What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2025-09-23 compared with 2024-09-27 · 330 added, 202 removed, 750 unchanged (41% of the section changed)

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and

Stockholders of Natural Alternatives International, Inc.

To the Board of Directors and Stockholders of

Natural Alternatives International, Inc.

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Natural Alternatives International, Inc.

(the “Company”) as of June 30, 2024 and 2023, and the related consolidated statements of operations and comprehensive (loss) income, stockholders’ equity and cash flows for each of the two years in the period ended June 30, 2024, and the related notes (collectively referred to as the “consolidated financial statements”).

(the “Company”) as of June 30, 2025 and 2024, and the related consolidated statements of operations and comprehensive loss, stockholders’ equity and cash flows for each of the two years in the period ended June 30, 2025, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of June 30, 2025 and 2024, and the consolidated results of its operations and its cash flows for each of the two years in the period ended June 30, 2025, in conformity with accounting principles generally accepted in the United States of America.

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We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of this critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.

Revenue Recognition — Refer to Note A to the Consolidated Financial Statements

Critical Audit Matter Description

The Company recognizes revenue upon transfer of control of promised products to customers in an amount that reflects the consideration the Company expects to receive in exchange for those products.

The Company is a party to certain customer supply contracts that contain unique, customer-specific terms and conditions that result in variable consideration.

For such contracts, significant interpretation may be required to determine the contract terms, estimated amounts and timing of recognition of variable consideration.

Variable consideration includes volume-related and other discounts and pricing concessions.

Our assessment of management’s evaluation of the above referenced matter related to proper revenue recognition is significant to our audit because the amounts may potentially be material to the consolidated financial statements, the assessment process involves significant judgment, and the application of U.S.

generally accepted accounting principles in this area is complex.

How the Critical Audit Matter Was Addressed in the Audit

Our principal audit procedures related to the Company’s revenue recognition for customer contracts that include variable consideration included the following:

We evaluated the appropriateness of management’s revenue recognition policies.

We tested the mathematical accuracy of management’s calculations of revenue, including variable consideration, and the associated timing of revenue recognized in the consolidated financial statements.

We identified customer contracts with variable consideration and performed the following procedures:

Obtained and read contracts and other source documents for each selection.

Tested management’s identification and treatment of the key contract terms, including performance obligations and variable consideration.

Evaluated the appropriateness of management's application of the Company’s accounting policies, along with their use of estimates, in the determination of revenue recognition in the proper amounts.

Critical Audit Matters

Critical audit matters are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

We determined that there are no critical audit matters.

/s/ HASKELL & WHITE LLP

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$ 12,325 $ 11,981

Accounts receivable – less allowance for credit losses of $ 0 at June 30, 2024 and $ 23 at June 30, 2023

Accounts receivable – less allowance for credit losses of $ 0 at June 30, 2025 and June 30, 2024

14,644 16,891

Inventories, net

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Natural Alternatives International, Inc.

Consolidated Statements of Operations and Comprehensive (Loss) Income

Consolidated Statements of Operations and Comprehensive Loss

For the Years Ended June 30

(Dollars in thousands, except share and per share data)

$ 129,860 $ 113,796

Cost of goods sold

Selling, general and administrative expenses

Recoveries of uncollectible accounts receivable

(Loss) income from operations

120,571 106,931

Other selling, general and administrative expenses

16,549 15,399

Settlement of legal proceeding and associated expense

Loss from operations

( 8,660 ) ( 8,534 )

Other income (expense):

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Interest expense

( 915 ) ( 361 )

Foreign exchange loss

( 1,340 ) ( 652 )

Total other expense

(Loss) income before income taxes

(Benefit) provision for income taxes

Net (loss) income

( 2,080 ) ( 930 )

Loss before income taxes

( 10,740 ) ( 9,464 )

Provision (benefit) for income taxes

2,835 ( 2,247 )

$ ( 13,575 ) $ ( 7,217 )

Change in minimum pension liability, net of tax

Unrealized loss resulting from change in fair value of derivative instruments, net of tax

Comprehensive (loss) income

Net (loss) income per common share:

( 1,443 ) ( 41 )

Comprehensive loss

$ ( 14,968 ) $ ( 7,156 )

Net loss per common share:

$ ( 2.28 ) $ ( 1.23 )

Weighted average common shares outstanding:

5,946,520 5,870,974

See accompanying notes to consolidated financial statements.

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Balance, June 30, 2023

9,314,406 $ 91 $ 31,436 $ 80,183 3,240,593 $ ( 22,855 ) $ ( 83 ) $ 88,772

Issuance of common stock for restricted stock grants

166,500 2 ( 2 ) — — — — —

Compensation expense related to stock compensation plans

— — 1,200 — — — — 1,200

Repurchase of common stock

— — — — 37,128 ( 221 ) — ( 221 )

Forfeiture of restricted stock

— — — — 3,000 — — —

Change in minimum pension liability, net of tax

— — — — — — 102 102

Unrealized loss resulting from change in fair value of derivative instruments, net of tax

— — — — — — ( 41 ) ( 41 )

— — — ( 7,217 ) — — — ( 7,217 )

Balance, June 30, 2024

9,480,906 $ 93 $ 32,634 $ 72,966 3,280,721 $ ( 23,076 ) $ ( 22 ) $ 82,595

Issuance of common stock for restricted stock grants

24,000 — — — — — — —

Compensation expense related to stock compensation plans

— — 977 — — — — 977

Repurchase of common stock

Forfeiture of restricted stock

— — — — 45,972 ( 178 ) — ( 178 )

Change in minimum pension liability, net of tax

— — — — — — 50 50

Unrealized loss resulting from change in fair value of derivative instruments, net of tax

— — — — — — ( 1,443 ) ( 1,443 )

— — — ( 13,575 ) — — — ( 13,575 )

Balance, June 30, 2025

9,504,906 $ 93 $ 33,611 $ 59,391 3,326,693 $ ( 23,254 ) $ (1,415 ) $ 68,426

See accompanying notes to consolidated financial statements.

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Cash flows from operating activities

Net (loss) income

Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:

Recoveries of uncollectible accounts receivable

$ ( 13,575 ) $ ( 7,217 )

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

Settlement of legal proceeding and associated expense

Depreciation and amortization

Deferred income taxes

3,613 ( 2,907 )

Non-cash lease expenses

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Pension expense, net of contributions

Gain on disposal of assets

Loss on disposal of assets

Changes in operating assets and liabilities:

Accounts receivable

Operating lease liabilities

2,247 ( 9,869 )

( 622 ) 5,445

Prepaids and other assets

2,223 ( 1,597 )

Accounts payable and accrued liabilities

Operating lease liabilities

( 4,235 ) ( 3,003 )

Forward contracts

( 1,110 ) 189

Accrued compensation and employee benefits

Net cash (used in) provided by operating activities

Net cash provided by (used in) operating activities

5,932 ( 1,497 )

Cash flows from investing activities

Purchases of property and equipment

Proceeds from sale of property and equipment

( 3,614 ) ( 3,017 )

Net cash used in investing activities

( 3,614 ) ( 3,017 )

Cash flows from financing activities

Borrowings on line of credit

(Payments) Borrowings on line of credit

( 1,500 ) 3,400

Repurchase of common stock

( 178 ) ( 221 )

Payments on long-term debt

Net cash provided by (used in) financing activities

Net decrease in cash and cash equivalents

( 296 ) ( 288 )

Net cash (used in) provided by financing activities

( 1,974 ) 2,891

Net increase (decrease) in cash and cash equivalents

344 ( 1,623 )

Cash and cash equivalents at beginning of year

11,981 13,604

Cash and cash equivalents at end of year

$ 12,325 $ 11,981

Supplemental disclosures of cash flow information

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We provide private-label contract manufacturing services to companies that market and distribute vitamins, minerals, herbs, and other nutritional supplements, as well as other health care products, to consumers both within and outside the U.S.

We also seek to commercialize our patent and trademark estate related to the ingredient known as beta-alanine sold under our CarnoSyn®, SR CarnoSyn® trademarks, and recently announced TriBsyn™ tradename through direct raw material sales and various license and similar arrangements.

We also seek to commercialize our patent and trademark estate related to the ingredient known as beta-alanine sold under our CarnoSyn®, SR CarnoSyn® and TriBsyn™ trademarks through raw material and finished product sales and various license and similar arrangements.

On January 22, 1999, Natural Alternatives International Europe S.A., a Swiss Corporation (NAIE) was formed as our wholly owned subsidiary, based in Manno, Switzerland.

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Recently Adopted Accounting Pronouncements

In June 2016, the FASB issued ASU 2016 - 13, “Financial Instruments—Credit Losses (Topic 326 ):

Measurement of Credit Losses on Financial Instruments.” ASU 2016 - 13 introduced a novel approach to assessing impairments known as the "current expected credit loss model" or "CECL." Unlike the previous standard, which focused on incurred losses, CECL centers on anticipated losses.

Under this framework, organizations are obligated to acknowledge an allowance corresponding to their estimate of expected credit losses.

The CECL model is applicable to a wide range of financial instruments, including debt instruments, trade receivables, lease receivables, financial guarantee contracts, and other loan commitments.

We adopted ASU 2016 - 13 effective July 1, 2023.

In November 2023, the FASB issued ASU 2023 - 07, "Segment Reporting (Topic 280 ):

Improvements to Reportable Segment Disclosures".

This amendment improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses.

The amendment in this update is effective for fiscal years beginning after December 15, 2023, and interim periods with fiscal years beginning after December 15, 2024.

We adopted this guidance in fiscal 2025 and will adopt the guidance in interim periods beginning in fiscal 2026.

The adoption of ASU 2023 - 07 did not materially impact our results of operations or our financial statement presentation or related disclosures.

Recently Issued Accounting and Regulatory Pronouncements

In November of 2024, the FASB issued ASU 2024 - 03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220 - 40 ):

Disaggregation of Income Statement Expenses.

This ASU requires public companies to disclose, in the notes to financial statements, specified information about certain costs and expenses presented in the Consolidated Statements of Operations and Comprehensive Loss.

ASU 2024 - 03 is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027.

ASU 2024 - 03 allows for early adoption and requires prospective application to financial statements issued for reporting periods after the effective date of ASU 2024 - 03, and it allows for election to retrospectively adopt to any or all comparatively presented prior periods in the financial statements beginning before the effective date.

This ASU will be adopted in our annual financial statements for the year ending June 30, 2028.

We are currently evaluating the impact of this standard;

however, we do not expect it to have a material impact on our Consolidated Financial Statements.

In October 2023, the FASB issued Accounting Standards Update ("ASU") 2023 - 06, "Disclosure Improvements - Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative".

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As we are currently subject to these SEC requirements, this ASU is not expected to have a material impact on our Consolidated Financial Statements or related disclosures.

In November 2023, the FASB issued ASU 2023 - 07, "Segment Reporting (Topic 280 ):

Improvements to Reportable Segment Disclosures".

This amendment improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses.

The amendments in ASU 2023 - 07 are effective for fiscal years beginning after December 15, 2023, with early adoption permitted.

This ASU will be adopted in our fiscal 2025.

We are currently evaluating the impact of this standard;

however, we do not expect it to have a material impact on our Consolidated Financial Statements.

In December 2023, the FASB issued ASU 2023 - 09, "Income Taxes (Topic 740 ):

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The amendments in ASU 2023 - 09 are effective for fiscal years beginning after December 15, 2024, with early adoption permitted.

This ASU will be adopted in our first quarter of fiscal 2026.

This ASU will be adopted in our annual financial statements for the year ending June 30, 2026.

We are currently evaluating the impact of this standard;

however, we do not expect it to have a material impact on our Consolidated Financial Statements.

In March 2024, the SEC adopted rules under SEC Release No.

33 - 11275, "The Enhancement and Standardization of Climate-Related Disclosures for Investors", which require a registrant to disclose information in annual reports and registration statements about climate-related risks that are reasonably likely to have a material impact on its business, results of operations, or financial condition.

The information would include disclosure of a registrant's greenhouse gas emissions.

In addition, certain disclosures related to severe weather events and other natural conditions will be required in a registrant’s audited financial statements.

Annual disclosure requirements would be effective for the Company as early as the fiscal year beginning July 1, 2027.

However, in April 2024, the SEC voluntarily stayed the final rules pending certain legal challenges.

It is presently unclear what the nature and scope of these requirements may be when and if the stay is lifted.

We are evaluating the impact these anticipated types of rules may have on our record keeping and disclosures.

Employee Retention Tax Credit

In March 2020, the Coronavirus Aid, Relief, and Economic Security Act was signed into law, providing numerous tax provisions and other stimulus measures, including the Employee Retention Tax Credit (“ERTC”).

The Taxpayer Certainty and Disaster Tax Relief Act of 2020 and the American Rescue Plan Act of 2021 extended the availability of the ERTC.

Under these expanded measures, we determined during fiscal 2023 that we qualified for the ERTC for the first three quarters of calendar 2021 and filed amended payroll tax returns that are expected to result in a net refund of $ 3.5 million.

Although we don’t anticipate receiving the funds related to these amended returns until sometime in fiscal 2025, we recorded a receivable and recognized a benefit for this amount in our Consolidated Statements of Operations and Comprehensive Income in fiscal 2023 by applying the loss recovery model as codified by Accounting Standards Codification (“ASC”) section 450 “Contingencies” that indicates that an asset related to a recovery should be recognized when the recovery is determined to be probable.

We recorded this benefit as a reduction to our payroll tax expense in the fiscal year 2023 with $ 2.2 million of the benefit offsetting cost of goods sold and $ 1.3 million offsetting selling, general and administrative expenses.

Cash and Cash Equivalents

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Total Derivative Contracts – Current Assets

Interest Swap – Other Noncurrent Assets

Euro Forward Contract– Other Noncurrent Assets

Total Derivative Contracts – Other Noncurrent Assets

Euro Forward Contract–Current Liabilities

Swiss Franc Forward Contract – Current Liabilities

( 263 ) ( 91 )

Total Derivative Contracts – Current Liabilities

( 1,967 ) ( 91 )

Fair Value Net Asset – all Derivative Contracts

$ ( 1,599 ) $ 590

We also classify any outstanding line of credit and term loan balance as a Level 2 liability, as the fair value is based on inputs that can be derived from information available in publicly quoted markets.

As of June 30, 2025 , we had $ 1.9 million outstanding on our line of credit and of $ 8.9 million outstanding on our term loan.

As of June 30, 2024 , we had $ 3.4 million outstanding on our line of credit and $ 9.2 million outstanding on our term loan.

As of June 30, 2023, we had no balance outstanding on our line of credit and $ 9.5 million outstanding on our term loan.

As of June 30, 2025 and June 30, 2024 , we did not have any financial assets or liabilities classified as Level 3.

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To date, such credit loss reserves, in the aggregate, have been adequate to cover collection losses.

In December 2022, we entered into an agreement to settle the remaining outstanding balance with a former customer whose accounts receivable balance was fully reserved in March 2020.

As of the date of the agreement, the remaining amount due from this customer was $ 3.4 million dollars and as part of the settlement, we agreed to a reduced amount of $ 1.4 million.

This reduced amount was paid based on an agreed upon payment schedule and if all payments are made as agreed the entire balance will be considered paid in full.

As of June 30, 2023, the former customer had made all scheduled payments totaling $ 850,000 , and we adjusted our accounts receivable reserve along with the corresponding accounts receivable balance such that the amount in excess of the settlement amount was written-off and the reserve associated with the unpaid portion of the settlement was no longer reserved for as of June 30, 2023.

All remaining scheduled payments were received during fiscal 2024 and there are no outstanding amounts due from this former customer as of June 30, 2024.

We operate primarily as a private-label contract manufacturer.

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Derivative Financial Instruments

We may use derivative financial instruments in the management of our foreign currency exchange risk inherent in our forecasted sales denominated in Euros, our long-term lease liability denominated in Swiss Francs and our exposure to interest rate fluctuations related to our term-note with Wells Fargo.

We may use derivative financial instruments in the management of our foreign currency exchange risk inherent in our forecasted sales denominated in Euros and Swiss Francs, our long-term lease liability denominated in Swiss Francs and our exposure to interest rate fluctuations related to our term-note with Wells Fargo.

We may hedge our foreign currency exposures by entering into offsetting forward exchange contracts.

To the extent we use derivative financial instruments that meet the relevant criteria, we account for them as cash flow hedges.

Foreign exchange derivative instruments that do not meet the criteria for cash flow hedge accounting are marked-to-market through the Consolidated Statements of Operations and Comprehensive (Loss) Income.

Foreign exchange derivative instruments that do not meet the criteria for cash flow hedge accounting are marked-to-market through the Consolidated Statements of Operations and Comprehensive Loss.

Historically, our cash flow derivative instruments related to our Euro sales have met the criteria for hedge accounting, while our derivative instruments related to our long-term lease liability have not.

In the fourth quarter of fiscal 2025, we began hedging our currency risk associated with sales denominated in Swiss Franc and these derivative instruments meet the criteria for cash flow hedge accounting.

We recognize any unrealized gains and losses associated with derivative instruments accounted for as cash flow hedges in income in the period in which the underlying hedged transaction is realized.

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As of June 30, 2025 , we held derivative contracts designated as cash flow hedges primarily to protect against the foreign exchange risks inherent in our forecasted sales of products at prices denominated in currencies other than the U.S.

Dollar, which is primarily the Euro.

As of June 30, 2024 , the notional amounts of our foreign exchange contracts were $ 34.0 million (€ 30.8 million).

Dollar, which are the Euro and Swiss Franc.

As of June 30, 2025 , the notional amounts of our foreign exchange contracts were $ 35.5 million (€ 31.2 million) for Euro sales and $ 6.8 million (CHF 5.4 million) for Swiss Franc sales.

These contracts will mature over the next 11 months.

As of June 30, 2024 , we held foreign currency contracts not designated as cash flow hedges primarily to protect against changes in valuation of our long-term lease liability.

As of June 30, 2025 , we held foreign currency contracts not designated as cash flow hedges primarily to protect against changes in valuation of our long-term lease liability associated with our Swiss manufacturing and storage facilities.

As of June 30, 2025 , the notional amounts of our foreign currency contracts not designated as cash flow hedges were $ 11.8 million (CHF 9.5 million).

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We are exposed to interest rate fluctuations related to our $ 10.0 million Term Note with Wells Fargo, which carries a variable interest rate of 1.80 % above the SOFR rolling 30 -day average.

To manage our exposure to this variable rate, on August 23, 2021, we entered into a floored interest rate swap that fixes our all-in rate on this loan to 2.4 % for the first three years of the term loan.

Defined Benefit Pension Plan

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Such estimates are calculated using historical averages adjusted for any expected changes due to current business conditions and experience.

We review and update these estimates at the end of each reporting period and the impact of any adjustments are recognized in the period the adjustments are identified.

We review and update these estimates at the end of each reporting period, and the impact of any adjustment is recognized in the period the adjustments are identified.

In assessing whether collection of consideration from a customer is probable, we consider both the customer's ability and intent to pay the amount of consideration when it is due.

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We provide early payment discounts to certain customers.

Based on historical payment trends, we expect that these customers will take advantage of these early payment discounts.

We evaluate the likelihood of customers taking advantage of these discounts based on historical payment trends.

The cost of these discounts is reported as a reduction to the transaction price.

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We require prepayment from certain customers.

We record any payments received in advance of contracts fulfillment as a contract liability and classified as customer deposits on the consolidated balance sheet.

We record any payments received in advance of contracts fulfillment as a contract liability, and they are classified as customer deposits on the consolidated balance sheet.

Contract liabilities and revenue recognized were as follows (in thousands):

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patents, and each patent’s corresponding foreign patent applications.

All of these patents and patent rights relate to the ingredient known as beta-alanine marketed and sold under our CarnoSyn® and SR CarnoSyn® trade marks and our TriBysn™ tradename.

All of these patents and patent rights relate to the ingredient known as beta-alanine marketed and sold under our CarnoSyn®, SR CarnoSyn® and TriBsyn™ trademarks.

We recorded beta-alanine raw material sales and royalty and licensing income as a component of revenue in the amount of $ 8.1 million during fiscal 2025 and $ 8.4 million during fiscal 2024 .

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In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will ultimately be realized based on whether future taxable income will be generated during the periods in which those temporary differences become deductible.

During the year ended June 30, 2024 , there was no change to our valuation allowance.

During the year ended June 30, 2025 , we recorded a valuation allowance against deferred income tax assets of $ 4.8 million, representing the amount of our deferred income tax assets in excess of our deferred income tax liabilities.

We recorded the valuation allowance because management was unable to conclude, in light of the cumulative loss we have realized related to our US-based operations in recent years, that realization of the net deferred income tax asset was more likely than not.

The valuation allowance recorded during fiscal 2025 primarily related to fiscal 2025 and prior net operating loss carry forwards and changes in other deferred tax items recognized during fiscal 2025 .

As a result of the recognition of these valuation adjustments, we have a $ 4.8 million net deferred tax asset offset by a valuation allowance of $ 4.8 million resulting in a net deferred tax asset of $ 0 as of June 30, 2025 .

This valuation allowance did not have any effect on the tax expense and related liability recorded for operating income recognized by NAIE during the year ended June 30, 2025 .

Income taxes are accounted for under the asset and liability method.

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Stock-Based Compensation

We had an omnibus equity incentive plan that was approved by our Board of Directors effective October 15, 2009, and approved by our stockholders at the Annual Meeting of Stockholders held on November 30, 2009 (the "2009 Plan").

The 2009 Plan expired on October 15, 2019.

The Board of Directors approved a new omnibus equity incentive plan that became effective January 1, 2021 ( the “2020 Plan”), which was approved by our stockholders at the Annual Meeting of Stockholders on December 4, 2020.

Our current omnibus equity incentive plan that became effective January 1, 2021 ( the “2020 Plan”), which was approved by our stockholders at the Annual Meeting of Stockholders on December 4, 2020.

Under the 2020 Plan, we may grant nonqualified and incentive stock options, restricted stock grants, restricted stock units, stock appreciation rights, and other stock-based awards to employees, non-employee directors and consultants.

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Actual results could differ from those estimates and our assumptions may prove to be inaccurate.

Net (Loss) Income per Common Share

We compute basic net (loss) income per common share using the weighted average number of common shares outstanding during the year, and diluted net income per common share using the additional dilutive effect of all dilutive securities.

Net Loss per Common Share

We compute basic net loss per common share using the weighted average number of common shares outstanding during the year, and diluted net loss per common share using the additional dilutive effect of all dilutive securities.

The dilutive impact of stock options and restricted shares account for the additional weighted average shares of common stock outstanding for our diluted net income per common share computation.

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For the Years Ended June 30,

Net (loss) income

$ ( 13,575 ) $ ( 7,217 )

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Diluted weighted average common shares outstanding

Basic net (loss) income per common share

Basic net loss per common share

$ ( 2.28 ) $ ( 1.23 )

Diluted net (loss) income per common share

Diluted net loss per common share

$ ( 2.28 ) $ ( 1.23 )

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Raw materials

$ 17,632 $ 18,489

Work in progress

Finished goods

( 758 ) ( 640 )

$ 24,871 $ 24,249

Property and Equipment

Property and equipment consisted of the following at June 30 (dollars in thousands):

$ 8,940 $ 8,940

Building and building improvements

24,650 24,723

Machinery and equipment

41,311 43,631

Office equipment and furniture

Leasehold improvements

24,788 23,223

Total property and equipment

106,862 107,519

accumulated depreciation and amortization

( 55,972 ) ( 55,308 )

Property and equipment, net

Depreciation and amortization expense was approximately $ 4.6 million in fiscal 2024 and $ 4.3 million in fiscal 2023 .

$ 50,890 $ 52,211

During fiscal year 2025, we disposed of machinery and equipment primarily due to obsolescence with total original value of $ 3.945 million and related accumulated depreciation of $ 3.896 million resulting in a loss on disposal of assets of $ 49,000 .

Depreciation and amortization expense was $ 4.6 million in both fiscal 2025 and fiscal 2024 .

We currently lease our Vista, California and Lugano, Switzerland product manufacturing and support facilities.

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Balance as of June 30, 2024

$ ( 278 ) $ 172 $ 84 $ ( 22 )

OCI/OCL before reclassifications

( 21 ) ( 1,983 ) ( 111 ) ( 2,115 )

Amounts reclassified from OCI

Tax effect of OCI activity

( 15 ) 432 27 444

Net current period OCI/OCL

50 ( 1,359 ) ( 84 ) ( 1,393 )

Balance as of June 30, 2025

$ ( 228 ) $ ( 1,187 ) $ — $ ( 1,415 )

Year Ended June 30, 2024

Balance as of June 30, 2023

$ ( 380 ) $ ( 110 ) $ 407 $ ( 83 )

OCI/OCL before reclassifications

88 538 ( 422 ) 204

Amounts reclassified from OCI

39 ( 92 ) — ( 53 )

Tax effect of OCI activity

( 25 ) ( 164 ) 99 ( 90 )

Net current period OCI/OCL

102 282 ( 323 ) 61

Balance as of June 30, 2024

On May 24, 2021, we entered into a renewed credit facility with Wells Fargo Bank, N.A (“Wells Fargo”) to extend the maturity of our working line of credit from November 1, 2022 to May 24, 2024.

That credit facility provided total lending capacity of up to $ 20.0 million and allowed us to use the credit facility for working capital as well as potential acquisitions.

On August 18, 2021, we entered into an amendment of that credit facility with Wells Fargo.

The amended credit facility added a $ 10.0 million term loan to the existing $ 20.0 million credit facility and permitted us to use the $10.0 million term loan as part of the $ 17.5 million purchase consideration for the acquisition of our new manufacturing and warehouse property in Carlsbad, California.

The amended credit agreement also increased the allowed capital expenditures from $ 10.0 million to $ 15.0 million for fiscal 2022, (exclusive of the amount paid for the acquisition of the new Carlsbad property noted above).

In addition, the revised credit notes reflected a change in the interest rate reference from London Interbank Offered Rate (LIBOR) to Secured Overnight Financing Rate (SOFR).

The Credit Agreement was amended and a new Revolving Line of Credit Note and Security Agreement were entered into.

A Term Note and real property security documents were added to secure the Term Note by the Carlsbad property.

Subsequently we entered into a Second and Third Amendment that changed certain limits on our use of the line of credit.

On December 31, 2023, we were not in compliance with certain financial covenants, including those related to net income requirements and the fixed charge coverage ratio.

On February 13, 2024, we entered into a fourth amendment to our credit facility with Wells Fargo that waived all prior instances of non-compliance, decreased our total borrowing capacity on the line of credit to $ 12.5 million, increased the interest rate on borrowings under the line of credit to 2.25 % from 1.29 % above the daily simple SOFR rate, modified our continuing compliance requirements, and reduced the uses we can fund with the line of credit.

Under the terms of the amended Credit Agreement, our new borrowing eligibility requirements including maintaining (i) a ratio of total liabilities to tangible net worth of not greater than 1.50 to 1.0 at any time;

(ii) limits our losses to a decreasing amount over the next three quarters, with net income after taxes of not less than $ 1.00 by September 30, 2024;

( iii) a rolling four -quarter fixed charge coverage ratio not less than 1.25 to 1.0 as of December 31, 2024 and each quarter thereafter.

The Fourth Amendment includes a limitation on the amount of capital expenditures that can be made in a given fiscal year, with such limitation set at $ 6.5 million, requires us to suspend share repurchase and dividend activity, and includes an availability reserve of 10 % that will be in place until we return to profitability.

Any amounts outstanding under the line of credit bear interest at a fixed or fluctuating interest rate as elected by us from time to time.

Any amounts outstanding under the line of credit must be paid in full on or before the maturity date which remains at May 23, 2025.

$ ( 278 ) $ 172 $ 84 $ ( 22 )

We have had a credit line with Wells Fargo Bank, N.A (“Wells Fargo”) for many years.

The credit line has been amended, modified, and extended several times, most recently on June 20, 2025, when we entered into a Sixth Amendment to Credit Agreement.

The Sixth Amendment waived all prior instances of non-compliance and preemptively waived anticipated non-compliance with covenants in the quarter ending June 30, 2025.

The amended Credit Agreement extended the credit line to December 31, 2026, decreased the maximum principal amount that can be borrowed from $ 12.5 million to $ 10.0 million, increased the interest rate on borrowings under the line of credit to 3.25 %, increased the unused commitment fee to 0.375 %, and added the Company’s powder processing facility in Carlsbad, California as security for the amended Credit Agreement.

Our obligations under the Credit Agreement are also secured by our accounts receivable and other rights to payment, general intangibles, inventory, equipment, and fixtures.

The Sixth Amendment also included modifications to our covenants under the Credit Agreement, including (i) net loss not greater than $ 250,000 for the first quarter of fiscal 2026, a net loss not greater than $ 750,000 for the first half of fiscal 2026, and net income of at least $ 1.00 on a year to date basis starting with the third quarter of fiscal 2026 and each fiscal quarter thereafter;

(ii) fixed charge coverage ratio calculated on a rolling 4 -quarter basis of not less than 1.0 to 1.0 for the first quarter of fiscal 2026 and not less than 1.25 to 1.0 for the second fiscal quarter of 2026 and all quarters thereafter.

Amounts outstanding that are subject to a fluctuating interest rate may be prepaid at any time without penalty.

Amounts outstanding that are subject to a fixed interest rate may be prepaid at any time in minimum amounts of $ 100,000 , subject to a prepayment fee equal to the sum of the discounted monthly differences between payment under a fixed rate versus payment under the variable rate for each month from the month of prepayment through the month in which the then applicable fixed rate term matures.

There is an unused commitment fee of 0.25 % required as part of the line of credit, and an origination fee of 1 % which we paid upon execution of the Fourth Amendment.

The Term Note used as part of the purchase consideration of our powder processing and warehouse property in Carlsbad, California referenced above, was for the original principal amount of $ 10.0 million, and is a seven -year term note with payments fully amortized based on a twenty-five year assumed term.

Installment payments under this loan commenced October 1, 2021 and continue through August 1, 2028 with a final installment consisting of all remaining amounts due to be paid in full on September 1, 2028.

Amounts outstanding on this note during the term of the agreement bear interest equal to 1.8 % above the SOFR rolling 30 -day average.

In connection with our term loan, we entered into an interest rate swap with Wells Fargo that effectively fixes our interest rate on our term loan at 2.4 % for the first three years of the term of the note.

Our obligations under the Credit Agreement are secured by our accounts receivable and other rights to payment, general intangibles, inventory, equipment and fixtures.

We also have credit approval with Wells Fargo Bank, which allows us to hedge foreign currency exposures up to 30 months in the future.

We also have credit approval with Bank of America which allows us to hedge foreign currency exposures up to 24 months in the future.

During fiscal year 2024 , no interest expense was capitalized to building improvements as our facility in Carlsbad, California was placed into service in April 2023.

As of June 30, 2023 , we capitalized $ 198,000 of interest expense to building improvements.

June 30, 2024 , we had $

9.2 million outstanding under the Term Note used

August 2021 for the purchase of our Carlsbad, California powder processing and warehouse property.

Amounts outstanding under our credit line are subject to a fixed interest rate, may be prepaid at any time in minimum amounts of $ 100,000 subject to a prepayment fee equal to the sum of the discounted monthly differences between payment under a fixed rate versus payment under the variable rate for each month from the month of prepayment through the month in which the then applicable fixed rate term matures.

There is an unused commitment fee of 0.375 % required as part of the line of credit, and an extension fee of $ 20,000 was incurred upon execution of the Sixth Amendment.

We have a Term Note with Wells Fargo we entered into on August 16, 2021 to borrow part of the purchase price of our powder processing and warehouse property in Carlsbad, California.

The Term Note is secured by a first mortgage on that property.

The Term Note was in the original principal amount of $ 10.0 million and is a seven -year note with payments fully amortized based on a twenty-five year assumed term.

Installment payments under this term loan commenced October 1, 2021 and continue through August 1, 2028 with a final installment consisting of all remaining amounts due, is due September 1, 2028.

Amounts outstanding on this note during the term of the agreement bear interest at the rate of 1.8 % above the SOFR rolling 30 -day average.

We also have credit approval with Wells Fargo Bank, which allows us to hedge foreign currency exposures up to 12 months in the future, and we have credit approval with Bank of America which allows us to hedge foreign currency exposures up to 24 months in the future.

As of June 30, 2025 , we had $ 8.9 million outstanding under the Term Note.

The future debt payments under the Term Note are as follows (in thousands):

2030 and Thereafter

Future Debt Payments

$ 305 $ 315 $ 325 $ 7,988 $ — $ 8,933

On June 30, 2024 , we were in compliance with all of the financial and other covenants required under the Amended Credit Agreement.

We anticipate we will not be able to comply with all of the covenants required under the Amended Credit Agreement in the first half of fiscal 2025.

We have advised the lender and are currently negotiating a potential revised credit facility or waiver.

For the quarter ended June 30, 2025 , we were not in compliance with the minimum net income and fixed charge coverage ratio covenants of our credit agreement, but these defaults were prospectively waived by the Sixth Amendment to our credit facility.

We anticipate we will not be able to comply with all of the covenants required under the modified Credit Agreement in the first half of fiscal 2026, primarily related to the impact on the fixed charge coverage ratio calculation due to the unexpected recognition of the litigation expense and valuation allowance on our net deferred tax assets during the fourth quarter of fiscal 2025.

We have advised our lender and are currently negotiating a potential revision to our credit agreement.

There can be no assurance we will be able to successfully complete the negotiation of a revised credit facility, or what the differences in amount, cost and other factors may be.

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Our available borrowing capacity under the amended terms of our amended credit facility was $ 9.9 million as of June 30, 2025 .

During fiscal 2024 , we recorded U.S.-based domestic tax benefit of $ 2.2 million and negligible foreign tax benefit.

During fiscal 2025 , we recorded U.S.-based domestic tax expense of $ 2.7 million and foreign tax expense of $ 0.1 million.

The following is a geographical breakdown of (loss) income before income taxes (in thousands):

During fiscal 2024 , we recorded U.S.-based domestic tax benefit of $ 2.2 million and negligible foreign tax benefit.

During fiscal 2025 , we recorded a valuation allowance against net domestic deferred income tax assets of $ 4.8 million, representing the amount of our deferred income tax assets in excess of our domestic deferred income tax liabilities.

This valuation allowance did not have any effect on the tax expense and related liability recorded for operating income recognized by NAIE during the year ended June 30, 2025 .

The following is a geographical breakdown of loss before income taxes (in thousands):

United States

$ ( 11,520 ) $ ( 9,046 )

Total (loss) income before income taxes

Total loss before income taxes

$ ( 10,740 ) $ ( 9,464 )

The (benefit) provision for income taxes for the years ended June 30 consisted of the following (in thousands):

The provision (benefit) for income taxes for the years ended June 30 consisted of the following (in thousands):

$ ( 858 ) $ ( 55 )

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( 68 ) ( 223 )

Total (benefit) provision for income taxes

Valuation allowance

3,549 ( 2,299 )

Total provision (benefit) for income taxes

$ 2,835 $ ( 2,247 )

Net deferred tax assets and deferred tax liabilities as of June 30 were as follows (in thousands):

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Pension liability

Accrued settlement of legal proceeding

Total gross deferred tax assets

14,347 12,563

Deferred tax liabilities:

4 unchanged sentences

( 7,464 ) ( 7,694 )

( 26 ) ( 31 )

Employee retention tax credit refund

Deferred tax liabilities

( 9,533 ) ( 9,393 )

Valuation allowance

Net deferred tax assets

$ 3,170 $ 355

As of June 30, 2025 , the Company had U.S.

1 unchanged sentence

The Company has state net operating loss carryforwards of $ 6.8 million, which, if unutilized, will begin to expire beginning in fiscal year 2032.

The Company also has foreign net operating loss carryforwards of $ 0.3 million, which, if unutilized, will begin to expire in fiscal year 2031.

The Company has federal and state tax credits of $ 0.8 million, which, if unutilized, will begin to expire in fiscal year 2041.

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NAIE’s effective tax rate for the fiscal year ended June 30, 2025 for Swiss federal, cantonal and communal taxes is approximately 21% .

This rate is lower than our historical effective rate for NAIE because NAIE recognized a pre-tax loss and the calculated benefit for the year was mostly offset by a capital tax that is calculated based on net equity regardless of whether the company recognized a profit or not.

As part of the Tax Cuts and Jobs Act of 2017 (the Tax Act), we were required to recognize a one -time deemed repatriation transition tax during the fiscal year ended June 30, 2018 based on our total post- 1986 earnings and profits (E&P) from our Swiss subsidiary, NAIE.

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We consider earnings accumulated subsequent to December 31, 2017 as indefinitely reinvested.

For tax years commencing on or after January 1, 2022, the Tax Cuts and Jobs Act of 2017, also eliminates the ability to immediately deduct research and development costs.

Instead, taxpayers are mandated to capitalize these expenses and amortize them over five years for research conducted within the United States and 15 years for research conducted abroad, as stipulated in IRC Section 174.

There is ongoing consideration in Congress for legislation that may revoke or postpone this capitalization and amortization requirement;

however, there is no guarantee that this provision will undergo repeal or any other form of modification.

Should this requirement remain unchanged, it will result in a reduction of our tax deduction for research and development expenses in the forthcoming years.

During fiscal 2024 , NAIE declared a dividend of $ 5.4 million to NAI, which was paid in the first quarter of fiscal 2025.

During fiscal 2023 , NAIE declared and paid dividends to NAI in the amount of $ 14.7 million.

These amounts are part of the undistributed earnings that we recorded a one -time deemed repatriation transition tax on in fiscal 2018 and therefore we did not recognize any additional tax on these dividends.

However, as part of these dividends, we were required to pay a 5 % Swiss withholding tax totaling $ 0.3 million in fiscal 2024 and $ 0.7 million in fiscal 2023 which were also accrued for as part of the implementation of the Tax Act in fiscal 2018.

A reconciliation of our income tax (benefit) provision computed by applying the statutory federal income tax rate of 21% for fiscal 2024 and for fiscal 2023 to net (loss) income before income taxes for the year ended June 30 is as follows (dollars in thousands):

For tax years commencing on or after January 1, 2022, the Tax Cuts and Jobs Act of 2017, also eliminated the ability to immediately deduct research and development costs.

Instead, taxpayers were mandated to capitalize these expenses and amortize them over five years for research conducted within the United States and 15 years for research conducted abroad, as stipulated in IRC Section 174.

Although the requirements of the Tax Cuts and Jobs Act of 2017 are applicable for our fiscal year ended on June 30, 2025 , the One Big Beautiful Bill Act was voted into law by congress on July 4, 2025 and restores the immediate expensing of domestic research and development expenses while making permanent the capitalization and amortization rules of research and development conducted abroad.

The One Big Beautiful Bill Act is effective beginning in our fiscal year 2026.

No dividends to NAI were declared by NAIE in fiscal 2025 .

During fiscal 2024 , NAIE declared a dividend to NAI of $ 5.4 million, which was paid in the first quarter of fiscal 2025.

These amounts are part of the undistributed earnings that we recorded a one -time deemed repatriation transition tax in fiscal 2018, and therefore, we did not recognize any additional tax on these dividends.

However, as part of these dividends, we were required to pay a 5 % Swiss withholding tax totaling $ 0.3 million in fiscal 2024 which was also accrued for as part of the implementation of the Tax Act in fiscal 2018.

A reconciliation of our income tax provision (benefit) computed by applying the statutory federal income tax rate of 21% for fiscal 2025 and for fiscal 2024 to net loss before income taxes for the year ended June 30 is as follows (dollars in thousands):

Income taxes computed at statutory federal income tax rate

1 unchanged sentence

State income taxes, net of federal income tax expense

( 177 ) ( 215 )

Permanent differences

4 unchanged sentences

Return to provision - differences

Income tax (benefit) provision as reported

Change in valuation allowance, net

Income tax provision (benefit) as reported

$ 2,835 $ ( 2,247 )

5 unchanged sentences

We have a profit-sharing plan pursuant to Section 401 (k) of the Code, whereby participants may contribute a percentage of compensation not in excess of the maximum allowed under the Code.

Effective January 1, 2022, all employees are eligible to participate in the plan the first of the month following 30 days of employment.

Also effective, January 1, 2022, we match 100 % of the first 5 % of a participant’s compensation contributed to the plan under the 401 (k) plan.

Effective January 1, 2022, all employees became eligible to participate in the plan the first of the month following 30 days of employment.

Also effective, January 1, 2025, we match 50 % of the first 6 % of a participant’s compensation contributed to the plan.

The total contributions under the plan charged to income from operations totaled $ 0.5 million for fiscal 2025 and $ 0.6 million for fiscal 2024 .

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The Incentive Plan provides the Board of Directors with the discretion to set aside assets to fund the Incentive Plan although that has not been done to date.

During the year ended June 30, 2024 , we granted a total of $ 0.9 million in deferred cash awards to members of our Board of Directors and certain key members of our management team.

During the year ended June 30, 2025 , we granted a total of $ 0.2 million in deferred cash awards to members of our Board of Directors.

During the year ended June 30, 2024 , we granted a total of $ 0.9 million in deferred cash awards to members of our Board of Directors and certain key members of our management team.

2 unchanged sentences

In the event a Participant ceases to be an employee of NAI or a member of our Board of Directors prior to any Payment Date, no further payments shall be made in connection with the Award.

No deferred cash awards were forfeited during the fiscal year ended June 30, 2025 and the fiscal year ended June 30, 2024 .

Defined Benefit Pension Plan

8 unchanged sentences

Interest cost

Actuarial loss

( 39 ) ( 29 )

Actuarial gain (loss)

Benefits paid

29 unchanged sentences

Net periodic benefit expense

In the fiscal year ended June 30, 2024 , we contributed $ 0.1 million to our defined benefit pension plan, and in the fiscal year ended June 30, 2023 , we did not contribute to the plan.

In the fiscal year ended June 30, 2025 , we contributed $ 48,000 to our defined benefit pension plan, and in the fiscal year ended June 30, 2024 , we contributed $ 116,000 to our defined benefit pension plan.

The following is a summary of changes in plan assets and benefit obligations recognized in other comprehensive income (loss) (in thousands):

Net income (loss)

$ 21 $ ( 88 )

26 unchanged sentences

100 % 100 % 100 %

The underlying basis of the investment strategy of our defined benefit pension plan is to ensure that pension funds are available to meet the plan’s benefit obligations when due.

5 unchanged sentences

$ 370 $ 370 $ — $ —

Cash alternatives(3)

$ 49 $ 49 $ — $ —

1 unchanged sentence

This category is comprised of publicly traded funds of which 74 % are U.S.

large-cap funds, 24 % emerging market funds, and 4 % non-U.S.

developed market funds.

large-cap funds, 20 % are U.S.

mid-cap funds, and 6 % U.S.

small-cap funds.

This category is comprised of publicly traded funds, of which 52 % are U.S.

fixed income funds and 23 % are corporate fixed income funds.

This category is comprised of money market funds.

fixed income funds and 48 % are corporate, foreign or emerging market funds.

This category is comprised of publicly traded assets, of which 81 % are money market funds and 19 % are commodities.

Stockholders' Equity

4 unchanged sentences

Under the Repurchase Plan, we may, from time to time, purchase shares of our common stock, depending upon market conditions, in open market or privately negotiated transactions.

The Fourth Amendment to the Credit Agreement with Wells Fargo effective February 13, 2024, currently prohibits most stock repurchases (see Note F).

Our Credit Agreement with Wells Fargo as amended, currently prohibits most stock repurchases (see Note F).

As a result, until that restriction is modified or removed, we do not intend to purchase our shares other than our longstanding practice of purchasing shares from our employees in exchange for paying the employees’ withholding tax requirements upon vesting of restricted stock held by the employee.

3 unchanged sentences

Shares acquired from employees for restricted stock vesting

45,972 3.88 178

Treasury Stock repurchases for the year ended June 30, 2024 were as follows:

2 unchanged sentences

Shares acquired from employees for restricted stock vesting

37,128 5.96 221

Treasury stock repurchase costs include commissions and fees.

6 unchanged sentences

Nonvested at June 30, 2024

283,107 $ 7.50

24,000 $ 3.84

( 133,122 ) $ 8.31

Nonvested at June 30, 2025

173,985 $ 6.38

Available for grant at June 30, 2025

2 unchanged sentences

Nonvested at June 30, 2023

Available for grant at June 30, 2023

Average Grant

Nonvested at June 30, 2022

223,682 $ 10.39

166,500 $ 6.09

( 104,075 ) $ 11.39

( 3,000 ) $ 9.59

Nonvested at June 30, 2024

283,107 $ 7.50

Available for grant at June 30, 2024

Restricted stock grants, granted to members of our Board of Directors and certain key members of our management team, vest over a period of years from the date of grant and the unvested shares cannot be sold or otherwise transferred and the right to receive dividends, if declared by our Board of Directors, is forfeitable until the shares become vested.

Restricted stock grants, granted to members of our Board of Directors and certain key members of our management team, vest over a period of up to three years from the date of grant and the unvested shares cannot be sold or otherwise transferred and the right to receive dividends, if declared by our Board of Directors, is forfeitable until the shares become vested.

The total remaining unrecognized compensation cost related to unvested restricted stock shares amounted to $ 0.9 million at June 30, 2025 and the weighted average remaining requisite service period of unvested restricted stock shares was 1.6 years.

We lease a total of approximately 162,000 square feet at our manufacturing facility in Vista, California from an unaffiliated third party under a non-cancelable operating lease.

On July 31, 2013, we executed a third amendment to the lease for our manufacturing facility in Vista, California.

As a result of this amendment, our facility lease had been extended through March 2024.

On July 18, 2023, we entered into a fourth amendment to the lease of our Vista, California manufacturing facility.

3 unchanged sentences

We primarily use the facilities for manufacturing, packaging, warehousing and distributing nutritional supplement products for the European and Asian marketplaces.

On July 1, 2019, NAIE extended the lease on its main manufacturing facility for an additional five years through June 30, 2024.

On May 4, 2022, NAIE further extended the lease on its main manufacturing facility for a new term of ten years effective January 1, 2023 with a new expiration date of December 31, 2032, with an option to extend one year.

1 unchanged sentence

NAIE uses the space primarily for raw material storage.

The lease is for an initial five -year term commencing on January 1, 2019 and NAIE can terminate the lease with 12 months advance notice given on June 30th or December 31st each year of the initial term.

The lease was for an initial five -year term commencing on January 1, 2019 and NAIE can terminate the lease with 12 months advance notice given on June 30th or December 31st each year of the initial term.

At the end of the initial term the lease transfers to an indefinite tenancy at the same rental rate terminable by NAIE or the landlord upon 12 months' advance notice.

This initial term of this lease ends on December 31, 2024 and as of June 30, 2024, we have not provided notification of terminating this lease, so the term automatically extended to December 31, 2025.

This initial term of this lease ended on December 31, 2024 and as of June 30, 2025 , we have not provided notification of terminating this lease, so the term automatically extended to December 31, 2026.

On January 26, 2024, we exercised the early termination of an apartment lease in Lugano, Switzerland.

8 unchanged sentences

Economic Dependency

We had substantial net sales to certain customers during the fiscal years ended June 30 shown in the following table.

We had substantial net sales to certain customers in our private-label contract manufacturing segment during the fiscal years ended June 30 shown in the following table.

The loss of any of these customers, or a significant decline in sales or the growth rate of sales to these customers, or in their ability to make payments when due, could have a material adverse impact on our net sales and net operating results.

Net sales to any one customer representing 10% or more of the respective year’s consolidated net sales were as follows (dollars in thousands):

Sales were less than 10% of the respective period’s consolidated net sales.

$ 42,289 $ 48,055

17,707 12,941

17,165 16,312

$ 77,161 $ 77,308

Accounts receivable from these customers totaled $ 9.9 million at June 30, 2025 and $ 12.3 million at June 30, 2024 .

We buy certain products, including beta-alanine, from a single supplier.

The loss of this supplier or other raw material suppliers could have a material adverse impact on our net sales and net income.

The loss of this supplier or other raw material suppliers could have a material adverse impact on our net results of operations.

Raw material purchases from any one supplier representing 10% or more of the respective period’s total raw material purchases were as follows (dollars in thousands):

Year ended June 30,

$ 12,004 18 % $ 11,624 23 %

Derivatives and Hedging

3 unchanged sentences

During the year ended June 30, 2025 and prior, we entered into forward contracts designated as cash flow hedges primarily to protect against the foreign exchange risks inherent in our forecasted sales of products at prices denominated in currencies other than the U.S.

These contracts are expected to be settled through September 2025.

These contracts are expected to be settled through June 2026.

For derivative instruments that are designated and qualify as cash flow hedges, we record the effective portion of the gain or loss on the derivative in accumulated other comprehensive income (OCI) as a separate component of stockholders’ equity and subsequently reclassify these amounts into earnings in the period during which the hedged transaction is recognized in earnings.

4 unchanged sentences

We monitor the probability of forecasted transactions as part of the hedge effectiveness testing on a quarterly basis.

As of June 30, 2024 , the notional amounts of our foreign exchange contracts accounted for as cash flow hedges were $ 34.0 million (€ 30.8 million).

As of June 30, 2024 , a net gain of approximately $ 0.2 million offset by approximately $ 0.1 million of deferred taxes, related to derivative instruments designated as cash flow hedges was recorded in OCI.

As of June 30, 2025 , the notional amounts of our foreign exchange contracts accounted for as cash flow hedges were $ 35.5 million (€ 31.2 million) for Euro sales and $ 6.8 million (CHF 5.4 million) for Swiss Franc sales.

As of June 30, 2025 , a net loss of approximately $ 1.6 million offset by approximately $ 0.4 million of deferred taxes, related to derivative instruments designated as cash flow hedges was recorded in OCI.

It is expected that $ 0.2 million of the gross gain as of June 30, 2024 , will be reclassified into earnings in the next 12 months along with the earnings effects of the related forecasted transactions.

During the year ended June 30, 2024 , we recognized $ 0.8 million of net gains in OCI and reclassified $ 0.4 million of gains and forward point amortization from OCI to Net Sales.

As of June 30, 2024 , a net gain of approximately $ 0.2 million, offset by approximately $ 0.1 million of deferred taxes, related to derivative instruments designated as cash flow hedges was recorded in OCI.

It is expected that $ 1.6 million of the net loss as of June 30, 2025 , will be reclassified into earnings in the next 12 months along with the earnings effects of the related forecasted transactions.

During the year ended June 30, 2025 , we recognized $ 1.6 million of net losses in OCI and reclassified $ 0.2 million of net losses and forward point amortization from OCI to Net Sales.

During the year ended June 30, 2024 , we recognized $ 0.8 million of net gains in OCI and reclassified $ 0.4 million of gains and forward point amortization from OCI to Net Sales.

6 unchanged sentences

Interest expense is adjusted for the difference between the actual SOFR spread and the swap contractual rate such that our effective interest expense for each period is equal to our hedged rate of 2.4%.

This interest rate swap contract expired on September 3, 2024.

Contingencies

5 unchanged sentences

Our evaluation of the likely impact of these actions could change in the future and we could have unfavorable outcomes we do not expect.

Israel-Hamas War

In October 2023, armed conflict escalated between Israel and Hamas.

Management is monitoring the conflict in Israel and Gaza and any broader economic effects from the crisis.

Israel accounts for a small portion of our global net sales, but we also source multiple raw materials that come from Israel.

While we do not anticipate this conflict will have a significant impact on our net sales, we are currently communicating with the customers and suppliers that may be impacted by this conflict, and we are evaluating options for alternative ingredient sources and/or holding safety stock of impacted materials to limit the effect this conflict may have on our ability to obtain the ingredients sourced from this region.

There are further concerns regarding consumer purchasing and consumption behavior, increases in global shipping expenses, greater volatility in foreign exchange and interest rates, and other unforeseen business disruptions due to the current global geopolitical tensions, including and relating to this conflict between Israel and Hamas and the continued conflict in Ukraine.

We will continue to evaluate impacts of these conflicts on our customers, suppliers, employees, and operations.

Settlement of Legal Proceeding

In December 2023, we were sued by three former employees in two separate, but substantially identical matters brought by the same law firm.

The lawsuits were filed as a putative class action and a PAGA action seeking awards for all similarly situated employees going back ten years or more.

We responded to these actions and agreed to submit the matters for mediation.

On July 3, 2025, the mediation took place, and a tentative settlement agreement was reached whereby we agreed to contribute a maximum of $ 1.25 million.

We have joined with the plaintiffs in moving the court to consolidate the two actions.

The potential settlement has been brought before the court and all similarly situated employees need to be contacted, and they may elect to participate or not.

The process of obtaining court approval of the settlement is estimated to take approximately one year.

We accrued the maximum settlement amount in our results of operations as of June 30, 2025 along with estimated related legal fees of approximately $ 0.15 million.

Employee Retention Tax Credit

In fiscal 2023, we recorded a $ 3.5 million Employee Retention Tax Credit ("ERTC") net refund associated with the Coronavirus Aid, Relief, and Economic Security Act signed into law in March 2020 and extended with the Taxpayer Certainty and Disaster Tax Relief Act of 2020 and the American Rescue Plan Act of 2021.

These acts provided numerous tax provisions and other stimulus measures, including the ERTC.

Under these expanded measures, we determined during fiscal 2023 that we qualified for the ERTC for the first three quarters of calendar 2021 and filed the required amended payroll tax returns to claim this refund.

On December 9, 2024, the Internal Revenue Service ("IRS") sent us a 105c letter informing us that they do not believe we qualify for the tax credit for the third quarter of calendar 2021.

We disagreed with the position the IRS noted in their denial letter and responded to their letter to contest their claim.

Although we had received this initial denial from the IRS, we believe we were entitled to the refund for these claims and therefore we have not made any allowances against the accrual for the related refund that was recorded in fiscal 2023.

We have not yet received any additional correspondence from the IRS associated with our appeal related to the third quarter of calendar 2021, but in April 2025, we collected the refund amounts associated with our ERTC filings for the first and second quarters of calendar year 2021, which totaled $ 2.9 million.

Geopolitical Uncertainty

Management is monitoring the war in Ukraine, and the armed conflicts in Gaza, Lebanon and Syria, and potential economic effects from these events as they develop.

These geographical areas account for a small portion of our global net sales, but we do source multiple raw materials from Israel.

We do not anticipate these conflicts will have a significant impact on our net sales.

We are continually evaluating options for alternative ingredient sources and/or holding safety stock of impacted materials to limit any impact.

We will continue to evaluate impacts of these developments on our customers, suppliers, employees, and operations.

Government Trade Tariffs

The President of the United States has recently ordered U.S.

government agencies to enforce new and increased tariffs on a wide range of goods and materials imported from foreign trade partners.

Some tariffs have been presently deferred, and details of future tariff restrictions continuously evolve.

Current and future implementation of tariffs may include products and ingredients we or our customers require for their products.

These goods may include beta-alanine.

The commercialization of our beta-alanine patent estate depends on the availability of the raw material beta-alanine.

In response, China and other governments have imposed tariffs on certain American products.

The resulting tariffs could have a significant adverse effect on our customers' businesses, the availability of beta-alanine, and the cost of our products.

While we do not know how potential increased tariffs will be imposed, or how any tariffs will impact our business, we believe the imposition of additional tariffs by the U.S.

or other governments on products or ingredients we use in the products we manufacture could adversely impact our customers as a result of increased product costs, and such increased costs could have an adverse impact on the availability of beta-alanine, the licensing of our patents and trademarks and our distribution of this raw material.

This could adversely impact our ability to license our patents and trademarks, our ability to sell beta-alanine, and our customers’ ability to compete in the marketplace, reducing demand for our products, and products we manufacture for our customers.

Any of these events could have a material adverse effect on our business and results of operations.

As a contract manufacturer, we pass through material cost increases to our customers, including increases associated with tariffs.

We also work with our customers to identify potential alternative supply sources for key ingredients to help mitigate the impact tariffs may have on the cost of their products.

We will continue to evaluate the impact of imposed trade tariffs on our customers, suppliers and operations.

Segment Information

Our business consists of two segments for financial reporting purposes.

The two segments are identified as (i) private-label contract manufacturing, which primarily relates to the provision of private-label contract manufacturing services to companies that market and distribute nutritional supplements and other health care products, and (ii) patent and trademark licensing, which primarily includes direct raw material sales and royalty income from our license and supply agreements associated with the sale and use of beta-alanine under our CarnoSyn® and SR CarnoSyn® trade names.

We evaluate performance based on a number of factors.

The chief operating decision maker is the Company's Chief Executive Officer, who, in conjunction with senior management, evaluates segment performance based on a number of factors.

The primary performance measures for each segment are net sales and income or loss from operations before corporate allocations.

3 unchanged sentences

The accounting policies of our segments are the same as those described in the summary of significant accounting policies in Note A.

Our operating results by business segment for the years ended June 30 were as follows (in thousands):

Private-label contract manufacturing

Our operating results by business segment for the year ended June 30, 2025 were as follows (in thousands):

Private-label

International

not allocated

manufacturing

$ 121,779 $ 8,081 $ - $ 129,860

Patent and trademark licensing

Cost of goods sold

118,111 2,460 - 120,571

3,668 5,621 - 9,289

Other selling, general and administrative expenses

5,395 2,215 8,939 16,549

Settlement of legal proceeding and associated expense

- - 1,400 (1) 1,400

(Loss) income from operations

Private-label contract manufacturing

( 1,727 ) 3,406 ( 10,339 ) ( 8,660 )

Patent and trademark licensing

(Loss) income from operations of reportable segments

Other income (expense):

Interest income

Interest expense

( 915 ) - - ( 915 )

Corporate expenses not allocated to segments

Foreign exchange loss

( 1,340 ) - - ( 1,340 )

Total other expense

( 2,080 ) - - ( 2,080 )

Private-label contract manufacturing

(Loss) income before income taxes

( 3,807 ) 3,406 ( 10,339 ) ( 10,740 )

Patent and trademark licensing

Provision for income taxes

Other supplemental information:

Stock-based compensation

$ 887 $ 90 $ - $ 977

Depreciation and amortization

4,553 7 - 4,560

113,843 38,096 - 151,939

Capital expenditures

3,614 - - 3,614

Expenses accrued for gross settlement of legal action pursuant to and in accordance with California's PAGA and related legal fees for services associated with the legal settlement were allocated to Corporate expenses.

Our operating results by business segment for the year ended June 30, 2024 were as follows (in thousands):

Corporate Alternatives

Private-label

International

not allocated

manufacturing

$ 105,358 $ 8,438 $ - $ 113,796

Cost of goods sold

103,727 3,204 - 106,931

1,631 5,234 - 6,865

Selling, general and administrative expenses

5,097 1,915 8,387 15,399

(Loss) income from operations

( 3,466 ) 3,319 ( 8,387 ) ( 8,534 )

Other income (expense):

Interest income

Interest expense

( 361 ) - - ( 361 )

Foreign exchange loss

( 652 ) - - ( 652 )

( 93 ) - - ( 93 )

Total other expense

( 930 ) - - ( 930 )

(Loss) income before income taxes

( 4,396 ) 3,319 ( 8,387 ) ( 9,464 )

Benefit for income taxes

Other supplemental information:

Stock-based compensation

$ 1,104 $ 96 $ - $ 1,200

Depreciation and amortization

4,640 7 - 4,647

127,786 34,556 - 162,342

Capital expenditures

3,017 - - 3,017

Our private-label contract manufacturing products are sold both in the U.S.

11 unchanged sentences

Products manufactured by NAIE accounted for 85 % of consolidated net sales in markets outside the U.S.

in fiscal 2024 and in fiscal 2023 .

in fiscal 2025 and 79 % of consolidated net sales in markets outside the U.S.

in fiscal 2024 .

No products manufactured by NAIE were sold in the U.S.

18 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data