NATURAL ALTERNATIVES INTERNATIONAL INC 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 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, 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. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. 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 We have served as the Company’s auditor since 2014. Irvine, California September 23, 2025 20 Table of Contents Natural Alternatives International, Inc. Consolidated Balance Sheets As of June 30 (Dollars in thousands, except share and per share data) 2025 2024 Assets Current assets: Cash and cash equivalents $ 12,325 $ 11,981 Accounts receivable – less allowance for credit losses of $ 0 at June 30, 2025 and June 30, 2024 14,644 16,891 Inventories, net 24,871 24,249 Income tax receivable 276 — Forward contracts 368 492 Prepaids and other current assets 6,792 7,997 Total current assets 59,276 61,610 Property and equipment, net 50,890 52,211 Operating lease right-of-use assets 41,054 43,537 Deferred tax asset, net – noncurrent — 3,170 Other noncurrent assets, net 719 1,814 Total assets $ 151,939 $ 162,342 Liabilities and Stockholders’ Equity Current liabilities: Accounts payable $ 15,352 $ 12,740 Accrued liabilities 3,105 2,847 Accrued compensation and employee benefits 2,173 2,090 Customer deposits 1,364 302 Short-term liability – operating leases 2,227 1,194 Forward contracts 1,967 91 Income taxes payable 411 505 Mortgage note payable, current portion 305 296 Line of credit – current 1,900 3,400 Total current liabilities 28,804 23,465 Long-term liability – operating leases 45,970 46,468 Long-term pension liability 111 141 Mortgage note payable, net of current portion 8,628 8,933 Income taxes payable, noncurrent — 740 Total liabilities 83,513 79,747 Commitments and contingencies (Notes D, F, H, J and M) Stockholders’ equity: Preferred stock; $ .01 par value; 500,000 shares authorized; none issued or outstanding — — Common stock; $ .01 par value; 20,000,000 shares authorized at June 30, 2025 and June 30, 2024, issued and outstanding (net of treasury shares) 6,178,213 at June 30, 2025 and 6,200,185 at June 30, 2024 93 93 Additional paid-in capital 33,611 32,634 Retained earnings 59,391 72,966 Treasury stock, at cost, 3,326,693 shares at June 30, 2025 and 3,280,721 at June 30, 2024 ( 23,254 ) ( 23,076 ) Accumulated other comprehensive loss ( 1,415 ) ( 22 ) Total stockholders’ equity 68,426 82,595 Total liabilities and stockholders’ equity $ 151,939 $ 162,342 See accompanying notes to consolidated financial statements. 21 Table of Contents Natural Alternatives International, Inc. Consolidated Statements of Operations and Comprehensive Loss For the Years Ended June 30 (Dollars in thousands, except share and per share data) 2025 2024 Net sales $ 129,860 $ 113,796 Cost of goods sold 120,571 106,931 Gross profit 9,289 6,865 Other selling, general and administrative expenses 16,549 15,399 Settlement of legal proceeding and associated expense 1,400 — Loss from operations ( 8,660 ) ( 8,534 ) Other income (expense): Interest income 168 176 Interest expense ( 915 ) ( 361 ) Foreign exchange loss ( 1,340 ) ( 652 ) Other, net 7 ( 93 ) Total other expense ( 2,080 ) ( 930 ) Loss before income taxes ( 10,740 ) ( 9,464 ) Provision (benefit) for income taxes 2,835 ( 2,247 ) Net loss $ ( 13,575 ) $ ( 7,217 ) Change in minimum pension liability, net of tax $ 50 $ 102 Unrealized loss resulting from change in fair value of derivative instruments, net of tax ( 1,443 ) ( 41 ) Comprehensive loss $ ( 14,968 ) $ ( 7,156 ) Net loss per common share: Basic $ ( 2.28 ) $ ( 1.23 ) Diluted $ ( 2.28 ) $ ( 1.23 ) Weighted average common shares outstanding: Basic 5,946,520 5,870,974 Diluted 5,946,520 5,870,974 See accompanying notes to consolidated financial statements. 22 Table of Contents Natural Alternatives International, Inc. Consolidated Statements of Stockholders ’ Equity For the Years Ended June 30 (Dollars in thousands) Accumulated Additional Other Common Stock Paid-in Retained Treasury Stock Comprehensive Shares Amount Capital Earnings Shares Amount Income (Loss) Total 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 ) Net loss — — — ( 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 — — — — 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 ) Net loss — — — ( 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. 23 Table of Contents Natural Alternatives International, Inc. Consolidated Statements of Cash Flows For the Years Ended June 30 (in thousands) 2025 2024 Cash flows from operating activities Net loss $ ( 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 1,400 — Depreciation and amortization 4,560 4,647 Deferred income taxes 3,613 ( 2,907 ) Non-cash lease expenses 7,254 6,083 Non-cash compensation 977 1,200 Pension expense, net of contributions 81 46 Loss on disposal of assets 49 — Changes in operating assets and liabilities: Accounts receivable 2,247 ( 9,869 ) Inventories ( 622 ) 5,445 Prepaids and other assets 2,223 ( 1,597 ) Accounts payable and accrued liabilities 2,858 5,387 Operating lease liabilities ( 4,235 ) ( 3,003 ) Forward contracts 176 372 Income taxes ( 1,110 ) 189 Accrued compensation and employee benefits 36 ( 273 ) Net cash provided by (used in) operating activities 5,932 ( 1,497 ) Cash flows from investing activities Purchases of property and equipment ( 3,614 ) ( 3,017 ) Net cash used in investing activities ( 3,614 ) ( 3,017 ) Cash flows from financing activities (Payments) Borrowings on line of credit ( 1,500 ) 3,400 Repurchase of common stock ( 178 ) ( 221 ) Payments on long-term debt ( 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 Cash paid during the year for: Income taxes $ 323 $ 463 Interest $ 814 $ 285 See accompanying notes to consolidated financial statements. 24 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS A. Organization and Summary of Significant Accounting Policies Organization 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® and TriBsyn™ trademarks through raw material and finished product sales and various license and similar arrangements. Subsidiaries 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. In September 1999, NAIE opened a manufacturing facility and currently possesses manufacturing capability in encapsulation, powders, tablets, finished goods packaging, quality control laboratory testing, warehousing, distribution and administration. Principles of Consolidation The consolidated financial statements include the accounts of Natural Alternatives International, Inc. (NAI) and our wholly owned subsidiary, NAIE. All intercompany accounts and transactions have been eliminated. The functional currency of NAIE, our foreign subsidiary, is the U.S. Dollar. Certain accounts of NAIE have been translated at either current or historical exchange rates, as appropriate, with gains and losses included in the consolidated statements of operations. Recently Adopted Accounting Pronouncements 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". ASU 2023 - 06 clarifies or improves disclosure and presentation requirements on various disclosure areas, including the statement of cash flows, earnings per share, debt, equity, and derivatives. The amendments will align the requirements in the FASB Accounting Standards Codification (ASC) with the SEC’s regulations. The amendments in this ASU will be effective on the date the related disclosures are removed from Regulation S- X or Regulation S-K by the SEC, and will not be effective if the SEC has not removed the applicable disclosure requirement by June 30, 2027. Early adoption is prohibited. 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 December 2023, the FASB issued ASU 2023 - 09, "Income Taxes (Topic 740 ): Improvements to Income Tax Disclosures". The amendments in this update address investor requests for more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. This update also includes certain other amendments to improve the effectiveness of income tax disclosures. 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 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. Cash and Cash Equivalents We consider all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. 25 Table of Contents Fair Value of Financial Instruments Fair value is defined as the exchange price that would be received to sell an asset or paid to transfer a liability (i.e., the “exit price”) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. We use a three -level hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from independent sources. Unobservable inputs are inputs that reflect our assumptions about the inputs that market participants would use in pricing the asset or liability and are developed based on the best information available under the circumstances. The fair value hierarchy is broken down into three levels based on the source of inputs. In general, fair values determined by Level 1 inputs use quoted prices (unadjusted) in active markets for identical assets or liabilities that we have the ability to access. We classify cash, cash equivalents, and marketable securities balances as Level 1 assets. The approximate fair value of cash and cash equivalents, accounts receivable, accounts payable and short-term borrowings is equal to book value due to the short-term nature of these items. Fair values determined by Level 2 inputs are based on quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active and models for which all significant inputs are observable or can be corroborated, either directly or indirectly by observable market data. Level 3 inputs are unobservable inputs for the asset or liability and include situations where there is little, if any, market activity for the asset or liability. These include certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs. Except for cash and cash equivalents, as of June 30, 2025 and June 30, 2024 , we did not have any financial assets or liabilities classified as Level 1. We classify derivative forward exchange contracts as Level 2 assets and liabilities. The fair values were determined by obtaining pricing from our bank. Fair value of derivative instruments classified as Level 2 assets and liabilities consisted of the following (in thousands): June 30, June 30, 2025 2024 Interest Swap – Other Current Assets $ — $ 111 Euro Forward Contract– Current Assets — 492 Swiss Franc Forward Contract – Current Assets 368 — Total Derivative Contracts – Current Assets 368 603 Euro Forward Contract– Other Noncurrent Assets — 78 Total Derivative Contracts – Other Noncurrent Assets — 78 Euro Forward Contract–Current Liabilities ( 1,704 ) — 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, 2025 and June 30, 2024 , we did not have any financial assets or liabilities classified as Level 3. We did not transfer any assets or liabilities between these levels during fiscal 2025 or fiscal 2024 . Accounts Receivable We perform ongoing credit evaluations of our customers and adjust credit limits based on payment history and expected future customer credit-worthiness. An allowance for estimated credit losses is maintained based on, but not limited to, historical collection experience, current customer financial condition, current and future economic and market conditions, and age of receivables to identify any customer credit issues. We monitor our expected collections regularly and adjust the allowance for credit loss accounts as necessary to recognize any changes in credit exposure. Upon conclusion that a receivable is uncollectible, we record the respective amount as a charge against allowance for credit losses. To date, such credit loss reserves, in the aggregate, have been adequate to cover collection losses. Inventories We operate primarily as a private-label contract manufacturer. We make products based upon anticipated demand or following receipt of customer specific purchase orders. From time to time, we make inventory for private-label contract manufacturing customers under a specific purchase order with delivery dates that may subsequently be rescheduled or canceled at the customer’s request. We value inventory at the lower of cost ( first -in, first -out) or net realizable value on an item-by-item basis, including costs for raw materials, labor and manufacturing overhead. We establish reserves equal to all or a portion of the related inventory to reflect situations in which the cost of the inventory is not expected to be recovered. This requires us to make estimates regarding the market value of our inventory, including an assessment for excess and obsolete inventory. Once we establish an inventory reserve in a fiscal period, the reduced inventory value is maintained until the inventory is sold or otherwise disposed of. In evaluating whether inventory is stated at the lower of cost or net realizable value, management considers such factors as the amount of inventory on hand, the estimated time required to sell such inventory, the remaining shelf life and efficacy, the foreseeable demand within a specified time horizon and current and expected market conditions. Based on this evaluation, we record adjustments to cost of goods sold to adjust inventory to its net realizable value. Property and Equipment We state property and equipment at cost. Depreciation of property and equipment is provided using the straight-line method over their estimated useful lives, generally ranging from 1 to 39 years. We amortize leasehold improvements using the straight-line method over the shorter of the useful life of the improvement or the term of the lease. Maintenance and repairs are expensed as incurred. Significant expenditures that increase economic useful lives of property or equipment are capitalized and expensed over the useful life of such expenditure. 26 Table of Contents Impairment of Long-Lived Assets We periodically evaluate the carrying value of long-lived assets to be held and used when events and circumstances indicate that the carrying amount of an asset may not be recovered. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. During fiscal 2025 and 2024 , we recognized no impairment losses. 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 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. 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. To the extent the derivative instrument is deemed ineffective we would recognize the resulting gain or loss in income at that time. 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 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, 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). These contracts will mature in the first quarter of fiscal year 2026. 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 which expired on September 3, 2024. Defined Benefit Pension Plan We formerly sponsored a defined benefit pension plan. Effective June 21, 1999, we adopted an amendment to freeze benefit accruals to the participants. The plan obligation and related assets of the plan are presented in the notes to the consolidated financial statements. Plan assets, which consist primarily of marketable equity and debt instruments, are valued based upon third party market quotations. Independent actuaries, through the use of a number of assumptions, determine plan obligations and annual pension expense. Key assumptions in measuring the plan obligations include the discount rate and estimated future return on plan assets. In determining the discount rate, we use an average long-term bond yield. Asset returns are based on the historical returns of multiple asset classes to develop a risk free rate of return and risk premiums for each asset class. The overall rate for each asset class was developed by combining a long-term inflation component, the risk free rate of return and the associated risk premium. A weighted average rate is developed based on the overall rates and the plan’s asset allocation. Revenue Recognition We record revenue based on a five -step model which includes: ( 1 ) identifying a contract with a customer; ( 2 ) identifying the performance obligations in the contract; ( 3 ) determining the transaction price; ( 4 ) allocating the transaction price among the performance obligations; and ( 5 ) recognizing revenue as each of the various performance obligations are satisfied. Revenue is measured as the net amount of consideration expected to be received in exchange for fulfilling one or more performance obligations. We identify purchase orders from customers as contracts. The amount of consideration expected to be received and revenue recognized includes estimates of variable consideration, including estimates for early payment discounts, volume rebates, and contractual discounts. 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 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. Payment of invoices is due as specified in the underlying customer agreement, which is typically 30 days from the invoice date. Invoices are generally issued on the date of transfer of control of the products ordered to the customer. Revenue is recognized at the point in time that each of our performance obligations is fulfilled, and control of the ordered products is transferred to the customer. This transfer occurs when the product is shipped, or in some cases, when the product is delivered to the customer. We recognize revenue in certain circumstances before delivery to the customer has occurred (commonly referred to as bill-and-hold transactions). Products sold under bill-and-hold arrangements are recorded as revenue when risk of ownership has been transferred to the customer, but the product has not shipped due to a substantive reason, typically at the customer’s request. The product must be separately identified as belonging to the customer, ready for physical transfer to the customer, and we cannot have the ability to redirect the product to another customer. We provide early payment discounts to certain customers. 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. If the actual discounts differ from those estimated, the difference is also reported as a change in the transaction price. We require prepayment from certain customers. 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. 27 Table of Contents Contract liabilities and revenue recognized were as follows (in thousands): June 30, 2024 Additions Revenue Recognized Customer Refunds June 30, 2025 Contract Liabilities (Customer Deposits) $ 302 $ 4,371 $ ( 3,309 ) $ — $ 1,364 June 30, 2023 Additions Revenue Recognized Customer Refunds June 30, 2024 Contract Liabilities (Customer Deposits) $ 317 $ 2,500 $ ( 2,515 ) $ — $ 302 Except for product defects, no right of return exists on the sale of our products. We estimate returns based on historical experience and recognize a returns liability for any estimated returns. As of June 30, 2025 , we have $ 11,000 in our returns reserve. We currently own certain U.S. 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®, 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 . These royalty income and raw material sale amounts resulted in royalty expense paid to the original patent holders from whom NAI acquired its patents and patent rights. We recognized royalty expense as a component of cost of goods sold in the amount of $ 0.3 million during fiscal 2025 and $ 0.3 million during fiscal 2024 . Cost of Goods Sold Cost of goods sold includes raw material, labor, manufacturing overhead, royalty expense, shipping, and customer related research and development costs. Shipping and Handling Costs We include fees earned on the shipment of our products to customers in sales and include costs incurred on the shipment of product to customers in costs of goods sold. Research and Development Costs As part of the services we provide to our private-label contract manufacturing customers, we may perform, but are not obligated to perform, certain research and development activities related to the development or improvement of their products. While our customers typically do not pay directly for this service, the cost of this service is included as a component of the price we charge to manufacture and deliver their products. We also direct and participate in clinical research studies, often in collaboration with scientists and research institutions, to validate the benefits of a product and provide scientific support for product claims and marketing initiatives. Research and development costs are expensed when incurred. Our research and development expenses for the last two fiscal years ended June 30 were $ 1.8 million for fiscal 2025 and $ 1.9 million for fiscal 2024 . These costs are included in selling, general and administrative expenses and cost of goods sold. Advertising Costs We expense the production costs of advertising the first time the advertising takes place. We incurred and expensed advertising costs in the amount of $ 0.4 million during the fiscal year ended June 30, 2025 and $ 0.3 million during fiscal 2024 . These costs are included in selling, general and administrative expenses. Income Taxes To determine our annual provision for income taxes, we use an estimated annual effective tax rate that is based on annual income, statutory tax rates and tax planning opportunities available in the various jurisdictions to which we are subject. We recognize interest and penalties related to uncertain tax positions, if any, as an income tax expense. We record valuation allowances to reduce our deferred tax assets to an amount that we believe is more likely than not to be realized. 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, 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. Deferred tax assets and liabilities are measured and recorded using enacted tax rates for each of the jurisdictions in which we operate, and adjusted using the tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income or expense in the period that includes the enactment date. We account for uncertain tax positions using the more-likely-than- not recognition threshold. It is our policy to establish reserves based on management’s assessment of exposure for certain positions taken in previously filed tax returns that may become payable upon audit by tax authorities. Our tax reserves are analyzed quarterly, and adjustments are made as events occur that we believe warrant adjustments to the reserves. Our practice is to recognize interest and/or penalties related to income tax matters in income tax expense. As of June 30, 2025 and June 30, 2024 , we did not record any tax liabilities for uncertain tax positions. 28 Table of Contents Stock-Based Compensation 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. We estimate the fair value of stock option awards at the date of grant using the Black-Scholes option valuation model. The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. Option valuation models require the use of highly subjective assumptions. Black-Scholes uses assumptions related to volatility, the risk-free interest rate, the dividend yield (which we assume to be zero, as we have not paid any cash dividends) and employee exercise behavior. Expected volatilities used in the model are based on the historical volatility of our stock price. The risk-free interest rate is derived from the U.S. Treasury yield curve in effect in the period of grant. The expected life of stock option grants is derived from historical experience. The fair value of restricted stock shares granted is based on the market price of our common stock on the date of grant. We amortize the estimated fair value of our stock awards to expense over the related vesting periods. We recognize forfeitures as they occur. Use of Estimates Our management has made a number of estimates and assumptions relating to the reporting of assets and liabilities, revenue and expenses, and the disclosure of contingent assets and liabilities to prepare these consolidated financial statements in conformity with U.S. generally accepted accounting principles (GAAP). Actual results could differ from those estimates and our assumptions may prove to be inaccurate. 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. We calculated basic and diluted net (loss) income per common share as follows (in thousands, except per share data): For the Years Ended June 30, 2025 2024 Numerator Net loss $ ( 13,575 ) $ ( 7,217 ) Denominator Basic weighted average common shares outstanding 5,947 5,871 Dilutive effect of stock options and restricted stock shares — — Diluted weighted average common shares outstanding 5,947 5,871 Basic net loss per common share $ ( 2.28 ) $ ( 1.23 ) Diluted net loss per common share $ ( 2.28 ) $ ( 1.23 ) We exclude the impact of restricted stock from the calculation of diluted net loss per common share in periods where we have a net loss or when their inclusion would be antidilutive. During the year ended June 30, 2025 , we excluded 222,551 shares of unvested restricted stock. For the year ended June 30, 2024 we excluded restricted stock totaling 232,574 , as their impact would have been anti-dilutive. Concentrations of Credit Risk Financial instruments that subject us to concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable. We place our cash and cash equivalents with highly rated financial institutions. Credit risk with respect to receivables is primarily concentrated with our three largest customers, whose receivable balances collectively represented 67.8 % of gross accounts receivable at June 30, 2025 and 72.6 % at June 30, 2024 . Additionally, amounts due related to our beta-alanine raw material sales were 6.8 % of gross accounts receivable at June 30, 2025 and 4.4 % of gross accounts receivable at June 30, 2024 . Concentrations of credit risk related to the remaining accounts receivable balances are limited due to the number of customers comprising our remaining customer base. B. Inventories Inventories, net, consisted of the following at June 30 (in thousands): 2025 2024 Raw materials $ 17,632 $ 18,489 Work in progress 3,943 3,362 Finished goods 4,054 3,038 Reserves ( 758 ) ( 640 ) $ 24,871 $ 24,249 29 Table of Contents C. Property and Equipment Property and equipment consisted of the following at June 30 (dollars in thousands): Depreciable Life In Years 2025 2024 Land NA $ 8,940 $ 8,940 Building and building improvements 7 – 39 24,650 24,723 Machinery and equipment 3 – 12 41,311 43,631 Office equipment and furniture 3 – 5 6,936 6,765 Vehicles 3 237 237 Leasehold improvements 1 – 20 24,788 23,223 Total property and equipment 106,862 107,519 Less: accumulated depreciation and amortization ( 55,972 ) ( 55,308 ) Property and equipment, net $ 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 . D. Leases We currently lease our Vista, California and Lugano, Switzerland product manufacturing and support facilities. At the inception of a contract, we assess whether the contract is, or contains, a lease. Our assessment is based on: ( 1 ) whether the contract involves the use of a distinct identified asset, ( 2 ) whether we obtain the right to substantially all the economic benefit from the use of the asset throughout the period of the contract, and ( 3 ) whether we have the right to direct the use of the asset during such time period. At inception of a lease, we allocate the consideration in the contract to each lease component based on its relative stand-alone price to determine the lease payments. On July 18, 2023, we entered into a Fourth Amendment to the Lease of our Vista, California manufacturing facility. The Fourth Amendment extends the term of the Lease by an additional ten years and five months commencing April 1, 2024. The amended lease covering two buildings and approximately 162,000 square feet will result in an increase in base rent to $ 1.50 per square foot, after five free months of base rent beginning at the commencement of the extended term. NAI intends to construct substantial improvements to the facilities including but not limited to installation of an approximately $ 2.3 million solar electrical generating system on both buildings, and other substantial improvements. Pursuant to the Fourth Amendment, the Landlord will reimburse NAI for up to $ 1.1 million of these tenant improvements to the buildings. Our lease liability and right of use asset were both increased by approximately $ 25.9 million as a result of this lease extension effective on the date that the Fourth Amendment was executed. On January 26, 2024, we exercised the early termination of an apartment lease in Lugano, Switzerland. The early termination reduced the lease term by 9 years and 8 months thus ending on April 30, 2024. Our lease liability and right of use asset were both decreased by approximately $ 0.3 million as a result of the early termination of the lease agreement. On January 22, 2024, we entered into a lease for a new apartment in Lugano, Switzerland. This lease is for an initial term of 27 months beginning April 1, 2024 and ending on June 30, 2026. Leases are classified as either finance leases or operating leases. A lease must be classified as a finance lease if any of the following criteria are met: the lease transfers ownership of the asset by the end of the lease term, the lease contains an option to purchase the asset that is reasonably certain to be exercised, the lease term is for a major part of the remaining useful life of the asset, or the present value of the lease payments equals or exceeds substantially all of the fair value of the asset. A lease is classified as an operating lease if it does not meet any of these criteria. Substantially all our operating leases are comprised of payments for the use of manufacturing and office space. We have no leases classified as finance leases. As of June 30, 2025 , the weighted average remaining lease term for our operating leases was 8.6 years. The weighted average discount rate for our operating leases was 5.94 %. As of June 30, 2024 , the weighted average remaining lease term for our operating leases was 9.5 years and the weighted average discount rate was 5.92 %. The lease discount rate is determined as the rate of interest that a lessee would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. For all leases at the lease commencement date, a right-of-use asset and a lease liability are recognized. The right-of-use asset represents the right to use the leased asset for the lease term. The lease liability represents the present value of the lease payments under the lease. The right-of-use asset is initially measured at cost, which primarily comprises the initial amount of the lease liability, plus any initial direct costs incurred, consisting mainly of brokerage commissions, less any lease incentives received. All right-of-use assets are reviewed for impairment. The lease liability is initially measured at the present value of the lease payments, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, our secured incremental borrowing rate for the same term as the underlying lease. For our real estate and other operating leases, we use our secured incremental borrowing rate. Lease payments included in the measurement of the lease liability comprise the following: the fixed noncancelable lease payments, payments for optional renewal periods where it is reasonably certain the renewal period will be exercised, and payments for early termination options unless it is reasonably certain the lease will not be terminated early. Certain leases contain escalation clauses. Fixed escalation clauses are included in our calculation of right-of-use assets and operating lease liabilities. Escalation clauses based on the CPI (Consumer Price Index) are not included in our calculation of right-of-use assets and operating lease liabilities because they cannot be readily determined. Some of our manufacturing leases contain variable lease payments, including payments based on an index or rate. Variable lease payments based on an index or rate are initially measured using the index or rate in effect at lease commencement and separated into lease and non-lease components based on the initial amount stated in the lease or standalone selling prices. Lease components are included in the measurement of the initial lease liability. Additional payments based on the change in an index or rate, or payments based on a change in our portion of the operating expenses, including real estate taxes and insurance, are recorded as a period expense when incurred. Lease modifications result in remeasurement of the lease liability. 30 Table of Contents Lease expense for operating leases consists of the lease payments plus any initial direct costs, primarily brokerage commissions, and is recognized on a straight-line basis over the lease term. Included in lease expense are any variable lease payments incurred in the period that were not included in the initial lease liability. Lease expense for finance leases consists of the amortization of the right-of-use asset on a straight-line basis over the lease term and interest expense determined on an amortized cost basis. The lease payments are allocated between a reduction of the lease liability and interest expense. We have elected not to recognize right-of-use assets and lease liabilities for short-term leases that have a term of 12 months or less. The effect of short-term leases on our right-of-use asset, lease liability, and the short-term lease cost for the years ended June 30, 2025 and 2024 was not material. Other information related to leases was as follows (in thousands) for the year ended June 30, Supplemental Cash Flows Information 2025 2024 Cash paid for amounts included in the measurement of operating lease liabilities $ 4,302 $ 2,966 Net increase in operating lease liabilities and right-of-use assets due to lease remeasurement - 25,692 E. Other Comprehensive (Loss) Income Other comprehensive (loss) income (“OCL” and “OCI”) consisted of the following at June 30 (dollars in thousands): Year Ended June 30, 2025 Unrealized Unrealized Gains Gains (Losses) (Losses) Defined on on Benefit Cash Flow Swap Pension Plan Hedges Derivative Total Balance as of June 30, 2024 $ ( 278 ) $ 172 $ 84 $ ( 22 ) OCI/OCL before reclassifications ( 21 ) ( 1,983 ) ( 111 ) ( 2,115 ) Amounts reclassified from OCI 86 192 — 278 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 Unrealized Unrealized (Losses) Gains Gains (Losses) Defined on on Benefit Cash Flow Swap Pension Plan Hedges Derivative Total 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 $ ( 278 ) $ 172 $ 84 $ ( 22 ) F. Debt 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. 31 Table of Contents 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): 2026 2027 2028 2029 2030 and Thereafter Total Future Debt Payments $ 305 $ 315 $ 325 $ 7,988 $ — $ 8,933 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. As of June 30, 2025 , we had $ 1.9 million outstanding on our credit facility with Wells Fargo Bank. Our available borrowing capacity under the amended terms of our amended credit facility was $ 9.9 million as of June 30, 2025 . G. Income Taxes During fiscal 2025 , we recorded U.S.-based domestic tax expense of $ 2.7 million and foreign tax expense of $ 0.1 million. 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. 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 . The following is a geographical breakdown of loss before income taxes (in thousands): 2025 2024 United States $ ( 11,520 ) $ ( 9,046 ) Foreign 780 ( 418 ) Total loss before income taxes $ ( 10,740 ) $ ( 9,464 ) The provision (benefit) for income taxes for the years ended June 30 consisted of the following (in thousands): 2025 2024 Current: Federal $ ( 858 ) $ ( 55 ) State ( 17 ) 41 Foreign 161 66 ( 714 ) 52 Deferred: Federal ( 1,198 ) ( 2,007 ) State ( 68 ) ( 223 ) Foreign — ( 69 ) Valuation allowance 4,815 — 3,549 ( 2,299 ) Total provision (benefit) for income taxes $ 2,835 $ ( 2,247 ) 32 Table of Contents Net deferred tax assets and deferred tax liabilities as of June 30 were as follows (in thousands): 2025 2024 Deferred tax assets: Inventory capitalization $ 295 $ 279 Inventory reserves 176 148 Lease liability 8,678 8,497 Net operating loss carry forward 2,151 1,505 Accrued compensation 186 140 Capitalized research and experimentation 944 694 Accrued contingent fee 72 207 Stock-based compensation 95 129 Forward contracts 378 — Tax credit carry forward 722 682 Pension liability 52 67 Accrued settlement of legal proceeding 302 — Other, net 296 215 Total gross deferred tax assets 14,347 12,563 Deferred tax liabilities: Withholding taxes ( 134 ) ( 134 ) Fixed assets ( 1,577 ) ( 1,485 ) Forward contracts — ( 54 ) Lease assets ( 7,464 ) ( 7,694 ) Employee retention tax credit refund ( 358 ) — Other, net — ( 26 ) Deferred tax liabilities ( 9,533 ) ( 9,393 ) Valuation allowance ( 4,814 ) — Net deferred tax assets $ — $ 3,170 As of June 30, 2025 , the Company had U.S. federal net operating loss carryforwards of $ 8.0 million which may be carried forward indefinitely. 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 has federal and state tax credits of $ 0.8 million, which, if unutilized, will begin to expire in fiscal year 2041. Pursuant to Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”), the annual use of the net operating loss carry forwards and research and development tax credits could be limited by any greater than 50% ownership change during any three -year testing period. We did not have any ownership changes that met this criterion during the fiscal years ended June 30, 2025 and June 30, 2024 . We are subject to taxation in the U.S., Switzerland and various state jurisdictions. Our tax years for the fiscal year ended June 30, 2020 and forward are subject to examination by the U.S. tax authorities. Our tax years for the fiscal years ended June 30, 2019 and forward are subject to examination by the state tax authorities. Our tax years for the fiscal year ended June 30, 2023 and forward are subject to assessment by the Swiss tax authorities. NAIE’s effective tax rate for the fiscal year ended June 30, 2025 for Swiss federal, cantonal and communal taxes is approximately 21% . 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. This accumulated E&P amount has historically been considered permanently reinvested thereby allowing us to defer recognizing any U.S. income tax on the amount. We no longer consider undistributed foreign earnings from NAIE as of December 31, 2017 as indefinitely reinvested. 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 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. 33 Table of Contents 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): 2025 2024 Income taxes computed at statutory federal income tax rate $ ( 2,256 ) $ ( 2,033 ) State income taxes, net of federal income tax expense ( 177 ) ( 215 ) Permanent differences 10 ( 20 ) Foreign tax rate differential ( 2 ) 131 Tax credits ( 61 ) ( 170 ) Stock based compensation 123 93 Global intangible low-taxed income (GILTI) 233 — Return to provision - differences 150 ( 33 ) Change in valuation allowance, net 4,815 — Income tax provision (benefit) as reported $ 2,835 $ ( 2,247 ) Effective tax rate ( 26.4 )% ( 23.7 )% We expect our U.S. federal statutory rate to be 21 % for fiscal years going forward. H. Employee Benefit Plans 401 (k) Plan 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 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 . Additionally, we have a discretionary profit-sharing plan pursuant to Section 401 (k) of the Code, whereby we may contribute an additional percentage of compensation. Employees are not required to contribute to the plan to receive the discretionary profit-sharing contribution. We did not make any discretionary profit-sharing contributions in fiscal 2025 or in fiscal 2024 . We have a “Cafeteria Plan” pursuant to Section 125 of the Code, whereby health care benefits are provided for active employees through insurance companies. Substantially all active full-time employees are eligible for these benefits. We recognize the cost of providing these benefits by expensing the annual premiums, which are based on benefits paid during the year. The premiums expensed to results from operations for these benefits totaled $ 1.6 million for the fiscal year ended June 30, 2025 and $ 1.4 million for the fiscal year ended June 30, 2024 . Deferred Compensation Plan Effective July 16, 2020, the Board of Directors approved and adopted a Non-Qualified Incentive Plan (the “Incentive Plan”). Pursuant to the Incentive Plan, the Human Resources Committee and the Board of Directors may make deferred cash payments or other cash awards (“Awards”) to directors, officers, employees and eligible consultants of NAI (“Participants”). These Awards are made subject to conditions precedent that must be met before NAI is obligated to make the payment. The purpose of the Incentive Plan is to enhance the long-term stockholder value of NAI by providing the Human Resources Committee and the Board of Directors the ability to make deferred cash payments or other cash awards to encourage Participants to serve NAI or to remain in the service of NAI, or to assist NAI to achieve results determined by the Human Resources Committee or the Board of Directors to be in NAI's best interest. The Incentive Plan authorizes the Human Resources Committee or the Board of Directors to grant to, and administer, unsecured and deferred cash Awards to Participants and to subject each Award to whatever conditions are determined appropriate by the Human Resources Committee or the Board of Directors. The terms of each Award, including the amount and any conditions that must be met to be entitled to payment of the Award are set forth in an Award Agreement between each Participant and NAI. 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, 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. Each deferred cash award provides for three equal cash payments to the applicable Participant to be paid on the one year, two year, and three year anniversaries of the date of the grant of such Awards, (the “Award Date”); provided on the date of each payment (the “Payment Date”), the Participant has been since the Award Date, and continues to be through the Payment Date, a member of our Board of Directors or an employee of NAI. 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 We formerly sponsored a defined benefit pension plan, which provides retirement benefits to employees based generally on years of service and compensation during the last five years before retirement. Effective June 21, 1999, we adopted an amendment to freeze benefit accruals to the participants. Annually, we contribute an amount not less than the minimum funding requirements of the Employee Retirement Income Security Act of 1974 nor more than the maximum tax-deductible amount. 34 Table of Contents Disclosure of Funded Status The following table sets forth the defined benefit pension plan’s funded status and amount recognized in our consolidated balance sheets at June 30 (in thousands): 2025 2024 Change in Benefit Obligation: Benefit obligation at beginning of year $ 1,374 $ 1,364 Interest cost 46 49 Actuarial gain (loss) 62 ( 39 ) Benefits paid ( 330 ) — Benefit obligation at end of year $ 1,152 $ 1,374 Change in Plan Assets: Fair value of plan assets at beginning of year $ 1,232 $ 1,025 Actual return on plan assets 92 91 Employer contributions 48 116 Benefits paid ( 330 ) — Fair value of plan assets at end of year $ 1,042 $ 1,232 Reconciliation of Funded Status: Difference between benefit obligation and fair value of plan assets $ ( 110 ) $ ( 142 ) Unrecognized net actuarial loss in accumulated other comprehensive income 217 282 Net amount recognized $ 107 $ 140 Projected benefit obligation $ 1,152 $ 1,374 Accumulated benefit obligation $ 1,152 $ 1,374 Fair value of plan assets $ 1,042 $ 1,232 The weighted-average discount rate used for determining the projected benefit obligations for the defined benefit pension plan was 5.29 % for the year ended June 30, 2025 and 5.28 % during the year ended June 30, 2024 . Net Periodic Benefit Cost The components included in the defined benefit pension plan’s net periodic benefit expense for the fiscal years ended June 30 were as follows (in thousands): 2025 2024 Interest cost $ 46 $ 49 Expected return on plan assets ( 51 ) ( 42 ) Recognized actuarial loss 24 39 Settlement loss 62 — Net periodic benefit expense $ 81 $ 46 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): 2025 2024 Net income (loss) $ 21 $ ( 88 ) Settlement loss ( 62 ) — Amortization of net loss ( 24 ) ( 39 ) Total recognized in other comprehensive loss $ ( 65 ) $ ( 127 ) Total recognized in net periodic benefit cost and other comprehensive loss $ 16 $ ( 81 ) The estimated net loss for the defined benefit pension plan that will be amortized from accumulated other comprehensive income into net periodic benefit cost over the next fiscal year is approximately $ 17,000 . We do not have any transition obligations or prior service costs recorded in accumulated other comprehensive income. The following benefit payments are expected to be paid (in thousands): 2026 $ 781 2027 101 2028 29 2029 33 2030 — 2031-2035 244 Total benefit payments expected to be paid $ 1,188 35 Table of Contents The weighted-average rates used for the years ended June 30 in determining the defined benefit pension plan’s net pension costs, were as follows: 2025 2024 Discount rate 5.29 % 5.28 % Expected long-term rate of return 6.70 % 6.70 % Compensation increase rate N/A N/A Our expected rate of return is determined based on a methodology that considers historical returns of multiple classes analyzed to develop a risk-free real rate of return and risk premiums for each asset class. The overall rate for each asset class was developed by combining a long-term inflation component, the risk-free real rate of return, and the associated risk premium. A weighted average rate was developed based on those overall rates and the target asset allocation of the plan. Our defined benefit pension plan’s weighted average asset allocation at June 30 and weighted average target allocation were as follows: Target 2025 2024 Allocation Equity securities 60 % 72 % 53 % Debt securities 35 % 14 % 41 % Cash alternatives 4 % 14 % 2 % Commodities 1 % 0 % 4 % 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. Our investment strategy is a long-term risk controlled approach using diversified investment options with relatively minimal exposure to volatile investment options like derivatives. The fair values by asset category of our defined benefit pension plan at June 30, 2025 were as follows (in thousands): Quoted Prices in Active Markets for Significant Significant Identical Observable Unobservable Assets Inputs Inputs Total (Level 1) (Level 2) (Level 3) Equity securities (1) $ 623 $ 623 $ — $ — Debt securities (2) $ 370 $ 370 $ — $ — Other (3) $ 49 $ 49 $ — $ — Total $ 1,042 $ 1,042 $ — $ — ( 1 ) This category is comprised of publicly traded funds of which 74 % are U.S. large-cap funds, 20 % are U.S. mid-cap funds, and 6 % U.S. small-cap funds. ( 2 ) This category is comprised of publicly traded funds, of which 52 % are U.S. fixed income funds and 48 % are corporate, foreign or emerging market funds. ( 3 ) This category is comprised of publicly traded assets, of which 81 % are money market funds and 19 % are commodities. I. Stockholders' Equity Treasury Stock On September 18, 2020, the Board of Directors authorized a $ 2.0 million increase to our stock repurchase plan (“Repurchase Plan”), thus bringing the total authorized repurchase amount to $ 12.0 million. On March 12, 2021, the Board of Directors authorized an additional $ 3.0 million increase to the Repurchase Plan, thus bringing the total authorized repurchase amount to $ 15.0 million. On January 14, 2022, the Board of Directors authorized an additional $ 3.0 million increase to the Repurchase Plan, thus bringing the total authorized repurchase amount to $ 18.0 million. 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. 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. Treasury Stock repurchases for the year ended June 30, 2025 were as follows: Shares Average Cost Total Cost (in thousands) Shares purchased under Repurchase Plan — $ — $ — Shares acquired from employees for restricted stock vesting 45,972 3.88 178 Total 45,972 $ 178 36 Table of Contents Treasury Stock repurchases for the year ended June 30, 2024 were as follows: Shares Average Cost Total Cost (in thousands) Shares purchased under Repurchase Plan — $ — $ — Shares acquired from employees for restricted stock vesting 37,128 5.96 221 Total 37,128 $ 221 Treasury stock repurchase costs include commissions and fees. Shares acquired from employees for restricted stock vesting were returned to us by the related employees and in return we paid each employee’s required tax withholding resulting from the vesting of restricted shares. The valuation of the shares acquired and thereby the number of shares returned to us was calculated based on the closing share price on the date the shares vested. Stock Incentive Plans For the years ended June 30, 2025 and June 30, 2024 , the Company had no stock options outstanding. Restricted stock activity for the year ended June 30, 2025 was as follows: Weighted Number of Average Grant Shares – Date Fair 2020 Plan Value Nonvested at June 30, 2024 283,107 $ 7.50 Granted 24,000 $ 3.84 Vested ( 133,122 ) $ 8.31 Forfeited — $ — Nonvested at June 30, 2025 173,985 $ 6.38 Available for grant at June 30, 2025 158,877 Restricted stock activity for the year ended June 30, 2024 was as follows: Weighted Number of Average Grant Shares – Date Fair 2020 Plan Value Nonvested at June 30, 2023 223,682 $ 10.39 Granted 166,500 $ 6.09 Vested ( 104,075 ) $ 11.39 Forfeited ( 3,000 ) $ 9.59 Nonvested at June 30, 2024 283,107 $ 7.50 Available for grant at June 30, 2024 182,877 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. J. Commitments 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 18, 2023, we entered into a fourth amendment to the lease of our Vista, California manufacturing facility. The fourth amendment extends the term of the lease by an additional ten years and five months commencing April 1, 2024 and includes an option to extend the lease through August 31, 2039. NAIE leases facility space in Manno, Switzerland from two unaffiliated third parties. The leased spaces total approximately 116,000 square feet . We primarily use the facilities for manufacturing, packaging, warehousing and distributing nutritional supplement products for the European and Asian marketplaces. 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. On November 5, 2018, NAIE entered into a lease with Sofinol SA for approximately 2,870 square meters of commercial warehouse space in a building located on the property adjacent to the leasehold for the primary existing NAIE facility in Manno, Switzerland. NAIE uses the space primarily for raw material storage. 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 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. 37 Table of Contents On January 26, 2024, we exercised the early termination of an apartment lease in Lugano, Switzerland. The early termination reduced the lease term by 9 years and 8 months thus ending on April 30, 2024. Our lease liability and Right of Use asset were both decreased by approximately $ 0.3 million as a result of the early termination of the lease agreement. On January 22, 2024, we entered into a lease for a new apartment in Lugano, Switzerland. This lease is for an initial term of 27 months beginning April 1, 2024 and ending on June 30, 2026. Minimum rental commitments (exclusive of property tax, insurance and maintenance) under all non-cancelable operating leases with initial or remaining lease terms in excess of one year, including the lease agreements referred to above, are set forth below as of June 30, 2025 (in thousands): There- 2026 2027 2028 2029 2030 after Total Gross minimum rental commitments $ 5,014 $ 4,889 $ 4,863 $ 4,996 $ 9,009 $ 20,420 $ 49,191 Rental expense totaled $ 5.5 million for the fiscal year ended June 30, 2025 and $ 5.4 million for the fiscal year ended June 30, 2024 . K. Economic Dependency 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): Fiscal 2025 Fiscal 2024 Customer 1 $ 42,289 $ 48,055 Customer 2 17,707 12,941 Customer 3 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 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, 2025 2024 % of Total % of Total Raw Material Raw Raw Material Raw Purchases by Material Purchases by Material Supplier Purchases Supplier Purchases Supplier 1 $ 12,004 18 % $ 11,624 23 % $ 12,004 18 % $ 11,624 23 % L. Derivatives and Hedging We are exposed to gains and losses resulting from fluctuations in foreign currency exchange rates relating to forecasted product sales denominated in foreign currencies and to other transactions of NAIE, our foreign subsidiary. As part of our overall strategy to manage the level of exposure to the risk of fluctuations in foreign currency exchange rates, we may use foreign exchange contracts in the form of forward contracts. There can be no guarantee any such contracts, to the extent we enter into such contracts, will be effective hedges against our foreign currency exchange risk. 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. dollar. 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. For foreign currency contracts designated as cash flow hedges, hedge effectiveness is measured using the spot rate. Changes in the spot-forward differential are excluded from the test of hedge effectiveness and are recorded currently in earnings as revenue. We measure effectiveness by comparing the cumulative change in the hedge contract with the cumulative change in the hedged item as well as ensuring the assumptions we made at hedge inception have not materially changed. No hedging relationships were terminated as a result of ineffective hedging for the years ended June 30, 2025 and June 30, 2024 . We monitor the probability of forecasted transactions as part of the hedge effectiveness testing on a quarterly basis. 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. 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. 38 Table of Contents 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. For foreign currency contracts not designated as cash flow hedges, changes in the fair value of the hedge are recorded directly to foreign exchange gain or loss in other income in an effort to offset the change in valuation of the underlying hedged item. During the year ended June 30, 2025 , we entered into forward contracts in order to hedge foreign exchange risk associated with our lease liability at NAIE, which is denominated in Swiss Francs (CHF). As of June 30, 2025 , the notional amounts of our foreign exchange contracts not designated as cash flow hedges were approximately $ 11.8 million (CHF 9.5 million). 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. Fluctuations in the relation of our contractual swap rate to current market rates are recorded as an asset or liability with an offset to OCI at the end of each reporting period. 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. M. Contingencies From time to time, we become involved in various investigations, claims and legal proceedings that arise in the ordinary course of our business. These matters may relate to product liability, employment, intellectual property, tax, regulation, contract or other matters. The resolution of these matters as they arise will be subject to various uncertainties and, even if such claims are without merit, could result in the expenditure of significant financial and managerial resources. While unfavorable outcomes are possible, based on available information, we generally do not believe the resolution of these matters will result in a material adverse effect on our business, consolidated financial condition, or results of operations and the price of our common stock. However, a settlement payment or unfavorable outcome could adversely impact our results of operations. Our evaluation of the likely impact of these actions could change in the future and we could have unfavorable outcomes we do not expect. 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. 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. 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. 39 Table of Contents N. 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 and TriBsyn™ trademark. 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. Operating income or loss for each segment does not include corporate general and administrative expenses, interest expense and other miscellaneous income and expense items. Corporate general and administrative expenses include, but are not limited to human resources, corporate legal, finance, information technology, and other corporate level related expenses, which are not allocated to any segment. Transfers of raw materials between segments are recorded at cost. 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 year ended June 30, 2025 were as follows (in thousands): Natural Corporate Alternatives Private-label Patent and expenses International contract trademark not allocated Inc. manufacturing licensing to segments Consolidated Net sales $ 121,779 $ 8,081 $ - $ 129,860 Cost of goods sold 118,111 2,460 - 120,571 Gross profit 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 ( 1,727 ) 3,406 ( 10,339 ) ( 8,660 ) Other income (expense): Interest income 168 - - 168 Interest expense ( 915 ) - - ( 915 ) Foreign exchange loss ( 1,340 ) - - ( 1,340 ) Other, net 7 - - 7 Total other expense ( 2,080 ) - - ( 2,080 ) (Loss) income before income taxes ( 3,807 ) 3,406 ( 10,339 ) ( 10,740 ) Provision for income taxes 2,835 Net loss $ ( 13,575 ) Other supplemental information: Stock-based compensation $ 887 $ 90 $ - $ 977 Depreciation and amortization 4,553 7 - 4,560 Total assets 113,843 38,096 - 151,939 Capital expenditures 3,614 - - 3,614 1 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. 40 Table of Contents Our operating results by business segment for the year ended June 30, 2024 were as follows (in thousands): Natural Corporate Alternatives Private-label Patent and expenses International contract trademark not allocated Inc. manufacturing licensing to segments Consolidated Net sales $ 105,358 $ 8,438 $ - $ 113,796 Cost of goods sold 103,727 3,204 - 106,931 Gross profit 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 176 - - 176 Interest expense ( 361 ) - - ( 361 ) Foreign exchange loss ( 652 ) - - ( 652 ) Other, net ( 93 ) - - ( 93 ) Total other expense ( 930 ) - - ( 930 ) (Loss) income before income taxes ( 4,396 ) 3,319 ( 8,387 ) ( 9,464 ) Benefit for income taxes ( 2,247 ) Net loss $ ( 7,217 ) Other supplemental information: Stock-based compensation $ 1,104 $ 96 $ - $ 1,200 Depreciation and amortization 4,640 7 - 4,647 Total assets 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. and in markets outside the U.S., including Europe, Canada, Australia, New Zealand, Mexico and Asia. Our primary markets outside the U.S. are Europe and Asia. Our patent and trademark licensing activities are primarily based in the U.S. Net sales by geographic region, based on the customers’ location, for the two years ended June 30 were as follows (in thousands): 2025 2024 United States $ 79,128 $ 73,512 Markets outside the United States 50,732 40,284 Total net sales $ 129,860 $ 113,796 Products manufactured by NAIE accounted for 85 % of consolidated net sales in markets outside the U.S. 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. during the fiscal years ended June 30, 2025 and 2024 . Long-lived assets by geographic region, based on the location of the company or subsidiary at which they were located or made, for the two years ended June 30 were as follows (in thousands): 2025 2024 United States $ 76,212 $ 78,146 Europe 15,732 17,602 Total Long-lived assets $ 91,944 $ 95,748 Total assets by geographic region, based on the location of the company or subsidiary at which they were located or made, for the two years ended June 30 were as follows (in thousands): 2025 2024 United States $ 105,860 $ 118,878 Europe 46,079 43,464 Total assets $ 151,939 $ 162,342 Capital expenditures by geographic region, based on the location of the company or subsidiary at which they were located or made, for the two years ended June 30 were as follows (in thousands): 2025 2024 United States $ 2,862 $ 2,793 Europe 752 224 Total capital expenditures $ 3,614 $ 3,017 41 Table of Contents ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.