10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

____________

FORM 10-Q

X Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2017

OR

  Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to

 Commission File Number 001-31668

INTEGRATED BIOPHARMA, INC.

(Exact name of registrant, as specified in its charter)

Delaware 22-2407475

(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

225 Long Ave., Hillside, New Jersey	07205
(Address of principal executive offices)	(Zip Code)

(888) 319-6962

(Registrant’s telephone number, including Area Code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes X    No ____

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer  ☐ Emerging growth          company ☐  Smaller reporting company☑

If an emerging growth company, indicate by check mark is the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes       No __X__

Applicable only to Corporate Issuers:

The number of shares outstanding of each of the issuer’s class of common stock, as of the latest practicable date:

Class	Outstanding at November 9, 2017
Common Stock, $0.002 par value	21,135,174 Shares

-1-

INTEGRATED BIOPHARMA, INC. AND SUBSIDIARIES

FORM 10-Q QUARTERLY REPORT

For the Three Months Ended September 30, 2017

INDEX

		Page
	Part I. Financial Information
Item 1.	Condensed Consolidated Statements of Operations for the Three Months Ended September 30, 2017 and 2016 (unaudited)	2
	Condensed Consolidated Balance Sheets as of September 30, 2017 and June 30, 2017(unaudited)	3
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended September 30, 2017 and 2016 (unaudited)	4
	Notes to the Condensed Consolidated Financial Statements (unaudited)	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	21
Item 4.	Controls and Procedures	21
	Part II. Other Information
Item 1.	Legal Proceedings	21
Item 1A.	Risk Factors	21
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	22
Item 3.	Defaults Upon Senior Securities	22
Item 4.	Mine Safety Disclosure	22
Item 5.	Other Information	22
Item 6.	Exhibits	22
	Other
Signatures		23

-2-

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 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 (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 including, among others, changes in general economic and business conditions; loss of market share through competition; introduction of competing products by other companies; the timing of regulatory approval and the introduction of new products by the Company; changes in industry capacity; pressure on prices from competition or from purchasers of the Company's products; regulatory changes in the pharmaceutical manufacturing industry and nutraceutical industry; regulatory obstacles to the introduction of new technologies or products that are important to the Company; availability of qualified personnel; the loss of any significant customers or suppliers; 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, 2017 (“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 1 of the Company’s Annual Report filed on Form 10-K for the year ended June 30, 2017 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.

-1-

ITEM 1. FINANCIAL STATEMENTS

INTEGRATED BIOPHARMA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except for share and per share amounts)
(Unaudited)
	Three months ended
	September 30,
	2017			2016
Sales, net	$	9,770		$	12,681
Cost of sales		8,765			10,529
Gross profit		1,005			2,152
Selling and administrative expenses		794			793
Operating income		211			1,359
Other income (expense), net:
Interest expense		(233	)		(232	)
Change in fair value of derivative liabilities		(118	)		(368	)
Impairment on investment in iBio, Inc.		(83	)		-
Other income, net		-			16
Total other expense, net		(434	)		(584	)
(Loss) income before income taxes		(223	)		775
Income tax (benefit) expense, net		(44	)		126
Net (loss) income	$	(179	)	$	649
Basic net (loss) income per common share	$	(0.01	)	$	0.03
Diluted net (loss) income per common share	$	(0.01	)	$	0.03
Weighted average common shares outstanding - basic		21,135,174			21,105,174
Add:   Equivalent shares outstanding		-			77,712
Shares issuable upon conversion of Convertible Debt - CD Financial, LLC		-			-
Weighted average common shares outstanding - diluted		21,135,174			21,182,886
See accompanying notes to condensed consolidated financial statements.

-2-

INTEGRATED BIOPHARMA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except for share and per share amounts)
(Unaudited)
	September 30,			June 30,
	2017			2017
Assets
Current Assets:
Cash	$	284		$	132
Accounts receivable, net		2,673			4,020
Inventories		7,042			7,645
Other current assets		636			754
Total current assets		10,635			12,551
Property and equipment, net		1,632			1,601
Deferred tax assets, net		877			823
Security deposits and other assets		237			221
Total Assets	$	13,381		$	15,196
Liabilities and Stockholders' Deficiency:
Current Liabilities:
Advances under revolving credit facility	$	3,904		$	4,676
Accounts payable (includes $77 due to related party)		3,722			4,177
Accrued expenses and other current liabilities		1,208			1,184
Current portion of long term debt, net		1,031			1,118
Total current liabilities		9,865			11,155
Subordinated convertible note, net - CD Financial, LLC		5,233			5,221
Long term debt, net		3,766			4,246
Derivative liability		621			503
Total liabilities		19,485			21,125
Commitments and Contingencies
Stockholders' Deficiency:
Common Stock, $0.002 par value; 50,000,000 shares authorized;
21,170,074 and 21,135,174 shares issued and outstanding, respectively		42			42
Additional paid-in capital		44,763			44,759
Accumulated deficit		(50,810	)		(50,631	)
Less: Treasury stock, at cost, 34,900 shares		(99	)		(99	)
Total Stockholders' Deficiency		(6,104	)		(5,929	)
Total Liabilities and Stockholders' Deficiency	$	13,381		$	15,196
See accompanying notes to condensed consolidated financial statements.

-3-

INTEGRATED BIOPHARMA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, except share and per share amounts)
(Unaudited)
	Three months ended
	September 30,
	2017			2016
Cash flows provided by operating activities:
Net (loss) income	$	(179	)	$	649
Adjustments to reconcile net (loss) income to net cash
from operating activities:
Depreciation and amortization		100			97
Accretion of financing instruments and other non cash interest		26			26
Stock based compensation		4			4
Change in valuation allowance of deferred tax assets		(54	)		-
Impairment charge on investment in iBio, Inc.		83			-
Change in fair value of derivative liabilities		118			368
Changes in operating assets and liabilities:
Decrease (increase) in:
Accounts receivable		1,347			(630	)
Inventories		603			(324	)
Other current assets		35			17
Security deposits and other assets		(48	)		-
(Decrease) increase in:
Accounts payable		(455	)		(640	)
Accrued expenses and other liabilities		24			(93	)
Net cash provided by (used in) operating activities		1,604			(526	)
Cash flows from investing activities:
Purchase of property and equipment		(107	)		(41	)
Net cash used in investing activities		(107	)		(41	)
Cash flows from financing activities:
Advances under revolving credit facility		9,997			12,556
Repayments of advances under revolving credit facility		(10,768	)		(11,881	)
Repayments under term note payables		(544	)		(372	)
Repayments under capitalized lease obligations		(30	)		(39	)
Net cash (used in) provided by financing activities		(1,345	)		264
Net increase (decrease) in cash		152			(303	)
Cash at beginning of period		132			395
Cash at end of period	$	284		$	92
Supplemental disclosures of cash flow information:
Interest paid	$	198		$	195
Income taxes paid	$	-		$	117
See accompanying notes to condensed consolidated financial statements.

-4-

INTEGRATED BIOPHARMA, INC. AND ITS SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 (in thousands, except share and per share amounts)

(Unaudited)

Note 1. Principles of Consolidation and Basis of Presentation

Basis of Presentation of Interim Financial Statements

The accompanying condensed consolidated financial statements for the interim periods are unaudited and include the accounts of Integrated BioPharma, Inc., a Delaware corporation (together with its subsidiaries, the “Company”). The interim condensed consolidated financial statements have been prepared in conformity with Rule 8-03 of Regulation S-X of the Securities and Exchange Commission (“SEC”) and therefore do not include information or footnotes necessary for a complete presentation of financial position, results of operations and cash flows in conformity with accounting principles generally accepted in the United States of America. However, all adjustments (consisting only of normal recurring adjustments) which are, in the opinion of management, necessary for a fair presentation of the financial position and operating results for the periods presented have been included. These condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto, together with Management’s Discussion and Analysis of Financial Condition and Results of Operations, contained in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2017 (“Form 10-K”), as filed with the SEC. The June 30, 2017 balance sheet was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America. The results of operations for the three months ended September 30, 2017 are not necessarily indicative of the results for the full fiscal year ending June 30, 2018 or for any other period.

Nature of Operations

The Company is engaged primarily in manufacturing, distributing, marketing and sales of vitamins, nutritional supplements and herbal products. The Company’s customers are located primarily in the United States, Luxembourg and Canada. The Company was previously known as Integrated Health Technologies, Inc. and, prior to that, as Chem International, Inc. The Company was reincorporated in its current form in Delaware in 1995. The Company continues to do business as Chem International, Inc. with certain of its customers and certain vendors.

The Company’s business segments include: (a) Contract Manufacturing operated by InB:Manhattan Drug Company, Inc. (“MDC”), which manufactures vitamins and nutritional supplements for sale to distributors, multilevel marketers and specialized health-care providers; (b) Branded Proprietary Products operated by AgroLabs, Inc. (“AgroLabs”), which distributes healthful nutritional products for sale through major mass market, grocery, drug and vitamin retailers, under the following brands: Naturally Noni, Peaceful Sleep, Green Envy, FiberCal, Wheatgrass and other products which are being introduced into the market (these are referred to as our branded proprietary nutraceutical business and/or products); and (c) Other Nutraceutical Businesses which includes the operations of (i) The Vitamin Factory (the “Vitamin Factory”), which sells private label MDC products, as well as our AgroLabs products, through the Internet, (ii) IHT Health Products, Inc. (“IHT”) a distributor of fine natural botanicals, including multi minerals produced under a license agreement, (iii) MDC Warehousing and Distribution, Inc., a service provider for warehousing and fulfilment services and (iv) Chem International, Inc. (“Chem”), a distributor of certain raw materials for DSM Nutritional Products LLC.

Significant Accounting Policies

In July 2015, the Financial Accounting Standards Board issued ASU No. 2015-11, Simplifying the Measurement of Inventory (Topic 330), an accounting standard that requires inventory be measured at the lower of cost and net realizable value and options that currently exist for market value be eliminated. The standard defines net realizable value as estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation.  This new guidance was effective for the Company on July 1, 2017.  There was no impact on the Company’s condensed consolidated financial statements as the result of the adoption of this ASU.

-5-

INTEGRATED BIOPHARMA, INC. AND ITS SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 (in thousands, except share and per share amounts)

(Unaudited)

Aside from the adoption of ASU No. 2015-11, as described above, there have been no material changes during fiscal year 2018 in the Company’s significant accounting policies to those previously disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2017.

Investment in iBio, Inc. The Company accounts for its investment in iBio, Inc. (“iBio”) common stock on the cost basis as it retained approximately 6% of its interest in iBio (1,266,706 common shares) (the “iBio Stock”) at the time of the spin-off of this subsidiary in August 2008.  The Company reviews its investment in iBio for impairment and records a loss when there is deemed to be a permanent impairment of the investment. To date, there were cumulative impairment charges of approximately $2,287. The market value of the iBio Stock as of September 30, 2017 was approximately $382 based on the trade price at the close of trading on September 30, 2017.

Pursuant to the Company’s Loan Agreement with PNC Bank, National Association (“PNC”), as amended on February 16, 2016, all the net proceeds from the sale of any of the iBio Stock is to be used to prepay the outstanding principal of the term loan outstanding under the Amended Loan Agreement. (See Note 4. Senior Credit Facility, Subordinated Convertible Note, net - CD Financial, LLC and other Long Term Debt).

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, warrants and convertible debt, subject to anti-dilution limitations using the treasury stock method and if converted method.

The following options and potentially dilutive shares for convertible notes payable (See Note 4. Senior Credit Facility, Subordinated Convertible Note, net - CD Financial, LLC and other Long Term Debt) were not included in the computation of weighted average diluted common shares outstanding as the effect of doing so would be anti-dilutive for the three months ended September 30, 2017 and 2016:

	Three Months Ended
	September 30,
	2017		2016
Anti-dilutive stock options		2,692,017		674,950
Anti-dilutive shares for
convertible notes payable		8,230,769		8,230,769
Total anti-dilutive shares		10,922,786		8,905,719

-6-

INTEGRATED BIOPHARMA, INC. AND ITS SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 (in thousands, except share and per share amounts)

(Unaudited)

Note 2. Inventories

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

	September 30,		June 30,
	2017		2017
Raw materials	$	3,798	$	3,847
Work-in-process		1,314		1,963
Finished goods		1,930		1,835
Total	$	7,042	$	7,645

Note 3. Property and Equipment, net

Property and equipment, net consists of the following:

	September 30,			June 30,
	2017			2017
Land and building	$	1,250		$	1,250
Leasehold improvements		1,268			1,268
Machinery and equipment		5,868			5,777
Transportation equipment		11			11
		8,397			8,306
Less: Accumulated depreciation  and amortization		(6,765	)		(6,705	)
Total	$	1,632		$	1,601

Depreciation and amortization expense recorded on property and equipment for the three months ended September 30, 2017 and 2016 was $75 and $72, respectively.

-7-

INTEGRATED BIOPHARMA, INC. AND ITS SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 (in thousands, except share and per share amounts)

(Unaudited)

 Note 4. Senior Credit Facility, Subordinated Convertible Note, net - CD Financial, LLC and other Long Term Debt

As of September 30, 2017 and June 30, 2017, the Company had the following debt outstanding:

	Principal Amount						Interest Rate			Maturity Date
	As of September 30, 2017			As of June 30, 2017
Revolving advances under Senior Credit
Facility with PNC Bank, National Association	$	3,904		$	4,676			4.25	%	2/19/2020
Installment Note with PNC Bank		2,039			2,542			4.75	%	2/19/2020
Installment Note with PNC Equipment Finance, LLC		168			190			4.57	%	7/29/2019
Promissory Note with CD Financial, LLC		1,714			1,714			6.00	%	2/29/2020
Promissory Note with Vitamin Realty, LLC		686			686			4.00	%	2/29/2020
Capitalized lease obligations		257			307			3.86% -11.43	%	3/6/2018 -12/08/2020
Total outstanding debt		8,768			10,115
Less:  Revolving Advances		(3,904	)		(4,676	)
Prepaid financing costs		(67	)		(75	)
Current portion of long term debt, net		(1,031	)		(1,118	)
Long term debt, net	$	3,766		$	4,246
Convertible Note payable - CD Financial, LLC	$	5,350		$	5,350			6.00	%	2/29/2020
Less:  Discount for embedded derivative		(95	)		(105	)
Prepaid financing costs		(22	)		(24	)
Convertible Note payable, net - CD Financial, LLC	$	5,233		$	5,221

SENIOR CREDIT FACILITY

On February 19, 2016, 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.

The Amended Loan Agreement provides for a total of $11,422 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 $8,000 (the “Revolving Credit Facility”) and (ii) a term loan in the amount of $3,422 (the “Term Loan”). The Senior Credit Facility is secured by all assets of the Borrowers, including, without limitation, machinery and equipment, real estate owned by IHT Properties, and common stock of iBio owned by the Company. Revolving Advances bear interest at PNC’s Base Rate or the Eurodollar Rate, at Borrowers’ option, plus 2.75% (4.25% as of September 30 and June 30, 2017). The Term Loan bears interest at PNC’s Base Rate or the Eurodollar Rate, at Borrowers’ option, plus 3.25% (4.75% as of September 30 and June 30, 2017). 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 February 19, 2020 (the “Senior Maturity Date”).

-8-

INTEGRATED BIOPHARMA, INC. AND ITS SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 (in thousands, except share and per share amounts)

(Unaudited)

The principal balance of the Revolving Advances is payable on the Senior Maturity Date, subject to acceleration, based upon a material adverse event clause, as defined, subjective accelerations for borrowing base reserves, as defined or upon the occurrence of any event of default under the Amended Loan Agreement or earlier termination of the Amended Loan Agreement pursuant to the terms thereof. The Term Loan shall be repaid in eighty-four (84) consecutive monthly installments of principal, the first eighty-three (83) of which shall be in the amount of $41, commencing on the first business day of March, 2016, and continuing on the first business day of each month thereafter, with a final payment of any unpaid balance of principal and interest payable on the Senior Maturity Date. The foregoing is subject to customary mandatory prepayment provisions and acceleration 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) $8.0 million 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 any one time (“Inventory Advance Rate” and together with the Receivables Advance Rate, collectively, the “Advance Rates”), minus (iii) the aggregate Maximum Undrawn Amount of all outstanding Letters of Credit, minus (iv) such reserves as PNC may reasonably deem proper and necessary from time to time.

The Amended Loan Agreement contains customary mandatory prepayment provisions, including, without limitation the requirement to use any sales proceeds from the sale of iBio Stock to repay the Term Loan and to prepay the outstanding amount of the Revolving Advances in an amount equal to twenty-five percent (25%) of Excess Cash Flow for each fiscal year commencing with the fiscal year ended June 30, 2016, payable upon delivery of the financial statements to PNC referred to in and required by the Amended Loan Agreement for such fiscal year but in any event not later than one hundred twenty (120) days after the end of each such fiscal year, which amount shall be applied ratably to the outstanding principal installments of the Term Loan in the inverse order of the maturities thereof. The Amended Loan Agreement also contains customary representations and warranties, covenants and events of default, including, without limitation, (i) a fixed charge coverage ratio maintenance requirement and (ii) an event of default tied to any change of control as defined in the Amended Loan Agreement. As of September 30, 2017, the Company was in compliance with the fixed charge coverage ratio maintenance requirement and with the required annual payments of 25% of the Excess Cash Flow for each fiscal year commencing with the fiscal year ended June 30, 2016.

-9-

INTEGRATED BIOPHARMA, INC. AND ITS SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 (in thousands, except share and per share amounts)

(Unaudited)

In connection with the Senior Credit Facility, PNC and CD Financial entered into the Intercreditor and Subordination Agreement (the “Intercreditor Agreement”), which was acknowledged by the Borrowers, pursuant to which, among other things, (a) the lien of CD Financial on assets of the Borrowers is subordinated to the lien of PNC on such assets during the effectiveness of the Senior Credit Facility, and (b) priorities for payment of the debt for the Company and its subsidiaries (as described in this Note 4) are established.

In addition, 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.

CD FINANCIAL, LLC

On June 27, 2012, the Company also entered into an Amended and Restated Securities Purchase Agreement (the “CD SPA”) with CD Financial, which amended and restated the Securities Purchase Agreement, dated as of February 21, 2008, between the Company and CD Financial, pursuant to which the Company issued to CD Financial a 9.5% Convertible Senior Secured Note in the original principal amount of $4,500 (the “Original CD Note”). Pursuant to the CD SPA, the Company issued to CD Financial (i) the Amended and Restated Convertible Promissory Note in the principal amount of $5,350 (the “CD Convertible Note”) and (ii) the Promissory Note in the principal amount of $1,714 (the “Liquidity Note”, and collectively with the CD Convertible Note, the “CD Notes”). The CD Notes had an original maturity date of July 7, 2017, however, on February 19, 2016, the CD Notes were amended to extend the maturity date thereof to February 29, 2020.

The proceeds of the CD Notes were used to refinance (a) the Original CD Note, (b) the CD MDC Note which was assigned by MDC to the Company, (c) past due interest in the aggregate amount of $333 and (d) other expenses owed to CD Financial by the Company in the aggregate amount of approximately $217.

The CD Notes are secured by all assets of the Borrowers, including, without limitation, machinery and equipment, real estate owned by IHT Properties, and iBio Stock owned by the Company. The CD Notes bear interest at an annual rate of 6% and have a default rate of 10%.

The CD Convertible Note is convertible at the option of CD Financial into common stock of the Company at a conversion price of $0.65 per share, subject to customary adjustments including conversion price protection provisions.

Pursuant to the terms of the Amended Loan Agreement and the Intercreditor Agreement, during the effectiveness of the Senior Credit Facility, (i) the principal of the CD Convertible Note may not be repaid, (ii) the principal of the Liquidity Note may only be repaid if certain conditions under the Amended Loan Agreement are satisfied, and (iii) interest in respect of the CD Notes may only be paid if certain conditions under the Intercreditor Agreement are satisfied.

The CD SPA contains customary representations and warranties, covenants and events of default, including, without limitation, an event of default tied to any change of control as defined in the CD SPA.

-10-

INTEGRATED BIOPHARMA, INC. AND ITS SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 (in thousands, except share and per share amounts)

(Unaudited)

In connection with the CD SPA, the Borrowers entered into an Amended and Restated Security Agreement and Amended and Restated Subsidiary Guaranty.

As of September 30, 2017 and June 30, 2017, the related embedded derivative liability with respect to conversion price protection provisions on the CD Convertible Note has an estimated fair value of $621 and $503, respectively.

The Company used the following assumptions to calculate the fair value of the derivative liability using the Black-Scholes option pricing model:

	September 30,			June 30,
	2017			2017
Risk Free Interest Rate		1.53	%		1.49	%
Volatility		101.70	%		98.11	%
Term	2 years 5 months			2 years 8 months
Dividend Rate		0.00	%		0.00	%
Closing Price of Common Stock	$	0.22		$	0.19

OTHER LONG TERM DEBT

Related Party Debt. On June 27, 2012, MDC and the Company entered into a promissory note with Vitamin Realty Associates, LLC (“Vitamin Realty”) in the principal amount of approximately $686 (the “Vitamin Note”). The principal amount of the Vitamin Note represents the aggregate amount of unpaid, past due rent owing by MDC under the Lease Agreement, dated as of January 10, 1997, between MDC, as lessor, and Vitamin Realty, as landlord, pertaining to the real property located at 225 Long Avenue, Hillside, New Jersey. (See Note 6. Commitments and Contingencies (a) Leases – Related Parties Leases). The Vitamin Note matures on February 29, 2020, as amended on February 19, 2016. The Vitamin Note accrues interest at an annual rate of 4% per annum. Interest in respect of the Vitamin Note is payable on the first business day of each calendar month. Pursuant to the terms of the Amended Loan Agreement, during the effectiveness of the Senior Credit Facility, the Vitamin Note may only be repaid or prepaid if certain conditions set forth in the Amended Loan Agreement are satisfied.

Note 5. Significant Risks and Uncertainties

(a) Major Customers. For the three months ended September 30, 2017 and 2016, approximately 91% in each period of consolidated net sales, were derived from two customers. These two customers are in the Company’s Contract Manufacturing Segment and represent approximately 63% and 32% in the three months ended September 30, 2017 and 48% for each of these two major customers in the three months ended September 30, 2016. Accounts receivable from these two major customers represented approximately 88% and 61% of total net accounts receivable as of September 30 and June 30, 2017, respectively. A third customer in the Branded Nutraceutical Segment, while not a significant customer of the Company’s consolidated net sales, represented approximately 10% and 67% of net sales in the three months ended September 30, 2017 and 2016, respectively, of the Branded Nutraceutical Segment. The loss of any of these customers could have an adverse affect on the Company’s operations. Major customers are those customers who account for more than 10% of net sales.

(b) Other Business Risks. Approximately 66% of the Company’s employees are covered by a union contract and are employed in its New Jersey facilities. The contract was renewed on September 1, 2015 and will expire on August 31, 2018.

-11-

INTEGRATED BIOPHARMA, INC. AND ITS SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 (in thousands, except share and per share amounts)

(Unaudited)

Note 6. Commitments and Contingencies

(a) Leases

Related Party Leases. Warehouse and office facilities are leased from Vitamin Realty, which is 100% owned by the Company’s chairman, Chief Executive Officer and major stockholder and certain of his family members, who are also executive officers and directors of the Company. On January 5, 2012, MDC entered into a second 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 provides for minimum annual rental payments of $533, plus increases in real estate taxes and building operating expenses. 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, 2019 to extend the expiration date to January 1, 2024. This additional lease provides for minimum lease payments of $27 with annual increases plus the proportionate share of operating expenses.

Rent expense for the three months ended September 30, 2017 and 2016 on these leases were $201 and $197 respectively, and are included in both cost of sales and selling and administrative expenses in the accompanying Condensed Consolidated Statements of Operations. As of September 30, 2017 and June 30, 2017, the Company had an outstanding obligation to Vitamin Realty of $786 and $763, respectively, included in accounts payable, accrued expenses and other liabilities and long term debt in the accompanying Condensed Consolidated Balance Sheet.

Other Lease Commitments. The Company has entered into certain non-cancelable operating lease agreements expiring up through January 31, 2026, related to office and warehouse space, equipment and vehicles (inclusive of the related party lease with Vitamin Realty).

The minimum rental commitments for long-term non-cancelable leases are as follows:

	Operating		Related Party
Year ending	Lease		Lease
June 30,	Commitment		Commitment		Total
2018, remaining	$	34	$	422	$	456
2019		27		563		590
2020		22		563		585
2021		21		563		584
2022		8		563		571
2023		-		563		563
Thereafter		-		1,392		1,392
Total	$	112	$	4,629	$	4,741

Total rent expense, including real estate taxes and maintenance charges, was approximately $242 and $237 for the three months ended September 30, 2017 and 2016, respectively. Rent expense is included in cost of sales and selling and administrative expenses in the accompanying Condensed Consolidated Statements of Operations.

-12-

INTEGRATED BIOPHARMA, INC. AND ITS SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 (in thousands, except share and per share amounts)

(Unaudited)

(b) Legal Proceedings.

The Company is subject, from time to time, to claims by third parties under various legal theories. The defense of such claims, or any adverse outcome relating to any such claims, could have a material adverse effect on the Company’s liquidity, financial condition and cash flows.

(c) Other Claims.

On May 15, 2012, Cedarburg Pharmaceuticals, Inc. ("Cedarburg") sent the Company a letter (the "Demand Letter") setting forth a demand for indemnification under the Stock Purchase Agreement, dated March 17, 2009 (the "Cedarburg SPA"), by and among Cedarburg, InB: Hauser Pharmaceutical Services, Inc., InB: Paxis Pharmaceuticals, Inc. and the Company. In the Demand Letter, Cedarburg demanded payment by the Company of $0.6 million in respect of the Company's indemnification obligations under the Cedarburg SPA. In addition, in the Demand Letter, Cedarburg informed the Company that there are also environmental issues pending which may lead to additional costs to Cedarburg which will likely be in excess of $0.3 million.

On May 30, 2012, the Company sent a letter responding to the Demand Letter and setting forth the Company’s position that it has no obligation to indemnify Cedarburg as demanded. On June 18, 2012, Cedarburg responded to the Company’s letter and, on July 27, 2012, the Company sent another letter to Cedarburg reiterating its position that the Company has no obligation to indemnify Cedarburg as demanded. On December 18, 2012, Cedarburg responded to the Company’s letter and, on January 15, 2013, the Company sent another letter to Cedarburg reiterating its position that the Company has no obligation to indemnify Cedarburg as demanded. As of November 9, 2017, the Company has not received any further communication from Cedarburg with respect to its demand for indemnification as set forth in the Demand Letter. The Company intends to vigorously contest Cedarburg's demand as set forth in the Demand Letter.

Note 7. Related Party Transactions

See Note 4. Senior Credit Facility, Subordinated Convertible Note, net - CD Financial, LLC and other Long Term Debt for related party securities and debt transactions.

See Note 6(a). Leases for related party lease transactions.

Note 8. 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 into three reportable segments as follows: Contract Manufacturing, Branded Proprietary Products and Other Nutraceutical Businesses. The international sales, concentrated primarily in Europe and Canada, for the three months ended September 30, 2017 and 2016 were $1,658 and $2,876, respectively.

-13-

INTEGRATED BIOPHARMA, INC. AND ITS SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 (in thousands, except share and per share amounts)

(Unaudited)

Financial information relating to the three months ended September 30, 2017 and 2016 operations by business segment are as follows:

		Sales, Net						Segment
		U.S.		International				Gross				Capital
		Customers		Customers		Total		Profit		Depreciation		Expenditures
Contract	2017	$	7,822	$	1,583	$	9,405	$	835	$	74	$	93
Manufacturing	2016		9,321		2,711		12,032		1,897		71		41
Branded Proprietary	2017		19		11		30		32		1		13
Products	2016		30		95		125		34		-		-
Other Nutraceutical	2017		271		64		335		138		-		1
Businesses	2016		454		70		524		221		1		-
Total	2017		8,112		1,658		9,770		1,005		75		107
Company	2016		9,805		2,876		12,681		2,152		72		41

	Total Assets as of
	September 30,		June 30,
	2017		2017
Contract Manufacturing	$	10,426	$	12,134
Branded Proprietary Products		804		784
Other Nutraceutical Businesses		2,151		2,278
Total Company	$	13,381	$	15,196

-14-

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANICAL CONDITION AND RESULTS OF OPERATION

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, 2017.

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 MD&A, 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, 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 Part II, Item 1A of this Quarterly Report on Form 10-Q.

For the three months ended September 30, 2017, our net sales from operations decreased by $2.9 million to approximately $9.8 million from approximately $12.7 million in the three months ended September 30, 2016. Substantially all the decrease in net sales was from the Contract Manufacturing Segment of $2.6 million ($2.9 million from our significant customer Herbalife offset by increased sales to other customers), while our other two segments, Branded Nutraceutical Segment and Other Nutraceuticals Segment, had decreased sales of $0.1 million and $0.2 million, respectively. The decline in sales in the three months ended September 30, 2017 was due to a scheduled shut down of Herbalife’s logistics software in August 2017, some shipments originally scheduled for the three months ended September 30, 2017 were requested by Herbalife to be shipped in the months of June and July 2017. For the three months ended September 30, 2017 we had operating income of approximately $0.2 million, a decrease of approximately $1.2 million from the three months ended September 30, 2016 of approximately $1.4 million. Our profit margins decreased from approximately 17% of net sales in the three months ended September 30, 2016 to 10.3% of net sales in the three months ended September 30, 2017, primarily as a result of the decreased sales in our Contract Manufacturing Segment of approximately $2.6 million. This decline in margins was the direct result of the decreased sales in the Contract Manufacturing Segment while our fixed manufacturing costs remained substantially the same in the year over year reporting period. We maintained our consolidated selling and administrative expenses at approximately $0.8 million in each of the three months ended September 30, 2017 and 2016.

Critical Accounting Policies and Estimates

There have been no changes to our critical accounting policies in the three months ended September 30, 2017. 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, 2017.

-15-

Results of Operations

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

	For the three months
	ended September 30,
	2017			2016
Sales, net		100.0	%		100.0	%
Costs and expenses:
Cost of sales		89.7	%		83.0	%
Selling and administrative		8.1	%		6.3	%
		97.8	%		89.3	%
Operating income		2.2	%		10.7	%
Other expense, net
Interest expense		(2.4%	)		(1.8%	)
Impairment on investment in iBio, Inc.		(0.8%	)		-
Change in faive value of derivative liabilities		(1.2%	)		(2.9%	)
Other income, net		-			0.1%
Other expense, net		(4.4%	)		(4.6%	)
(Loss) income before income taxes		(2.2%	)		6.1	%
Income tax (benefit) expense, net		(0.4%	)		1.0	%
Net (loss) income		(1.8%	)		5.1	%

For the Three Months Ended September 30, 2017 compared to the Three Months Ended September 30, 2016

Sales, net.Sales, net, for the three months ended September 30, 2017 and 2016 were $9.8 million and $12.7 million, respectively, a decrease of 23.0%, and are comprised of the following:

	Three months ended				Dollar			Percentage
	September 30,				Change			Change
	2017		2016		2017 vs 2016			2017 vs 2016
	(amounts in thousands)
Contract Manufacturing:
US Customers	$	7,822	$	9,321	$	(1,499	)		(16.1%	)
International Customers		1,583		2,711		(1,128	)		(41.6%	)
Net sales, Contract Manufacturing		9,405		12,032		(2,627	)		(21.8%	)
Branded Nutraceutical Products:
US Customers		19		30		(11	)		(36.7%	)
International Customers		11		95		(84	)		(88.4%	)
Net sales, Branded Nutraceutical Products		30		125		(95	)		(76.0%	)
Other Nutraceuticals:
US Customers		271		454		(183	)		(40.3%	)
International Customers		64		70		(6	)		(8.6%	)
Net sales, Other Nutraceuticals		335		524		(189	)		(36.1%	)
Total net sales	$	9,770	$	12,681	$	(2,911	)		(23.0%	)

-16-

For the three months ended September 30, 2017 and 2016, a significant portion of our consolidated net sales, approximately 91% in each period, were concentrated among two customers in our Contract Manufacturing Segment, Life Extension and Herbalife. Life Extension and Herbalife represented approximately 63% and 32%, of our Contract Manufacturing Segment’s net sales in the three months ended September 30, 2017, respectively, and 48% for each of these two major customers in the three months ended September 30, 2016. The loss of any of these customers could have a significant adverse impact on our financial condition and results of operations. Costco Wholesale Corporation (“Costco”) (a customer of our Branded Proprietary Products Segment), while not a significant customer of our consolidated net sales represented approximately 10% and 67% of net sales in the three months ended September 30, 2017 and 2016, respectively of the Branded Propriety Products Segment.

The decrease in net sales of approximately $2.9 million was primarily the result of:

● Net sales decreased in our Contract Manufacturing Segment by $2.6 million primarily due to decreased sales volumes to Herbalife of approximately $2.9 million in the three months ended September 30, 2017 versus the three months ended September 30, 2016. The decline in sales in the three months ended September 30, 2017 was due to a scheduled shut down of Herbalife’s logistics software in August 2017, some shipments originally scheduled for the three months ended September 30, 2017 were requested by Herablife to be shipped in the months of June and July 2017.

● Net sales in our Branded Nutraceutical Segment decreased by approximately $0.1 million in the three months ended September 30, 2017, primarily as the result of decreased sales of $81,000 to Costco resulting from pricing pressures from the strong US Dollar versus the Canadian Dollar.

● Net sales in our Other Nutraceuticals segment increased by $0.2 million primarily as a result of the timing of shipments to our regular customers. We expect $0.1 million of these sales to occur in the next three months ending December 31, 2017.

Cost of sales. Cost of sales decreased by $1.8 million to $8.8 million for the three months ended September 30, 2017, as compared to $10.5 million for the three months ended September 30, 2016 or approximately 17%. Cost of sales increased as a percentage of sales to 89.7% for the three months ended September 30, 2017 as compared to 83.0% for the three months ended September 30, 2016. The decrease in the cost of goods sold amount is consistent with the decreased net sales of approximately 23%. The increase in the cost of goods sold as a percentage of net sales, was primarily the result of the increased sales to Life Extension as a percentage of total sales in our Contract Manufacturing Segment. The cost of the raw materials for the Life Extension finished goods, on average, cost more per bottle than goods produced for our other customers in the Contract Manufacturing Segment as they tend to use raw materials with trademarked characteristics which limits the ability to negotiate pricing.  Secondarily, the cost of sales increased as a percentage of sales, net as a result of the fixed manufacturing costs in our Contract Manufacturing Segment decreasing by approximately 7% from the  comparable period a year ago, while our sales decreased by approximately 23%.  There were no significant changes in the cost of goods sold in our other two segments other than the decreased sales in each of the other two segments.

Selling and Administrative Expenses. There was a slight increase in selling and administrative expenses of $1,000, less than 1% in the three months ended September 30, 2017 as compared to the three months ended September 30, 2016. As a percentage of sales, net, selling and administrative expenses was approximately 8.1% and 6.3% for the three months ended September 30, 2017 and 2016, respectively. The increase was primarily from (i) an increase in professional and consulting fees of approximately $12,400 for work performed on new products labels and trademark registrations in our Branded Nutraceutical Segment as well as legal fees incurred in our Other Nutraceutical Segment for the trademark and patent protection of the Multi Minerals sold under a license agreement; (ii) an aggregate increase of approximately $9,100 in other components (excluding consulting and professional fees and salaries and employee benefits) of our selling and administrative expenses; which was (iii) offset by a decrease in salaries and employees benefits of approximately $22,500, as the result of decreasing our sales support by two people and a decrease in our vacation pay liability.

-17-

Other income (expense), net. Other income (expense), net was approximately $0.4 million for the three months ended September 30, 2017 compared to $0.6 million for the three months ended September 30, 2016, and is composed of:

	Three months ended
	September 30,
	2017			2016
	(dollars in thousands)
Interest expense	$	(233	)	$	(232	)
Change in fair value of derivative instruments		(118	)		(368	)
Impairment on investment in iBio, Inc.		(83	)		-
Other income, net		-			16
Other income (expense), net	$	(434	)	$	(584	)

The change in fair value of derivative liabilities in the three months ended September 30, 2017 was mainly attributable to the change in the closing price from $0.19 as of June 30, 2017 to $0.22 as of September 30, 2017. The change in fair value of derivative liabilities in the three months ended September 30, 2016 was mainly the result of the increased volatility in the closing trading price of our common stock from 63.2% as of June 30, 2016 to 98.3% as of September 30, 2016 as well as the change in the closing price from $0.11 to $0.15, respectively. The volatility of the closing trading price of our stock and the closing trading price are two of the variables used to calculate the estimated fair value of our derivative liabilities associated with the underlying derivative instrument.

In the three months ended September 30, 2017 we determined that there was an impairment on the carrying value of our investment in iBio, Inc. in the amount of approximately $83,000 resulting from the decline in the closing trading price of their common stock on the NYSE American Exchange for the three month period ended September 30, 2017 and continuing into the month ended October 31, 2017.

Our interest expense for the three months ended September 30, 2017 varied by $1,000 from the three month period ended September 30, 2016 as a result of lower average outstanding balances during the period, offset by increased interest rates of 0.75% on our outstanding debt with PNC Bank (See Note 4 to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q).

Federal and state income tax (benefit) expense, net. For the three months ended September 30, 2017 and 2016, we had state income tax expense, net of approximately $10,300 and $126,000, respectively and a federal income tax benefit of $54,000 and none, respectively. We continue to maintain a reserve on 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, that it is “more likely than not” the Company’s deferred tax assets may not be fully realized. The decrease in state income tax expense is the result of a decrease in the estimated taxable income for MDC from the three months ended September 30, 2016 to the three month period ended September 30, 2017. All of our other subsidiaries still have adequate net operating losses for state income tax purposes to absorb any taxable income for state tax purposes.

Net (loss) income. Our net loss for the three months ended September 30, 2017 was $0.2 million compared to net income of $0.6 million in the three months ended September 30, 2016, a decrease of $0.8 million. The decrease of approximately $0.8 million was primarily the result of decreased operating income of $1.1 million offset by the decreases in other expenses and federal and state income taxes of $0.1 million and $0.2 million, respectively.

Seasonality

The nutraceutical business tends to be seasonal. We have found that in our first fiscal quarter ending on September 30th of each year, orders for our branded proprietary nutraceutical products usually slow (absent the addition of new customers or a new product launch with a significant first time order), as buyers in various markets may have purchased sufficient inventory to carry them through the summer months. Conversely, in our second fiscal quarter, ending on

-18-

December 31st of each year, orders for our products increase as the demand for our branded nutraceutical products, as well as sales orders from our customers in our contract manufacturing segment, seem to increase in late December to early January as consumers become health conscious as they enter the new year.

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

Liquidity and Capital Resources

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

	For the three months ended
	September 30,
	2017			2016
	(dollars in thousands)
Net cash provided by (used in) operating acitivites	$	1,604		$	(526	)
Net cash used in investing acitivites	$	(107	)	$	(41	)
Net cash (used in) provided by financing acitivites	$	(1,345	)	$	264
Cash at end of period	$	284		$	92

At September 30, 2017 and June 30, 2017, our working capital was approximately $0.8 million and $1.4 million, respectively. Our current assets decreased by $1.9 million and current liabilities decreased by $1.3 million, resulting in a net decrease in our working capital of $0.6 million.

Net cash provided by operating activities of $1.6 million in the three months ended September 30, 2017, includes a net loss of approximately $0.2 million. After excluding the effects of non-cash expenses, including depreciation and amortization, and changes in the fair value of derivative liabilities and impairment charge on investment in iBio, Inc., the adjusted cash provided from operations before the effect of the changes in working capital components was $0.1 million. Net cash provided in our operations from our working capital assets and liabilities in the amount of approximately $1.5 million was primarily the result of decreases in accounts receivable and inventories of $1.3 million and $0.6 million, respectively offset by a net decrease in accounts payable and accrued expenses and other liabilities of approximately $0.4 million.

Net cash used in operating activities of $0.5 million in the three months ended September 30, 2016, includes net income of approximately $0.6 million. After excluding the effects of non-cash expenses, including depreciation and amortization, and changes in the fair value of derivative liabilities, the adjusted cash provided from operations before the effect of the changes in working capital components was $1.1 million. Net cash used in our operations from our working capital assets and liabilities in the amount of approximately $1.6 million was primarily the result of increases in accounts receivable and inventories of $0.6 million and $0.3 million, respectively and from a net decrease in accounts payable and accrued expenses and other liabilities of approximately $0.7 million.

Cash used in investing activities in the three months ended September 30, 2017 and 2016, of approximately $107,000 and $41,000, respectively, was used for the purchase of machinery and equipment.

-19-

Cash used in financing activities was approximately $1.3 million for the three months ended September 30, 2017, and was from repayments of advances under our revolving credit facility of $10.8 million and principal payments under our term notes in the amount of $0.5 million offset by advances under our revolving credit facility offset of approximately $10.0 million.

Cash provided from financing activities was approximately $0.3 million for the three months ended September 30, 2016, $12.6 million from advances under our revolving credit facility offset, in part, by repayments of advances under our revolving credit facility of $11.9 million and principal payments under our term notes in the amount of $0.4 million.

As of September 30, 2017, we had cash of $0.3 million, funds available under our revolving credit facility of approximately $1.0 million and working capital of approximately $0.8 million. Our working capital includes $3.9 million outstanding under our revolving line of credit which is not due until February 2020 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). Furthermore, we had income from operations of approximately $0.2 million in the three months ended September 30, 2017. After taking into consideration our interim results and current projections, management believes that operations, together with the revolving credit facility will support our working capital requirements at least through the period ending November 9, 2018.

Our total annual commitments at September 30, 2017 for long term non-cancelable leases of approximately $590,000 consists of obligations under operating leases for facilities and operating lease agreements for the rental of warehouse equipment, office equipment and automobiles.

On May 15, 2012, Cedarburg Pharmaceuticals, Inc. ("Cedarburg") sent us a letter (the "Demand Letter") setting forth a demand for indemnification under the Stock Purchase Agreement, dated March 17, 2009 (the "Cedarburg SPA"), by and among Cedarburg, InB: Hauser Pharmaceutical Services, Inc., InB: Paxis Pharmaceuticals, Inc. and the Company. In the Demand Letter, Cedarburg demanded payment by us of $0.6 million in respect of the Company's indemnification obligations under the Cedarburg SPA. In addition, in the Demand Letter, Cedarburg informed us that there are also environmental issues pending which may lead to additional costs to Cedarburg which will likely be in excess of $0.3 million.

On May 30, 2012, we sent a letter responding to the Demand Letter and setting forth our position that we have no obligation to indemnify Cedarburg as demanded. On June 18, 2012, Cedarburg responded to our letter and, on July 27, 2012, we sent another letter to Cedarburg reiterating our position that we have no obligation to indemnify Cedarburg as demanded. On December 18, 2012, Cedarburg responded to our letter and, on January 15, 2013, we sent another letter to Cedarburg reiterating our position that we have no obligation to indemnify Cedarburg as demanded. As of November 9, 2017, we have not received any further communication from Cedarburg with respect to its demand for indemnification as set forth in the Demand Letter. We intend to vigorously contest Cedarburg's demand as set forth in the Demand Letter.

Capital Expenditures

The Company's capital expenditures for the three months ended September 30, 2017 and 2016 were approximately $107,000 and $41,000, respectively. The Company has budgeted approximately $0.3 million for capital expenditures for fiscal year 2018. 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.

-20-

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 Commission’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 Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, the Company has evaluated the effectiveness of its disclosure controls and procedures (as such term is defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) as of September 30, 2017, and, based upon this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that these controls and procedures are effective in providing reasonable assurance of compliance.

Changes in Internal Control over Financial Reporting

No change in our internal control over financial reporting occurred during the three months ended September 30, 2017 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

None.

Item 1A. Risk Factors

The risks described in Item 1A, Risk Factors, in our Annual Report on Form 10-K for the year ended June 30, 2017, could materially and adversely affect our business, financial condition and results of operations. The risk factors discussed in that Form 10-K do not identify all risks that we face because our business operations could also be affected by additional factors that are not presently known to us or that we currently consider to be immaterial to our operations. There have been no material changes to our risk factors from those disclosed in our Form 10-K for the year ended June 30, 2017.

-21-

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

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 Section 302 of the Sarbanes-Oxley Act of 2002 by Chief Executive Officer.
31.2	Certification of pursuant to Section 302 of 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 Chief Executive Officer.
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 September 30, 2017, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Statements of Operations for the three months ended September 30, 2017 and 2016, (ii) Condensed Consolidated Balance Sheets as of September 30, 2017 and June 30, 2017, (iii) Condensed Consolidated Statements of Cash Flows for the three months ended September 30, 2017 and 2016, and (iv) the Notes to Condensed Consolidated Financial Statements.

-22-

SIGNATURES

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

INTEGRATED BIOPHARMA, INC.

Date:   November 9, 2017	By: /s/ E. Gerald Kay
	E. Gerald Kay
	President and Chief Executive Officer

Date:   November 9, 2017	By: /s/ Dina L. Masi
	Dina L. Masi
	Chief Financial Officer and Senior Vice President

-23-

EX-31.1

Exhibit 31.1

Certification of Chief Executive Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, E. Gerald Kay certify that:

1.        I have reviewed this quarterly report on Form 10-Q of Integrated BioPharma, Inc.;

2.        Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.        Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.        The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting.

5.        The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:  November 9, 2017	By: /s/ E. Gerald Kay
	Name:  E. Gerald Kay
	Title:  President and Chief Executive Officer

EX-31.2

Exhibit 31.2

Certification of Chief Financial Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Dina L. Masi certify that:

1.        I have reviewed this quarterly report on Form 10-Q of Integrated BioPharma, Inc.;

2.        Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.        Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.        The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. 

5.        The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:  November 9, 2017	By: /s/ Dina L. Masi
	Name:  Dina L. Masi
	Title:  Chief Executive Officer & Senior Vice President

EX-32.1

Exhibit 32.1

CERTIFICATION OF PERIODIC REPORT

As adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report on Form 10-Q for the first quarter ended September 30, 2017 of Integrated BioPharma, Inc. (the “Company”) as filed with the Securities and Exchange Commission on the date hereof (the “Report”), E. Gerald Kay, the President and Chief Executive Officer of Integrated BioPharma, Inc. certifies, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that to his knowledge:

1. the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and

2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

This certification accompanies the Report pursuant to Section 906 of Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

A signed original of this written statement has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

Dated:   November 9, 2017	By: /s/ E. Gerald Kay
	E. Gerald Kay
	President and Chief Executive Officer

EX-32.2

Exhibit 32.2

CERTIFICATION OF PERIODIC REPORT

As adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report on Form 10-Q for the first quarter ended September 30, 2017 of Integrated BioPharma, Inc. (the “Company”) as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Dina L. Masi, the Senior Vice President and Chief Financial Officer of Integrated BioPharma, Inc. certifies, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that to her knowledge:

1. the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and

2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

This certification accompanies the Report pursuant to Section 906 of Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

A signed original of this written statement has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

Dated:   November 9, 2017	By:  /s/  Dina L. Masi
	Dina L. Masi
	Chief Financial Officer & Senior Vice President

XML

Document And Entity Information - shares	3 Months Ended
	Sep. 30, 2017	Nov. 09, 2017
Document Information [Line Items]
Entity Registrant Name	INTEGRATED BIOPHARMA INC
Entity Central Index Key	0001016504
Trading Symbol	inbp
Current Fiscal Year End Date	--06-30
Entity Filer Category	Smaller Reporting Company
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	No
Entity Common Stock, Shares Outstanding (in shares)		21,135,174
Document Type	10-Q
Document Period End Date	Sep. 30, 2017
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	Q1
Amendment Flag	false

XML

Condensed Consolidated Statements of Operations (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Sep. 30, 2017	Sep. 30, 2016
Sales, net	$ 9,770	$ 12,681
Cost of sales	8,765	10,529
Gross profit	1,005	2,152
Selling and administrative expenses	794	793
Operating income	211	1,359
Other income (expense), net:
Interest expense	(233)	(232)
Change in fair value of derivative liabilities	(118)	(368)
Impairment on investment in iBio, Inc.	(83)
Other income, net		16
Total other expense, net	(434)	(584)
(Loss) income before income taxes	(223)	775
Income tax (benefit) expense, net	(44)	126
Net (loss) income	$ (179)	$ 649
Basic net (loss) income per common share (in dollars per share)	$ (0.01)	$ 0.03
Diluted net (loss) income per common share (in dollars per share)	$ (0.01)	$ 0.03
Weighted average common shares outstanding - basic (in shares)	21,135,174	21,105,174
Add: Equivalent shares outstanding (in shares)		77,712
Shares issuable upon conversion of Convertible Debt - CD Financial, LLC (in shares)
Weighted average common shares outstanding - diluted (in shares)	21,135,174	21,182,886

XML

Condensed Consolidated Balance Sheets (Current Period Unaudited) - USD ($) $ in Thousands	Sep. 30, 2017	Jun. 30, 2017
Assets
Cash	$ 284	$ 132
Accounts receivable, net	2,673	4,020
Inventories	7,042	7,645
Other current assets	636	754
Total current assets	10,635	12,551
Property and equipment, net	1,632	1,601
Deferred tax assets, net	877	823
Security deposits and other assets	237	221
Total Assets	13,381	15,196
Current Liabilities:
Advances under revolving credit facility	3,904	4,676
Accounts payable (includes $77 due to related party)	3,722	4,177
Accrued expenses and other current liabilities	1,208	1,184
Current portion of long term debt, net	1,031	1,118
Total current liabilities	9,865	11,155
Convertible Note payable, net - CD Financial, LLC	5,233	5,221
Long term debt, net	3,766	4,246
Derivative liability	621	503
Total liabilities	19,485	21,125
Commitments and Contingencies
Stockholders' Deficiency:
Common Stock, $0.002 par value; 50,000,000 shares authorized; 21,170,074 and 21,135,174 shares issued and outstanding, respectively	42	42
Additional paid-in capital	44,763	44,759
Accumulated deficit	(50,810)	(50,631)
Less: Treasury stock, at cost, 34,900 shares	(99)	(99)
Total Stockholders' Deficiency	(6,104)	(5,929)
Total Liabilities and Stockholders' Deficiency	$ 13,381	$ 15,196

XML

Condensed Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - USD ($) $ in Thousands	Sep. 30, 2017	Jun. 30, 2017
Accounts payable, due to related parties	$ 77	$ 77
Common stock, shares authorized (in shares)	50,000,000	50,000,000
Common stock, shares issued (in shares)	21,170,074	21,135,174
Common stock, shares outstanding (in shares)	21,170,074	21,135,174
Common stock, par value (in dollars per share)	$ 0.002	$ 0.002
Treasury stock, shares acquired (in shares)	34,900	34,900

XML

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Sep. 30, 2017	Sep. 30, 2016
Cash flows provided by operating activities:
Net (loss) income	$ (179)	$ 649
Adjustments to reconcile net (loss) income to net cash from operating activities:
Depreciation and amortization	100	97
Accretion of financing instruments and other non cash interest	26	26
Stock based compensation	4	4
Change in valuation allowance of deferred tax assets	(54)
Impairment charge on investment in iBio, Inc.	83
Change in fair value of derivative liabilities	118	368
Changes in operating assets and liabilities:
Accounts receivable	1,347	(630)
Inventories	603	(324)
Other current assets	35	17
Security deposits and other assets	(48)
Accounts payable	(455)	(640)
Accrued expenses and other liabilities	24	(93)
Net cash provided by (used in) operating activities	1,604	(526)
Cash flows from investing activities:
Purchase of property and equipment	(107)	(41)
Net cash used in investing activities	(107)	(41)
Cash flows from financing activities:
Advances under revolving credit facility	9,997	12,556
Repayments of advances under revolving credit facility	(10,768)	(11,881)
Repayments under term note payables	(544)	(372)
Repayments under capitalized lease obligations	(30)	(39)
Net cash (used in) provided by financing activities	(1,345)	264
Net increase (decrease) in cash	152	(303)
Cash at beginning of period	132	395
Cash at end of period	284	92
Supplemental disclosures of cash flow information:
Interest paid	198	195
Income taxes paid		$ 117

XML

Note 1 - Principles of Consolidation and Basis of Presentation

3 Months Ended

Sep. 30, 2017

Notes to Financial Statements

Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]

Note

1.

Principles of Consolidation and Basis of Presentation

Basis of Presentation of Interim Financial Statements

The accompanying

condensed consolidated financial statements for the interim periods are unaudited and include the accounts of Integrated BioPharma, Inc., a Delaware corporation (together with its subsidiaries, the “Company”). The interim condensed consolidated financial statements have been prepared in conformity with Rule

8

-

03

of Regulation S-

X

of the Securities and Exchange Commission (“SEC”) and therefore do

not

include information or footnotes necessary for a complete presentation of financial position, results of operations and cash flows in conformity with accounting principles generally accepted in the United States of America. However, all adjustments (consisting only of normal recurring adjustments) which are, in the opinion of management, necessary for a fair presentation of the financial position and operating results for the periods presented have been included. These condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto, together with Management’s Discussion and Analysis of Financial Condition and Results of Operations, contained in the Company’s Annual Report on Form

10

-K for the fiscal year ended

June 30, 2017 (

“Form

10

-K”), as filed with the SEC. The

June 30, 2017

balance sheet was derived from audited financial statements, but does

not

include all disclosures required by accounting principles generally accepted in the United States of America. The results of operations for the

three

months ended

September 30, 2017

are

not

necessarily indicative of the results for the full fiscal year ending

June 30, 2018

or for any other period.

Nature of Operations

The

Company is engaged primarily in manufacturing, distributing, marketing and sales of vitamins, nutritional supplements and herbal products. The Company’s customers are located primarily in the United States, Luxembourg and Canada. The Company was previously known as Integrated Health Technologies, Inc. and, prior to that, as Chem International, Inc. The Company was reincorporated in its current form in Delaware in

1995.

The Company continues to do business as Chem International, Inc. with certain of its customers and certain vendors.

The Company

’s business segments include: (a) Contract Manufacturing operated by InB:Manhattan Drug Company, Inc. (“MDC”), which manufactures vitamins and nutritional supplements for sale to distributors, multilevel marketers and specialized health-care providers; (b) Branded Proprietary Products operated by AgroLabs, Inc. (“AgroLabs”), which distributes healthful nutritional products for sale through major mass market, grocery, drug and vitamin retailers, under the following brands: Naturally Noni, Peaceful Sleep, Green Envy, FiberCal, Wheatgrass and other products which are being introduced into the market (these are referred to as our branded proprietary nutraceutical business and/or products); and (c) Other Nutraceutical Businesses which includes the operations of (i) The Vitamin Factory (the “Vitamin Factory”), which sells private label MDC products, as well as our AgroLabs products, through the Internet, (ii) IHT Health Products, Inc. (“IHT”) a distributor of fine natural botanicals, including multi minerals produced under a license agreement, (iii) MDC Warehousing and Distribution, Inc., a service provider for warehousing and fulfilment services and (iv) Chem International, Inc. (“Chem”), a distributor of certain raw materials for DSM Nutritional Products LLC.

Significant Accounting Policies

In

July 2015,

the Financial Accounting Standards Board issued ASU

No.

2015

-

11,

Simplifying the Measurement of Inventory (Topic

330

), an accounting standard that requires inventory be measured at the lower of cost and net realizable value and options that

currently exist for market value be eliminated. The standard defines net realizable value as estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation.  This new guidance was effective for the Company on

July 1, 2017.  

There was

no

impact on the Company

’s condensed consolidated financial statements as the result of the adoption of this ASU.

Aside from the adoption of ASU

No.

2015

-

11,

as described above, there have been

no

material changes during fiscal year

2018

in the Company

’s significant accounting policies to those previously disclosed in the Company’s Annual Report on Form

10

-K for the fiscal year ended

June 30, 2017.

Investment in iBio, Inc.

The Company accounts for its investment in iBio, Inc. (“iBio”) common stock on the cost basis as it retained approximately

6%

of its interest in iBio (

1,266,706

common shares) (the “iBio Stock”) at the time of the spin-off of this subsidiary in

August 2008.  

The Company reviews its investment in iBio for impairment and records a loss when there is deemed to be a permanent impairment of the investment. To date, there were cumulative impairment charges of approximately

$2,287.

The market value of the iBio Stock as of

September 30, 2017

was approximately

$382

based on the trade price at the close of trading on

September 30, 2017.

Pursuant to the Company

’s Loan Agreement with PNC Bank, National Association (“PNC”), as amended on

February 16, 2016,

all the net proceeds from the sale of any of the iBio Stock is to be used to prepay the outstanding principal of the term loan outstanding under the Amended Loan Agreement. (See Note

4.

Senior Credit Facility, Subordinated Convertible Note, net - CD Financial, LLC and other Long Term Debt).

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, warrants and convertible debt, subject to anti-dilution limitations using the treasury stock method and if converted method.

The following options and potentially dilutive shares

for convertible notes payable (See Note

4.

Senior Credit Facility, Subordinated Convertible Note, net - CD Financial, LLC and other Long Term Debt) were

not

included in the computation of weighted average diluted common shares outstanding as the effect of doing so would be anti-dilutive for the

three

months ended

September 30, 2017

and

2016:

	Three Months Ended
	September 30,
	2017		2016
Anti-dilutive stock options		2,692,017		674,950
Anti-dilutive shares for
convertible notes payable		8,230,769		8,230,769
Total anti-dilutive shares		10,922,786		8,905,719

XML

Note 2 - Inventories

3 Months Ended

Sep. 30, 2017

Notes to Financial Statements

Inventory Disclosure [Text Block]

Note

2

. Inventories

Inventories are stated at the lower of cost or market using the

first

-in,

first

-out method and consist of the following:

	September 30,		June 30,
	2017		2017
Raw materials	$	3,798	$	3,847
Work-in-process		1,314		1,963
Finished goods		1,930		1,835
Total	$	7,042	$	7,645

XML

Note 3 - Property and Equipment, Net

3 Months Ended

Sep. 30, 2017

Notes to Financial Statements

Property, Plant and Equipment Disclosure [Text Block]

Note

3

. Property and Equipment, net

Property and equipment, net consists of the following:

	September 30,			June 30,
	2017			2017
Land and building	$	1,250		$	1,250
Leasehold improvements		1,268			1,268
Machinery and equipment		5,868			5,777
Transportation equipment		11			11
		8,397			8,306
Less: Accumulated depreciation   and amortization		(6,765	)		(6,705	)
Total	$	1,632		$	1,601

Depreciation

and amortization expense recorded on property and equipment for the

three

months ended

September 30, 2017

and

2016

was

$75

and

$72,

respectively.

XML

Note 4 - Senior Credit Facility, Subordinated Convertible Note, Net - CD Financial, LLC and Other Long Term Debt

3 Months Ended

Sep. 30, 2017

Notes to Financial Statements

Debt Disclosure [Text Block]

Note

4

.

Senior Credit Facility, Subordinated Convertible Note, net - CD Financial, LLC and other Long Term Debt

As of

September 30, 2017

and

June 30, 2017,

the Company had the following debt outstanding:

	Principal Amount						Interest Rate			Maturity Date
	As of September 30, 2017			As of June 30, 2017
Revolving advances under Senior Credit
Facility with PNC Bank, National Association	$	3,904		$	4,676			4.25	%	2/19/2020
Installment Note with PNC Bank		2,039			2,542			4.75	%	2/19/2020
Installment Note with PNC Equipment Finance, LLC		168			190			4.57	%	7/29/2019
Promissory Note with CD Financial, LLC		1,714			1,714			6.00	%	2/29/2020
Promissory Note with Vitamin Realty, LLC		686			686			4.00	%	2/29/2020
Capitalized lease obligations		257			307			3.86% -11.43	%	3/6/2018 -12/08/2020
Total outstanding debt		8,768			10,115
Less:  Revolving Advances		(3,904	)		(4,676	)
Prepaid financing costs		(67	)		(75	)
Current portion of long term debt, net		(1,031	)		(1,118	)
Long term debt, net	$	3,766		$	4,246
Convertible Note payable - CD Financial, LLC	$	5,350		$	5,350			6.00	%	2/29/2020
Less:  Discount for embedded derivative		(95	)		(105	)
Prepaid financing costs		(22	)		(24	)
Convertible Note payable, net - CD Financial, LLC	$	5,233		$	5,221

SENIOR CREDIT FACILITY

On

February 19, 2016,

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.

The Amended Loan Agreement provides for a total of

$11,422

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

$8,000

(the “Revolving Credit Facility”) and (ii) a term loan in the amount of

$3,422

(the “Term Loan”). The Senior Credit Facility is secured by all assets of the Borrowers, including, without limitation, machinery and equipment, real estate owned by IHT Properties, and common stock of iBio owned by the Company. Revolving Advances bear interest at PNC

’s Base Rate or the Eurodollar Rate, at Borrowers’ option, plus

2.75%

(

4.25%

as of

September 30

and

June 30, 2017).

The Term Loan bears interest at PNC’s Base Rate or the Eurodollar Rate, at Borrowers’ option, plus

3.25%

(

4.75%

as of

September 30

and

June 30, 2017).

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

February 19, 2020 (

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 Term Loan shall be repaid in

eighty-four

(

84

) consecutive monthly installments of principal, the

first

eighty-three

(

83

) of which shall be in the amount of

$41,

commencing on the

first

business day of

March, 2016,

and continuing on the

first

business day of each month thereafter, with a final payment of any unpaid balance of principal and interest payable on the Senior Maturity Date. The foregoing is subject to customary mandatory prepayment provisions and acceleration 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

)

$8.0

million 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 any

one

time (“Inventory Advance Rate” and together with the Receivables Advance Rate, collectively, the “Advance Rates”), minus (iii) the aggregate Maximum Undrawn Amount of all outstanding Letters of Credit, minus (iv) such reserves as PNC

may

reasonably deem proper and necessary from time to time.

The Amended Loan Agreement contains customary mandatory prepayment provisions, including, without limitation the requirement to use any sales proceeds from the sale of iBio Stock to repay the Term Loan and to prepay the outstanding amount of the

Revolving Advances in an amount equal to

twenty-five

percent (

25%

) of Excess Cash Flow for each fiscal year commencing with the fiscal year ended

June 30, 2016,

payable upon delivery of the financial statements to PNC referred to in and required by the Amended Loan Agreement for such fiscal year but in any event

not

later than

one hundred twenty

(

120

) days after the end of each such fiscal year, which amount shall be applied ratably to the outstanding principal installments of the Term Loan in the inverse order of the maturities thereof. The Amended Loan Agreement also contains customary representations and warranties, covenants and events of default, including, without limitation, (i) a fixed charge coverage ratio maintenance requirement and (ii) an event of default tied to any change of control as defined in the Amended Loan Agreement. As of

September 30, 2017,

the Company was in compliance with the fixed charge coverage ratio maintenance requirement and with the required annual payments of

25%

of the Excess Cash Flow for each fiscal year commencing with the fiscal year ended

June 30, 2016

.

In connection with the Senior Credit Facility, PNC and CD Financial entered into the Intercreditor and Subordination Agreement (the “Intercreditor Agreement”), which was acknowledged by the Borrowers, pursuant to which, among other things, (a) the lien of CD Financial on assets of the Borrowers is subordinated to the lien of PNC on such assets during the effectiveness of the Senior Credit Facility, and (b) priorities for payment of the debt for the Company and its subsidiar

ies (as described in this Note

4

) are established.

In addition, 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.

CD FINANCIAL, LLC

On

June 27, 2012,

the Company also entered into an Amended and Restated Securities Purchase Agreement (the “CD SPA”) with CD Financial, which amend

ed and restated the Securities Purchase Agreement, dated as of

February 21, 2008,

between the Company and CD Financial, pursuant to which the Company issued to CD Financial a

9.5%

Convertible Senior Secured Note in the original principal amount of

$4,500

(the “Original CD Note”). Pursuant to the CD SPA, the Company issued to CD Financial (i) the Amended and Restated Convertible Promissory Note in the principal amount of

$5,350

(the “CD Convertible Note”) and (ii) the Promissory Note in the principal amount of

$1,714

(the “Liquidity Note”, and collectively with the CD Convertible Note, the “CD Notes”). The CD Notes had an original maturity date of

July 7, 2017,

however, on

February 19, 2016,

the CD Notes were amended to extend the maturity date thereof to

February

29,

2020.

The proceeds of the CD Notes were used to refinance (a) the Original CD Note, (b) the

CD MDC Note which was assigned by MDC to the Company, (c) past due interest in the aggregate amount of

$333

and (d) other expenses owed to CD Financial by the Company in the aggregate amount of approximately

$217.

The CD Notes are secured by all assets of the Borrowers, including, without limitation, machinery and equipment, real estate owned by IHT

Properties, and iBio Stock owned by the Company. The CD Notes bear interest at an annual rate of

6%

and have a default rate of

10%.

The CD Convertible Note is convertible at the option of CD Financial into common stock of the Company at a conversion price of

$0.65

per share, subject to customary adjustments

including conversion price protection provisions.

Pursuant to the terms of the

Amended Loan Agreement and the Intercreditor Agreement, during the effectiveness of the Senior Credit Facility, (i) the principal of the CD Convertible Note

may

not

be repaid, (ii) the principal of the Liquidity Note

may

only be repaid if certain conditions under the Amended Loan Agreement are satisfied, and (iii) interest in respect of the CD Notes

may

only be paid if certain conditions under the Intercreditor Agreement are satisfied.

The CD SPA contains customary representations and warranties, covenants and events of default, including, without limitation, an event of default tied to any change of control as defined in the CD SPA.

In connection with the CD SPA, the Borrowers entered into an Amended and Restated Security Agreement and Amended and Restated Subsidiary Guaranty.

As of

September 30, 2017

and

June 30, 2017,

the related embedded derivative liability with respect to conversion price protection provisions on the CD Convertible Note has an estimated fair value of

$621

and

$503,

respectively.

The Company used the following assumptions to calculate the fair value of the derivative liability using the Black-Scholes option pricing model:

	September 30,			June 30,
	2017			2017
Risk Free Interest Rate		1.53	%		1.49	%
Volatility		101.70	%		98.11	%
Term	2 years 5 months			2 years 8 months
Dividend Rate		0.00	%		0.00	%
Closing Price of Common Stock	$	0.22		$	0.19

OTHER LONG TERM DEBT

Related Party Debt

.

On

June 27, 2012,

MDC and the Company entered into a promissory note with Vitamin Realty Associates, LLC (“Vitamin Realty”) in the principal amount of approximately

$686

(the “Vitamin Note”). The principal amount of the Vitamin Note represents the aggregate amount of unpaid, past due rent owing by MDC under the Lease Agreement, dated as of

January 10, 1997,

between MDC, as lessor, and Vitamin Realty, as landlord, pertaining to the real property located at

225

Long Avenue, Hillside, New Jersey. (See Note

6.

Commitments and Contingencies (a) Leases – Related Parties Leases). The Vitamin Note matures on

February

29,

2020,

as amended on

February 19, 2016.

The Vitamin Note accrues interest at an annual rate of

4%

per annum. Interest in respect of the Vitamin Note is payable on the

first

business day of each calendar month. Pursuant to the terms of the Amended Loan Agreement, during the effectiveness of the Senior Credit Facility, the Vitamin Note

may

only be repaid or prepaid if certain conditions set forth in the Amended Loan Agreement are satisfied.

XML

Note 5 - Significant Risks and Uncertainties

3 Months Ended

Sep. 30, 2017

Notes to Financial Statements

Concentration Risk Disclosure [Text Block]

Note

5.

Significant Risks and Uncertainties

(

a

) Major Customers.

For the

three

months ended

September 30, 2017

and

2016,

approximately

91%

in each period of consolidated net sales, were derived from

two

customers. These

two

customers are in the Company’s Contract Manufacturing Segment and represent approximately

63%

and

32%

in the

three

months ended

September 30, 2017

and

48%

for each of these

two

major customers in the

three

months ended

September 30, 2016.

Accounts receivable from these

two

major customers represented approximately

88%

and

61%

of total net accounts receivable as of

September 30

and

June 30, 2017,

respectively. A

third

customer in the Branded Nutraceutical Segment, while

not

a significant customer of the Company

’s consolidated net sales, represented approximately

10%

and

67%

of net sales in the

three

months ended

September 30, 2017

and

2016,

respectively, of the Branded Nutraceutical Segment.

The loss of any of these customers could have an adverse affect on the Company’s operations. Major customers are those customers who account for more than

10%

of net sales.

(

b

) Other Business Risks.

Approximately

66%

of the Company’s employees are covered by a union contract and are employed in its New Jersey facilities. The contract was renewed on

September 1, 2015

and will expire on

August 31, 2018.

XML

Note 6 - Commitments and Contingencies

3 Months Ended

Sep. 30, 2017

Notes to Financial Statements

Commitments and Contingencies Disclosure [Text Block]

Note

6.

Commitments and Contingencies

(a) Leases

Related Party L

e

ases.

Warehouse and office facilities are leased from Vitamin Realty, which is

100%

owned by the Company’s chairman, Chief Executive Officer and major stockholder and certain of his family members, who are also executive officers and directors of the Company. On

January 5, 2012,

MDC entered into a

second

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 provides for minimum annual rental payments of

$533,

plus increases in real estate taxes and building operating expenses. 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, 2019

to extend the expiration date to

January 1, 2024.

This additional lease provides for minimum lease payments of

$27

with annual increases plus the proportionate share of operating expenses.

Rent expense for the

three

months ended

September 30, 2017

and

2016

on these leases were

$201

and

$197

respectively, and are included in both cost of sales and selling and administrative expenses in the accompanying Condensed Consolidated Statements of Operations. As of

September 30, 2017

and

June 30, 2017,

the Company had an outstanding obligation to Vitamin Realty of

$786

and

$763,

respectively, included in accounts payable, accrued expenses and other liabilities and long term debt in the accompanying Condensed Consolidated Balance Sheet.

Other Lease Commitments.

The Company has entered into certain non-cancelable operating lease agreements expiring up through

January 31, 2026,

related to office and warehouse space, equipment and vehicles (inclusive of the related party lease with Vitamin Realty).

The minimum rental commitment

s for long-term non-cancelable leases are as follows:

	Operating		Related Party
Year ending	Lease		Lease
June 30,	Commitment		Commitment		Total
2018, remaining	$	34	$	422	$	456
2019		27		563		590
2020		22		563		585
2021		21		563		584
2022		8		563		571
2023		-		563		563
Thereafter		-		1,392		1,392
Total	$	112	$	4,629	$	4,741

Total rent expense, including real estate taxes and maintenance charges, was approximately

$242

and

$237

for the

three

months ended

September 30, 2017

and

2016,

respectively. Rent expense is included in cost of sales and selling and administrative expenses in the accompanying Condensed Consolidated Statements of Operations.

(

b

) Legal Proceedings.

The Company is subject, from time to time, to claims by

third

parties under various legal theories. The defense of such claims, or any adverse outcome relating to any such claims, could have a material adverse effect on the Company

’s liquidity, financial condition and cash flows.

(c) Other Claims.

On

May 15, 2012,

Cedarburg Pharmaceuticals, Inc. ("Cedarburg") sent the Company a letter (the "Demand Letter") setting forth a demand for indemnification under the Stock Purchase Agreement, dated

March 17, 2009 (

the "Cedarburg SPA"), by and among Cedarburg, InB: Hauser Pharmaceutical Services, Inc., InB: Paxis Pharmaceuticals, Inc. and the Company. In the Demand Letter, Cedarburg demanded payment by the Company of

$0.6

million in respect of the Company's indemnification obligations under the Cedarburg SPA. In addition, in the Demand Letter, Cedarburg informed the Company that there are also environmental issues pending which

may

lead to additional costs to Cedarburg which will likely be in excess of $

0.3

million.

On

May 30, 2012,

the Company sent a letter responding to the Demand Letter and setting forth the Company

’s position that it has

no

obligation to indemnify Cedarburg as demanded. On

June 18, 2012,

Cedarburg responded to the Company’s letter and, on

July 27, 2012,

the Company sent another letter to Cedarburg reiterating its position that the Company has

no

obligation to indemnify Cedarburg as demanded. On

December 18, 2012,

Cedarburg responded to the Company’s letter and, on

January 15, 2013,

the Company sent another letter to Cedarburg reiterating its position that the Company has

no

obligation to indemnify Cedarburg as demanded. As of

November 9, 2017,

the Company has

not

received any further communication from Cedarburg with respect to its demand for indemnification as set forth in the Demand Letter. The Company intends to vigorously contest Cedarburg's demand as set forth in the Demand Letter.

XML

Note 7 - Related Party Transactions

3 Months Ended

Sep. 30, 2017

Notes to Financial Statements

Related Party Transactions Disclosure [Text Block]

Note

7.

Related Party Transactions

See Note

4

. Senior Credit Facility, Subordinated Convertible Note, net - CD Financial, LLC and other Long Term Debt for related party securities and debt transactions.

See Note

6

(a). Leases for related party lease transactions.

XML

Note 8 - Segment Information

3 Months Ended

Sep. 30, 2017

Notes to Financial Statements

Segment Reporting Disclosure [Text Block]

Note

8.

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 into

three

reportable segments as follows: Contract Manufacturing,

Branded Proprietary Products and Other Nutraceutical Businesses. The international sales, concentrated primarily in Europe and Canada, for the

three

months ended

September 30, 2017

and

2016

were

$1,658

and

$2,876,

respectively.

Financial information relating to the

three

months ended

September 30, 2017

and

2016

operations by business segment are as follows:

		Sales, Net						Segment
		U.S.		International				Gross				Capital
		Customers		Customers		Total		Profit		Depreciation		Expenditures
Contract	2017	$	7,822	$	1,583	$	9,405	$	835	$	74	$	93
Manufacturing	2016		9,321		2,711		12,032		1,897		71		41
Branded Proprietary	2017		19		11		30		32		1		13
Products	2016		30		95		125		34		-		-
Other Nutraceutical	2017		271		64		335		138		-		1
Businesses	2016		454		70		524		221		1		-
Total	2017		8,112		1,658		9,770		1,005		75		107
Company	2016		9,805		2,876		12,681		2,152		72		41

	Total Assets as of
	September 30,		June 30,
	2017		2017
Contract Manufacturing	$	10,426	$	12,134
Branded Proprietary Products		804		784
Other Nutraceutical Businesses		2,151		2,278
Total Company	$	13,381	$	15,196

XML

Significant Accounting Policies (Policies)

3 Months Ended

Sep. 30, 2017

Accounting Policies [Abstract]

Basis of Accounting, Policy [Policy Text Block]

Basis of Presentation of Interim Financial Statements

The accompanying

condensed consolidated financial statements for the interim periods are unaudited and include the accounts of Integrated BioPharma, Inc., a Delaware corporation (together with its subsidiaries, the “Company”). The interim condensed consolidated financial statements have been prepared in conformity with Rule

8

-

03

of Regulation S-

X

of the Securities and Exchange Commission (“SEC”) and therefore do

not

include information or footnotes necessary for a complete presentation of financial position, results of operations and cash flows in conformity with accounting principles generally accepted in the United States of America. However, all adjustments (consisting only of normal recurring adjustments) which are, in the opinion of management, necessary for a fair presentation of the financial position and operating results for the periods presented have been included. These condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto, together with Management’s Discussion and Analysis of Financial Condition and Results of Operations, contained in the Company’s Annual Report on Form

10

-K for the fiscal year ended

June 30, 2017 (

“Form

10

-K”), as filed with the SEC. The

June 30, 2017

balance sheet was derived from audited financial statements, but does

not

include all disclosures required by accounting principles generally accepted in the United States of America. The results of operations for the

three

months ended

September 30, 2017

are

not

necessarily indicative of the results for the full fiscal year ending

June 30, 2018

or for any other period.

Nature of Operations

The

Company is engaged primarily in manufacturing, distributing, marketing and sales of vitamins, nutritional supplements and herbal products. The Company’s customers are located primarily in the United States, Luxembourg and Canada. The Company was previously known as Integrated Health Technologies, Inc. and, prior to that, as Chem International, Inc. The Company was reincorporated in its current form in Delaware in

1995.

The Company continues to do business as Chem International, Inc. with certain of its customers and certain vendors.

The Company

’s business segments include: (a) Contract Manufacturing operated by InB:Manhattan Drug Company, Inc. (“MDC”), which manufactures vitamins and nutritional supplements for sale to distributors, multilevel marketers and specialized health-care providers; (b) Branded Proprietary Products operated by AgroLabs, Inc. (“AgroLabs”), which distributes healthful nutritional products for sale through major mass market, grocery, drug and vitamin retailers, under the following brands: Naturally Noni, Peaceful Sleep, Green Envy, FiberCal, Wheatgrass and other products which are being introduced into the market (these are referred to as our branded proprietary nutraceutical business and/or products); and (c) Other Nutraceutical Businesses which includes the operations of (i) The Vitamin Factory (the “Vitamin Factory”), which sells private label MDC products, as well as our AgroLabs products, through the Internet, (ii) IHT Health Products, Inc. (“IHT”) a distributor of fine natural botanicals, including multi minerals produced under a license agreement, (iii) MDC Warehousing and Distribution, Inc., a service provider for warehousing and fulfilment services and (iv) Chem International, Inc. (“Chem”), a distributor of certain raw materials for DSM Nutritional Products LLC.

Cost Method Investments, Policy [Policy Text Block]

Investment in iBio, Inc.

The Company accounts for its investment in iBio, Inc. (“iBio”) common stock on the cost basis as it retained approximately

6%

of its interest in iBio (

1,266,706

common shares) (the “iBio Stock”) at the time of the spin-off of this subsidiary in

August 2008.  

The Company reviews its investment in iBio for impairment and records a loss when there is deemed to be a permanent impairment of the investment. To date, there were cumulative impairment charges of approximately

$2,287.

The market value of the iBio Stock as of

September 30, 2017

was approximately

$382

based on the trade price at the close of trading on

September 30, 2017.

Pursuant to the Company

’s Loan Agreement with PNC Bank, National Association (“PNC”), as amended on

February 16, 2016,

all the net proceeds from the sale of any of the iBio Stock is to be used to prepay the outstanding principal of the term loan outstanding under the Amended Loan Agreement. (See Note

4.

Senior Credit Facility, Subordinated Convertible Note, net - CD Financial, LLC and other Long Term Debt).

Earnings Per Share, Policy [Policy Text Block]

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, warrants and convertible debt, subject to anti-dilution limitations using the treasury stock method and if converted method.

The following options and potentially dilutive shares

for convertible notes payable (See Note

4.

Senior Credit Facility, Subordinated Convertible Note, net - CD Financial, LLC and other Long Term Debt) were

not

included in the computation of weighted average diluted common shares outstanding as the effect of doing so would be anti-dilutive for the

three

months ended

September 30, 2017

and

2016:

	Three Months Ended
	September 30,
	2017		2016
Anti-dilutive stock options		2,692,017		674,950
Anti-dilutive shares for
convertible notes payable		8,230,769		8,230,769
Total anti-dilutive shares		10,922,786		8,905,719

XML

Note 1 - Principles of Consolidation and Basis of Presentation (Tables)

3 Months Ended

Sep. 30, 2017

Notes Tables

Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share [Table Text Block]

	Three Months Ended
	September 30,
	2017		2016
Anti-dilutive stock options		2,692,017		674,950
Anti-dilutive shares for
convertible notes payable		8,230,769		8,230,769
Total anti-dilutive shares		10,922,786		8,905,719

XML

Note 2 - Inventories (Tables)

3 Months Ended

Sep. 30, 2017

Notes Tables

Schedule of Inventory, Current [Table Text Block]

	September 30,		June 30,
	2017		2017
Raw materials	$	3,798	$	3,847
Work-in-process		1,314		1,963
Finished goods		1,930		1,835
Total	$	7,042	$	7,645

XML

Note 3 - Property and Equipment, Net (Tables)

3 Months Ended

Sep. 30, 2017

Notes Tables

Property, Plant and Equipment [Table Text Block]

	September 30,			June 30,
	2017			2017
Land and building	$	1,250		$	1,250
Leasehold improvements		1,268			1,268
Machinery and equipment		5,868			5,777
Transportation equipment		11			11
		8,397			8,306
Less: Accumulated depreciation   and amortization		(6,765	)		(6,705	)
Total	$	1,632		$	1,601

XML

Note 4 - Senior Credit Facility, Subordinated Convertible Note, Net - CD Financial, LLC and Other Long Term Debt (Tables)

3 Months Ended

Sep. 30, 2017

Notes Tables

Schedule of Debt [Table Text Block]

	Principal Amount						Interest Rate			Maturity Date
	As of September 30, 2017			As of June 30, 2017
Revolving advances under Senior Credit
Facility with PNC Bank, National Association	$	3,904		$	4,676			4.25	%	2/19/2020
Installment Note with PNC Bank		2,039			2,542			4.75	%	2/19/2020
Installment Note with PNC Equipment Finance, LLC		168			190			4.57	%	7/29/2019
Promissory Note with CD Financial, LLC		1,714			1,714			6.00	%	2/29/2020
Promissory Note with Vitamin Realty, LLC		686			686			4.00	%	2/29/2020
Capitalized lease obligations		257			307			3.86% -11.43	%	3/6/2018 -12/08/2020
Total outstanding debt		8,768			10,115
Less:  Revolving Advances		(3,904	)		(4,676	)
Prepaid financing costs		(67	)		(75	)
Current portion of long term debt, net		(1,031	)		(1,118	)
Long term debt, net	$	3,766		$	4,246
Convertible Note payable - CD Financial, LLC	$	5,350		$	5,350			6.00	%	2/29/2020
Less:  Discount for embedded derivative		(95	)		(105	)
Prepaid financing costs		(22	)		(24	)
Convertible Note payable, net - CD Financial, LLC	$	5,233		$	5,221

Schedule of Derivative Liabilities at Fair Value [Table Text Block]

	September 30,			June 30,
	2017			2017
Risk Free Interest Rate		1.53	%		1.49	%
Volatility		101.70	%		98.11	%
Term	2 years 5 months			2 years 8 months
Dividend Rate		0.00	%		0.00	%
Closing Price of Common Stock	$	0.22		$	0.19

XML

Note 6 - Commitments and Contingencies (Tables)

3 Months Ended

Sep. 30, 2017

Notes Tables

Schedule of Future Minimum Lease Payments for Capital Leases [Table Text Block]

	Operating		Related Party
Year ending	Lease		Lease
June 30,	Commitment		Commitment		Total
2018, remaining	$	34	$	422	$	456
2019		27		563		590
2020		22		563		585
2021		21		563		584
2022		8		563		571
2023		-		563		563
Thereafter		-		1,392		1,392
Total	$	112	$	4,629	$	4,741

XML

Note 8 - Segment Information (Tables)

3 Months Ended

Sep. 30, 2017

Notes Tables

Schedule of Segment Reporting Information, by Segment [Table Text Block]

		Sales, Net						Segment
		U.S.		International				Gross				Capital
		Customers		Customers		Total		Profit		Depreciation		Expenditures
Contract	2017	$	7,822	$	1,583	$	9,405	$	835	$	74	$	93
Manufacturing	2016		9,321		2,711		12,032		1,897		71		41
Branded Proprietary	2017		19		11		30		32		1		13
Products	2016		30		95		125		34		-		-
Other Nutraceutical	2017		271		64		335		138		-		1
Businesses	2016		454		70		524		221		1		-
Total	2017		8,112		1,658		9,770		1,005		75		107
Company	2016		9,805		2,876		12,681		2,152		72		41

Reconciliation of Assets from Segment to Consolidated [Table Text Block]

	Total Assets as of
	September 30,		June 30,
	2017		2017
Contract Manufacturing	$	10,426	$	12,134
Branded Proprietary Products		804		784
Other Nutraceutical Businesses		2,151		2,278
Total Company	$	13,381	$	15,196

XML

Note 1 - Principles of Consolidation and Basis of Presentation (Details Textual) - IBio Inc [Member] - USD ($) $ in Millions	9 Months Ended
	Sep. 30, 2017	Aug. 31, 2008
Cost Method Investment, Ownership Percentage		6.00%
Investment Owned, Balance, Shares		1,266,706
Asset Impairment Charges	$ 2,287
Investment Owned, at Fair Value	$ 382

XML

Note 1 - Principles of Consolidation and Basis of Presentation - Antidilutive Securities Excluded From Weighted Average Diluted Common Shares Outstanding (Details) - shares	3 Months Ended
	Sep. 30, 2017	Sep. 30, 2016
Anti-dilutive securities (in shares)	10,922,786	8,905,719
Employee Stock Option [Member]
Anti-dilutive securities (in shares)	2,692,017	674,950
Convertible Debt Securities [Member]
Anti-dilutive securities (in shares)	8,230,769	8,230,769

XML

Note 2 - Inventories - Inventories (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Jun. 30, 2017
Raw materials	$ 3,798	$ 3,847
Work-in-process	1,314	1,963
Finished goods	1,930	1,835
Total	$ 7,042	$ 7,645

XML

Note 3 - Property and Equipment, Net (Details Textual) - USD ($) $ in Thousands	3 Months Ended
	Sep. 30, 2017	Sep. 30, 2016
Depreciation	$ 75	$ 72

XML

Note 3 - Property and Equipment, Net - Property and Equipment, Net (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Jun. 30, 2017
Property and equipment, gross	$ 8,397	$ 8,306
Less: Accumulated depreciation and amortization	(6,765)	(6,705)
Total	1,632	1,601
Land and Building [Member]
Property and equipment, gross	1,250	1,250
Leasehold Improvements [Member]
Property and equipment, gross	1,268	1,268
Machinery and Equipment [Member]
Property and equipment, gross	5,868	5,777
Transportation Equipment [Member]
Property and equipment, gross	$ 11	$ 11

XML

Note 4 - Senior Credit Facility, Subordinated Convertible Note, Net - CD Financial, LLC and Other Long Term Debt (Details Textual) - USD ($) $ / shares in Units, $ in Thousands		1 Months Ended
	Feb. 19, 2016	Jun. 27, 2012	Sep. 30, 2017	Jun. 30, 2017	Feb. 21, 2008
Debt Instrument, Periodic Payment	$ 41
Interest Paid		$ 333
Other Expenses		$ 217
CD Financial LLC [Member]
Debt Instrument, Interest Rate, Stated Percentage		6.00%			9.50%
Debt Instrument, Face Amount					$ 4,500
Convertible Notes Payable		$ 5,350
Debt Instrument, Convertible, Conversion Price		$ 0.65
Embedded Derivative, Fair Value of Embedded Derivative Liability			$ 621	$ 503
CD Financial LLC [Member] | Default Rate [Member]
Debt Instrument, Interest Rate, Stated Percentage		10.00%
Vitamin Realty LLC [Member]
Debt Instrument, Face Amount		$ 686
Revolving Credit Facility [Member] | Eurodollar [Member]
Line of Credit Facility, Interest Rate at Period End			4.25%	4.25%
Term Loan [Member] | Eurodollar [Member]
Line of Credit Facility, Interest Rate at Period End	3.25%		4.75%	4.75%
Amended Loan Agreement [Member]
Senior Notes	$ 11,422
Loans Payable, Noncurrent	$ 3,422
Line of Credit Facility Covenant Prepayment Provisions Percentage of Excess Cash flow	25.00%		25.00%
Amended Loan Agreement [Member] | Revolving Credit Facility [Member]
Line of Credit Facility, Maximum Borrowing Capacity	$ 8,000
Amended Loan Agreement [Member] | Revolving Credit Facility [Member] | Eurodollar [Member]
Debt Instrument, Basis Spread on Variable Rate	2.75%
Term Loan [Member] | Scenario Event of Default [Member]
Debt Instrument, Interest Rate, Increase (Decrease)	2.00%
Number of Consecutive Monthly Installments	84
Number of Consecutive Monthly Installments, Fixed Amount	83
Revolving Advances [Member]
Line of Credit Facility Covenant Maximum Aggregate Revolving Advance	$ 8,000
Line of Credit Facility Covenant Aggregate Revolving Advance Receivables Advance Rate	85.00%
Line of Credit Facility Covenant Aggregate Revolving Advance Inventory Advance Rate	75.00%
Promissory Note [Member] | CD Financial LLC [Member]
Debt Instrument, Face Amount		$ 1,714
E. Gerald Kay [Member] | Vitamin Realty LLC [Member]
Debt Instrument, Interest Rate, Stated Percentage	4.00%

XML

Note 4 - Senior Credit Facility, Subordinated Convertible Note, Net - CD Financial, LLC and Other Long Term Debt - Debt Outstanding (Details) - USD ($) $ in Thousands	3 Months Ended
	Sep. 30, 2017	Jun. 30, 2017
Capitalized lease obligations	$ 257	$ 307
Total outstanding debt	8,768	10,115
Prepaid financing costs	(67)	(75)
Current portion of long term debt, net	(1,031)	(1,118)
Long term debt, net	3,766	4,246
Convertible Note payable, net - CD Financial, LLC	$ 5,233	5,221
Convertible Debt [Member]
Interest Rate	6.00%
Maturity Date	Feb. 29, 2020
Notes Payable	$ 5,350	5,350
Prepaid financing costs	(22)	(24)
Less: Discount for embedded derivative	(95)	(105)
Convertible Note payable, net - CD Financial, LLC	$ 5,233	5,221
Minimum [Member]
Capitalized lease obligations, interest rate	3.86%
Capitalized lease obligations, maturity date	Mar. 06, 2018
Maximum [Member]
Capitalized lease obligations, interest rate	11.43%
Capitalized lease obligations, maturity date	Dec. 08, 2020
Revolving Advances [Member]
Line of Credit Facility	$ 3,904	4,676
Interest Rate	4.25%
Maturity Date	Feb. 19, 2020
Less: Revolving Advances	$ (3,904)	(4,676)
Installment Note with PNC Bank [Member]
Interest Rate	4.75%
Maturity Date	Feb. 19, 2020
Notes Payable	$ 2,039	2,542
PNC Equipment Finance LLC [Member]
Interest Rate	4.57%
Maturity Date	Jul. 29, 2019
Notes Payable	$ 168	190
CD Financial LLC [Member]
Interest Rate	6.00%
Maturity Date	Feb. 29, 2020
Notes Payable	$ 1,714	1,714
Vitamin Realty LLC [Member]
Interest Rate	4.00%
Maturity Date	Feb. 29, 2020
Notes Payable	$ 686	$ 686

XML

Note 4 - Senior Credit Facility, Subordinated Convertible Note, Net - CD Financial, LLC and Other Long Term Debt - Calculation of Fair Value of Derivative Liability (Details) - $ / shares	3 Months Ended	12 Months Ended
	Sep. 30, 2017	Jun. 30, 2017
Closing Price of Common Stock (in dollars per share)	$ 0.22	$ 0.19
Derivative [Member]
Risk Free Interest Rate	1.53%	1.49%
Volatility	101.70%	98.11%
Term (Month)	2 years 150 days	2 years 240 days
Dividend Rate	0.00%	0.00%

XML

Note 5 - Significant Risks and Uncertainties (Details Textual)	3 Months Ended		12 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Jun. 30, 2017
Sales Revenue, Net [Member] | Customer Concentration Risk [Member]
Number of Major Customers	2	2
Sales Revenue, Net [Member] | Customer Concentration Risk [Member] | Two Customers [Member]
Concentration Risk, Percentage	91.00%	91.00%
Sales Revenue, Segment [Member] | Customer Concentration Risk [Member] | Major Customer 1 [Member] | Contract Manufacturing [Member]
Concentration Risk, Percentage	63.00%	48.00%
Sales Revenue, Segment [Member] | Customer Concentration Risk [Member] | Major Customer 2 [Member] | Contract Manufacturing [Member]
Concentration Risk, Percentage	32.00%	48.00%
Sales Revenue, Segment [Member] | Customer Concentration Risk [Member] | Major Customer 3 [Member] | Branded Nutraceutical [Member]
Concentration Risk, Percentage	10.00%	67.00%
Accounts Receivable [Member] | Customer Concentration Risk [Member]
Number of Major Customers	2		2
Accounts Receivable [Member] | Customer Concentration Risk [Member] | Two Customers [Member]
Concentration Risk, Percentage	88.00%		61.00%
Number of Employees, Geographic Area [Member] | Unionized Employees Concentration Risk [Member]
Concentration Risk, Percentage	66.00%

XML

Note 6 - Commitments and Contingencies (Details Textual) $ in Thousands			3 Months Ended
	May 19, 2014 USD ($) ft²	Jan. 05, 2012 USD ($) ft²	Sep. 30, 2017 USD ($)	Sep. 30, 2016 USD ($)	Jun. 30, 2017 USD ($)	May 15, 2012 USD ($)
Operating Leases, Rent Expense			$ 242	$ 237
Stock Purchase Agreement [Member]
Loss Contingency, Estimate of Possible Loss						$ 600
Environmental Issues [Member]
Loss Contingency, Estimate of Possible Loss						$ 300
Manhattan Drug Company [Member]
Payments for Rent		$ 533
Manhattan Drug Company [Member] | Minimum [Member]
Area of Real Estate Property | ft²		74,898
Manhattan Drug Company [Member] | Maximum [Member]
Area of Real Estate Property | ft²		76,161
AgroLabs [Member]
Area of Real Estate Property | ft²	2,700
Payments for Rent	$ 27
Chairman, Chief Executive Office and Major Stockholder [Member]
Percent of Ownership for Warehouse and Office Facilities Leased			100.00%
Vitamin Realty LLC [Member]
Operating Leases, Rent Expense			$ 201	$ 197
Accrued Rent			$ 786		$ 763

XML

Note 6 - Commitments and Contingencies - Minimum Rental Commitment for Long-term Non-cancelable Leases (Details) $ in Thousands	Sep. 30, 2017 USD ($)
2018, remaining	$ 456
2019	590
2020	585
2021	584
2022	571
2023	563
Thereafter	1,392
Total	4,741
Operating Lease Commitment [Member]
2018, remaining	34
2019	27
2020	22
2021	21
2022	8
2023
Thereafter
Total	112
Related Party Lease Commitment [Member]
2018, remaining	422
2019	563
2020	563
2021	563
2022	563
2023	563
Thereafter	1,392
Total	$ 4,629

XML

Note 8 - Segment Information (Details Textual) $ in Thousands	3 Months Ended
	Sep. 30, 2017 USD ($)	Sep. 30, 2016 USD ($)
Number of Reportable Segments	3
Europe and Canada [Member]
Revenues	$ 1,658	$ 2,876

XML

Note 8 - Segment Information - Operations by Business Segment (Details) - USD ($) $ in Thousands	3 Months Ended
	Sep. 30, 2017	Sep. 30, 2016
Sales, net	$ 9,770	$ 12,681
Gross Profit	1,005	2,152
Depreciation	75	72
Capital Expenditures	107	41
UNITED STATES
Sales, net	8,112	9,805
International Customers [Member]
Sales, net	1,658	2,876
Contract Manufacturing [Member]
Sales, net	9,405	12,032
Gross Profit	835	1,897
Depreciation	74	71
Capital Expenditures	93	41
Contract Manufacturing [Member] | UNITED STATES
Sales, net	7,822	9,321
Contract Manufacturing [Member] | International Customers [Member]
Sales, net	1,583	2,711
Branded Proprietary Products [Member]
Sales, net	30	125
Gross Profit	32	34
Depreciation	1
Capital Expenditures	13
Branded Proprietary Products [Member] | UNITED STATES
Sales, net	19	30
Branded Proprietary Products [Member] | International Customers [Member]
Sales, net	11	95
Other Nutraceutical Business [Member]
Sales, net	335	524
Gross Profit	138	221
Depreciation		1
Capital Expenditures	1
Other Nutraceutical Business [Member] | UNITED STATES
Sales, net	271	454
Other Nutraceutical Business [Member] | International Customers [Member]
Sales, net	$ 64	$ 70

XML

Note 8 - Segment Operations - Total Assets (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Jun. 30, 2017
Total Assets	$ 13,381	$ 15,196
Contract Manufacturing [Member]
Total Assets	10,426	12,134
Branded Proprietary Products [Member]
Total Assets	804	784
Other Nutraceutical Business [Member]
Total Assets	$ 2,151	$ 2,278