Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANICAL CONDITION AND RESULTS OF OPERATION (dollars in thousands)
Certain statements set forth under this caption constitute “forward-looking statements.” See “Disclosure Regarding Forward-Looking Statements” on page 1 of this Quarterly Report on Form 10-Q for additional factors relating to such statements. The following discussion should also be read in conjunction with the condensed consolidated financial statements of the Company and Notes thereto included herein and the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2020.
The Company is engaged primarily in the manufacturing, distributing, marketing and sales of vitamins, nutritional supplements and herbal products. The Company’s customers are located primarily in the United States, Luxembourg and Canada.
Business Outlook
Our future results of operations and the other forward-looking statements contained in this Quarterly Report on Form 10-Q, including this “Management’s Discussion and Analysis of Financial Condition and Results of Operation”, involve a number of risks and uncertainties—in particular, the statements regarding our goals and strategies, new product introductions, plans to cultivate new businesses, future economic conditions, revenue, pricing, gross margin and costs, competition, the tax rate, and potential legal proceedings. We are focusing our efforts to improve operational efficiency and reduce spending that may have an impact on expense levels and gross margin. In addition to the various important factors discussed above, a number of other important factors could cause actual results to differ significantly from our expectations. See the risks described in “Risk Factors” in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2020.
For the six months ended December 31, 2020, our net sales from operations increased by $3,826 to approximately $29,429 from approximately $25,603 in the six months ended December 31, 2019. Our net sales in the Contract Manufacturing Segment increased by $3,870, offset by a decrease in our Other Nutraceuticals Segment of $44. Net sales increased in our Contract Manufacturing Segment primarily due to increased sales volumes to Life Extension and Herbalife in the amount of $3,306 and $160, respectively. For the six months ended December 31, 2020, we had operating income of approximately $2,753, an increase of approximately $1,072 from operating income of approximately $1,681 for the six months ended December 31, 2019. Our profit margins increased from approximately 13.4% of net sales in the six months ended December 31, 2019 to approximately 15.5% of net sales in the six months ended December 31, 2020, primarily as a result of the increased sales in our Contract Manufacturing Segment of approximately $3,870. Our consolidated selling and administrative expenses increased by approximately $50 or approximately 2.9% in the six months ended December 31, 2020 compared to the six months ended December 31, 2019. Our employee stock compensation expense increased by $64 and we had an increase in expected losses on customer receivables of $30, offset in part, from decreases in professional fees of $40 primarily from decreased legal fees, along with a decrease in travel and entertainment of $37.
Our revenue from our two significant customers in our Contract Manufacturing Segment is dependent on their demand within their respective distribution channels for the products we manufacture for them. As in any competitive market, our ability to match or beat other contract manufacturers pricing for the same items may also alter our outlook and the ability to maintain or increase revenues. We will continue to focus on our core businesses and push forward in maintaining our cost structure in line with our sales and expanding our customer base.
The COVID-19, or coronavirus outbreak, has the potential to cause a disruption in our supply chain. Currently, some of our suppliers of certain materials used in the production of our supplements are located in China and other impacted countries or other states within the United States. Most materials may be obtained from more than one supplier. However, due to port closures and other restrictions resulting from the coronavirus outbreak throughout the world, these suppliers, located both inside and outside of the United States, may have limited supply of such materials, which has caused prices of some materials to increase. As of February 12, 2021, we have had delays, however; have not experienced a significant disruption in the supply chain for our raw materials.
We have taken measures to secure some surplus stock and have informed our customers who may be affected of the potential price increase. In addition, the significant outbreak of this contagious disease in the human population has resulted in a widespread health crisis that could adversely affect the economies and financial markets of many countries, resulting in an economic downturn that could affect demand for our products and impact our operating results.
While, as of February 12, 2021, we haven’t experienced a major disruption in the supply chain for our manufactured products, we have, however, seen a disruption in the supply chain for personal protection equipment (“PPE”) and cleaning supplies used in our manufacturing facilities in accordance with our standard operating procedures and the updated guidelines issued by the Centers for Disease Control and Prevention (the “CDC”) for personal safety. The U.S. Department of Labor Occupational Safety and Health Administration has adopted the CDC guidelines and as such we are required to provide the PPE for our employees to wear while working. When we have obtained the out of stock items, such as face masks, gloves and other protective personal items, the cost of such items were substantially higher than the historical costs. This may impact our future gross margins. Additionally, if we are unable to obtain cleaning supplies, we may have to temporarily close areas of production until the needed supplies are obtained.
We do not currently anticipate any negative impact to our margins resulting from the coronavirus outbreak, however; if we are unable to obtain the necessary materials to produce a supplement within our standard lead times or the necessary PPE and cleaning supplies, it may delay the production and shipment of those supplements, thereby shifting the timing of recognizing the resulting sale to our customers.
While our facilities remained open during the State of New Jersey lockdown as an essential business, there can be no assurances that we will continue to operate if the Governor of New Jersey should modify or issue new executive orders prohibiting our facilities to remain open.
Critical Accounting Policies and Estimates
There have been no changes to our critical accounting policies in the three and six months ended December 31, 2020, except as disclosed in Note 1. Principles of Consolidation and Basis of Presentation of the Condensed Financial Statements of the Company contained in this Quarterly Report on Form 10-Q. Critical accounting policies and the significant estimates made in accordance with them are regularly discussed by management with our Audit Committee. Those policies are discussed under “Critical Accounting Policies” in our “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Item 7 of our Annual Report on Form 10-K for the year ended June 30, 2020 and in Note 1. Principles of Consolidation and Basis of Presentation of the Condensed Financial Statements of the Company contained in this Quarterly Report on Form 10-Q.
Results of Operations (in thousands, except share and per share amounts)
Our results from operations in the following table, sets forth the income statement data of our results as a percentage of net sales for the periods indicated:
|
|
For the three months
|
|
|
For the six months
|
|
|
|
ended December 31,
|
|
|
ended December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales, net
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales
|
|
|
84.8
|
%
|
|
|
85.7
|
%
|
|
|
84.5
|
%
|
|
|
86.6
|
%
|
Selling and administrative
|
|
|
6.5
|
%
|
|
|
5.8
|
%
|
|
|
6.1
|
%
|
|
|
6.8
|
%
|
|
|
|
91.3
|
%
|
|
|
91.5
|
%
|
|
|
90.6
|
%
|
|
|
93.4
|
%
|
Income from operations
|
|
|
8.7
|
%
|
|
|
8.5
|
%
|
|
|
9.4
|
%
|
|
|
6.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense), net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(0.6%
|
)
|
|
|
(0.8%
|
)
|
|
|
(0.5%
|
)
|
|
|
(0.9%
|
)
|
Realized gain on sale of iBio Stock
|
|
|
-
|
|
|
|
-
|
|
|
|
0.2
|
%
|
|
|
-
|
|
Unrealized loss on investments
|
|
|
(0.3%
|
)
|
|
|
(0.2%
|
)
|
|
|
(0.3%
|
)
|
|
|
(0.2%
|
)
|
Other income, net
|
|
|
0.1
|
%
|
|
|
0.1
|
%
|
|
|
0.0
|
%
|
|
|
0.1
|
%
|
Other expense, net
|
|
|
(0.8%
|
)
|
|
|
(0.9%
|
)
|
|
|
(0.6%
|
)
|
|
|
(1.0%
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
7.9
|
%
|
|
|
7.6
|
%
|
|
|
8.8
|
%
|
|
|
5.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes
|
|
|
(0.7%
|
)
|
|
|
0.8
|
%
|
|
|
1.1
|
%
|
|
|
0.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
8.6
|
%
|
|
|
6.8
|
%
|
|
|
7.7
|
%
|
|
|
5.0
|
%
|
For the Six months ended December 31, 2020 compared to the Six months ended December 31, 2019
Sales, net. Sales, net, for the six months ended December 31, 2020 and 2019 were $29,429 and $25,603, respectively, an increase of 14.9%, and were comprised of the following:
|
|
Six months ended
|
|
|
Dollar
|
|
|
Percentage
|
|
|
|
December 31,
|
|
|
Change
|
|
|
Change
|
|
|
|
2020
|
|
|
2019
|
|
|
2020 vs 2019
|
|
|
2020 vs 2019
|
|
|
|
(amounts in thousands)
|
|
|
|
|
|
Contract Manufacturing:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US Customers
|
|
$
|
25,492
|
|
|
$
|
20,502
|
|
|
$
|
4,990
|
|
|
|
24.3
|
%
|
International Customers
|
|
|
3,166
|
|
|
|
4,286
|
|
|
|
(1,120
|
)
|
|
|
(26.1%
|
)
|
Net sales, Contract Manufacturing
|
|
|
28,658
|
|
|
|
24,788
|
|
|
|
3,870
|
|
|
|
15.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Nutraceuticals:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US Customers
|
|
|
720
|
|
|
|
756
|
|
|
|
(36
|
)
|
|
|
(4.8%
|
)
|
International Customers
|
|
|
51
|
|
|
|
59
|
|
|
|
(8
|
)
|
|
|
(13.6%
|
)
|
Net sales, Other Nutraceuticals
|
|
|
771
|
|
|
|
815
|
|
|
|
(44
|
)
|
|
|
(5.4%
|
)
|
Total net sales
|
|
$
|
29,429
|
|
|
$
|
25,603
|
|
|
$
|
3,826
|
|
|
|
14.9
|
%
|
In each of the six months ended December 31, 2020 and 2019, a significant portion of our consolidated net sales, approximately 92%, were concentrated among two customers in our Contract Manufacturing Segment, Life Extension and Herbalife. Life Extension and Herbalife represented approximately 70% and 24% and 68% and 27%, respectively, of our Contract Manufacturing Segment’s net sales in the six months ended December 31, 2020 and 2019, respectively. Innophos (a customer of our Other Nutraceutical Businesses), while not a significant customer of our consolidated net sales, represented approximately 0% and 18% of the Other Nutraceutical Businesses net sales in the six months ended December 31, 2020 and 2019, respectively. The loss of any of these customers could have a significant adverse impact on our financial condition and results of operations.
The increase in net sales of approximately $3,826 was primarily the result of increased net sales in our Contract Manufacturing Segment by $3,870 primarily due to increased sales volumes to Life Extension and Herbalife in the amounts of $3,306 and $160, respectively, and a combined net increase to our other customers of $404.
Cost of sales. Cost of sales increased by approximately $2,704 to $24,882 for the six months ended December 31, 2020, as compared to $22,178 for the six months ended December 31, 2019 or approximately 12%. Cost of sales decreased as a percentage of sales to 84.5% for the six months ended December 31, 2020 as compared to 86.6% for the six months ended December 31, 2019. The increase of 12.2% in the cost of goods sold amount is consistent with the increased net sales of approximately 14.9%. The decrease in the cost of goods sold as a percentage of net sales, was primarily the result of the increased net sales used to offset the fixed manufacturing overhead. There were no significant changes in the cost of goods sold in our other two segments other than the variances in sales.
Selling and Administrative Expenses. There was an increase in selling and administrative expenses of $50, approximately 3% in the six months ended December 31, 2020 as compared to the six months ended December 31, 2019. As a percentage of sales, net, selling and administrative expenses were approximately 6% and 7% in the six months ended December 31, 2020 and 2019, respectively. The increase of $50 was primarily from increases in (i) employee stock compensation expense of $64 as a result of issuing stock options in November 2020, with no such grant in the period ended December 31, 2019 and; (ii) an increase in expected losses on customer receivables of $30. These increases we offset, in part, by decreases in (i) professional and consulting fees of approximately $40 primarily as the result of decreased legal fees of approximately $52 from general legal counsel offset by an increase in of $12 in other professional consulting services and (ii) travel and entertainment expenses of $37 as the result of the travel and entertainment restrictions from the COVID-19 pandemic.
Other income (expense), net. Other income (expense), net was approximately $156 for the six months ended December 31, 2020 compared to $261 for the six months ended December 31, 2019, and was composed of:
|
|
Six months ended
|
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
(dollars in thousands)
|
|
Interest expense
|
|
$
|
(155
|
)
|
|
$
|
(233
|
)
|
Realized gain on sale of investment in iBio Stock
|
|
|
56
|
|
|
|
-
|
|
Unrealized loss on investment in iBio Stock
|
|
|
(73
|
)
|
|
|
(55
|
)
|
Other income
|
|
|
16
|
|
|
|
27
|
|
Other income (expense), net
|
|
$
|
(156
|
)
|
|
$
|
(261
|
)
|
Our interest expense for the six months ended December 31, 2020 decreased by $78 from the six month period ended December 31, 2019, primarily resulting from of lower average daily balances outstanding under the Senior Credit Facility with PNC and a decrease in the interest rates of approximately 1.5% in the six months ended December 31, 2020 from the six months ended December 31, 2019 (See Note 4 to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q).
In the six months ended December 31, 2020, we sold 16,000 shares of iBio Stock for a gain of $56 with no such sales in the six months ended December 31, 2019. Also, in the six months ended December 31, 2020, and 2019, we had an unrealized loss on the remaining iBio Stock of approximately $73 and $55, respectively.
Provision for income taxes. For the six months ended December 31, 2020 and 2019, we had a state income tax provision of approximately $311 and $158, respectively and a federal income tax benefit of $9 in the six months ended December 31, 2019, compared to a federal tax provision of $21 in the six months ended December 31, 2020. We continue to maintain a reserve on a portion of our deferred tax assets as it has been determined that based upon past losses, the Company’s past liquidity concerns and the current economic environment, it is “more likely than not” that the Company’s deferred tax assets may not be fully realized.
Net income. Our net income for the six months ended December 31, 2020 and 2019 was approximately $2,265 and $1,271, respectively. The increase of approximately $994 was primarily the result of increased operating income of $1,072 and decreased interest expense of $78, offset by increases in selling and administrative expenses of $50 and provision for income taxes of $183.
For the Three Months Ended December 31, 2020 compared to the Three Months Ended December 31, 2019
Sales, net. Sales, net, for the three months ended December 31, 2020 and 2019 were $14,257 and $14,197, respectively, an increase of 0.4%, and are comprised of the following:
|
|
Three months ended
|
|
|
Dollar
|
|
|
Percentage
|
|
|
|
December 31,
|
|
|
Change
|
|
|
Change
|
|
|
|
2020
|
|
|
2019
|
|
|
2020 vs 2019
|
|
|
2020 vs 2019
|
|
|
|
(amounts in thousands)
|
|
|
|
|
|
Contract Manufacturing:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US Customers
|
|
$
|
12,168
|
|
|
$
|
11,501
|
|
|
$
|
667
|
|
|
|
5.8
|
%
|
International Customers
|
|
|
1,704
|
|
|
|
2,303
|
|
|
|
(599
|
)
|
|
|
(26.0%
|
)
|
Net sales, Contract Manufacturing
|
|
|
13,872
|
|
|
|
13,804
|
|
|
|
68
|
|
|
|
0.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Nutraceuticals:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US Customers
|
|
|
339
|
|
|
|
377
|
|
|
|
(38
|
)
|
|
|
(10.1%
|
)
|
International Customers
|
|
|
46
|
|
|
|
16
|
|
|
|
30
|
|
|
|
187.5
|
%
|
Net sales, Other Nutraceuticals
|
|
|
385
|
|
|
|
393
|
|
|
|
(8
|
)
|
|
|
(2.0%
|
)
|
Total net sales
|
|
$
|
14,257
|
|
|
$
|
14,197
|
|
|
$
|
60
|
|
|
|
0.4
|
%
|
For the three months ended December 31, 2020 and 2019, a significant portion of our consolidated net sales, approximately 92% and 93%, respectively, were concentrated among two customers, Life Extension and Herbalife, in our Contract Manufacturing Segment. Life Extension and Herbalife, represented approximately 72% and 24% and 70% and 26%, respectively, of our Contract Manufacturing Segment’s net sales in the three months ended December 31, 2020 and 2019, respectively. Innophos, while not significant customer of our consolidated net sales, represented approximately 0% and 10%, of the Other Nutraceutical Businesses net sales in the three months ended December 31, 2020 and 2019, 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 $60 was primarily the result of increased net sales in our Contract Manufacturing Segment by $68 primarily due to increased sales volumes to Life Extension of $313, offset by decreases in sales volume to Herbalife in the amount $369, respectively and a combined net increase to our other customers of $124.
Cost of sales. Cost of sales were substantially the same in the each of three months ended December 31, 2020 and 2019, $12,083 as compared to $12,171, respectively. Cost of sales as a percentage of sales was approximately 85% for each of the three months ended December 31, 2020 and 2019.
Selling and Administrative Expenses. There was an increase in selling and administrative expenses of $109, approximately 13.3% in the three months ended December 31, 2020 as compared to the three months ended December 31, 2019. As a percentage of sales, net, selling and administrative expenses were approximately 6.5% and 5.8% in the three months ended December 31, 2020 and 2019, respectively. The increase of $109 was primarily from increases in (i) employee stock compensation expense of $71 as a result of issuing stock options in November 2020,
with no such grant in the period ended December 31, 2019 and; (ii) professional and consulting fees of approximately $31 primarily as the result of increased legal fees of approximately $9 from general legal counsel and of $22 in other professional consulting services. These increases were offset, in part by a decrease in travel and entertainment expenses of $22 as the result of the travel and entertainment restrictions from the COVID-19 pandemic. No other component of selling and administrative expenses increased by more than $10 in the three month period ended December 31, 2020 compared to the same period ended December 31, 2019.
Other income (expense), net. Other income (expense), net was approximately $115 for the three months ended December 31, 2020 compared to $134 for the three months ended December 31, 2019, and is composed of:
|
|
Three months ended
|
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
(dollars in thousands)
|
|
Interest expense
|
|
$
|
(79
|
)
|
|
$
|
(109
|
)
|
Unrealized loss on investment in iBio Stock
|
|
|
(44
|
)
|
|
|
(31
|
)
|
Other income
|
|
|
8
|
|
|
|
6
|
|
Other income (expense), net
|
|
$
|
(115
|
)
|
|
$
|
(134
|
)
|
Our interest expense for the three months ended December 31, 2020 decreased by $30 from the three month period ended December 31, 2019, primarily as the result of lower average daily balances outstanding under the Senior Credit Facility with PNC and a decrease in the interest rates of approximately 1.5% in the three month period ended December 31, 2020 from the three month period ended December 31, 2019 (See Note 4 to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q).
Federal and state income tax expense, net. For the three months ended December 31, 2020 and 2019, we had a federal deferred income tax benefit of $252 and $3, respectively, and state income tax expense, net of approximately $157 and $115, in the three months ended December 31, 2020 and 2019, respectively. We continue to maintain a reserve on a portion of our deferred tax assets as it has been determined that based upon past losses, the Company’s past liquidity concerns and the current economic environment, it is “more likely than not” that the Company’s deferred tax assets may not be fully realized.
Net income. Our net income for the three months ended December 31, 2020 and 2019 was approximately $1,224 and $959, respectively. The increase of approximately $265 was primarily the result of the decrease in the provision for income taxes of $207.
Seasonality
The nutraceutical business can be seasonal. Due to our current customer base in our contract manufacturing segment, our fiscal quarter ending December 31st each year tends to be more than our average quarterly volume for the other three fiscal quarters in the fiscal year. This increase is based on their forecast of their customer base.
The Company believes that there are non-seasonal factors that may influence the variability of quarterly results including, but not limited to, general economic and industry conditions that affect consumer spending, changing consumer demands and current news on nutritional supplements. Accordingly, a comparison of the Company’s results of operations from consecutive periods is not necessarily meaningful, and the Company’s results of operations for any period are not necessarily indicative of future periods.
Liquidity and Capital Resources
The following table sets forth, for the periods indicated, the Company’s net cash flows used in operating, investing and financing activities, its period end cash and cash equivalents and other operating measures:
|
|
For the six months ended
|
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
(dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
$
|
1,164
|
|
|
$
|
1,058
|
|
Net cash used in investing activities
|
|
$
|
(21
|
)
|
|
$
|
(98
|
)
|
Net cash used in financing activities
|
|
$
|
(1,502
|
)
|
|
$
|
(1,368
|
)
|
|
|
|
|
|
|
|
|
|
Cash at end of period
|
|
$
|
43
|
|
|
$
|
67
|
|
At December 31, 2020, our working capital was approximately $4,834, an increase of $1,472 from our working capital of $3,362 at June 30, 2020. Our current assets increased by $2,638 offset by an increase in our current liabilities of $1,166. The increase in the current assets is primarily from increases in inventories in the amount of $3,815 offset by a decrease in accounts receivable, net of $970.
Operating Activities
Net cash provided by operating activities of $1,164 in the six months ended December 31, 2020 includes net income of approximately $2,265. After excluding the effects of non-cash expenses, including depreciation and amortization, and changes in deferred tax assets, the adjusted cash provided from operations before the effect of the changes in working capital components was $2,832. Net cash provided by our operations in the six months ended December 31, 2020 was offset by uses in our working capital assets and liabilities in the amount of approximately $1,668 and was primarily the result of an increase in our inventory of $3,815, offset by an aggregate increase in accounts payable, accrued expenses and other liabilities of $1,684 and a decrease in accounts receivable of $970.
Net cash provided by operating activities of $1,058 in the six months ended December 31, 2019 includes net income of approximately $1,271. After excluding the effects of non-cash expenses, including depreciation and amortization, and changes in the fair value of derivative liabilities and deferred tax assets, the adjusted cash provided from operations before the effect of the changes in working capital components was $1,746. Net cash used in our operations in the six months ended December 31, 2019 from our working capital assets and liabilities in the amount of approximately $688 was primarily the result of cash used in accounts receivable of $441 and inventories of $471 and a decrease in obligations under operating leases of $234 offset by an aggregate increase in accounts payable, accrued expenses and other liabilities of $475.
Investing Activities
Cash used in investing activities in the six months ended December 31, 2020 of approximately $21 was from proceeds of $96 from the sale of iBio Stock offset by the purchase of machinery and equipment of $117. Cash used in investing activities of $98 in the six months ended December 31, 2019 was used primarily for the purchase of machinery and equipment of approximately $101.
Financing Activities
Cash used in financing activities was approximately $1,502 for the six months ended December 31, 2020, and was primarily from repayments of advances under our revolving credit facility of $29,151 and principal payments under our term notes in the amount of $862, offset by advances under our revolving credit facility of approximately $28,579.
Cash used in financing activities was approximately $1,368 for the six months ended December 31, 2019, and was from repayments of advances under our revolving credit facility of $24,469 and principal payments under our term notes in the amount of $610, offset, in part, by advances under our revolving credit facility of approximately $23,826.
As of December 31, 2020, we had cash of $43, funds available under our revolving credit facility of approximately $2,694 and working capital of approximately $4,834. Our working capital includes $3,475 outstanding under our revolving line of credit which is not due until May 2024 but classified as current due to a subjective acceleration clause that could cause the advances to become currently due. (See Note 4 to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q). Additionally, we had income from operations of approximately $2,753 in the six months ended December 31, 2020. 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 February 12, 2022.
Our total annual commitments at December 31, 2020 for long term non-cancelable leases of approximately $565 consists of obligations under operating leases for facilities and operating lease agreements for the rental of warehouse equipment, office equipment and automobiles.
Capital Expenditures
The Company's capital expenditures for the six months ended December 31, 2020 and 2019 were approximately $117 and $101, respectively. The Company has budgeted approximately $475 for capital expenditures for fiscal year 2021. The total amount is expected to be funded from lease financing and cash provided from the Company’s operations.
Off-Balance Sheet Arrangements
The Company has no off-balance sheet arrangements.
Recent Accounting Pronouncements
None.
Impact of Inflation
The Company does not believe that inflation has significantly affected its results of operations.