant outbreak of this contagious disease in the human population has resulted in a widespread health crisis that could adversely affect the economies and financial markets of many countries, resulting in an economic downturn that could affect demand for our products and impact our operating results.

 

 

In addition to supply chain issues resulting from the COVID-19 pandemic, we are experiencing supply chain disruptions relating to fuel refinery and transportation issues as it pertains to the production of plastics.  This is impacting the supply and demand of bottles and caps, key components in our Contract Manufacturing Segment.   Transportation, in general, continues to be an issue in the delay of receiving materials and our ability to meet promised delivery dates to our customers in the Contract Manufacturing Segment.

 

While, as of May 13, 2021, we haven’t experienced a major disruption in the supply chain for our manufactured products, we did, however, see a disruption in the supply chain for personal protection equipment (“PPE”) and cleaning supplies used in our manufacturing facilities in accordance with our standard operating procedures and the updated guidelines issued by the Centers for Disease Control and Prevention (the “CDC”) for personal safety. The U.S. Department of Labor Occupational Safety and Health Administration has adopted the CDC guidelines and as such we are required to provide the PPE for our employees to wear while working.  When we did obtain the out of stock items, such as face masks, gloves and other protective personal items, the cost of such items were substantially higher than the historical costs.  Due to increased volumes of sales, the increased costs of PPE did not impact our gross margins. Additionally, if we are unable to obtain cleaning supplies in the future, we may have to temporarily close areas of production until the needed supplies are obtained.

 

We do not currently anticipate any negative impact to our margins resulting from the coronavirus outbreak or the supply chain disruptions relating to fuel refinery and transportation, however; if we are unable to obtain the necessary materials to produce and bottle a supplement within our standard lead times or the necessary PPE and cleaning supplies, it may delay the production and shipment of those supplements, thereby shifting the timing of recognizing the resulting sale to our customers.  If there are increased shipping costs as a result of the fuel refinery and transportation issues that we are not able to pass along to our customers, it could have a negative impact on our margins.

 

While our facilities did remain open during the State of New Jersey lockdown during the coronavirus outbreak as an essential business, there can be no assurances that we will continue to operate if the Governor of New Jersey should modify or issue new executive orders prohibiting our facilities to remain open.

 

Critical Accounting Policies and Estimates

 

There have been no changes to our critical accounting policies in the three months ended March 31, 2021, except as disclosed in Note 1. Principles of Consolidation and Basis of Presentation of the Condensed Financial Statements of the Company contained in this Quarterly Report on Form 10-Q. Critical accounting policies and the significant estimates made in accordance with them are regularly discussed by management with our Audit Committee. Those policies are discussed under “Critical Accounting Policies” in our “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Item 7 of our Annual Report on Form 10-K for the year ended June 30, 2020 and in Note 1. Principles of Consolidation and Basis of Presentation of the Condensed Financial Statements of the Company contained in this Quarterly Report on Form 10-Q.

 

 

 

 

 

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

 

Our results from operations in the following table, sets forth the income statement data of our results as a percentage of net sales for the periods indicated:

 

		For the three months								For the nine months
		ended March 31,								ended March 31,
		2021				2020				2021				2020
Sales, net			100.0	%			100.0	%			100.0	%			100.0	%
Costs and expenses:
Cost of sales			84.4	%			86.4	%			84.5	%			86.5	%
Selling and administrative			5.5	%			6.5	%			5.9	%			6.7	%
			89.9	%			92.9	%			90.4	%			93.2	%
Income from operations			10.1	%			7.1	%			9.6	%			6.8	%
Other income (expense), net
Interest expense			(0.3%	)			(0.7%	)			(0.5%	)			(0.8%	)
Realized gain on sale of iBio Stock			-				0.3	%			0.1	%			0.1	%
Unrealized gain (loss) on investments			0.1	%			0.7	%			(0.1%	)			0.1	%
Other income, net			0.1	%			-				0.1	%			0.1	%
Other expense, net			(0.1%	)			0.3	%			(0.4%	)			(0.5%	)
Income before income taxes			10.0	%			7.4	%			9.2	%			6.3	%
Provision for income taxes			2.7	%			0.5	%			1.7	%			0.6	%
Net income			7.3	%			6.9	%			7.5	%			5.7	%

 

 

 

For the nine months ended March 31, 2021 compared to the nine months ended March 31, 2020

 

Sales, net. Sales, net, for the nine months ended March 31, 2021 and 2020 were $46,501 and $39,234, respectively, an increase of 18.5%, and were comprised of the following:

 

 

	Nine months ended				Dollar			Percentage
	March 31,				Change			Change
	2021		2020		2021 vs 2020			2021 vs 2020
	(amounts in thousands)
Contract Manufacturing:
US Customers	$	39,803	$	31,277	$	8,526			27.3	%
International Customers		5,474		6,844		(1,370	)		(20.0	%)
Net sales, Contract Manufacturing		45,277		38,121		7,156			18.8	%
Other Nutraceuticals:
US Customers		1,148		1,039		109			10.5	%
International Customers		76		74		2			2.7	%
Net sales, Other Nutraceuticals		1,224		1,113		111			10.0	%
Total net sales	$	46,501	$	39,234	$	7,267			18.5	%

 

 

In each of the nine months ended March 31, 2021 and 2020, a significant portion of our consolidated net sales, approximately 92%, were concentrated among two customers in our Contract Manufacturing Segment, Life Extension and Herbalife. Life Extension and Herbalife represented approximately 70% and 24% and 67% and 27%, respectively, of our Contract Manufacturing Segment’s net sales in the nine months ended March 31, 2021 and 2020, respectively. Innophos (a customer of our Other Nutraceutical Businesses), while not a significant customer of our consolidated net sales, represented approximately 0% and 13% of the Other Nutraceutical Businesses net sales in the nine months ended March 31, 2021 and 2020, respectively. The loss of any of these customers could have a significant adverse impact on our financial condition and results of operations.

 

 

The increase in net sales of approximately $7,267 was primarily the result of increased net sales in our Contract Manufacturing Segment by $7,156 primarily due to increased sales volumes to Life Extension and Herbalife in the amounts of $6,152 and $559, respectively, and a combined net increase to our other customers of $445.

 

Cost of sales. Cost of sales increased by approximately $5,336 to $39,293 for the nine months ended March 31, 2021, as compared to $33,957 for the nine months ended March 31, 2020 or approximately 15.7%. Cost of sales decreased as a percentage of sales to 84.5% for the nine months ended March 31, 2021 as compared to 86.5% for the nine months ended March 31, 2020. The increase in the cost of goods sold amount is consistent and expected with the increase in net sales. The decrease in the cost of goods sold as a percentage of net sales and the resulting increase in gross profit, was primarily the result of the increased net sales not needed to offset the fixed manufacturing overhead.

 

Selling and Administrative Expenses. There was an increase in selling and administrative expenses of $100, approximately 4% in the nine months ended March 31, 2021 as compared to the nine months ended March 31, 2020. As a percentage of sales, net, selling and administrative expenses were approximately 6% and 7% in the nine months ended March 31, 2021 and 2020, respectively. The increase of $100 was primarily from increases in (i) employee stock compensation expense of $118 as a result of issuing stock options in November 2020, with no such grant in the period ended March 31, 2020; (ii) increased insurance premium costs for general liability and directors and officers due to the general increases in the insurance market for potential COVID-19 related claims of $24 and; (iii) expected losses on customer receivables of $22. These increases we offset, in part, by decreases in (i) professional and consulting fees of approximately $36 primarily as the result of decreased legal fees of approximately $42 from general legal counsel offset by an increase of $6 in other professional consulting services and (ii) travel and entertainment expenses of $44 as the result of the travel and entertainment restrictions from the COVID-19 pandemic. All other operating expenses increased in aggregate amount of $17 in the nine months ended March 31, 2021 as compared to the nine months ended March 31, 2020.

 

Other income (expense), net. Other income (expense), net was approximately $(169) for the nine months ended March 31, 2021 compared to $(218) for the nine months ended March 31, 2020, and was composed of:

 

		Nine months ended
		March 31,
		2021				2020
Other income (expense), net		(dollars in thousands)
Interest expense		$	(213	)		$	(329	)
Realized gain on sale of investment in iBio Stock			56				49
Unrealized (loss) gain on investment in iBio Stock			(51	)			35
Other income			39				27
Other income (expense), net		$	(169	)		$	(218	)

 

 

Our interest expense for the nine months ended March 31, 2021 decreased by $116 from the nine-month period ended March 31, 2020, primarily resulting from of lower average daily balances outstanding under the Senior Credit Facility with PNC and a decrease in the interest rates of approximately 1.5% in the nine months ended March 31, 2021 from the nine months ended March 31, 2020 (See Note 4 to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q).

 

In the nine months ended March 31, 2021 and 2020, we sold 16,000 shares of iBio Stock for a gain of $56 and 40,000 shares of iBio Stock for a gain of $49, respectively. Also, in the nine months ended March 31, 2021, and 2020, we had an unrealized loss on the remaining iBio Stock of approximately $51 and an unrealized gain of $35, respectively.

 

 

Provision for income taxes. For the nine months ended March 31, 2021 and 2020, we had a state income tax provision of approximately $375 and $318, respectively and federal income tax expense of $422 in the nine months ended March 31, 2021 and a $102 federal income tax benefit in the nine months ended March 31, 2020. We continue to maintain a reserve on a portion of our deferred tax assets as it has been determined that based upon past losses, the Company’s past liquidity concerns and the current economic environment, it is “more likely than not” that the Company’s deferred tax assets may not be fully realized.

 

Net income. Our net income for the nine months ended March 31, 2021 and 2020 was approximately $3,506 and $2,207, respectively. The increase of approximately $1,299 was primarily the result of increased operating income of $1,831 and decreased interest expense of $116, offset by an increase in the provision for income taxes of $581.

 

For the Three Months Ended March 31, 2021 compared to the Three Months Ended March 31, 2020

 

Sales, net. Sales, net, for the three months ended March 31, 2021 and 2020 were $17,072 and $13,631, respectively, an increase of 25.2%, and are comprised of the following:

 

 

		Three months ended								Dollar				Percentage
		March 31,								Change				Change
		2021				2020				2021 vs 2020				2021 vs 2020
		(amounts in thousands)
Contract Manufacturing:
US Customers		$	14,311			$	10,775			$	3,536				32.8	%
International Customers			2,308				2,558				(250	)			(9.8%	)
Net sales, Contract Manufacturing			16,619				13,333				3,286				24.6	%
Other Nutraceuticals:
US Customers			428				283				145				51.2	%
International Customers			25				15				10				66.7	%
Net sales, Other Nutraceuticals			453				298				155				52.0	%
Total net sales		$	17,072			$	13,631			$	3,441				25.2	%

 

For the three months ended March 31, 2021 and 2020, a significant portion of our consolidated net sales, approximately 92% and 91%, respectively, were concentrated among two customers, Life Extension and Herbalife, in our Contract Manufacturing Segment. Life Extension and Herbalife represented approximately 70% and 24% and 64% and 26%, respectively, of our Contract Manufacturing Segment’s net sales in the three months ended March 31, 2021 and 2020, respectively. The loss of any of these customers could have a significant adverse impact on our financial condition and results of operations.

 

The increase in net sales of approximately $3,441 was primarily the result of increased net sales in our Contract Manufacturing Segment by $3,286 primarily due to increased sales volumes to Life Extension and Herbalife in the amounts of $2,846 an $399, respectively.

 

Cost of sales. Cost of sales increased by approximately $2,632 to $14,411 for the three months ended March 31, 2021, as compared to $11,779 for the three months ended March 31, 2020 or approximately 22.3%. Cost of sales decreased as a percentage of sales to 84.4% for the three months ended March 31, 2021 as compared to 86.4% for the three months ended March 31, 2020. The increase in the cost of goods sold amount is consistent and expected with the increase in net sales. The decrease in the cost of goods sold as a percentage of net sales and the resulting increase in gross profit, was primarily the result of the increased net sales not needed to offset the fixed manufacturing overhead.

 

 

Selling and Administrative Expenses. There was an increase in selling and administrative expenses of $50, approximately 5.6% in the three months ended March 31, 2021 as compared to the three months ended March 31, 2020. As a percentage of sales, net, selling and administrative expenses were approximately 6% and 7% in the three months ended March 31, 2021 and 2020, respectively. The increase of $50 was primarily from an increase in employee stock compensation expense of $54 as a result of issuing stock options in November 2020, with no such grant in the period ended December 31, 2019. No other component of selling and administrative expenses increased by more than $14 in the three-month period ended March 31, 2021 compared to the same period ended March 31, 2020.

 

Other income (expense), net. Other income (expense), net was approximately $(13) for the three months ended March 31, 2021 compared to $43 for the three months ended March 31, 2020, and is composed of:

 

		Three months ended
		March 31,
		2021				2020
Other income (expense), net		(dollars in thousands)
Interest expense		$	(58	)		$	(96	)
Realized gain on investment in iBio Stock			-				49
Unrealized gain on investment in iBio Stock			22				90
Other income			23				-
Other income (expense), net		$	(13	)		$	43

 

 

Our interest expense for the three months ended March 31, 2021 decreased by $38 from the three-month period ended March 31, 2020, primarily as the result of lower average daily balances outstanding under the Senior Credit Facility with PNC.

 

In the three months ended March 31, 2020, we sold 40,000 shares of iBio Stock for a gain of $49 with no such sales in the three months ended March 31, 2021. Also, in the three months ended March 31, 2020, we had an unrealized gain on the remaining iBio Stock of approximately $90 compared to an unrealized gain of $22 in the three months ended March 31, 2021.

 

Federal and state income tax expense, net. For the three months ended March 31, 2021, we had a federal deferred income tax expense of $401 and compared to a federal deferred income tax benefit of $93 in the three months ended March 31, 2020, and state income tax expense, net of approximately $64 and $160, in the three months ended March 31, 2021 and 2020, respectively. We continue to maintain a reserve on a portion of our deferred tax assets as it has been determined that based upon past losses, the Company’s past liquidity concerns and the current economic environment, it is “more likely than not” that the Company’s deferred tax assets may not be fully realized.

 

The decrease in state tax expense of approximately $96 is primarily the result the change in the state filing status from separate taxable entities in the State of New Jersey to an affiliated filing status. This status reduces the taxable state income due to taxable losses in some entities offsetting state taxable income in others.

 

The federal tax benefit of $93 in the three-month period ended March 31, 2020 includes the recognition of the change from the tax provision for the fiscal year ended June 30, 2019 to the tax return filed in March 2020 in the amount of $40 relating to the alternative minimum tax carryover due from payments made in prior years.

 

Net income. Our net income for the three months ended March 31, 2021 and 2020 was approximately $1,241 and $936, respectively. The increase of approximately $305 was primarily the result of the increase in operating income of $960 offset, in part, by the increase in the provision for income taxes of $398.

 

Seasonality

 

 

The nutraceutical business can be seasonal. Due to our current customer base in our contract manufacturing segment, our fiscal quarter ending December 31st each year tends to be more than our average quarterly volume for the other three fiscal quarters in the fiscal year. This increase is based on their forecast of their customer base.

 

The Company believes that there are non-seasonal factors that may influence the variability of quarterly results including, but not limited to, general economic and industry conditions that affect consumer spending, changing consumer demands and current news on nutritional supplements. Accordingly, a comparison of the Company’s results of operations from consecutive periods is not necessarily meaningful, and the Company’s results of operations for any period are not necessarily indicative of future periods.

 

Liquidity and Capital Resources

 

The following table sets forth, for the periods indicated, the Company’s net cash flows used in operating, investing and financing activities, its period end cash and cash equivalents and other operating measures:

 

 

		For the nine months ended
		March 31,
		2021				2020
		(dollars in thousands)
Net cash provided by operating activities		$	2,338			$	3,549
Net cash used in investing activities		$	(54	)		$	(70	)
Net cash used in financing activities		$	(2,581	)		$	(3,389	)
Cash at end of period		$	105			$	565

 

 

At March 31, 2021, our working capital was approximately $6,154, an increase of $2,792 from our working capital of $3,362 at June 30, 2020. Our current assets increased by $4,065 offset by an increase in our current liabilities of $1,273. The increase in the current assets is primarily from increases in inventories in the amount of $3,321 and accounts receivable, net of $948.

 

Operating Activities

 

Net cash provided by operating activities of $2,338 in the nine months ended March 31, 2021 includes net income of approximately $3,506. 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 $4,717. Net cash provided by our operations in the nine months ended March 31, 2021 was offset by uses in our working capital assets and liabilities in the amount of approximately $2,379 and was primarily the result of an increases in our inventory of $3,321 and accounts receivable of $948, offset by an aggregate increase in accounts payable, accrued expenses and other liabilities of $2,413.

 

Net cash provided by operating activities of $3,549 in the nine months ended March 31, 2020 includes net income of approximately $2,207. After excluding the effects of non-cash expenses, including depreciation and amortization, and changes in the fair value of derivative liabilities and deferred tax assets, the adjusted cash provided from operations before the effect of the changes in working capital components was $2,657. Net cash provided by our operations in the nine months ended March 31, 2020 from our working capital assets and liabilities in the amount of approximately $892 was primarily the result of cash provided by a decrease in accounts receivable of $166 and an aggregate increase in accounts payable, accrued expenses and other liabilities of $2,327, offset, in part, by decreases in inventories of $1,247 and obligations under operating leases of $343.

 

Investing Activities

 

Cash used in investing activities in the nine months ended March 31, 2021 and 2020, of approximately $54 and $70, respectively, was used primarily for the purchase of machinery and equipment of $150 and $158, respectively. Additionally, in the nine months ended March 31, 2021 and 2020, cash used in investing activities was offset, in part, with proceeds in the amount of $96 and $85 from the sale of 16,000 and 40,000 shares of iBio Stock, respectively.

 

 

 

Financing Activities

 

Cash used in financing activities was approximately $2,581 for the nine months ended March 31, 2021, and was primarily from repayments of advances under our revolving credit facility of $43,288 and principal payments under our term notes in the amount of $990, offset by advances under our revolving credit facility of approximately $41,758.

 

Cash used in financing activities was approximately $3,389 for the nine months ended March 31, 2020, and was from repayments of advances under our revolving credit facility of $37,599 and principal payments under our term notes and under capitalized lease obligations in the amount of $823 and $157, respectively, offset by advances under our revolving credit facility of approximately $35,190.

 

As of March 31, 2021, we had cash of $105, funds available under our revolving credit facility of approximately $5,245 and working capital of approximately $6,154. Our working capital includes $2,516 outstanding under our revolving line of credit which is not due until May 2024 but classified as current due to a subjective acceleration clause that could cause the advances to become currently due. (See Note 4 to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q). Additionally, we had income from operations of approximately $4,472 in the nine months ended March 31, 2021. After taking into consideration our interim results and current projections, management believes that operations, together with the revolving credit facility will support our working capital requirements at least through the period ending May 13, 2022.

 

Our total annual commitments at March 31, 2021 for long term non-cancelable leases of approximately $565 consists of obligations under operating leases for facilities and operating lease agreements for the rental of warehouse equipment, office equipment and automobiles.

 

Capital Expenditures

 

The Company's capital expenditures for the nine months ended March 31, 2021 and 2020 were approximately $150 and $158, respectively. The Company has budgeted approximately $475 for capital expenditures for fiscal year 2021. The total amount is expected to be funded from lease financing and cash provided from the Company’s operations.

 

Off-Balance Sheet Arrangements

 

The Company has no off-balance sheet arrangements.

 

Recent Accounting Pronouncements

 

None.

 

Impact of Inflation

 

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

 

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Not applicable.

 

 

Item 4. CONTROLS AND PROCEDURES

 

Disclosure Controls and Procedures

 

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed by the Company in the reports it files or submits under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized, and reported within the time periods specified by the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to provide reasonable assurance that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is accumulated and communicated to management, including the Co-Chief Executive Officers and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

 

Under the supervision and with the participation of management, including the Co-Chief Executive Officers and Chief Financial Officer, the Company has evaluated the effectiveness of its disclosure controls and procedures (as such term is defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) as of March 31, 2021, and, based upon this evaluation, the Co-Chief Executive Officers and Chief Financial Officer have concluded that these controls and procedures are effective in providing reasonable assurance of compliance.

 

Changes in Internal Control over Financial Reporting

 

No change in our internal control over financial reporting occurred during the three months ended March 31, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

PART II – OTHER INFORMATION

 

Item 1. LEGAL PROCEEDINGS

 

From time to time, we may become involved in various lawsuits and legal proceedings that arise in the ordinary course of business. However, litigation is subject to inherent uncertainties and an adverse result in these or other matters may arise from time to time that may harm our business. We are currently not aware of any such legal proceedings or claims that we believe will have a material adverse effect on our business, financial condition or operating results.

 

Item 1A. Risk Factors

 

As of January 22, 2021, the Company’s common stock was upgraded to the OTCQX® Best Market of the OTC Markets Group, Inc. and commenced quotation under the symbol “INBP.” In order to maintain quotation on the OTCQX, the Company will be required to comply with certain minimum qualitative and quantitative requirements, including with respect to corporate governance. There can be no assurances that the Company will be able to comply with these qualitative and quantitative requirements for continued quotation of its common stock on the OTCQX. If the Company doesn’t maintain compliance with the OTCQX rules, the Company’s common stock may resume listing on the OTCQB and holders of the Company’s common stock may find it more difficult to sell their shares.

 

Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

Recent Sales of Unregistered Securities

 

None

 

 

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

         

None

 

Item 3. DEFAULTS UPON SENIOR SECURITIES

 

None.

 

Item 4. MINE SAFETY DISCLOSURE         

 

Not Applicable.

 

 

Item 5. OTHER INFORMATION         

 

None.

 

Item 6. EXHIBITS

 

(a)         Exhibits

 

Exhibit

Number

31.1	Certification of pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by Co-Chief Executive Officers.
31.2	Certification of pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by Chief Financial Officer.
32.1	Certification of periodic financial report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by Co-Chief Executive Officers.
32.2	Certification of periodic financial report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by Chief Financial Officer.
101	The following financial information from Integrated BioPharma, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2021, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Statements of Income for the three and nine months ended March 31, 2021 and 2020, (ii) Condensed Consolidated Balance Sheets as of March 31, 2021 and June 30, 2020, (iii) Condensed Consolidated Statement of Changes in Stockholders’ Equity for the nine months ended March 31, 2021 and 2020, (iv) Condensed Consolidated Statements of Cash Flows for the nine months ended March 31, 2021 and 2020, and (iv) the Notes to Condensed Consolidated Financial Statements.

 

SIGNATURES

 

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

INTEGRATED BIOPHARMA, INC.

 

 

Date:         May 13, 2021	By: /s/ Christina Kay
	Christina Kay,
	Co-Chief Executive Officer
Date:         May 13, 2021	By: /s/ Riva Sheppard
	Riva Sheppard,
	Co-Chief Executive Officer
Date:         May 13, 2021	By: /s/ Dina L. Masi
	Dina L. Masi,
	Chief Financial Officer & Senior Vice President