10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT

pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2022

000-15701

(Commission file number)

NATURAL ALTERNATIVES INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)

Delaware	84-1007839
(State of incorporation)	(IRS Employer Identification No.)
1535 Faraday Ave Carlsbad, CA 92008	(760) 736-7700
(Address of principal executive offices)	(Registrant’s telephone number)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Common Stock, $0.01 par value per share	NAII	Nasdaq Stock Market

Indicate by check mark whether NAI (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that NAI was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    ☒  Yes     ☐  No

Indicate by check mark whether NAI has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that NAI was required to submit and post such files).    ☒  Yes     ☐  No

Indicate by check mark whether NAI is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.

Large accelerated filer	☐	Accelerated filer	☐	Emerging Growth Company	☐
Non-accelerated filer	☐	Smaller reporting company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether NAI is a shell company (as defined in Rule 12b-2 of the Exchange Act): ☐ Yes ☒ No

As of May 12, 2022, 6,150,452 shares of NAI's common stock were outstanding, net of 2,989,763 treasury shares.

1

TABLE OF CONTENTS

		Page
SPECIAL NOTE ABOUT FORWARD-LOOKING STATEMENTS		1
PART I	FINANCIAL INFORMATION
Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets	4
	Condensed Consolidated Statements of Income and Comprehensive Income	5
	Condensed Consolidated Statements of Stockholders’ Equity	6
	Condensed Consolidated Statements of Cash Flows	8
	Notes to Condensed Consolidated Financial Statements	9
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	22
Item 4.	Controls and Procedures	27
PART II	OTHER INFORMATION
Item 1.	Legal Proceedings	28
Item 1A.	Risk Factors	28
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	28
Item 3.	Defaults Upon Senior Securities	28
Item 5.	Other Information	28
Item 6.	Exhibits	29
SIGNATURES		30

2

SPECIAL NOTE ABOUT FORWARD-LOOKING STATEMENTS

Certain statements in this report, including information incorporated by reference, are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934, and the Private Securities Litigation Reform Act of 1995. Forward-looking statements reflect current views about future events and financial performance based on certain assumptions. They include opinions, forecasts, intentions, plans, goals, projections, guidance, expectations, beliefs, or other statements that are not statements of historical fact. Words such as “may,” “will,” “should,” “could,” “would,” “expect,” “plan,” “believe,” “anticipate,” “intend,” “estimate,” “approximate,” “predict,” “forecast,” “project,”, “future”, or “likely”, or the negative or other variation of such words, and similar expressions may identify a statement as a forward-looking statement. Any statements that refer to projections of our future financial performance, our anticipated growth and trends in our business, our goals, strategies, focus and plans, and other characterizations of future events or circumstances, including statements expressing general optimism or pessimism about future operating results, are forward-looking statements. Forward-looking statements in this report may include statements about:

• our ability to develop market acceptance for and increase sales of new products, develop relationships with new customers and maintain or improve existing customer relationships;

• the impact, of the Covid-19 Pandemic (“COVID-19”) and other external factors both within and outside of our control, on our business and results in operations including variations in our quarterly net sales, our employees, supply chain, vendors and customers;

• future financial and operating results, including projections of net sales, revenue, income or loss, net income or loss per share, profit margins, expenditures, liquidity, and other financial items;

• our ability to maintain or increase our patent and trademark licensing revenues;

• our ability to attract and retain sufficient labor to successfully execute our business strategies and achieve our goals and objectives;

• inventory levels, including the adequacy of quality raw material and other inventory levels to meet future customer demand, in particular assumptions regarding the impact of the COVID-19 pandemic;

• our ability to price our products to achieve profit margin targets, especially in the current volatile raw material and labor environment;

• our ability to protect our intellectual property;

• future economic and political conditions, including implementation of new or increased tariffs;

• our ability to improve operating efficiencies, manage costs and business risks, and improve or maintain profitability;

• currency exchange rates and their effect on our results of operations (including amounts that we may reclassify as earnings), the availability of foreign exchange facilities, our ability to effectively hedge against foreign exchange risks and the extent to which we may seek to hedge against such risks;

• the outcome of litigation, regulatory and tax matters we may become involved in, the costs associated with such matters and the effect of such matters on our business and results of operations;

• sources, availability and quality of raw materials, including the limited number of suppliers of beta-alanine meeting our quality requirements;

• the future adequacy and intended use of our facilities;

• potential manufacturing and distribution channels, product returns, and potential product recalls;

• future customer orders;

• the impact of external factors on our business and results of operations, especially, for example, variations in quarterly net sales from seasonal and other external factors;

• our ability to operate within the standards set by the U.S. Food and Drug Administration’s (FDA) Good Manufacturing Practices (GMPs);

• our ability to successfully expand our operations, including outside the United States (U.S.);

• the adequacy of our financial reserves and allowances;

• the sufficiency of our available cash, cash equivalents, and potential cash flows from our operations to fund our working capital and capital expenditure needs through the next 12 months and longer;

• the impact of accounting pronouncements and our adoption of certain accounting guidance; and

• other assumptions described in this Report underlying or relating to any forward-looking statements.

Forward-looking statements in this Report speak only as of the date of this Report based on information available to us at that time and caution should be taken not to place undue reliance on any such forward-looking statements. Forward-looking statements are subject to certain future events, risks, and uncertainties that are or may be outside of our control. When considering forward-looking statements, you should carefully review the risks, uncertainties and other cautionary statements in this Report as they identify certain important factors that could cause actual results to differ materially from those expressed in, or implied by, the forward-looking statements. These factors include, among others, the risks described under Item 1A of Part II and elsewhere in this Report, as well as in other reports and documents we have filed and will file with the United States Securities and Exchange Commission (SEC).

3

PART I – FINANCIAL INFORMATION

ITEM 1.     FINANCIAL STATEMENTS

Natural Alternatives International, Inc.

Condensed Consolidated Balance Sheets

(In thousands, except share and per share data)

	March 31, 2022			June 30, 2021
Assets	(Unaudited)
Current assets:
Cash and cash equivalents	$	18,575		$	32,133
Accounts receivable – less allowance for doubtful accounts of $3,383 at March 31, 2022 and $3,527 at June 30, 2021		16,736			17,946
Inventories, net		36,800			27,006
Income tax receivable		—			1,095
Forward contracts		2,445			—
Prepaids and other current assets		3,650			2,168
Total current assets		78,206			80,348
Property and equipment, net		40,400			22,271
Operating lease right-of-use assets		14,049			15,877
Deferred tax asset – noncurrent		—			214
Other noncurrent assets, net		2,833			1,571
Total assets	$	135,488		$	120,281
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	17,838		$	11,893
Accrued liabilities		2,235			2,441
Accrued compensation and employee benefits		3,110			4,584
Customer deposits		372			1,721
Income taxes payable		513			619
Forward contracts		—			814
Mortgage note payable, current portion		300			—
Total current liabilities		24,368			22,072
Long-term liability – operating leases		14,585			16,481
Noncurrent forward contracts		—			4
Long-term pension liability		417			391
Deferred tax liability		360			—
Mortgage note payable, net of current portion		9,563			—
Income taxes payable, noncurrent		1,118			1,250
Total liabilities		50,411			40,198
Commitments and contingencies (Notes E, F, and L)
Stockholders’ equity:
Preferred stock; $.01 par value; 500,000 shares authorized; none issued or outstanding		—			—
Common stock; $.01 par value; 20,000,000 shares authorized at March 31, 2022 and June 30, 2021, issued and outstanding (net of treasury shares) 6,146,221 at March 31, 2022 and 6,436,568 at June 30, 2021		89			88
Additional paid-in capital		30,188			29,456
Retained earnings		74,556			66,949
Treasury stock, at cost, 2,984,994 shares at March 31, 2022 and 2,567,797 at June 30, 2021		(20,954	)		(15,849	)
Accumulated other comprehensive income (loss)		1,198			(561	)
Total stockholders’ equity		85,077			80,083
Total liabilities and stockholders’ equity	$	135,488		$	120,281

See accompanying notes to condensed consolidated financial statements.

4

Natural Alternatives International, Inc.

Condensed Consolidated Statements of Income and Comprehensive Income

(In thousands, except share and per share data)

(Unaudited)

	Three Months Ended						Nine Months Ended
	March 31,						March 31,
	2022			2021			2022			2021
Net sales	$	42,373		$	46,320		$	118,440		$	134,129
Cost of goods sold		34,980			39,484			96,220			111,614
Gross profit		7,393			6,836			22,220			22,515
Selling, general and administrative		4,119			4,136			12,317			12,338
Income from operations		3,274			2,700			9,903			10,177
Other (expense) income:
Interest income		—			—			—			1
Interest expense		(19	)		(15	)		(45	)		(110	)
Foreign exchange loss		(40	)		(304	)		(35	)		(1,322	)
Other, net		(29	)		(7	)		(43	)		(22	)
Total other expense		(88	)		(326	)		(123	)		(1,453	)
Income before income taxes		3,186			2,374			9,780			8,724
Provision for income taxes		682			458			2,173			918
Net income	$	2,504		$	1,916		$	7,607		$	7,806
Unrealized gain (loss) resulting from change in fair value of derivative instruments, net of tax		474			1,925			1,759			(49	)
Comprehensive income	$	2,978		$	3,841		$	9,366		$	7,757
Net income per common share:
Basic	$	0.42		$	0.31		$	1.23		$	1.24
Diluted	$	0.41		$	0.30		$	1.22		$	1.22
Weighted average common shares outstanding
Basic		6,003,036			6,200,712			6,167,539			6,296,408
Diluted		6,041,424			6,326,777			6,216,422			6,401,021

See accompanying notes to condensed consolidated financial statements.

5

Natural Alternatives International, Inc.

Condensed Consolidated Statements Of Stockholders’ Equity

Three-Month Period Ended March 31, 2022 and 2021

(Dollars in thousands)

(Unaudited)

	Common Stock				Additional Paid-in			Retained		Treasury Stock					Accumulated Other Comprehensive
	Shares		Amount		Capital			Earnings		Shares		Amount			Income (Loss)			Total
Balance, December 31, 2021		9,004,365	$	88	$	29,923		$	72,052		2,776,623	$	(18,386	)	$	724		$	84,401
Compensation expense related to stock compensation plans		—		—		266			—		—		—			—			266
Issuance of common stock for restricted stock grants		126,850		1		(1	)		—		—		—			—			—
Repurchase of common stock		—		—		—			—		206,971		(2,568	)		—			(2,568	)
Forfeiture of restricted stock		—		—		—			—		1,400		—			—			—
Unrealized gain resulting from change in fair value of derivative instruments, net of tax		—		—		—			—		—		—			474			474
Net income		—		—		—			2,504		—		—			—			2,504
Balance, March 31, 2022		9,131,215	$	89	$	30,188		$	74,556		2,984,994	$	(20,954	)	$	1,198		$	85,077
Balance, December 31, 2020		8,887,119	$	88	$	28,689		$	62,071		2,523,254	$	(15,203	)	$	(3,157	)	$	72,488
Compensation expense related to stock compensation plans		—		—		334			—		—		—			—			334
Issuance of common stock for restricted stock grants		91,773		1		(1	)		—		—		—			—			—
Repurchase of common stock		—		—		—			—		44,132		(639	)		—			(639	)
Issuance of common stock for stock option exercise		7,883		—		—			—		—		—			—			—
Unrealized gain resulting from change in fair value of derivative instruments, net of tax		—		—		—			—		—		—			1,925			1,925
Net income		—		—		—			1,916		—		—			—			1,916
Balance, March 31, 2021		8,986,775	$	89	$	29,022		$	63,987		2,567,386	$	(15,842	)	$	(1,232	)	$	76,024

See accompanying notes to condensed consolidated financial statements.

6

Natural Alternatives International, Inc.

Condensed Consolidated Statements Of Stockholders’ Equity

Nine-Month Period Ended March 31, 2022 and 2021

(Dollars in thousands)

(Unaudited)

	Common Stock				Additional Paid-in			Retained		Treasury Stock					Accumulated Other Comprehensive
	Shares		Amount		Capital			Earnings		Shares		Amount			Income (Loss)			Total
Balance, June 30, 2021		9,004,365	$	88	$	29,456		$	66,949		2,567,797	$	(15,849	)	$	(561	)	$	80,083
Compensation expense related to stock compensation plans		—		—		733			—		—		—			—			733
Issuance of common stock for restricted stock grants		126,850		1		(1	)		—		—		—			—			—
Repurchase of common stock		—		—		—			—		397,365		(5,105	)		—			(5,105	)
Forfeiture of restricted stock		—		—		—			—		19,832		—			—			—
Unrealized gain resulting from change in fair value of derivative instruments, net of tax		—		—		—			—		—		—			1,759			1,759
Net income		—		—		—			7,607		—		—			—			7,607
Balance, March 31, 2022		9,131,215	$	89	$	30,188		$	74,556		2,984,994	$	(20,954	)	$	1,198		$	85,077
Balance, June 30, 2020		8,856,677	$	87	$	27,992		$	56,181		2,104,305	$	(11,702	)	$	(1,183	)	$	71,375
Compensation expense related to stock compensation plans		—		—		1,032			—		—		—			—			1,032
Issuance of common stock for restricted stock grants		91,773		1		(1	)		—		—		—			—			—
Repurchase of common stock		—		—		—			—		463,081		(4,140	)		—			(4,140	)
Issuance of common stock for stock option exercise		38,325		1		(1	)		—		—		—			—			—
Unrealized loss resulting from change in fair value of derivative instruments, net of tax		—		—		—			—		—		—			(49	)		(49	)
Net income		—		—		—			7,806		—		—			—			7,806
Balance, March 31, 2021		8,986,775	$	89	$	29,022		$	63,987		2,567,386	$	(15,842	)	$	(1,232	)	$	76,024

See accompanying notes to condensed consolidated financial statements.

7

Natural Alternatives International, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands, except share and per share data)

(Unaudited)

	Nine Months Ended March 31,
	2022			2021
Cash flows from operating activities
Net income	$	7,607		$	7,806
Adjustments to reconcile net income to net cash provided by operating activities:
Recovery of uncollectible accounts receivable		(48	)		(111	)
Depreciation and amortization		3,318			3,309
Non-cash compensation		733			1,032
Non-cash lease expenses		2,355			2,488
Deferred income taxes		—			(469	)
Pension expense, net of contributions		26			6
(Gain) loss on disposal of assets		(9	)		61
Changes in operating assets and liabilities:
Accounts receivable		1,257			230
Inventories, net		(9,794	)		(1,116	)
Prepaids and other assets		(2,019	)		(64	)
Accounts payable and accrued liabilities		4,390			4,081
Forward contracts		(1,654	)		1,061
Accrued compensation and employee benefits		(1,474	)		711
Operating lease liabilities		(2,423	)		(2,441	)
Income taxes		857			(585	)
Net cash provided by operating activities		3,122			15,999
Cash flows from investing activities
Proceeds from sale of property and equipment		30			3
Purchases of property and equipment		(21,468	)		(4,251	)
Net cash used in investing activities		(21,438	)		(4,248	)
Cash flows from financing activities
Borrowings on line of credit		—			(10,000	)
Borrowings on long-term debt		10,000			—
Payments on long-term debt		(137	)		—
Repurchase of common stock		(5,105	)		(4,140	)
Net cash provided by (used in) financing activities		4,758			(14,140	)
Net decrease in cash and cash equivalents		(13,558	)		(2,389	)
Cash and cash equivalents at beginning of period		32,133			30,478
Cash and cash equivalents at end of period	$	18,575		$	28,089
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest	$	173		$	123
Taxes	$	2,169		$	1,549

See accompanying notes to condensed consolidated financial statements.

8

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

A. Basis of Presentation and Summary of Significant Accounting Policies

The accompanying interim unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and with applicable rules and regulations. Pursuant to such rules and regulations, certain information and note disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (U.S. GAAP) have been condensed or omitted. In management’s opinion, all adjustments necessary for a fair presentation of the financial position, results of operations, stockholders’ equity, and cash flows have been included and are of a normal, recurring nature. The results of operations for the three and nine months ended March 31, 2022 are not necessarily indicative of the operating results for the full fiscal year or for any future periods.

You should read the financial statements and these notes, which notes are an integral part of the financial statements, together with our audited financial statements included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2021 (“2021 Annual Report”). The accounting policies used to prepare the financial statements included in this Report are the same policies described in the notes to the consolidated financial statements in our 2021 Annual Report unless otherwise noted below.

Recently Adopted Accounting Pronouncements

On December 18, 2019, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update ("ASU") No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. This new standard eliminates certain exceptions in Accounting Standards Codification ("ASC") 740 related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities for outside basis differences. It also clarifies and simplifies other aspects of the accounting for income taxes. This standard is effective for fiscal years, and interim periods within those years, beginning after December 15, 2020, with early adoption permitted in any interim period within that year. We have adopted this ASU effective this first quarter of fiscal 2022. This ASU did not have a material impact on our consolidated financial statements.

Recently Issued Accounting and Regulatory Pronouncements

On March 28, 2022, the Financial Accounting Standards Board (the "FASB”) issued Accounting Standards Update ("ASU") No. 2022-01, Derivatives and Hedging (Topic 815): Fair Value Hedging-Portfolio Layer Method. This new standard clarifies the guidance in ASC 815 on fair value hedge accounting of interest rate risk for portfolios of financial assets. The ASU amends the guidance in ASU 2017-123 (released on August 28, 2017) that, among other things, established the “last-of-layer” method for making the fair value hedge accounting for these portfolios more accessible. ASU 2022-01 renames that method the “portfolio layer” method and addresses feedback from stakeholders regarding its application. This standard is effective for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years, with early adoption permitted in any interim period within that year. This ASU will be adopted in our first quarter of fiscal 2023. We do not expect this ASU to have a material impact on our consolidated financial statements.

Net Income per Common Share

We compute net income per common share using the weighted average number of common shares outstanding during the period, and diluted net income per common share using the additional dilutive effect of all dilutive securities. The dilutive impact of stock options and unvested 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 income per common share as follows (in thousands, except per share data):

	Three Months Ended				Nine Months Ended
	March 31,				March 31,
	2022		2021		2022		2021
Numerator
Net income	$	2,504	$	1,916	$	7,607	$	7,806
Denominator
Basic weighted average common shares outstanding		6,003		6,201		6,168		6,296
Dilutive effect of stock options and restricted stock		38		126		48		105
Diluted weighted average common shares outstanding		6,041		6,327		6,216		6,401
Basic net income per common share	$	0.42	$	0.31	$	1.23	$	1.24
Diluted net income per common share	$	0.41	$	0.30	$	1.22	$	1.22

9

 

We excluded 126,850 shares of restricted stock and no shares related to stock options for the three and nine months ended March 31, 2022, as their impact would have been anti-dilutive. We excluded 91,773 shares of restricted stock and no shares related to stock options for the three months ended March 31, 2021. During the nine months ended March 31, 2021, we excluded shares relating to stock options totaling 30,000 and 69,477 shares of unvested restricted stock, as their impact would have been anti-dilutive.

Revenue Recognition

We record revenue based on a five-step model which includes: (1) identifying a contract with a customer; (2) identifying the performance obligations in the contract; (3) determining the transaction price; (4) allocating the transaction price among the performance obligations; and (5) recognizing revenue as each of the various performance obligations are satisfied.

Revenue is measured as the net amount of consideration expected to be received in exchange for fulfilling one or more performance obligations. We identify purchase orders from customers as contracts. The amount of consideration expected to be received and revenue recognized includes estimates of variable consideration, including estimates for early payment discounts and volume rebates. Such estimates are calculated using historical averages adjusted for any expected changes due to current business conditions and experience. We review and update these estimates at the end of each reporting period and the impact of any adjustments is recognized in the period the adjustments are identified. In assessing whether collection of consideration from a customer is probable, we consider both the customer's ability and intent to pay that amount of consideration when it is due. Payment of invoices is due as specified in the underlying customer agreement, which is typically 30 days from the invoice date. Invoices are generally issued on the date of transfer of control of the products ordered to the customer.

Revenue is recognized at the point in time that each of our performance obligations is fulfilled, and control of the ordered products is transferred to the customer. This transfer occurs when the product is shipped, or in some cases, when the product is delivered to the customer.

We provide early payment discounts to certain customers. Based on historical payment trends, we expect that these customers will take advantage of these early payment discounts. The cost of these discounts is reported as a reduction to the transaction price. If the actual discounts differ from those estimated, the difference is also reported as a change in the transaction price. We require prepayment from certain customers. We record any payments received in advance of contracts fulfillment as a contract liability and classified as customer deposits on the consolidated balance sheet.

Except for product defects, no right of return exists on the sale of our products. We estimate returns based on historical experience and recognize a returns liability for any estimated returns. As of March 31, 2022, we have no known returns liability.

We have an Exclusive Manufacturing Agreement with The Juice Plus+ Company LLC (“Juice Plus+”) through August 6, 2025. Pursuant to the Exclusive Manufacturing Agreement, Juice Plus+ has granted us exclusive rights to manufacture and supply them with certain of their products within 24 countries where Juice Plus+ currently sells those products. Pursuant to this Exclusive Manufacturing Agreement, we provide Juice Plus+ with a cash discount. We recorded $0.3 million of “Cash Sales Discount” for the three months ended March 31, 2022, and $1.0 million during the nine months ended March 31, 2022, which was recorded as a reduction to net sales. We recorded $0.4 million of cash sales discount during the three months ended March 31, 2021 and $1.2 million during the nine months ended March 31, 2021.

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® and SR CarnoSyn® trade names. We recorded beta-alanine raw material sales and royalty and licensing income as a component of revenue in the amount of $4.8 million during the three months ended March 31, 2022, and $13.5 million during the nine months ended March 31, 2022. We similarly recorded $4.1 million during the three months ended March 31, 2021, and $9.6 million during the nine months ended March 31, 2021. These royalty income and raw material sale amounts resulted in royalty expense paid to the original patent holders from whom NAI acquired its patents and patent rights. We recognized royalty expense as a component of cost of goods sold in the amount of $0.2 million during the three months ended March 31, 2022, and $0.6 million during the nine months ended March 31, 2022. We recorded $0.2 million during the three months ended March 31, 2021, and $0.4 million during the nine months ended March 31, 2021.

Stock-Based Compensation

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

10

 

We did not grant any options during each of the three and nine month periods ending March 31, 2022 and March 31, 2021. No options were exercised during the three and nine month periods ending March 31, 2022. During the three months ended March 31, 2021, 10,000 stock options were exercised. During the nine months ended March 31, 2021, 110,000 stock options were exercised. These exercises were cashless net exercises resulting in the issuance of 7,833 shares for the three months ended March 31, 2021 and 38,325 for the nine months ended March 31, 2021. There were no option forfeitures during the three and nine month periods ended March 31, 2022 or March 31, 2021. As of March 31, 2022, we did not have any stock options outstanding.

During the three and nine months ended March 31, 2022, we granted a total of 126,850 restricted stock shares to members of our Board of Directors and certain key members of our management team. During the three and nine months ended March 31, 2021, we granted a total of 91,773 restricted stock shares to members of our Board of Directors and certain key members of our management team. During the three months ended March 31, 2022, 1,400 restricted stock shares were forfeited. During the nine months ended March 31, 2022, 19,832 restricted stock shares were forfeited. No restricted stock shares were forfeited during the three or nine month periods ended March 31, 2021.

Deferred Compensation Plan

Effective July 16, 2020, the Board of Directors approved and adopted a Non-Qualified Incentive Plan (the “Incentive Plan”). Pursuant to the Incentive Plan, the Human Resources Committee and the Board of Directors may make deferred cash payments or other cash awards (“Awards”) to directors, officers, employees and eligible consultants of NAI, (“Participants”). These Awards are made subject to conditions precedent that must be met before NAI is obligated to make the payment. The purpose of the Incentive Plan is to enhance the long-term stockholder value of NAI by providing the Human Resources Committee and the Board of Directors the ability to make deferred cash payments or other cash awards to encourage Participants to serve NAI or to remain in the service of NAI, or to assist NAI to achieve results determined by the Human Resources Committee or the Board of Directors to be in NAI's best interest.

The Incentive Plan authorizes the Human Resources Committee or the Board of Directors to grant to, and administer, unsecured and deferred cash Awards to Participants and to subject each Award to whatever conditions are determined appropriate by the Human Resources Committee or the Board of Directors. The terms of each Award, including the amount and any conditions that must be met to be entitled to payment of the Award are set forth in an Award Agreement between each Participant and NAI. The Incentive Plan provides the Board of Directors with the discretion to set aside assets to fund the Incentive Plan although that has not been done to date.

During the three and nine months ended March 31, 2022, we granted a total of $0.3 million in deferred cash awards to members of our Board of Directors and certain key members of our management team. During the three months ended March 31, 2021, we granted a total of $0.5 million in deferred cash awards to members of our Board of Directors and certain key members of our management team. During the nine months ended March 31, 2021, we granted a total of $1.5 million in deferred cash awards to members of our Board of Directors and certain key members of our management team.

No deferred cash awards were forfeited during the three months ended March 31, 2022. Awards totaling $191,000 were forfeited during the nine months ended March 31, 2022. No awards were forfeited during the three and nine months ended March 31, 2021. Each deferred cash award we have granted to date provides for three equal cash payments to the applicable Participant to be paid on the one year, two year, and three year anniversaries of the date of the grant of such Awards, (the “Award Date”); provided on the date of each payment (the “Payment Date”), the Participant has been since 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 are to be made in connection with the Award.

Fair Value of Financial Instruments

Except for cash and cash equivalents, as of March 31, 2022, and June 30, 2021, we did not have any financial assets or liabilities classified as Level 1. We classify derivative forward exchange and interest rate swap contracts as Level 2 assets and liabilities. The fair values were determined by obtaining pricing from our bank and corroborating those values with a third party bank or pricing service.

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

	March 31, 2022		June 30, 2021
Euro Forward Contract– Current Assets	$	2,419	$	—
Swiss Franc Forward Contract – Current Assets		26		—
Total Derivative Contracts – Current Assets		2,445		—
Interest Swap – Other noncurrent Assets		358		—
Euro Forward Contract– Other noncurrent Assets		365		—
Total Derivative Contracts – Other noncurrent Assets		723		—
Euro Forward Contract–Current Liabilities		—		(630	)
Swiss Franc Forward Contract – Current Liabilities		—		(184	)
Total Derivative Contracts – Current Liabilities		—		(814	)
Euro Forward Contract – Noncurrent Liabilities		—		(4	)
Fair Value Net Asset (Liability) – all Derivative Contracts	$	3,168	$	(818	)

We also classify any outstanding line of credit and term loan balance as a Level 2 liability, as the fair value is based on inputs that can be derived from information available in publicly quoted markets. As of March 31, 2022, and June 30, 2021, we did not have any financial assets or liabilities classified as Level 3. We did not transfer any assets or liabilities between these levels during fiscal 2021 or the nine months ended March 31, 2022. 

Reclassification of Prior Year Presentation

Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on the reported results of operations. 

B. Inventories, net

Inventories, net consisted of the following (in thousands):

	March 31, 2022			June 30, 2021
Raw materials	$	28,584		$	20,530
Work in progress		4,987			3,765
Finished goods		3,748			3,056
Reserve		(519	)		(345	)
	$	36,800		$	27,006

C. Property and Equipment

Property and equipment consisted of the following (in thousands):

	Depreciable Life In Years			March 31, 2022			June 30, 2021
Land	NA			$	7,645		$	1,200
Building and building improvements	7	–	39		15,427			3,757
Machinery and equipment	3	–	12		37,522			35,458
Office equipment and furniture	3	–	5		5,906			5,712
Vehicles		3			211			255
Leasehold improvements	1	–	15		21,277			20,236
Total property and equipment					87,988			66,618
Less: accumulated depreciation and amortization					(47,588	)		(44,347	)
Property and equipment, net				$	40,400		$	22,271

On August 20, 2021, we acquired a manufacturing and warehouse property in Carlsbad California from an unrelated party for $17.5 million. The approximately 54,154 square foot building includes environmentally controlled warehouse space, office space and additional non-environmentally controlled warehouse space. We intend to retrofit a significant portion of the building into a dedicated high-volume powder blending and packaging facility. This new facility will also provide us with additional raw material storage capacity, and additional office space.

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D. Other Comprehensive Income (Loss)

Other comprehensive income (loss) (“OCI” and “OCL”) consisted of the following during the three and nine months ended March 31, 2022 and March 31, 2021 (in thousands):

	Three Months Ended
	March 31, 2022
	Defined			Unrealized Gains			Unrealized Gains
	Benefit			(Losses) on			(Losses) on
	Pension			Cash Flow			Swap
	Plan			Hedges			Derivative			Total
Beginning Balance	$	(538	)	$	1,200			62		$	724
OCI/OCL before reclassifications		—			1,064			299			1,363
Amounts reclassified from OCI to Sales		—			(685	)		—			(685	)
Tax effect of OCI activity		—			(120	)		(84	)		(204	)
Net current period OCI/OCL		—			259			215			474
Ending Balance	$	(538	)	$	1,459			277			1,198

	Nine Months Ended
	March 31, 2022
	Defined			Unrealized Gains			Unrealized Gains
	Benefit			(Losses) on			(Losses) on
	Pension			Cash Flow			Swap
	Plan			Hedges			Derivative			Total
Beginning Balance	$	(538	)	$	(23	)		—		$	(561	)
OCI/OCL before reclassifications		—			3,308			361			3,669
Amounts reclassified from OCI to Sales		—			(1,335	)		—			(1,335	)
Tax effect of OCI activity		—			(491	)		(84	)		(575	)
Net current period OCI/OCL		—			1,482			277			1,759
Ending Balance	$	(538	)	$	1,459			277			1,198

	Three Months Ended
	March 31, 2021
	Defined			Unrealized Gains			Unrealized Gains
	Benefit			(Losses) on			(Losses) on
	Pension			Cash Flow			Swap
	Plan			Hedges			Derivative		Total
Beginning Balance	$	(888	)	$	(2,269	)		—	$	(3,157	)
OCI/OCL before reclassifications		—			1,639			—		1,639
Amounts reclassified from OCI to Sales		—			868			—		868
Tax effect of OCI activity		—			(582	)		—		(582	)
Net current period OCI/OCL		—			1,925			—		1,925
Ending Balance	$	(888	)	$	(344	)		—		(1,232	)

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	Nine Months Ended
	March 31, 2021
	Defined			Unrealized Gains			Unrealized Gains
	Benefit			(Losses) on			(Losses) on
	Pension			Cash Flow			Swap
	Plan			Hedges			Derivative		Total
Beginning Balance	$	(888	)	$	(295	)		—	$	(1,183	)
OCI/OCL before reclassifications		—			(2,274	)		—		(2,274	)
Amounts reclassified from OCI to Sales		—			2,209			—		2,209
Tax effect of OCI activity		—			16			—		16
Net current period OCI/OCL		—			(49	)		—		(49	)
Ending Balance	$	(888	)	$	(344	)		—		(1,232	)

E. Leases

We currently lease our Vista, CA and Lugano, Switzerland product manufacturing and support facilities. At the inception of a contract we assess whether the contract is, or contains, a lease. Our assessment is based on: (1) whether the contract involves the use of a distinct identified asset, (2) whether we obtain the right to substantially all the economic benefit from the use of the asset throughout the period of the contract, and (3) whether we have the right to direct the use of the asset during such time period. At inception of a lease, we allocate the consideration in the contract to each lease component based on its relative stand-alone price to determine the lease payments.

Leases are classified as either finance leases or operating leases. A lease must be classified as a finance lease if any of the following criteria are met: the lease transfers ownership of the asset by the end of the lease term, the lease contains an option to purchase the asset that is reasonably certain to be exercised, the lease term is for a major part of the remaining useful life of the asset or the present value of the lease payments equals or exceeds substantially all of the fair value of the asset. A lease is classified as an operating lease if it does not meet any of these criteria. Substantially all our operating leases are comprised of payments for the use of manufacturing and office space. We have no leases classified as finance leases. As of March 31, 2022, the weighted average remaining lease term for our operating leases was 5.7 years. The weighted average discount rate for our operating leases was 3.24%. As of June 30, 2021, the weighted average remaining lease term for our operating leases was 6.3 years and the weighted average discount rate was 3.24%.

For all leases at the lease commencement date, a right-of-use asset and a lease liability are recognized. The right-of-use asset represents the right to use the leased asset for the lease term. The lease liability represents the present value of the lease payments under the lease.

The right-of-use asset is initially measured at cost, which primarily comprises the initial amount of the lease liability, plus any initial direct costs incurred, consisting mainly of brokerage commissions, less any lease incentives received. All right-of-use assets are reviewed for impairment. The lease liability is initially measured at the present value of the lease payments, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, our secured incremental borrowing rate for the same term as the underlying lease. For our real estate and other operating leases, we use our secured incremental borrowing rate.

Lease payments included in the measurement of the lease liability comprise the following: the fixed noncancelable lease payments, payments for optional renewal periods where it is reasonably certain the renewal period will be exercised, and payments for early termination options unless it is reasonably certain the lease will not be terminated early.

Some of our manufacturing leases contain variable lease payments, including payments based on an index or rate. Variable lease payments based on an index or rate are initially measured using the index or rate in effect at lease commencement and separated into lease and non-lease components based on the initial amount stated in the lease or standalone selling prices. Lease components are included in the measurement of the initial lease liability. Additional payments based on the change in an index or rate, or payments based on a change in our portion of the operating expenses, including real estate taxes and insurance, are recorded as a period expense when incurred. Lease modifications result in remeasurement of the lease liability.

Lease expense for operating leases consists of the lease payments plus any initial direct costs, primarily brokerage commissions, and is recognized on a straight-line basis over the lease term. Included in lease expense are any variable lease payments incurred in the period that were not included in the initial lease liability. Lease expense for finance leases consists of the amortization of the right-of-use asset on a straight-line basis over the lease term and interest expense determined on an amortized cost basis. The lease payments are allocated between a reduction of the lease liability and interest expense.

We have elected not to recognize right-of-use assets and lease liabilities for short-term leases that have a term of 12 months or less. The effect of short-term leases on our right-of-use asset and lease liability was not material.

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Other information related to leases as of March 31, 2022, was as follows (in thousands):

Supplemental Cash Flows Information	Nine Months Ended March 31, 2022		Nine Months Ended March 31, 2021
Cash paid for amounts included in the measurement of operating lease liabilities	$	2,495	$	2,467
Operating lease liabilities arising from obtaining Right of Use Assets for new leases		182		187

F. Debt

On May 24, 2021, we entered into a new credit facility with Wells Fargo Bank, N.A (“Wells Fargo”) to extend the maturity for our working line of credit from November 1, 2022, to May 24, 2024. This new credit facility provides total lending capacity of up to $20.0 million and allows us to use the credit facility for working capital as well as potential acquisitions. On August 18, 2021, we entered into an amendment of our credit facility with Wells Fargo. The amended credit facility added a $10.0 million term loan to the existing $20.0 million credit facility, and permitted us to use the $10.0 million term loan as part of the $17.5 million purchase consideration for the acquisition of our new manufacturing and warehouse property in Carlsbad, California. The amended credit agreement also increased the allowed capital expenditures from $10.0 million to $15.0 million for fiscal 2022, (exclusive of the amount paid for the acquisition of the new Carlsbad property noted above). In addition, the new credit notes now reflect a change in the interest rate reference from LIBOR to SOFR. The Credit Agreement was amended and a new Revolving Line of Credit Note, and Security Agreement were entered into. A Term Note and real property security documents were added to secure the Term Note by the new Carlsbad property. Additionally, we entered into a second amendment to our credit facility with Wells Fargo on February 8, 2022 that is effective January 31, 2022 and modifies the annual limit imposed upon our ability to repurchase stock and issue dividends. This amendment increased this limit from $5.0 million annually to $7.0 million annually.

Under the terms of the Credit Agreement, borrowings are subject to eligibility requirements including maintaining (i) a ratio of total liabilities to tangible net worth of not greater than 1.50 to 1.0 at any time; (ii) a ratio of total current assets to total current liabilities of not less than 1.75 to 1.0 at each fiscal quarter end (iii) net income after taxes not less than $1.00, determined on a trailing four quarter basis with no two consecutive quarterly losses, determined as of each quarter end and (iv) a rolling 4-quarter fixed charge coverage ratio not less than 1.25 to 1.0 as of each fiscal quarter end. The credit agreement also includes a limitation on the amount of capital expenditures that can be made in a given fiscal year, with such limitation set at $15.0 million for our fiscal year ending June 30, 2022 and $7.5 million for all fiscal years thereafter. Any amounts outstanding under the line of credit will bear interest at a fixed or fluctuating interest rate as elected by us from time to time; provided, however, that if the outstanding principal amount is less than $100,000 such amount shall bear interest at the then applicable fluctuating rate of interest. If elected, the fluctuating rate per annum would be equal to 1.29% above the daily simple SOFR rate as in effect from time to time. If a fixed rate is elected, it would equal a per annum rate of 1.29% above the SOFR rolling 30-day average rate in effect on the first day of the applicable fixed rate term. Any amounts outstanding under the line of credit must be paid in full on or before the maturity date. Amounts outstanding that are subject to a fluctuating interest rate may be prepaid at any time without penalty. Amounts outstanding that are subject to a fixed interest rate may be prepaid at any time in minimum amounts of $100,000, subject to a prepayment fee equal to the sum of the discounted monthly differences between payment under a fixed rate versus payment under the variable rate for each month from the month of prepayment through the month in which the then applicable fixed rate term matures. There is an unused commitment fee of 0.125% required as part of the line of credit.

The Term Note used as part of the purchase consideration of our new manufacturing and warehouse property in Carlsbad California referenced above, is for the original principal amount of $10.0 million, and is a seven year term note with payments fully amortized based on a twenty five year assumed term. Installment payments under this loan commenced October 1, 2021 and continue through August 1, 2028 with a final installment consisting of all remaining amounts due to be paid in full on September 1, 2028. Amounts outstanding on this note during the term of the agreement will bear interest equal to 1.8% above the SOFR rolling 30-day average. In connection with our term loan, we entered into an interest rate swap with Wells Fargo that effectively fixes our interest rate on our term loan at 2.4% for the first three years of the term of the note.

Our obligations under the Credit Agreement are secured by our accounts receivable and other rights to payment, general intangibles, inventory, equipment and fixtures. We also have credit approval with Wells Fargo Bank, N.A. which allows us to hedge foreign currency exposures up to 30 months in the future. We also have credit approval with Bank of America which allows us to hedge foreign currency exposures up to 24 months in the future.

On March 31, 2022, we were in compliance with all of the financial and other covenants required under the Amended Credit Agreement.

As of March 31, 2022, we had $20.0 million available for borrowing under our credit facility with Wells Fargo Bank.

As of March 31, 2022, we had $9.8 million outstanding under the Term Note used in the purchase of the warehouse in August 2021.

G. Economic Dependency

We had substantial net sales to certain customers during the periods shown in the following table. The loss of any of these customers, or a significant decline in (i) sales to these customers, (ii) the growth rate of sales to these customers, or (iii) these customers’ ability to make payments when due, each individually could have a material adverse impact on our net sales and net income. Net sales to any one customer representing 10% or more of the respective period's consolidated net sales were as follows (in thousands):

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	Three Months Ended March 31,				Nine Months Ended March 31,
	2022		2021		2022		2021
Customer 1	$	13,846	$	23,215	$	40,110	$	72,001
Customer 2		6,773	(a)			22,761		16,288
Customer 3		10,673	(a)			19,795	(a)
Customer 4	(a)			5,811	(a)		(a)
	$	31,292	$	29,026	$	82,666	$	88,289

(a)          Sales were less than 10% of the respective period’s total net sales.

We buy certain products, including beta-alanine, from a limited number of raw material suppliers who meet our quality standards. The loss of any of these suppliers could have a material adverse impact on our net sales and net income. Raw material purchases from any one supplier representing 10% or more of the respective period’s total raw material purchases were as follows (dollars in thousands):

	Three Months Ended March 31,				Nine Months Ended March 31,
	2022		2021		2022		2021
Supplier 1	$	2,946		5,978	$	10,800		15,765
	$	2,946		5,978	$	10,800		15,765

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 concentrated with two of our largest customers, whose receivable balances collectively represented 51.7% of gross accounts receivable at March 31, 2022 and 64.8% at June 30, 2021. As of March 31, 2022, and at June 30, 2021, we had a receivable balance of $3.4 million related to a former contract manufacturing customer. We have recorded a bad debt reserve equal to 100% of this outstanding balance and thus did not reflect it in the percentages listed above.

Additionally, amounts due related to our beta-alanine raw material sales were 14.1% of gross accounts receivable at March 31, 2022, and 8.6% of gross accounts receivable at June 30, 2021. Concentrations of credit risk related to the remaining accounts receivable balances are limited due to the number of customers responsible for the remaining accounts receivable.

H. Segment Information

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

We evaluate performance of these segments based on a number of factors. The primary performance measures for each segment are net sales and income or loss from operations before the allocation of certain corporate level expenses. Operating income or loss for each segment does not include corporate general and administrative expenses, interest expense and other miscellaneous income and expense items. Corporate general and administrative expenses include, but are not limited to human resources, corporate legal, finance, information technology, and other corporate level related expenses, which are not allocated to any segment. Transfers of raw materials between segments are recorded at cost. The accounting policies of our segments are the same as those described in the summary of significant accounting policies in Note A above and in the consolidated financial statements included in our 2021 Annual Report.

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Our operating results by business segment were as follows (in thousands):

	Three Months Ended March 31,				Nine Months Ended March 31,
	2022		2021		2022		2021
Net Sales
Private label contract manufacturing	$	37,623	$	42,196	$	104,894	$	124,569
Patent and trademark licensing		4,750		4,124		13,546		9,560
Total Net Sales	$	42,373	$	46,320	$	118,440	$	134,129

	Three Months Ended March 31,						Nine Months Ended March 31,
	2022			2021			2022			2021
Income from Operations
Private label contract manufacturing	$	3,605		$	3,241		$	10,065		$	13,511
Patent and trademark licensing		1,813			1,541			6,206			2,740
Income from operations of reportable segments		5,418			4,782			16,271			16,251
Corporate expenses not allocated to segments		(2,144	)		(2,082	)		(6,368	)		(6,074	)
Total Income from Operations	$	3,274		$	2,700		$	9,903		$	10,177

	March 31, 2022		June 30, 2021
Total Assets
Private-label contract manufacturing	$	105,552	$	95,324
Patent and trademark licensing		29,936		24,957
	$	135,488	$	120,281

Our private-label contract manufacturing products are sold both in the U.S. and in markets outside the U.S., including Europe, Canada, Australia, New Zealand, Mexico and Asia. Our primary markets outside the U.S. are Europe and Asia. Our patent and trademark licensing activities are primarily based in the U.S.

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Net sales by geographic region, based on the customers’ location, were as follows (in thousands):

	Three Months Ended March 31,				Nine Months Ended March 31,
	2022		2021		2022		2021
United States	$	29,382	$	27,674	$	78,279	$	70,534
Markets outside of the United States		12,991		18,646		40,161		63,595
Total	$	42,373	$	46,320	$	118,440	$	134,129

Products manufactured by our Swiss subsidiary ("NAIE") accounted for 85% of net sales in markets outside the U.S. for the three months ended March 31, 2022 and 84% for the nine months ended March 31, 2022. Products manufactured by our Swiss subsidiary ("NAIE") accounted for 65% of net sales in markets outside the U.S. for the three months ended March 31, 2021 and 79% for the nine months ended March 31, 2021. No products manufactured by NAIE were sold in U.S. markets during the three and nine month periods ended March 31, 2022 and 2021.

Long-lived assets by geographic region, based on the location of the company or subsidiary at which they were located or made, were as follows (in thousands):

	March 31, 2022		June 30, 2021
United States	$	39,729	$	21,109
Europe		14,720		17,039
Total Long-Lived Assets	$	54,449	$	38,148

Total assets by geographic region, based on the location of the company or subsidiary at which they were located or made, were as follows (in thousands):

	March 31, 2022		June 30, 2021
United States	$	81,917	$	67,307
Europe		53,571		52,974
Total Assets	$	135,488	$	120,281

Capital expenditures by geographic region, based on the location of the company or subsidiary at which they were located or made, were as follows (in thousands):

	Nine Months Ended March 31,
	2022		2021
United States	$	20,766	$	1,788
Europe		702		2,463
Total Capital Expenditures	$	21,468	$	4,251

I. Income Taxes

To determine our quarterly provision for income taxes, we use an estimated annual effective tax rate, which is based on expected annual income, statutory tax rates and tax planning opportunities available in the various jurisdictions to which we are subject. Certain significant or unusual items are separately recognized in the quarter in which they occur and can be a source of variability in the effective tax rate from quarter to quarter. We recognize interest and penalties related to uncertain tax positions, if any, as an income tax expense.

Our effective tax rate for the three months ended March 31, 2022 was 21.4% and the effective tax rate for the nine months ended March 31, 2022 was 22.2%. Our effective rates differ from the fiscal 2022 U.S. federal statutory rate of 21% primarily due to state income taxes. Our effective tax rate for the three months ended March 31, 2021 was 19.3% and the effective rate for the nine months ended March 31, 2021 was 10.5%. Our effective rate for the nine months ended March 31, 2021, differed from the fiscal 2021 U.S. federal statutory rate of 21% primarily due to a discrete tax benefit discussed below. 

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On July 23, 2020, the Department of Treasury issued final regulations which provide an exclusion to the global intangible low-taxed income (GILTI) calculation on an elective basis. These regulations were effective September 21, 2020 and could be retroactively applied. Under these new regulations, we are able to exclude the GILTI calculation from our domestic taxable income if the deemed effective tax rate at our foreign subsidiary is greater than 18.9%. We assessed this rate, including the implementation of certain tax strategies, and we determined that our effective rate at our foreign subsidiary was greater than 18.9% as of the year ending June 30, 2020. During the first quarter of fiscal 2021, we reassessed our estimated taxes for fiscal 2020 and in the three months ended September 30, 2020 we recorded a reduction to our fiscal 2020 estimated taxes of $0.4 million as a discrete benefit. As a result of this adjustment, our domestic tax return for fiscal 2020 was expected to reflect a net operating loss which, in accordance with the CARES Act, allowed us to carry the loss back to fiscal 2015 and fiscal 2016. Such carryback resulted in a rate differential that resulted in the recognition of a permanent tax benefit of $0.3 million during the nine months ended March 31, 2021.

We record valuation allowances to reduce our deferred tax assets to an amount we believe is more likely than not to be realized. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. During the three and nine months ended March 31, 2022, there was no change to our valuation allowance for our deferred tax assets.

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are measured using enacted tax rates for each of the jurisdictions in which we operate. Deferred tax assets and liabilities are expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled using the tax rates then in effect. The effect on deferred tax assets and liabilities of a change in tax rates is recognized as income or expense in the period that includes the enactment date for such new rates.

We are subject to taxation in the U.S., Switzerland and various state jurisdictions. Our U.S. tax returns for the fiscal year ended June 30, 2015 and forward are subject to examination by the U.S. tax authorities. Our state tax returns for the fiscal years ended June 30, 2017 and forward are subject to examination by the state tax authorities. Our Swiss tax returns for the fiscal year ended June 30, 2020 and forward are subject to examination by the Swiss tax authorities.

It is our policy to establish reserves based on management’s assessment of exposure for certain positions taken in previously filed tax returns that may become payable upon examination by tax authorities. Our tax reserves are analyzed quarterly, and adjustments are made as events occur that we believe warrant adjustments to those reserves. There were no adjustments to reserves in the three and nine month period ended March 31, 2022.

J. Treasury Stock

On September 18, 2020, the Board of Directors authorized a $2.0 million increase to our stock repurchase plan (“Repurchase Plan”), thus bringing the total authorized repurchase amount to $12.0 million. On March 12, 2021, the Board of Directors authorized an additional $3.0 million increase to the Repurchase Plan, thus bringing the total authorized repurchase amount to $15.0 million. On January 14, 2022, the Board of Directors authorized an additional $3.0 million increase to the Repurchase Plan, thus bringing the total authorized repurchase amount to $18.0 million. Under the Repurchase Plan, we may, from time to time, purchase shares of our common stock, depending upon market conditions, in open market or privately negotiated transactions.

Stock repurchases for the three months ended March 31, 2022 were as follows:

	Shares		Average Cost		Total Cost (in thousands)
Shares purchased under Repurchase Plan		179,810	$	12.62	$	2,269
Shares acquired in connection with stock option exercises		—		—		—
Shares acquired from employees for restricted stock vesting		27,161		11.00		299
Total		206,971			$	2,568

Stock repurchases for the nine months ended March 31, 2022 were as follows:

	Shares		Average Cost		Total Cost (in thousands)
Shares purchased under Repurchase Plan		369,512	$	12.98	$	4,797
Shares acquired in connection with stock option exercises		—		—		—
Shares acquired from employees for restricted stock vesting		27,853		11.08		308
Total		397,365			$	5,105

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Stock repurchases for the three months ended March 31, 2021 were as follows:

	Shares		Average Cost		Total Cost (in thousands)
Shares purchased under Repurchase Plan		5,751	$	10.60	$	61
Shares acquired from employees for restricted stock vesting		38,381		15.05		578
Total		44,132			$	639

Stock repurchases for the nine months ended March 31, 2021 were as follows:

	Shares		Average Cost		Total Cost (in thousands)
Shares purchased under Repurchase Plan		385,822	$	8.28	$	3,197
Shares acquired in connection with stock option exercises		30,442		9.95		303
Shares acquired from employees for restricted stock vesting		46,817		13.66		640
Total		463,081			$	4,140

Stock repurchase costs include commissions and fees.

Shares acquired from employees for restricted stock vesting and stock options exercises were returned to us by the related employees and in return we paid each employee’s required tax withholding resulting from the vesting of restricted shares. The valuation of the shares acquired and thereby the number of shares returned to us was calculated based on the closing share price on the date the shares vested.

K. Derivatives and Hedging

We are exposed to gains and losses resulting from fluctuations in foreign currency exchange rates relating to forecasted product sales denominated in foreign currencies and to other transactions of NAIE, our foreign subsidiary. As part of our overall strategy to manage the level of exposure to the risk of fluctuations in foreign currency exchange rates, we may use foreign exchange contracts in the form of forward contracts. To the extent we enter into such contracts, there can be no guarantee any such contracts will be effective hedges against our foreign currency exchange risk.

As of March 31, 2022, we had forward contracts designated as cash flow hedges primarily to protect against the foreign exchange risks inherent in our forecasted sales of products at prices denominated in currencies other than the U.S. Dollar. These contracts are expected to be settled through August 2023. For derivative instruments that are designated and qualify as cash flow hedges, we record the effective portion of the gain or loss on the derivative in accumulated other comprehensive income (“OCI”) as a separate component of stockholders’ equity and subsequently reclassify these amounts into earnings in the period during which the hedged transaction is recognized in earnings.

For foreign currency contracts designated as cash flow hedges, hedge effectiveness is measured using the spot rate. Changes in the spot-forward differential are excluded from the test of hedge effectiveness and are recorded currently in earnings as revenue. We measure effectiveness by comparing the cumulative change in the hedge contract with the cumulative change in the hedged item. No hedging relationships were terminated as a result of ineffective hedging for the three and nine months ended March 31, 2022 and March 31, 2021.

We monitor the probability of forecasted transactions as part of the hedge effectiveness testing on a quarterly basis. During the three and nine months ended March 31, 2022 and March 31, 2021, we did not have any losses or gains related to the ineffective portion of our hedging instruments.

As of March 31, 2022, the notional amounts of our foreign exchange contracts designated as cash flow hedges were approximately $43.7 million (EUR 36.5 million). As of March 31, 2022, a net gain of approximately $1.9 million, offset by $0.5 million of deferred taxes, related to derivative instruments designated as cash flow hedges was recorded in OCI. It is expected that $1.6 million will be reclassified into earnings in the next 12 months along with the earnings effects of the related forecasted transactions.

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 three and nine months ended March 31, 2022 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 March 31, 2022, the notional amounts of our foreign exchange contracts not designated as cash flow hedges were approximately $5.4 million (CHF 5.0 million).

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We are exposed to interest rate fluctuations related to our $10 million Term Note with Wells Fargo, which carries a variable interest rate of 1.80% above the SOFR rolling 30-day average. To manage our exposure to this variable rate, on August 23, 2021, we entered into a floored interest rate swap that fixes our all-in rate on this loan to 2.4% for the first three years of the term loan. Fluctuations in the relation of our contractual swap rate to current market rates are recorded as an asset or liability with an offset to OCI at the end of each reporting period. Interest expense is adjusted for the difference between the actual SOFR spread and the swap contractual rate such that our effective interest expense for each period is equal to our hedged rate of 2.4%.

L. Contingencies

From time to time, we become involved in various investigations, claims and legal proceedings that arise in the ordinary course of our business. These matters may relate to product liability, employment, intellectual property, regulatory, contract or other matters. The resolution of these matters as they arise may be subject to various uncertainties and, even if such claims are without merit, could result in the expenditure of significant financial and managerial resources. While unfavorable outcomes are possible, based on available information, we currently do not believe the resolution of these matters will result in a material adverse effect on our business, consolidated financial condition, or results of operations. However, a settlement payment or unfavorable outcome could be greater than we currently anticipate and if so, could adversely impact our results of operations. Our evaluation of the likely impact of these actions could change in the future and we could have unfavorable outcomes we do not expect.

COVID-19 Pandemic

We continue to monitor and evaluate the risks to public health and the impact on overall global business activity related to the COVID-19 pandemic, including its potential impacts on our employees, customers, suppliers and financial results. As the situation remains fluid, it is difficult to predict the duration and scope of the pandemic and its impact on our business. However, it may result in a material adverse impact to our financial position, operations and cash flows if conditions persist or worsen.

Russia-Ukraine War

In February 2022, armed conflict escalated between Russia and Ukraine. Management is monitoring the conflict in Ukraine and any broader economic effects from the crisis. Although Russia and Ukraine did not account for any of our net sales in FY 2021, recently imposed economic sanctions and export control measures by the U.S. and European Union against Russia have resulted in increased volatility in the availability and prices of raw materials that are produced in that region. There are further concerns regarding continued supply chain disruptions, consumer purchasing and consumption behavior, increases in global shipping expenses, greater volatility in foreign exchange and interest rates, and other unforeseen business disruptions due to the current global geopolitical tensions, including relating to Ukraine. Additionally, escalation by Russia beyond Ukraine could adversely affect our European operations. We will continue to evaluate impacts of the conflict on our customers, suppliers, employees, and operations.

M. Subsequent Event

On April 22, 2022, we purchased two forward contracts designated and effective as cash flow hedges to protect against the foreign currency exchange risk inherent in a portion of our forecasted sales transactions denominated in Euros. The two contracts expire quarterly beginning May 2023 and ending August 2023. The forward contracts have a notional amount of EUR 6.0 million and a weighted average forward rate of 1.11.

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ITEM 2.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis is intended to help you understand our financial condition and results of operations for the three and nine months ended March 31, 2022. You should read the following discussion and analysis together with our unaudited condensed consolidated financial statements and the notes to the condensed consolidated financial statements included under Item 1 in this Report, as well as the risk factors and other information included in our 2021 Annual Report and other reports and documents we file with the SEC. Our future financial condition and results of operations will vary from our historical financial condition and results of operations described below based on a variety of factors.

Executive Overview

The following overview does not address all of the matters covered in the other sections of this Item 2 or other items in this Report nor does it contain all of the information that may be important to our stockholders or the investing public. You should read this overview in conjunction with the other sections of this Item 2 and this Report.

Our primary business activity is providing private-label contract manufacturing services to companies that market and distribute vitamins, minerals, herbal and other nutritional supplements, as well as other health care products, to consumers both within and outside the U.S. Historically, our revenue has been largely dependent on sales to two or three private-label contract manufacturing customers and subject to variations in the timing of such customers’ orders, which in turn is impacted by such customers’ internal marketing programs, supply chain management, entry into new markets, new product introductions, the demand for such customers’ products, and general industry and economic conditions. Our revenue also includes raw material sales and royalty and licensing revenue generated from license and supply agreements with third parties, granting them the right to use our patents, trademarks and other intellectual property in connection with the distribution and use of the ingredient known as beta-alanine sold under our CarnoSyn® and SR CarnoSyn® trademarks.

A cornerstone of our business strategy is to achieve long-term growth and profitability and to diversify our sales base. We have sought and expect to continue to seek to diversify our sales by developing relationships with additional, quality-oriented, private-label contract manufacturing customers, and commercializing our patent estate through sales of beta-alanine under our CarnoSyn® and SR CarnoSyn® trade names, royalties from license agreements, and potentially additional contract manufacturing opportunities with licensees.

During the first nine months of fiscal 2022, our net sales were 12% lower than in the first nine months of fiscal 2021. Private-label contract manufacturing sales decreased 16% primarily due to lower sales to our largest customer. Sales to this customer decreased 44% as compared to the same period in the prior year with a majority of the decrease associated with an inventory reduction program mostly related to their European business. The decrease in sales to our largest customer was partially offset by increased sales to other existing customers and a new customer. Sales to our new customer are expected to increase during the fourth quarter of fiscal 2022 as compared to the quarter ended March 31, 2022, and the corresponding prior year fourth quarter. Revenue concentration risk for our largest private-label contract manufacturing customer as a percentage of our total net sales decreased from 54% for the first nine months of fiscal 2021 to 34% for the first nine months of fiscal 2022. We expect our annualized fiscal year 2022 revenue concentration for this customer to comparable to the first nine months of fiscal 2022.

During the first nine months of fiscal 2022, patent and trademark licensing revenue increased 42% to $13.5 million, compared to revenue of $9.6 million for the first nine months of fiscal 2021. The increase in patent and trademark licensing revenue during the first nine months of fiscal 2022 was primarily due to sales to new customers, higher average sales prices, and increased shipments to existing customers related in part to athletic activities and gyms reopening in accordance with easing COVID-19 restrictions across the USA as compared to significant restrictions in athletic activities primarily during the first nine months of fiscal 2021.

We continue to invest in research and development for our SR CarnoSyn® sustained release delivery system. We believe SR CarnoSyn® may provide a unique opportunity within the growing Wellness and Healthy Aging markets. We believe our recent efforts to refine our formulations and product offerings will be positively received and result in significant opportunity for increased SR CarnoSyn® sales.

To protect our CarnoSyn® business and our patents, trademarks and other intellectual property, we incurred litigation and patent compliance expenses of approximately $0.3 million during the first nine months of fiscal 2022 as compared to $1.0 million during the comparable period in fiscal 2021. The decrease in these legal expenses on a year over year basis was primarily due to the successful resolution of several cases that were settled. Our ability to maintain or further increase our beta-alanine royalty and licensing revenue will depend in large part on our ability to develop a market for our sustained release form of beta-alanine marketed under our SR CarnoSyn® trademark, maintain our patent rights, obtain the raw material beta-alanine when and in the amounts needed, expand distribution of beta-alanine to new and existing customers, and continued compliance by third parties with our license agreements and our patent, trademark and other intellectual property rights. During the remainder of fiscal 2022, we will continue our sales and marketing activities to consumers, customers, potential customers, and brand owners on multiple platforms to promote and reinforce the features and benefits of utilizing CarnoSyn® and SR CarnoSyn® beta-alanine.

22

Based on our current sales order volumes and forecasts we have received from our customers, and despite the continued challenges with supply chain and staffing shortages, including challenges from COVID-19 employee absences, we now anticipate our consolidated net sales during the fourth quarter of fiscal 2022 will increase between 18.0% to 21.0% as compared to the fourth quarter of fiscal 2021. We also anticipate operating income as a percent of net sales will increase to between 9.0% and 12.0% for our fourth quarter ending June 30, 2022. The improvement in net sales and operating profitability is expected to be generated from continued growth from one of our newest customers, improved sales demand from our largest customer, improved sales mix and improved staffing levels which will increase our production capacities. There can be no assurance our expectations will result in the currently anticipated increase in net sales and operating income.

Impact of COVID-19 on Our Business

The COVID-19 pandemic has resulted, and is likely to continue to result, in significant economic disruption and has and will likely continue to affect our business. Significant uncertainty exists concerning the magnitude of the impact and duration of the COVID-19 pandemic. Our facilities, located both in the United States and Europe, continue to operate as an essential and critical manufacturer in accordance with applicable federal, state, and local regulations, however, there can be no assurance our facilities will continue to operate without interruption. Factors that derive from COVID-19 and the accompanying response, and that have or may negatively impact sales and gross margin in the future include, but are not limited to the following:

● Limitations on the ability of our suppliers to manufacture, or procure from manufacturers, the materials included in the products we sell, or to meet delivery requirements and commitments;

● Limitations on the ability of our employees to perform their work due to illness caused by the pandemic or due to other restrictions on our employees to keep them safe and the increased cost of measures taken to ensure employee health and safety;

● Limitation on the availability of qualified individuals to adequately staff our manufacturing facilities;

● Limitations on the ability of our suppliers to manufacture and meet timelines associated with capital improvement projects;

● Limitations on the ability of our customers to conduct their business and purchase our products and services; and

● Limitations on the ability of our customers to pay us on a timely basis.

We will continue to actively monitor the situation and may take further actions to alter our business operations as may be required by federal, state or local authorities or that we determine are in the best interests of our employees, customers, suppliers and shareholders. While we are unable to determine or predict the nature, duration, or scope of the overall impact the COVID-19 pandemic will have on our business, results of operations, liquidity or capital resources, we believe we will be able to remain operational and our working capital will be sufficient for us to remain operational even as the longer-term consequences of this pandemic become known.

During the remainder of fiscal year 2022, we also plan to continue our focus on:

• Leveraging our state-of-the-art, certified facilities to increase the value of the goods and services we provide to our highly valued private-label contract manufacturing customers, and to assist us in developing relationships with additional quality oriented customers;

• Expanding the commercialization of our beta-alanine patent estate through raw material sales, developing a new sales distribution channel under the Wellness and Healthy Aging category for our sustained release form of beta-alanine marketed under our SR CarnoSyn® trademark, exploiting new contract manufacturing opportunities license and royalty agreements, and protecting our proprietary rights; and

• Improving operational efficiencies and managing costs and business risks to improve profitability.

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Discussion of Critical Accounting Estimates

We have identified the following as our most critical accounting estimates, which are those that are most important to the portrayal of the Company’s financial condition and results, and that require management’s most subjective and complex judgments. Information regarding our other significant accounting estimates and policies are disclosed in Note 1 of Item 1 of this report and as disclosed in the 2021 Annual Report.

Revenue Recognition — Revenue is measured as the net amount of consideration expected to be received in exchange for fulfilling one or more performance obligations. For certain contracts with volume rebates and discounts, our estimates of future sales used to assess the volume rebate and discount estimates are subject to a high degree of judgement and may differ from actual sales due to, among other things, changes in customer orders and raw material availability. 

Results of Operations

The results of our operations for the three and nine months ended March 31 were as follows (dollars in thousands):

	Three Months Ended									Nine Months Ended
	March 31,									March 31,
	2022			2021			% Change			2022			2021			% Change
Private label contract manufacturing	$	37,623		$	42,196			(11	)%	$	104,894		$	124,569			(16	)%
Patent and trademark licensing		4,750			4,124			15	%		13,546			9,560			42	%
Total net sales		42,373			46,320			(9	)%		118,440			134,129			(12	)%
Cost of goods sold		34,980			39,484			(11	)%		96,220			111,614			(14	)%
Gross profit		7,393			6,836			8	%		22,220			22,515			(1	)%
Gross profit %		17.4	%		14.8	%					18.8	%		16.8	%
Selling, general and administrative expenses		4,119			4,136			(0	)%		12,317			12,338			(0	)%
% of net sales		9.7	%		8.9	%					10.4	%		9.2	%
Income from operations		3,274			2,700			21	%		9,903			10,177			(3	)%
% of net sales		7.7	%		5.8	%					8.4	%		7.6	%
Other expense		(88	)		(326	)		(73	)%		(123	)		(1,453	)		(92	)%
Income before income taxes		3,186			2,374			34	%		9,780			8,724			12	%
% of net sales		7.5	%		5.1	%					8.3	%		6.5	%
Provision for income taxes		682			458			49	%		2,173			918			137	%
Net income	$	2,504		$	1,916			31	%	$	7,607		$	7,806			(3	)%
% of net sales		5.9	%		4.1	%					6.4	%		5.8	%

Private-label contract manufacturing net sales decreased 11% during the three months ended March 31, 2022 and 16% during the nine months ended March 31, 2022, when compared to the same periods in the prior year. The decrease in sales during the three months ended March 31, 2022 was primarily due to lower sales to our largest customer partially offset by sales to other existing customers and a new customer. Sales to our largest customer decreased 40% for the three months ended March 31, 2022 as compared to the same period in fiscal 2021 and was driven by an inventory reduction program mostly related to their European business. The decrease in sales during the first nine months of fiscal 2022 was primarily due to decreased sales from our largest customer partially offset by sales to other existing customers and a new customer. Sales to our largest customer decreased 44% for the nine months ended March 31, 2022 as compared to the same period in the prior year with a majority of the decrease associated with their European business.

Net sales from our patent and trademark licensing segment increased 15% during the three months ended March 31, 2022 and 42% during the nine months ended March 31, 2022, when compared to the same periods in the prior year. The increase in patent and trademark licensing revenue during the third quarter and the first nine months of fiscal 2022 was primarily due to increased shipments to existing customers in part related to athletic activities and gyms reopening in accordance with easing COVID-19 restrictions across the USA as compared to significant restrictions in athletic activities primarily impacting the first nine months of fiscal 2021. The increase in the nine months ended March 31, 2022 also included sales to new customers and higher average sales prices.

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The change in gross profit margin for the three and nine months ended March 31, 2022, was as follows:

	Three Months			Nine Months
	Ended			Ended
Contract manufacturing(1)		1.7	%		(0.9	)%
Patent and trademark licensing(2)		0.9			2.9
Total change in gross profit margin		2.6	%		2.0	%

1 Private-label contract manufacturing gross profit margin as a percentage of consolidated net sales increased 1.7 percentage points during the three months ended March 31, 2022 and decreased 0.9 percentage points during the nine months ended March 31, 2022, when compared to the comparable prior year periods. The increase in gross profit as a percentage of sales for private-label contract manufacturing during the third quarter of fiscal 2022 is primarily due to favorable sales mix partially offset by a slight increase in per unit manufacturing costs. The decrease in gross profit as a percentage of sales for the first nine months of fiscal 2022 is primarily due to an increase in per unit manufacturing costs partially offset by favorable sales mix.

2 Patent and trademark licensing gross profit margin as a percentage of consolidated net sales increased 0.9 percentage points during the three months ended March 31, 2022 and 2.9 percentage points during the nine months ended March 31, 2022, when compared to the comparable prior year periods. The increase in margin contribution during the three and nine month periods ending March 31, 2022 was primarily due to increased patent and trademark licensing net sales as a percentage of total consolidated net sales. The first nine months of fiscal 2022 also included a change in estimate regarding certain volume rebate programs.

Selling, general and administrative expenses were flat during the three and nine months ended March 31, 2022 as compared to the comparable prior year periods.

Other expense, net, decreased $0.2 million during the three months ended March 31, 2022, and decreased $1.3 million during the nine months ended March 31, 2022, when compared to the comparable periods during the prior year. The decreases were primarily due to the favorable fiscal 2022 foreign exchange revaluation activity associated with our balance sheet and the fluctuations in unhedged foreign currency rates when compared to the same activity in fiscal 2021.

Our income tax expense increased $0.2 million during the three months ended March 31, 2022 and increased $1.3 million during the nine months ended March 31, 2022, when compared to the same periods in fiscal 2021. The increase in income tax expense during the third quarter of fiscal 2022 was primarily related to an increase in pre-tax income as compared to the same period in the prior year. The increase during the first nine months of fiscal 2022 was primarily related to a discrete tax benefit of $0.9 million recorded during the nine months ended March 31, 2021 without a corresponding discrete item in the nine months ended March 31, 2022 and an increase in taxes associated with higher pre-tax income and a marginally higher effective tax rate excluding the discrete item.

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Liquidity and Capital Resources

Our primary sources of liquidity and capital resources are cash flows provided by operating activities and the availability of borrowings under our credit facility. Net cash used by operating activities was $3.1 million for the nine months ended March 31, 2022 compared to net cash provided by operating activities of $16.0 million in the comparable period in the prior fiscal year.

At March 31, 2022, changes in accounts receivable, consisting of amounts due from our private-label contract manufacturing customers and our patent and trademark licensing activities, provided $1.3 million in cash compared to providing $0.2 million of cash during the comparable nine month period in the prior year. The increase in cash provided by accounts receivable during the nine months ended March 31, 2022 primarily resulted from the timing of sales and related collections. Days sales outstanding was 40 days during the nine months ended March 31, 2022 as compared to 35 days for the prior year period.

Changes in inventory used $9.8 million in cash during the nine months ended March 31, 2022 compared to using $1.1 million in the comparable prior year period. The change in cash related to inventory during the nine months ended March 31, 2022 was primarily related to the difference in the amount and timing of orders and anticipated sales as compared to same period in the prior year. Changes in accounts payable and accrued liabilities provided $4.4 million in cash during the nine months ended March 31, 2022 compared to providing $4.1 million during the nine months ended March 31, 2021. The change in cash flow activity related to accounts payable and accrued liabilities was primarily due to the timing of inventory receipts and payments.

Cash used in investing activities in the nine months ended March 31, 2022 was $21.4 million compared to $4.2 million in the comparable prior year period. The primary reason for the change was due to the purchase of a new manufacturing and warehouse facility in Carlsbad, CA during the first quarter of fiscal 2022.

Cash provided by financing activities for the nine months ended March 31, 2022, was $4.8 million, compared to $14.1 million used in the comparable prior year period. The difference is primarily due to borrowings related to the purchase of our new manufacturing and warehouse facility in Carlsbad, CA, offset by the difference in treasury stock repurchase activity.  

At March 31, 2022 we had $9.9 million due in connection with a term loan related to our recently acquired manufacturing and warehouse facility and we also had a $20.0 million working capital line of credit available to us under which we had no borrowings outstanding. During the nine months ending March 31, 2022, we were in compliance with all of the financial and other covenants required under the Credit Agreement. Refer to Item 1, Note F., "Debt," in this Quarterly Report, for terms of our Credit Agreement.         

As of March 31, 2022, we had $18.6 million in cash and cash equivalents. We believe our available cash, cash equivalents, credit facility and potential cash flows from operations will be sufficient to fund our current working capital needs, capital expenditures, and minimum debt and interest payments through the next 12 months. Our capital requirements for fiscal 2022 include amounts that will be required to complete our planned retrofit of the facility we purchased in August 2021 that is planned to become a powder blending, packaging, and storage facility.

Off-Balance Sheet Arrangements

As of March 31, 2022, we did not have any off-balance sheet debt nor did we have any transactions, arrangements, obligations (including contingent obligations) or other relationships with any unconsolidated entities or other persons that have or are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, results of operations, liquidity, capital expenditures, capital resources, or significant components of revenue or expenses material to investors.

Recent Accounting Pronouncements

Recent accounting pronouncements are discussed in the notes to our consolidated financial statements included under Item 1, Note A. of this Report. Other than those pronouncements, we are not aware of any other pronouncements that materially affect our financial position or results of operations.

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ITEM 4.     CONTROLS AND PROCEDURES

We maintain certain disclosure controls and procedures as defined under the Securities Exchange Act of 1934. They are designed to help ensure that material information is: (1) gathered and communicated to our management, including our principal executive and financial officers, in a manner that allows for timely decisions regarding required disclosures; and (2) recorded, processed, summarized, reported and filed with the SEC as required under the Securities Exchange Act of 1934 and within the time periods specified by the SEC.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer (principal financial and accounting officer), evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2022. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective for their intended purpose described above as of March 31, 2022.

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarterly period ended March 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

From time to time, we become involved in various investigations, claims and legal proceedings that arise in the ordinary course of our business. These matters may relate to intellectual property, product liability, employment, tax, regulation, contract or other matters. The resolution of these matters as they arise will be subject to various uncertainties and, even if such claims are without merit, could result in the expenditure of significant financial and managerial resources. While unfavorable outcomes are possible, based on available information, we currently do not believe the resolution of these matters, even if unfavorable, will result in a material adverse effect on our business, consolidated financial condition, or results of operations. However, a settlement payment or unfavorable outcome could adversely impact our results of operations. Our evaluation of the likely impact of these actions could change in the future and we could have unfavorable outcomes we do not expect. An unexpected settlement expense or an unexpected unfavorable outcome of a matter could adversely impact our results of operations.

As of May 12, 2022, neither NAI nor NAIE were a party to any material pending legal proceeding nor was any of our property the subject of any material pending legal proceeding. We are currently involved in several matters in the ordinary course of our business. 

There is no assurance NAI will prevail in these litigation matters or in similar proceedings NAI or others may initiate or that litigation expenses will not be greater than anticipated.

ITEM 1A.  RISK FACTORS

When evaluating our business and future prospects you should carefully consider the risks described under Item 1A of our 2021 Annual Report, as well as the other information in our 2021 Annual Report, this Report and other reports and documents we file with the SEC. If any of the identified risks actually occur, our business, financial condition and results of operations could be seriously harmed. In that event, the market price of our common stock could decline, and you could lose all or a portion of the value of your investment in our common stock.

ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

We did not sell any unregistered equity securities during the three and nine month periods ended March 31, 2022 and March 31, 2021.

Repurchases

During the three months ended March 31, 2022 we repurchased 179,810 shares of our common stock at a total cost of $2.3 million (including commissions and transaction fees) as set forth below:

Period	Total Number of Shares Purchased		Average Price Paid per Share (1)		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs (as of March 31, 2022) (in thousands)
January 1, 2022 to January 31, 2022		106,058	$	13.29		106,058		—
February 1, 2022 to February 28, 2022		43,456	$	11.95		43,456		—
March 1, 2022 to March 31, 2022		30,296	$	11.24		30,296		—
Total		179,810				179,810	$	1,402

⁽¹⁾ Average price paid per share includes costs associated with the repurchases

Refer to Note J, "Treasury Stock," in this Quarterly Report, for terms of repurchase plan and additional information.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 5.  OTHER INFORMATION

None.

28

ITEM 6.     EXHIBITS

The following exhibit index shows those exhibits filed with this Report and those incorporated by reference:

EXHIBIT INDEX

Exhibit Number	Description	Incorporated By Reference To
3(i)	Amended and Restated Certificate of Incorporation of Natural Alternatives International, Inc. filed with the Delaware Secretary of State on January 14, 2005	Exhibit 3(i) of NAI’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2004, filed with the commission on February 14, 2005
3(ii)	Amended and Restated By-laws of Natural Alternatives International, Inc. dated as of February 9, 2009	Exhibit 3(ii) of NAI’s Current Report on Form 8-K dated February 9, 2009, filed with the commission on February 13, 2009
4(i)	Form of NAI’s Common Stock Certificate	Exhibit 4(i) of NAI’s Annual Report on Form 10-K for the fiscal year ended June 30, 2005, filed with the commission on December 8, 2005
31.1	Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer	Filed herewith
31.2	Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer	Filed herewith
32	Section 1350 Certification	Filed herewith
101.INS	XBRL Instance Document	Filed herewith
101.SCH	XBRL Taxonomy Extension Schema Document	Filed herewith
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document	Filed herewith
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document	Filed herewith
101.LAB	XBRL Taxonomy Extension Label Linkbase Document	Filed herewith
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document	Filed herewith

29

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, Natural Alternatives International, Inc., the registrant, has duly caused this Report to be signed on its behalf by the undersigned, duly authorized officers.

Date: May 13, 2022

NATURAL ALTERNATIVES INTERNATIONAL, INC.
By:	/s/ Mark A. LeDoux
	Mark A. LeDoux, Chief Executive Officer
	(principal executive officer)
By:	/s/ Michael E. Fortin
	Michael E. Fortin, Chief Financial Officer
	(principal financial and accounting officer)

30

EX-31.1

Exhibit 31.1

Certification of Chief Executive Officer

Pursuant to

Rule 13a-14(a)/15d-14(a)

I, Mark A. LeDoux, Chief Executive Officer of Natural Alternatives International, Inc., certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Natural Alternatives International, Inc.;

2. Based on my knowledge, this Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Report;

3. Based on my knowledge, the financial statements, and other financial information included in this Report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this Report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this Report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this Report based on such evaluation; and

d) disclosed in this Report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 13, 2022

/s/ Mark A. LeDoux

Mark A. LeDoux, Chief Executive Officer

EX-31.2

Exhibit 31.2

Certification of Chief Financial Officer

Pursuant to

Rule 13a-14(a)/15d-14(a)

I, Michael Fortin, Chief Financial Officer of Natural Alternatives International, Inc., certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Natural Alternatives International, Inc. (the “Report”);

2. Based on my knowledge, this Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Report;

3. Based on my knowledge, the financial statements, and other financial information included in this Report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this Report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this Report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this Report based on such evaluation; and

d) disclosed in this Report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 13, 2022

/s/ Michael E. Fortin

Michael E. Fortin, Chief Financial Officer

EX-32

Exhibit 32

Certification

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code)

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code), each of the undersigned officers of Natural Alternatives International, Inc., a Delaware corporation, does hereby certify, that the Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2022 of Natural Alternatives International, Inc. fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)) and that information contained in such report fairly presents, in all material respects, the financial condition and results of operations of Natural Alternatives International, Inc.

Date: May 13, 2022	/s/ Mark A. LeDoux
	Mark A. LeDoux, Chief Executive Officer
Date: May 13, 2022	/s/ Michael E. Fortin
	Michael E. Fortin, Chief Financial Officer

The foregoing certification is furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code) and is not being filed as part of the Form 10-Q or as a separate disclosure document.

XML

Document And Entity Information - shares	9 Months Ended
	Mar. 31, 2022	May 12, 2022
Document Information [Line Items]
Entity Central Index Key	0000787253
Entity Registrant Name	NATURAL ALTERNATIVES INTERNATIONAL INC
Amendment Flag	false
Current Fiscal Year End Date	--06-30
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2022
Document Type	10-Q
Document Period End Date	Mar. 31, 2022
Entity File Number	000-15701
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	84-1007839
Entity Address, Address Line One	1535 Faraday Ave
Entity Address, City or Town	Carlsbad
Entity Address, State or Province	CA
Entity Address, Postal Zip Code	92008
City Area Code	760
Local Phone Number	736-7700
Title of 12(b) Security	Common Stock, $0.01 par value per share
Trading Symbol	NAII
Security Exchange Name	NASDAQ
Document Quarterly Report	true
Entity Current Reporting Status	Yes
Document Transition Report	false
Entity Interactive Data Current	Yes
Entity Emerging Growth Company	false
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		6,150,452

XML

Condensed Consolidated Balance Sheets (Current Period Unaudited) - USD ($) $ in Thousands	Mar. 31, 2022	Jun. 30, 2021
Current assets:
Cash and cash equivalents	$ 18,575	$ 32,133
Accounts receivable – less allowance for doubtful accounts of $3,383 at March 31, 2022 and $3,527 at June 30, 2021	16,736	17,946
Inventories, net	36,800	27,006
Income tax receivable	0	1,095
Derivative assets, current asset	2,445	0
Prepaids and other current assets	3,650	2,168
Total current assets	78,206	80,348
Property and equipment, net	40,400	22,271
Operating lease right-of-use assets	14,049	15,877
Deferred tax asset – noncurrent	0	214
Other noncurrent assets, net	2,833	1,571
Total assets	135,488	120,281
Current liabilities:
Accounts payable	17,838	11,893
Accrued liabilities	2,235	2,441
Accrued compensation and employee benefits	3,110	4,584
Customer deposits	372	1,721
Income taxes payable	513	619
Forward contracts	0	814
Mortgage note payable, current portion	300	0
Total current liabilities	24,368	22,072
Long-term liability – operating leases	14,585	16,481
Noncurrent forward contracts	0	4
Long-term pension liability	417	391
Deferred tax liability	360	0
Mortgage note payable, net of current portion	9,563	0
Income taxes payable, noncurrent	1,118	1,250
Total liabilities	50,411	40,198
Commitments and contingencies (Notes E, F, and L)
Stockholders’ equity:
Preferred stock; $.01 par value; 500,000 shares authorized; none issued or outstanding	0	0
Common stock; $.01 par value; 20,000,000 shares authorized at March 31, 2022 and June 30, 2021, issued and outstanding (net of treasury shares) 6,146,221 at March 31, 2022 and 6,436,568 at June 30, 2021	89	88
Additional paid-in capital	30,188	29,456
Retained earnings	74,556	66,949
Treasury stock, at cost, 2,984,994 shares at March 31, 2022 and 2,567,797 at June 30, 2021	(20,954)	(15,849)
Accumulated other comprehensive income (loss)	1,198	(561)
Total stockholders’ equity	85,077	80,083
Total liabilities and stockholders’ equity	$ 135,488	$ 120,281

XML

Condensed Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - USD ($) $ in Thousands	Mar. 31, 2022	Jun. 30, 2021
Accounts receivable, allowance for doubtful accounts	$ 3,383	$ 3,527
Preferred stock par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized (in shares)	500,000	500,000
Preferred stock, shares issued (in shares)	0	0
Preferred stock, shares outstanding (in shares)	0	0
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	20,000,000	20,000,000
Common stock, shares outstanding (in shares)	6,146,221	6,436,568
Treasury stock, shares (in shares)	2,984,994	2,567,797

XML

Condensed Consolidated Statements of Income and Comprehensive Income (Unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Mar. 31, 2022	Mar. 31, 2021	Mar. 31, 2022	Mar. 31, 2021
Net sales	$ 42,373	$ 46,320	$ 118,440	$ 134,129
Cost of goods sold	34,980	39,484	96,220	111,614
Gross profit	7,393	6,836	22,220	22,515
Selling, general and administrative	4,119	4,136	12,317	12,338
Income from operations	3,274	2,700	9,903	10,177
Other (expense) income:
Interest income	0	0	0	1
Interest expense	(19)	(15)	(45)	(110)
Foreign exchange loss	(40)	(304)	(35)	(1,322)
Other, net	(29)	(7)	(43)	(22)
Total other expense	(88)	(326)	(123)	(1,453)
Income before income taxes	3,186	2,374	9,780	8,724
Provision for income taxes	682	458	2,173	918
Net income	2,504	1,916	7,607	7,806
Unrealized gain (loss) resulting from change in fair value of derivative instruments, net of tax	474	1,925	1,759	(49)
Comprehensive income	$ 2,978	$ 3,841	$ 9,366	$ 7,757
Net income per common share:
Basic (in dollars per share)	$ 0.42	$ 0.31	$ 1.23	$ 1.24
Diluted (in dollars per share)	$ 0.41	$ 0.30	$ 1.22	$ 1.22
Weighted average common shares outstanding
Basic (in shares)	6,003,036	6,200,712	6,167,539	6,296,408
Diluted (in shares)	6,041,424	6,326,777	6,216,422	6,401,021

XML

Condensed Consolidated Statements of Stockholders' Equity (Unaudited) - USD ($) $ in Thousands	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	Treasury Stock [Member]	AOCI Attributable to Parent [Member]	Total
Balance (in shares) at Jun. 30, 2020	8,856,677			2,104,305
Balance at Jun. 30, 2020	$ 87	$ 27,992	$ 56,181	$ (11,702)	$ (1,183)	$ 71,375
Compensation expense related to stock compensation plans	$ 0	1,032	0	$ 0	0	1,032
Issuance of common stock for restricted stock grants (in shares)	91,773			0
Issuance of common stock for restricted stock grants	$ 1	(1)	0	$ 0	0	$ 0
Treasury Stock Acquired, Shares (in shares)	0			463,081		463,081
Repurchase of common stock	$ 0	0	0	$ (4,140)	0	$ (4,140)
Unrealized gain resulting from change in fair value of derivative instruments, net of tax	0	0	0	0	(49)	(49)
Net income (loss)	$ 0	0	7,806	$ 0	0	$ 7,806
Issuance of common stock for stock option exercise (in shares)	38,325			0		110,000
Issuance of common stock for stock option exercise	$ 1	(1)	0	$ 0	0	$ 0
Balance (in shares) at Mar. 31, 2021	8,986,775			2,567,386
Balance at Mar. 31, 2021	$ 89	29,022	63,987	$ (15,842)	(1,232)	76,024
Balance (in shares) at Dec. 31, 2020	8,887,119			2,523,254
Balance at Dec. 31, 2020	$ 88	28,689	62,071	$ (15,203)	(3,157)	72,488
Compensation expense related to stock compensation plans	$ 0	334	0	$ 0	0	334
Issuance of common stock for restricted stock grants (in shares)	91,773			0
Issuance of common stock for restricted stock grants	$ 1	(1)	0	$ 0	0	$ 0
Treasury Stock Acquired, Shares (in shares)	0			44,132		44,132
Repurchase of common stock	$ 0	0	0	$ (639)	0	$ (639)
Unrealized gain resulting from change in fair value of derivative instruments, net of tax	0	0	0	0	1,925	1,925
Net income (loss)	$ 0	0	1,916	$ 0	0	$ 1,916
Issuance of common stock for stock option exercise (in shares)	7,883			0		10,000
Issuance of common stock for stock option exercise	$ 0	0	0	$ 0	0	$ 0
Balance (in shares) at Mar. 31, 2021	8,986,775			2,567,386
Balance at Mar. 31, 2021	$ 89	29,022	63,987	$ (15,842)	(1,232)	76,024
Balance (in shares) at Jun. 30, 2021	9,004,365			2,567,797
Balance at Jun. 30, 2021	$ 88	29,456	66,949	$ (15,849)	(561)	80,083
Compensation expense related to stock compensation plans	$ 0	733	0	$ 0	0	733
Issuance of common stock for restricted stock grants (in shares)	126,850			0
Issuance of common stock for restricted stock grants	$ 1	(1)	0	$ 0	0	$ 0
Treasury Stock Acquired, Shares (in shares)	0			397,365		397,365
Repurchase of common stock	$ 0	0	0	$ (5,105)	0	$ (5,105)
Forfeiture of restricted stock (in shares)	0			19,832
Forfeiture of restricted stock	$ 0	0	0	$ 0	0	0
Unrealized gain resulting from change in fair value of derivative instruments, net of tax	0	0	0	0	1,759	1,759
Net income (loss)	$ 0	0	7,607	$ 0	0	$ 7,607
Issuance of common stock for stock option exercise (in shares)						0
Balance (in shares) at Mar. 31, 2022	9,131,215			2,984,994
Balance at Mar. 31, 2022	$ 89	30,188	74,556	$ (20,954)	1,198	$ 85,077
Balance (in shares) at Dec. 31, 2021	9,004,365			2,776,623
Balance at Dec. 31, 2021	$ 88	29,923	72,052	$ (18,386)	724	84,401
Compensation expense related to stock compensation plans	$ 0	266	0	$ 0	0	266
Issuance of common stock for restricted stock grants (in shares)	126,850			0
Issuance of common stock for restricted stock grants	$ 1	(1)	0	$ 0	0	$ 0
Treasury Stock Acquired, Shares (in shares)	0			206,971		206,971
Repurchase of common stock	$ 0	0	0	$ (2,568)	0	$ (2,568)
Forfeiture of restricted stock (in shares)	0			1,400
Forfeiture of restricted stock	$ 0	0	0	$ 0	0	0
Unrealized gain resulting from change in fair value of derivative instruments, net of tax	0	0	0	0	474	474
Net income (loss)	$ 0	0	2,504	$ 0	0	$ 2,504
Issuance of common stock for stock option exercise (in shares)						0
Balance (in shares) at Mar. 31, 2022	9,131,215			2,984,994
Balance at Mar. 31, 2022	$ 89	$ 30,188	$ 74,556	$ (20,954)	$ 1,198	$ 85,077

XML

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	9 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Cash flows from operating activities
Net income	$ 7,607	$ 7,806
Adjustments to reconcile net income to net cash provided by operating activities:
Recovery of uncollectible accounts receivable	(48)	(111)
Depreciation and amortization	3,318	3,309
Non-cash compensation	733	1,032
Non-cash lease expenses	2,355	2,488
Deferred income taxes	0	(469)
Pension expense, net of contributions	26	6
(Gain) loss on disposal of assets	(9)	61
Changes in operating assets and liabilities:
Accounts receivable	1,257	230
Inventories, net	(9,794)	(1,116)
Prepaids and other assets	(2,019)	(64)
Accounts payable and accrued liabilities	4,390	4,081
Forward contracts	(1,654)	1,061
Accrued compensation and employee benefits	(1,474)	711
Operating lease liabilities	(2,423)	(2,441)
Income taxes	857	(585)
Net cash provided by operating activities	3,122	15,999
Cash flows from investing activities
Proceeds from sale of property and equipment	30	3
Purchases of property and equipment	(21,468)	(4,251)
Net cash used in investing activities	(21,438)	(4,248)
Cash flows from financing activities
Borrowings on line of credit	0	(10,000)
Borrowings on long-term debt	10,000	0
Payments on long-term debt	(137)	0
Repurchase of common stock	(5,105)	(4,140)
Net cash provided by (used in) financing activities	4,758	(14,140)
Net decrease in cash and cash equivalents	(13,558)	(2,389)
Cash and cash equivalents at beginning of period	32,133	30,478
Cash and cash equivalents at end of period	18,575	28,089
Supplemental disclosures of cash flow information
Interest	173	123
Taxes	$ 2,169	$ 1,549

XML

Note A - Basis of Presentation and Summary of Significant Accounting Policies

9 Months Ended

Mar. 31, 2022

Notes to Financial Statements

Organization, Consolidation and Presentation of Financial Statements Disclosure and Significant Accounting Policies [Text Block]

A. Basis of Presentation and Summary of Significant Accounting Policies

The accompanying interim unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and with applicable rules and regulations. Pursuant to such rules and regulations, certain information and note disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (U.S. GAAP) have been condensed or omitted. In management’s opinion, all adjustments necessary for a fair presentation of the financial position, results of operations, stockholders’ equity, and cash flows have been included and are of a normal, recurring nature. The results of operations for the three and nine months ended March 31, 2022 are not necessarily indicative of the operating results for the full fiscal year or for any future periods.

You should read the financial statements and these notes, which notes are an integral part of the financial statements, together with our audited financial statements included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2021 (“2021 Annual Report”). The accounting policies used to prepare the financial statements included in this Report are the same policies described in the notes to the consolidated financial statements in our 2021 Annual Report unless otherwise noted below.

Recently Adopted Accounting Pronouncements

On December 18, 2019, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update ("ASU") No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. This new standard eliminates certain exceptions in Accounting Standards Codification ("ASC") 740 related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities for outside basis differences. It also clarifies and simplifies other aspects of the accounting for income taxes. This standard is effective for fiscal years, and interim periods within those years, beginning after December 15, 2020, with early adoption permitted in any interim period within that year. We have adopted this ASU effective this first quarter of fiscal 2022. This ASU did not have a material impact on our consolidated financial statements.

Recently Issued Accounting and Regulatory Pronouncements

On March 28, 2022, the Financial Accounting Standards Board (the "FASB”) issued Accounting Standards Update ("ASU") No. 2022-01, Derivatives and Hedging (Topic 815): Fair Value Hedging-Portfolio Layer Method. This new standard clarifies the guidance in ASC 815 on fair value hedge accounting of interest rate risk for portfolios of financial assets. The ASU amends the guidance in ASU 2017-123 (released on August 28, 2017) that, among other things, established the “last-of-layer” method for making the fair value hedge accounting for these portfolios more accessible. ASU 2022-01 renames that method the “portfolio layer” method and addresses feedback from stakeholders regarding its application. This standard is effective for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years, with early adoption permitted in any interim period within that year. This ASU will be adopted in our first quarter of fiscal 2023. We do not expect this ASU to have a material impact on our consolidated financial statements.

Net Income per Common Share

We compute net income per common share using the weighted average number of common shares outstanding during the period, and diluted net income per common share using the additional dilutive effect of all dilutive securities. The dilutive impact of stock options and unvested 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 income per common share as follows (in thousands, except per share data):

	Three Months Ended				Nine Months Ended
	March 31,				March 31,
	2022		2021		2022		2021
Numerator
Net income	$	2,504	$	1,916	$	7,607	$	7,806
Denominator
Basic weighted average common shares outstanding		6,003		6,201		6,168		6,296
Dilutive effect of stock options and restricted stock		38		126		48		105
Diluted weighted average common shares outstanding		6,041		6,327		6,216		6,401
Basic net income per common share	$	0.42	$	0.31	$	1.23	$	1.24
Diluted net income per common share	$	0.41	$	0.30	$	1.22	$	1.22

We excluded 126,850 shares of restricted stock and no shares related to stock options for the three and nine months ended March 31, 2022, as their impact would have been anti-dilutive. We excluded 91,773 shares of restricted stock and no shares related to stock options for the three months ended March 31, 2021. During the nine months ended March 31, 2021, we excluded shares relating to stock options totaling 30,000 and 69,477 shares of unvested restricted stock, as their impact would have been anti-dilutive.

Revenue Recognition

We record revenue based on a five-step model which includes: (1) identifying a contract with a customer; (2) identifying the performance obligations in the contract; (3) determining the transaction price; (4) allocating the transaction price among the performance obligations; and (5) recognizing revenue as each of the various performance obligations are satisfied.

Revenue is measured as the net amount of consideration expected to be received in exchange for fulfilling one or more performance obligations. We identify purchase orders from customers as contracts. The amount of consideration expected to be received and revenue recognized includes estimates of variable consideration, including estimates for early payment discounts and volume rebates. Such estimates are calculated using historical averages adjusted for any expected changes due to current business conditions and experience. We review and update these estimates at the end of each reporting period and the impact of any adjustments is recognized in the period the adjustments are identified. In assessing whether collection of consideration from a customer is probable, we consider both the customer's ability and intent to pay that amount of consideration when it is due. Payment of invoices is due as specified in the underlying customer agreement, which is typically 30 days from the invoice date. Invoices are generally issued on the date of transfer of control of the products ordered to the customer.

Revenue is recognized at the point in time that each of our performance obligations is fulfilled, and control of the ordered products is transferred to the customer. This transfer occurs when the product is shipped, or in some cases, when the product is delivered to the customer.

We provide early payment discounts to certain customers. Based on historical payment trends, we expect that these customers will take advantage of these early payment discounts. The cost of these discounts is reported as a reduction to the transaction price. If the actual discounts differ from those estimated, the difference is also reported as a change in the transaction price. We require prepayment from certain customers. We record any payments received in advance of contracts fulfillment as a contract liability and classified as customer deposits on the consolidated balance sheet.

Except for product defects, no right of return exists on the sale of our products. We estimate returns based on historical experience and recognize a returns liability for any estimated returns. As of March 31, 2022, we have no known returns liability.

We have an Exclusive Manufacturing Agreement with The Juice Plus+ Company LLC (“Juice Plus+”) through August 6, 2025. Pursuant to the Exclusive Manufacturing Agreement, Juice Plus+ has granted us exclusive rights to manufacture and supply them with certain of their products within 24 countries where Juice Plus+ currently sells those products. Pursuant to this Exclusive Manufacturing Agreement, we provide Juice Plus+ with a cash discount. We recorded $0.3 million of “Cash Sales Discount” for the three months ended March 31, 2022, and $1.0 million during the nine months ended March 31, 2022, which was recorded as a reduction to net sales. We recorded $0.4 million of cash sales discount during the three months ended March 31, 2021 and $1.2 million during the nine months ended March 31, 2021.

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® and SR CarnoSyn® trade names. We recorded beta-alanine raw material sales and royalty and licensing income as a component of revenue in the amount of $4.8 million during the three months ended March 31, 2022, and $13.5 million during the nine months ended March 31, 2022. We similarly recorded $4.1 million during the three months ended March 31, 2021, and $9.6 million during the nine months ended March 31, 2021. These royalty income and raw material sale amounts resulted in royalty expense paid to the original patent holders from whom NAI acquired its patents and patent rights. We recognized royalty expense as a component of cost of goods sold in the amount of $0.2 million during the three months ended March 31, 2022, and $0.6 million during the nine months ended March 31, 2022. We recorded $0.2 million during the three months ended March 31, 2021, and $0.4 million during the nine months ended March 31, 2021.

Stock-Based Compensation

The Board of Directors approved a new omnibus equity incentive plan that became effective January 1, 2021 (the “2020 Plan”), which was approved by our stockholders at the Annual Meeting of Stockholders on December 4, 2020. 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 did not grant any options during each of the three and nine month periods ending March 31, 2022 and March 31, 2021. No options were exercised during the three and nine month periods ending March 31, 2022. During the three months ended March 31, 2021, 10,000 stock options were exercised. During the nine months ended March 31, 2021, 110,000 stock options were exercised. These exercises were cashless net exercises resulting in the issuance of 7,833 shares for the three months ended March 31, 2021 and 38,325 for the nine months ended March 31, 2021. There were no option forfeitures during the three and nine month periods ended March 31, 2022 or March 31, 2021. As of March 31, 2022, we did not have any stock options outstanding.

During the three and nine months ended March 31, 2022, we granted a total of 126,850 restricted stock shares to members of our Board of Directors and certain key members of our management team. During the three and nine months ended March 31, 2021, we granted a total of 91,773 restricted stock shares to members of our Board of Directors and certain key members of our management team. During the three months ended March 31, 2022, 1,400 restricted stock shares were forfeited. During the nine months ended March 31, 2022, 19,832 restricted stock shares were forfeited. No restricted stock shares were forfeited during the three or nine month periods ended March 31, 2021.

Deferred Compensation Plan

Effective July 16, 2020, the Board of Directors approved and adopted a Non-Qualified Incentive Plan (the “Incentive Plan”). Pursuant to the Incentive Plan, the Human Resources Committee and the Board of Directors may make deferred cash payments or other cash awards (“Awards”) to directors, officers, employees and eligible consultants of NAI, (“Participants”). These Awards are made subject to conditions precedent that must be met before NAI is obligated to make the payment. The purpose of the Incentive Plan is to enhance the long-term stockholder value of NAI by providing the Human Resources Committee and the Board of Directors the ability to make deferred cash payments or other cash awards to encourage Participants to serve NAI or to remain in the service of NAI, or to assist NAI to achieve results determined by the Human Resources Committee or the Board of Directors to be in NAI's best interest.

The Incentive Plan authorizes the Human Resources Committee or the Board of Directors to grant to, and administer, unsecured and deferred cash Awards to Participants and to subject each Award to whatever conditions are determined appropriate by the Human Resources Committee or the Board of Directors. The terms of each Award, including the amount and any conditions that must be met to be entitled to payment of the Award are set forth in an Award Agreement between each Participant and NAI. The Incentive Plan provides the Board of Directors with the discretion to set aside assets to fund the Incentive Plan although that has not been done to date.

During the three and nine months ended March 31, 2022, we granted a total of $0.3 million in deferred cash awards to members of our Board of Directors and certain key members of our management team. During the three months ended March 31, 2021, we granted a total of $0.5 million in deferred cash awards to members of our Board of Directors and certain key members of our management team. During the nine months ended March 31, 2021, we granted a total of $1.5 million in deferred cash awards to members of our Board of Directors and certain key members of our management team.

No deferred cash awards were forfeited during the three months ended March 31, 2022. Awards totaling $191,000 were forfeited during the nine months ended March 31, 2022. No awards were forfeited during the three and nine months ended March 31, 2021. Each deferred cash award we have granted to date provides for three equal cash payments to the applicable Participant to be paid on the one year, two year, and three year anniversaries of the date of the grant of such Awards, (the “Award Date”); provided on the date of each payment (the “Payment Date”), the Participant has been since 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 are to be made in connection with the Award.

Fair Value of Financial Instruments

Except for cash and cash equivalents, as of March 31, 2022, and June 30, 2021, we did not have any financial assets or liabilities classified as Level 1. We classify derivative forward exchange and interest rate swap contracts as Level 2 assets and liabilities. The fair values were determined by obtaining pricing from our bank and corroborating those values with a third party bank or pricing service.

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

	March 31, 2022		June 30, 2021
Euro Forward Contract– Current Assets	$	2,419	$	—
Swiss Franc Forward Contract – Current Assets		26		—
Total Derivative Contracts – Current Assets		2,445		—
Interest Swap – Other noncurrent Assets		358		—
Euro Forward Contract– Other noncurrent Assets		365		—
Total Derivative Contracts – Other noncurrent Assets		723		—
Euro Forward Contract–Current Liabilities		—		(630	)
Swiss Franc Forward Contract – Current Liabilities		—		(184	)
Total Derivative Contracts – Current Liabilities		—		(814	)
Euro Forward Contract – Noncurrent Liabilities		—		(4	)
Fair Value Net Asset (Liability) – all Derivative Contracts	$	3,168	$	(818	)

We also classify any outstanding line of credit and term loan balance as a Level 2 liability, as the fair value is based on inputs that can be derived from information available in publicly quoted markets. As of March 31, 2022, and June 30, 2021, we did not have any financial assets or liabilities classified as Level 3. We did not transfer any assets or liabilities between these levels during fiscal 2021 or the nine months ended March 31, 2022. 

Reclassification of Prior Year Presentation

Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on the reported results of operations. 

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Note B - Inventories, Net

9 Months Ended

Mar. 31, 2022

Notes to Financial Statements

Inventory Disclosure [Text Block]

B. Inventories, net

Inventories, net consisted of the following (in thousands):

	March 31, 2022			June 30, 2021
Raw materials	$	28,584		$	20,530
Work in progress		4,987			3,765
Finished goods		3,748			3,056
Reserve		(519	)		(345	)
	$	36,800		$	27,006

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Note C - Property and Equipment

9 Months Ended

Mar. 31, 2022

Notes to Financial Statements

Property, Plant and Equipment Disclosure [Text Block]

C. Property and Equipment

Property and equipment consisted of the following (in thousands):

	Depreciable Life In Years			March 31, 2022			June 30, 2021
Land	NA			$	7,645		$	1,200
Building and building improvements	7	–	39		15,427			3,757
Machinery and equipment	3	–	12		37,522			35,458
Office equipment and furniture	3	–	5		5,906			5,712
Vehicles		3			211			255
Leasehold improvements	1	–	15		21,277			20,236
Total property and equipment					87,988			66,618
Less: accumulated depreciation and amortization					(47,588	)		(44,347	)
Property and equipment, net				$	40,400		$	22,271

On August 20, 2021, we acquired a manufacturing and warehouse property in Carlsbad California from an unrelated party for $17.5 million. The approximately 54,154 square foot building includes environmentally controlled warehouse space, office space and additional non-environmentally controlled warehouse space. We intend to retrofit a significant portion of the building into a dedicated high-volume powder blending and packaging facility. This new facility will also provide us with additional raw material storage capacity, and additional office space.

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Note D - Other Comprehensive Income (Loss)

9 Months Ended

Mar. 31, 2022

Notes to Financial Statements

Comprehensive Income (Loss) Note [Text Block]

D. Other Comprehensive Income (Loss)

Other comprehensive income (loss) (“OCI” and “OCL”) consisted of the following during the three and nine months ended March 31, 2022 and March 31, 2021 (in thousands):

	Three Months Ended
	March 31, 2022
	Defined			Unrealized Gains			Unrealized Gains
	Benefit			(Losses) on			(Losses) on
	Pension			Cash Flow			Swap
	Plan			Hedges			Derivative			Total
Beginning Balance	$	(538	)	$	1,200			62		$	724
OCI/OCL before reclassifications		—			1,064			299			1,363
Amounts reclassified from OCI to Sales		—			(685	)		—			(685	)
Tax effect of OCI activity		—			(120	)		(84	)		(204	)
Net current period OCI/OCL		—			259			215			474
Ending Balance	$	(538	)	$	1,459			277			1,198

	Nine Months Ended
	March 31, 2022
	Defined			Unrealized Gains			Unrealized Gains
	Benefit			(Losses) on			(Losses) on
	Pension			Cash Flow			Swap
	Plan			Hedges			Derivative			Total
Beginning Balance	$	(538	)	$	(23	)		—		$	(561	)
OCI/OCL before reclassifications		—			3,308			361			3,669
Amounts reclassified from OCI to Sales		—			(1,335	)		—			(1,335	)
Tax effect of OCI activity		—			(491	)		(84	)		(575	)
Net current period OCI/OCL		—			1,482			277			1,759
Ending Balance	$	(538	)	$	1,459			277			1,198

	Three Months Ended
	March 31, 2021
	Defined			Unrealized Gains			Unrealized Gains
	Benefit			(Losses) on			(Losses) on
	Pension			Cash Flow			Swap
	Plan			Hedges			Derivative		Total
Beginning Balance	$	(888	)	$	(2,269	)		—	$	(3,157	)
OCI/OCL before reclassifications		—			1,639			—		1,639
Amounts reclassified from OCI to Sales		—			868			—		868
Tax effect of OCI activity		—			(582	)		—		(582	)
Net current period OCI/OCL		—			1,925			—		1,925
Ending Balance	$	(888	)	$	(344	)		—		(1,232	)

	Nine Months Ended
	March 31, 2021
	Defined			Unrealized Gains			Unrealized Gains
	Benefit			(Losses) on			(Losses) on
	Pension			Cash Flow			Swap
	Plan			Hedges			Derivative		Total
Beginning Balance	$	(888	)	$	(295	)		—	$	(1,183	)
OCI/OCL before reclassifications		—			(2,274	)		—		(2,274	)
Amounts reclassified from OCI to Sales		—			2,209			—		2,209
Tax effect of OCI activity		—			16			—		16
Net current period OCI/OCL		—			(49	)		—		(49	)
Ending Balance	$	(888	)	$	(344	)		—		(1,232	)

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Note E - Leases

9 Months Ended

Mar. 31, 2022

Notes to Financial Statements

Lessee, Operating Leases [Text Block]

E. Leases

We currently lease our Vista, CA and Lugano, Switzerland product manufacturing and support facilities. At the inception of a contract we assess whether the contract is, or contains, a lease. Our assessment is based on: (1) whether the contract involves the use of a distinct identified asset, (2) whether we obtain the right to substantially all the economic benefit from the use of the asset throughout the period of the contract, and (3) whether we have the right to direct the use of the asset during such time period. At inception of a lease, we allocate the consideration in the contract to each lease component based on its relative stand-alone price to determine the lease payments.

Leases are classified as either finance leases or operating leases. A lease must be classified as a finance lease if any of the following criteria are met: the lease transfers ownership of the asset by the end of the lease term, the lease contains an option to purchase the asset that is reasonably certain to be exercised, the lease term is for a major part of the remaining useful life of the asset or the present value of the lease payments equals or exceeds substantially all of the fair value of the asset. A lease is classified as an operating lease if it does not meet any of these criteria. Substantially all our operating leases are comprised of payments for the use of manufacturing and office space. We have no leases classified as finance leases. As of March 31, 2022, the weighted average remaining lease term for our operating leases was 5.7 years. The weighted average discount rate for our operating leases was 3.24%. As of June 30, 2021, the weighted average remaining lease term for our operating leases was 6.3 years and the weighted average discount rate was 3.24%.

For all leases at the lease commencement date, a right-of-use asset and a lease liability are recognized. The right-of-use asset represents the right to use the leased asset for the lease term. The lease liability represents the present value of the lease payments under the lease.

The right-of-use asset is initially measured at cost, which primarily comprises the initial amount of the lease liability, plus any initial direct costs incurred, consisting mainly of brokerage commissions, less any lease incentives received. All right-of-use assets are reviewed for impairment. The lease liability is initially measured at the present value of the lease payments, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, our secured incremental borrowing rate for the same term as the underlying lease. For our real estate and other operating leases, we use our secured incremental borrowing rate.

Lease payments included in the measurement of the lease liability comprise the following: the fixed noncancelable lease payments, payments for optional renewal periods where it is reasonably certain the renewal period will be exercised, and payments for early termination options unless it is reasonably certain the lease will not be terminated early.

Some of our manufacturing leases contain variable lease payments, including payments based on an index or rate. Variable lease payments based on an index or rate are initially measured using the index or rate in effect at lease commencement and separated into lease and non-lease components based on the initial amount stated in the lease or standalone selling prices. Lease components are included in the measurement of the initial lease liability. Additional payments based on the change in an index or rate, or payments based on a change in our portion of the operating expenses, including real estate taxes and insurance, are recorded as a period expense when incurred. Lease modifications result in remeasurement of the lease liability.

Lease expense for operating leases consists of the lease payments plus any initial direct costs, primarily brokerage commissions, and is recognized on a straight-line basis over the lease term. Included in lease expense are any variable lease payments incurred in the period that were not included in the initial lease liability. Lease expense for finance leases consists of the amortization of the right-of-use asset on a straight-line basis over the lease term and interest expense determined on an amortized cost basis. The lease payments are allocated between a reduction of the lease liability and interest expense.

We have elected not to recognize right-of-use assets and lease liabilities for short-term leases that have a term of 12 months or less. The effect of short-term leases on our right-of-use asset and lease liability was not material.

Other information related to leases as of March 31, 2022, was as follows (in thousands):

Supplemental Cash Flows Information	Nine Months Ended March 31, 2022		Nine Months Ended March 31, 2021
Cash paid for amounts included in the measurement of operating lease liabilities	$	2,495	$	2,467
Operating lease liabilities arising from obtaining Right of Use Assets for new leases		182		187

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Note F - Debt

9 Months Ended

Mar. 31, 2022

Notes to Financial Statements

Debt Disclosure [Text Block]

F. Debt

On May 24, 2021, we entered into a new credit facility with Wells Fargo Bank, N.A (“Wells Fargo”) to extend the maturity for our working line of credit from November 1, 2022, to May 24, 2024. This new credit facility provides total lending capacity of up to $20.0 million and allows us to use the credit facility for working capital as well as potential acquisitions. On August 18, 2021, we entered into an amendment of our credit facility with Wells Fargo. The amended credit facility added a $10.0 million term loan to the existing $20.0 million credit facility, and permitted us to use the $10.0 million term loan as part of the $17.5 million purchase consideration for the acquisition of our new manufacturing and warehouse property in Carlsbad, California. The amended credit agreement also increased the allowed capital expenditures from $10.0 million to $15.0 million for fiscal 2022, (exclusive of the amount paid for the acquisition of the new Carlsbad property noted above). In addition, the new credit notes now reflect a change in the interest rate reference from LIBOR to SOFR. The Credit Agreement was amended and a new Revolving Line of Credit Note, and Security Agreement were entered into. A Term Note and real property security documents were added to secure the Term Note by the new Carlsbad property. Additionally, we entered into a second amendment to our credit facility with Wells Fargo on February 8, 2022 that is effective January 31, 2022 and modifies the annual limit imposed upon our ability to repurchase stock and issue dividends. This amendment increased this limit from $5.0 million annually to $7.0 million annually.

Under the terms of the Credit Agreement, borrowings are subject to eligibility requirements including maintaining (i) a ratio of total liabilities to tangible net worth of not greater than 1.50 to 1.0 at any time; (ii) a ratio of total current assets to total current liabilities of not less than 1.75 to 1.0 at each fiscal quarter end (iii) net income after taxes not less than $1.00, determined on a trailing four quarter basis with no two consecutive quarterly losses, determined as of each quarter end and (iv) a rolling 4-quarter fixed charge coverage ratio not less than 1.25 to 1.0 as of each fiscal quarter end. The credit agreement also includes a limitation on the amount of capital expenditures that can be made in a given fiscal year, with such limitation set at $15.0 million for our fiscal year ending June 30, 2022 and $7.5 million for all fiscal years thereafter. Any amounts outstanding under the line of credit will bear interest at a fixed or fluctuating interest rate as elected by us from time to time; provided, however, that if the outstanding principal amount is less than $100,000 such amount shall bear interest at the then applicable fluctuating rate of interest. If elected, the fluctuating rate per annum would be equal to 1.29% above the daily simple SOFR rate as in effect from time to time. If a fixed rate is elected, it would equal a per annum rate of 1.29% above the SOFR rolling 30-day average rate in effect on the first day of the applicable fixed rate term. Any amounts outstanding under the line of credit must be paid in full on or before the maturity date. Amounts outstanding that are subject to a fluctuating interest rate may be prepaid at any time without penalty. Amounts outstanding that are subject to a fixed interest rate may be prepaid at any time in minimum amounts of $100,000, subject to a prepayment fee equal to the sum of the discounted monthly differences between payment under a fixed rate versus payment under the variable rate for each month from the month of prepayment through the month in which the then applicable fixed rate term matures. There is an unused commitment fee of 0.125% required as part of the line of credit.

The Term Note used as part of the purchase consideration of our new manufacturing and warehouse property in Carlsbad California referenced above, is for the original principal amount of $10.0 million, and is a seven year term note with payments fully amortized based on a twenty five year assumed term. Installment payments under this loan commenced October 1, 2021 and continue through August 1, 2028 with a final installment consisting of all remaining amounts due to be paid in full on September 1, 2028. Amounts outstanding on this note during the term of the agreement will bear interest equal to 1.8% above the SOFR rolling 30-day average. In connection with our term loan, we entered into an interest rate swap with Wells Fargo that effectively fixes our interest rate on our term loan at 2.4% for the first three years of the term of the note.

Our obligations under the Credit Agreement are secured by our accounts receivable and other rights to payment, general intangibles, inventory, equipment and fixtures. We also have credit approval with Wells Fargo Bank, N.A. which allows us to hedge foreign currency exposures up to 30 months in the future. We also have credit approval with Bank of America which allows us to hedge foreign currency exposures up to 24 months in the future.

On March 31, 2022, we were in compliance with all of the financial and other covenants required under the Amended Credit Agreement.

As of March 31, 2022, we had $20.0 million available for borrowing under our credit facility with Wells Fargo Bank.

As of March 31, 2022, we had $9.8 million outstanding under the Term Note used in the purchase of the warehouse in August 2021.

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Note G - Economic Dependency

9 Months Ended

Mar. 31, 2022

Notes to Financial Statements

Concentration Risk Disclosure [Text Block]

G. Economic Dependency

We had substantial net sales to certain customers during the periods shown in the following table. The loss of any of these customers, or a significant decline in (i) sales to these customers, (ii) the growth rate of sales to these customers, or (iii) these customers’ ability to make payments when due, each individually could have a material adverse impact on our net sales and net income. Net sales to any one customer representing 10% or more of the respective period's consolidated net sales were as follows (in thousands):

	Three Months Ended March 31,				Nine Months Ended March 31,
	2022		2021		2022		2021
Customer 1	$	13,846	$	23,215	$	40,110	$	72,001
Customer 2		6,773	(a)			22,761		16,288
Customer 3		10,673	(a)			19,795	(a)
Customer 4	(a)			5,811	(a)		(a)
	$	31,292	$	29,026	$	82,666	$	88,289

(a)          Sales were less than 10% of the respective period’s total net sales.

We buy certain products, including beta-alanine, from a limited number of raw material suppliers who meet our quality standards. The loss of any of these suppliers could have a material adverse impact on our net sales and net income. Raw material purchases from any one supplier representing 10% or more of the respective period’s total raw material purchases were as follows (dollars in thousands):

	Three Months Ended March 31,				Nine Months Ended March 31,
	2022		2021		2022		2021
Supplier 1	$	2,946		5,978	$	10,800		15,765
	$	2,946		5,978	$	10,800		15,765

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 concentrated with two of our largest customers, whose receivable balances collectively represented 51.7% of gross accounts receivable at March 31, 2022 and 64.8% at June 30, 2021. As of March 31, 2022, and at June 30, 2021, we had a receivable balance of $3.4 million related to a former contract manufacturing customer. We have recorded a bad debt reserve equal to 100% of this outstanding balance and thus did not reflect it in the percentages listed above.

Additionally, amounts due related to our beta-alanine raw material sales were 14.1% of gross accounts receivable at March 31, 2022, and 8.6% of gross accounts receivable at June 30, 2021. Concentrations of credit risk related to the remaining accounts receivable balances are limited due to the number of customers responsible for the remaining accounts receivable.

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Note H - Segment Information

9 Months Ended

Mar. 31, 2022

Notes to Financial Statements

Segment Reporting Disclosure [Text Block]

H. Segment Information

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

We evaluate performance of these segments based on a number of factors. The primary performance measures for each segment are net sales and income or loss from operations before the allocation of certain corporate level expenses. Operating income or loss for each segment does not include corporate general and administrative expenses, interest expense and other miscellaneous income and expense items. Corporate general and administrative expenses include, but are not limited to human resources, corporate legal, finance, information technology, and other corporate level related expenses, which are not allocated to any segment. Transfers of raw materials between segments are recorded at cost. The accounting policies of our segments are the same as those described in the summary of significant accounting policies in Note A above and in the consolidated financial statements included in our 2021 Annual Report.

Our operating results by business segment were as follows (in thousands):

	Three Months Ended March 31,				Nine Months Ended March 31,
	2022		2021		2022		2021
Net Sales
Private label contract manufacturing	$	37,623	$	42,196	$	104,894	$	124,569
Patent and trademark licensing		4,750		4,124		13,546		9,560
Total Net Sales	$	42,373	$	46,320	$	118,440	$	134,129

	Three Months Ended March 31,						Nine Months Ended March 31,
	2022			2021			2022			2021
Income from Operations
Private label contract manufacturing	$	3,605		$	3,241		$	10,065		$	13,511
Patent and trademark licensing		1,813			1,541			6,206			2,740
Income from operations of reportable segments		5,418			4,782			16,271			16,251
Corporate expenses not allocated to segments		(2,144	)		(2,082	)		(6,368	)		(6,074	)
Total Income from Operations	$	3,274		$	2,700		$	9,903		$	10,177

	March 31, 2022		June 30, 2021
Total Assets
Private-label contract manufacturing	$	105,552	$	95,324
Patent and trademark licensing		29,936		24,957
	$	135,488	$	120,281

Our private-label contract manufacturing products are sold both in the U.S. and in markets outside the U.S., including Europe, Canada, Australia, New Zealand, Mexico and Asia. Our primary markets outside the U.S. are Europe and Asia. Our patent and trademark licensing activities are primarily based in the U.S.

Net sales by geographic region, based on the customers’ location, were as follows (in thousands):

	Three Months Ended March 31,				Nine Months Ended March 31,
	2022		2021		2022		2021
United States	$	29,382	$	27,674	$	78,279	$	70,534
Markets outside of the United States		12,991		18,646		40,161		63,595
Total	$	42,373	$	46,320	$	118,440	$	134,129

Products manufactured by our Swiss subsidiary ("NAIE") accounted for 85% of net sales in markets outside the U.S. for the three months ended March 31, 2022 and 84% for the nine months ended March 31, 2022. Products manufactured by our Swiss subsidiary ("NAIE") accounted for 65% of net sales in markets outside the U.S. for the three months ended March 31, 2021 and 79% for the nine months ended March 31, 2021. No products manufactured by NAIE were sold in U.S. markets during the three and nine month periods ended March 31, 2022 and 2021.

Long-lived assets by geographic region, based on the location of the company or subsidiary at which they were located or made, were as follows (in thousands):

	March 31, 2022		June 30, 2021
United States	$	39,729	$	21,109
Europe		14,720		17,039
Total Long-Lived Assets	$	54,449	$	38,148

Total assets by geographic region, based on the location of the company or subsidiary at which they were located or made, were as follows (in thousands):

	March 31, 2022		June 30, 2021
United States	$	81,917	$	67,307
Europe		53,571		52,974
Total Assets	$	135,488	$	120,281

Capital expenditures by geographic region, based on the location of the company or subsidiary at which they were located or made, were as follows (in thousands):

	Nine Months Ended March 31,
	2022		2021
United States	$	20,766	$	1,788
Europe		702		2,463
Total Capital Expenditures	$	21,468	$	4,251

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Note I - Income Taxes

9 Months Ended

Mar. 31, 2022

Notes to Financial Statements

Income Tax Disclosure [Text Block]

I. Income Taxes

To determine our quarterly provision for income taxes, we use an estimated annual effective tax rate, which is based on expected annual income, statutory tax rates and tax planning opportunities available in the various jurisdictions to which we are subject. Certain significant or unusual items are separately recognized in the quarter in which they occur and can be a source of variability in the effective tax rate from quarter to quarter. We recognize interest and penalties related to uncertain tax positions, if any, as an income tax expense.

Our effective tax rate for the three months ended March 31, 2022 was 21.4% and the effective tax rate for the nine months ended March 31, 2022 was 22.2%. Our effective rates differ from the fiscal 2022 U.S. federal statutory rate of 21% primarily due to state income taxes. Our effective tax rate for the three months ended March 31, 2021 was 19.3% and the effective rate for the nine months ended March 31, 2021 was 10.5%. Our effective rate for the nine months ended March 31, 2021, differed from the fiscal 2021 U.S. federal statutory rate of 21% primarily due to a discrete tax benefit discussed below. 

On July 23, 2020, the Department of Treasury issued final regulations which provide an exclusion to the global intangible low-taxed income (GILTI) calculation on an elective basis. These regulations were effective September 21, 2020 and could be retroactively applied. Under these new regulations, we are able to exclude the GILTI calculation from our domestic taxable income if the deemed effective tax rate at our foreign subsidiary is greater than 18.9%. We assessed this rate, including the implementation of certain tax strategies, and we determined that our effective rate at our foreign subsidiary was greater than 18.9% as of the year ending June 30, 2020. During the first quarter of fiscal 2021, we reassessed our estimated taxes for fiscal 2020 and in the three months ended September 30, 2020 we recorded a reduction to our fiscal 2020 estimated taxes of $0.4 million as a discrete benefit. As a result of this adjustment, our domestic tax return for fiscal 2020 was expected to reflect a net operating loss which, in accordance with the CARES Act, allowed us to carry the loss back to fiscal 2015 and fiscal 2016. Such carryback resulted in a rate differential that resulted in the recognition of a permanent tax benefit of $0.3 million during the nine months ended March 31, 2021.

We record valuation allowances to reduce our deferred tax assets to an amount we believe is more likely than not to be realized. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. During the three and nine months ended March 31, 2022, there was no change to our valuation allowance for our deferred tax assets.

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are measured using enacted tax rates for each of the jurisdictions in which we operate. Deferred tax assets and liabilities are expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled using the tax rates then in effect. The effect on deferred tax assets and liabilities of a change in tax rates is recognized as income or expense in the period that includes the enactment date for such new rates.

We are subject to taxation in the U.S., Switzerland and various state jurisdictions. Our U.S. tax returns for the fiscal year ended June 30, 2015 and forward are subject to examination by the U.S. tax authorities. Our state tax returns for the fiscal years ended June 30, 2017 and forward are subject to examination by the state tax authorities. Our Swiss tax returns for the fiscal year ended June 30, 2020 and forward are subject to examination by the Swiss tax authorities.

It is our policy to establish reserves based on management’s assessment of exposure for certain positions taken in previously filed tax returns that may become payable upon examination by tax authorities. Our tax reserves are analyzed quarterly, and adjustments are made as events occur that we believe warrant adjustments to those reserves. There were no adjustments to reserves in the three and nine month period ended March 31, 2022.

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Note J - Treasury Stock

9 Months Ended

Mar. 31, 2022

Notes to Financial Statements

Stockholders' Equity Note Disclosure [Text Block]

J. Treasury Stock

On September 18, 2020, the Board of Directors authorized a $2.0 million increase to our stock repurchase plan (“Repurchase Plan”), thus bringing the total authorized repurchase amount to $12.0 million. On March 12, 2021, the Board of Directors authorized an additional $3.0 million increase to the Repurchase Plan, thus bringing the total authorized repurchase amount to $15.0 million. On January 14, 2022, the Board of Directors authorized an additional $3.0 million increase to the Repurchase Plan, thus bringing the total authorized repurchase amount to $18.0 million. Under the Repurchase Plan, we may, from time to time, purchase shares of our common stock, depending upon market conditions, in open market or privately negotiated transactions.

Stock repurchases for the three months ended March 31, 2022 were as follows:

	Shares		Average Cost		Total Cost (in thousands)
Shares purchased under Repurchase Plan		179,810	$	12.62	$	2,269
Shares acquired in connection with stock option exercises		—		—		—
Shares acquired from employees for restricted stock vesting		27,161		11.00		299
Total		206,971			$	2,568

Stock repurchases for the nine months ended March 31, 2022 were as follows:

	Shares		Average Cost		Total Cost (in thousands)
Shares purchased under Repurchase Plan		369,512	$	12.98	$	4,797
Shares acquired in connection with stock option exercises		—		—		—
Shares acquired from employees for restricted stock vesting		27,853		11.08		308
Total		397,365			$	5,105

Stock repurchases for the three months ended March 31, 2021 were as follows:

	Shares		Average Cost		Total Cost (in thousands)
Shares purchased under Repurchase Plan		5,751	$	10.60	$	61
Shares acquired from employees for restricted stock vesting		38,381		15.05		578
Total		44,132			$	639

Stock repurchases for the nine months ended March 31, 2021 were as follows:

	Shares		Average Cost		Total Cost (in thousands)
Shares purchased under Repurchase Plan		385,822	$	8.28	$	3,197
Shares acquired in connection with stock option exercises		30,442		9.95		303
Shares acquired from employees for restricted stock vesting		46,817		13.66		640
Total		463,081			$	4,140

Stock repurchase costs include commissions and fees.

Shares acquired from employees for restricted stock vesting and stock options exercises were returned to us by the related employees and in return we paid each employee’s required tax withholding resulting from the vesting of restricted shares. The valuation of the shares acquired and thereby the number of shares returned to us was calculated based on the closing share price on the date the shares vested.

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Note K - Derivatives and Hedging

9 Months Ended

Mar. 31, 2022

Notes to Financial Statements

Derivative Instruments and Hedging Activities Disclosure [Text Block]

K. Derivatives and Hedging

We are exposed to gains and losses resulting from fluctuations in foreign currency exchange rates relating to forecasted product sales denominated in foreign currencies and to other transactions of NAIE, our foreign subsidiary. As part of our overall strategy to manage the level of exposure to the risk of fluctuations in foreign currency exchange rates, we may use foreign exchange contracts in the form of forward contracts. To the extent we enter into such contracts, there can be no guarantee any such contracts will be effective hedges against our foreign currency exchange risk.

As of March 31, 2022, we had forward contracts designated as cash flow hedges primarily to protect against the foreign exchange risks inherent in our forecasted sales of products at prices denominated in currencies other than the U.S. Dollar. These contracts are expected to be settled through August 2023. For derivative instruments that are designated and qualify as cash flow hedges, we record the effective portion of the gain or loss on the derivative in accumulated other comprehensive income (“OCI”) as a separate component of stockholders’ equity and subsequently reclassify these amounts into earnings in the period during which the hedged transaction is recognized in earnings.

For foreign currency contracts designated as cash flow hedges, hedge effectiveness is measured using the spot rate. Changes in the spot-forward differential are excluded from the test of hedge effectiveness and are recorded currently in earnings as revenue. We measure effectiveness by comparing the cumulative change in the hedge contract with the cumulative change in the hedged item. No hedging relationships were terminated as a result of ineffective hedging for the three and nine months ended March 31, 2022 and March 31, 2021.

We monitor the probability of forecasted transactions as part of the hedge effectiveness testing on a quarterly basis. During the three and nine months ended March 31, 2022 and March 31, 2021, we did not have any losses or gains related to the ineffective portion of our hedging instruments.

As of March 31, 2022, the notional amounts of our foreign exchange contracts designated as cash flow hedges were approximately $43.7 million (EUR 36.5 million). As of March 31, 2022, a net gain of approximately $1.9 million, offset by $0.5 million of deferred taxes, related to derivative instruments designated as cash flow hedges was recorded in OCI. It is expected that $1.6 million will be reclassified into earnings in the next 12 months along with the earnings effects of the related forecasted transactions.

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 three and nine months ended March 31, 2022 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 March 31, 2022, the notional amounts of our foreign exchange contracts not designated as cash flow hedges were approximately $5.4 million (CHF 5.0 million).

We are exposed to interest rate fluctuations related to our $10 million Term Note with Wells Fargo, which carries a variable interest rate of 1.80% above the SOFR rolling 30-day average. To manage our exposure to this variable rate, on August 23, 2021, we entered into a floored interest rate swap that fixes our all-in rate on this loan to 2.4% for the first three years of the term loan. Fluctuations in the relation of our contractual swap rate to current market rates are recorded as an asset or liability with an offset to OCI at the end of each reporting period. Interest expense is adjusted for the difference between the actual SOFR spread and the swap contractual rate such that our effective interest expense for each period is equal to our hedged rate of 2.4%.

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Note L - Contingencies

9 Months Ended

Mar. 31, 2022

Notes to Financial Statements

Legal Matters and Contingencies [Text Block]

L. Contingencies

From time to time, we become involved in various investigations, claims and legal proceedings that arise in the ordinary course of our business. These matters may relate to product liability, employment, intellectual property, regulatory, contract or other matters. The resolution of these matters as they arise may be subject to various uncertainties and, even if such claims are without merit, could result in the expenditure of significant financial and managerial resources. While unfavorable outcomes are possible, based on available information, we currently do not believe the resolution of these matters will result in a material adverse effect on our business, consolidated financial condition, or results of operations. However, a settlement payment or unfavorable outcome could be greater than we currently anticipate and if so, could adversely impact our results of operations. Our evaluation of the likely impact of these actions could change in the future and we could have unfavorable outcomes we do not expect.

COVID-19 Pandemic

We continue to monitor and evaluate the risks to public health and the impact on overall global business activity related to the COVID-19 pandemic, including its potential impacts on our employees, customers, suppliers and financial results. As the situation remains fluid, it is difficult to predict the duration and scope of the pandemic and its impact on our business. However, it may result in a material adverse impact to our financial position, operations and cash flows if conditions persist or worsen.

Russia-Ukraine War

In February 2022, armed conflict escalated between Russia and Ukraine. Management is monitoring the conflict in Ukraine and any broader economic effects from the crisis. Although Russia and Ukraine did not account for any of our net sales in FY 2021, recently imposed economic sanctions and export control measures by the U.S. and European Union against Russia have resulted in increased volatility in the availability and prices of raw materials that are produced in that region. There are further concerns regarding continued supply chain disruptions, consumer purchasing and consumption behavior, increases in global shipping expenses, greater volatility in foreign exchange and interest rates, and other unforeseen business disruptions due to the current global geopolitical tensions, including relating to Ukraine. Additionally, escalation by Russia beyond Ukraine could adversely affect our European operations. We will continue to evaluate impacts of the conflict on our customers, suppliers, employees, and operations.

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Note M - Subsequent Events

9 Months Ended

Mar. 31, 2022

Notes to Financial Statements

Subsequent Events [Text Block]

M. Subsequent Event

On April 22, 2022, we purchased two forward contracts designated and effective as cash flow hedges to protect against the foreign currency exchange risk inherent in a portion of our forecasted sales transactions denominated in Euros. The two contracts expire quarterly beginning May 2023 and ending August 2023. The forward contracts have a notional amount of EUR 6.0 million and a weighted average forward rate of 1.11.

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Significant Accounting Policies (Policies)

9 Months Ended

Mar. 31, 2022

Accounting Policies [Abstract]

New Accounting Pronouncements, Policy [Policy Text Block]

Recently Adopted Accounting Pronouncements

On December 18, 2019, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update ("ASU") No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. This new standard eliminates certain exceptions in Accounting Standards Codification ("ASC") 740 related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities for outside basis differences. It also clarifies and simplifies other aspects of the accounting for income taxes. This standard is effective for fiscal years, and interim periods within those years, beginning after December 15, 2020, with early adoption permitted in any interim period within that year. We have adopted this ASU effective this first quarter of fiscal 2022. This ASU did not have a material impact on our consolidated financial statements.

Recently Issued Accounting and Regulatory Pronouncements

On March 28, 2022, the Financial Accounting Standards Board (the "FASB”) issued Accounting Standards Update ("ASU") No. 2022-01, Derivatives and Hedging (Topic 815): Fair Value Hedging-Portfolio Layer Method. This new standard clarifies the guidance in ASC 815 on fair value hedge accounting of interest rate risk for portfolios of financial assets. The ASU amends the guidance in ASU 2017-123 (released on August 28, 2017) that, among other things, established the “last-of-layer” method for making the fair value hedge accounting for these portfolios more accessible. ASU 2022-01 renames that method the “portfolio layer” method and addresses feedback from stakeholders regarding its application. This standard is effective for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years, with early adoption permitted in any interim period within that year. This ASU will be adopted in our first quarter of fiscal 2023. We do not expect this ASU to have a material impact on our consolidated financial statements.

Earnings Per Share, Policy [Policy Text Block]

Net Income per Common Share

We compute net income per common share using the weighted average number of common shares outstanding during the period, and diluted net income per common share using the additional dilutive effect of all dilutive securities. The dilutive impact of stock options and unvested 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 income per common share as follows (in thousands, except per share data):

	Three Months Ended				Nine Months Ended
	March 31,				March 31,
	2022		2021		2022		2021
Numerator
Net income	$	2,504	$	1,916	$	7,607	$	7,806
Denominator
Basic weighted average common shares outstanding		6,003		6,201		6,168		6,296
Dilutive effect of stock options and restricted stock		38		126		48		105
Diluted weighted average common shares outstanding		6,041		6,327		6,216		6,401
Basic net income per common share	$	0.42	$	0.31	$	1.23	$	1.24
Diluted net income per common share	$	0.41	$	0.30	$	1.22	$	1.22

We excluded 126,850 shares of restricted stock and no shares related to stock options for the three and nine months ended March 31, 2022, as their impact would have been anti-dilutive. We excluded 91,773 shares of restricted stock and no shares related to stock options for the three months ended March 31, 2021. During the nine months ended March 31, 2021, we excluded shares relating to stock options totaling 30,000 and 69,477 shares of unvested restricted stock, as their impact would have been anti-dilutive.

Revenue [Policy Text Block]

Revenue Recognition

We record revenue based on a five-step model which includes: (1) identifying a contract with a customer; (2) identifying the performance obligations in the contract; (3) determining the transaction price; (4) allocating the transaction price among the performance obligations; and (5) recognizing revenue as each of the various performance obligations are satisfied.

Revenue is measured as the net amount of consideration expected to be received in exchange for fulfilling one or more performance obligations. We identify purchase orders from customers as contracts. The amount of consideration expected to be received and revenue recognized includes estimates of variable consideration, including estimates for early payment discounts and volume rebates. Such estimates are calculated using historical averages adjusted for any expected changes due to current business conditions and experience. We review and update these estimates at the end of each reporting period and the impact of any adjustments is recognized in the period the adjustments are identified. In assessing whether collection of consideration from a customer is probable, we consider both the customer's ability and intent to pay that amount of consideration when it is due. Payment of invoices is due as specified in the underlying customer agreement, which is typically 30 days from the invoice date. Invoices are generally issued on the date of transfer of control of the products ordered to the customer.

Revenue is recognized at the point in time that each of our performance obligations is fulfilled, and control of the ordered products is transferred to the customer. This transfer occurs when the product is shipped, or in some cases, when the product is delivered to the customer.

We provide early payment discounts to certain customers. Based on historical payment trends, we expect that these customers will take advantage of these early payment discounts. The cost of these discounts is reported as a reduction to the transaction price. If the actual discounts differ from those estimated, the difference is also reported as a change in the transaction price. We require prepayment from certain customers. We record any payments received in advance of contracts fulfillment as a contract liability and classified as customer deposits on the consolidated balance sheet.

Except for product defects, no right of return exists on the sale of our products. We estimate returns based on historical experience and recognize a returns liability for any estimated returns. As of March 31, 2022, we have no known returns liability.

We have an Exclusive Manufacturing Agreement with The Juice Plus+ Company LLC (“Juice Plus+”) through August 6, 2025. Pursuant to the Exclusive Manufacturing Agreement, Juice Plus+ has granted us exclusive rights to manufacture and supply them with certain of their products within 24 countries where Juice Plus+ currently sells those products. Pursuant to this Exclusive Manufacturing Agreement, we provide Juice Plus+ with a cash discount. We recorded $0.3 million of “Cash Sales Discount” for the three months ended March 31, 2022, and $1.0 million during the nine months ended March 31, 2022, which was recorded as a reduction to net sales. We recorded $0.4 million of cash sales discount during the three months ended March 31, 2021 and $1.2 million during the nine months ended March 31, 2021.

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® and SR CarnoSyn® trade names. We recorded beta-alanine raw material sales and royalty and licensing income as a component of revenue in the amount of $4.8 million during the three months ended March 31, 2022, and $13.5 million during the nine months ended March 31, 2022. We similarly recorded $4.1 million during the three months ended March 31, 2021, and $9.6 million during the nine months ended March 31, 2021. These royalty income and raw material sale amounts resulted in royalty expense paid to the original patent holders from whom NAI acquired its patents and patent rights. We recognized royalty expense as a component of cost of goods sold in the amount of $0.2 million during the three months ended March 31, 2022, and $0.6 million during the nine months ended March 31, 2022. We recorded $0.2 million during the three months ended March 31, 2021, and $0.4 million during the nine months ended March 31, 2021.

Share-Based Payment Arrangement [Policy Text Block]

Stock-Based Compensation

The Board of Directors approved a new omnibus equity incentive plan that became effective January 1, 2021 (the “2020 Plan”), which was approved by our stockholders at the Annual Meeting of Stockholders on December 4, 2020. 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 did not grant any options during each of the three and nine month periods ending March 31, 2022 and March 31, 2021. No options were exercised during the three and nine month periods ending March 31, 2022. During the three months ended March 31, 2021, 10,000 stock options were exercised. During the nine months ended March 31, 2021, 110,000 stock options were exercised. These exercises were cashless net exercises resulting in the issuance of 7,833 shares for the three months ended March 31, 2021 and 38,325 for the nine months ended March 31, 2021. There were no option forfeitures during the three and nine month periods ended March 31, 2022 or March 31, 2021. As of March 31, 2022, we did not have any stock options outstanding.

During the three and nine months ended March 31, 2022, we granted a total of 126,850 restricted stock shares to members of our Board of Directors and certain key members of our management team. During the three and nine months ended March 31, 2021, we granted a total of 91,773 restricted stock shares to members of our Board of Directors and certain key members of our management team. During the three months ended March 31, 2022, 1,400 restricted stock shares were forfeited. During the nine months ended March 31, 2022, 19,832 restricted stock shares were forfeited. No restricted stock shares were forfeited during the three or nine month periods ended March 31, 2021.

Compensation Related Costs, Policy [Policy Text Block]

Deferred Compensation Plan

Effective July 16, 2020, the Board of Directors approved and adopted a Non-Qualified Incentive Plan (the “Incentive Plan”). Pursuant to the Incentive Plan, the Human Resources Committee and the Board of Directors may make deferred cash payments or other cash awards (“Awards”) to directors, officers, employees and eligible consultants of NAI, (“Participants”). These Awards are made subject to conditions precedent that must be met before NAI is obligated to make the payment. The purpose of the Incentive Plan is to enhance the long-term stockholder value of NAI by providing the Human Resources Committee and the Board of Directors the ability to make deferred cash payments or other cash awards to encourage Participants to serve NAI or to remain in the service of NAI, or to assist NAI to achieve results determined by the Human Resources Committee or the Board of Directors to be in NAI's best interest.

The Incentive Plan authorizes the Human Resources Committee or the Board of Directors to grant to, and administer, unsecured and deferred cash Awards to Participants and to subject each Award to whatever conditions are determined appropriate by the Human Resources Committee or the Board of Directors. The terms of each Award, including the amount and any conditions that must be met to be entitled to payment of the Award are set forth in an Award Agreement between each Participant and NAI. The Incentive Plan provides the Board of Directors with the discretion to set aside assets to fund the Incentive Plan although that has not been done to date.

During the three and nine months ended March 31, 2022, we granted a total of $0.3 million in deferred cash awards to members of our Board of Directors and certain key members of our management team. During the three months ended March 31, 2021, we granted a total of $0.5 million in deferred cash awards to members of our Board of Directors and certain key members of our management team. During the nine months ended March 31, 2021, we granted a total of $1.5 million in deferred cash awards to members of our Board of Directors and certain key members of our management team.

No deferred cash awards were forfeited during the three months ended March 31, 2022. Awards totaling $191,000 were forfeited during the nine months ended March 31, 2022. No awards were forfeited during the three and nine months ended March 31, 2021. Each deferred cash award we have granted to date provides for three equal cash payments to the applicable Participant to be paid on the one year, two year, and three year anniversaries of the date of the grant of such Awards, (the “Award Date”); provided on the date of each payment (the “Payment Date”), the Participant has been since 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 are to be made in connection with the Award.

Fair Value Measurement, Policy [Policy Text Block]

Fair Value of Financial Instruments

Except for cash and cash equivalents, as of March 31, 2022, and June 30, 2021, we did not have any financial assets or liabilities classified as Level 1. We classify derivative forward exchange and interest rate swap contracts as Level 2 assets and liabilities. The fair values were determined by obtaining pricing from our bank and corroborating those values with a third party bank or pricing service.

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

	March 31, 2022		June 30, 2021
Euro Forward Contract– Current Assets	$	2,419	$	—
Swiss Franc Forward Contract – Current Assets		26		—
Total Derivative Contracts – Current Assets		2,445		—
Interest Swap – Other noncurrent Assets		358		—
Euro Forward Contract– Other noncurrent Assets		365		—
Total Derivative Contracts – Other noncurrent Assets		723		—
Euro Forward Contract–Current Liabilities		—		(630	)
Swiss Franc Forward Contract – Current Liabilities		—		(184	)
Total Derivative Contracts – Current Liabilities		—		(814	)
Euro Forward Contract – Noncurrent Liabilities		—		(4	)
Fair Value Net Asset (Liability) – all Derivative Contracts	$	3,168	$	(818	)

We also classify any outstanding line of credit and term loan balance as a Level 2 liability, as the fair value is based on inputs that can be derived from information available in publicly quoted markets. As of March 31, 2022, and June 30, 2021, we did not have any financial assets or liabilities classified as Level 3. We did not transfer any assets or liabilities between these levels during fiscal 2021 or the nine months ended March 31, 2022. 

Reclassification, Comparability Adjustment [Policy Text Block]

Reclassification of Prior Year Presentation

Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on the reported results of operations. 

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Note A - Basis of Presentation and Summary of Significant Accounting Policies (Tables)

9 Months Ended

Mar. 31, 2022

Notes Tables

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

	Three Months Ended				Nine Months Ended
	March 31,				March 31,
	2022		2021		2022		2021
Numerator
Net income	$	2,504	$	1,916	$	7,607	$	7,806
Denominator
Basic weighted average common shares outstanding		6,003		6,201		6,168		6,296
Dilutive effect of stock options and restricted stock		38		126		48		105
Diluted weighted average common shares outstanding		6,041		6,327		6,216		6,401
Basic net income per common share	$	0.42	$	0.31	$	1.23	$	1.24
Diluted net income per common share	$	0.41	$	0.30	$	1.22	$	1.22

Fair Value, by Balance Sheet Grouping [Table Text Block]

	March 31, 2022		June 30, 2021
Euro Forward Contract– Current Assets	$	2,419	$	—
Swiss Franc Forward Contract – Current Assets		26		—
Total Derivative Contracts – Current Assets		2,445		—
Interest Swap – Other noncurrent Assets		358		—
Euro Forward Contract– Other noncurrent Assets		365		—
Total Derivative Contracts – Other noncurrent Assets		723		—
Euro Forward Contract–Current Liabilities		—		(630	)
Swiss Franc Forward Contract – Current Liabilities		—		(184	)
Total Derivative Contracts – Current Liabilities		—		(814	)
Euro Forward Contract – Noncurrent Liabilities		—		(4	)
Fair Value Net Asset (Liability) – all Derivative Contracts	$	3,168	$	(818	)

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Note B - Inventories, Net (Tables)

9 Months Ended

Mar. 31, 2022

Notes Tables

Schedule of Inventory, Current [Table Text Block]

	March 31, 2022			June 30, 2021
Raw materials	$	28,584		$	20,530
Work in progress		4,987			3,765
Finished goods		3,748			3,056
Reserve		(519	)		(345	)
	$	36,800		$	27,006

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Note C - Property and Equipment (Tables)

9 Months Ended

Mar. 31, 2022

Notes Tables

Property, Plant and Equipment [Table Text Block]

	Depreciable Life In Years			March 31, 2022			June 30, 2021
Land	NA			$	7,645		$	1,200
Building and building improvements	7	–	39		15,427			3,757
Machinery and equipment	3	–	12		37,522			35,458
Office equipment and furniture	3	–	5		5,906			5,712
Vehicles		3			211			255
Leasehold improvements	1	–	15		21,277			20,236
Total property and equipment					87,988			66,618
Less: accumulated depreciation and amortization					(47,588	)		(44,347	)
Property and equipment, net				$	40,400		$	22,271

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Note D - Other Comprehensive Income (Loss) (Tables)

9 Months Ended

Mar. 31, 2022

Notes Tables

Schedule of Accumulated Other Comprehensive Income (Loss) [Table Text Block]

	Three Months Ended
	March 31, 2022
	Defined			Unrealized Gains			Unrealized Gains
	Benefit			(Losses) on			(Losses) on
	Pension			Cash Flow			Swap
	Plan			Hedges			Derivative			Total
Beginning Balance	$	(538	)	$	1,200			62		$	724
OCI/OCL before reclassifications		—			1,064			299			1,363
Amounts reclassified from OCI to Sales		—			(685	)		—			(685	)
Tax effect of OCI activity		—			(120	)		(84	)		(204	)
Net current period OCI/OCL		—			259			215			474
Ending Balance	$	(538	)	$	1,459			277			1,198

	Nine Months Ended
	March 31, 2022
	Defined			Unrealized Gains			Unrealized Gains
	Benefit			(Losses) on			(Losses) on
	Pension			Cash Flow			Swap
	Plan			Hedges			Derivative			Total
Beginning Balance	$	(538	)	$	(23	)		—		$	(561	)
OCI/OCL before reclassifications		—			3,308			361			3,669
Amounts reclassified from OCI to Sales		—			(1,335	)		—			(1,335	)
Tax effect of OCI activity		—			(491	)		(84	)		(575	)
Net current period OCI/OCL		—			1,482			277			1,759
Ending Balance	$	(538	)	$	1,459			277			1,198

	Three Months Ended
	March 31, 2021
	Defined			Unrealized Gains			Unrealized Gains
	Benefit			(Losses) on			(Losses) on
	Pension			Cash Flow			Swap
	Plan			Hedges			Derivative		Total
Beginning Balance	$	(888	)	$	(2,269	)		—	$	(3,157	)
OCI/OCL before reclassifications		—			1,639			—		1,639
Amounts reclassified from OCI to Sales		—			868			—		868
Tax effect of OCI activity		—			(582	)		—		(582	)
Net current period OCI/OCL		—			1,925			—		1,925
Ending Balance	$	(888	)	$	(344	)		—		(1,232	)

	Nine Months Ended
	March 31, 2021
	Defined			Unrealized Gains			Unrealized Gains
	Benefit			(Losses) on			(Losses) on
	Pension			Cash Flow			Swap
	Plan			Hedges			Derivative		Total
Beginning Balance	$	(888	)	$	(295	)		—	$	(1,183	)
OCI/OCL before reclassifications		—			(2,274	)		—		(2,274	)
Amounts reclassified from OCI to Sales		—			2,209			—		2,209
Tax effect of OCI activity		—			16			—		16
Net current period OCI/OCL		—			(49	)		—		(49	)
Ending Balance	$	(888	)	$	(344	)		—		(1,232	)

XML

Note E - Leases (Tables)

9 Months Ended

Mar. 31, 2022

Notes Tables

Lease, Cost [Table Text Block]

Supplemental Cash Flows Information	Nine Months Ended March 31, 2022		Nine Months Ended March 31, 2021
Cash paid for amounts included in the measurement of operating lease liabilities	$	2,495	$	2,467
Operating lease liabilities arising from obtaining Right of Use Assets for new leases		182		187

XML

Note G - Economic Dependency (Tables)

9 Months Ended

Mar. 31, 2022

Supplier Concentration Risk [Member]

Notes Tables

Schedules of Concentration of Risk, by Risk Factor [Table Text Block]

	Three Months Ended March 31,				Nine Months Ended March 31,
	2022		2021		2022		2021
Supplier 1	$	2,946		5,978	$	10,800		15,765
	$	2,946		5,978	$	10,800		15,765

Customer Concentration Risk [Member]

Notes Tables

Schedules of Concentration of Risk, by Risk Factor [Table Text Block]

	Three Months Ended March 31,				Nine Months Ended March 31,
	2022		2021		2022		2021
Customer 1	$	13,846	$	23,215	$	40,110	$	72,001
Customer 2		6,773	(a)			22,761		16,288
Customer 3		10,673	(a)			19,795	(a)
Customer 4	(a)			5,811	(a)		(a)
	$	31,292	$	29,026	$	82,666	$	88,289

XML

Note H - Segment Information (Tables)

9 Months Ended

Mar. 31, 2022

Notes Tables

Schedule of Segment Reporting Information, by Segment [Table Text Block]

	Three Months Ended March 31,				Nine Months Ended March 31,
	2022		2021		2022		2021
Net Sales
Private label contract manufacturing	$	37,623	$	42,196	$	104,894	$	124,569
Patent and trademark licensing		4,750		4,124		13,546		9,560
Total Net Sales	$	42,373	$	46,320	$	118,440	$	134,129

	Three Months Ended March 31,						Nine Months Ended March 31,
	2022			2021			2022			2021
Income from Operations
Private label contract manufacturing	$	3,605		$	3,241		$	10,065		$	13,511
Patent and trademark licensing		1,813			1,541			6,206			2,740
Income from operations of reportable segments		5,418			4,782			16,271			16,251
Corporate expenses not allocated to segments		(2,144	)		(2,082	)		(6,368	)		(6,074	)
Total Income from Operations	$	3,274		$	2,700		$	9,903		$	10,177

Reconciliation of Assets from Segment to Consolidated [Table Text Block]

	March 31, 2022		June 30, 2021
Total Assets
Private-label contract manufacturing	$	105,552	$	95,324
Patent and trademark licensing		29,936		24,957
	$	135,488	$	120,281

Revenue from External Customers by Geographic Areas [Table Text Block]

	Three Months Ended March 31,				Nine Months Ended March 31,
	2022		2021		2022		2021
United States	$	29,382	$	27,674	$	78,279	$	70,534
Markets outside of the United States		12,991		18,646		40,161		63,595
Total	$	42,373	$	46,320	$	118,440	$	134,129

Long-Lived Assets by Geographic Areas [Table Text Block]

	March 31, 2022		June 30, 2021
United States	$	39,729	$	21,109
Europe		14,720		17,039
Total Long-Lived Assets	$	54,449	$	38,148

Assets by Geographic Areas [Table Text Block]

	March 31, 2022		June 30, 2021
United States	$	81,917	$	67,307
Europe		53,571		52,974
Total Assets	$	135,488	$	120,281

Capital Expenditures by Geographic Areas [Table Text Block]

	Nine Months Ended March 31,
	2022		2021
United States	$	20,766	$	1,788
Europe		702		2,463
Total Capital Expenditures	$	21,468	$	4,251

XML

Note J - Treasury Stock (Tables)

9 Months Ended

Mar. 31, 2022

Notes Tables

Class of Treasury Stock [Table Text Block]

	Shares		Average Cost		Total Cost (in thousands)
Shares purchased under Repurchase Plan		179,810	$	12.62	$	2,269
Shares acquired in connection with stock option exercises		—		—		—
Shares acquired from employees for restricted stock vesting		27,161		11.00		299
Total		206,971			$	2,568

	Shares		Average Cost		Total Cost (in thousands)
Shares purchased under Repurchase Plan		369,512	$	12.98	$	4,797
Shares acquired in connection with stock option exercises		—		—		—
Shares acquired from employees for restricted stock vesting		27,853		11.08		308
Total		397,365			$	5,105

	Shares		Average Cost		Total Cost (in thousands)
Shares purchased under Repurchase Plan		5,751	$	10.60	$	61
Shares acquired from employees for restricted stock vesting		38,381		15.05		578
Total		44,132			$	639

	Shares		Average Cost		Total Cost (in thousands)
Shares purchased under Repurchase Plan		385,822	$	8.28	$	3,197
Shares acquired in connection with stock option exercises		30,442		9.95		303
Shares acquired from employees for restricted stock vesting		46,817		13.66		640
Total		463,081			$	4,140

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Note A - Basis of Presentation and Summary of Significant Accounting Policies (Details Textual) - USD ($)	3 Months Ended		9 Months Ended
	Mar. 31, 2022	Mar. 31, 2021	Mar. 31, 2022	Mar. 31, 2021	Dec. 31, 2020
Contract with Customer, Refund Liability, Total	$ 0		$ 0
Sales, Royalty and Licensing Revenue	4,800,000	$ 4,100,000	13,500,000	$ 9,600,000
Royalty Expense	$ 200,000	$ 200,000	$ 600,000	$ 400,000
Share-Based Compensation Arrangement by Share-Based Payment Award, Options, Grants in Period, Gross (in shares)	0	0	0	0
Share-Based Compensation Arrangement by Share-Based Payment Award, Options, Exercises in Period (in shares)	0	10,000	0	110,000
Share-Based Compensation Arrangement by Share-Based Payment Award, Options, Forfeitures in Period (in shares)	0	0	0	0
Share-Based Compensation Arrangement by Share-Based Payment Award, Shares Issued in Period (in shares)		7,833		38,325
Share-Based Compensation Arrangement by Share-Based Payment Award, Options, Outstanding, Number, Ending Balance (in shares)	0		0
Deferred Compensation Arrangement with Individual, Cash Award Forfeited, Amount	$ 0	$ 0	$ 191,000	$ 0
Deferred Compensation Arrangement with Individual, Cash Award Granted, Amount	$ 300,000	$ 1,500,000	$ 300,000	$ 1,500,000	$ 500,000
Restricted Stock [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award, Equity Instruments Other than Options, Grants in Period (in shares)	126,850	91,773	126,850	91,773
Share-Based Compensation Arrangement by Share-Based Payment Award, Equity Instruments Other than Options, Forfeited in Period (in shares)	1,400		19,832
Juice Plus + [Member]
Sales Discounts, Cash	$ 300,000	$ 400,000	$ 1,000,000.0	$ 1,200,000
Restricted Stock 1 [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount (in shares)	126,850	91,773	126,850	69,477
Share-Based Payment Arrangement, Option [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount (in shares)	0	0	0	30,000

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Note A - Basis of Presentation and Summary of Significant Accounting Policies - Calculation of Basic and Diluted Net Income Per Common Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		9 Months Ended
	Mar. 31, 2022	Mar. 31, 2021	Mar. 31, 2022	Mar. 31, 2021
Numerator
Net income	$ 2,504	$ 1,916	$ 7,607	$ 7,806
Denominator
Basic weighted average common shares outstanding (in shares)	6,003,036	6,200,712	6,167,539	6,296,408
Dilutive effect of stock options and restricted stock (in shares)	38,000	126,000	48,000	105,000
Diluted weighted average common shares outstanding (in shares)	6,041,424	6,326,777	6,216,422	6,401,021
Basic net income per common share (in dollars per share)	$ 0.42	$ 0.31	$ 1.23	$ 1.24
Diluted net income per common share (in dollars per share)	$ 0.41	$ 0.30	$ 1.22	$ 1.22

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Note A - Basis of Presentation and Summary of Significant Accounting Policies - Fair Value of Derivative Instruments Classified As Level 2 Assets and Liabilities (Details) - USD ($) $ in Thousands	Mar. 31, 2022	Jun. 30, 2021
Derivative assets, current asset	$ 2,445	$ 0
Derivative assets, current liability	0	(814)
Derivative assets, noncurrent liability	0	(4)
Fair Value, Inputs, Level 2 [Member]
Derivative assets, current asset	2,445	0
Derivative assets, noncurrent asset	723	0
Derivative assets, current liability	0	(814)
Fair Value Net Asset (Liability) – all Derivative Contracts	3,168	(818)
Fair Value, Inputs, Level 2 [Member] | Euro Forward Contract [Member]
Derivative assets, current asset	2,419	0
Derivative assets, noncurrent asset	365	0
Derivative assets, current liability	0	(630)
Derivative assets, noncurrent liability	0	(4)
Fair Value, Inputs, Level 2 [Member] | Swiss Franc Forward Contract [Member]
Derivative assets, current asset	26	0
Derivative assets, current liability	0	(184)
Fair Value, Inputs, Level 2 [Member] | Interest Rate Swap [Member]
Derivative assets, noncurrent asset	$ 358	$ 0

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Note B - Inventories, Net - Summary of Inventories (Details) - USD ($) $ in Thousands	Mar. 31, 2022	Jun. 30, 2021
Raw materials	$ 28,584	$ 20,530
Work in progress	4,987	3,765
Finished goods	3,748	3,056
Reserve	(519)	(345)
Inventories, net	$ 36,800	$ 27,006

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Note C - Property and Equipment (Details Textual) $ in Thousands		9 Months Ended
	Aug. 20, 2021 USD ($) ft²	Mar. 31, 2022 USD ($)	Mar. 31, 2021 USD ($)
Payments to Acquire Property, Plant, and Equipment, Total		$ 21,468	$ 4,251
Manufacturing Facility and Warehouse [Member] | Carlsbad, California [Member]
Payments to Acquire Property, Plant, and Equipment, Total	$ 17,500
Area of Real Estate Property (Square Foot) | ft²	54,154

XML

Note C - Property and Equipment - Summary of Property and Equipment (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Jun. 30, 2021
Property and equipment, gross	$ 87,988	$ 66,618
Less: accumulated depreciation and amortization	(47,588)	(44,347)
Property and equipment, net	40,400	22,271
Land [Member]
Property and equipment, gross	7,645	1,200
Building and Building Improvements [Member]
Property and equipment, gross	$ 15,427	3,757
Building and Building Improvements [Member] | Minimum [Member]
Depreciable Life In Years (Year)	7 years
Building and Building Improvements [Member] | Maximum [Member]
Depreciable Life In Years (Year)	39 years
Machinery and Equipment [Member]
Property and equipment, gross	$ 37,522	35,458
Machinery and Equipment [Member] | Minimum [Member]
Depreciable Life In Years (Year)	3 years
Machinery and Equipment [Member] | Maximum [Member]
Depreciable Life In Years (Year)	12 years
Office Equipment [Member]
Property and equipment, gross	$ 5,906	5,712
Office Equipment [Member] | Minimum [Member]
Depreciable Life In Years (Year)	3 years
Office Equipment [Member] | Maximum [Member]
Depreciable Life In Years (Year)	5 years
Vehicles [Member]
Property and equipment, gross	$ 211	255
Depreciable Life In Years (Year)	3 years
Leasehold Improvements [Member]
Property and equipment, gross	$ 21,277	$ 20,236
Leasehold Improvements [Member] | Minimum [Member]
Depreciable Life In Years (Year)	1 year
Leasehold Improvements [Member] | Maximum [Member]
Depreciable Life In Years (Year)	15 years

XML

Note D - Other Comprehensive Income (Loss) - Other Comprehensive (Loss) Income (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Mar. 31, 2022	Mar. 31, 2021	Mar. 31, 2022	Mar. 31, 2021
Balance	$ 84,401	$ 72,488	$ 80,083	$ 71,375
Balance	85,077	76,024	85,077	76,024
Accumulated Defined Benefit Plans Adjustment Attributable to Parent [Member]
Balance	(538)	(888)	(538)	(888)
OCI/OCL before reclassifications	0	0	0	0
Amounts reclassified from OCI to Sales	0	0	0	0
Tax effect of OCI activity	0	0	0	0
Net current period OCI/OCL	0	0	0	0
Balance	(538)	(888)	(538)	(888)
Accumulated Gain (Loss), Net, Cash Flow Hedge, Parent [Member]
Balance	1,200	(2,269)	(23)	(295)
OCI/OCL before reclassifications	1,064	1,639	3,308	(2,274)
Amounts reclassified from OCI to Sales	(685)	868	(1,335)	2,209
Tax effect of OCI activity	(120)	(582)	(491)	16
Net current period OCI/OCL	259	1,925	1,482	(49)
Balance	1,459	(344)	1,459	(344)
Accumulated Gain (Loss), Net, Swap Derivative, Parent [Member]
Balance	62	0	0	0
OCI/OCL before reclassifications	299	0	361	0
Amounts reclassified from OCI to Sales	0	0	0	0
Tax effect of OCI activity	(84)	0	(84)	0
Net current period OCI/OCL	215	0	277	0
Balance	277	0	277	0
AOCI Attributable to Parent [Member]
Balance	724	(3,157)	(561)	(1,183)
OCI/OCL before reclassifications	1,363	1,639	3,669	(2,274)
Amounts reclassified from OCI to Sales	(685)	868	(1,335)	2,209
Tax effect of OCI activity	(204)	(582)	(575)	16
Net current period OCI/OCL	474	1,925	1,759	(49)
Balance	$ 1,198	$ (1,232)	$ 1,198	$ (1,232)

XML

Note E - Leases (Details Textual)	Mar. 31, 2022	Jun. 30, 2021
Operating Lease, Weighted Average Remaining Lease Term (Year)	5 years 8 months 12 days	6 years 3 months 18 days
Operating Lease, Weighted Average Discount Rate, Percent	3.24%	3.24%

XML

Note E - Leases - Lease Cash Flow Information (Details) - USD ($) $ in Thousands	9 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Cash paid for amounts included in the measurement of operating lease liabilities	$ 2,495	$ 2,467
Operating lease liabilities arising from obtaining Right of Use Assets for new leases	$ 182	$ 187

XML

Note F - Debt (Details Textual)			9 Months Ended
	Aug. 20, 2021 USD ($)	Aug. 18, 2021 USD ($)	Mar. 31, 2022 USD ($)	Mar. 31, 2021 USD ($)	Dec. 31, 2021 USD ($)	Jun. 30, 2021 USD ($)	May 24, 2021 USD ($)	Jan. 31, 2021 USD ($)
Payments to Acquire Property, Plant, and Equipment, Total			$ 21,468,000	$ 4,251,000
Interest Rate Swap [Member]
Derivative, Fixed Interest Rate		2.40%
Manufacturing Facility and Warehouse [Member] | Carlsbad, California [Member]
Payments to Acquire Property, Plant, and Equipment, Total	$ 17,500,000
Wells Fargo Bank, N.A. [Member]
Debt Instrument, Covenant, Annual Limit To Repurchase Stock or Issue Dividends					$ 5,000,000.0			$ 7,000,000.0
Wells Fargo Bank, N.A. [Member] | Credit Agreement [Member]
Line of Credit Facility, Maximum Borrowing Capacity							$ 20,000,000.0
Debt Instrument Covenant Capital Expenditures Limitation, Amount, Next Twelve Years		$ 15,000,000.0				$ 10,000,000.0
Debt Instrument Covenant Minimum, Net Income Required		$ 1.00
Debt Instrument Covenant, Fixed Charge Coverage Ratio		1.25
Debt Instrument Covenant Capital Expenditures Limitation, Amount, After Twelve Years						$ 7,500,000
Long-term Debt, Percentage Bearing Fluctuating Interest, Threshold Amount		$ 100,000
Minimum Prepayment Amount Under Line of Credit		$ 100,000
Line of Credit Facility, Commitment Fee Percentage		0.125%
Line of Credit Facility, Remaining Borrowing Capacity			20,000,000.0
Wells Fargo Bank, N.A. [Member] | Credit Agreement [Member] | Secured Overnight Financing Rate (SOFR) Overnight Index Swap Rate [Member]
Debt Instrument, Basis Spread on Variable Rate		1.29%
Debt Instrument Basis Spread on Elected Fixed Rate Borrowing		1.29%
Wells Fargo Bank, N.A. [Member] | Credit Agreement [Member] | Maximum [Member]
Ratio of Indebtedness to Net Capital		1.50
Ratio of Total Current Assets to Total Current Liabilities		1.75
Wells Fargo Bank, N.A. [Member] | Credit Agreement [Member] | Term Loan [Member]
Debt Instrument, Face Amount		$ 10,000,000.0
Debt Instrument, Term (Year)		7 years
Debt Instrument, Amortization Period (Year)		25 years
Long-Term Debt, Total			$ 9,800,000
Wells Fargo Bank, N.A. [Member] | Credit Agreement [Member] | Term Loan [Member] | Secured Overnight Financing Rate (SOFR) Overnight Index Swap Rate [Member]
Debt Instrument, Basis Spread on Variable Rate		1.80%

XML

Note G - Economic Dependency (Details Textual) $ in Millions	3 Months Ended	12 Months Ended
	Mar. 31, 2022	Jun. 30, 2021 USD ($)
Kaged Muscle LLC [Member]
Accounts Receivable, after Allowance for Credit Loss, Total		$ 3.4
Customer Concentration Risk [Member] | Accounts Receivable [Member]
Number of Major Customers	2	2
Customer Concentration Risk [Member] | Accounts Receivable [Member] | Two Largest Customers [Member]
Concentration Risk, Percentage	51.70%	64.80%
Product Concentration Risk [Member] | Revenue Benchmark [Member] | Beta-alanine Raw Material [Member]
Concentration Risk, Percentage	14.10%	8.60%

XML

Note G - Economic Dependency - Substantial Net Sales to Certain Customers (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Mar. 31, 2022	Mar. 31, 2021	Mar. 31, 2022	Mar. 31, 2021
Net sales	$ 42,373	$ 46,320	$ 118,440	$ 134,129
Customer Concentration Risk [Member] | Revenue Benchmark [Member]
Net sales	31,292	29,026	82,666	88,289
Customer Concentration Risk [Member] | Revenue Benchmark [Member] | Customer 1 [Member]
Net sales	13,846	23,215	40,110	72,001
Customer Concentration Risk [Member] | Revenue Benchmark [Member] | Customer 2 [Member]
Net sales	6,773		22,761	$ 16,288
Customer Concentration Risk [Member] | Revenue Benchmark [Member] | Customer 3 [Member]
Net sales	$ 10,673		$ 19,795
Customer Concentration Risk [Member] | Revenue Benchmark [Member] | Customer 4 [Member]
Net sales		$ 5,811

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Note G - Economic Dependency - Substantial Net Purchase From Certain Suppliers (Details) - Supplier Concentration Risk [Member] - Raw Material Purchases [Member] - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Mar. 31, 2022	Mar. 31, 2021	Mar. 31, 2022	Mar. 31, 2021
Raw Material Purchases by Supplier	$ 2,946	$ 5,978	$ 10,800	$ 15,765
Supplier 1 [Member]
Raw Material Purchases by Supplier	$ 2,946	$ 5,978	$ 10,800	$ 15,765

XML

Note H - Segment Information (Details Textual) $ in Thousands	3 Months Ended		9 Months Ended
	Mar. 31, 2022 USD ($)	Mar. 31, 2021 USD ($)	Mar. 31, 2022 USD ($)	Mar. 31, 2021 USD ($)
Number of Reportable Segments	2
Revenue from Contract with Customer, Including Assessed Tax	$ 42,373	$ 46,320	$ 118,440	$ 134,129
Non-US [Member]
Revenue from Contract with Customer, Including Assessed Tax	12,991	18,646	40,161	63,595
UNITED STATES
Revenue from Contract with Customer, Including Assessed Tax	29,382	27,674	78,279	70,534
Products Manufactured by NAIE [Member] | UNITED STATES
Revenue from Contract with Customer, Including Assessed Tax	$ 0	$ 0	$ 0	$ 0
Products Manufactured by NAIE [Member] | Revenue Benchmark [Member] | Product Concentration Risk [Member] | Non-US [Member]
Concentration Risk, Percentage	85.00%	65.00%	84.00%	79.00%

XML

Note H - Segment Information - Operating Results by Business Segment (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Mar. 31, 2022	Mar. 31, 2021	Mar. 31, 2022	Mar. 31, 2021
Net sales	$ 42,373	$ 46,320	$ 118,440	$ 134,129
Income from operations	3,274	2,700	9,903	10,177
Operating Segments [Member]
Income from operations	5,418	4,782	16,271	16,251
Corporate, Non-Segment [Member]
Income from operations	(2,144)	(2,082)	(6,368)	(6,074)
Private Label Contract Manufacturing [Member]
Net sales	37,623	42,196	104,894	124,569
Private Label Contract Manufacturing [Member] | Operating Segments [Member]
Income from operations	3,605	3,241	10,065	13,511
Patent and Trademark Licensing [Member]
Net sales	4,750	4,124	13,546	9,560
Patent and Trademark Licensing [Member] | Operating Segments [Member]
Income from operations	$ 1,813	$ 1,541	$ 6,206	$ 2,740

XML

Note H - Segment Information - Assets by Business Segment (Details) - USD ($) $ in Thousands	Mar. 31, 2022	Jun. 30, 2021
Assets	$ 135,488	$ 120,281
Private Label Contract Manufacturing [Member]
Assets	105,552	95,324
Patent and Trademark Licensing [Member]
Assets	$ 29,936	$ 24,957

XML

Note H - Segment Information - Net Sales by Geographic Region (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Mar. 31, 2022	Mar. 31, 2021	Mar. 31, 2022	Mar. 31, 2021
Net sales	$ 42,373	$ 46,320	$ 118,440	$ 134,129
UNITED STATES
Net sales	29,382	27,674	78,279	70,534
Non-US [Member]
Net sales	$ 12,991	$ 18,646	$ 40,161	$ 63,595

XML

Note H - Segment Information - Long-lived Assets by Geographical Region (Details) - USD ($) $ in Thousands	Mar. 31, 2022	Jun. 30, 2021
Long-Lived Assets	$ 54,449	$ 38,148
UNITED STATES
Long-Lived Assets	39,729	21,109
Europe [Member]
Long-Lived Assets	$ 14,720	$ 17,039

XML

Note H - Segment Information - Total Assets by Geographical Region (Details) - USD ($) $ in Thousands	Mar. 31, 2022	Jun. 30, 2021
Total Assets	$ 135,488	$ 120,281
UNITED STATES
Total Assets	81,917	67,307
Europe [Member]
Total Assets	$ 53,571	$ 52,974

XML

Note H - Segment Information - Capital Expenditures by Geographical Region (Details) - USD ($) $ in Thousands	9 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Payments to Acquire Property, Plant, and Equipment, Total	$ 21,468	$ 4,251
UNITED STATES
Payments to Acquire Property, Plant, and Equipment, Total	20,766	1,788
Europe [Member]
Payments to Acquire Property, Plant, and Equipment, Total	$ 702	$ 2,463

XML

Note I - Income Taxes (Details Textual) - USD ($) $ in Thousands	3 Months Ended			6 Months Ended	9 Months Ended		12 Months Ended
	Mar. 31, 2022	Mar. 31, 2021	Sep. 30, 2020	Mar. 31, 2022	Mar. 31, 2022	Mar. 31, 2021	Jun. 30, 2021
Effective Income Tax Rate Reconciliation, Percent, Total	21.40%	19.30%			22.20%	10.50%
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent					21.00%		21.00%
Effective Income Tax Rate Reconciliation, Global Intangible Low-taxed Income, Amount			$ 400
Income Tax Benefit Cares Act						$ 300
Valuation Allowance, Deferred Tax Asset, Increase (Decrease), Amount	$ 0			$ 0

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Note J - Treasury Stock (Details Textual) - USD ($) $ in Millions	Jan. 14, 2022	Mar. 12, 2021	Sep. 19, 2020
Stock Repurchase Program, Additional Authorized Amount	$ 3	$ 3	$ 2
Stock Repurchase Program, Authorized Amount	$ 18	$ 15	$ 12

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Note J - Treasury Stock - Treasury Stock Repurchases (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		9 Months Ended
	Mar. 31, 2022	Mar. 31, 2021	Mar. 31, 2022	Mar. 31, 2021
Treasury Stock Acquired, Shares (in shares)	206,971	44,132	397,365	463,081
Treasury Stock Acquired, Average Cost (in dollars per share)
Treasury Stock Acquired, Total Cost	$ 2,568	$ 639	$ 5,105	$ 4,140
Stock Repurchase Plan [Member]
Treasury Stock Acquired, Shares (in shares)	179,810	5,751	369,512	385,822
Treasury Stock Acquired, Average Cost (in dollars per share)	$ 12.62	$ 10.60	$ 12.98	$ 8.28
Treasury Stock Acquired, Total Cost	$ 2,269	$ 61	$ 4,797	$ 3,197
Stock Repurchased in Connection with Stock Option Exercised [Member]
Treasury Stock Acquired, Average Cost (in dollars per share)	$ 0		$ 0	$ 9.95
Shares acquired in connection with stock option exercises, shares (in shares)	0		0	30,442
Shares acquired in connection with stock option exercises, cost	$ 0		$ 0	$ 303
Stock Repurchased from Employee for Restricted Stock Vesting [Member]
Treasury Stock Acquired, Shares (in shares)	27,161	38,381	27,853	46,817
Treasury Stock Acquired, Average Cost (in dollars per share)	$ 11.00	$ 15.05	$ 11.08	$ 13.66
Treasury Stock Acquired, Total Cost	$ 299	$ 578	$ 308	$ 640

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Note K - Derivatives and Hedging (Details Textual) € in Millions, SFr in Millions, $ in Millions	Aug. 18, 2021 USD ($)	Mar. 31, 2022 USD ($)	Mar. 31, 2022 EUR (€)	Mar. 31, 2022 CHF (SFr)
Accumulated Other Comprehensive Income (Loss) Cumulative Cash Flow Hedges, Gain (Loss)		$ 1.9
Deferred Tax Assets, Derivative Instruments		0.5
Wells Fargo Bank, N.A. [Member] | Credit Agreement [Member] | Secured Overnight Financing Rate (SOFR) Overnight Index Swap Rate [Member]
Debt Instrument, Basis Spread on Variable Rate	1.29%
Wells Fargo Bank, N.A. [Member] | Credit Agreement [Member] | Term Loan [Member]
Debt Instrument, Face Amount	$ 10.0
Wells Fargo Bank, N.A. [Member] | Credit Agreement [Member] | Term Loan [Member] | Secured Overnight Financing Rate (SOFR) Overnight Index Swap Rate [Member]
Debt Instrument, Basis Spread on Variable Rate	1.80%
Reclassification out of Accumulated Other Comprehensive Income [Member]
Foreign Currency Cash Flow Hedge Gain (Loss) to be Reclassified During Next 12 Months		1.6
Foreign Exchange Contract [Member] | Not Designated as Hedging Instrument [Member]
Derivative, Notional Amount		5.4		SFr 5
Foreign Exchange Contract [Member] | Cash Flow Hedging [Member]
Derivative, Notional Amount		$ 36.5	€ 43.7
Interest Rate Swap [Member]
Derivative, Fixed Interest Rate	2.40%

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Note M - Subsequent Events (Details Textual) - Foreign Exchange Contract [Member] - Designated as Hedging Instrument [Member] - Subsequent Event [Member] € in Millions	Apr. 22, 2022 EUR (€)
Derivative, Notional Amount	€ 6
Derivative, Average Forward Exchange Rate	1.11