Annual Report for Fiscal Year Ending 06-30, 2025 (Form 10-K)

Management's Discussion and Analysis of Financial Condition and Results of Operations (dollars in thousands).

Certain statements set forth under this caption constitute "forward-looking statements." See "Cautionary Statement Regarding Forward-Looking Statements" on page 3 of this Annual Report on Form 10-K for additional factors relating to such statements.

The Company is engaged primarily in the business of manufacturing, distributing, marketing and sale of vitamins, nutritional supplements and herbal products. The Company's customers are located primarily throughout the United States and Luxembourg.

Our financial results are substantially dependent on net sales. Net sales are partly dependent on the mix of contract manufactured products and other nutraceutical sales, which are difficult to forecast. Factors that could cause demand to be different from our expectations include: customer acceptance of our pricing and our competitors' pricing; changes in customer order patterns; changes in the level of customer inventory; and changes in business and economic conditions, including conditions in the credit market that could affect consumer confidence and result in lower than expected demand for our manufactured products and to a lesser extent, our other nutraceutical business products and services.

We believe that we have established and developed business relationships, facilities, personnel, product offerings, and competitive and financial resources in place for business success; however, future revenue, costs, gross margins, and profits are all influenced by a number of factors, including those discussed above, all of which are inherently difficult to forecast. Except as otherwise noted, all dollar amounts below are "in thousands".

In the fiscal year ended June 30, 2025, our net sales from operations increased by $4,036 to approximately $54,353 from approximately $50,317 in the fiscal year ended June 30, 2024. Our net sales increased by approximately $3,114 and $922 in our Contract Manufacturing Segment and Other Business Lines Segment, respectively. These increases were primarily from net increased sales to the two major customers and all other customers in the Contract Manufacturing Segment in the amounts of $763 and $2,351, respectively. The increase in all others was concentrated in one customer in the amount of $2,612 offset by a decrease of $261 to all other customers in this segment. The increase in the Other Business Lines Segment was the result of increased sales to new customers in the amounts of $849 and $275 and increased sales to a third customer in the amount of $139 in the fiscal year ended June 30, 2025 compared to the fiscal year ended June 30, 2024. These increases were offset by the loss of one customer with sales in the amount of $246 in the fiscal year ended June 30, 2024 and a decline in sales of $81 to a second customer in the fiscal year ended June 30, 2025 compared to the fiscal year ended June 30, 2024. Our profit margins increased by 2.5% in the fiscal year ended June 30, 2025, from 7.7% in the fiscal year ended June 30, 2024 to 10.2% in the fiscal year ended June 30, 2025, primarily as a result of the increased sales volume in the fiscal year ended June 30, 2025 compared to the fiscal year ended June 30, 2024.

We had consolidated selling and administrative expenses of approximately $3,542 and $3,633 in the fiscal years ended June 30, 2025 and 2024, respectively. The decrease in the consolidated selling and administrative expenses of $91, or approximately 2.5%, was primarily from decreases in salaries and employee benefits, non-cash stock compensation and other general expenses of $60, $66 and $44, respectively. These decreases were offset by an increase of $80 in professional and consulting fees. Our legal, auditing and other consulting costs increased by $58, $17 and $5, respectively.

In the fiscal years ended June 30, 2025 and 2024, we had operating income of approximately $2,020 and $251, respectively.

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

We have seen a slight negative impact in our margins due to inflation and tightened labor markets as we strive to increase prices to our customers as our operating costs increase. These declines were offset by an increase in sales volumes to offset the fixed overhead costs in the Contract Manufacturing Segment. We may not be able to timely increase our selling prices to our customers resulting from price increases from our suppliers due to various economic factors, including tariffs and other inflationary costs, labor and shipping costs and our own increases in shipping, labor and other operating costs. Our results of operations may also be affected by economic conditions, including tariffs and other inflationary pressures, that can impact consumer disposable income levels and spending habits, thereby reducing the orders we may receive from our significant customers.

Critical Accounting Estimates

The preparation of financial statements are prepared in conformity with generally accepted accounting principles in the United States of America ("GAAP"). In preparing these financial statements, we make assumptions, judgements and estimates that involve a level of estimation uncertainty and could 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:

● revenue recognition and allowances for credit losses;

● inventory valuation;

● impairment of long-lived assets; and

● income taxes and valuation allowances on deferred income taxes.

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.

Revenue Recognition and Allowances for Credit Losses

The Company recognizes product sales revenue, the prices of which are fixed and determinable, when title and risk of loss have transferred to the customer, when estimated provisions for product returns, rebates, charge-backs and other sales allowances are reasonably determinable, and when collectability is reasonably assured. Accruals for these items are presented in the consolidated financial statements as reductions to sales. The Company's net sales represent gross sales invoiced to customers, less certain related charges for discounts, returns, rebates, charge-backs and other allowances. Cost of sales includes the cost of raw materials and all labor and overhead associated with the manufacturing and packaging of the products. Gross margins are affected by, among other things, changes in the relative sales mix among our products and valuation and/or charge off of slow moving, expired or obsolete inventories. To perform revenue recognition for arrangements within the scope of ASC 606, the Company performs the following five steps:

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identification of the promised goods or services in the contract;

●

determination of whether the promised goods or services are performance obligations, including whether they are distinct in the context of the contract;

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measurement of the transaction price, including the constraint on variable consideration;

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allocation of the transaction price to the performance obligations based on estimated selling prices; and

●

recognition of revenue when (or as) the Company satisfies each performance obligation. A performance obligation is a promise to transfer a distinct good or service to the customer and is the unit of account in ASC 606.

Our return policy in our contract manufacturing business is to only accept returns for defective products. If defective products are returned, our agreement with our customers is to cure the defect and re-ship the product. Based on this policy, when the product is shipped we make an estimate of any potential returns or allowances.

Our management makes judgments as to its ability to collect outstanding receivables and provides allowances for the portion of receivables for which collection becomes doubtful. Provisions are made based upon a specific review of all significant outstanding amounts. We continuously monitor payments from our customers and maintain allowances for estimated credit losses and other allowances for uncollectible accounts receivable in the period they become known.

If the historical data we use to calculate the allowance provided for credit losses does not reflect the future ability to collect outstanding receivables, additional provisions for credit losses may be needed and the future results of operations could be materially affected. In recording any additional allowances, a respective charge against income is reflected in the general and administrative expenses; and would reduce the operating results in the period in which the increase is recorded. Amounts determined to be uncollectible are written off against the credit loss or other reserve accounts. In the fiscal years ended June 30, 2025 and 2024, we had an allowance for credit losses of less than $20 and $1, respectively.

Inventory Valuation

Inventories are stated at the lower of cost or net realizable value, which reflects management's estimates of net realizable value. Cost is determined using the first-in, first-out method based on specific lots. As a result of our inventory being manufactured primarily on a purchase order basis, the quantity of both raw materials and finished goods inventory provides for minimal risk of potential overstock or obsolescence. Another component of our inventory valuation includes the estimation of our inventory overhead costs that are capitalized and included in the cost of our inventory.

Long Lived Assets

We record impairment losses on long lived assets, which consists primarily of right-of-use assets and machinery and equipment, when events and circumstances indicate that such assets might be impaired and the estimated fair value of any such asset is less than its recorded amount. The Company reviews the value of its long-lived assets for impairment whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable or that the useful lives of these assets are no longer appropriate. Conditions that would necessitate an impairment assessment include material adverse changes in operations, significant adverse differences in actual results in comparison with initial valuation forecasts prepared at the time of acquisition, a decision to abandon certain acquired products, services, or marketplaces, or other significant adverse changes that would indicate the carrying amount of the recorded asset might not be recoverable. 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. The Company also re-evaluates the periods of amortization to determine whether circumstances warrant revised estimates of current useful lives. An impairment charge of $28 was identified in the fiscal year ended June 30, 2025, with no impairment loss identified in the fiscal year ended June 30, 2024.

Income Taxes

The Company records deferred tax assets and liabilities for the estimated future tax effects of temporary differences between tax bases of assets and liabilities and amounts reported in the accompanying consolidated balance sheets, as well as operating losses and tax credit carry-forwards. The Company measures deferred tax assets and liabilities using enacted tax rates expected to be applied to taxable income in the years in which those temporary differences are expected to be recovered or settled. The Company reduces deferred tax assets by a valuation allowance if, based on available evidence, it is more likely than not that these benefits will not be realized.

The Company uses a recognition threshold and measurement attribute for financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities.

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

The following table sets forth the income statement data of the Company as a percentage of net sales for the periods indicated:

		For the Fiscal Year Ended June 30,
		2025				2024
Sales, net			100.0	%			100.0	%
Costs and expenses:
Cost of sales			89.8	%			92.3	%
Selling and administrative			6.5	%			7.2	%
Total costs and expenses			96.3	%			99.5	%
Income from operations			3.7	%			0.5	%
Other income, net:
Interest income, net			0.1	%			0.0	%
Other income (expense), net			0.0	%			(0.0	%)
Total other income, net			0.1	%			(0.0	%)
Income before income taxes			3.8	%			0.5	%
Federal and state income tax expense, net			2.4	%			0.3	%
Net income			1.4	%			0.2	%

Year ended June 30, 2025 Compared to the Year ended June 30, 2024

Sales, net. Net sales for the fiscal year ended June 30, 2025 and 2024 were $54,353 and $50,317, respectively, an increase of $4,036 or 8.0%. The increase is comprised of the following:

		Fiscal Year Ended								Dollar Increase				Percentage
		June 30,								(Decrease)				Change
		2025				2024				2025 vs 2024				2025 vs 2024
		(dollars in thousands)
Contract Manufacturing:
US Customers		$	40,956			$	40,622			$	334				0.8	%
International Customers			10,726				7,946				2,780				35.0	%
Net sales, Contract Manufacturing			51,682				48,568				3,114				6.4	%
Other Nutraceuticals:
US Customers			2,671				1,722				949				55.1	%
International Customers			-				27				(27	)			100.0	%)
Net sales, Other Nutraceuticals			2,671				1,749				922				52.7	%
Total net sales		$	54,353			$	50,317			$	4,036				8.0	%

In the fiscal years ended June 30, 2025 and 2024, a significant portion of our consolidated net sales, approximately 84% and 90%, respectively, were concentrated among two customers, Life Extension and Herbalife, customers in our Contract Manufacturing Segment. Life Extension and Herbalife represented approximately 62% and 26% and 71% and 23%, respectively, of our Contract Manufacturing Segment's net sales in the fiscal years ended June 30, 2025 and 2024, respectively. Four other customers, Trusted Influencers Inc. (Hotpack Global, Inc. in 2024), Thermosource Tooling and Manufacturing, Life Technologies, Inc. and Eastern Drayage (customers of our Other Business Lines Segment), while not significant customers of our consolidated net sales, represented 32%, 25%, 11% and 10% and 14%, 43%, 10%, and 0%, respectively, of the Other Business Lines Segment net sales in the fiscal years ended June 30, 2025 and 2024, respectively. The loss of any of these customers could have a significant adverse impact on our financial condition and results of operations.

The increase in net sales of approximately $4,036 was the result of increased sales of approximately $3,114 and $922 in our Contract Manufacturing and Other Business Lines Segments, respectively. These increases were primarily from net increased sales to the two major customers and all other customers in the Contract Manufacturing Segment in the amounts of $763 and $2,351, respectively. The increase in all others was concentrated in one customer in the amount of $2,612 offset by a decrease of $261 to all other customers in this segment. The increase in the Other Business Lines Segment was the result of increased sales to new customers in the amounts of $849 and $275 and increased sales to a third customer in the amount of $139 in the fiscal year ended June 30, 2025 compared the fiscal year ended June 30, 2024. These increases were offset by the loss of one customer with sales in the amount of $246 in the fiscal year ended June 30, 2024 and a decline in sales of $81 to a second customer in the fiscal year ended June 30, 2025 compared to the fiscal year ended June 30, 2024.

Cost of sales. Cost of sales increased by $2,358 to $48,791 for the fiscal year ended June 30, 2025, as compared to $46,433 for the fiscal year ended June 30, 2024, an increase of approximately 5.1%. Cost of sales as a percentage of sales was approximately 89.8% and 92.3% for the fiscal years ended June 30, 2025 and 2024, respectively. The increase in the cost of goods sold amount is consistent and expected with the increase in net sales as well as the decrease in the cost of goods sold as a percentage of net sales.

Selling and Administrative Expenses. There was a decrease in selling and administrative expenses of $91 or approximately 2.5% in the fiscal year ended June 30, 2025 as compared to the fiscal year ended June 30, 2024. As a percentage of sales, net, selling and administrative expenses were approximately 6.5% and 7.2% for the fiscal year ended June 30, 2025 and 2024, respectively. The decrease was primarily from decreases in salaries and employee benefits, non-cash stock compensation and other general expenses of $60, $66 and $44, respectively. Office salaries and employee benefits were lower due to lower employee benefits in the amount of $64 primarily as a result of changing health care providers for our major medical plans provided to the non- union staff and lower PEO benefit costs offset by an increase in salaries of $4. Non-cash stock compensation was lower due lower fair market value estimates on the stock options granted in the fiscal year ended June 30, 2025 compared to the prior year and our general expenses were lower primarily as the result of decreases of in general office and other operating expenses. These decreases were offset by an increase of $80 in professional and consulting fees. Our legal, auditing and other consulting costs increased by $58, $17 and $5, respectively.

Other income, net. Other income, net was approximately $42 for the fiscal year ended June 30, 2025 compared to $17 for the fiscal year ended June 30, 2024 and is composed of:

		Fiscal Year Ended
		June 30,
		2025				2024
		(dollars in thousands)
Other income (expense):
Interest income, net		$	39			$	18
Other income (expense), net			3				(1)
Total Other income (expense), net		$	42			$	17

Our interest income, net increased by $21 in the fiscal year ended June 30 2025 primarily due to higher average daily cash balances in our cash operating accounts resulting in increased interest credited to our account in fiscal year ended June 30, 2025 compared to prior comparable period. Interest income was offset by interest expense of $46 and $52 in the fiscal years ended June 30, 2025 and 2024, respectively.

Federal and state income tax, net. In the fiscal year ended June 30, 2025 and 2024, we had deferred federal income taxes of $1,386 and $124, respectively. Included in the fiscal year ended June 30, 2025 federal income tax expense of $1,386 is the recognition of an $830 valuation allowance on our federal net operating loss carryovers. We also had current state tax expense of approximately $18 and $31, respectively and deferred state tax benefit of $150 and state income tax expense of $1, in the fiscal years ended June 30, 2025 and 2024, respectively.

We continue to maintain a reserve on a portion of our deferred tax assets as it has been determined that it is "more likely than not" that the Company's deferred tax assets, other than federal net operating losses, may not be fully realized.

Net income. Our net income for the fiscal years ended June 30, 2025 and 2024 was approximately $808 and $112, respectively. The increase of approximately $696 was primarily the result of increased operating income of $1,769 offset by an increase in income taxes, net of $1,098.

Liquidity and Capital Resources

The following table sets forth, for the periods indicated, the Company's net cash flows provided by or used in operating, investing and financing activities:

		For the fiscal year ended June 30,
		2025				2024
		(dollars in thousands)
Net cash provided by operating activities		$	2,065			$	943
Net cash used in investing activities		$	(205	)		$	(553	)
Net cash provided by (used in) financing activities		$	78			$	(29	)
Cash at end of year		$	3,615			$	1,677

At June 30, 2025 and 2024, the Company had working capital of $14,515 and $11,752, respectively. Our current assets increased by $888 and our current liabilities decreased by $1,875, respectively, from June 30, 2024 to June 30, 2025. The increase in current assets was primarily from increases in cash and accounts receivable of $1,938 and $762, respectively, offset by a decrease in inventories of $1,882. Our current liabilities decreased primarily from the decreases of $1,359 and $243 in accrued expenses and other current liabilities and accounts payable, respectively.

As of April 15, 2025, the Company paid off its outstanding obligations under its Senior Credit Facility with PNC Bank, National Association ("PNC"), terminating the Senior Credit Facility, and entered into a Loan Agreement (the "Loan Agreement") with PNC.

The Loan Agreement provides a committed revolving line of credit under which we may request, and PNC will make advances to us from time to time until April 5, 2026, in an aggregate amount outstanding at any time not to exceed $4,000 (the "Line of Credit") and a Convertible Equipment Line of Credit in an aggregate amount outstanding at any time not to exceed $500 (the "Convertible ELOC"). Advances under the Convertible ELOC will be used for the purchase of equipment and/or vehicles.

Operating Activities

Net cash provided by operating activities of $2,065 in the fiscal year ended June 30, 2025 includes a net income of approximately $808. After excluding the effects of non-cash expenses and income, such as depreciation and amortization, compensation expense for employee stock options, allowances for credit losses and changes in deferred tax assets, the adjusted cash used in operations before the effect of the changes in working capital components was an increase of approximately $3,567. Cash in the amount of approximately $1,502 from our working capital assets and liabilities was used in our operating activities and was primarily the result of decreases in accrued expenses and other liabilities of $1,355, operating lease obligations of approximately $945, accounts payable of $211 and increases in accounts receivable of $781 and other assets of $92, offset by a decrease in inventories of 1,882.

Net cash provided by operating activities of $943 in the fiscal year ended June 30, 2024 includes a net income of approximately $112. After excluding the effects of non-cash expenses and income, such as depreciation and amortization, compensation expense for employee stock options, allowances for credit losses and changes in deferred tax assets, the adjusted cash used in operations before the effect of the changes in working capital components was an increase of approximately $1,721. Cash in the amount of approximately $744 from our working capital assets and liabilities was used in our operating activities and was primarily the result of decreases in operating lease obligations of approximately $902 and increases in inventories and accounts receivable of $983 and $120, respectively, offset, by increases in accounts payable of $244 and accrued expenses and other liabilities of $1,029.

Investing Activities

Cash used in investing activities was used for the purchase of machinery and equipment for approximately $205 and $553 in the fiscal years ended June 30, 2025 and 2024, respectively.

Financing Activities

Cash provided by financing activities was approximately $78 for the fiscal year ended June 30, 2025, and was primarily from proceeds from the exercise of stock options of $86, offset by payments under our financed lease obligations of $8.

Cash used in financing activities was approximately $29 for the fiscal year ended June 30, 2024, and was primarily from payments under our financed lease obligation of $42 offset by proceeds from the exercise of stock options of $14.

As of June 30, 2025, we had cash of approximately $3,615, funds available under our Line of Credit and Convertible ELOC of approximately $4,500, and working capital of $14,515. We had income from operations of approximately $2,020 in the fiscal year ended June 30, 2025 and net income of approximately $808. Net income includes a net tax provision of $1,254, of which $1,232 is a non-cash item due to our Federal and state net operating loss carryforwards and deferred tax assets offsetting the amounts owed. After taking into consideration our interim results and current projections, management believes that operations, together with our credit facilities and equipment financing will support our working capital requirements at least through the twelve-month period ending September 18, 2026.

Our current total annual commitments as of June 30, 2025, for long term non-cancelable leases are approximately $717 consisting of obligations under operating leases for office and warehouse facilities and operating and finance lease obligations for the use of machinery and office equipment.

Capital Expenditures

The Company's capital expenditures in the fiscal years ended June 30, 2025 and 2024 were approximately $205 and $553, respectively. The Company has budgeted approximately $500 for capital expenditures for the fiscal year ending June 30, 2026. The total amount is expected to be funded from cash provided from the Company's operations and from lease financing.

Off-Balance Sheet Arrangements

The Company has no off-balance sheet arrangements.

Impact of Inflation

The Company may not be able to timely increase its selling prices to its customer resulting from price increases from its suppliers due to various economic factors, including inflation, labor and shipping costs and its own increases in shipping, labor and other operating costs. The Company's results of operations may also be affected by economic conditions, including inflationary pressures, that can impact consumer disposable income levels and spending habits, thereby reducing the orders it may receive from the Company's significant customers.