What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2026-09-28 compared with 2025-09-23 · 370 added, 209 removed, 871 unchanged (40% of the section changed)

7 unchanged sentences

In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of June 30, 2026 and 2025, and the consolidated results of its operations and its cash flows for each of the two years in the period ended June 30, 2026, in conformity with accounting principles generally accepted in the United States of America.

Substantial Doubt About the Company ’ s Ability to Continue as a Going Concern

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern.

As discussed in Note A to the consolidated financial statements, the Company has experienced continued net losses and negative operating cash flow, a forecasted inability to meet financial covenant requirements in its credit facility agreement, and insufficient cash resources to satisfy the liabilities under the credit facility agreement should such be deemed in default and the lender exercises its rights under the agreement.

These conditions raise substantial doubt about the Company’s ability to continue as a going concern.

Management’s plans in regard to these matters are also described in Note A to the consolidated financial statements.

The consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty.

Basis for Opinion

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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:

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that:

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

We determined that there are no critical audit matters.

The communication of the critical audit matter does not alter in any

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (Continued)

way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.

Impairment of Long-Lived Assets

Critical Audit Matter Description

As described in Note A to the consolidated financial statements, during the year ended June 30, 2026, the Company recorded an impairment charge of $10.4 million related to the long-lived assets of its Carlsbad, CA manufacturing facility.

Management compared the undiscounted cash flows expected to result from the use and eventual disposition of the asset group to its carrying amount and, because those cash flows did not exceed the carrying amount, measured the impairment loss as the excess of the carrying amount over the fair value of the asset group.

Measuring the impairment loss required management to estimate the fair value of the land and building and the machinery and equipment, which are measurements developed using significant unobservable inputs, including the determination of the highest and best use of the assets from the perspective of a market participant.

The principal considerations for our determination that this is a critical audit matter are the significant judgments made by management in developing the fair value estimates of the asset group and of the individual long-lived assets within that group, including the determination of highest and best use and the selection of the value indications considered representative of fair value.

How the Critical Audit Matter was Addressed in the Audit

Auditing management’s estimates of the fair value of the asset group and of the individual long-lived assets within that group was challenging and judgmental because the estimates involve significant measurement uncertainty regarding the highest and best use of a specialized manufacturing facility as determined by a market participant, the value indications selected as representative of fair value, and the assumptions underlying the projected cash flows of the asset group.

A high degree of auditor judgment, subjectivity and effort was required in performing procedures and evaluating evidence related to management's assumptions in these areas.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included, among others:

We obtained an understanding of the Company’s process for identifying indicators of impairment and for determining the composition of its asset groups;

we evaluated management's accounting policies and practices with respect to the impairment of long-lived assets for compliance with accounting principles generally accepted in the United States of America;

and we evaluated whether the assets and liabilities included in the asset group represent the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities.

We evaluated the projected undiscounted cash flows used in the recoverability test, including assessing the completeness of those cash flows relative to the composition of the asset group, comparing revenue growth, operating cost, capital expenditure and terminal assumptions to historical operating results, the Company’s approved operating budget, and other internal and external information, and evaluating whether such assumptions were applied consistently across the Company’s asset groups.

We recomputed the comparison of the projected undiscounted cash flows to the carrying amount of the asset group.

Through inquiries with management and examination of Company-prepared analyses, we obtained an understanding of management’s determination of the highest and best use of the assets and of the significant assumptions supporting the fair value estimates.

We evaluated that determination against the requirements of accounting principles generally accepted in the United States of America, including whether the valuation premise and related assumptions were applied consistently to all of the assets of the group and were consistent

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (Continued)

with the assumptions underlying management's projected cash flows.

We evaluated whether the valuation techniques applied were appropriate in the circumstances and consistent with that use.

We obtained the third-party evidence underlying the value indications used by management and evaluated its relevance and reliability, including the source of the information, the basis and date on which it was prepared, and whether it was developed on a basis consistent with the fair value measurement objective.

Using the third-party evidence obtained by management together with market data for comparable properties that we obtained from independent sources, we evaluated whether management’s fair value conclusions fell within a range of reasonable outcomes.

We tested the allocation of the impairment loss to the long-lived assets of the asset group, including the limitation of the loss allocated to any individual asset to that asset's fair value.

We evaluated information subsequent to the balance sheet date to determine whether there was any new information that would require adjustment to the previously estimated amounts.

We evaluated the classification of the impairment loss and related financial statement disclosures to ensure compliance with accounting principles generally accepted in the United States of America.

/s/ HASKELL & WHITE LLP

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$ 7,388 $ 12,325

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

Restricted cash

Accounts receivable – less allowance for credit losses of $ 1 at June 30, 2026 and $ 0 at June 30, 2025

20,650 14,644

1 unchanged sentence

30,753 24,871

Income tax receivable

Forward contracts

Assets held for sale

Prepaids and other current assets

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24,062 41,054

Deferred tax asset, net – noncurrent

Other noncurrent assets, net

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Forward contracts

Income taxes payable

Mortgage note payable, current portion

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Mortgage note payable, net of current portion

Income taxes payable, noncurrent

Total liabilities

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( 23,343 ) ( 23,254 )

Accumulated other comprehensive loss

Accumulated other comprehensive income (loss)

299 ( 1,415 )

3 unchanged sentences

$ 126,446 $ 151,939

See accompanying notes to consolidated financial statements.

See accompanying notes to consolidated financial statements and report of independent registered public accounting firm.

Natural Alternatives International, Inc.

7 unchanged sentences

17,296 16,549

Impairment loss (Note A)

Settlement of legal proceeding and associated expense

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( 20,265 ) ( 10,740 )

Provision (benefit) for income taxes

2,835 ( 2,247 )

Provision for income taxes

$ ( 20,695 ) $ ( 13,575 )

Change in minimum pension liability, net of tax

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

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

1,565 ( 1,443 )

7 unchanged sentences

6,027,816 5,946,520

See accompanying notes to consolidated financial statements.

See accompanying notes to consolidated financial statements and report of independent registered public accounting firm.

Natural Alternatives International, Inc.

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— — — — 45,972 ( 178 ) — ( 178 )

Forfeiture of restricted stock

— — — — 3,000 — — —

Change in minimum pension liability, net of tax

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— — — — 32,006 ( 88 ) — ( 88 )

Forfeiture of restricted stock

— — — — 26,665 ( 1 ) — ( 1 )

Change in minimum pension liability, net of tax

— — — — — — 149 149

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

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

— — — — — — 1,565 1,565

2 unchanged sentences

9,651,906 $ 94 $ 34,213 $ 38,696 3,385,364 $ ( 23,343 ) $ 299 $ 49,959

See accompanying notes to consolidated financial statements.

See accompanying notes to consolidated financial statements and report of independent registered public accounting firm.

Natural Alternatives International, Inc.

4 unchanged sentences

$ ( 20,695 ) $ ( 13,575 )

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

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

Impairment loss

Settlement of legal proceeding and associated expense

1 unchanged sentence

Deferred income taxes

3,613 ( 2,907 )

Non-cash lease expenses

Non-cash compensation

Stock-based compensation

Pension expense, net of contributions

5 unchanged sentences

Prepaids and other assets

2,223 ( 1,597 )

Accounts payable and accrued liabilities

4 unchanged sentences

Accrued compensation and employee benefits

Net cash provided by (used in) operating activities

Net cash (used in) provided by operating activities

( 8,916 ) 5,932

5 unchanged sentences

Cash flows from financing activities

(Payments) Borrowings on line of credit

Borrowings under line of credit

66,710 31,000

Repurchase of common stock

Repayments under line of credit

( 60,861 ) ( 32,500 )

Payments on long-term debt

Borrowings under long-term debt

Repayments under long-term debt

( 8,994 ) ( 296 )

Net cash (used in) provided by financing activities

Repurchase of common stock

( 89 ) ( 178 )

Net increase (decrease) in cash and cash equivalents

Net cash provided by (used in) financing activities

7,766 ( 1,974 )

Cash and cash equivalents at beginning of year

Net (decrease) increase in cash, cash equivalents and restricted cash

( 4,851 ) 344

Cash and cash equivalents at end of year

Cash, cash equivalents and restricted cash at beginning of year

12,325 11,981

Cash, cash equivalents and restricted cash at end of year

$ 7,474 $ 12,325

Supplemental disclosures of cash flow information

Cash paid during the year for:

See accompanying notes to consolidated financial statements.

$ 1,082 $ 814

Non-cash purchases of property and equipment

See accompanying notes to consolidated financial statements and report of independent registered public accounting firm.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

We also seek to commercialize our patent and trademark estate related to the ingredient known as beta-alanine sold under our CarnoSyn®, SR CarnoSyn®, CarnoSyn® 4X and TriBsyn® trademarks through raw material and finished product sales and various license and similar arrangements.

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

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The functional currency of NAIE, our foreign subsidiary, is the U.S.

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.

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 and comprehensive loss.

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.

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.

We adopted the new standard and the additional disclosure requirements in our annual financial statements for the year ended June 30, 2026 with prospective application contained in Note G.

Recently Issued Accounting and Regulatory Pronouncements

In December 2025, the FASB issued ASU 2025 - 12, Codification Improvements ("ASU 2025 - 12" ).

ASU 2025 - 12 addresses suggestions received from stakeholders regarding the Accounting Standards Codification and makes other incremental improvements to U.S.

The update represents changes to the Codification that clarify, correct errors in or make other improvements to a variety of topics that are intended to make it easier to understand and apply.

ASU 2025 - 12 is effective for fiscal years beginning after December 15, 2026 and interim periods within those fiscal years.

Entities are required to apply the amendments to ASC 260 retrospectively.

All other amendments may be applied prospectively or retrospectively.

Early adoption is permitted.

We plan to adopt this pronouncement for the interim periods within our fiscal year beginning July 1, 2027, and we are currently evaluating the impact this ASU may have on our consolidated financial statements and related disclosures.

In December 2025, the FASB issued ASU 2025 - 11 which is related to interim disclosure requirements.

The amendments in this update clarify current interim disclosure requirements and provide a comprehensive list of required interim disclosures.

The update also incorporates a disclosure principle that requires entities to disclose events that occur after the end of the last annual reporting period.

This update is effective for interim periods within annual periods beginning after December 15, 2027, though early adoption is permitted.

We plan to adopt this pronouncement for the interim periods within our fiscal year beginning July 1, 2028, and we do not expect it to have a material effect on our consolidated financial statements and related disclosures.

In November 2025, the FASB issued ASU 2025 - 09, Derivatives and Hedging (Topic 815 ):

Hedge Accounting Improvements, which introduces five targeted improvements to better align hedge accounting with risk management activities of the entity.

The update will be effective for annual reporting periods beginning after December 15, 2026, and interim periods within those annual reporting periods.

Early adoption is permitted.

We plan to adopt this pronouncement for the interim periods within our fiscal year beginning July 1, 2027, and we are assessing the effect of this update on our consolidated financial statements and related disclosures.

In July 2025, the FASB issued ASU 2025 - 05, Financial Instruments - Credit Losses (Topic 326 ):

Measurement of Credit Losses for Accounts Receivable and Contract Assets to introduce a practical expedient intended to simplify the estimation of expected credit losses on current accounts receivable and contract assets arising from revenue transactions under ASC 606.

The practical expedient permits entities to assume that current conditions as of the reporting date remain unchanged for the remaining life of the asset.

ASU 2025 - 05 is effective for fiscal years beginning after December 15, 2025, including interim periods within those fiscal years, with early adoption permitted.

The provisions under ASU 2025 - 05 should be applied on a prospective basis.

We plan to adopt this pronouncement for the interim periods within our fiscal year beginning July 1, 2026, and we do not expect it to have a material effect on our consolidated financial statements and related disclosures.

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

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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.

We are currently evaluating the impact of this standard on our consolidated financial statements and related disclosures.

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".

4 unchanged sentences

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".

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

Reclassifications

Certain amounts in the prior period consolidated financial statements have been reclassified to conform to the current period presentation.

These reclassifications had no effect on reported results of operations.

Going Concern

Management evaluated whether conditions and events, considered in aggregate, raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date our financial statements are issued.

As of June 30, 2026 , we had $ 7.5 million in cash, cash equivalents and restricted cash of which $ 6.3 million was held by NAIE.

On October 15, 2025, NAIE paid a dividend of $ 3.1 million to NAI which was subject to a 5 % Swiss withholding tax.

On May 18, 2026, we entered into a new domestic credit facility with Legacy (Note F).

The new credit facility includes a fixed charge coverage ratio covenant requirement as defined in the Loan and Security Agreement that is based on only domestic operations and will first be measured for the nine months ending September 30, 2026.

We anticipate we will not be able to comply with the covenant required under the Loan and Security Agreement as of September 30, 2026 due to one of our largest private-label contract manufacturing customer's material downward revisions to their forecast of projected orders and purchases from us during our fiscal year 2027 (Note O).

We have informed Legacy of our pending non-compliance with the fixed charge coverage ratio, and there is no assurance that a waiver, amendment, or remedy will be available or what the difference in amount, cost or other factors may be.

Management identified the following conditions that raised substantial doubt about the Company’s ability to continue as a going concern:

• Continued net losses and negative operating cash flows;

• A forecasted inability to meet the financial covenant requirements of Legacy for the nine months ending September 30, 2026;

• Our inability to satisfy amounts owed under the current credit facility and term loan with cash currently available in the event Legacy elects to exercise its rights under the credit facility in the event of non-compliance regarding default actions against the Company.

To address these conditions, management has implemented the following actions:

We currently have our corporate headquarters classified as held for sale of which we expect to generate net positive cash flow from a future sale;

Management continues to focus on growing sales through the expansion of existing customer relationships and new customer relationships;

Management is evaluating cost containment and reduction opportunities in an effort to improve financial results while also improving working capital usage;

After careful consideration of the Company's current financial position and strategic objectives, management has determined the sale of our Carlsbad, California manufacturing facility is in the best interests of the Company and its stockholders.

The Board of Directors has concluded that divesting this real property asset will provide the Company with additional liquidity needed to manage cash flows and reduce the overall debt load while improving capacity utilization.

In light of the Company's recent operating challenges, management believes unlocking the capital currently held in this facility will allow the Company to extinguish the outstanding term-note on this property, reduce persistent excess capacity in our contract manufacturing segment, and better size the Company for sustainable growth.

Management believes production can be effectively consolidated into our Vista, California manufacturing facility with no disruptions to production of customers' products;

Initiated a comprehensive review process to explore strategic alternatives focused on maximizing shareholder value including evaluating a full range of strategic growth paths, potential mergers, acquisitions, joint ventures, or a strategic sale of the Company.

Management has prepared cash flow projections incorporating these plans, as well as projected sales growth reflecting our best estimates of future operating performance and liquidity needs.

Management believes these plans will allow the Company to mitigate the current conditions that have raised substantial doubt about the Company’s ability to continue as a going concern.

While management plans to take the actions noted above, there can be no assurance we will be successful in our efforts to obtain a waiver, amendment, or obtain alternative financing or avoid future issues maintaining compliance with financial covenants.

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

Cash, Cash Equivalents, and Restricted Cash

We consider all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents.

Amounts classified as restricted cash are for a lockbox arrangement with our lender.

The following table sets forth the company’s reconciliation of cash, cash equivalents and restricted cash reported within the consolidated statement of cash flows that equals the total of the same amounts shown in the consolidated balance sheets:

Supplemental disclosures of cash flow information

Cash and cash equivalents

$ 7,388 $ 12,325

Restricted cash (1)

Cash, cash equivalents and restricted cash

$ 7,474 $ 12,325

( 1 ) Restricted cash is comprised of payment receipts from our customers used to reduce borrowing on the outstanding balance of our line of credit.

Fair Value of Financial Instruments

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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.

We classify cash, cash equivalents, restricted cash, and marketable securities balances as Level 1 assets.

The approximate fair value of cash, cash equivalents, restricted cash, 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.

1 unchanged sentence

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.

As part of the refinancing of our previous credit facility, Wells Fargo required us to extinguish and settle all our remaining outstanding foreign currency hedge contracts.

As a result, we did not hold any foreign currency hedge contracts as of June 30, 2026 .

Except for cash, cash equivalents and restricted cash, as of June 30, 2026 and June 30, 2025 , 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):

Interest Swap – Other Current Assets

Euro Forward Contract– Current Assets

The fair values were determined by obtaining pricing from Wells Fargo.

We measure assets held for sale, property and equipment, net, and operating lease right-of-use assets at fair value on a nonrecurring basis and recognize them at the lower of fair value or their carrying amount when they are deemed to be impaired.

As of June 30, 2026 , we recognized a non-cash impairment charge of $ 10.4 million presented as a separate line item, Impairment loss , on the consolidated statements of operations and comprehensive loss to write down property and equipment, net to reflect the lower of their estimated fair values or carrying amount as of June 30, 2026.

Our estimates of fair value measurements used to calculate the impairment loss were classified as Level 3 within the fair value hierarchy due to the use of significant unobservable inputs and management's own assumptions regarding future cash flows.

As of June 30, 2026 , we had no derivative instruments classified as Level 2 assets and liabilities.

Fair value of derivative instruments classified as Level 2 assets and liabilities consisted of the following as of June 30, 2025 (in thousands):

Swiss Franc Forward Contract – Current Assets

Total Derivative Contracts – Current Assets

Euro Forward Contract– Other Noncurrent Assets

Total Derivative Contracts – Other Noncurrent Assets

Euro Forward Contract–Current Liabilities

Swiss Franc Forward Contract – Current Liabilities

( 263 ) ( 91 )

Total Derivative Contracts – Current Liabilities

( 1,967 ) ( 91 )

Fair Value Net Asset – all Derivative Contracts

$ ( 1,599 ) $ 590

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

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Significant expenditures that increase economic useful lives of property or equipment are capitalized and expensed over the useful life of such expenditure.

Impairment of Long-Lived Assets

Impairment Loss

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.

2 unchanged sentences

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.

During fiscal 2026 in our Private-label contract manufacturing segment, we observed a decline in the fair value of our manufacturing facility we own in Carlsbad, California compared to its carrying value, negative cash flow results from operating activities in fiscal years 2026 and 2024 , an adverse change in the business climate as a result of one of our largest customer's downward revisions of forecasted orders, and expected negative cash flow results for fiscal year 2027.

These factors indicated the carrying value of certain long-lived assets might not be fully recoverable.

Consequently, we performed an evaluation of the recoverability of this asset group.

Based on this evaluation, we determined the carrying amount of our manufacturing facility in Carlsbad, California exceeded the projected undiscounted future cash flows from that facility.

Accordingly, we determined an impairment loss due to the carrying value of this asset group as of June 30, 2026 being in excess of the sum of expected cash flows over the forecasted useful life of the facility subject to fair value limitations.

As a result, we recognized a non-cash impairment charge of $ 10.4 million presented as a separate line item, Impairment loss , on the consolidated statements of operations and comprehensive loss to write down property and equipment, to reflect the lower of their estimated fair values or carrying amounts as of June 30, 2026.

This charge significantly increased our operating loss for fiscal year 2026 but had no immediate impact on our cash position or liquidity.

For estimates of fair values, we relied on significant unobservable inputs categorized as Level 3 within the fair value hierarchy such as third -party real estate experts for building and land fair values as of June 5, 2026, and a third -party appraiser's report for Machinery and Equipment as of January 28, 2026, which we received as part of our debt refinancing in May 2026 and do not represent fair values as of June 30, 2026.

It is possible the assumptions and underlying estimates used to determine the fair value of this asset group will change in the future, and such changes could result in a material difference from the impairment loss recognized in these financial statements.

During fiscal 2025 , we recognized no impairment losses.

Assets Held for Sale

During the fourth quarter of fiscal year 2026 after careful consideration of our financial position and strategic objectives, management determined the sale of the Company's corporate headquarters building was in the best interests of the Company and its stockholders.

The Board of Directors concluded that divesting this real property asset would provide us with enhanced financial flexibility and additional liquidity needed to pursue business opportunities.

By the end of the fourth quarter of fiscal year 2026, we had met all of the criteria required for treatment of the building, land and other fixed assets as assets held for sale.

The assets held for sale are located in Carlsbad, California and are reported at their combined carrying value of $ 4.0 million as of June 30, 2026 .

We estimate the sale of these assets to occur during our fiscal year 2027.

No impairment loss was recognized upon classification to assets held for sale.

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.

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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.

As of June 30, 2026 , we held no derivative contracts designated as cash flow hedges as all contracts were settled on May 11, 2026 resulting in a net settlement loss of $ 0.2 million when our hedging credit line with Well Fargo was terminated.

We are exploring opportunities with other lenders to establish a new foreign currency hedging credit line.

Defined Benefit Pension Plan

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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.

Payments of invoices are due as specified in the underlying customer agreement, which typically range from 30 to 60 days from the invoice date.

Invoices are generally issued on the date of transfer of control of the products ordered to the customer.

23 unchanged sentences

$ 302 $ 4,371 $ ( 3,309 ) $ — $ 1,364

Except for product defects, no right of return exists on the sale of our products.

Except for product defects, no right of return exists on the sale of our products, or those we manufacture for our customers.

We estimate returns based on historical experience and recognize a returns liability for any estimated returns.

As of June 30, 2026 , we have $ 0 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 currently own and previously owned certain U.S.

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

All of these patents, pending patents, and patent rights, relate to the ingredient known as beta-alanine marketed and sold under our CarnoSyn®, SR CarnoSyn®, CarnoSyn® 4X and TriBsyn® trademarks.

We recorded beta-alanine raw material sales and royalty and licensing income as a component of revenue in the amount of $ 7.9 million during fiscal 2026 and $ 8.1 million during fiscal 2025 .

1 unchanged sentence

We recognized royalty expense as a component of cost of goods sold in the amount of $ 0.2 million during fiscal 2026 and $ 0.3 million during fiscal 2025 .

In July 2026, our patents related to instant release beta-alanine expired and the royalty expense agreement terminated.

Cost of Goods Sold

1 unchanged sentence

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.

We include fees earned on the shipment of 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

3 unchanged sentences

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 .

Our research and development expenses were $ 2.3 million for fiscal 2026 and $ 1.8 million for fiscal 2025 .

These costs are included in selling, general and administrative expenses and cost of goods sold.

9 unchanged sentences

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 .

The valuation allowance recorded during fiscal 2026 primarily related to fiscal 2026 and changes in other deferred tax items recognized during fiscal 2026 .

As a result of the recognition of these valuation adjustments, we have a $ 10.4 million net deferred tax asset offset by a valuation allowance of $ 10.4 million resulting in a net deferred tax asset of $ 0 as of June 30, 2026 .

9 unchanged sentences

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.

Our current omnibus equity incentive plan that became effective January 1, 2021 ( the “2020 Plan”), 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.

When we issue stock options or have any outstanding, 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.

7 unchanged sentences

We amortize the estimated fair value of our stock awards to expense over the related vesting periods.

We recognize forfeitures as they occur.

We recognize forfeiture of stock-based compensation as they occur.

Use of Estimates

4 unchanged sentences

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):

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

We calculated basic and diluted net loss per common share as follows (in thousands, except per share data):

For the Years Ended June 30,

11 unchanged sentences

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 .

Financial instruments that subject us to concentrations of credit risk consist primarily of cash, cash equivalents, restricted cash and accounts receivable.

We place our cash, cash equivalents and restricted cash with highly rated financial institutions.

Credit risk with respect to receivables is primarily concentrated with our two largest customers whose receivable balances collectively represented 59.4 % of gross accounts receivable at June 30, 2026 and with our three largest customers whose receivable balances collectively represented 67.8 % at June 30, 2025 .

Additionally, amounts due related to our beta-alanine raw material sales were 9.2 % of gross accounts receivable at June 30, 2026 and 6.8 % of gross accounts receivable at June 30, 2025 .

23 unchanged sentences

$ 35,605 $ 50,890

During fiscal year 2026 , we disposed of machinery and equipment primarily due to obsolescence with total original value of $ 804,000 and related accumulated depreciation of $ 798,000 resulting in a loss on disposal of assets of $ 6,000 .

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

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

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

Depreciation and amortization expense was approximately $ 4.7 million in fiscal 2026 and $ 4.6 million in fiscal 2025 .

As of June 30, 2026 , we had met all of the criteria required for treatment of the Company's corporate headquarters building, land and other fixed assets located in Carlsbad, California as assets held for sale.

The assets held for sale are reported at their combined carrying value of $ 4.0 million as of June 30, 2026 .

We estimate the sale of these assets to occur during our fiscal year 2027.

No impairment loss was recognized upon classification to assets held for sale.

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

At the inception of a contract, we assess whether the contract is, or contains, a lease.

3 unchanged sentences

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.

The Fourth Amendment extended 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 resulted 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 constructed substantial improvements to the facilities including but not limited to installation of an approximately $ 2.4 million solar electrical generating system on both buildings, and other substantial improvements.

Pursuant to the Fourth Amendment, the Landlord has reimbursed NAI $ 1.1 million for 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.

We reevaluated our leased property in Vista as of June 30, 2026 and determined that it was in our best interest not to exercise an extension option that was previously recorded at the time of the Fourth Amendment to the Lease.

As a result, our lease liability and right-of-use asset as of June 30, 2026 both decreased by $ 14.1 million due to this remeasurement.

On June 9, 2026, NAIE provided notice of termination related to our warehouse leased in Manno, Switzerland.

The notice of termination reduced the lease term by one year and six months, thus ending on December 31, 2026.

NAIE's lease liability and right-of-use asset as of June 30, 2026 both decreased by approximately $ 0.3 million as a result of their notification and termination of the lease agreement.

On January 22, 2024, NAIE entered into a lease for an apartment in Lugano, Switzerland with an original lease term of 27 months beginning April 1, 2024 and ending on June 30, 2026.

On June 2, 2026, NAIE extended the lease term six months through December 31, 2026.

NAIE's lease liability and right of use asset as of June 30, 2026 both increased by approximately $ 27,000 as a result of the lease extension.

Leases are classified as either finance leases or operating leases.

35 unchanged sentences

$ 5,036 $ 4,302

Net increase in operating lease liabilities and right-of-use assets due to lease remeasurement

Other Comprehensive (Loss) Income

Other comprehensive (loss) income (“OCL” and “OCI”) consisted of the following at June 30 (dollars in thousands):

Net decrease in operating lease liabilities and right-of-use assets due to lease remeasurements

Other Comprehensive Income (Loss)

Other comprehensive income (loss) (“OCI” and “OCL”) consisted of the following at June 30 (dollars in thousands):

Year Ended June 30, 2026

1 unchanged sentence

$ ( 228 ) $ ( 1,187 ) $ ( 1,415 )

OCI/OCL before reclassifications

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

OCI before reclassifications

Amounts reclassified from OCI

Tax effect of OCI activity

20 1,142 1,162

Net current period OCI/OCL

Net current period OCI

149 1,565 1,714

4 unchanged sentences

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

OCI/OCL before reclassifications

OCL before reclassifications

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

Amounts reclassified from OCI

39 ( 92 ) — ( 53 )

Tax effect of OCI activity

4 unchanged sentences

$ ( 228 ) $ ( 1,187 ) $ — $ ( 1,415 )

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

2030 and Thereafter

On May 18, 2026, we entered into a new domestic credit facility with Legacy Corporate Lending, LLC (“Legacy”).

This new credit facility includes a new real estate term loan for $ 11.0 million and a working capital line of credit with a maximum borrowing capacity of $ 20.0 million subject to a borrowing-base calculation.

The new credit facility is secured by all the assets of the Company, excluding NAIE's assets, and may be prepaid at any time.

The new line of credit bears interest at a rate of 4.5 % above the Term Secured Overnight Financing Rate (“Term SOFR”), while the real estate term loan was amortized over 15 years and initially bore interest at a fixed rate of 14.0 % until such time as Legacy completed an appraisal and any necessary other documentation after which the interest rate reverted to 5.0 % above Term SOFR .

Effective July 14, 2026, NAI successfully completed the required appraisal and documentation thereby reducing the interest rate to 5 % above Term SOFR.

The credit facility also includes a 0.50 % unused commitment fee and a one -time closing fee of 1.0 % of the total committed credit amount.

The term of this new credit facility is three years maturing on May 18, 2029.

This credit facility contains covenants which restrict our ability to declare dividends to our shareholders and repurchase our common stock under the stock repurchase plan.

The credit facility includes a fixed charge coverage ratio covenant requirement as defined in the Loan and Security Agreement that is based on only domestic operations and will first be measured for the nine months ending September 30, 2026.

We anticipate we will not be able to comply with the covenant required under the Loan and Security Agreement as of September 30, 2026 due to one of our largest customer's material downward revisions to their forecast of projected orders and purchases from us during our fiscal year 2027 (Note O).

On May 18, 2026, the new credit facility was used to extinguish all our prior indebtedness with Wells Fargo Bank and to repay $ 10.0 million on our prior line of credit and $ 8.7 million on our prior term loan thus releasing all our assets formally securing these debts.

As of June 30, 2026, we had $ 17.7 million available of the maximum borrowing capacity under the terms of our new credit line, of which we had outstanding borrowings of $ 7.7 million.

We also owed $ 10.9 million on the new real estate term loan.

As of June 30, 2025 , we had $ 9.9 million available of the maximum borrowing capacity on our previous credit facility of which we had outstanding borrowings of $ 1.9 million.

We also owed $ 8.9 million on the previous term loan.

The future debt payments under the new term Note as of June 30, 2026 are as follows (in thousands):

Future Debt Payments

$ 733 $ 733 $ 9,473 $ — $ 10,939

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 .

For many years prior to our new credit facility with Legacy, we had a credit line with Wells Fargo Bank, N.A (“Wells Fargo”).

The credit line had 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.

With this amendment, the maximum borrowing limit was reduced to $ 10.0 million based on a borrowing base calculation and was secured by our accounts receivable and other rights to payment, general intangibles, inventory, equipment, and fixtures.

Interest under this credit facility was equal to 3.25 % above the applicable Secured Overnight Financing Rate (“SOFR”) and also included an unused commitment fee of 0.375 %.

We also had a Term Note with Wells Fargo that 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 had been secured by a first mortgage on that property.

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

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

For the three and nine months ended March 31, 2026, we were not in compliance with the maximum net loss and fixed charge coverage ratio covenants of the Wells Fargo credit agreement.

We also have historically had a foreign currency hedging credit line with Wells Fargo to hedge foreign currency exposure up to 12 months in the future.

As part of the above noted refinancing, Wells Fargo required us to extinguish and settle our remaining outstanding foreign currency hedge contracts.

As a result, we net settled our remaining contracts as of May 11, 2026 resulting in a net settlement loss of $ 0.2 million, and we terminated our hedging line of credit with Wells Fargo.

We are currently seeking a replacement hedging counterparty and are in discussions with several lenders.

On June 17, 2026, our subsidiary NAIE entered into a new Credit Agreement with UBS Switzerland AG (“UBS”).

This new Credit Agreement is a line of credit with maximum borrowing capacity of CHF 2.0 million secured by NAIE’s accounts receivables.

Variable rates of interest are determined by a currency-specific base rate plus a margin to be provided by UBS upon our request.

As of June 30, 2026, NAIE was in compliance with the Credit Agreement.

NAIE paid a one -time facility origination fee of CHF 15,000 to bind the Credit Agreement for an indefinite term.

The Credit Agreement with UBS is filed as Exhibit 10.49 to this Annual Report on Form 10 -K.

During fiscal 2026 , we recorded U.S.-based domestic tax expense of $ 0.1 million and foreign tax expense of $ 0.3 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 U.S.-based domestic tax benefit of $ 2.7 million and foreign tax expense of 0.1 million.

During fiscal 2026 , we recorded a valuation allowance against net domestic deferred income tax assets of $ 5.6 million, representing the amount of our deferred income tax assets in excess of our domestic deferred income tax liabilities.

The valuation allowance recorded during fiscal 2026 primarily related to fiscal 2026 and changes in other deferred tax items recognized during fiscal 2026 .

10 unchanged sentences

Valuation allowance

3,549 ( 2,299 )

Total provision (benefit) for income taxes

Total provision for income taxes

$ 430 $ 2,835

Deferred income taxes reflect the net effect of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

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

15 unchanged sentences

Deferred tax liabilities:

Assets held for sale

Withholding taxes

( 134 ) ( 134 )

( 1,577 ) ( 1,485 )

Forward contracts

4 unchanged sentences

Valuation allowance

( 10,395 ) ( 4,814 )

Net deferred tax assets

3 unchanged sentences

The Company has federal and state tax credits of $ 1.7 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.

Pursuant to Internal Revenue Code Section 382 and 383, annual use of our net operating loss carryforwards and tax credit carryforwards may be limited as a result of cumulative changes of ownership of more than 50% that occur within a three -year period, resulting in a change of control of our company.

We believe it is more-likely-than- not that all net operating losses will be materially available to offset future taxable income.

Future changes in ownership could impact the ability to utilize net operating losses and credits available to offset future taxable income.

We are subject to taxation in the U.S., Switzerland and various U.S.

state jurisdictions.

Our tax years for the fiscal year ended June 30, 2021 and forward are subject to examination by the U.S.

2 unchanged sentences

Our tax years for the fiscal year ended June 30, 2023 and forward are subject to assessment by the Swiss tax authorities.

We believe it is more likely than not that all significant tax positions taken to date would be sustained by the relevant taxing authorities.

As of June 30, 2026 and 2025 , there were no active taxing authority examinations in any of our major tax jurisdictions.

NAIE’s effective tax rate for the fiscal year ended June 30, 2026 for Swiss federal, cantonal and communal taxes is approximately 18 %.

7 unchanged sentences

Although the requirements of the Tax Cuts and Jobs Act of 2017 are applicable for our fiscal year ended on June 30, 2026 , 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.

The One Big Beautiful Bill Act was effective beginning in our fiscal year 2026 and its impact is reflected in the changes in domestic other deferred tax items recognized during fiscal 2026 , fully offset by a valuation allowance recorded during fiscal 2026 .

During fiscal 2026 , NAIE declared a dividend to NAI of $ 3.1 million, which was paid in the second quarter of fiscal 2026 .

As part of these dividends, we were required to pay a 5 % Swiss withholding tax totaling $ 0.2 million in fiscal 2026 which is recorded in the current tax provision.

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

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

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

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

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

Income taxes computed at statutory federal income tax rate

A reconciliation of the statutory federal income tax rate to the effective consolidated tax rate for the year ended June 30, 2026 , after adoption of ASU 2023 - 09, is as follows (dollars in thousands):

Reconciliation to income tax provision Percentage

U.S statutory federal income tax rate

$ ( 4,256 ) 21.0 %

State income taxes, net of federal income tax expense (1)

( 177 ) ( 215 )

Permanent differences

1 unchanged sentence

( 761 ) 3.8 %

Stock based compensation

Global intangible low-taxed income (GILTI)

Return to provision - differences

Change in valuation allowance, net

Income tax provision (benefit) as reported

5,082 ( 25.1 )%

1 unchanged sentence

$ 430 ( 2.1 )%

No single state or local jurisdiction accounted for more than 5% of the total income tax provision.

Our state tax expense is attributed primarily to our operations in California.

Foreign taxes are attributed to NAIE operations in Switzerland.

Represents other reconciling items less than 5% of the total income tax provision

A reconciliation of the statutory federal income tax rate of 21% to the effective consolidated tax rate for the year ended June 30, 2025 , prior to adoption of ASU 2023 - 09, is as follows (dollars in thousands):

Income taxes computed at statutory federal income tax rate

State income taxes, net of federal income tax expense

Permanent differences

Foreign tax rate differential

Stock based compensation

Global intangible low-taxed income (GILTI)

Return to provision - differences

Change in valuation allowance, net

Income tax provision as reported

Effective tax rate

We expect our U.S.

federal statutory rate to be 21% for fiscal years going forward.

Cash paid during the fiscal year ended June 30, 2026 for income taxes, net of refunds is as follows:

Total cash paid during the year for income taxes, net of refunds

Employee Benefit Plans

9 unchanged sentences

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 .

The premiums expensed to results from operations for these benefits totaled $ 1.6 million for the fiscal year ended June 30, 2026 and for the fiscal year ended June 30, 2025 .

Deferred Compensation Plan

2 unchanged sentences

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 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, and 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.

1 unchanged sentence

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, 2026 , 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”);

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.

Each deferred cash award provides for three equal cash payments to the applicable Participant to be paid approximately 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 .

During the fiscal year ended June 30, 2026 , deferred cash award forfeitures were $ 0.1 million, and there were none during the fiscal year ended June 30, 2025 .

Defined Benefit Pension Plan

8 unchanged sentences

Interest cost

Actuarial gain (loss)

Actuarial (loss) gain

Benefits paid

( 53 ) ( 330 )

Benefit obligation at end of year

6 unchanged sentences

Benefits paid

( 53 ) ( 330 )

Fair value of plan assets at end of year

22 unchanged sentences

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

Net income (loss)

Net (loss) income

$ ( 129 ) $ 21

4 unchanged sentences

$ ( 149 ) $ ( 65 )

Total recognized in net periodic benefit cost and other comprehensive loss

Total recognized in net periodic benefit cost and other comprehensive (loss) income

$ ( 134 ) $ 16

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 .

No estimated net gain or loss for the defined benefit pension plan will be amortized from accumulated other comprehensive income into net periodic benefit cost over the next fiscal year.

We do not have any transition obligations or prior service costs recorded in accumulated other comprehensive income.

28 unchanged sentences

large-cap funds, 16 % are U.S.

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

mid-cap funds, 11 % are developed and emerging markets and 6 % are U.S.

small-cap funds.

8 unchanged sentences

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

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

Our new Credit Agreement with Legacy 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.

9 unchanged sentences

45,972 3.88 178

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.

8 unchanged sentences

( 100,163 ) $ 6.93

( 26,665 ) $ 4.25

Nonvested at June 30, 2026

7 unchanged sentences

( 133,122 ) $ 8.31

( 3,000 ) $ 9.59

Nonvested at June 30, 2025

6 unchanged sentences

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.

We reevaluated our leased property in Vista as of June 30, 2026 and determined that it was no longer reasonably certain that we would exercise an extension option that was previously recorded at the time of the Fourth Amendment to the Lease.

As a result, our lease liability and right-of-use asset as of June 30, 2026 both decreased by $ 14.1 million due to this remeasurement.

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.

NAIE 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.

3 unchanged sentences

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.

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.

The initial term of this lease ended on December 31, 2024.

On June 9, 2026, NAIE provided notification of terminating this lease thus ending the lease on December 31, 2026.

On January 22, 2024, NAIE entered into a lease for an apartment in Lugano, Switzerland with an original lease term of 27 months beginning April 1, 2024 and ending on June 30, 2026.

On June 2, 2026, NAIE extended the lease term six months until December 31, 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, 2026 (in thousands):

9 unchanged sentences

$ 73,521 $ 77,161

$ 77,161 $ 77,308

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

Accounts receivable from these customers totaled $ 12.3 million at June 30, 2026 and $ 9.9 million at June 30, 2025 .

10 unchanged sentences

During the year ended June 30, 2026 and prior, we entered into forward contracts designated as cash flow hedges primarily to protect against the foreign exchange risks inherent in our forecasted sales of products at prices denominated in currencies other than the U.S.

These contracts are expected to be settled through June 2026.

These contracts were all settled as of June 30, 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.

2 unchanged sentences

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 .

Although no hedging relationships were terminated as a result of ineffective hedging for the years ended June 30, 2026 and June 30, 2025 , as part of our debt refinancing, Wells Fargo required us to extinguish and settle our remaining outstanding foreign currency hedge contracts (see Note F).

As a result, we net settled our remaining contracts as of May 11, 2026 resulting in a net settlement loss of $ 0.2 million, and we terminated our hedging line of credit with Wells Fargo.

We are exploring opportunities with other lenders to establish a new foreign currency hedging credit line.

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, 2026 , no foreign exchange contracts were outstanding.

During the year ended June 30, 2026 , a net gain of approximately $ 1.6 million was recorded in OCI and reclassified into earnings.

As of June 30, 2026 , approximately $ 0.4 million of deferred taxes related to derivative instruments designated as cash flow hedges was recorded in OCI.

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.

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.

During the year ended June 30, 2026 , we recognized $ 0.9 million of net gains in OCI and reclassified $ 0.4 million of net gains and forward point amortization from OCI to Net Sales as well a net settlement loss of $ 0.2 million to Foreign exchange loss when we settled our remaining contracts on May 11, 2026 ( see Note F).

During the year ended June 30, 2025 , we recognized $ 1.6 million of net losses in OCI and reclassified $ 0.2 million of losses 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.

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.

During the year ended June 30, 2026 , we entered into forward contracts in order to hedge foreign exchange risk associated with the lease liability at NAIE, which is denominated in Swiss Francs (CHF).

As of June 30, 2026 , there were no foreign exchange contracts not designated as cash flow hedges outstanding.

Contingencies

10 unchanged sentences

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.

The court has consolidated the two actions.

The settlement was brought before the court and an attempt to contact all similarly situated employees was made for them to participate at their discretion.

The court agreed to the settlement.

Payment was remitted in the first quarter of fiscal year 2027, and final court approval and termination of the proceedings is expected to take place in February 2027.

Although we were not found liable and did not admit liability, we accrued the maximum settlement amount in our results of operations as of June 30, 2025 , along with estimated related legal fees of approximately $ 150,000 .

During the year ended June 30, 2026 , we accrued additional estimated related legal fees of $ 44,000 .

Employee Retention Tax Credit

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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.

Although we had received this initial denial from the IRS, we believed we were entitled to the refund for these claims 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.

As of June 30, 2026 , our legal advisors on this matter informed us that the cost of litigation with the IRS based on their aggressive posturing of our request for refund of the third quarter of calendar 2021 credit would outweigh the benefits.

Consequently, we reserved the remaining receivable balance of $ 1.5 million and reversed associated fees of $ 0.3 million for a net expense to our results of operations of $ 1.2 million for the year ended June 30, 2026 .

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.

Management is monitoring the 2026 Iran War in the Middle East, the Russo-Ukrainian war in Eastern Europe, and on-going conflicts in Sudan 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.

1 unchanged sentence

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.

There are further concerns regarding overall decreased supplies of commodities that rely on available safe passage through the Strait of Hormuz and other potential maritime chokepoints, 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.

On February 20, 2026, the U.S.

Supreme Court ruled in the present circumstances the International Emergency Economic Powers Act ("IEEPA") does not authorize the President of the United States to impose tariffs.

On February 24, 2026, the United States Government terminated tariffs imposed under the IEEPA and replaced them with tariffs from 10% to 15% under Section 122 of the Trade Act of 1974 which expired on July 23, 2026.

On July 24, 2026, replacement tariffs of 10% to 12.5 % under Section 301of the Trade Act of 1974 were imposed on 60 U.S.

trading partners.

Details of future tariff restrictions seem to continuously evolve thus making changes to them unpredictable.

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

1 unchanged sentence

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.

In response to the U.S.

imposition of tariffs, China, Canada, the European Union, and other governments have imposed their own 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.

While we do not know how potential increased tariffs will unfold, 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.

6 unchanged sentences

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 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®, SR CarnoSyn®, CarnoSyn® 4X, and TriBsyn® trademarks.

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.

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

These factors indicated the carrying value of certain long-lived assets might not be fully recoverable.

Consequently, we performed an evaluation of the recoverability of this asset group.

Based on this evaluation, we determined the carrying amount of our manufacturing facility in Carlsbad, California exceeded the projected undiscounted future cash flows from that facility.

This charge significantly increased our operating loss for fiscal year 2026 but had no immediate impact on our cash position or liquidity.

Our operating results by business segment for the year ended June 30, 2026 were as follows (in thousands):

9 unchanged sentences

5,958 2,390 8,948 17,296

Settlement of legal proceeding and associated expense

Impairment loss

10,409 - - 10,409

Settlement of legal proceeding and associated expense

(Loss) income from operations

6 unchanged sentences

( 316 ) - - ( 316 )

( 61 ) - - ( 61 )

Total other expense

11 unchanged sentences

3,816 - - 3,816

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.

Additional estimated legal fees related to services associated with settlement of two legal proceedings were allocated to Corporate expenses.

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

Corporate Alternatives

Private-label

6 unchanged sentences

3,668 5,621 - 9,289

Selling, general and administrative expenses

Other selling, general and administrative expenses

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

Settlement of legal proceeding and associated expense

- - 1,400 (a)

(Loss) income from operations

6 unchanged sentences

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

( 93 ) - - ( 93 )

Total other expense

2 unchanged sentences

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

Benefit for income taxes

Provision for income taxes

Other supplemental information:

6 unchanged sentences

3,614 - - 3,614

Expenses accrued for gross settlement of two legal actions and related legal fees for services associated with the settlement were allocated to Corporate expenses.

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

13 unchanged sentences

in fiscal 2025 .

Products manufactured by NAIE and sold in the U.S.

during the fiscal year ended June 30, 2026 accounted for $ 36,000 of NAIE net sales.

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

during the fiscal years ended June 30, 2025 and 2024 .

during the fiscal year ended June 30, 2025

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):

14 unchanged sentences

$ 3,816 $ 3,614

Subsequent Events

In August 2026, one of our largest private-label contract manufacturing customers informed us of a material downward revision in their forecast of projected orders and purchases from us during our fiscal year 2027 caused by growing inventory levels on their behalf.

As a result, we made considerable changes to our forecast for fiscal year 2027.

Although our overall sales forecast for fiscal 2027 includes an expected increase in sales as compared to fiscal 2026 , we currently anticipate we will experience a net loss for fiscal 2027 .

Consequently, we anticipate we will not be able to comply with the fixed charge coverage ratio covenant requirement as defined in the Loan and Security Agreement that is based on only domestic operations and will first be measured for the nine months ending September 30, 2026.

After careful consideration of the Company's current financial position and strategic objectives, management has determined the sale of the manufacturing facility located in Carlsbad, California is in the best interests of the Company and its stockholders.

Management believes production can be effectively consolidated in our Vista, California manufacturing facility with no disruptions to production of customers' products.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data