Note

Summary of Significant Accounting Policies

Principles of Consolidation.

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

Reclassifications

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

Use of Estimates.

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

not

readily apparent from other sources. The most significant estimates include:

● sales returns and allowances;

● trade marketing and merchandising;

● allowance for doubtful accounts;

● inventory valuation;

● valuation and recoverability of long-lived and intangible assets;

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

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

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

Derivative Liabilities

The Company generally does

not

use derivative financial instruments to hedge exposures to cash flow or market risks. However, certain other financial instruments, such as warrants and embedded conversion features on the subordinated convertible debt, are classified as derivative liabilities due to protection provisions within the agreements. Such financial instruments are initially recorded at fair value using the Black Scholes model and subsequently adjusted to fair value at the close of each reporting period. The Company accounts for derivative instruments and debt instruments in accordance with the interpretative guidance of ASC

815

and associated pronouncements related to the classification and measurement of warrants and instruments with conversion features.

Revenue Recognition.

For product sales, the Company recognizes revenue when the product’s title and risk of loss transfers to the customer. The Company believes this revenue recognizing practice is appropriate because the Company’s sales policies meet the following

four

criteria: (i) persuasive evidence that an arrangement exists; (ii) delivery has occurred; (iii) the seller’s price to the buyer is fixed and determinable; and (iv) collectability is reasonably assured. The Company’s sales policy is to require customers to provide purchase orders with the agreed upon selling prices and shipping terms. The Company evaluates the credit risk of each customer and establishes an allowance of doubtful accounts for any credit risk. Sales returns and allowances are estimated upon shipment, based on historical experience.

Shipping and Handling Costs.

Shipping and handling costs were approximately

$207

and

$296

for the fiscal years ended

June 30, 2018

and

2017,

respectively, and are included in cost of sales in the accompanying Consolidated Statements of Operations.

Trade Marketing and Merchandising.

In order to support the Company’s proprietary nutraceutical product lines, various promotional activities are conducted through the retail trade, distributors or directly with consumers, including in-store display and product placement programs, feature price discounts, coupons, and other similar activities. The Company regularly reviews and revises, when it deems necessary, estimates of costs to the Company for these promotional programs based on estimates of what will be redeemed by the retail trade, distributors, or consumers. These estimates are made using various techniques, including historical data on performance of similar promotional programs. Differences between estimated expense and actual performance are generally

not

material and are recognized as a change in management’s estimate in a subsequent period.

Advertising.

Advertising costs are expensed as incurred. Advertising expense was approximately

$17

and

$22

for the fiscal years ended

June 30, 2018

and

2017,

respectively.

Stock-Based Compensation.

The Company has

two

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

three

years.

Income Taxes

. The Company accounts for income taxes using the asset and liability method. Accordingly, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in the tax rate is recognized in income or expense in the period that the change is effective. Tax benefits are recognized when it is probable that the deduction will be sustained. A valuation allowance is established when it is more likely than

not

that all or a portion of a deferred tax asset will

not

be realized.

The Company files a U.S. federal income tax return as well as returns for various states. The Company’s income taxes have

not

been examined by any tax authorities for the periods subject to review by such taxing authorities, except for the State of New Jersey tax filings for MDC which are currently under review for the open tax periods of

2014

through

2017.

Uncertain tax positions taken on our tax returns are accounted for as liabilities for unrecognized tax benefits. The Company recognizes interest and penalties, if any, related to unrecognized tax benefits in general and administrative expenses in the Consolidated Statements of Operations. There were

liabilities recorded for uncertain tax positions at

June 30, 2018

2017.

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.

Fair Value of Financial Instruments.

Generally accepted accounting principles require disclosing the fair value of financial instruments to the extent practicable for financial instruments which are recognized or unrecognized in the balance sheet. The fair value of the financial instruments disclosed herein is

not

necessarily representative of the amount that could be realized or settled, nor does the fair value amount consider the tax consequences of realization or settlement.

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

Accounts Receivable and Allowance for Doubtful Accounts.

In the normal course of business, the Company extends credit to customers. Accounts receivable, less the allowance for doubtful accounts, reflect the net realizable value of receivables, and approximate fair value. The Company believes there is

concentration of credit risk with any single customer whose failure or nonperformance would materially affect the Company’s results other than as discussed in Note

(c) – Significant Risks and Uncertainties – Major Customers. On a regular basis, the Company evaluates its accounts receivables and establishes an allowance for doubtful accounts based on a combination of specific customer circumstances, credit conditions, and historical write-offs and collections. The allowance for doubtful accounts as of

June 30, 2018

and

2017

was

$134

and

$99,

respectively. Accounts receivable are charged off against the allowance after management determines that the potential for recovery is remote.

Inventories.

Inventories are stated at the lower of cost or net realizable value. Cost is determined using the

first

-in,

first

-out method. Allowances for obsolete and overstock inventories are estimated based on “expiration dating” of inventory and projection of sales.

Property and Equipment.

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

Building	15 Years
Leasehold Improvements	Shorter of estimated useful life or term of lease
Machinery and Equipment	7 Years
Transportation Equipment	5 Years

Impairment of Long-Lived Assets.

Long-lived assets are reviewed for impairment when circumstances indicate that the carrying value of an asset

may

not

be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the assets to the future net cash flows estimated by the Company to be generated by such assets.

If such assets are considered to be impaired, the impairment to be recognized is the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of by sale are recorded as held for sale at the lower of carrying value or estimated net realizable value. Tests for impairment or recoverability are performed at least annually and require significant management judgment and the use of estimates which the Company believes are reasonable and appropriate at the time of the impairment test. Future unanticipated events affecting cash flows and changes in market conditions could affect such estimates and result in the need for an impairment charge. The Company also re-evaluates the periods of amortization to determine whether circumstances warrant revised estimates of current useful lives.

impairment losses were identified or recorded in the fiscal years ended

June 30, 2018

and

2017

on the Company’s other intangible assets.

Other intangible assets consist of trade names, license fees, and unpatented technology. Amortization is being recorded on the straight-line basis over periods ranging from

years to

years based on contractual or estimated lives. Other intangible assets of

$33

and

$134

are included in security deposits and other assets in the consolidated balance sheets as of

June 30, 2018

and

2017,

respectively.

Investment in iBio, Inc.

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

of its interest in iBio (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

$2,562.

The market value of the iBio Stock as of

June 30, 2018

was approximately

$107

and

$465,

respectively, based on the trade price at the close of trading on

June 30, 2018

and

2017,

respectively. The investment in iBio is included in other current assets in the consolidated balance sheets as of

June 30, 2018

and

2017

at the respective market values.

Investment in AgroSport LLC .

The Company accounts for its investment in AgroSport LLC (“AGS”) on the equity method. On

June 1, 2018,

AgroLabs contributed the AgroSport product line to AGS in exchange for a

one

third

interest in AGS. The contribution included the website, www.agrosport.com, all trademarks and all other intangible assets associated with the AgroSport product line and a future capital contribution commitment of

$10.

The equity basis value of AgroSport was

$89,

as of

June 30, 2018

and is included in other current assets as of

June 30, 2018.

Accounting Pronouncements

Recently Adopted

July 2015,

the FASB 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.

The adoption of this ASU did

not

impact the Company’s consolidated financial statements.

March 2016,

the FASB issued ASU

No.

2016

09,

Stock Compensation (Topic

718

), which includes provisions intended to simplify various aspects related to how share-based payments are accounted for and presented in the financial statements. This guidance requires recognition of excess tax benefits and deficiencies (resulting from an increase or decrease in the fair value of an award from grant date to the vesting or exercise date) in the provision for income taxes as a discrete item in the quarterly period in which they occur. Currently, excess tax benefits are recognized in equity. In addition, these amounts will be classified as an operating activity in the Statement of Cash Flows instead of as a financing activity. The adoption of this standard had

impact on the Company’s consolidated financial statements.

For the years ended

June 30, 2018

and

2017,

the Company did

not

recognize any excess tax benefits in equity. These amounts

may

not

necessarily be indicative of future amounts that

may

be recognized subsequent to the adoption of this new standard, as any excess tax benefits recognized would be dependent on future stock prices, employee exercise behavior and applicable tax rates. The new guidance was effective for the Company beginning on

July 1, 2017.

Accounting Pronouncements

Not

Yet Adopted

May 2014,

the FASB issued

ASU2014

09,

“Revenue from Contracts with Customers”, Topic

606.

This update affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets, unless those contracts are within the scope of other standards. The guidance in this update supersedes the revenue recognition requirements in Topic

605,

Revenue Recognition and most industry-specific guidance. The core principle of the guidance is that an entity should recognize revenue to illustrate the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new guidance also includes a cohesive set of disclosure requirements that will provide users of financial statements with comprehensive information about the nature, amount, timing, and uncertainty of revenue and cash flows arising from a reporting organization’s contracts with customers. This new guidance was effective for the Company beginning on

July 1, 2018.

During

2016,

the FASB issued several accounting updates (ASU

No.

2016

08,

2016

and

2016

) to clarify implementation guidance and correct unintended application of the guidance. The standard allows for either “full retrospective” adoption, meaning the standard is applied to all of the periods presented, or “modified retrospective” adoption, meaning the standard is applied only to the most current period presented in the financial statements. The adoption of this standard using the modified retrospective approach will

not

have a material impact on the Company’s revenue recognition accounting policy or its Consolidated Financial Statements.

January 2016,

the FASB issued ASU

No.

2016

01,

Financial Instruments – Overall, (Subtopic

825

) “Recognition and Measurement of Financial Assets and Financial Liabilities”, which addresses certain aspects of recognition, measurement, presentation and disclosure of financial instruments. Under this guidance, companies have to measure equity investments, except those accounted for under the equity method, at fair value and recognize changes in fair value in net income. The standard will be effective for us beginning

July 1, 2018.

The Company currently does

not

expect the pending adoption of ASU

No.

2016

to have a material effect on its Consolidated Financial Statements.

February 2016,

the FASB issued a new standard related to leases to increase transparency and comparability among organizations by requiring the recognition of right-of-use (“ROU”) assets and lease liabilities on the balance sheet. Most prominent among the changes in the standard is the recognition of ROU assets and lease liabilities by lessees for those leases classified as operating leases under current U.S. GAAP. Under the standard, disclosures are required to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. We will be required to recognize and measure leases existing at, or entered into after, the beginning of the earliest comparative period presented using a modified retrospective approach, with certain practical expedients available.

The standard will be effective for us beginning

July 1, 2019,

with early adoption permitted. We elected to early adopt the standard effective

July 1, 2018.

We elected the available practical expedients on adoption. In preparation for adoption of the standard, we have implemented internal controls and key system functionality to enable the preparation of financial information. The standard will have a material impact on our consolidated balance sheets, but will

not

have a material impact on our consolidated income statements. The most significant impact will be the recognition of ROU assets and lease liabilities for operating leases, while our accounting for capital leases remains substantially unchanged.

Adoption of the standard will result in the recognition of additional ROU assets and lease liabilities for operating leases of

3,746

as of

June 30, 2018.

October, 2016,

the FASB issued ASU

No.

2016

16,

“Income Taxes (Topic

740

): Intra-Entity Transfers of Assets Other than Inventory,” which eliminates the requirement to defer recognition of income taxes on intra-entity transfers until the asset is sold to an outside party. The new guidance requires the recognition of current and deferred income taxes on intra-entity transfers of assets other than inventory, such as intellectual property and property, plant and equipment, when the transfer occurs. The guidance is effective for the Company on

July 1, 2019

and early adoption is permitted. The standard requires a “modified retrospective” adoption, meaning the standard is applied through a cumulative adjustment in retained earnings as of the beginning of the period of adoption. This new guidance is

not

expected to have a material impact on the Company’s Consolidated Financial Statements.

August, 2016,

the FASB issued ASU

No.

2016

15,

“Statement of Cash Flows (Topic

230

): Classification of Certain Cash Receipts and Cash Payments,” which clarifies how certain cash receipts and payments are to be presented in the statement of cash flows. The guidance is effective for the Company on

July 1, 2018

and early adoption is permitted. This new guidance is

not

expected to have a material impact on the Company’s Consolidated Financial Statements.

July 2017,

the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)

2017

11,

"Earnings Per Share (Topic

260

) Distinguishing Liabilities from Equity (Topic

480

) Derivatives and Hedging (Topic

815

)," which addresses the complexity of accounting for certain financial instruments with down round features. The amendments are effective for the Company on

July 1, 2019

for the fiscal year ended

June 30, 2020,

and the interim periods within it. Early adoption is available. The Company is currently evaluating the impact on the Company’s Consolidated Financial Statements.