10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended June 30, 2023

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from            to             .

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	Name of exchange on which registered
Common Stock, $0.01 par value per share	Nasdaq Global Market

Securities registered pursuant to Section 12(g) 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 if Natural Alternatives International, Inc. (NAI) is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act of 1933.   ☐  Yes    ☒  No

Indicate by check mark if NAI is not required to file reports pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934.   ☐  Yes    ☒  No

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 pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that NAI was required to submit such files).   ☒  Yes     ☐  No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of NAI’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.   ☐

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 the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.     ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

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

The aggregate market value of NAI’s common stock held by non-affiliates of NAI as of the last business day of NAI’s most recently completed second fiscal quarter (December 31, 2022) was approximately $50,460,000 (based on the closing sale price of $8.39 reported by Nasdaq on December 31, 2022).

As of September 19, 2023, 6,088,813 shares of NAI’s common stock were outstanding, net of 3,240,593 treasury shares.

DOCUMENTS INCORPORATED BY REFERENCE

Part III (Items 10, 11, 12, 13 and 14) of this Form 10-K incorporates by reference portions of NAI’s definitive proxy statement, to be filed on or before October 28, 2023, for its Annual Meeting of Stockholders to be held December 7, 2023.

TABLE OF CONTENTS

		Page
SPECIAL NOTE ABOUT FORWARD-LOOKING STATEMENTS		1
PART I
Item 1.	Business	2
Item 1A.	Risk Factors	9
Item 2.	Properties	17
Item 3.	Legal Proceedings	17
Item 4.	Mine Safety Disclosures	17
PART II
Item 5.	Market for Our Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	18
Item 6.	Selected Financial Data	18
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	22
Item 8.	Financial Statements and Supplementary Data	23
	Report of Independent Registered Public Accounting Firm (PCAOB ID 200)	23
	Consolidated Financial Statements	25
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	47
Item 9A.	Controls and Procedures	47
Item 9B.	Other Information	47
PART III
Item 10.	Directors, Executive Officers and Corporate Governance	47
Item 11.	Executive Compensation	47
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	47
Item 13.	Certain Relationships and Related Transactions, and Director Independence	47
Item 14.	Principal Accountant Fees and Services	47
PART IV
Item 15.	Exhibits and Financial Statement Schedules	48
SIGNATURES		50

(i)

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;

• 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;

• 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;

• our ability to negotiate a revision to our credit facility with Wells Fargo Bank or another financial institution;

• future customer orders and the timing thereof;

• 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;

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

• our ability to protect our intellectual property;

• future economic and political conditions;

• 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, including obtaining third party inspection certifications for our new manufacturing facility in Carlsbad, California, which began commercial production in April 2023;

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

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

• 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.

The forward-looking statements in this report speak only as of the date of this report and caution should be taken not to place undue reliance on any such forward-looking statements. Forward-looking statements are subject to certain 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 I and elsewhere in this report, as well as in other reports and documents we file with the United States Securities and Exchange Commission (SEC).

1

PART I

ITEM 1. BUSINESS

General

Our vision is to enrich the world through the best of nutrition.

We are a leading formulator, manufacturer and marketer of nutritional supplements. Our comprehensive strategic partnerships with our customers allow us to offer a wide range of innovative nutritional products and services to such customers including: scientific research, clinical studies, proprietary ingredients, customer-specific nutritional product formulation, product testing and evaluation, marketing management and support, packaging and delivery system design, regulatory review, and international product registration assistance.

As our primary business activity, we provide 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. We also own a patent estate related to the raw material ingredient known as beta-alanine, which is primarily commercialized through the direct sale of this raw material and supply agreements with third parties for the distribution and use of this raw material under our CarnoSyn® and SR CarnoSyn® trademarks. We also sell a branded version of our SR CarnoSyn® tablet product under a brand we created called SustainedRx® and a product named Perfect Synergy®. We have also recently introduced two new SR CarnoSyn® Wellness tablet products – Complete Vision Support and Complete Memory Support. These products are being offered both as business-to-business private label products and direct to the consumer through Amazon and our own direct to consumer website.

History

Originally founded in 1980, Natural Alternatives International, Inc. (NAI) reorganized as a Delaware corporation in 1989. Our principal executive offices are located at 1535 Faraday Ave, Carlsbad, CA 92008. Our primary U.S. manufacturing facility is located approximately three miles away in Vista, California. We also have another manufacturing and warehousing facility located approximately one mile away from our executive offices in Carlsbad, California. This is a new facility and became operational in April of 2023.

In January 1999, we formed our wholly owned subsidiary Natural Alternatives International Europe S.A. (NAIE), a Swiss corporation based in Manno, Switzerland. In September 1999, NAIE opened its manufacturing facility in Manno, Switzerland, which has grown over the ensuing years and currently possesses manufacturing capabilities in encapsulation, powders, tablets, finished goods packaging, quality control, laboratory testing, warehousing, distribution and administration.

In 1997, we licensed certain patent rights related to instant-release beta-alanine and have since expanded this patent estate by applying for and obtaining patents to include sustained-release beta-alanine. We sell these products under our trademarks CarnoSyn® and SR CarnoSyn®. As part of our business strategy, we have sought to commercialize our CarnoSyn® patent estate through contract manufacturing, royalty and license agreements. We directly sell CarnoSyn® and SR CarnoSyn® and license our related patent and trademark rights to others for use in or with their products.

Unless the context requires otherwise, all references in this report to the “Company,” “NAI,” “we,” “our,” and “us” refer to Natural Alternatives International, Inc. and, as applicable NAIE.

Overview of our Facilities and Operations

Our U.S.-based operations are located in Vista and Carlsbad, California and include manufacturing and distribution, sales and marketing, in-house formulation, laboratory, and other research and development services. Our Vista manufacturing facilities are certified by the Therapeutic Goods Administration (TGA) of Australia after its audit of our GMP’s. TGA evaluates new therapeutic products, prepares standards, develops testing methods and conducts testing programs to ensure that products are high in quality, safe and effective. TGA also conducts a range of assessment and monitoring activities including audits of the manufacturing practices of companies who export and sell products to Australia. TGA certification enables us to manufacture products for export into countries that have signed the Pharmaceutical Inspection Convention, which include most European countries as well as several Pacific Rim countries. TGA certifications are generally reviewed every eighteen to thirty six months. During August 2022, TGA completed an inspection of our Vista, California facility and quality systems for compliance with GMP, and issued a renewed GMP certification valid through August 12, 2025.

2

Our Vista, California facilities have also been awarded GMP registration annually since October 2002 by NSF International (NSF) through the NSF Dietary Supplements Certification Program and received “GMP for Sport” NSF Certified registration on February 16, 2009. GMP requirements are regulatory standards and guidelines setting forth necessary processes, procedures and documentation for manufacturers in an effort to assure the products produced by that manufacturer have the identity, strength, composition, quality and purity represented. The NSF Certified for Sport program focuses on minimizing the risk that a dietary supplement or sports nutrition product contains banned substances and was developed due to growing demand from athletes and coaches concerned about banned substances in sports supplements. The program focuses primarily on manufacturing and sourcing processes, while embedding preventative measures throughout. NAI’s participation in the program allows us to produce products bearing the NSF Sport logo.

Our Vista, California operations are also certified by Health Canada as compliant with the GMP requirements outlined in Part 3 of the Canadian Natural Health Products Regulations. Health Canada is the department of the Canadian government with responsibility for national public health. Health Canada has initiated work to modernize its regulatory system for food and health products. Health Canada plays an active role in ensuring access to safe and effective drugs and health products while giving high priority to public safety and strives to provide information needed to make good choices and informed decisions regarding one’s health. NAI was issued its initial certification by Health Canada in December 2011 and maintains renewal in compliance with the Natural and Non-prescription Health Products Directorate. This approval demonstrates another level of regulatory compliance by NAI, and may also ease the approval process for our customers who import products into Canada.

Our Vista, California facility is also certified as an Organic Processor and Handler by Natural Food Certifiers (NFC). This certification demonstrates our facility meets the USDA National Organic Program standards and allows our contract manufacturing and packaging services to include products labeled as Organic. The certification requires annual renewal and was last renewed in April 2023. We are registered with the State of California, Department of Public Health Food and Drug Branch as an organic processor. Additionally, we are certified by various Rabbinical and Halal authorities to produce Kosher and Halal certified products. These certifications guarantee the manufacturing facility and processes for, and the ingredients of, certified products have been reviewed and found to be in compliance with the strict dietary laws of the respective Jewish and Muslim communities.

In April 2021, NAI became the first company to meet new safety and benchmarking standards created by the Supplement Safety & Compliance Initiative (SSCI). The SSCI is an industry-driven initiative led by retailers to provide a harmonized benchmark to recognize various safety standards throughout the entire dietary supplement supply chain. Patterned after the Global Food Safety Initiative (GFSI), which has been very successful in implementation across the grocery marketplace and food retail sectors, the program is focused on improved traceability and identification protocols to provide maximum safety for end users. SSCI key objectives include creating effective global systems to ensure traceability, transparency, and quality in the supply chain; reducing risks by ensuring equivalence between safety management systems’ and driving global change through benchmarking of domestic and international quality standards. NAI’s SSCI certification was last renewed in July 2023.

In August 2021, NAI acquired a new manufacturing and warehouse facility in Carlsbad, California and retrofitted the facility to become a dedicated high volume powder blending and packaging facility while also providing additional raw material storage capacity. The state-of-the-art facility commenced full operations in April 2023. While we plan to temporarily close this facility in our second fiscal quarter, we are nonetheless currently evaluating which of the above referenced additional certifications will be advantageous for this new facility based on the types of products and customers we plan to service out of this facility. 

NAIE operates a manufacturing, warehousing, packaging and distribution facility in Manno, Switzerland. In January 2004, NAIE obtained a pharmaceutical license from the Swissmedic Authority of Bern, Switzerland to process pharmaceuticals for packaging, import, export and sale within Switzerland and other countries. In March 2007, following the expansion of NAIE’s manufacturing facilities to include powder filling capabilities, NAIE obtained an additional pharmaceutical license from the Swissmedic Authority certifying that NAIE’s expanded facilities conform to their GMPs. In January 2013, following an additional upgrade of NAIE’s manufacturing facilities to include the manufacture of pharmaceuticals, NAIE obtained an additional pharmaceutical approval from the Swissmedic Authority certifying that NAIE’s upgraded facilities conform to GMP. We believe these licenses and NAIE’s manufacturing capabilities help strengthen our relationships with existing customers and improve our ability to develop relationships with new customers. NAIE's last Swissmedic inspection was conducted in August 2022 and the renewed GMP compliance certification was issued in November 2022.

In March 2019, the Japanese Minister of Health, Labor, and Welfare approved beta-alanine for use in Japanese food products. We have partnered with Shimizu Chemical Corporation of Hiroshima Japan to provide exclusive distribution of our CarnoSyn® and SR CarnoSyn® beta-alanine in Japan.

3

Business Strategy

Our goals are to achieve long-term growth and profitability and to diversify our sales base. To accomplish these goals, we have sought, and intend to continue to seek, to do the following:

• leverage our state-of-the-art, new Carlsbad, California facility, and our other 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 in developing relationships with additional quality oriented customers;

• expand 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, introduction of private-label branded products, and license and royalty agreements while protecting our proprietary rights; and

• improve operational efficiencies and manage costs and business risks to improve profitability.

Overall, we believe there is an opportunity to enhance consumer confidence in the quality of our customer’s nutritional supplements and their adherence to label claims through education provided by direct sales and direct-to-consumer marketing programs. We believe our GMP and TGA certified manufacturing operations, science-based product formulations, peer-reviewed clinical studies and regulatory expertise collectively provide us with a sustainable competitive advantage and provide our customers with a high degree of confidence in the products we manufacture.

While today’s consumer may have access to a variety of information, we believe many consumers remain uneducated about nutrition and nutritional supplementation, uncertain about the relevance or reliability of the information available to them, or confused about conflicting claims or information. We believe this state of the market creates a significant opportunity for the direct sales marketing channel. The direct sales marketing channel has proved, and we believe will continue to prove, to be a highly effective method for marketing high-quality nutritional supplements because it allows associates or other individuals to educate consumers on the benefits of science-based nutritional supplements. Some of our largest customers operate in the direct sales marketing channel. Thus, the majority of our business has relied primarily on the effectiveness of our customers in this marketing channel.

We also believe there is significant opportunity with the commercialization of our patent estate through the introduction of CarnoSyn® and SR CarnoSyn® beta-alanine into additional markets and with the introduction of new beta-alanine product offerings. Currently, a majority of our sales of CarnoSyn® are to companies that operate in the sports nutrition channel and are focused on products containing the instant release form of beta-alanine. We believe there are several other markets and distribution channels that represent growth opportunities for the distribution of CarnoSyn® and SR CarnoSyn® beta-alanine. We believe SR CarnoSyn® is a superior delivery system of CarnoSyn® beta-alanine based on its sustained release profile that allows for increased daily dosing and improved muscle retention of carnosine. We believe SR CarnoSyn® beta-alanine is a vital component in the further commercialization of our patent estate outside of the sports nutrition channel. As part of this commercialization effort, we have recently introduced two new SR CarnoSyn® Wellness tablet products – Complete Vision Support and Complete Memory Support. These new offerings are condition-specific tablet products that include SR CarnoSyn® as the primary ingredient along with other science-backed ingredients that strengthen the claims and marketing around the product and are more recognizable to the consumer. These new products are being offered both as business-to-business private label products and direct to the consumer through Amazon and our own direct to consumer website. In addition, we are also working on several innovations that could lead to new patentable products for CarnoSyn® Brands in the future. Our patents related to instant release beta-alanine extend through 2026 and our patents for SR CarnoSyn® extend through 2036.

We believe our comprehensive approach to customer service is unique within our industry. We believe this comprehensive approach, together with our commitment to high quality, product development and manufacturing capabilities, will provide the means to implement our strategies and achieve our goals. There can be no assurance, however, that we will successfully implement any of our business strategies or that we will increase or diversify our sales, successfully commercialize our patent estate, or improve our overall financial results.

Products, Principal Markets and Methods of Distribution

Our primary business activity is to provide private-label contract manufacturing services to companies that market and distribute vitamins, minerals, herbs, and other nutritional supplements, as well as other health care products, to consumers both within and outside the U.S. Our private-label contract manufacturing customers include companies that market nutritional supplements through direct sales marketing channels, direct to consumer ecommerce channels, and retail stores. We manufacture products in a variety of forms, including capsules, tablets, chewable wafers, and powders to accommodate a variety of our customer’s preferences.

4

We provide strategic partnering services to our private-label contract manufacturing customers that include but are not limited to the following:

• customized product formulation;

• clinical study design and support;

• manufacturing;

• marketing support;

• international regulatory and label law compliance;

• international product registration; and

• packaging in multiple formats and labeling design.

We also seek to commercialize our patent and trademarks through the direct distribution and sale of CarnoSyn® and SR CarnoSyn®, new contract manufacturing opportunities, and various license, royalty, and similar arrangements.

For the last two fiscal years ended June 30, our net sales were derived from the following (in thousands):

	2023				2022
	$		%		$		%
Private-label Contract Manufacturing	$	145,294		94	$	154,798		91
Patent and Trademark Licensing		8,721		6		16,168		9
Total Net Sales	$	154,015		100	$	170,966		100

Research and Development

We are committed to quality research and development. We focus on the development of new science-based products and the improvement of existing products. We periodically test and validate products we manufacture to help ensure their stability, potency, efficacy and safety. We maintain quality control procedures to verify that products we manufacture comply with applicable specifications and standards established by the FDA and other regulatory agencies. We also both direct and participate in clinical research studies, often in collaboration with scientists and research institutions, to validate the benefits of an ingredient or a product and provide scientific support for product claims and marketing initiatives. We believe our commitment to research and development, as well as to our facilities and strategic alliances with our suppliers and customers, allow us to effectively identify, develop and market high-quality and innovative products.

As part of the services we provide to our private-label contract manufacturing customers, we may perform certain research and development activities related to the development or improvement of their products. Our customers are usually charged for our services but are often reimbursed for these costs if their products are ultimately commercialized and manufactured by NAI. Research and development costs, including costs associated with international regulatory compliance services we provide to our customers, are expensed as incurred.

Our research and development expenses for the fiscal year ended June 30, 2023 were $2.1 million, compared to $2.5 million for the fiscal year ended June 30, 2022.

Sources and Availability of Raw Materials

We use many raw materials in our operations including powders, excipients, empty capsules, and components for packaging and distributing our finished products. In addition, the commercialization of our beta-alanine patents and trademarks depends on the availability of the raw material beta-alanine. We conduct identity testing for all raw materials we purchase and, on a predetermined testing protocol basis we evaluate raw materials to ensure their quality, purity and potency before we use them in our or our customer’s products. We typically buy raw materials in bulk from qualified vendors located both within and outside the U.S.

Like many companies and industries, we experienced challenges within our supply chain as a result of the effects of the COVID-19 pandemic. In particular, we encountered difficulties related to the supply of raw materials and packaging components. These challenges were driven by, but were not limited to, increased demand for certain ingredients with a limited supply, our supplier’s inability to meet demand due to capacity constraints, and increased lead times associated with constrained transportation availability. While these impacts have lessened over the past year, there continues to be significant pricing pressures and supply chain challenges associated with various raw materials and packaging components and we continue to manage these circumstances by working closely with our customers and suppliers. Additionally, there still remains uncertainty related to existing and potentially increased tariffs. Throughout fiscal 2024, we expect upward pricing pressures for raw materials, packaging components, and other costs will continue as a result of limited supplies of various ingredients and the impact of inflationary factors, including higher labor and transportation costs, and the potential levy of tariffs on goods we import from overseas, including beta-alanine.

5

Customers

We have two private-label contract manufacturing customers that each individually represent more than 10% of our consolidated net sales. The loss of either of these customers could result in a significant negative impact to our financial position and results of operations. We continue to focus on obtaining new private-label contract manufacturing customers to reduce the risks associated with deriving a significant portion of our sales from a limited number of customers.

On August 16, 2023, we announced the temporary closure of our new high-speed powder processing facility in Carlsbad, California due to excess inventory on hand at one of our largest customers and their efforts to rebalance supply and demand. As a result of this temporary closure, sixty-day notice was provided to all employees who may be furloughed starting in early October 2023 as a result of this closure. We expect this facility will re-open and our prior level of operations will resume in this facility late in our third fiscal quarter of 2024, but there can be no assurance this customer will resolve its supply and demand issues in the timeframe expected or what level of business we will have with this customer if they purchase from us in the future. Closure of this plant will contribute to an anticipated net loss in the first half of fiscal 2024, net income for the second half, and an overall annual loss for fiscal 2024. If this customer is unable to resolve its inventory issues in this timeframe, or our sales forecast is not otherwise realized, we will likely experience a continuing material decrease in revenues during fiscal year 2024.

Competition

We compete with other manufacturers, distributors and marketers of vitamins, minerals, plant extracts, and other nutritional supplements both within and outside the U.S. The nutritional supplement industry is highly fragmented and competition for the sale of nutritional supplements comes from many sources. These products are sold primarily through retailers (drug store chains, supermarkets, and mass market discount retailers), ecommerce, health and natural food stores, and direct sales channels (network marketing and internet sales).

We believe private-label contract manufacturing competition in our industry is based on, among other things, customized services offered, product quality and safety, innovation, price and customer service. We believe we compete favorably with other companies because of our ability to provide comprehensive solutions for customers, our certified manufacturing operations, our commitment to quality and safety, and our research and development activities.

Our future competitive position for private-label contract manufacturing and patent and trademark licensing will likely depend on, but not be limited to, the following:

• growing acceptance of our products by new and current customers and by consumers;

• our ability to protect our proprietary rights in our patent estate and the continued validity of such patents;

• our ability to successfully expand our product offerings related to our patent and trademark estate;

• our ability to maintain adequate inventory levels to meet our customer’s demands;

• our ability to continue to manufacture high quality products at competitive prices;

• our ability to attract and retain qualified personnel;

• the effect of any future governmental regulations on our products and business;

• the results of, and publicity from, product safety and performance studies performed by governments and other research institutions;

• continued growth of the global nutrition industry; and

• our ability to respond to changes within the industry and consumer demand, financially and otherwise.

The nutritional supplement industry is highly competitive and we expect the level of competition to remain high over the near term. We do not have sufficient information to accurately estimate the total number or size of our competitors.

Government Regulation

Our business is subject to varying degrees of regulation by a number of government authorities in the U.S., including the FDA, the Federal Trade Commission (FTC), the Consumer Product Safety Commission, the U.S. Department of Agriculture, and the Environmental Protection Agency. Various state and local agencies in areas where we operate and in which our products are sold also regulate our business, such as the California Department of Health Services, Food and Drug Branch. The areas of our business regulated by both these and other authorities include, among others:

• product claims and advertising;

• product labels;

• product ingredients;

6

• how we manufacture, package, distribute, import, export, sell and store our products; and

• our classification as an essential business and our right to continue operations during government shutdowns.

The FDA, in particular, regulates the formulation, manufacturing, packaging, storage, labeling, promotion, distribution and sale of vitamins and other nutritional supplements in the U.S., while the FTC regulates marketing and advertising claims. Under FDA rules, companies that manufacture, package, label, distribute or hold nutritional supplements are required to meet certain GMP’s to ensure such products are of the quality specified and are properly packaged and labeled. We are committed to meeting or exceeding the standards set by the FDA and believe we are currently operating within the FDA mandated GMP.

The FDA also regulates the labeling and marketing of dietary supplements and nutritional products, including the following:

• the identification of dietary supplements or nutritional products and their nutrition and ingredient labeling;

• requirements related to the wording used for claims about nutrients, health claims, and statements of nutritional support;

• labeling requirements for dietary supplements or nutritional products for which “high potency” and “antioxidant” claims are made;

• notification procedures for statements on dietary supplements or nutritional products; and

• premarket notification procedures for new dietary ingredients in nutritional supplements.

The Dietary Supplement Health and Education Act of 1994 (DSHEA) revised the provisions of the Federal Food, Drug and Cosmetic Act concerning the composition and labeling of dietary supplements and re-defined dietary supplements to include vitamins, minerals, herbs, amino acids and other dietary substances. DSHEA generally provides a regulatory framework to help ensure safe, quality dietary supplements and the dissemination of accurate information about such products. The FDA is generally prohibited from regulating active ingredients in dietary supplements as drugs unless product claims about such supplements trigger regulatory status, such as claims that a product may heal, mitigate, cure or prevent an illness, disease or malady.

In December 2006, the Dietary Supplement and Nonprescription Drug Consumer Protection Act (the “2006 Act”) was passed, and further revised the provisions of the Federal Food, Drug and Cosmetic Act. Under the 2006 Act, manufacturers, packers or distributors whose name appears on the product label of a dietary supplement or nonprescription drug are required to include contact information on the product label for consumers to use in reporting adverse events associated with the product’s use and to notify the FDA of any serious adverse event report. Events reported to the FDA are not considered an admission from a company that its product caused or contributed to the reported event. We believe we are in compliance with the 2006 Act and we are committed to meeting or exceeding the requirements of the 2006 Act.

We are also subject to a variety of other regulations in the U.S., including those relating to health, safety, bioterrorism, taxes, labor, employment, import and export, the environment and intellectual property. All of these regulations require significant financial and operational resources to ensure compliance, and we cannot assure you we will always be in compliance despite our best efforts to do so or that being in compliance will not become prohibitively costly to our business.

Our operations outside the U.S. are similarly regulated by various agencies and entities in the countries in which we operate and in which our products are sold. The regulations of these countries may conflict with those in the U.S. and may vary from country to country. The sale of our products in certain European countries is subject to the rules and regulations of the European Union, which may be interpreted differently among the countries within the European Union. In other markets outside the U.S., we may be required to obtain approvals, licenses or certifications from a country’s Ministry of Health or comparable agency before we or our customers begin operations or the marketing of products in that country. Approvals or licenses may be conditioned on reformulation of our or our customer’s products for a particular market or may be unavailable for certain products or product ingredients. These regulations may limit our or our customer’s ability to enter, or continue to operate in certain markets outside the U.S. As with the costs of regulatory compliance in the U.S., foreign regulations require significant financial and operational resources to ensure compliance, and we cannot provide assurances we will always be in compliance despite our best efforts to do so or that being in compliance will not become prohibitively costly to our business. Our failure to maintain regulatory compliance within and outside the U.S. could impact our ability to sell our products and thus, adversely impact our financial position and results of operations.

7

Intellectual Property

Trademarks. We have developed and use trademarks in our business, particularly relating to corporate, brand and product names. We own 47 trademark registrations; including 11 registrations in the U.S. Eight of these U.S. registrations are incontestable. Federal registration of a trademark in the United States affords the owner nationwide exclusive trademark rights in the registered mark and the ability to prevent subsequent users from using the same or similar mark. However, to the extent any other business operator has acquired trademark rights in a mark by its consistent use of such mark in connection with similar goods or services in a particular geographic area, the nationwide rights conferred by federal registration can be subject to that user’s prior established non-statutory (“Common Law”) rights in that geographic area. In addition, rights in a registered mark are dependent upon the continued use of the mark in connection with the goods and/or services set forth in the registration.

We have 36 foreign trademark registrations covering 41 countries including registrations for CarnoSyn and SR CarnoSyn in Australia, Brazil, Canada, China, Hong Kong, Cuba, the European Union Intellectual Property Office, Israel, Japan, Mexico, New Zealand, Poland, and South Korea. Registrations have also been obtained for CarnoSyn® and the SR CarnoSyn® logos in Switzerland. We also claim common law ownership and protection of certain unregistered trademarks and service marks based upon our continued use of the marks under common law. In some countries, such as the United States, Common Law offers protection of a mark within the particular geographic area in which it is continually and deliberately used.

We believe our registered and unregistered trademarks constitute valuable assets, adding to the recognition of our products and services in the marketplace. These and other proprietary rights have been and will continue to be important in enabling us to compete; however, we cannot provide assurances our current or future trademark applications will be granted or our current trademarks or registrations will be maintained.

Trade Secrets. We own certain intellectual property, including trade secrets, which we seek to protect, in part, through confidentiality agreements with employees and other parties. We regard our proprietary technology, trade secrets, trademarks and similar intellectual property as critical to our success, and we rely on a combination of trade secrets, contract, patent, copyright and trademark law (including established but non-statutory law) to establish and protect the rights in our products and technology. The laws of certain foreign countries may not protect our intellectual property rights to the same extent as the laws of the U.S.

Patents and Patent Licenses. We currently own 11 U.S. patents and 9 corresponding non-U.S. patents registered in countries throughout North America, Europe and Asia. We also have pending applications in several countries. All of these patents and patent rights relate to the ingredient known as beta-alanine. Certain of these patents were assigned to NAI and we make certain ongoing royalty payments to the prior owners of the patents. The royalty payments and licenses are expected to continue until the expiration of the patents. We also sell beta-alanine and license our patent and trademark rights related to beta-alanine. Some of our patents extend as far as through 2036.

Licensing, royalties, raw material sales, and revenues we have received associated with the sale and licensing of beta-alanine under the CarnoSyn® and SR CarnoSyn® trade names were primarily related to the direct sale of the raw material beta-alanine and totaled $8.7 million in fiscal 2023. We incurred intellectual property litigation and patent compliance expenses of approximately $0.2 million during fiscal 2023 primarily in connection with our efforts to procure and protect our proprietary rights and patent estate. We expect to continue to incur these types of litigation and compliance expenses during fiscal 2024.

Employees

As of June 30, 2023, we employed 241 full-time employees in the U.S., 3 of whom held executive management positions. Of the remaining full-time employees, 46 were employed in research, laboratory and quality control, 14 in sales and marketing, and 178 in manufacturing and administration. From time to time we use temporary personnel to help us meet shorter-term operating requirements. These positions typically are in manufacturing and manufacturing support. As of June 30, 2023, we had no temporary personnel.

As of June 30, 2023, NAIE employed an additional 76 full-time employees and 4 temporary employees. Most of these positions were in the areas of manufacturing and manufacturing support.

Our employees are not represented by a collective bargaining agreement, and we have not experienced any work stoppages as a result of labor disputes. We believe our relationship with our employees is good. We cannot assure this will continue in the future.

Seasonality

In addition to general economic factors, we are impacted by seasonal factors and trends, such as major cultural events and vacation patterns. We manufacture and sell products to customers that operate in many different countries throughout the world and these seasonal factors vary by region. Although we believe the impact of seasonality on our consolidated results of operations is minimal, our quarterly results may vary significantly in the future due to the timing of private-label contract manufacturing and CarnoSyn® and SR CarnoSyn® beta-alanine raw material orders. We cannot provide assurances future revenue trends will follow historical patterns. The market price of our common stock may be adversely affected by these seasonal factors.

8

Financial Information about Our Business Segments and Geographic Areas

Our operations are comprised of two reportable segments:

• Private-label contract manufacturing, in which we primarily provide manufacturing services to companies that market and distribute nutritional supplements and other health care products.

• Royalty, licensing, and raw material sales associated with the sale and license of beta-alanine under our CarnoSyn® and SR CarnoSyn® trademarks.

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

For additional financial information, including financial information about our business segment and geographic areas, please see the consolidated financial statements and accompanying notes to the consolidated financial statements included under Item 8 of this report.

Our activities in markets outside the U.S. are subject to political, economic and other risks in the countries in which our products are sold and in which we operate. For more information about these and other risks, please see Item 1A in this report.

ITEM 1A. RISK FACTORS

When evaluating our business and future prospects, you should carefully review and consider the risks described below in conjunction with other information in this report and in other reports and documents we file with the SEC. The risks and uncertainties described below are not the only ones we face. Additional material risks and uncertainties, not presently known to us, or that we currently see as immaterial, may also occur or become material. If any of the following risks or any additional risks and uncertainties actually occur or become material, 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 our stockholders could lose all or a portion of the value of their investment in our common stock.

Risks Related to the Company’s Industry and Business

A significant or prolonged economic downturn, could have, and at certain times in the past has had, a material adverse effect on our results of operations.

Our results of operations are affected by the level of business activity of our customers and licensees, which in turn are affected by the level of consumer demand for their products. A significant or prolonged economic downturn may adversely affect the disposable income of many consumers and may lower demand for the products we produce for our private-label contract manufacturing customers and products sold or manufactured by others using our licensed patent rights. Any decline in economic conditions in the U.S. and the various foreign markets in which our customers operate could negatively impact our customers’ businesses and our operations. A significant decline in consumer demand and the level of business activity of our customers, even if only due in part to general economic conditions, could have a material adverse effect on our revenues and profit margins.

Risks related to global economic instability, including global supply chain issues, inflation and fuel and energy costs may affect the Company's business.

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 2023, 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, increased energy costs, 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.

This conflict has created market uncertainty and volatility recently and this global economic uncertainty has negatively affected many industries, including the dietary supplement industry. Global financial conditions remain subject to sudden and rapid destabilizations in response to economic shocks. A slowdown in the financial markets or other economic conditions including but not limited to global supply chain issues, inflation, fuel and energy costs, business conditions, lack of available credit, the state of the financial markets, interest rates and tax rates, may adversely affect our growth. Future economic shocks may be precipitated by a number of causes, including a continued rise in the price of oil and other commodities, the volatility of raw material prices, geopolitical instability, terrorism, pandemics, the devaluation and volatility of global stock markets and natural disasters. Any sudden or rapid destabilization of global economic conditions could impact our ability to obtain equity or debt financing in the future on terms favorable to us or at all. In such an event, our operations and financial condition could be adversely impacted.

9

Prices and availability of commodities consumed or used in connection with raw materials we purchase or the operation of our manufacturing facilities, such as natural gas, diesel, oil and electricity, also fluctuate, and these fluctuations affect the costs of operations. These fluctuations can be unpredictable, can occur over short periods of time and may have a material adverse impact on our operating costs or the timing and costs of various projects. Over the past several years, the United States, and many other countries, have experienced significant volatility related to inflationary factors. These factors have impacted all aspects of manufacturing operations, including increased costs of labor, utilities, materials, supplies, etc. While we continue to evaluate cost reduction opportunities, including working with both suppliers and customers, to attempt to mitigate the impact of these higher operational costs, there can be no assurance our efforts will result in a complete offset of such increases or when inflation will return to more reasonable levels.

Our industry is highly competitive and we may be unable to continue to compete effectively. Increased competition could adversely affect our financial condition.

The market for our products, and those of our customers, is highly competitive. Some of our competitors are larger than we are and have greater financial resources and broader name recognition than we do. Our competitors may be able to devote greater resources to research and development, marketing and other activities that could provide them with a competitive advantage. Our market has relatively low entry barriers and is highly sensitive to the introduction of new products that may rapidly capture significant market share. Our competitors may not stress the level of quality we provide and could manufacture with a lower level of quality at lower costs. Our competitors are largely private and not subject to the same disclosure requirements as a publicly traded company. If consumers do not perceive higher quality as worth a higher price, our revenue could suffer. Increased competition could result in price reductions, reduced profit margins or loss of market share, any of which could have a material adverse effect on our financial condition and results of operations. There can be no assurance we will be able to compete effectively in this intensely competitive environment.

Our business is subject to the effects of adverse publicity, which could negatively affect our sales and revenues.

Our business can be affected by adverse publicity or negative public perception about us, our competitors, our customers, our products, or our industry and competitors generally. Adverse publicity may include publicity about the nutritional supplements industry generally, the efficacy, safety and quality of nutritional supplements and other health care products or ingredients in general or our products or ingredients specifically, and regulatory investigations, regardless of whether these investigations involve us or the business practices or products of our competitors, or our customers. Any adverse publicity or negative public perception could have a material adverse effect on our business, financial condition and results of operations. Our business, financial condition and results of operations could be adversely affected if any of our products or any similar products distributed by other companies are alleged to be or are proved to be harmful to consumers or to have unanticipated and unwanted health consequences.

Risks Related to Operations, Manufacturing, and Technology

If we are unable to attract and retain qualified management personnel and key manufacturing personnel, our business may suffer.

Our executive officers and other management personnel along with key manufacturing positions are primarily responsible for managing our day-to-day operations. We believe our success depends largely on our ability to attract, retain and motivate highly qualified management and key manufacturing personnel. Competition for qualified individuals can be intense and has been increasing in recent years. We may not be able to hire additional qualified personnel in a timely manner or on terms that would not substantially increase our costs. Any inability to retain a skilled professional management team and manufacturing team could adversely affect our ability to successfully execute our business strategies and achieve our goals and objectives.

Our manufacturing and third party fulfillment activities are subject to certain risks.

We manufacture the majority of our products at our manufacturing facilities in California and Switzerland. As a result, we are dependent on the uninterrupted and efficient operation of these facilities. Our manufacturing operations, including those of our suppliers, are subject to power failures, blackouts, border shutdowns, telecommunications failures, computer viruses, cybersecurity vulnerabilities, human error, breakdown, failure or substandard performance of our facilities, our equipment, the improper installation or operation of equipment, terrorism, pandemics (including COVID-19), natural or other disasters, intentional acts of violence, and the need to comply with the requirements or directives of governmental agencies, including but not limited to the FDA. In addition, we may in the future determine to expand or relocate our facilities, which may result in slowdowns or delays in our operations. While we have implemented and regularly evaluate various emergency, contingency and disaster recovery plans and we maintain business interruption insurance, there can be no assurance the occurrence of these or any other operational problems at our facilities in California or Switzerland would not have a material adverse effect on our business, financial condition and results of operations. Furthermore, there can be no assurance our contingency plans will prove to be adequate or successful if needed or our insurance will continue to be available at a reasonable cost or, if available, will be adequate to cover any losses that we may incur from an interruption in our manufacturing and distribution operations. We recently opened a new warehouse and distribution facility in Carlsbad, California, and converted it into a dedicated high volume powder blending and packaging facility while also providing additional raw material storage capacity. There can be no assurance we will be successful in obtaining additional facility certifications that may be necessary to attract new customers or that we will obtain sufficient business through our on-going sales efforts to effectively utilize the facility and our investment therein. Directly as a result of one of our largest customers experiencing a sales decline and consequently retention of excess of inventory, we are currently planning to close our new high-speed powder processing facility in Carlsbad, California. While we anticipate the closure will be temporary this cannot be assured, we cannot currently predict all of the consequences from this plant closure, how long the closure will continue or the overall economic impact of it or other similar declines in product sales by our customers. Notwithstanding, we believe the closure will contribute to an anticipated net loss in the first half of fiscal 2024, net income in the second half and an overall net loss in fiscal 2024.

We outsource our beta-alanine fulfillment and distribution activities as well as certain manufacturing activities. The operation of the third party service provider’s facilities is subject to the interruption risk and other risks similar to those described above for our facilities and there can be no assurance these interruptions or any other operational problem at such third party’s facilities would not have a material adverse effect on our business, financial condition and results of operations.

10

The COVID-19 pandemic could have a material adverse effect on our operations and business. 

In March 2020, the World Health Organization declared the outbreak of the coronavirus known as Covid-19 a worldwide pandemic.  As of September 2023, although the U.S. government has declared an end to the pandemic, there are a limited number of approved vaccines or effective treatments for coronavirus and it is extremely difficult to predict the future impact of coronavirus.  In addition, the emergence of new strains of the virus that are resistant to current vaccines could also have an adverse impact on the Company’s business. While our facilities continued to operate amid the global COVID-19 pandemic, disruptions in supply chains have impacted our production and sales. These disruptions, though expected to be temporary, carry uncertainty about their duration, recurrence and impact. The extent of COVID-19's impact on our operational and financial performance depends on ongoing and future pandemic effects on customers, vendors, labor availability, and potential expanded restrictions. While we cannot predict the full scope of COVID-19's impact on our business, operations, liquidity, or capital resources, we believe our existing working capital and credit facility will sustain our operations. However, we cannot guarantee additional working capital will be available when needed, potentially affecting our financial condition and results.

If we or our private-label contract manufacturing customers expand into additional markets outside the U.S. or our or their sales in markets outside the U.S. increase, our business could become increasingly subject to political, economic, regulatory and other risks in those markets, which could adversely affect our business.

Our future growth may depend, in part, on our ability and the ability of our private-label contract manufacturing customers, to expand into additional markets outside the U.S. or to improve sales in markets outside the U.S. There can be no assurance we or such customers will be able to expand in existing markets outside the U.S. or enter new markets on a timely basis, or that new markets outside the U.S. will be profitable. There are significant regulatory and legal barriers in markets outside the U.S. that must be overcome to enter and operate in such markets. We will be subject to the burden of complying with a wide variety of national and local laws, including multiple and possibly overlapping and conflicting laws. We may also experience difficulties adapting to new cultures, business customs and legal systems. Our sales and operations outside the U.S. are subject to political, economic and social uncertainties including, among others:

• changes and limits in import and export controls;

• increases in custom duties and tariffs;

• changes in government regulations and laws;

• coordination of geographically separated locations;

• absence in some jurisdictions of effective laws to protect our intellectual property rights;

• changes in currency exchange rates;

• economic and political instability; and

• currency transfer and other restrictions and regulations that may limit our ability to sell certain products or repatriate profits to the U.S.

Any changes related to these and other factors could adversely affect our business, profitability and growth prospects. If we or our customers expand into additional markets outside the U.S. or improve sales in markets outside the U.S., these and other risks associated with operations outside the U.S. will likely increase.

The failure of our suppliers to supply quality materials in sufficient quantities, at a favorable price, and in a timely fashion could adversely affect the results of our operations.

We buy our raw materials from a limited number of suppliers. During fiscal 2023 and fiscal 2022, one of our suppliers represented more than 10% of our total raw material purchases. Additionally, we currently purchase all of our beta-alanine for our CarnoSyn® and SR CarnoSyn® business from a single manufacturer located in Japan. Any disruption in their ability to source materials for or produce the amounts of beta-alanine needed to meet our requirements could have an adverse effect on our business.

The loss of any of our other major suppliers or of any supplier who provides us materials that are hard to obtain elsewhere at the same quality could adversely affect our business operations. Although we believe we could establish alternate sources for most of our raw materials, any delay in locating and establishing relationships with other sources could result in shortages of products we manufacture from such raw materials, with a resulting loss of sales and customers. In certain situations, we may be required to alter our products or with our customer’s consent to substitute different materials from alternative sources.

A shortage of raw materials or an unexpected interruption of supply could also result in higher prices for those materials. We have experienced increases in various raw material costs, transportation costs and the cost of petroleum-based raw materials and packaging supplies used in our business. Increasing pricing pressures on raw materials and other products have continued throughout fiscal 2023 as a result of limited supplies of various ingredients, inflationary factors, including higher labor and transportation costs, and the impact of COVID-19. We expect these upward pressures to continue through fiscal 2024. Although we may be able to raise our prices in response to significant increases in the cost of raw materials, we may not be able to raise prices sufficiently or quickly enough to offset the negative effects such cost increases could have on our results of operations or financial condition.

11

There can be no assurance suppliers will provide the quality raw materials needed by us in the quantities requested or at a price we are willing to pay. Because we do not control the actual production of these raw materials, we are also subject to delays caused by interruption in production of materials including but not limited to those resulting from conditions outside of our control, such as pandemics, weather, transportation interruptions, labor shortages, strikes, terrorism, natural disasters, and other catastrophic events.

In addition, our efforts to maintain or increase sales of CarnoSyn® and SR CarnoSyn® are substantially dependent on the availability of the raw material beta-alanine and sales of beta-alanine or products incorporating beta-alanine. The availability of beta-alanine, and thus sales of such raw material and products using such material, could be negatively impacted by any shortages, interruptions and similar events described above, which could in turn adversely affect the amount of revenue and profit margin we earn from the sale of beta-alanine.

Risks Related to Customer Concentration

Because we derive a significant portion of our revenues from a limited number of customers, our revenues would be adversely affected by the loss of a major customer or a significant change in their business, personnel or the timing or amount of their sales to their customers and their orders from us.

We have in the past and expect to continue to derive a significant portion of our revenues from a relatively limited number of customers. During the fiscal year ended June 30, 2023, sales to our two largest customers were approximately 71% of our consolidated net sales. We cannot predict with any certainty if sales to these customers will increase or decrease in the future.

Although no other customers represented more than 10% of our consolidated net sales, the loss of one of our largest customers, or other major customers, a significant decline in sales to any of our largest customers, a significant change in their business model or personnel, or in their ability to make payments when due, could materially and adversely affect our financial condition and results of operations. The timing of our customers’ orders is impacted by, among other factors, their marketing programs, their customer demand, seasonality, their raw material suppliers we are sometimes required to use, their supply chain management, their entry into new markets and their new product introductions, all of which are outside of our control. All of these attributes have had and are expected to have a significant impact on our business in the future.

On August 16, 2023, we announced the temporary closure of our new high-speed powder processing facility in Carlsbad, California due to one of our largest customer’s efforts to rebalance supply and demand. We expect  normal operations will not resume in this facility until late in our third fiscal quarter of 2024. There can be no assurance our customer will resolve its supply and demand issues in the timeframe expected. If this customer is unable to resolve these issues in this timeframe, then we will likely experience a continuing material decrease in revenues during fiscal year 2024.

Our future growth and stability depends, in part, on our ability to diversify our sales. Our efforts to establish new sales from both existing customers and new customers could require significant initial investments, which may or may not result in higher overall sales and improved financial results.

Our business strategy depends in large part on our ability to develop new product sales from both current and new customer relationships. These activities often require a significant up-front investment including, among others, customized formulations, compliance with different regulatory schemes, product registrations, package design, product testing, pilot production runs, and the build-up of initial inventory. We may experience significant delays from the time we increase our operating expenses and make investments in inventory (and incur additional related carrying costs) until the time we generate net sales from new products or customers, and it is possible after incurring such expenditures we may not generate material revenue from new products or customers. If we incur significant expenses and investments in inventory that we are not able to recover, and we are not able to compensate for those expenses, our operating results would be adversely affected.

We currently derive significant revenues and income from sales of beta-alanine and from licensing our patents. Our ability to maintain or grow our sales of beta-alanine and license revenue from our other patents is contingent on our ability to continue to defend our patents, and commercialize the sale of beta-alanine under our instant release CarnoSyn® patents and trademark and our sustained release SR CarnoSyn® patents and trademark.

We own multiple patents and trademarks related to the use of beta-alanine in food and nutritional supplements. A majority of our revenue and income from this segment is currently derived from activity related to licensing our patents and other intellectual property associated with instant release beta-alanine, sold under our trade name CarnoSyn®. We have five patents for this version of CarnoSyn®, of which the latest expires in 2026. Our patent and trademark licensing revenue decreased from $16.2 million in fiscal 2022 to $8.7 million in fiscal 2023 in part due to a general slowdown in the Sports Nutrition sales channel in fiscal year 2023 while fiscal year 2022 benefited from a recovery of the sports nutrition industry after the reopening of gyms and athletic facilities and activities in accordance with easing COVID-19 guidelines for such activities. There is no assurance we will be successful maintaining our historical CarnoSyn® instant release beta-alanine sales levels or growing future sales volumes with our remaining CarnoSyn® instant release patent estate. If we are not successful it could have a material adverse effect on our business, results of operations, and financial condition.

We believe SR CarnoSyn® is a superior delivery system for CarnoSyn® beta-alanine based on its sustained release profile that allows for increased daily dosing and improved muscle retention of carnosine. Our patents related to SR CarnoSyn® extend through 2036 and we believe the introduction of SR CarnoSyn® beta-alanine is an important step in the further commercialization of our patent estate. There can be no assurance we will be successful in getting the market to accept this new form of beta-alanine or that we will be successful launching new products utilizing SR CarnoSyn® beta-alanine.

12

Risks Related to Regulations

Our products and manufacturing activities are subject to extensive government regulation, which could limit or prevent the sale of our products in some markets and could increase our costs.

The manufacturing, packaging, labeling, advertising, promotion, distribution, and sale of our products are subject to regulation by numerous national and local governmental agencies in the U.S. and in other countries. For example, we are required to comply with certain GMP’s and incur costs associated with the audit and certification of our facilities. Failure to comply with governmental regulations may result in, among other things, injunctions, product withdrawals, recalls, product seizures, fines, and criminal prosecutions. Any action of this type by a governmental agency could materially adversely affect our ability to successfully market our products and services. In addition, if such governmental agency has reason to believe the law is being violated (for example, if it believes we do not possess adequate substantiation for product claims), it can initiate an enforcement action. Governmental agency enforcement could result in orders requiring, among other things, limits on advertising, consumer redress, divestiture of assets, rescission of contracts, and such other relief as may be deemed necessary. Violation of these orders could result in substantial financial or other penalties. Any action by a governmental agency could materially adversely affect our ability and our customers’ ability to successfully market and continue selling the products involved.

Before commencing operations or marketing our products in markets outside the U.S., we are routinely required to obtain approvals, licenses, or certifications from a country’s ministry of health or comparable agency. Approvals or licensing may be conditioned on reformulation of products or even may be unavailable with respect to certain products or product ingredients. We must also comply with product labeling and packaging regulations that vary from country to country. Furthermore, the regulations of these countries may conflict with those in the U.S. and with each other. The sale of our products in certain European countries is subject to the rules and regulations of the European Union, which may be interpreted differently among the countries within the European Union. The cost of complying with these various and potentially conflicting regulations can be substantial and could adversely affect our results of operations.

During the recent COVID-19 pandemic, our operations were subject to additional laws and regulations imposed by federal, state, and local governments primarily related to the ability of our employees to come to work and the safety measures that need to be in place in order for our facilities to remain operational. While we already had robust quality standards and procedures, we have had to constantly monitor these new regulations and implement additional procedures where necessary, including at times temperature checks, additional cleaning procedures, allowing administrative personnel to work remotely, etc. Recurrence of pandemic related regulations, or new or expanded regulations, or the reinstatement of pandemic conditions, including any inability to continue qualifying as an essential business in the event of future government imposed lockdowns could adversely affect our results of operations.

We cannot predict the nature of any future laws, regulations, interpretations, or applications, nor can we determine what effect additional governmental regulations, when and if adopted, would have on our business. They could include new or revised requirements or restrictions related to the safe operation of our facilities due to the pandemic, or for the reformulation of certain products to meet new standards, the recall or discontinuance of certain products, additional compliance costs or record keeping requirements, expanded or different labeling, and additional scientific substantiation. Any or all of these requirements could have a material adverse effect on our operations.

Possible new tariffs on imported goods from China and elsewhere could adversely affect our business operations.

The United States has implemented increased tariffs on a wide range of goods and materials imported from China and other governments. These goods and materials may include products, applications, and ingredients we or our customers require for their products, including beta-alanine. Our ability to maintain or increase CarnoSyn® sales and licensing revenue depends on the availability of the raw material beta-alanine. China and other governments have responded to the implementation of tariffs by the United States by imposing their own tariffs on certain American products. Continuing or increased tariffs could have a material adverse effect on our customer’s businesses, the availability of beta-alanine, and the cost of other raw materials we use in our customer’s products. While it is difficult to predict whether or how existing and additional potential tariffs will be imposed, or how tariffs will impact our business, we believe the imposition of additional tariffs by the U.S. or other governments on products we or our customers offer for sale, or ingredients we use in the products we manufacture could adversely impact our offerings and our customers, and could have an adverse impact on the availability of raw materials we purchase including beta-alanine from Japan.

Such results could adversely impact our ability to license our patents and trademarks, our ability to sell beta-alanine, and our customers’ ability to compete in the marketplace, resulting in reduced demand for our products, and products we manufacture for our customers. Additional tariffs imposed by any government on beta-alanine could have an adverse impact on the price we have to pay for beta-alanine and the availability of beta-alanine. Any of these events could have a material adverse effect on our business and results of operations.

13

Risks Related to Litigation

We could be exposed to product liability claims or other litigation, which may be costly and could materially adversely affect our operations.

We could face financial liability due to product liability claims if the use of our products results in significant loss or injury. Additionally, the manufacture and sale of our products involves risk of injury to consumers from tampering by unauthorized third parties or product contamination. We could be exposed to future product liability claims that include, among others, assertions that: our products contain contaminants; we provide consumers with inadequate instructions about product use; or we provide inadequate warning about side effects or interactions of our products with other substances. Even if we were to prevail in any such claims, the cost of litigation and settlement could be significant.

We maintain product liability insurance coverage, including primary product liability and excess liability coverage. While we expect to be able to continue our product liability insurance, there can be no assurance we will in fact be able to continue such insurance coverage, or that such insurance coverage will be adequate to cover any liability we may incur, or that our insurance policies will continue to be available at a cost similar to our cost today, or even an economically reasonable cost.

Additionally, it is possible one or more of our insurers could exclude from our coverage certain ingredients used in our products. In such event, we may have to stop using those ingredients or rely on indemnification or similar arrangements with our customers who wish to continue to include those ingredients in their products. A substantial increase in our product liability risk or the loss of customers or product lines, or the failure of a customer to honor indemnification agreements could each have a material adverse effect on our results of operations and financial condition.

We may continue to incur significant costs in the course of creating and defending our intellectual property. We may be unable to protect our intellectual property rights or may inadvertently infringe on the intellectual property rights of others.

We possess and may possess in the future certain proprietary technology, trade secrets, trademarks, trade names, licenses, patents, and similar intellectual property. We may continue to incur significant patent and trademark litigation costs associated with creating and defending our intellectual property. During fiscal 2023, we incurred approximately $0.2 million in patent litigation and prosecution expense and expect these expenses to be between $0.1 million and $0.3 million during fiscal 2024. There is no assurance we will be able to create new intellectual property, protect our existing intellectual property adequately or that our intellectual property rights will be upheld. If as we have been in the past, we are again subject to legal proceedings seeking to invalidate our patent rights, such proceedings or the success of the efforts thereby could have a material adverse impact upon our financial condition and results of operations. Furthermore, the laws of certain foreign countries may not protect our intellectual property rights to the same extent as do the laws of the U.S. Additional litigation in the U.S. or abroad may be necessary to enforce our intellectual property rights, to determine the validity and scope of the proprietary rights of others or to defend against claims of infringement. Such litigation, even if ultimately determined in our favor, could result in substantial additional costs and diversion of resources and could have a material adverse effect on our business, results of operations and financial condition. If infringement claims are asserted against us, we may seek to obtain a license to use the claiming third party’s intellectual property rights. There can be no assurance such a license would be available at all or available on terms acceptable or favorable to us.

Risks Related to Insider Ownership and Corporate Structure

If certain provisions of our Certificate of Incorporation, Bylaws and Delaware law are triggered, the market for our shares may decrease.

Certain provisions in our Certificate of Incorporation, Bylaws and Delaware corporate law may discourage unsolicited proposals to acquire our business, even if such proposals would benefit our stockholders. Those provisions include one that authorizes our Board of Directors, without stockholder approval, to issue up to 500,000 shares of preferred stock having such rights, preferences, and privileges, including voting rights, as the Board of Directors designates. The rights of our common stockholders will be subject to, and may be adversely affected by, the rights of holders of any preferred stock that may be issued in the future. Any or all of these provisions could delay, deter or prevent a takeover of our company and could lower the price investors are willing to pay for our common stock and the number of investors willing to own our common stock.

Collectively, our officers and directors own a significant amount of our common stock, giving them influence over corporate transactions and other matters and potentially limiting the influence of other stockholders on important policy and management issues.

Our officers and directors, together with their families and affiliates, beneficially owned approximately 21% of our outstanding shares of common stock as of June 30, 2023. Approximately 16% of the outstanding shares of common stock are beneficially owned by Mark LeDoux, and his family and affiliates. Mr. LeDoux is our Chief Executive Officer and Chairman of the Board. As a result, our officers and directors, and in particular Mr. LeDoux, could influence such business matters as the election of directors and approval of significant corporate transactions.

14

Various transactions could be delayed, deferred, or prevented without the approval of stockholders, including the following:

• transactions resulting in a change in control;

• mergers and acquisitions;

• tender offers;

• election of directors; and

• proxy contests.

There can be no assurance that conflicts of interest will not arise with respect to the officers and directors who own shares of our common stock or that conflicts will be resolved in a manner favorable to us or our other stockholders.

Risks Related to Future Acquisitions

We may pursue acquisitions of other companies that, if not successful, could adversely affect our business, financial condition and results of operations.

We may pursue acquisitions of companies we believe could complement or expand our business, augment our market coverage, provide us with important relationships or otherwise offer us growth opportunities. Acquisitions involve numerous risks, including the following:

• potential difficulties related to integrating the products, personnel and operations of an acquired company;

• failure to operate efficiently as a combined organization utilizing common information and communication systems, operating procedures, financial controls and human resources practices;

• diverting management’s attention from other daily operations of the business;

• entering markets in which we have no or limited prior direct experience and where competitors in such markets have more experience and stronger market positions;

• potential loss of key employees of an acquired company;

• potential inability to achieve cost savings and other potential benefits expected from the acquisition;

• an uncertain sales and earnings stream from an acquired company; and

• potential impairment charges, which may be significant, against goodwill and purchased intangible assets acquired in an acquisition due to changes in conditions and circumstances that occur after the acquisition, many of which may be outside of our control.

There can be no assurance that acquisitions we may pursue will be successful. If we pursue an acquisition but are not successful in completing it, or if we complete an acquisition but are not successful in integrating an acquired company’s employees, products or operations successfully, our business, financial position or results of operations could be adversely affected.

General Risk Factors

We expect our operating results will vary. Fluctuations in our operating results may adversely affect the share price of our common stock.

Our net sales decreased during fiscal 2023 as compared to fiscal 2022, and there can be no assurance our net sales will improve in the near term, or we will earn a profit in any given year. We experienced a net profit in fiscal 2023 but may incur losses in the future. Our operating results may fluctuate from year to year and/or from quarter to quarter due to various factors including differences related to the timing of revenues and expenses for financial reporting purposes and other factors described in this report. At times, these fluctuations may be significant. We currently anticipate we will experience a net loss in the first half of fiscal 2024, net income in the second half and an overall net loss in fiscal 2024. Fluctuations in our operating results may adversely affect the share price of our common stock.

15

Our stock price could fluctuate significantly.

Stock prices in general can be volatile and ours is no different. The trading price of our stock may fluctuate in response to the following, as well as other, factors including but not limited to factors outside of our control:

• broad market fluctuations and general economic and/or political conditions;

• fluctuations in our financial results;

• relatively low trading volumes;

• future offerings of our common stock or other securities;

• the general condition of the nutritional supplement industry;

• increased competition;

• regulatory action;

• adverse publicity;

• manipulative or illegal trading practices by third parties; and

• our and our customers’ and suppliers’ products and other public announcements.

The market for our stock has historically experienced significant price and volume fluctuations. There can be no assurance that an active market in our stock will continue to exist or that the price of our common stock will not decline. Our future operating results may be below the expectations of securities analysts and investors. If this were to occur, the price of our common stock could decline, perhaps substantially.

From time to time our shares may be listed for trading on one or more foreign exchanges, with or without our prior knowledge or consent. Certain foreign exchanges may have less stringent listing requirements, rules and enforcement procedures than the Nasdaq Global Market or other markets in the U.S., which may increase the potential for manipulative trading practices to occur on such foreign exchanges. These practices, or the perception by investors that such practices could occur, may increase the volatility of our stock price or result in a decline in our stock price, which in some cases could be significant.

We may not be able to raise additional capital or obtain additional financing if needed.

It is possible our cash from operations could become insufficient to meet our working capital needs and/or to implement our business strategies. In such an event, there can be no assurance our existing line of credit would be sufficient to meet our working capital needs, if the line has any credit still available when needed. Furthermore, if we fail to maintain certain loan covenants, we may no longer have access to our credit line. Under the terms of our credit facility, there are limits on our ability to create, incur or assume additional indebtedness without the approval of our lender. Our credit line terminates in May 2025 and there is no guarantee we will be able to extend or renew this credit line on favorable terms or at all.

We may consider issuing additional debt or equity securities in the future to fund potential acquisitions or investments, to refinance existing debt, or for general corporate purposes. If we issue equity or convertible debt securities to raise additional funds, our existing stockholders may experience dilution, and the new equity or debt securities may have rights, preferences and privileges senior to those of our existing stockholders. If we incur additional debt, it may increase our leverage relative to our earnings or to our equity capitalization, requiring us to pay additional interest expenses and potentially lowering our credit ratings. At any given time, it could be difficult for us to raise capital due to a variety of factors, some of which may be outside of our control, including a tightening of credit markets, overall poor performance of stock markets, and/or an economic slowdown in the U.S. or other countries, or in the businesses of our customers. There is no assurance we would be able to market such security issuances on favorable terms, or at all, in which case, if we did not have any alternate funds we might not be able to develop or enhance our products, execute our business plan, take advantage of future opportunities, respond to competitive pressures or meet unanticipated customer requirements.

Our inability to raise additional capital or to obtain additional financing if needed could negatively affect our ability to implement our business strategies and meet our goals. This, in turn, could adversely affect our financial condition and results of operations.

16

ITEM 2. PROPERTIES

This table summarizes our facilities as of June 30, 2023. We believe our facilities are adequate to meet our operating requirements for the foreseeable future.

					Lease
		Square			Expiration
Location	Nature of Use	Feet		How Held	Date
Vista, CA USA(1),(2)	Manufacturing, warehousing, packaging and distribution		162,000	Leased	August 2034
Manno, Switzerland(3)	Manufacturing, warehousing, packaging and distribution		95,990	Leased	December 2032
Manno, Switzerland(4)	Warehousing		30,892	Leased	December 2024
Carlsbad, CA USA(5)	Corporate headquarters		20,981	Owned	N/A
Carlsbad, CA USA(6)	Powder filling, packaging, distribution and storage		67,453	Owned	N/A

(1) This facility is used by NAI for its private-label contract manufacturing segment.

(2) At this facility we use approximately 93,000 square feet for production, 60,000 square feet for warehousing and 9,000 square feet for administrative functions. In July 2023, NAI executed an extension to the lease covering this facility effective April 1, 2024 and extends the lease through August 31, 2034.

(3) This facility is used by NAIE in connection with our private-label contract manufacturing segment. In May 2022, NAIE executed an extension to the lease covering this facility that is effective January 1, 2023 and extends the lease through December 31, 2032.

(4) This facility is used by NAIE for additional warehouse storage.

(5) We purchased our Carlsbad, California corporate headquarters in March 2016.

(6) We acquired this facility in August 2021 and retrofitted it into a dedicated high-volume powder blending and packaging facility with supplementary raw material storage. This facility became operational in April 2023, however it is scheduled to be temporarily closed soon due to a current customer holding off on further purchases while absorbing excess inventory.

ITEM 3. 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 generally 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. 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 September 20, 2023, 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 any litigation matters or that litigation expenses will not be greater than anticipated.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

17

PART II

ITEM 5. MARKET FOR OUR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

Our common stock trades on the Nasdaq Global Market under the symbol “NAII.” Below are the high and low sales prices of our common stock as reported on the Nasdaq Global Market for each quarter of the fiscal years ended June 30, 2023 and 2022:

	Fiscal 2023				Fiscal 2022
	High		Low		High		Low
First Quarter	$	12.60	$	8.38	$	19.15	$	13.50
Second Quarter	$	9.84	$	7.04	$	14.47	$	12.49
Third Quarter	$	10.12	$	7.95	$	13.62	$	10.68
Fourth Quarter	$	9.44	$	6.97	$	11.73	$	8.91

Holders

As of September 19, 2023, there were 181 stockholders of record of our common stock. On that same date, the last sales price of our common stock as reported on NASDAQ was $6.36 per share.

Dividends

We have never paid a dividend on our common stock and we do not intend to pay a dividend in the foreseeable future. Our current policy is to retain all earnings to provide funds for operations and future growth. Additionally, under the terms of our credit facility, we are precluded from paying a dividend while such facility is in place without a waiver from our lender.

Recent Sales of Unregistered Securities

During the fiscal year ended June 30, 2023, we did not sell any unregistered securities.

Repurchases

During the quarter ended June 30, 2023, we did not repurchase any shares of our common stock.

Equity Compensation Plan Information

The following table sets forth information regarding outstanding options and shares reserved for future issuance under our existing equity compensation plans as of June 30, 2023:

					Number of
					Shares
					Remaining
					Available
			Weighted-		for Future
	Number of		Average		Issuance
	Shares		Exercise		Under Equity
	to be Issued		Price		Compensation
	Upon		of		Plans
	Exercise of		Outstanding		(Excluding
	Outstanding		Options,		Shares
	Options,		Warrants,		Reflected in
	Warrants,		and		Column
Plan Category	and Rights		Rights		(a))
	(a)		(b)		(c)
Equity compensation plans approved by stockholders		—	$	—		349,377
Equity compensation plans not approved by stockholders		N/A		N/A		N/A
Total		—	$	—		349,377

ITEM 6. SELECTED FINANCIAL DATA

As a smaller reporting company, we are not required to provide Item 6 disclosure in this Annual Report.

18

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

The following discussion and analysis is intended to help you understand our financial condition and results of operations as of June 30, 2023 and 2022 and for each of the last two fiscal years then ended. You should read the following discussion and analysis together with our audited consolidated financial statements and the notes to the consolidated financial statements included under Item 8 in this report. 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. You should carefully review the risks described under Item 1A and elsewhere in this report, which identify certain important factors that could cause our future financial condition and results of operations to vary.

Executive Overview

The following overview does not address all of the matters covered in the other sections of this Item 7 or other items in this report or 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 7, the financial statements and accompanying notes, and this report.

Our primary business activity is providing private-label contract manufacturing services to companies that market and distribute vitamins, minerals, herbs and other nutritional supplements, as well as other health care products, to consumers both within and outside the U.S. 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, royalty and licensing revenue generated from our patent estate pursuant to license and supply agreements with third parties for 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 fiscal 2023, our consolidated net sales were 10% lower than in fiscal 2022. Private-label contract manufacturing sales decreased 6% primarily due to reduced orders from several of our larger customers associated with their efforts to reduce excess on-hand inventory. Sales were also negatively impacted by Euro to USD exchange rates. Our foreign currency exchange rates as applied to sales denominated in Euro decreased to a weighted average of 1.13 EUR/USD in fiscal 2023 compared to a weighted average of 1.18 EUR/USD in fiscal 2022. The decrease in sales to these customers was partially offset by increased sales to our largest customer. Sales to this customer increased 66% in fiscal 2023 as compared to fiscal 2022. Revenue concentration from our largest private-label contract manufacturing customer as a percentage of our total net sales was 40% in fiscal 2023, and revenue concentration from our largest private-label contract manufacturing customer as a percentage of total net sales in fiscal 2022 was 32%.

During fiscal 2023, patent and trademark licensing revenue decreased 46% to $8.7 million as compared to $16.2 million for fiscal 2022. The decrease in patent and trademark licensing revenue was primarily due to a decrease in orders from existing customers as a result of market and inflationary factors along with a general slowdown in the Sports Nutrition sales channel. Included in the market factors, fiscal 2022 benefited from a ramp up of Sports Nutrition sales activity due to easing COVID restrictions on athletic activities with no corresponding activity in fiscal 2023.

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 efforts to refine our formulations and product offerings will be positively received and result in significant opportunity for increased SR CarnoSyn® sales. As part of this commercialization effort, we have recently introduced two new SR CarnoSyn® Wellness tablet products – Complete Vision Support and Complete Memory Support. These new offerings are condition-specific tablet products that include SR CarnoSyn® as the primary ingredient along with other science-backed ingredients that strengthen the claims and marketing around the product and are more recognizable to the consumer. These new products are being offered both as business-to-business private label products and direct to the consumer through Amazon and our own direct to consumer website. In addition, we are also working on several innovations that could lead to new patentable products for CarnoSyn® Brands in the future.

To protect our CarnoSyn® business, we incurred litigation and patent compliance expenses of approximately $0.2 million during fiscal 2023 and $0.2 million during fiscal 2022. Our legal expense associated with our CarnoSyn® business has remained low as we have no active litigation and the current run-rate of expenses is primarily related to maintenance of our patent and trademark estate. 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, the availability and the cost of the raw material when and in the amounts needed, the ability to 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 fiscal 2024, 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.

19

On August 16, 2023, we announced the temporary closure of our new high-speed powder processing facility in Carlsbad, California due to excess inventory on hand at one of our largest customer’s and their efforts to rebalance supply and demand. As a result of this temporary closure sixty-day notice was provided to all employees who may be furloughed starting in early October 2023. We expect this facility will re-open and our prior level of operations will resume late in our third fiscal quarter of 2024, but there can be no assurance this customer will resolve its supply and demand issues in the timeframe expected, or what level of business we will have with this customer when they purchase from us in the future. If this customer is unable to resolve its inventory issues in this timeframe, or our sales forecast is not realized we will likely experience a continuing material decrease in revenues during fiscal year 2024.

Subject to this uncertainty, and our overall sales forecast, we currently anticipate we will experience a net loss in the first half of fiscal 2024, net income in the second half and an overall net loss in fiscal 2024.

During fiscal 2024, we 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 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.

Impact of COVID-19 on Our Business

The COVID-19 pandemic resulted in significant economic disruption and may have some effect on our business in the future. Our facilities, located both in the United States and Europe, maintained operations throughout the duration of the COVID-19 pandemic, however, there can be no assurance our facilities will continue to operate without interruption.

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 our 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 A, Organization and Summary of Significant Accounting Policies, of the notes to the consolidated financial statements.

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, our estimates of future sales used to assess the volume rebate 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.

20

Results of Operations

The following table sets forth selected consolidated operating results for each of the last two fiscal years, presented as a percentage of net sales (dollars in thousands).

	Fiscal Year Ended
	June 30, 2023					June 30, 2022					Increase (Decrease)
Private-label contract manufacturing	$	145,294		94	%	$	154,798		91	%	$	(9,504	)	(6	)%
Patent and trademark licensing		8,721		6	%		16,168		9	%		(7,447	)	(46	)%
Total net sales		154,015		100	%		170,966		100	%		(16,951	)	(10	)%
Cost of goods sold		135,857		88	%		140,457		82	%		(4,600	)	(3	)%
Gross profit		18,158		12	%		30,509		18	%		(12,351	)	(40	)%
Selling, general & administrative expenses		13,445		9	%		16,830		10	%		(3,385	)	(20	)%
Income from operations		4,713		3	%		13,679		8	%		(8,966	)	(66	)%
Other (loss), net		(1,158	)	(1	)%		(20	)	(0	)%		(1,138	)	5690	%
Income before income taxes		3,555		2	%		13,659		8	%		(10,104	)	(74	)%
Provision for income taxes		1,033		1	%		2,947		2	%		(1,914	)	(65	)%
Net income	$	2,522		2	%	$	10,712		6	%	$	(8,190	)	(76	)%

Private-label contract manufacturing sales decreased 6% primarily due to reduced orders from several of our larger customers associated with their efforts to reduce excess on-hand inventory. Sales were also negatively impacted by Euro to USD exchange rates. Our foreign currency exchange rates as applied to sales denominated in Euro decreased to a weighted average of 1.13 EUR/USD in fiscal 2023 compared to a weighted average of 1.18 EUR/USD in fiscal 2022. The decrease in sales to these customers was partially offset by increased sales to our largest customer. Sales to this customer increased 66% in fiscal 2023 as compared to fiscal 2022. Revenue concentration from our largest private-label contract manufacturing customer as a percentage of our total net sales was 40% in fiscal 2023, and revenue concentration from our largest private-label contract manufacturing customer as a percentage of total net sales in fiscal 2022 was 32%.

Net sales from our patent and trademark licensing segment decreased 46% during fiscal 2023. The decrease in patent and trademark licensing revenue was primarily due to a decrease in orders from existing customers as a result of market and inflationary factors along with a general slowdown in the Sports Nutrition sales channel. Included in the market factors, fiscal 2022 benefited from a ramp up of Sports Nutrition sales activity due to easing COVID restrictions on athletic activities with no corresponding activity in fiscal 2023. 

The change in gross profit margin for the year ended June 30, 2023, was as follows:

	Percentage
	Change
Contract manufacturing(1)		(3.9	)
Patent and trademark licensing(2)		(2.2	)
Total change in gross profit margin		(6.1	)

1 Private-label contract manufacturing gross profit margin contribution decreased 3.9 percentage points in fiscal 2023 as compared to fiscal 2022. The decrease in gross profit as a percentage of sales for private-label contract manufacturing is primarily due to lower sales and unfavorable sales mix, increased costs related to labor, utilities, operating supplies, freight and other costs resulting in an increase in per-unit manufacturing costs. Included in the increased labor costs for the fiscal 2023 is a restructuring charge of approximately $350,000 due to a workforce restructuring plans completed during the year. These factors were partially offset by a $2.2 million Employee Retention Tax Credit (“ERTC”) recorded in fiscal 2023. In March 2020, the Coronavirus Aid, Relief, and Economic Security Act was signed into law, providing numerous tax provisions and other stimulus measures, including the ERTC. The Tax Payer Certainty and Disaster Tax Relief Act of 2020 and the American Rescue Plan Act of 2021 extended the availability of the ERTC. Under these expanded measures, we determined during fiscal 2023 that we qualified for the ERTC for the first three quarters of calendar 2021 and do not expect any further benefit to subsequent periods.

2 During fiscal 2023, patent and trademark licensing gross profit margin contribution decreased 2.2 percentage points as compared to fiscal 2022. The decrease in margin contribution during the year ended June 30, 2023 was primarily due to decreased patent and trademark licensing net sales as a percentage of total consolidated net sales, as patent and trademark licensing historically provides higher profit margins than our private-label contract manufacturing business.

Selling, general and administrative expenses decreased $3.4 million, or 20% to $13.5 million in fiscal 2023 as compared to $16.8 million in fiscal 2022. The decrease year over year includes a $1.3 million benefit recorded related to our ERTC filing, a $1.4 million bad debt recovery associated with a settlement we agreed to with a former customer whose balance was written-off in a prior year, and favorable salary costs.

Other loss, net, increased $1.1 million during fiscal 2023 as compared to fiscal 2022. The increase is primarily associated with increased expenses related to our CHF balance sheet hedge and interest expense related to usage of our line of credit.

Our income tax expense decreased $1.9 million during fiscal 2023 as compared to fiscal 2022. The decrease is primarily due to a reduction in pre-tax income, which was partially offset by a higher effective tax rate. The increase in effective tax rate was primarily driven by changes in apportionment allocation of income to state jurisdictions and an increase in the Global Low-Taxed Intangible Income associated with our Swiss operations.

21

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 facilities. Net cash provided by operating activities was $7.0 million in fiscal 2023 compared to net cash provided by operating activities of $11.9 million in fiscal 2022.

At June 30, 2023, changes in accounts receivable, consisting primarily of amounts due from our private-label contract manufacturing customers and our patent and trademark raw material sales activities, provided $11.8 million in cash compared to providing $0.6 million in fiscal 2022. The increase in cash provided by accounts receivable during fiscal 2023 primarily resulted from timing of sales and the related collections. Days sales outstanding decreased to 29 days during fiscal 2023 compared to 38 days during fiscal 2022, primarily due to customer sales mix and timing of sales and the related collections.

Inventory provided $2.8 million in cash during fiscal 2023 compared to using $5.5 million in fiscal 2022. The change in cash activity from inventory was primarily related to the difference in the amount and timing of orders and anticipated sales in fiscal year 2023 as compared to fiscal year 2022. Changes in accounts payable and accrued liabilities used $8.6 million in cash during fiscal 2023 compared to providing $3.1 million during fiscal 2022. The change in cash flow activity related to accounts payable and accrued liabilities is primarily due to the timing of inventory receipts and payments.

Cash used in investing activities in fiscal 2023 was $13.5 million compared to $26.5 million in fiscal 2022. The primary reason for the change was due to the purchase of a new manufacturing and warehouse facility in Carlsbad, California in fiscal 2022 while fiscal 2023 included capital improvement costs and equipment purchases associated with the on-going project to improve the new facility to become a high capacity powder processing and storage facility.

Cash used in financing activities in fiscal 2023 was $1.8 million, compared to $4.3 million provided in fiscal 2022. The change in financing activities includes a reduction of stock repurchase activity, which totaled $1.5 million in fiscal 2023 as compared to $5.5 million in fiscal 2022. Fiscal 2022 also included $10.0 million in borrowings used to finance a portion of the purchase of our new manufacturing and warehouse facility in Carlsbad, California while fiscal 2023 did not include any such borrowings.

At June 30, 2023,we had no outstanding balances due on our line of credit and had $20.0 million available with this loan facility and we owed $9.5 million on a term loan that was borrowed as part of the purchase of our new Carlsbad manufacturing facility in August 2021. At June 30, 2022 we had no outstanding balances due and $20.0 million available in connection with our loan facility.

During fiscal 2023, we were in compliance with all of the financial and other covenants required under our Credit Agreement.

As of June 30, 2023, we had $13.6 million in cash and cash equivalents. Of these amounts, $12.2 million of cash and cash equivalents were held by NAIE. Overall, we believe our available cash, cash equivalents, potential cash flows from operations, and our credit facility will be sufficient to fund our current working capital needs and capital expenditures through at least the next 12 months. As a result of reduced sales overall, and the impact of temporary closure of our Carlsbad California high-speed powder processing facility, we anticipate we will not be able to comply with all of the covenants required under the Credit Agreement in the second quarter of fiscal 2024.  We have advised the lender and are currently negotiating a potential revised credit facility. There can be no assurance we will be able to successfully complete the negotiation of a revised credit facility, or what the differences in amount, cost and other factors may be. Please see Note F in Item 8 of this report for terms of our credit facility.

Off-Balance Sheet Arrangements

As of June 30, 2023, we did not have any significant 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, in each case 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.

Inflation

During fiscal 2023, we experienced price increases in product raw material and operational costs related to inflationary pressures. We currently believe increasing raw material and product cost pricing pressures will continue throughout fiscal 2024 as a result of limited supplies of various ingredients, the effects of higher labor and transportation costs, rising interest rates, higher global fuel and energy costs, and the continued impact of COVID-19. We anticipate current inflation rates will have a negative impact on our fiscal 2024 operations and we are monitoring the drivers and working with suppliers and customers to mitigate the impact on our results.

Recent Accounting Pronouncements

A discussion of recent accounting pronouncements is included under Note A in the notes to our consolidated financial statements which are included under Item 8 of this report.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As a smaller reporting company, we are not required to provide Item 7A disclosure in this Annual Report.

22

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Report of Independent Registered Public Accounting Firm

To the Board of Directors and
Stockholders of Natural Alternatives International, Inc.

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Natural Alternatives International, Inc. (the “Company”) as of June 30, 2023 and 2022, and the related consolidated statements of operations and comprehensive income, stockholders’ equity and cash flows for each of the two years in the period ended June 30, 2023, and the related notes (collectively referred to as the “consolidated financial statements”).  In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of June 30, 2023 and 2022, and the consolidated results of its operations and its cash flows for each of the two years in the period ended June 30, 2023, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits.  We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.  The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.  Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.  Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matters communicated below are matters arising from the current-period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of these critical audit matters do not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

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

Critical Audit Matter Description

The Company recognizes revenue upon transfer of control of promised products to customers in an amount that reflects the consideration the Company expects to receive in exchange for those products. The Company enters certain customer supply contracts that contain unique, customer-specific terms and conditions that results in variable consideration. For such contracts, significant interpretation may be required to determine the contract terms, estimated amounts and timing of recognition of variable consideration.  Variable consideration includes volume-related and other discounts and pricing concessions.

Our assessment of management’s evaluation of the above referenced matters related to proper revenue recognition is significant to our audit because the amounts are material to the consolidated financial statements, the assessment process involves significant judgment, and the application of U.S. generally accepted accounting principles in this area is complex.

23

How the Critical Audit Matter Was Addressed in the Audit

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

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

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

● We selected a sample of revenue transactions with variable consideration and performed the following procedures:

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

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

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

Employee Retention Credits – Refer to Note A to the Consolidated Financial Statements

Critical Audit Matter Description

The Company applied for Employee Retention Credits (“ERCs”) as provided for by provisions of the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”).  ERCs related to eligible quarterly periods in fiscal 2021 aggregated a net amount of $3,477,526, for which the Company submitted its amended payroll tax returns during the fiscal year ended June 30, 2023. 

How the Critical Audit Matter Was Addressed in the Audit

Our principal audit procedures related to the Company’s eligibility for ERCs included the following:

● We obtained an understanding of the provisions of the ERCs, as afforded by the CARES Act and notices published by the IRS.

● We evaluated management’s analysis supporting the Company’s eligibility to receive the ERCs, including documentation from external legal counsel.

● We corroborated key information used by management to determine the amount of ERCs, including employee attendance records and payroll and personnel data.

● We examined the Company’s amended payroll tax returns filed with the IRS.

/s/ HASKELL & WHITE LLP

We have served as the Company’s auditor since 2014.

Irvine, California

September 21, 2023

24

Natural Alternatives International, Inc.

Consolidated Balance Sheets

As of June 30

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

	2023			2022
Assets
Current assets:
Cash and cash equivalents	$	13,604		$	21,833
Accounts receivable – less allowance for doubtful accounts of $23 at June 30, 2023 and $3,383 at June 30, 2022		7,022			17,422
Inventories, net		29,694			32,475
Income tax receivable		305			67
Forward contracts		390			3,144
Prepaids and other current assets		5,995			1,805
Total current assets		57,010			76,746
Property and equipment, net		53,841			44,573
Operating lease right-of-use assets		20,369			21,701
Deferred tax asset – noncurrent		355			—
Other noncurrent assets, net		2,577			2,983
Total assets	$	134,152		$	146,003
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	7,778		$	16,185
Accrued liabilities		2,409			2,787
Accrued compensation and employee benefits		2,246			3,673
Customer deposits		317			140
Short-term liability – operating leases		2,448			634
Income taxes payable		374			174
Mortgage note payable, current portion		312			302
Total current liabilities		15,884			23,895
Long-term liability – operating leases		18,965			21,413
Long-term pension liability		339			344
Deferred tax liability		—			1,220
Mortgage note payable, net of current portion		9,205			9,493
Income taxes payable, noncurrent		987			1,118
Total liabilities		45,380			57,483
Commitments and contingencies (Notes D, F, H, J and M)
Stockholders’ equity:
Preferred stock; $.01 par value; 500,000 shares authorized; none issued or outstanding		—			—
Common stock; $.01 par value; 20,000,000 shares authorized at June 30, 2023 and June 30, 2022, issued and outstanding (net of treasury shares) 6,073,813 at June 30, 2023 and 6,129,611 at June 30, 2022		91			89
Additional paid-in capital		31,436			30,423
Retained earnings		80,183			77,661
Treasury stock, at cost, 3,240,593 shares at June 30, 2023 and 3,061,795 at June 30, 2022		(22,855	)		(21,352	)
Accumulated other comprehensive income		(83	)		1,699
Total stockholders’ equity		88,772			88,520
Total liabilities and stockholders’ equity	$	134,152		$	146,003

See accompanying notes to consolidated financial statements.

25

Natural Alternatives International, Inc.

Consolidated Statements of Operations and Comprehensive Income

For the Years Ended June 30

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

	2023			2022
Net sales	$	154,015		$	170,966
Cost of goods sold		135,857			140,457
Gross profit		18,158			30,509
Other selling, general and administrative expenses		14,869			16,950
Recoveries of uncollectible accounts receivable		(1,424	)		(120	)
Income from operations		4,713			13,679
Other income (expense):
Interest income		33			—
Interest expense		(451	)		(83	)
Foreign exchange (loss) gain		(658	)		118
Other, net		(82	)		(55	)
Total other expense		(1,158	)		(20	)
Income before income taxes		3,555			13,659
Provision for income taxes		1,033			2,947
Net income	$	2,522		$	10,712
Change in minimum pension liability, net of tax	$	64		$	94
Unrealized (loss) gain resulting from change in fair value of derivative instruments, net of tax		(1,846	)		2,166
Comprehensive income	$	740		$	12,972
Net income per common share:
Basic	$	0.43		$	1.75
Diluted	$	0.43		$	1.74
Weighted average common shares outstanding:
Basic		5,863,083			6,117,044
Diluted		5,877,559			6,155,118

See accompanying notes to consolidated financial statements.

26

Natural Alternatives International, Inc.

Consolidated Statements of Stockholders’ Equity

For the Years Ended June 30

(Dollars in thousands)

															Accumulated
					Additional										Other
	Common Stock				Paid-in			Retained		Treasury Stock					Comprehensive
	Shares		Amount		Capital			Earnings		Shares		Amount			Income (Loss)			Total
Balance, June 30, 2021		9,004,365	$	88	$	29,456		$	66,949		2,567,797	$	(15,849	)	$	(561	)	$	80,083
Issuance of common stock for restricted stock grants		135,850		1		(1	)		—		—		—			—			—
Compensation expense related to stock compensation plans		—		—		968			—		—		—			—			968
Repurchase of common stock		—		—		—			—		435,080		(5,503	)		—			(5,503	)
Forfeiture of restricted stock		—		—		—			—		19,832		—			—			—
Share correction		51,191		—		—			—		39,086		—			—			—
Change in minimum pension liability, net of tax		—		—		—			—		—		—			94			94
Unrealized gain resulting from change in fair value of derivative instruments, net of tax		—		—		—			—		—		—			2,166			2,166
Net income		—		—		—			10,712		—		—			—			10,712
Balance, June 30, 2022		9,191,406	$	89	$	30,423		$	77,661		3,061,795	$	(21,352	)	$	1,699		$	88,520
Issuance of common stock for restricted stock grants		123,000		2		(2	)		—		—		—			—			—
Compensation expense related to stock compensation plans		—		—		1,015			—		—		—			—			1,015
Repurchase of common stock		—		—		—			—		164,399		(1,503	)		—			(1,503	)
Forfeiture of restricted stock		—		—		—			—		14,399		—			—			—
Change in minimum pension liability, net of tax		—		—		—			—		—		—			64			64
Unrealized loss resulting from change in fair value of derivative instruments, net of tax		—		—		—			—		—		—			(1,846	)		(1,846	)
Net income		—		—		—			2,522		—		—			—			2,522
Balance, June 30, 2023		9,314,406	$	91	$	31,436		$	80,183		3,240,593	$	(22,855	)	$	(83	)	$	88,772

See accompanying notes to consolidated financial statements.

27

Natural Alternatives International, Inc.

Consolidated Statements of Cash Flows

For the Years Ended June 30

(in thousands)

	2023			2022
Cash flows from operating activities
Net income	$	2,522		$	10,712
Adjustments to reconcile net income to net cash provided by operating activities:
Recoveries of uncollectible accounts receivable		(1,424	)		(120	)
Depreciation and amortization		4,250			4,165
Deferred income taxes		(974	)		751
Non-cash lease expenses		2,831			2,749
Non-cash compensation		1,015			968
Pension expense		81			83
Gain on disposal of assets		(51	)		(9	)
Changes in operating assets and liabilities:
Accounts receivable		11,823			644
Inventories		2,781			(5,469	)
Operating lease liabilities		(2,134	)		(3,007	)
Prepaids and other assets		(4,362	)		75
Accounts payable and accrued liabilities		(8,606	)		3,057
Forward contracts		863			(2,273	)
Income taxes		(169	)		451
Accrued compensation and employee benefits		(1,427	)		(911	)
Net cash provided by operating activities		7,019			11,866
Cash flows from investing activities
Purchases of property and equipment		(13,524	)		(26,488	)
Proceeds from sale of property and equipment		57			30
Net cash used in investing activities		(13,467	)		(26,458	)
Cash flows from financing activities
Repurchase of common stock		(1,503	)		(5,503	)
Borrowings on long-term debt		—			10,000
Payments on long-term debt		(278	)		(205	)
Net cash (used in) provided by financing activities		(1,781	)		4,292
Net decrease in cash and cash equivalents		(8,229	)		(10,300	)
Cash and cash equivalents at beginning of year		21,833			32,133
Cash and cash equivalents at end of year	$	13,604		$	21,833
Supplemental disclosures of cash flow information
Cash paid during the year for:
Taxes	$	1,842		$	2,608
Interest	$	802		$	206

See accompanying notes to consolidated financial statements.

28

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 

A. Organization and Summary of Significant Accounting Policies

Organization

We provide private-label contract manufacturing services to companies that market and distribute vitamins, minerals, herbs, and other nutritional supplements, as well as other health care products, to consumers both within and outside the U.S. We also seek to commercialize our patent and trademark estate related to the ingredient known as beta-alanine sold under our CarnoSyn® and SR CarnoSyn® tradenames through direct raw material sales and various license and similar arrangements.

Subsidiaries

On January 22, 1999, Natural Alternatives International Europe S.A., a Swiss Corporation (NAIE) was formed as our wholly-owned subsidiary, based in Manno, Switzerland. In September 1999, NAIE opened a manufacturing facility and currently possesses manufacturing capability in encapsulation, powders, tablets, finished goods packaging, quality control laboratory testing, warehousing, distribution and administration.

Principles of Consolidation

The consolidated financial statements include the accounts of Natural Alternatives International, Inc. (NAI) and our wholly-owned subsidiary, NAIE. All intercompany accounts and transactions have been eliminated. The functional currency of NAIE, our foreign subsidiary, is the U.S. Dollar. Certain accounts of NAIE have been translated at either current or historical exchange rates, as appropriate, with gains and losses included in the consolidated statements of operations.

Recently Adopted Accounting Pronouncements

As of June 30, 2023, there have been no adopted accounting pronouncements issued by the FASB that materially impact the Consolidated Financial Statements of the Company.

Recently Issued Accounting and Regulatory Pronouncements

In June of 2016, the FASB issued ASU 2016-13 titled "Financial Instruments - Credit Losses (Topic 326)." This directive introduced a novel approach to assessing impairments known as the "current expected credit loss model" or "CECL." Unlike the previous standard, which focused on incurred losses, CECL centers on anticipated losses. Under this framework, organizations are obligated to acknowledge an allowance corresponding to their estimate of expected credit losses. The CECL model is applicable to a wide range of financial instruments, including debt instruments, trade receivables, lease receivables, financial guarantee contracts, and other loan commitments. Notably, there is no minimum threshold for recognizing impairment losses, and it mandates the evaluation of expected credit losses even for assets with minimal risk of loss. Future evaluations of credit losses will take this guidance into account. The adoption of ASU 2016-13 is not presently expected to significantly impact our consolidated financial statements upon its July 1, 2023 effective date.

Reclassifications

Certain amounts in the prior period consolidated financial statements have been reclassified to conform to the current period presentation. These reclassifications had no effect on reported net income.

Employee Retention Tax Credit

In March 2020, the Coronavirus Aid, Relief, and Economic Security Act was signed into law, providing numerous tax provisions and other stimulus measures, including the Employee Retention Tax Credit (“ERTC”). The Tax Payer Certainty and Disaster Tax Relief Act of 2020 and the American Rescue Plan Act of 2021 extended the availability of the ERTC. Under these expanded measures, we determined during fiscal 2023 that we qualified for the ERTC for the first three quarters of calendar 2021 and filed amended payroll tax returns that are expected to result in a net refund of $3.5 million. Although we don’t anticipate receiving the funds related to these amended returns until sometime in fiscal 2024, we recorded a receivable and recognized a benefit for this amount in our Consolidated Statements of Operations and Comprehensive Income in fiscal 2023 by applying the loss recovery model as codified by Accounting Standards Codification (“ASC”) section 450 “Contingencies” that indicates that an asset related to a recovery should be recognized when the recovery is determined to be probable. We recorded this benefit as a reduction to our payroll tax expense in the current year with $2.2 million of the benefit offsetting cost of goods sold and $1.3 million offsetting other selling, general and administrative expenses.

Cash and Cash Equivalents

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

29

 

Fair Value of Financial Instruments

Fair value is defined as the exchange price that would be received to sell an asset or paid to transfer a liability (i.e., the “exit price”) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. We use a three-level hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from independent sources. Unobservable inputs are inputs that reflect our assumptions about the inputs that market participants would use in pricing the asset or liability and are developed based on the best information available under the circumstances.

The fair value hierarchy is broken down into three levels based on the source of inputs. In general, fair values determined by Level 1 inputs use quoted prices (unadjusted) in active markets for identical assets or liabilities that we have the ability to access. We classify cash, cash equivalents, and marketable securities balances as Level 1 assets. The approximate fair value of cash and cash equivalents, accounts receivable, accounts payable and short-term borrowings is equal to book value due to the short-term nature of these items. Fair values determined by Level 2 inputs are based on quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active and models for which all significant inputs are observable or can be corroborated, either directly or indirectly by observable market data. Level 3 inputs are unobservable inputs for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability. These include certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

Except for cash and cash equivalents, as of June 30, 2023 and June 30, 2022, we did not have any financial assets or liabilities classified as Level 1. We classify derivative forward exchange contracts as Level 2 assets and liabilities. The fair values were determined by obtaining pricing from our bank.

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

	June 30,		June 30,
	2023		2022
Euro Forward Contract– Current Assets	$	250	$	3,144
Swiss Franc Forward Contract – Current Assets		140		109
Total Derivative Contracts – Current Assets		390		3,253
Interest Swap – Other noncurrent Assets		532		453
Euro Forward Contract– Other noncurrent Assets		15		561
Total Derivative Contracts – Other noncurrent Assets		547		1,014
Fair Value Net Asset – all Derivative Contracts	$	937	$	4,267

We also classify any outstanding line of credit and term loan balance as a Level 2 liability, as the fair value is based on inputs that can be derived from information available in publicly quoted markets. As of June 30, 2023, and June 30, 2022, 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 2022 or fiscal 2023.

Accounts Receivable

We perform ongoing credit evaluations of our customers and adjust credit limits based on payment history and customer credit-worthiness. An allowance for estimated doubtful accounts is maintained based on historical experience, including identified customer credit issues. We monitor collections regularly and adjust the allowance for doubtful accounts as necessary to recognize any changes in credit exposure. Upon conclusion that a receivable is uncollectible, we record the respective amount as a charge against allowance for doubtful accounts. To date, such doubtful accounts reserves, in the aggregate, have been adequate to cover collection losses.

In December 2022, we entered into an agreement to settle the remaining outstanding balance with a former customer whose accounts receivable balance was fully reserved in March 2020. As of the date of the agreement, the remaining amount due from this customer was $3.4 million dollars and as part of the settlement, we agreed to a reduced amount of $1.4 million. This reduced amount is to be paid based on an agreed upon payment schedule and if all payments are made as agreed the entire balance will be considered paid in full. As of June 30, 2023, the former customer made all scheduled payments totaling $850,000 and we have adjusted our accounts receivable reserve along with the corresponding accounts receivable balance such that the amount in excess of the settlement amount has been written-off and the reserve associated with the unpaid portion of the settlement is no longer reserved for.

Inventories

We operate primarily as a private-label contract manufacturer. We build products based upon anticipated demand or following receipt of customer specific purchase orders. From time to time, we build inventory for private-label contract manufacturing customers under a specific purchase order with delivery dates that may subsequently be rescheduled or canceled at the customer’s request. We value inventory at the lower of cost (first-in, first-out) or net realizable value on an item-by-item basis, including costs for raw materials, labor and manufacturing overhead. We establish reserves equal to all or a portion of the related inventory to reflect situations in which the cost of the inventory is not expected to be recovered. This requires us to make estimates regarding the market value of our inventory, including an assessment for excess and obsolete inventory. Once we establish an inventory reserve in a fiscal period, the reduced inventory value is maintained until the inventory is sold or otherwise disposed of. In evaluating whether inventory is stated at the lower of cost or net realizable value, management considers such factors as the amount of inventory on hand, the estimated time required to sell such inventory, the remaining shelf life and efficacy, the foreseeable demand within a specified time horizon and current and expected market conditions. Based on this evaluation, we record adjustments to cost of goods sold to adjust inventory to its net realizable value.

30

 

Property and Equipment

We state property and equipment at cost. Depreciation of property and equipment is provided using the straight-line method over their estimated useful lives, generally ranging from 1 to 39 years. We amortize leasehold improvements using the straight-line method over the shorter of the useful life of the improvement or the term of the lease. Maintenance and repairs are expensed as incurred. Significant expenditures that increase economic useful lives of property or equipment are capitalized and expensed over the useful life of such expenditure.

Impairment of Long-Lived Assets

We periodically evaluate the carrying value of long-lived assets to be held and used when events and circumstances indicate that the carrying amount of an asset may not be recovered. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. During fiscal 2023 and 2022, we recognized no impairment losses.

Derivative Financial Instruments

We may use derivative financial instruments in the management of our foreign currency exchange risk inherent in our forecasted sales denominated in Euros and our long-term lease liability denominated in Swiss Francs. We may hedge our foreign currency exposures by entering into offsetting forward exchange contracts. To the extent we use derivative financial instruments that meet the relevant criteria, we account for them as cash flow hedges. Foreign exchange derivative instruments that do not meet the criteria for cash flow hedge accounting are marked-to-market through the Consolidated Statements of Operations and Comprehensive Income. Historically, our cash flow derivative instruments related to our Euro sales have met the criteria for hedge accounting, while our derivative instruments related to our long-term lease liability have not.

We recognize any unrealized gains and losses associated with derivative instruments accounted for as cash flow hedges in income in the period in which the underlying hedged transaction is realized. To the extent the derivative instrument is deemed ineffective we would recognize the resulting gain or loss in income at that time. As of June 30, 2023, we held derivative contracts designated as cash flow hedges primarily to protect against the foreign exchange risks inherent in our forecasted sales of products at prices denominated in currencies other than the U.S. Dollar, which is primarily the Euro. As of June 30, 2023, the notional amounts of our foreign exchange contracts were $31.7 million (€28.4 million). These contracts will mature over the next 15 months.

As of June 30, 2023, we held foreign currency contracts not designated as cash flow hedges primarily to protect against changes in valuation of our long-term lease liability. As of June 30, 2023, the notional amounts of our foreign currency contracts not designated as cash flow hedges were $12.3 million (CHF 11.1 million). These contracts will mature in the first quarter of fiscal year 2024.

Defined Benefit Pension Plan

We formerly sponsored a defined benefit pension plan. Effective June 21, 1999, we adopted an amendment to freeze benefit accruals to the participants. The plan obligation and related assets of the plan are presented in the notes to the consolidated financial statements. Plan assets, which consist primarily of marketable equity and debt instruments, are valued based upon third party market quotations. Independent actuaries, through the use of a number of assumptions, determine plan obligations and annual pension expense. Key assumptions in measuring the plan obligations include the discount rate and estimated future return on plan assets. In determining the discount rate, we use an average long-term bond yield. Asset returns are based on the historical returns of multiple asset classes to develop a risk free rate of return and risk premiums for each asset class. The overall rate for each asset class was developed by combining a long-term inflation component, the risk free rate of return and the associated risk premium. A weighted average rate is developed based on the overall rates and the plan’s asset allocation.

Revenue Recognition

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

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

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

31

 

We recognize revenue in certain circumstances before delivery to the customer has occurred (commonly referred to as bill-and-hold transactions). Products sold under bill-and-hold arrangements are recorded as revenue when risk of ownership has been transferred to the customer, but the product has not shipped due to a substantive reason, typically at the customer’s request. The product must be separately identified as belonging to the customer, ready for physical transfer to the customer, and we cannot have the ability to redirect the product to another customer.

We provide early payment discounts to certain customers. 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.

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

	June 30, 2022		Additions		Revenue Recognized			Customer Refunds			June 30, 2023
Contract Liabilities (Customer Deposits)	$	140	$	317	$	(137	)	$	(3	)	$	317
	June 30, 2021		Additions		Revenue Recognized			Customer Refunds			June 30, 2022
Contract Liabilities (Customer Deposits)	$	1,721	$	140	$	(1,721	)	$	—		$	140

Except for product defects, no right of return exists on the sale of our products. We estimate returns based on historical experience and recognize a returns liability for any estimated returns. As of June 30, 2023, we have $0 in our returns reserve.

We currently own certain U.S. patents, and each patent’s corresponding foreign patent applications. All of these patents and patent rights relate to the ingredient known as beta-alanine marketed and sold under our CarnoSyn® 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 $8.7 million during fiscal 2023 and $16.2 million during fiscal 2022. These royalty income and raw material sale amounts resulted in royalty expense paid to the original patent holders from whom NAI acquired its patents and patent rights. We recognized royalty expense as a component of cost of goods sold in the amount of $0.3 million during fiscal 2023 and $0.7 million during fiscal 2022.

Cost of Goods Sold

Cost of goods sold includes raw material, labor, manufacturing overhead, and royalty expense.

Shipping and Handling Costs

We include fees earned on the shipment of our products to customers in sales and include costs incurred on the shipment of product to customers in costs of goods sold.

Research and Development Costs

As part of the services we provide to our private-label contract manufacturing customers, we may perform, but are not obligated to perform, certain research and development activities related to the development or improvement of their products. While our customers typically do not pay directly for this service, the cost of this service is included as a component of the price we charge to manufacture and deliver their products. We also direct and participate in clinical research studies, often in collaboration with scientists and research institutions, to validate the benefits of a product and provide scientific support for product claims and marketing initiatives.

Research and development costs are expensed when incurred. Our research and development expenses for the last two fiscal years ended June 30 were $2.1 million for fiscal 2023 and $2.5 million for fiscal 2022. These costs were included in selling, general and administrative expenses and cost of goods sold.

Advertising Costs

We expense the production costs of advertising the first time the advertising takes place. We incurred and expensed advertising costs in the amount of $0.7 million during the fiscal year ended June 30, 2023 and $1.1 million during fiscal 2022. These costs were included in selling, general and administrative expenses.

32

 

Income Taxes

To determine our quarterly provision for income taxes, we use an estimated annual effective tax rate that 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 as discrete items 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.

We record valuation allowances to reduce our deferred tax assets to an amount that we believe is more likely than not to be realized. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will ultimately be realized based on whether future taxable income will be generated during the periods in which those temporary differences become deductible. During the year ended June 30, 2023, there was no change to our valuation allowance.

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

We account for uncertain tax positions using the more-likely-than-not recognition threshold. It is our policy to establish reserves based on management’s assessment of exposure for certain positions taken in previously filed tax returns that may become payable upon audit by tax authorities. Our tax reserves are analyzed quarterly and adjustments are made as events occur that we believe warrant adjustments to the reserves. Our practice is to recognize interest and/or penalties related to income tax matters in income tax expense. As of June 30, 2023 and June 30, 2022, we did not record any tax liabilities for uncertain tax positions.

Stock-Based Compensation

We had an omnibus equity incentive plan that was approved by our Board of Directors effective October 15, 2009, and approved by our stockholders at the Annual Meeting of Stockholders held on November 30, 2009 (the "2009 Plan"). The 2009 Plan expired on October 15, 2019. The Board of Directors approved a new omnibus equity incentive plan that became effective January 1, 2021 (the “2020 Plan”), which was approved by our stockholders at the Annual Meeting of Stockholders on December 4, 2020. Under the 2020 Plan, we may grant nonqualified and incentive stock options, restricted stock grants, restricted stock units, stock appreciation rights, and other stock-based awards to employees, non-employee directors and consultants.

We estimate the fair value of stock option awards at the date of grant using the Black-Scholes option valuation model. The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. Option valuation models require the use of highly subjective assumptions. Black-Scholes uses assumptions related to volatility, the risk-free interest rate, the dividend yield (which we assume to be zero, as we have not paid any cash dividends) and employee exercise behavior. Expected volatilities used in the model are based on the historical volatility of our stock price. The risk-free interest rate is derived from the U.S. Treasury yield curve in effect in the period of grant. The expected life of stock option grants is derived from historical experience. The fair value of restricted stock shares granted is based on the market price of our common stock on the date of grant. We amortize the estimated fair value of our stock awards to expense over the related vesting periods.

We recognize forfeitures as they occur.

Use of Estimates

Our management has made a number of estimates and assumptions relating to the reporting of assets and liabilities, revenue and expenses, and the disclosure of contingent assets and liabilities to prepare these consolidated financial statements in conformity with U.S. generally accepted accounting principles (GAAP). Actual results could differ from those estimates and our assumptions may prove to be inaccurate.

Net Income per Common Share

We compute basic 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 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):

	For the Years Ended June 30,
	2023		2022
Numerator
Net income	$	2,522	$	10,712
Denominator
Basic weighted average common shares outstanding		5,863		6,117
Dilutive effect of stock options and restricted stock shares		14		38
Diluted weighted average common shares outstanding		5,878		6,155
Basic net income per common share	$	0.43	$	1.75
Diluted net income per common share	$	0.43	$	1.74

During the year ended June 30, 2023, we excluded 60,497 shares of unvested restricted stock, as their impact would have been anti-dilutive. For the year ended  June 30, 2022 we excluded restricted stock totaling 93,114. We excluded no shares related to stock options in the years ended June 30, 2023 and June 30, 2022.

33

 

Concentrations of Credit Risk

Financial instruments that subject us to concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable. We place our cash and cash equivalents with highly rated financial institutions. Credit risk with respect to receivables is primarily concentrated with our three largest customers, whose receivable balances collectively represented 47.4% of gross accounts receivable at June 30, 2023 and 52.4% at June 30, 2022. 

Additionally, amounts due related to our beta-alanine raw material sales were 21.4% of gross accounts receivable at June 30, 2023 and 5.4% of gross accounts receivable at June 30, 2022. Concentrations of credit risk related to the remaining accounts receivable balances are limited due to the number of customers comprising our remaining customer base.

B. Inventories

Inventories, net, consisted of the following at June 30 (in thousands):

	2023			2022
Raw materials	$	20,946		$	28,196
Work in progress		4,504			1,948
Finished goods		4,928			2,842
Reserves		(684	)		(511	)
	$	29,694		$	32,475

C. Property and Equipment

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

	Depreciable
	Life
	In Years	2023			2022
Land	NA	$	8,940		$	7,645
Building and building improvements	7 – 39		24,712			17,415
Machinery and equipment	3 – 12		41,460			40,131
Office equipment and furniture	3 – 5		6,522			5,970
Vehicles	3		227			211
Leasehold improvements	1 – 20		22,641			21,626
Total property and equipment			104,502			92,998
Less: accumulated depreciation and amortization			(50,661	)		(48,425	)
Property and equipment, net		$	53,841		$	44,573

Depreciation expense was approximately $4.3 million in fiscal 2023 and $4.2 million in fiscal 2022.

34

 

D. Leases

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

Leases are classified as either finance leases or operating leases. A lease must be classified as a finance lease if any of the following criteria are met: the lease transfers ownership of the asset by the end of the lease term, the lease contains an option to purchase the asset that is reasonably certain to be exercised, the lease term is for a major part of the remaining useful life of the asset or the present value of the lease payments equals or exceeds substantially all of the fair value of the asset. A lease is classified as an operating lease if it does not meet any of these criteria. Substantially all our operating leases are comprised of payments for the use of manufacturing and office space. We have no leases classified as finance leases. As of June 30, 2023, the weighted average remaining lease term for our operating leases was 5.3 years. The weighted average discount rate for our operating leases was 4.12%. As of June 30, 2022, the weighted average remaining lease term for our operating leases was 6.3 years and the weighted average discount rate was 4.12%. The lease discount rate is determined as the rate of interest that a lessee would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment.

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

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

Lease payments included in the measurement of the lease liability comprise the following: the fixed noncancelable lease payments, payments for optional renewal periods where it is reasonably certain the renewal period will be exercised, and payments for early termination options unless it is reasonably certain the lease will not be terminated early. Certain leases contain escalation clauses. Fixed escalation clauses are included in our calculation of right-of-use assets and operating lease liabilities. Escalation clauses based on the CPI (Consumer Price Index) are not included in our calculation of right-of-use assets and operating lease liabilities because they cannot be readily determined.

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

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

We have elected not to recognize right-of-use assets and lease liabilities for short-term leases that have a term of 12 months or less. The effect of short-term leases on our right-of-use asset, lease liability, and the short-term lease cost for the years ended June 30, 2023 and 2022 was not material.

Other information related to leases was as follows (in thousands) for the year ended June 30,

Supplemental Cash Flows Information	2023		2022
Cash paid for amounts included in the measurement of operating lease liabilities	$	3,291	$	3,289
Increase in operating lease liabilities and right-of-use assets due to lease remeasurement		906		8,513

35

 

E. Other Comprehensive Income

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

	Year Ended June 30, 2023
				Unrealized			Unrealized
				Gains			Gains
				(Losses)			(Losses)
	Defined			on			on
	Benefit			Cash Flow			Swap
	Pension Plan			Hedges			Derivative			Total
Balance as of June 30, 2022	$	(444	)	$	1,795		$	348		$	1,699
OCI/OCL before reclassifications		8			538			79			625
Amounts reclassified from OCI		78			(3,086	)		—			(3,008	)
Tax effect of OCI activity		(22	)		643			(20	)		601
Net current period OCI/OCL		64			(1,905	)		59			(1,782	)
Balance as of June 30, 2023	$	(380	)	$	(110	)	$	407		$	(83	)

	Year Ended June 30, 2022
				Unrealized			Unrealized
				Gains			Gains
				(Losses)			(Losses)
	Defined			on			on
	Benefit			Cash Flow			Swap
	Pension Plan			Hedges			Derivative			Total
Balance as of June 30, 2021	$	(538	)	$	(23	)	$	—		$	(561	)
OCI/OCL before reclassifications		17			5,370			454			5,841
Amounts reclassified from OCI		113			(3,011	)		—			(2,898	)
Tax effect of OCI activity		(36	)		(541	)		(106	)		(683	)
Net current period OCI/OCL		94			1,818			348			2,260
Balance as of June 30, 2022	$	(444	)	$	1,795		$	348		$	1,699

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 was 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. Effective September 19, 2022, we entered into a third amendment to our credit facility with Wells Fargo. The third amendment extended the maturity date to May 23, 2025 and also increased the allowed capital expenditures from $7.5 million to $25.0 million for the fiscal year ending June 30, 2023.

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; and (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 $25.0 million for our fiscal year ending June 30, 2023 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.

36

 

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.

During fiscal year 2023, we capitalized $198,000 of interest expense to building improvements. As of June 30, 2022, we capitalized $171,000 of interest expense to building improvements.

As of June 30, 2023, we had $ 9.5 million outstanding under the Term Note used in the purchase of the manufacturing and warehouse property in August 2021. The future debt payments under the Term Note are as follows (in thousands):

	2024		2025		2026		2027		2028		Thereafter		Total
Future Debt Payments	$	312	$	296	$	305	$	315	$	325	$	7,964	$	9,517

On June 30, 2023, we were in compliance with all of the financial and other covenants required under the Credit Agreement. As a result of reduced sales overall, and the impact of temporary closure of our Carlsbad, California high-speed powder processing facility, we anticipate we will not be able to comply with all of the covenants required under the Credit Agreement in the second quarter of fiscal 2024.  We have advised the lender and are currently negotiating a potential revised credit facility. There can be no assurance we will be able to successfully complete the negotiation of a revised credit facility, or what the differences in amount, cost and other factors may be.

As of June 30, 2023, we had the full $20.0 million available for borrowing under our credit facility with Wells Fargo Bank.

G. Income Taxes

During fiscal 2023, we recorded U.S.-based domestic tax expense of $0.8 million and foreign tax expense of $0.2 million. During fiscal 2022, we recorded U.S.-based domestic tax expense of $2.0 million and foreign tax expense of $0.9 million.

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

	2023		2022
United States	$	2,588	$	9,152
Foreign		967		4,507
Total income before income taxes	$	3,555	$	13,659

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

	2023			2022
Current:
Federal	$	843		$	1,297
State		211			(1	)
Foreign		221			900
		1,275			2,196
Deferred:
Federal		(246	)		501
State		4			250
Foreign		—			—
		(242	)		751
Total provision for income taxes	$	1,033		$	2,947

37

 

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

	2023			2022
Deferred tax assets:
Inventory capitalization	$	220		$	373
Inventory reserves		164			113
Lease liability		2,018			2,139
Net operating loss carry forward		433			242
Accrued compensation		166			458
Capitalized research and experimentation		412			—
Accrued contingent fee		219			—
Stock-based compensation		81			66
Forward contracts		56			—
Tax credit carry forward		229			43
Allowance for bad debt		1			795
Interest expense		103			—
Other, net		87			—
Total gross deferred tax assets		4,189			4,229
Deferred tax liabilities:
Withholding taxes		(401	)		(1,133	)
Fixed assets		(1,451	)		(1,523	)
Forward contracts		—			(541	)
Lease asset		(1,951	)		(2,073	)
Other, net		(31	)		(179	)
Deferred tax liabilities		(3,834	)		(5,449	)
Net deferred tax assets (liabilities)	$	355		$	(1,220	)

At June 30, 2023, we had state tax net operating loss carry forwards of approximately $5.6 million. Under California Assembly Bill 85, effective June 29, 2020, net operating loss deductions were suspended for tax years beginning in 2019, 2020, and 2021 and the carry forward periods of any net operating losses not utilized due to such suspension were extended. California Senate Bill 113, effective February 9, 2022, reinstates net operating loss deductions in tax years beginning in 2022. Our state tax loss carry forwards will begin to expire in fiscal 2031, unless used before their expiration.

Pursuant to Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”), the annual use of the net operating loss carry forwards and research and development tax credits could be limited by any greater than 50% ownership change during any three-year testing period. We did not have any ownership changes that met this criterion during the fiscal years ended June 30, 2023 and June 30, 2022.

We are subject to taxation in the U.S., Switzerland and various state jurisdictions. Our tax years for the fiscal year ended June 30, 2015 and forward are subject to examination by the U.S. tax authorities. Our tax years for the fiscal years ended June 30, 2018 and forward are subject to examination by the state tax authorities. Our tax years for the fiscal year ended June 30, 2022 and forward are subject to examination by the Swiss tax authorities.

NAIE’s effective tax rate for the fiscal year ended  June 30, 2023 for Swiss federal, cantonal and communal taxes is approximately 23%.

As part of the Tax Cuts and Jobs Act of 2017 (the Tax Act), we were required to recognize a one-time deemed repatriation transition tax during the fiscal year ended June 30, 2018 based on our total post-1986 earnings and profits (E&P) from our Swiss subsidiary, NAIE. This accumulated E&P amount has historically been considered permanently reinvested thereby allowing us to defer recognizing any U.S. income tax on the amount. We no longer consider undistributed foreign earnings from NAIE as of December 31, 2017 as indefinitely reinvested. We consider earnings accumulated subsequent to December 31, 2017 as indefinitely reinvested.

For tax years commencing on or after January 1, 2022, the Tax Cuts and Jobs Act of 2017, also eliminates the ability to immediately deduct research and development costs. Instead, taxpayers are mandated to capitalize these expenses and amortize them over five years for research conducted within the United States and 15 years for research conducted abroad, as stipulated in IRC Section 174. There is ongoing consideration in Congress for legislation that may revoke or postpone this capitalization and amortization requirement; however, there is no guarantee that this provision will undergo repeal or any other form of modification. Should this requirement remain unchanged, it will result in a reduction of our tax deduction for research and development expenses in the forthcoming years. During fiscal 2023, NAIE declared and paid dividends to NAI in the amount of $14.7 million. This amount is part of the undistributed earnings that we recorded a one-time deemed repatriation transition tax on in fiscal 2018 and therefore we did not recognize any additional tax on this dividend in fiscal 2023. However, as part of this dividend, we were required to pay a 5% Swiss withholding tax totaling $0.7 million, which was also accrued for as part of the implementation of the Tax Act in fiscal 2018.

38

 

A reconciliation of our income tax provision computed by applying the statutory federal income tax rate of 21% for fiscal 2023 and for fiscal 2022 to net income before income taxes for the year ended June 30 is as follows (dollars in thousands):

	2023			2022
Income taxes computed at statutory federal income tax rate	$	749		$	2,868
State income taxes, net of federal income tax expense		90			174
Permanent differences		8			85
Foreign tax rate differential		18			(47	)
Tax credits		(347	)		(124	)
FDII export sales incentive		—			(46	)
Stock based compensation		61			37
Global intangible low-taxed income (GILTI)		355			—
Return to provision - differences		99
Income tax provision as reported	$	1,033		$	2,947
Effective tax rate		29.1	%		21.6	%

We expect our U.S. federal statutory rate to be 21% for fiscal years going forward.

H. Employee Benefit Plans

401(k) Plan

We have a profit-sharing plan pursuant to Section 401(k) of the Code, whereby participants may contribute a percentage of compensation not in excess of the maximum allowed under the Code. Effective January 1, 2022, all employees are eligible to participate in the plan the first of the month following 30 days of employment. Also effective, January 1, 2022, we match 100% of the first 5% of a participant’s compensation contributed to the plan under the 401(k) plan. The total contributions under the plan charged to income from operations totaled $0.7 million for fiscal 2023 and $0.5 million for fiscal 2022.

Additionally, we have a discretionary profit-sharing plan pursuant to Section 401(k) of the Code, whereby we may contribute an additional percentage of compensation. Employees are not required to contribute to the plan to receive the discretionary profit-sharing contribution. We did not make a discretionary profit-sharing contribution in fiscal 2023. In fiscal 2022, we made a discretionary profit-sharing contribution of $0.3 million. 

We have a “Cafeteria Plan” pursuant to Section 125 of the Code, whereby health care benefits are provided for active employees through insurance companies. Substantially all active full-time employees are eligible for these benefits. We recognize the cost of providing these benefits by expensing the annual premiums, which are based on benefits paid during the year. The premiums expensed to income from operations for these benefits totaled $1.7 million for the fiscal year ended June 30, 2023 and $1.4 million for the fiscal year ended June 30, 2022.

Deferred Compensation Plan

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

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

During the year ended June 30, 2023, we granted a total of $0.6 million in deferred cash awards to members of our Board of Directors and certain key members of our management team. During the year ended June 30, 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. Each deferred cash award provides for three equal cash payments to the applicable Participant to be paid on the one year, two year, and three year anniversaries of the date of the grant of such Awards, (the “Award Date”); provided on the date of each payment (the “Payment Date”), the Participant has been since the Award Date, and continues to be through the Payment Date, a member of our Board of Directors or an employee of NAI. In the event a Participant ceases to be an employee of NAI or a member of our Board of Directors prior to any Payment Date, no further payments shall be made in connection with the Award.

39

 

Defined Benefit Pension Plan

We formerly sponsored a defined benefit pension plan, which provides retirement benefits to employees based generally on years of service and compensation during the last five years before retirement. Effective June 21, 1999, we adopted an amendment to freeze benefit accruals to the participants. Annually, we contribute an amount not less than the minimum funding requirements of the Employee Retirement Income Security Act of 1974 nor more than the maximum tax-deductible amount.

Disclosure of Funded Status

The following table sets forth the defined benefit pension plan’s funded status and amount recognized in our consolidated balance sheets at June 30 (in thousands):

	2023			2022
Change in Benefit Obligation:
Benefit obligation at beginning of year	$	1,438		$	1,820
Interest cost		46			39
Actuarial loss		(29	)		(276	)
Benefits paid		(91	)		(145	)
Benefit obligation at end of year	$	1,364		$	1,438
Change in Plan Assets:
Fair value of plan assets at beginning of year	$	1,094		$	1,429
Actual return on plan assets		22			(190	)
Employer contributions		—			—
Benefits paid		(91	)		(145	)
Plan expenses		—			—
Fair value of plan assets at end of year	$	1,025		$	1,094
Reconciliation of Funded Status:
Difference between benefit obligation and fair value of plan assets	$	(339	)	$	(344	)
Unrecognized net actuarial loss in accumulated other comprehensive income		409			495
Net amount recognized	$	70		$	151
Projected benefit obligation	$	1,364		$	1,438
Accumulated benefit obligation	$	1,364		$	1,438
Fair value of plan assets	$	1,025		$	1,094

The weighted-average discount rate used for determining the projected benefit obligations for the defined benefit pension plan was 4.89% for the year ended June 30, 2023 and 4.39% during the year ended June 30, 2022.

Net Periodic Benefit Cost

The components included in the defined benefit pension plan’s net periodic benefit expense for the fiscal years ended June 30 were as follows (in thousands):

	2023			2022
Interest cost	$	46		$	39
Expected return on plan assets		(42	)		(69	)
Recognized actuarial loss		50			63
Settlement loss		27			50
Net periodic benefit expense	$	81		$	83

In the fiscal years ended June 30, 2023 and June 30, 2022, we did not contribute to our defined benefit pension plan.

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

	2023			2022
Net loss	$	(8	)	$	(17	)
Settlement loss		(28	)		(50	)
Amortization of net loss		(50	)		(63	)
Plan expenses		—			—
Total recognized in other comprehensive loss	$	(86	)	$	(130	)
Total recognized in net periodic benefit cost and other comprehensive loss	$	(5	)	$	(47	)

40

 

The estimated net loss for the defined benefit pension plan that will be amortized from accumulated other comprehensive income into net periodic benefit cost over the next fiscal year is approximately $40,000. We do not have any transition obligations or prior service costs recorded in accumulated other comprehensive income.

The following benefit payments are expected to be paid (in thousands):

2024	$	739
2025		264
2026		13
2027		106
2028		30
2029-2033		105
Total benefit payments expected to be paid	$	1,257

The weighted-average rates used for the years ended June 30 in determining the defined benefit pension plan’s net pension costs, were as follows:

	2023			2022
Discount rate		4.89	%		4.39	%
Expected long-term rate of return		6.24	%		6.10	%
Compensation increase rate		N/A			N/A

Our expected rate of return is determined based on a methodology that considers historical returns of multiple classes analyzed to develop a risk-free real rate of return and risk premiums for each asset class. The overall rate for each asset class was developed by combining a long-term inflation component, the risk-free real rate of return, and the associated risk premium. A weighted average rate was developed based on those overall rates and the target asset allocation of the plan.

Our defined benefit pension plan’s weighted average asset allocation at June 30 and weighted average target allocation were as follows:

							Target
	2023			2022			Allocation
Equity securities		64	%		49	%		53	%
Debt securities		14	%		20	%		41	%
Commodities		12	%		0	%		0	%
Other		10	%		31	%		6	%
		100	%		100	%		100	%

The underlying basis of the investment strategy of our defined benefit pension plan is to ensure that pension funds are available to meet the plan’s benefit obligations when due. Our investment strategy is a long-term risk controlled approach using diversified investment options with relatively minimal exposure to volatile investment options like derivatives.

The fair values by asset category of our defined benefit pension plan at June 30, 2023 were as follows (in thousands):

			Quoted
			Prices in
			Active
			Markets for		Significant		Significant
			Identical		Observable		Unobservable
			Assets		Inputs		Inputs
	Total		(Level 1)		(Level 2)		(Level 3)
Equity securities(1)	$	653	$	653	$	—	$	—
Debt securities(2)	$	141	$	141	$	—	$	—
Other(3)	$	231	$	231	$	—	$	—
Total	$	1,025	$	1,025	$	—	$	—

(1) This category is comprised of publicly traded funds, of which 50% are large-cap funds, 26% are developed and emerging market funds, 18% are mid-cap funds, and 6% are small-cap funds.

(2) This category is comprised of publicly traded funds, of which 34% are U.S. fixed income funds and 66% are corporate and foreign market fixed income funds.

(3) This category is comprised of commodities and cash alternatives.

41

 

I. Stockholders’ Equity

Treasury Stock

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

Treasury Stock repurchases for the year ended June 30, 2023 were as follows:

	Shares		Average Cost		Total Cost (in thousands)
Shares purchased under Repurchase Plan		140,812	$	9.19	$	1,294
Shares acquired from employees for restricted stock vesting		23,587		8.86		209
Total		164,399			$	1,503

Treasury Stock repurchases for the year ended  June 30, 2022 were as follows:

	Shares		Average Cost		Total Cost (in thousands)
Shares purchased under Repurchase Plan		406,817	$	12.76	$	5,190
Shares acquired from employees for restricted stock vesting		28,263		11.08		313
Total		435,080			$	5,503

Treasury 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.

Stock Incentive Plans

For the years ended June 30, 2023and June 30, 2022, the Company had no stock options outstanding.

Restricted stock activity for the year ended June 30, 2023 was as follows:

			Weighted
	Number of		Average Grant
	Shares –		Date Fair
	2009 Plan		Value
Nonvested at June 30, 2022		1,666	$	8.50
Granted		—	$	—
Vested		1,666	$	8.50
Forfeited		—	$	—
Nonvested at June 30, 2023		—	$	—
Available for grant at June 30, 2023		—

				Weighted
	Number of			Average Grant
	Shares –			Date Fair
	2020 Plan			Value
Nonvested at June 30, 2022		186,227		$	12.56
Granted		123,000		$	8.79
Vested		(71,146	)	$	13.04
Forfeited		(14,399	)	$	11.69
Nonvested at June 30, 2023		223,682		$	10.39
Available for grant at June 30, 2023		349,377

42

 

Restricted stock activity for the year ended  June 30, 2022 was as follows:

				Weighted
	Number of			Average Grant
	Shares –			Date Fair
	2009 Plan			Value
Nonvested at June 30, 2021		61,324		$	11.47
Granted		—		$	—
Vested		(51,326	)	$	11.52
Forfeited		(8,332	)	$	10.88
Nonvested at June 30, 2022		1,666		$	8.50
Available for grant at June 30, 2022		—

				Weighted
	Number of			Average Grant
	Shares –			Date Fair
	2020 Plan			Value
Nonvested at June 30, 2021		87,773		$	16.81
Granted		135,850		$	10.99
Vested		(25,896	)	$	16.81
Forfeited		(11,500	)	$	16.81
Nonvested at June 30, 2022		186,227		$	12.56
Available for grant at June 30, 2022		472,377

Restricted stock grants, granted to members of our Board of Directors and certain key members of our management team, vest over a period of years from the date of grant and the unvested shares cannot be sold or otherwise transferred and the right to receive dividends, if declared by our Board of Directors, is forfeitable until the shares become vested. The total remaining unrecognized compensation cost related to unvested restricted stock shares amounted to $2.0 million at June 30, 2023 and the weighted average remaining requisite service period of unvested restricted stock shares was 2.1 years.

J. Commitments

We lease a total of approximately 162,000 square feet at our manufacturing facility in Vista, California from an unaffiliated third party under a non-cancelable operating lease. On July 31, 2013, we executed a third amendment to the lease for our manufacturing facility in Vista, California. As a result of this amendment, our facility lease has been extended through March 2024.

NAIE leases facility space in Manno, Switzerland from two unaffiliated third parties. The leased spaces total approximately 125,000 square feet. We primarily use the facilities for manufacturing, packaging, warehousing and distributing nutritional supplement products for the European and Asian marketplaces. On July 1, 2019, NAIE extended the lease on its main manufacturing facility for an additional five years through June 30, 2024. On May 4, 2022, NAIE further extended the lease on its main manufacturing facility for a new term of ten years effective January 1, 2023 with a new expiration date of December 31, 2032, with an option to extend one year.

On November 5, 2018, NAIE entered into a lease with Sofinol SA for approximately 2,870 square meters of commercial warehouse space in a building located on the property adjacent to the leasehold for the primary existing NAIE facility in Manno, Switzerland. NAIE uses the space primarily for raw material storage. The lease is for an initial five-year term commencing on January 1, 2019 and NAIE can terminate the lease with 12 months advance notice given on June 30th or December 31st each year of the initial term. At the end of the initial term the lease transfers to an indefinite tenancy at the same rental rate terminable by NAIE or the landlord upon 12 months' advance notice. This initial term of this lease ends on December 31, 2023 and as of June 30, 2023, we have not provided notification of terminating this lease so the term automatically extended to December 31, 2024.

Minimum rental commitments (exclusive of property tax, insurance and maintenance) under all non-cancelable operating leases with initial or remaining lease terms in excess of one year, including the lease agreements referred to above, are set forth below as of June 30, 2023 (in thousands): 

											There-
	2024		2025		2026		2027		2028		after		Total
Gross minimum rental commitments	$	2,868	$	1,369	$	1,369	$	1,369	$	1,369	$	6,162	$	14,506

Rental expense totaled $3.3 million for the fiscal year ended June 30, 2023 and $3.4 million for the fiscal year ended June 30, 2022.

43

 

K. Economic Dependency

We had substantial net sales to certain customers during the fiscal years ended June 30 shown in the following table. The loss of any of these customers, or a significant decline in sales or the growth rate of sales to these customers, or in their ability to make payments when due, could have a material adverse impact on our net sales and net income. Net sales to any one customer representing 10% or more of the respective year’s consolidated net sales were as follows (dollars in thousands):

	Fiscal 2023		Fiscal 2022
Customer 1	$	61,646	$	37,218
Customer 2		48,066		54,599
Customer 3		(a)		31,552
	$	109,712	$	123,369

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

Accounts receivable from these customers totaled $1.8 million at June 30, 2023 and $10.7 million at June 30, 2022.

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

	Year ended June 30,
	2023					2022
			% of Total					% of Total
	Raw Material		Raw			Raw Material		Raw
	Purchases by		Material			Purchases by		Material
	Supplier		Purchases			Supplier		Purchases
Supplier 1	$	11,487		13	%	$	14,065		17	%
	$	11,487		13	%	$	14,065		17	%

L. Derivatives and Hedging

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

During the year ended June 30, 2023 and prior, we entered into forward contracts designated as cash flow hedges primarily to protect against the foreign exchange risks inherent in our forecasted sales of products at prices denominated in currencies other than the U.S. dollar. These contracts are expected to be settled through September 2024. For derivative instruments that are designated and qualify as cash flow hedges, we record the effective portion of the gain or loss on the derivative in accumulated other comprehensive income (OCI) as a separate component of stockholders’ equity and subsequently reclassify these amounts into earnings in the period during which the hedged transaction is recognized in earnings.

For foreign currency contracts designated as cash flow hedges, hedge effectiveness is measured using the spot rate. Changes in the spot-forward differential are excluded from the test of hedge effectiveness and are recorded currently in earnings as revenue. We measure effectiveness by comparing the cumulative change in the hedge contract with the cumulative change in the hedged item as well as ensuring the assumptions we made at hedge inception have not materially changed. No hedging relationships were terminated as a result of ineffective hedging for the years ended June 30, 2023 and June 30, 2022.

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

As of June 30, 2023, the notional amounts of our foreign exchange contracts accounted for as cash flow hedges were $31.7 million (€28.4 million). As of June 30, 2023, a net gain of approximately $0.2 million offset by approximately $0.1 million of deferred taxes, related to derivative instruments designated as cash flow hedges was recorded in OCI. As of June 30, 2022, a net loss of approximately $2.3 million, offset by approximately $0.5 million of deferred taxes, related to derivative instruments designated as cash flow hedges was recorded in OCI. It is expected that $0.2 million of the gross gain as of June 30, 2023, will be reclassified into earnings in the next 12 months along with the earnings effects of the related forecasted transactions.

During the year ended June 30, 2023, we recognized $0.5 million of net gains in OCI, reclassified $3.1 million of gains and forward point amortization from OCI to Net Sales. During the year ended June 30, 2022, we recognized $5.4 million of net gains in OCI, reclassified $3.0 million of gains and forward point amortization from OCI to Net Sales.

For foreign currency contracts not designated as cash flow hedges, changes in the fair value of the hedge are recorded directly to foreign exchange gain or loss in other income in an effort to offset the change in valuation of the underlying hedged item. During the year ended June 30, 2023, we entered into forward contracts in order to hedge foreign exchange risk associated with our lease liability at NAIE, which is denominated in Swiss Francs (CHF). As of June 30, 2023, the notional amounts of our foreign exchange contracts not designated as cash flow hedges were approximately $12.3 million (CHF 11.1 million).

We are exposed to interest rate fluctuations related to our $10.0 million Term Note with Wells Fargo, which carries a variable interest rate of 1.80% above the SOFR rolling 30-day average. To manage our exposure to this variable rate, on August 23, 2021, we entered into a floored interest rate swap that fixes our all-in rate on this loan to 2.4% for the first three years of the term loan. Fluctuations in the relation of our contractual swap rate to current market rates are recorded as an asset or liability with an offset to OCI at the end of each reporting period. Interest expense is adjusted for the difference between the actual SOFR spread and the swap contractual rate such that our effective interest expense for each period is equal to our hedged rate of 2.4%.

44

 

M. Contingencies

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

COVID-19 Pandemic

The Company continues to monitor and evaluate the risks to public health and the impact on overall global business activity related to the COVID-19 pandemic, including 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.

N. Segment Information

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

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

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

	2023		2022
Net Sales
Private-label contract manufacturing	$	145,294	$	154,798
Patent and trademark licensing		8,721		16,168
	$	154,015	$	170,966

	2023			2022
Income from Operations
Private-label contract manufacturing	$	9,488		$	15,667
Patent and trademark licensing		3,021			6,780
Income from operations of reportable segments		12,509			22,447
Corporate expenses not allocated to segments		(7,796	)		(8,768	)
	$	4,713		$	13,679

	2023		2022
Assets
Private-label contract manufacturing	$	102,495	$	115,649
Patent and trademark licensing		31,657		30,354
	$	134,152	$	146,003

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

Net sales by geographic region, based on the customers’ location, for the two years ended June 30 were as follows (in thousands):

	2023		2022
United States	$	109,277	$	115,255
Markets outside the United States		44,738		55,711
Total net sales	$	154,015	$	170,966

Products manufactured by NAIE accounted for 79% of consolidated net sales in markets outside the U.S. in fiscal 2023 and 84% in fiscal 2022. No products manufactured by NAIE were sold in the U.S. during the fiscal years ended June 30, 2023 and 2022.

45

 

Long-lived assets by geographic region, based on the location of the company or subsidiary at which they were located or made, for the two years ended June 30 were as follows (in thousands):

	2023		2022
United States	$	53,536	$	43,769
Europe		20,674		22,505
Total Long-Lived Assets	$	74,210	$	66,274

Total assets by geographic region, based on the location of the company or subsidiary at which they were located or made, for the two years ended June 30 were as follows (in thousands):

	2023		2022
United States	$	89,167	$	83,443
Europe		44,985		62,560
Total Assets	$	134,152	$	146,003

Capital expenditures by geographic region, based on the location of the company or subsidiary at which they were located or made, for the two years ended June 30 were as follows (in thousands):

	2023		2022
United States	$	13,210	$	25,383
Europe		314		1,105
Total Capital Expenditures	$	13,524	$	26,488

O. Subsequent Events

On July 18, 2023, we entered into a Fourth Amendment to Lease amending and extending the term of the lease of its Vista, California manufacturing facilities. The Fourth Amendment extends the term of the Lease by an additional ten years and five months commencing April 1, 2024. The amended Lease covering two buildings and approximately 162,000 square feet will result in an increase in base rent to $1.50 per square foot, after five free months of base rent beginning at the commencement of the extended term. NAI intends to construct substantial improvements to the facilities including but not limited to installation of an approximately $2.3 million solar electrical generating system on both buildings, and other substantial improvements. Pursuant to the Fourth Amendment, the Landlord will reimburse NAI for up to $1.1 million of these tenant improvements to the buildings.

On August 16, 2023, we announced the temporary closure of our new high-speed powder processing facility in Carlsbad, California due to excess inventory on hand at one of our largest customer’s and their efforts to rebalance supply and demand. We expect this facility will re-open and our prior level of operations will resume late in our third fiscal quarter of 2024, but there can be no assurance this customer will resolve its supply and demand issues in the timeframe expected or what level of business we will have with this customer if they purchase from us in the future. Closure of this plant will contribute to an anticipated net loss in the first half of fiscal 2024, net income in the second half, and an overall net loss in fiscal 2024. If this customer is unable to resolve its inventory issues in this timeframe, or our sales forecast is not realized we will likely experience a continuing material decrease in revenues during fiscal year 2024.

On September 15, 2023, our Board of Directors adopted a Clawback Policy requiring recoupment of certain executive compensation in the event of an accounting restatement resulting from material noncompliance with financial reporting requirements under the federal securities laws.

46

 

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure 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, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2023. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of June 30, 2023.

(b) Management’s Annual Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company, and for performing an assessment of the effectiveness of internal control over financial reporting as of June 30, 2023. For this purpose, internal control over financial reporting refers to a process designed by, or under the supervision of, our principal executive and financial officers and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. Internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material adverse effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management performed an assessment of the effectiveness of our internal control over financial reporting as of June 30, 2023 based upon criteria in an Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) (2013 framework). Based on this assessment, management believes our internal control over financial reporting was effective as of June 30, 2023 based on the criteria issued by COSO.

This assessment does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not required to be attested to by our independent registered public accounting firm pursuant to applicable law and rules that permit the Company to provide only the management’s report as part of this assessment.

(c) Changes in Internal Control Over Financial Reporting

There were no changes to our internal control over financial reporting during the fourth quarter ended June 30, 2023 that have materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

None.

PART III

The information called for under Items 10- 14 of this Part III will be incorporated by reference from our definitive proxy statement for our Annual Meeting of Stockholders to be held on December 7, 2023, to be filed on or before October 28, 2023.

47

PART IV

ITEM  15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

The following documents are filed as part of this report:

(1) Financial Statements. The financial statements listed below are included under Item 8 of this report:

• Consolidated Balance Sheets as of June 30, 2023 and 2022;

• Consolidated Statements of Operations and Comprehensive Income for the years ended June 30, 2023 and 2022;

• Consolidated Statements of Stockholders’ Equity for the years ended June 30, 2023 and 2022;

• Consolidated Statements of Cash Flows for the years ended June 30, 2023 and 2022; and

• Notes to Consolidated Financial Statements.

(2) 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 December 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 September 8, 2005
10.1	Lease of Facilities in Vista, California between NAI and Calwest Industrial Properties, LLC, a California limited liability company (lease reference date June 12, 2003)	Exhibit 10.10 of NAI’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2003, filed with the commission on November 5, 2003
10.2	Form of Indemnification Agreement entered into between NAI and each of its directors	Exhibit 10.15 of NAI’s Annual Report on Form 10-K for the fiscal year ended June 30, 2004, filed with the commission on September 14, 2004
10.3	2009 Omnibus Incentive Plan*	Attachment D of NAI’s definitive Proxy Statement filed with the commission on October 16, 2009
10.4	Nonqualified Incentive Plan*	Exhibit 10.1 to NAI’s Current Report on Form 8-K dated July 16, 2020, filed with the commission on July 22, 2020
10.5	License and Fee Agreement effective November 10, 2010 by and among Roger Harris, Mark Dunnett, Kenny Johansson and NAI	Exhibit 10.40 of NAI’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2010, filed with the commission on November 12, 2010
10.6	ISDA 2002 Master Agreement dated as of March 10, 2011 by and between Bank of America N.A. and NAI (with Schedule dated March 10, 2011)	Exhibit 10.31 of NAI’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2011, filed with the commission on May 16, 2011
10.7	Third amendment to the Lease of Facilities in Vista, California between NAI and CWCA Vista Distribution 77, LLC, a Delaware limited liability company	Exhibit 10.40 of NAI’s Annual Report on Form 10-K for the fiscal year ended June 30, 2013, filed with the commission on September 19, 2013
10.8	Lease of Facilities in Manno, Switzerland between NAIE and Mr. Silvio Tarchini effective July 1, 2014 (English translation)	Exhibit 10.38 of NAI’s Annual Report on Form 10-K for the fiscal year ended June 30, 2014, filed with the commission on September 25, 2014.
10.9	Amended and Restated Employment Agreement, by and between NAI and Mark A. LeDoux, effective October 1, 2015*	Exhibit 10.1 of NAI’s Current Report on Form 8-K dated October 1, 2015, filed with the commission on October 1, 2015.
10.10	Amended and Restated Employment Agreement, by and between NAI and Kenneth E. Wolf, effective October 1, 2015*	Exhibit 10.2 of NAI’s Current Report on Form 8-K dated October 1, 2015, filed with the commission on October 1, 2015.
10.11	Amended and Restated Employment Agreement, by and between NAI and Michael E. Fortin, effective October 1, 2015*	Exhibit 10.3 of NAI’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2015, filed with the commission on November 12, 2015.
10.12	First amendment to credit agreement by and between NAI and the Wells Fargo Bank N.A. effective as of February 1, 2016	Exhibit 10.01 of NAI’s Quarterly Report on Form 10-Q for the quarterly period ended December 31, 2015, filed with the commission on February 9, 2016.
10.13	First amendment to the Amended and Restated Employment Agreement, by and between NAI and Michael E. Fortin, effective September 1, 2016*	NAI’s Current Report on Form 8-K dated September 1, 2016, filed with the commission on September 6, 2016
10.14	First amendment to the Amended and Restated Employment Agreement, by and between NAI and Mark A. LeDoux, effective July 1, 2018*	Exhibit 10.1 of NAI’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2018, filed with the commission on November 13, 2018

48

10.15	First amendment to the Amended and Restated Employment Agreement, by and between NAI and Kenneth E. Wolf, effective July 1, 2018*	Exhibit 10.2 of NAI’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2018, filed with the commission on November 13, 2018
10.16	Second amendment to the Amended and Restated Employment Agreement, by and between NAI and Michael E. Fortin, effective July 1, 2018*	Exhibit 10.3 of NAI’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2018, filed with the commission on November 13, 2018
10.17	Lease of Facilities in Manno, Switzerland between NAIE and Mr. Silvio Tarchini dated October 19, 2018	Exhibit 10.4 of NAI’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2018, filed with the commission on November 13, 2018
10.18	Lease of Parking Places in Manno, Switzerland between NAIE and Mr. Silvio Tarchini dated October 19, 2018	Exhibit 10.5 of NAI’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2018, filed with the commission on November 13, 2018
10.19	Lease of Facilities in Manno, Switzerland between NAIE and Sofinol SA dated November 5, 2018	Exhibit 10.6 of NAI’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2018, filed with the commission on November 13, 2018
10.20	Amended and Restated Exclusive Manufacturing Agreement with Juice Plus+ dated March 31, 2019	Exhibit 10.48 of NAI’s Current Report on Form 8-K Form 8-K dated March 31, 2019, filed with the commission on April 5, 2019
10.21	Third amendment to the Amended and Restated Employment Agreement, by and between NAI and Michael E. Fortin, effective July 1, 2019*	Exhibit 10.61 of NAI's Annual Report on Form 10-K for the annual period ended June 30, 2019, filed with the commission on September 24, 2019
10.22	Second amendment to the Amended and Restated Employment Agreement, by and between NAI and Mark LeDoux, effective July 1, 2021*	Exhibit 10.65 of NAI’s Current Report on Form 8-K dated July 1, 2021, filed with the commission on July 9, 2021
10.23	Second amendment to the Amended and Restated Employment Agreement, by and between NAI and Kenneth E. Wolf, effective July 1, 2021*	Exhibit 10.66 of NAI’s Current Report on Form 8-K dated July 1, 2021, filed with the commission on July 9, 2021
10.24	Fourth amendment to the Amended and Restated Employment Agreement, by and between NAI and Michael E. Fortin, effective July 1, 2021*	Exhibit 10.67 of NAI’s Current Report on Form 8-K dated July 1, 2021, filed with the commission on July 9, 2021
10.25	Credit Agreement by and between NAI and Wells Fargo Bank, N.A. effective as of May 24, 2021	Exhibit 10.1 of NAI’s Current Report on Form 8-K dated May 24, 2021 filed with the commission on May 27, 2021.
10.26	2020 Omnibus Incentive Plan*	Annex I of NAI’s definitive Proxy Statement filed with the commission on October 26, 2020
10.27	First Amendment to Credit Agreement by and between NAI and Wells Fargo Bank, N.A. effective as of August 16, 2021	Exhibit 10.3 of NAI’s Current Report on Form 8-K dated August 16, 2021 filed with the commission on August 24, 2021
10.28	Revolving Line of Credit Note made by NAI for the benefit of Wells Fargo Bank. N.A. dated August 16, 2021 in the amount of $20,000,000	Exhibit 10.4 of NAI’s Current Report on Form 8-K dated August 16, 2021 filed with the commission on August 24, 2021
10.29	Term Note by and between NAI and Wells Fargo Bank, N.A. effective as of August 16, 2021	Exhibit 10.5 of NAI’s Current Report on Form 8-K dated August 16, 2021 filed with the commission on August 24, 2021
10.30	Security Agreement by and between NAI and Wells Fargo Bank, N.A. effective as of August 16. 2021	Exhibit 10.6 of NAI’s Current Report on Form 8-K dated August 16, 2021 filed with the commission on August 24, 2021
10.31	Second Amendment to Credit Agreement by and between NAI and Wells Fargo Bank, N.A. effective January 31, 2022	Exhibit 10.33 of NAI’s Quarterly Report on Form 10-Q for the quarterly period ended December 31, 2021, filed with the commission on February 9, 2022
10.32	Lease of Facilities in Manno, Switzerland between NAIE and Mr. Silvio Tarchini dated May 4, 2022	Exhibit 10.34 of NAI's Annual Report on Form 10-K for the fiscal year ended June 30, 2022, filed with the commission on September 21, 2022.
10.33	Third Amendment to Credit Agreement by and between NAI and Wells Fargo effective as of September 19, 2022.	Exhibit 10.35 of NAI's Current Report on Form 8-K dated October 12, 2022, file with the commission on October 13, 2022
10.34	Revolving Line of Credit Note made by NAI for the benefit of Wells Fargo dated September 19, 2022 in the amount of $20,000,000.	Exhibit 10.36 of NAI's Current Report on Form 8-K dated October 12, 2022, file with the commission on October 13, 2022
10.35	Fourth  Amendment to Lease of NAI manufacturing facilities in Vista, California between NAI, the tenant, and Park Center Industrial ILP, LLC, a Delaware limited liability company, the landlord	Exhibit 10.17 of NAI's Current Report on Form 8-K dated July 21, 2023, file with the commission on July 24, 2023.
10.36	Clawback Policy	Filed herewith
21	Subsidiaries of the Company	Filed herewith
23.1	Consent of Independent Registered Public Accounting Firm	Filed herewith
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	Inline XBRL Instance Document (the Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)	Furnished herewith
101.SCH	Inline XBRL Taxonomy Extension Schema Document	Furnished herewith
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document	Furnished herewith
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document	Furnished herewith
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document	Furnished herewith
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document	Furnished herewith
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)	Furnished herewith

* Indicates management contract or compensatory plan or arrangement.

49

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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, thereunto duly authorized.

Date: September 21, 2023

NATURAL ALTERNATIVES INTERNATIONAL,  INC.
By:	/s/ Mark A. LeDoux
	Mark A. LeDoux, Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of Natural Alternatives International, Inc. and in the capacities and on the dates indicated.

Signature	Title	Date
/s/ Mark A. LeDoux	Chief Executive Officer and Chairman of the Board of Directors	September 21, 2023
(Mark A. LeDoux)	(principal executive officer)
/s/ Michael E. Fortin	Chief Financial Officer	September 21, 2023
(Michael E. Fortin)	(principal financial officer and principal accounting officer)
/s/ Alan G. Dunn	Director	September 21, 2023
(Alan G. Dunn)
/s/ L. Kay Matherly	Director	September 21, 2023
(L. Kay Matherly)
/s/ Guru Ramanathan	Director	September 21, 2023
(Guru Ramanathan)

50

EX-10.36

Exhibit 10.36

NATURAL ALTERNATIVES INTERNATIONAL, INC.

CLAWBACK POLICY

Introduction

The Board of Directors (the "Board") of Natural Alternatives International, Inc. (“the Company”) believes that it is in the best interests of the Company and its shareholders to create and maintain a culture that emphasizes integrity and accountability and that reinforces the Company's compensation philosophy. The Board has therefore adopted this policy which provides for the recoupment of certain executive compensation in the event of an accounting restatement resulting from material noncompliance with financial reporting requirements under the federal securities laws (the "Policy"). This Policy is designed to comply with Section 10D of the Securities Exchange Act of 1934 (the "Exchange Act").

Administration

This Policy shall be administered by the Board and by the Human Resources Committee. References herein to the Board shall be deemed references to the Board and the Human Resources Committee. Any determinations made by the Human Resources Committee shall be final and binding on all affected individuals or may be referred by the Human Resources Committee to the Board. Any determinations made by the Board shall be final and binding on all affected individuals.

Covered Executives

This Policy applies to the Company's current and former executive officers, as determined by the Board in accordance with Section 10D of the Exchange Act and the listing standards of the national securities exchange on which the Company's securities are listed, and such other employees who may from time to time be deemed subject to the Policy by the Board ("Covered Executives").

Recoupment; Accounting Restatement

In the event the Company is required to prepare an accounting restatement of its financial statements due to the Company's material noncompliance with any financial reporting requirement under the securities laws, the Board will require reimbursement or forfeiture of any excess Incentive Compensation received by any Covered Executive during the three completed fiscal years immediately preceding the date on which the Company is required to prepare an accounting restatement.

Incentive Compensation

For purposes of this Policy, Incentive Compensation means any of the following; provided that, such compensation is granted, earned, or vested based wholly or in part on the attainment of a financial reporting measure:

● Annual bonuses and other short- and long-term cash incentives.

● Stock options.

● Stock appreciation rights.

● Restricted stock.

● Restricted stock units.

● Performance shares.

● Performance units.

Financial reporting measures include:

● Company stock price.

● Total shareholder return.

● Revenues.

● Net income.

● Earnings before interest, taxes, depreciation, and amortization (EBITDA).

● Funds from operations.

● Liquidity measures such as working capital or operating cash flow.

● Return measures such as return on invested capital or return on assets.

● Earnings measures such as earnings per share.

Excess Incentive Compensation: Amount Subject to Recovery

The amount to be recovered will be the excess of the Incentive Compensation paid to the Covered Executive based on the erroneous data over the Incentive Compensation that would have been paid to the Covered Executive had it been based on the restated results, as determined by the Board.

If the Board cannot determine the amount of excess Incentive Compensation received by the Covered Executive directly from the information in the accounting restatement, then it will make its determination based on a reasonable estimate of the effect of the accounting restatement.

Method of Recoupment

The Board will determine, in its sole discretion, the method for recouping Incentive Compensation hereunder which may include, without limitation:

(a) requiring reimbursement of cash Incentive Compensation previously paid;

(b) seeking recovery of any gain realized on the vesting, exercise, settlement, sale, transfer, or other disposition of any equity-based awards;

(c) offsetting the recouped amount from any compensation otherwise owed by the Company to the Covered Executive;

(d) cancelling outstanding vested or unvested equity awards; and/or

(e) taking any other remedial and recovery action permitted by law, as determined by the Board.

No Indemnification

The Company shall not indemnify any Covered Executives against the loss of any incorrectly awarded Incentive Compensation.

2

Interpretation

The Board is authorized to interpret and construe this Policy and to make all determinations necessary, appropriate, or advisable for the administration of this Policy. It is intended that this Policy be interpreted in a manner that is consistent with the requirements of Section 10D of the Exchange Act and any applicable rules or standards adopted by the Securities and Exchange Commission or any national securities exchange on which the Company's securities are listed.

Effective Date

This Policy shall be effective as of the date it is adopted by the Board (the "Effective Date") and shall apply to Incentive Compensation that is approved, awarded or granted to Covered Executives on or after that date.

Amendment; Termination

The Board may amend this Policy from time to time in its discretion and shall amend this Policy as it deems necessary to reflect final regulations adopted by the Securities and Exchange Commission under Section 10D of the Exchange Act and to comply with any rules or standards adopted by a national securities exchange on which the Company's securities are listed. The Board may terminate this Policy at any time.

Other Recoupment Rights

The Board intends that this Policy will be applied to the fullest extent of the law. The Board may require that any employment agreement, equity award agreement, or similar agreement entered into on or after the Effective Date shall, as a condition to the grant of any benefit thereunder, require a Covered Executive to agree to abide by the terms of this Policy. Any right of recoupment under this Policy is in addition to, and not in lieu of, any other remedies or rights of recoupment that may be available to the Company pursuant to the terms of any similar policy in any employment agreement, equity award agreement, or similar agreement and any other legal remedies available to the Company.

Impracticability

The Board shall recover any excess Incentive Compensation in accordance with this Policy unless such recovery would be impracticable, as determined by the Board in accordance with Rule 10D-1 of the Exchange Act and the listing standards of the national securities exchange on which the Company's securities are listed.

Successors

This Policy shall be binding and enforceable against all Covered Executives and their beneficiaries, heirs, executors, administrators or other legal representatives.

3

EX-21

Exhibit 21

List of Subsidiaries of

Natural Alternatives International, Inc., a Delaware corporation

Name of Subsidiary	State or other Jurisdiction of Incorporation or Organization
Natural Alternatives International Europe
S.A.	Switzerland

EX-23.1

EXHIBIT 23.1

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the Registration Statement (Form S-8 No. 333-254014) of our report dated September 21, 2023, with respect to the consolidated financial statements of Natural Alternatives International, Inc. included in this Annual Report (Form 10-K) of Natural Alternatives International, Inc. for the fiscal year ended  June 30, 2023.

/s/ HASKELL & WHITE LLP

Irvine, California

September 21, 2023

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 Annual Report on Form 10-K 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 (or persons performing the equivalent functions):

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: September 21, 2023

/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 E. Fortin, Chief Financial Officer of Natural Alternatives International, Inc., certify that:

1. I have reviewed this Annual Report on Form 10-K 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 (or persons performing the equivalent functions):

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: September 21, 2023

/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, to such officer’s knowledge, that the Annual Report on Form 10-K for the fiscal year ended June 30, 2023 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: September 21, 2023	/s/ Mark A. LeDoux
	Mark A. LeDoux, Chief Executive Officer
Date: September 21, 2023	/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-K or as a separate disclosure document.

XML

Document And Entity Information - USD ($)	12 Months Ended
	Jun. 30, 2023	Sep. 19, 2023	Dec. 31, 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	FY
Document Fiscal Year Focus	2023
Document Type	10-K
Document Annual Report	true
Document Period End Date	Jun. 30, 2023
Document Transition Report	false
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
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Emerging Growth Company	false
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Document Financial Statement Error Correction [Flag]	false
ICFR Auditor Attestation Flag	false
Entity Shell Company	false
Entity Public Float			$ 50,460,000
Entity Common Stock, Shares Outstanding		6,088,813
Auditor Name	HASKELL & WHITE LLP
Auditor Firm ID	200
Auditor Location	Irvine, California

XML

Consolidated Balance Sheets - USD ($) $ in Thousands	Jun. 30, 2023	Jun. 30, 2022
Current assets:
Cash and cash equivalents	$ 13,604	$ 21,833
Accounts receivable – less allowance for doubtful accounts of $23 at June 30, 2023 and $3,383 at June 30, 2022	7,022	17,422
Inventories, net	29,694	32,475
Income tax receivable	305	67
Forward contracts	390	3,144
Prepaids and other current assets	5,995	1,805
Total current assets	57,010	76,746
Property and equipment, net	53,841	44,573
Operating lease right-of-use assets	20,369	21,701
Deferred tax asset – noncurrent	355	0
Other noncurrent assets, net	2,577	2,983
Total assets	134,152	146,003
Current liabilities:
Accounts payable	7,778	16,185
Accrued liabilities	2,409	2,787
Accrued compensation and employee benefits	2,246	3,673
Customer deposits	317	140
Short-term liability – operating leases	2,448	634
Income taxes payable	374	174
Mortgage note payable, current portion	312	302
Total current liabilities	15,884	23,895
Long-term liability – operating leases	18,965	21,413
Long-term pension liability	339	344
Deferred tax liability	0	1,220
Mortgage note payable, net of current portion	9,205	9,493
Income taxes payable, noncurrent	987	1,118
Total liabilities	45,380	57,483
Commitments and contingencies (Notes D, F, H, J and M)
Stockholders’ equity:
Preferred stock; $.01 par value; 500,000 shares authorized; none issued or outstanding	0	0
Common stock; $.01 par value; 20,000,000 shares authorized at June 30, 2023 and June 30, 2022, issued and outstanding (net of treasury shares) 6,073,813 at June 30, 2023 and 6,129,611 at June 30, 2022	91	89
Additional paid-in capital	31,436	30,423
Retained earnings	80,183	77,661
Treasury stock, at cost, 3,240,593 shares at June 30, 2023 and 3,061,795 at June 30, 2022	(22,855)	(21,352)
Accumulated other comprehensive income	(83)	1,699
Total stockholders’ equity	88,772	88,520
Total liabilities and stockholders’ equity	$ 134,152	$ 146,003

XML

Consolidated Balance Sheets (Parentheticals) - USD ($) $ in Thousands	Jun. 30, 2023	Jun. 30, 2022
Accounts receivable, allowance for doubtful accounts	$ 23	$ 3,383
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 issued (in shares)	6,073,813	6,129,611
Common stock, shares outstanding (in shares)	6,073,813	6,129,611
Treasury stock, shares (in shares)	3,240,593	3,061,795

XML

Consolidated Statements of Operations and Comprehensive Income - USD ($) $ in Thousands	12 Months Ended
	Jun. 30, 2023	Jun. 30, 2022
Net sales	$ 154,015	$ 170,966
Cost of goods sold	135,857	140,457
Gross profit	18,158	30,509
Other selling, general and administrative expenses	14,869	16,950
Recoveries of uncollectible accounts receivable	(1,424)	(120)
Income from operations	4,713	13,679
Other income (expense):
Interest income	33	0
Interest expense	(451)	(83)
Foreign exchange (loss) gain	(658)	118
Other, net	(82)	(55)
Total other expense	(1,158)	(20)
Income before income taxes	3,555	13,659
Provision for income taxes	1,033	2,947
Net income	2,522	10,712
Change in minimum pension liability, net of tax	64	94
Unrealized (loss) gain resulting from change in fair value of derivative instruments, net of tax	(1,846)	2,166
Comprehensive income	$ 740	$ 12,972
Net income per common share:
Basic (in dollars per share)	$ 0.43	$ 1.75
Diluted (in dollars per share)	$ 0.43	$ 1.74
Weighted average common shares outstanding:
Basic (in shares)	5,863,083	6,117,044
Diluted (in shares)	5,877,559	6,155,118

XML

Consolidated Statements of Stockholders' Equity - USD ($) $ in Thousands	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	Treasury Stock, Common [Member]	AOCI Attributable to Parent [Member]	Total
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
Issuance of common stock for restricted stock grants (in shares)	135,850			0
Issuance of common stock for restricted stock grants	$ 1	(1)	0	$ 0	0	0
Compensation expense related to stock compensation plans	$ 0	968	0	$ 0	0	$ 968
Treasury Stock Acquired, Shares (in shares)	0			435,080		435,080
Repurchase of common stock	$ 0	0	0	$ (5,503)	0	$ (5,503)
Forfeiture of restricted stock (in shares)	0			19,832
Forfeiture of restricted stock	$ 0	0	0	$ 0	0	0
Share correction	0	0	0	0	0	0
Change in minimum pension liability, net of tax	0	0	0	0	94	94
Unrealized gain (loss) resulting from change in fair value of derivative instruments, net of tax	0	0	0	0	2,166	2,166
Net income (loss)	$ 0	0	10,712	$ 0	0	10,712
Repurchase of common stock						$ (5,503)
Balance (in shares) at Jun. 30, 2022	9,191,406			3,061,795		6,129,611
Balance at Jun. 30, 2022	$ 89	30,423	77,661	$ (21,352)	1,699	$ 88,520
Share correction (in shares)	51,191			39,086
Issuance of common stock for restricted stock grants (in shares)	123,000			0
Issuance of common stock for restricted stock grants	$ 2	(2)	0	$ 0	0	0
Compensation expense related to stock compensation plans	$ 0	1,015	0	$ 0	0	$ 1,015
Treasury Stock Acquired, Shares (in shares)	0			164,399		164,399
Forfeiture of restricted stock (in shares)	0			14,399
Forfeiture of restricted stock	$ 0	0	0	$ 0	0	$ 0
Change in minimum pension liability, net of tax	0	0	0	0	64	64
Unrealized gain (loss) resulting from change in fair value of derivative instruments, net of tax	0	0	0	0	(1,846)	(1,846)
Net income (loss)	0	0	2,522	0	0	2,522
Repurchase of common stock	$ 0	0	0	$ (1,503)	0	$ (1,503)
Balance (in shares) at Jun. 30, 2023	9,314,406			3,240,593		6,073,813
Balance at Jun. 30, 2023	$ 91	$ 31,436	$ 80,183	$ (22,855)	$ (83)	$ 88,772

XML

Consolidated Statements of Cash Flows - USD ($) $ in Thousands	12 Months Ended
	Jun. 30, 2023	Jun. 30, 2022
Cash flows from operating activities
Net income	$ 2,522	$ 10,712
Adjustments to reconcile net income to net cash provided by operating activities:
Recoveries of uncollectible accounts receivable	(1,424)	(120)
Depreciation and amortization	4,250	4,165
Deferred income taxes	(974)	751
Non-cash lease expenses	2,831	2,749
Non-cash compensation	1,015	968
Pension expense	81	83
Gain on disposal of assets	(51)	(9)
Changes in operating assets and liabilities:
Accounts receivable	11,823	644
Inventories	2,781	(5,469)
Operating lease liabilities	(2,134)	(3,007)
Prepaids and other assets	(4,362)	75
Accounts payable and accrued liabilities	(8,606)	3,057
Forward contracts	863	(2,273)
Income taxes	(169)	451
Accrued compensation and employee benefits	(1,427)	(911)
Net cash provided by operating activities	7,019	11,866
Cash flows from investing activities
Purchases of property and equipment	(13,524)	(26,488)
Proceeds from sale of property and equipment	57	30
Net cash used in investing activities	(13,467)	(26,458)
Cash flows from financing activities
Repurchase of common stock	(1,503)	(5,503)
Borrowings on long-term debt	0	10,000
Payments on long-term debt	(278)	(205)
Net cash (used in) provided by financing activities	(1,781)	4,292
Net decrease in cash and cash equivalents	(8,229)	(10,300)
Cash and cash equivalents at beginning of year	21,833	32,133
Cash and cash equivalents at end of year	13,604	21,833
Supplemental disclosures of cash flow information
Taxes	1,842	2,608
Interest	$ 802	$ 206

XML

Note A - Organization and Summary of Significant Accounting Policies

12 Months Ended

Jun. 30, 2023

Notes to Financial Statements

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

A. Organization and Summary of Significant Accounting Policies

Organization

We provide private-label contract manufacturing services to companies that market and distribute vitamins, minerals, herbs, and other nutritional supplements, as well as other health care products, to consumers both within and outside the U.S. We also seek to commercialize our patent and trademark estate related to the ingredient known as beta-alanine sold under our CarnoSyn® and SR CarnoSyn® tradenames through direct raw material sales and various license and similar arrangements.

Subsidiaries

On January 22, 1999, Natural Alternatives International Europe S.A., a Swiss Corporation (NAIE) was formed as our wholly-owned subsidiary, based in Manno, Switzerland. In September 1999, NAIE opened a manufacturing facility and currently possesses manufacturing capability in encapsulation, powders, tablets, finished goods packaging, quality control laboratory testing, warehousing, distribution and administration.

Principles of Consolidation

The consolidated financial statements include the accounts of Natural Alternatives International, Inc. (NAI) and our wholly-owned subsidiary, NAIE. All intercompany accounts and transactions have been eliminated. The functional currency of NAIE, our foreign subsidiary, is the U.S. Dollar. Certain accounts of NAIE have been translated at either current or historical exchange rates, as appropriate, with gains and losses included in the consolidated statements of operations.

Recently Adopted Accounting Pronouncements

As of June 30, 2023, there have been no adopted accounting pronouncements issued by the FASB that materially impact the Consolidated Financial Statements of the Company.

Recently Issued Accounting and Regulatory Pronouncements

In June of 2016, the FASB issued ASU 2016-13 titled "Financial Instruments - Credit Losses (Topic 326)." This directive introduced a novel approach to assessing impairments known as the "current expected credit loss model" or "CECL." Unlike the previous standard, which focused on incurred losses, CECL centers on anticipated losses. Under this framework, organizations are obligated to acknowledge an allowance corresponding to their estimate of expected credit losses. The CECL model is applicable to a wide range of financial instruments, including debt instruments, trade receivables, lease receivables, financial guarantee contracts, and other loan commitments. Notably, there is no minimum threshold for recognizing impairment losses, and it mandates the evaluation of expected credit losses even for assets with minimal risk of loss. Future evaluations of credit losses will take this guidance into account. The adoption of ASU 2016-13 is not presently expected to significantly impact our consolidated financial statements upon its July 1, 2023 effective date.

Reclassifications

Certain amounts in the prior period consolidated financial statements have been reclassified to conform to the current period presentation. These reclassifications had no effect on reported net income.

Employee Retention Tax Credit

In March 2020, the Coronavirus Aid, Relief, and Economic Security Act was signed into law, providing numerous tax provisions and other stimulus measures, including the Employee Retention Tax Credit (“ERTC”). The Tax Payer Certainty and Disaster Tax Relief Act of 2020 and the American Rescue Plan Act of 2021 extended the availability of the ERTC. Under these expanded measures, we determined during fiscal 2023 that we qualified for the ERTC for the first three quarters of calendar 2021 and filed amended payroll tax returns that are expected to result in a net refund of $3.5 million. Although we don’t anticipate receiving the funds related to these amended returns until sometime in fiscal 2024, we recorded a receivable and recognized a benefit for this amount in our Consolidated Statements of Operations and Comprehensive Income in fiscal 2023 by applying the loss recovery model as codified by Accounting Standards Codification (“ASC”) section 450 “Contingencies” that indicates that an asset related to a recovery should be recognized when the recovery is determined to be probable. We recorded this benefit as a reduction to our payroll tax expense in the current year with $2.2 million of the benefit offsetting cost of goods sold and $1.3 million offsetting other selling, general and administrative expenses.

Cash and Cash Equivalents

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

Fair Value of Financial Instruments

Fair value is defined as the exchange price that would be received to sell an asset or paid to transfer a liability (i.e., the “exit price”) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. We use a three-level hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from independent sources. Unobservable inputs are inputs that reflect our assumptions about the inputs that market participants would use in pricing the asset or liability and are developed based on the best information available under the circumstances.

The fair value hierarchy is broken down into three levels based on the source of inputs. In general, fair values determined by Level 1 inputs use quoted prices (unadjusted) in active markets for identical assets or liabilities that we have the ability to access. We classify cash, cash equivalents, and marketable securities balances as Level 1 assets. The approximate fair value of cash and cash equivalents, accounts receivable, accounts payable and short-term borrowings is equal to book value due to the short-term nature of these items. Fair values determined by Level 2 inputs are based on quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active and models for which all significant inputs are observable or can be corroborated, either directly or indirectly by observable market data. Level 3 inputs are unobservable inputs for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability. These include certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

Except for cash and cash equivalents, as of June 30, 2023 and June 30, 2022, we did not have any financial assets or liabilities classified as Level 1. We classify derivative forward exchange contracts as Level 2 assets and liabilities. The fair values were determined by obtaining pricing from our bank.

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

	June 30,		June 30,
	2023		2022
Euro Forward Contract– Current Assets	$	250	$	3,144
Swiss Franc Forward Contract – Current Assets		140		109
Total Derivative Contracts – Current Assets		390		3,253
Interest Swap – Other noncurrent Assets		532		453
Euro Forward Contract– Other noncurrent Assets		15		561
Total Derivative Contracts – Other noncurrent Assets		547		1,014
Fair Value Net Asset – all Derivative Contracts	$	937	$	4,267

We also classify any outstanding line of credit and term loan balance as a Level 2 liability, as the fair value is based on inputs that can be derived from information available in publicly quoted markets. As of June 30, 2023, and June 30, 2022, 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 2022 or fiscal 2023.

Accounts Receivable

We perform ongoing credit evaluations of our customers and adjust credit limits based on payment history and customer credit-worthiness. An allowance for estimated doubtful accounts is maintained based on historical experience, including identified customer credit issues. We monitor collections regularly and adjust the allowance for doubtful accounts as necessary to recognize any changes in credit exposure. Upon conclusion that a receivable is uncollectible, we record the respective amount as a charge against allowance for doubtful accounts. To date, such doubtful accounts reserves, in the aggregate, have been adequate to cover collection losses.

In December 2022, we entered into an agreement to settle the remaining outstanding balance with a former customer whose accounts receivable balance was fully reserved in March 2020. As of the date of the agreement, the remaining amount due from this customer was $3.4 million dollars and as part of the settlement, we agreed to a reduced amount of $1.4 million. This reduced amount is to be paid based on an agreed upon payment schedule and if all payments are made as agreed the entire balance will be considered paid in full. As of June 30, 2023, the former customer made all scheduled payments totaling $850,000 and we have adjusted our accounts receivable reserve along with the corresponding accounts receivable balance such that the amount in excess of the settlement amount has been written-off and the reserve associated with the unpaid portion of the settlement is no longer reserved for.

Inventories

We operate primarily as a private-label contract manufacturer. We build products based upon anticipated demand or following receipt of customer specific purchase orders. From time to time, we build inventory for private-label contract manufacturing customers under a specific purchase order with delivery dates that may subsequently be rescheduled or canceled at the customer’s request. We value inventory at the lower of cost (first-in, first-out) or net realizable value on an item-by-item basis, including costs for raw materials, labor and manufacturing overhead. We establish reserves equal to all or a portion of the related inventory to reflect situations in which the cost of the inventory is not expected to be recovered. This requires us to make estimates regarding the market value of our inventory, including an assessment for excess and obsolete inventory. Once we establish an inventory reserve in a fiscal period, the reduced inventory value is maintained until the inventory is sold or otherwise disposed of. In evaluating whether inventory is stated at the lower of cost or net realizable value, management considers such factors as the amount of inventory on hand, the estimated time required to sell such inventory, the remaining shelf life and efficacy, the foreseeable demand within a specified time horizon and current and expected market conditions. Based on this evaluation, we record adjustments to cost of goods sold to adjust inventory to its net realizable value.

Property and Equipment

We state property and equipment at cost. Depreciation of property and equipment is provided using the straight-line method over their estimated useful lives, generally ranging from 1 to 39 years. We amortize leasehold improvements using the straight-line method over the shorter of the useful life of the improvement or the term of the lease. Maintenance and repairs are expensed as incurred. Significant expenditures that increase economic useful lives of property or equipment are capitalized and expensed over the useful life of such expenditure.

Impairment of Long-Lived Assets

We periodically evaluate the carrying value of long-lived assets to be held and used when events and circumstances indicate that the carrying amount of an asset may not be recovered. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. During fiscal 2023 and 2022, we recognized no impairment losses.

Derivative Financial Instruments

We may use derivative financial instruments in the management of our foreign currency exchange risk inherent in our forecasted sales denominated in Euros and our long-term lease liability denominated in Swiss Francs. We may hedge our foreign currency exposures by entering into offsetting forward exchange contracts. To the extent we use derivative financial instruments that meet the relevant criteria, we account for them as cash flow hedges. Foreign exchange derivative instruments that do not meet the criteria for cash flow hedge accounting are marked-to-market through the Consolidated Statements of Operations and Comprehensive Income. Historically, our cash flow derivative instruments related to our Euro sales have met the criteria for hedge accounting, while our derivative instruments related to our long-term lease liability have not.

We recognize any unrealized gains and losses associated with derivative instruments accounted for as cash flow hedges in income in the period in which the underlying hedged transaction is realized. To the extent the derivative instrument is deemed ineffective we would recognize the resulting gain or loss in income at that time. As of June 30, 2023, we held derivative contracts designated as cash flow hedges primarily to protect against the foreign exchange risks inherent in our forecasted sales of products at prices denominated in currencies other than the U.S. Dollar, which is primarily the Euro. As of June 30, 2023, the notional amounts of our foreign exchange contracts were $31.7 million (€28.4 million). These contracts will mature over the next 15 months.

As of June 30, 2023, we held foreign currency contracts not designated as cash flow hedges primarily to protect against changes in valuation of our long-term lease liability. As of June 30, 2023, the notional amounts of our foreign currency contracts not designated as cash flow hedges were $12.3 million (CHF 11.1 million). These contracts will mature in the first quarter of fiscal year 2024.

Defined Benefit Pension Plan

We formerly sponsored a defined benefit pension plan. Effective June 21, 1999, we adopted an amendment to freeze benefit accruals to the participants. The plan obligation and related assets of the plan are presented in the notes to the consolidated financial statements. Plan assets, which consist primarily of marketable equity and debt instruments, are valued based upon third party market quotations. Independent actuaries, through the use of a number of assumptions, determine plan obligations and annual pension expense. Key assumptions in measuring the plan obligations include the discount rate and estimated future return on plan assets. In determining the discount rate, we use an average long-term bond yield. Asset returns are based on the historical returns of multiple asset classes to develop a risk free rate of return and risk premiums for each asset class. The overall rate for each asset class was developed by combining a long-term inflation component, the risk free rate of return and the associated risk premium. A weighted average rate is developed based on the overall rates and the plan’s asset allocation.

Revenue Recognition

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

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

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

We recognize revenue in certain circumstances before delivery to the customer has occurred (commonly referred to as bill-and-hold transactions). Products sold under bill-and-hold arrangements are recorded as revenue when risk of ownership has been transferred to the customer, but the product has not shipped due to a substantive reason, typically at the customer’s request. The product must be separately identified as belonging to the customer, ready for physical transfer to the customer, and we cannot have the ability to redirect the product to another customer.

We provide early payment discounts to certain customers. 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.

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

	June 30, 2022		Additions		Revenue Recognized			Customer Refunds			June 30, 2023
Contract Liabilities (Customer Deposits)	$	140	$	317	$	(137	)	$	(3	)	$	317
	June 30, 2021		Additions		Revenue Recognized			Customer Refunds			June 30, 2022
Contract Liabilities (Customer Deposits)	$	1,721	$	140	$	(1,721	)	$	—		$	140

Except for product defects, no right of return exists on the sale of our products. We estimate returns based on historical experience and recognize a returns liability for any estimated returns. As of June 30, 2023, we have $0 in our returns reserve.

We currently own certain U.S. patents, and each patent’s corresponding foreign patent applications. All of these patents and patent rights relate to the ingredient known as beta-alanine marketed and sold under our CarnoSyn® 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 $8.7 million during fiscal 2023 and $16.2 million during fiscal 2022. These royalty income and raw material sale amounts resulted in royalty expense paid to the original patent holders from whom NAI acquired its patents and patent rights. We recognized royalty expense as a component of cost of goods sold in the amount of $0.3 million during fiscal 2023 and $0.7 million during fiscal 2022.

Cost of Goods Sold

Cost of goods sold includes raw material, labor, manufacturing overhead, and royalty expense.

Shipping and Handling Costs

We include fees earned on the shipment of our products to customers in sales and include costs incurred on the shipment of product to customers in costs of goods sold.

Research and Development Costs

As part of the services we provide to our private-label contract manufacturing customers, we may perform, but are not obligated to perform, certain research and development activities related to the development or improvement of their products. While our customers typically do not pay directly for this service, the cost of this service is included as a component of the price we charge to manufacture and deliver their products. We also direct and participate in clinical research studies, often in collaboration with scientists and research institutions, to validate the benefits of a product and provide scientific support for product claims and marketing initiatives.

Research and development costs are expensed when incurred. Our research and development expenses for the last two fiscal years ended June 30 were $2.1 million for fiscal 2023 and $2.5 million for fiscal 2022. These costs were included in selling, general and administrative expenses and cost of goods sold.

Advertising Costs

We expense the production costs of advertising the first time the advertising takes place. We incurred and expensed advertising costs in the amount of $0.7 million during the fiscal year ended June 30, 2023 and $1.1 million during fiscal 2022. These costs were included in selling, general and administrative expenses.

Income Taxes

To determine our quarterly provision for income taxes, we use an estimated annual effective tax rate that 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 as discrete items 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.

We record valuation allowances to reduce our deferred tax assets to an amount that we believe is more likely than not to be realized. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will ultimately be realized based on whether future taxable income will be generated during the periods in which those temporary differences become deductible. During the year ended June 30, 2023, there was no change to our valuation allowance.

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

We account for uncertain tax positions using the more-likely-than-not recognition threshold. It is our policy to establish reserves based on management’s assessment of exposure for certain positions taken in previously filed tax returns that may become payable upon audit by tax authorities. Our tax reserves are analyzed quarterly and adjustments are made as events occur that we believe warrant adjustments to the reserves. Our practice is to recognize interest and/or penalties related to income tax matters in income tax expense. As of June 30, 2023 and June 30, 2022, we did not record any tax liabilities for uncertain tax positions.

Stock-Based Compensation

We had an omnibus equity incentive plan that was approved by our Board of Directors effective October 15, 2009, and approved by our stockholders at the Annual Meeting of Stockholders held on November 30, 2009 (the "2009 Plan"). The 2009 Plan expired on October 15, 2019. The Board of Directors approved a new omnibus equity incentive plan that became effective January 1, 2021 (the “2020 Plan”), which was approved by our stockholders at the Annual Meeting of Stockholders on December 4, 2020. Under the 2020 Plan, we may grant nonqualified and incentive stock options, restricted stock grants, restricted stock units, stock appreciation rights, and other stock-based awards to employees, non-employee directors and consultants.

We estimate the fair value of stock option awards at the date of grant using the Black-Scholes option valuation model. The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. Option valuation models require the use of highly subjective assumptions. Black-Scholes uses assumptions related to volatility, the risk-free interest rate, the dividend yield (which we assume to be zero, as we have not paid any cash dividends) and employee exercise behavior. Expected volatilities used in the model are based on the historical volatility of our stock price. The risk-free interest rate is derived from the U.S. Treasury yield curve in effect in the period of grant. The expected life of stock option grants is derived from historical experience. The fair value of restricted stock shares granted is based on the market price of our common stock on the date of grant. We amortize the estimated fair value of our stock awards to expense over the related vesting periods.

We recognize forfeitures as they occur.

Use of Estimates

Our management has made a number of estimates and assumptions relating to the reporting of assets and liabilities, revenue and expenses, and the disclosure of contingent assets and liabilities to prepare these consolidated financial statements in conformity with U.S. generally accepted accounting principles (GAAP). Actual results could differ from those estimates and our assumptions may prove to be inaccurate.

Net Income per Common Share

We compute basic 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 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):

	For the Years Ended June 30,
	2023		2022
Numerator
Net income	$	2,522	$	10,712
Denominator
Basic weighted average common shares outstanding		5,863		6,117
Dilutive effect of stock options and restricted stock shares		14		38
Diluted weighted average common shares outstanding		5,878		6,155
Basic net income per common share	$	0.43	$	1.75
Diluted net income per common share	$	0.43	$	1.74

During the year ended June 30, 2023, we excluded 60,497 shares of unvested restricted stock, as their impact would have been anti-dilutive. For the year ended  June 30, 2022 we excluded restricted stock totaling 93,114. We excluded no shares related to stock options in the years ended June 30, 2023 and June 30, 2022.

Concentrations of Credit Risk

Financial instruments that subject us to concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable. We place our cash and cash equivalents with highly rated financial institutions. Credit risk with respect to receivables is primarily concentrated with our three largest customers, whose receivable balances collectively represented 47.4% of gross accounts receivable at June 30, 2023 and 52.4% at June 30, 2022. 

Additionally, amounts due related to our beta-alanine raw material sales were 21.4% of gross accounts receivable at June 30, 2023 and 5.4% of gross accounts receivable at June 30, 2022. Concentrations of credit risk related to the remaining accounts receivable balances are limited due to the number of customers comprising our remaining customer base.

XML

Note B - Inventories

12 Months Ended

Jun. 30, 2023

Notes to Financial Statements

Inventory Disclosure [Text Block]

B. Inventories

Inventories, net, consisted of the following at June 30 (in thousands):

	2023			2022
Raw materials	$	20,946		$	28,196
Work in progress		4,504			1,948
Finished goods		4,928			2,842
Reserves		(684	)		(511	)
	$	29,694		$	32,475

XML

Note C - Property and Equipment

12 Months Ended

Jun. 30, 2023

Notes to Financial Statements

Property, Plant and Equipment Disclosure [Text Block]

C. Property and Equipment

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

	Depreciable
	Life
	In Years	2023			2022
Land	NA	$	8,940		$	7,645
Building and building improvements	7 – 39		24,712			17,415
Machinery and equipment	3 – 12		41,460			40,131
Office equipment and furniture	3 – 5		6,522			5,970
Vehicles	3		227			211
Leasehold improvements	1 – 20		22,641			21,626
Total property and equipment			104,502			92,998
Less: accumulated depreciation and amortization			(50,661	)		(48,425	)
Property and equipment, net		$	53,841		$	44,573

Depreciation expense was approximately $4.3 million in fiscal 2023 and $4.2 million in fiscal 2022.

XML

Note D - Leases

12 Months Ended

Jun. 30, 2023

Notes to Financial Statements

Lessee, Operating Leases [Text Block]

D. Leases

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

Leases are classified as either finance leases or operating leases. A lease must be classified as a finance lease if any of the following criteria are met: the lease transfers ownership of the asset by the end of the lease term, the lease contains an option to purchase the asset that is reasonably certain to be exercised, the lease term is for a major part of the remaining useful life of the asset or the present value of the lease payments equals or exceeds substantially all of the fair value of the asset. A lease is classified as an operating lease if it does not meet any of these criteria. Substantially all our operating leases are comprised of payments for the use of manufacturing and office space. We have no leases classified as finance leases. As of June 30, 2023, the weighted average remaining lease term for our operating leases was 5.3 years. The weighted average discount rate for our operating leases was 4.12%. As of June 30, 2022, the weighted average remaining lease term for our operating leases was 6.3 years and the weighted average discount rate was 4.12%. The lease discount rate is determined as the rate of interest that a lessee would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment.

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

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

Lease payments included in the measurement of the lease liability comprise the following: the fixed noncancelable lease payments, payments for optional renewal periods where it is reasonably certain the renewal period will be exercised, and payments for early termination options unless it is reasonably certain the lease will not be terminated early. Certain leases contain escalation clauses. Fixed escalation clauses are included in our calculation of right-of-use assets and operating lease liabilities. Escalation clauses based on the CPI (Consumer Price Index) are not included in our calculation of right-of-use assets and operating lease liabilities because they cannot be readily determined.

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

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

We have elected not to recognize right-of-use assets and lease liabilities for short-term leases that have a term of 12 months or less. The effect of short-term leases on our right-of-use asset, lease liability, and the short-term lease cost for the years ended June 30, 2023 and 2022 was not material.

Other information related to leases was as follows (in thousands) for the year ended June 30,

Supplemental Cash Flows Information	2023		2022
Cash paid for amounts included in the measurement of operating lease liabilities	$	3,291	$	3,289
Increase in operating lease liabilities and right-of-use assets due to lease remeasurement		906		8,513

XML

Note E - Other Comprehensive Income

12 Months Ended

Jun. 30, 2023

Notes to Financial Statements

Comprehensive Income (Loss) Note [Text Block]

E. Other Comprehensive Income

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

	Year Ended June 30, 2023
				Unrealized			Unrealized
				Gains			Gains
				(Losses)			(Losses)
	Defined			on			on
	Benefit			Cash Flow			Swap
	Pension Plan			Hedges			Derivative			Total
Balance as of June 30, 2022	$	(444	)	$	1,795		$	348		$	1,699
OCI/OCL before reclassifications		8			538			79			625
Amounts reclassified from OCI		78			(3,086	)		—			(3,008	)
Tax effect of OCI activity		(22	)		643			(20	)		601
Net current period OCI/OCL		64			(1,905	)		59			(1,782	)
Balance as of June 30, 2023	$	(380	)	$	(110	)	$	407		$	(83	)

	Year Ended June 30, 2022
				Unrealized			Unrealized
				Gains			Gains
				(Losses)			(Losses)
	Defined			on			on
	Benefit			Cash Flow			Swap
	Pension Plan			Hedges			Derivative			Total
Balance as of June 30, 2021	$	(538	)	$	(23	)	$	—		$	(561	)
OCI/OCL before reclassifications		17			5,370			454			5,841
Amounts reclassified from OCI		113			(3,011	)		—			(2,898	)
Tax effect of OCI activity		(36	)		(541	)		(106	)		(683	)
Net current period OCI/OCL		94			1,818			348			2,260
Balance as of June 30, 2022	$	(444	)	$	1,795		$	348		$	1,699

XML

Note F - Debt

12 Months Ended

Jun. 30, 2023

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 was 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. Effective September 19, 2022, we entered into a third amendment to our credit facility with Wells Fargo. The third amendment extended the maturity date to May 23, 2025 and also increased the allowed capital expenditures from $7.5 million to $25.0 million for the fiscal year ending June 30, 2023.

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; and (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 $25.0 million for our fiscal year ending June 30, 2023 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.

During fiscal year 2023, we capitalized $198,000 of interest expense to building improvements. As of June 30, 2022, we capitalized $171,000 of interest expense to building improvements.

As of June 30, 2023, we had $ 9.5 million outstanding under the Term Note used in the purchase of the manufacturing and warehouse property in August 2021. The future debt payments under the Term Note are as follows (in thousands):

	2024		2025		2026		2027		2028		Thereafter		Total
Future Debt Payments	$	312	$	296	$	305	$	315	$	325	$	7,964	$	9,517

On June 30, 2023, we were in compliance with all of the financial and other covenants required under the Credit Agreement. As a result of reduced sales overall, and the impact of temporary closure of our Carlsbad, California high-speed powder processing facility, we anticipate we will not be able to comply with all of the covenants required under the Credit Agreement in the second quarter of fiscal 2024.  We have advised the lender and are currently negotiating a potential revised credit facility. There can be no assurance we will be able to successfully complete the negotiation of a revised credit facility, or what the differences in amount, cost and other factors may be.

As of June 30, 2023, we had the full $20.0 million available for borrowing under our credit facility with Wells Fargo Bank.

XML

Note G - Income Taxes

12 Months Ended

Jun. 30, 2023

Notes to Financial Statements

Income Tax Disclosure [Text Block]

G. Income Taxes

During fiscal 2023, we recorded U.S.-based domestic tax expense of $0.8 million and foreign tax expense of $0.2 million. During fiscal 2022, we recorded U.S.-based domestic tax expense of $2.0 million and foreign tax expense of $0.9 million.

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

	2023		2022
United States	$	2,588	$	9,152
Foreign		967		4,507
Total income before income taxes	$	3,555	$	13,659

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

	2023			2022
Current:
Federal	$	843		$	1,297
State		211			(1	)
Foreign		221			900
		1,275			2,196
Deferred:
Federal		(246	)		501
State		4			250
Foreign		—			—
		(242	)		751
Total provision for income taxes	$	1,033		$	2,947

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

	2023			2022
Deferred tax assets:
Inventory capitalization	$	220		$	373
Inventory reserves		164			113
Lease liability		2,018			2,139
Net operating loss carry forward		433			242
Accrued compensation		166			458
Capitalized research and experimentation		412			—
Accrued contingent fee		219			—
Stock-based compensation		81			66
Forward contracts		56			—
Tax credit carry forward		229			43
Allowance for bad debt		1			795
Interest expense		103			—
Other, net		87			—
Total gross deferred tax assets		4,189			4,229
Deferred tax liabilities:
Withholding taxes		(401	)		(1,133	)
Fixed assets		(1,451	)		(1,523	)
Forward contracts		—			(541	)
Lease asset		(1,951	)		(2,073	)
Other, net		(31	)		(179	)
Deferred tax liabilities		(3,834	)		(5,449	)
Net deferred tax assets (liabilities)	$	355		$	(1,220	)

At June 30, 2023, we had state tax net operating loss carry forwards of approximately $5.6 million. Under California Assembly Bill 85, effective June 29, 2020, net operating loss deductions were suspended for tax years beginning in 2019, 2020, and 2021 and the carry forward periods of any net operating losses not utilized due to such suspension were extended. California Senate Bill 113, effective February 9, 2022, reinstates net operating loss deductions in tax years beginning in 2022. Our state tax loss carry forwards will begin to expire in fiscal 2031, unless used before their expiration.

Pursuant to Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”), the annual use of the net operating loss carry forwards and research and development tax credits could be limited by any greater than 50% ownership change during any three-year testing period. We did not have any ownership changes that met this criterion during the fiscal years ended June 30, 2023 and June 30, 2022.

We are subject to taxation in the U.S., Switzerland and various state jurisdictions. Our tax years for the fiscal year ended June 30, 2015 and forward are subject to examination by the U.S. tax authorities. Our tax years for the fiscal years ended June 30, 2018 and forward are subject to examination by the state tax authorities. Our tax years for the fiscal year ended June 30, 2022 and forward are subject to examination by the Swiss tax authorities.

NAIE’s effective tax rate for the fiscal year ended  June 30, 2023 for Swiss federal, cantonal and communal taxes is approximately 23%.

As part of the Tax Cuts and Jobs Act of 2017 (the Tax Act), we were required to recognize a one-time deemed repatriation transition tax during the fiscal year ended June 30, 2018 based on our total post-1986 earnings and profits (E&P) from our Swiss subsidiary, NAIE. This accumulated E&P amount has historically been considered permanently reinvested thereby allowing us to defer recognizing any U.S. income tax on the amount. We no longer consider undistributed foreign earnings from NAIE as of December 31, 2017 as indefinitely reinvested. We consider earnings accumulated subsequent to December 31, 2017 as indefinitely reinvested.

For tax years commencing on or after January 1, 2022, the Tax Cuts and Jobs Act of 2017, also eliminates the ability to immediately deduct research and development costs. Instead, taxpayers are mandated to capitalize these expenses and amortize them over five years for research conducted within the United States and 15 years for research conducted abroad, as stipulated in IRC Section 174. There is ongoing consideration in Congress for legislation that may revoke or postpone this capitalization and amortization requirement; however, there is no guarantee that this provision will undergo repeal or any other form of modification. Should this requirement remain unchanged, it will result in a reduction of our tax deduction for research and development expenses in the forthcoming years. During fiscal 2023, NAIE declared and paid dividends to NAI in the amount of $14.7 million. This amount is part of the undistributed earnings that we recorded a one-time deemed repatriation transition tax on in fiscal 2018 and therefore we did not recognize any additional tax on this dividend in fiscal 2023. However, as part of this dividend, we were required to pay a 5% Swiss withholding tax totaling $0.7 million, which was also accrued for as part of the implementation of the Tax Act in fiscal 2018.

A reconciliation of our income tax provision computed by applying the statutory federal income tax rate of 21% for fiscal 2023 and for fiscal 2022 to net income before income taxes for the year ended June 30 is as follows (dollars in thousands):

	2023			2022
Income taxes computed at statutory federal income tax rate	$	749		$	2,868
State income taxes, net of federal income tax expense		90			174
Permanent differences		8			85
Foreign tax rate differential		18			(47	)
Tax credits		(347	)		(124	)
FDII export sales incentive		—			(46	)
Stock based compensation		61			37
Global intangible low-taxed income (GILTI)		355			—
Return to provision - differences		99
Income tax provision as reported	$	1,033		$	2,947
Effective tax rate		29.1	%		21.6	%

We expect our U.S. federal statutory rate to be 21% for fiscal years going forward.

XML

Note H - Employee Benefit Plans

12 Months Ended

Jun. 30, 2023

Notes to Financial Statements

Retirement Benefits [Text Block]

H. Employee Benefit Plans

401(k) Plan

We have a profit-sharing plan pursuant to Section 401(k) of the Code, whereby participants may contribute a percentage of compensation not in excess of the maximum allowed under the Code. Effective January 1, 2022, all employees are eligible to participate in the plan the first of the month following 30 days of employment. Also effective, January 1, 2022, we match 100% of the first 5% of a participant’s compensation contributed to the plan under the 401(k) plan. The total contributions under the plan charged to income from operations totaled $0.7 million for fiscal 2023 and $0.5 million for fiscal 2022.

Additionally, we have a discretionary profit-sharing plan pursuant to Section 401(k) of the Code, whereby we may contribute an additional percentage of compensation. Employees are not required to contribute to the plan to receive the discretionary profit-sharing contribution. We did not make a discretionary profit-sharing contribution in fiscal 2023. In fiscal 2022, we made a discretionary profit-sharing contribution of $0.3 million. 

We have a “Cafeteria Plan” pursuant to Section 125 of the Code, whereby health care benefits are provided for active employees through insurance companies. Substantially all active full-time employees are eligible for these benefits. We recognize the cost of providing these benefits by expensing the annual premiums, which are based on benefits paid during the year. The premiums expensed to income from operations for these benefits totaled $1.7 million for the fiscal year ended June 30, 2023 and $1.4 million for the fiscal year ended June 30, 2022.

Deferred Compensation Plan

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

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

During the year ended June 30, 2023, we granted a total of $0.6 million in deferred cash awards to members of our Board of Directors and certain key members of our management team. During the year ended June 30, 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. Each deferred cash award provides for three equal cash payments to the applicable Participant to be paid on the one year, two year, and three year anniversaries of the date of the grant of such Awards, (the “Award Date”); provided on the date of each payment (the “Payment Date”), the Participant has been since the Award Date, and continues to be through the Payment Date, a member of our Board of Directors or an employee of NAI. In the event a Participant ceases to be an employee of NAI or a member of our Board of Directors prior to any Payment Date, no further payments shall be made in connection with the Award.

Defined Benefit Pension Plan

We formerly sponsored a defined benefit pension plan, which provides retirement benefits to employees based generally on years of service and compensation during the last five years before retirement. Effective June 21, 1999, we adopted an amendment to freeze benefit accruals to the participants. Annually, we contribute an amount not less than the minimum funding requirements of the Employee Retirement Income Security Act of 1974 nor more than the maximum tax-deductible amount.

Disclosure of Funded Status

The following table sets forth the defined benefit pension plan’s funded status and amount recognized in our consolidated balance sheets at June 30 (in thousands):

	2023			2022
Change in Benefit Obligation:
Benefit obligation at beginning of year	$	1,438		$	1,820
Interest cost		46			39
Actuarial loss		(29	)		(276	)
Benefits paid		(91	)		(145	)
Benefit obligation at end of year	$	1,364		$	1,438
Change in Plan Assets:
Fair value of plan assets at beginning of year	$	1,094		$	1,429
Actual return on plan assets		22			(190	)
Employer contributions		—			—
Benefits paid		(91	)		(145	)
Plan expenses		—			—
Fair value of plan assets at end of year	$	1,025		$	1,094
Reconciliation of Funded Status:
Difference between benefit obligation and fair value of plan assets	$	(339	)	$	(344	)
Unrecognized net actuarial loss in accumulated other comprehensive income		409			495
Net amount recognized	$	70		$	151
Projected benefit obligation	$	1,364		$	1,438
Accumulated benefit obligation	$	1,364		$	1,438
Fair value of plan assets	$	1,025		$	1,094

The weighted-average discount rate used for determining the projected benefit obligations for the defined benefit pension plan was 4.89% for the year ended June 30, 2023 and 4.39% during the year ended June 30, 2022.

Net Periodic Benefit Cost

The components included in the defined benefit pension plan’s net periodic benefit expense for the fiscal years ended June 30 were as follows (in thousands):

	2023			2022
Interest cost	$	46		$	39
Expected return on plan assets		(42	)		(69	)
Recognized actuarial loss		50			63
Settlement loss		27			50
Net periodic benefit expense	$	81		$	83

In the fiscal years ended June 30, 2023 and June 30, 2022, we did not contribute to our defined benefit pension plan.

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

	2023			2022
Net loss	$	(8	)	$	(17	)
Settlement loss		(28	)		(50	)
Amortization of net loss		(50	)		(63	)
Plan expenses		—			—
Total recognized in other comprehensive loss	$	(86	)	$	(130	)
Total recognized in net periodic benefit cost and other comprehensive loss	$	(5	)	$	(47	)

The estimated net loss for the defined benefit pension plan that will be amortized from accumulated other comprehensive income into net periodic benefit cost over the next fiscal year is approximately $40,000. We do not have any transition obligations or prior service costs recorded in accumulated other comprehensive income.

The following benefit payments are expected to be paid (in thousands):

2024	$	739
2025		264
2026		13
2027		106
2028		30
2029-2033		105
Total benefit payments expected to be paid	$	1,257

The weighted-average rates used for the years ended June 30 in determining the defined benefit pension plan’s net pension costs, were as follows:

	2023			2022
Discount rate		4.89	%		4.39	%
Expected long-term rate of return		6.24	%		6.10	%
Compensation increase rate		N/A			N/A

Our expected rate of return is determined based on a methodology that considers historical returns of multiple classes analyzed to develop a risk-free real rate of return and risk premiums for each asset class. The overall rate for each asset class was developed by combining a long-term inflation component, the risk-free real rate of return, and the associated risk premium. A weighted average rate was developed based on those overall rates and the target asset allocation of the plan.

Our defined benefit pension plan’s weighted average asset allocation at June 30 and weighted average target allocation were as follows:

							Target
	2023			2022			Allocation
Equity securities		64	%		49	%		53	%
Debt securities		14	%		20	%		41	%
Commodities		12	%		0	%		0	%
Other		10	%		31	%		6	%
		100	%		100	%		100	%

The underlying basis of the investment strategy of our defined benefit pension plan is to ensure that pension funds are available to meet the plan’s benefit obligations when due. Our investment strategy is a long-term risk controlled approach using diversified investment options with relatively minimal exposure to volatile investment options like derivatives.

The fair values by asset category of our defined benefit pension plan at June 30, 2023 were as follows (in thousands):

			Quoted
			Prices in
			Active
			Markets for		Significant		Significant
			Identical		Observable		Unobservable
			Assets		Inputs		Inputs
	Total		(Level 1)		(Level 2)		(Level 3)
Equity securities(1)	$	653	$	653	$	—	$	—
Debt securities(2)	$	141	$	141	$	—	$	—
Other(3)	$	231	$	231	$	—	$	—
Total	$	1,025	$	1,025	$	—	$	—

(1) This category is comprised of publicly traded funds, of which 50% are large-cap funds, 26% are developed and emerging market funds, 18% are mid-cap funds, and 6% are small-cap funds.

(2) This category is comprised of publicly traded funds, of which 34% are U.S. fixed income funds and 66% are corporate and foreign market fixed income funds.

(3) This category is comprised of commodities and cash alternatives.

XML

Note I - Stockholders' Equity

12 Months Ended

Jun. 30, 2023

Notes to Financial Statements

Equity [Text Block]

I. Stockholders’ Equity

Treasury Stock

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

Treasury Stock repurchases for the year ended June 30, 2023 were as follows:

	Shares		Average Cost		Total Cost (in thousands)
Shares purchased under Repurchase Plan		140,812	$	9.19	$	1,294
Shares acquired from employees for restricted stock vesting		23,587		8.86		209
Total		164,399			$	1,503

Treasury Stock repurchases for the year ended  June 30, 2022 were as follows:

	Shares		Average Cost		Total Cost (in thousands)
Shares purchased under Repurchase Plan		406,817	$	12.76	$	5,190
Shares acquired from employees for restricted stock vesting		28,263		11.08		313
Total		435,080			$	5,503

Treasury 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.

Stock Incentive Plans

For the years ended June 30, 2023and June 30, 2022, the Company had no stock options outstanding.

Restricted stock activity for the year ended June 30, 2023 was as follows:

			Weighted
	Number of		Average Grant
	Shares –		Date Fair
	2009 Plan		Value
Nonvested at June 30, 2022		1,666	$	8.50
Granted		—	$	—
Vested		1,666	$	8.50
Forfeited		—	$	—
Nonvested at June 30, 2023		—	$	—
Available for grant at June 30, 2023		—

				Weighted
	Number of			Average Grant
	Shares –			Date Fair
	2020 Plan			Value
Nonvested at June 30, 2022		186,227		$	12.56
Granted		123,000		$	8.79
Vested		(71,146	)	$	13.04
Forfeited		(14,399	)	$	11.69
Nonvested at June 30, 2023		223,682		$	10.39
Available for grant at June 30, 2023		349,377

Restricted stock activity for the year ended  June 30, 2022 was as follows:

				Weighted
	Number of			Average Grant
	Shares –			Date Fair
	2009 Plan			Value
Nonvested at June 30, 2021		61,324		$	11.47
Granted		—		$	—
Vested		(51,326	)	$	11.52
Forfeited		(8,332	)	$	10.88
Nonvested at June 30, 2022		1,666		$	8.50
Available for grant at June 30, 2022		—

				Weighted
	Number of			Average Grant
	Shares –			Date Fair
	2020 Plan			Value
Nonvested at June 30, 2021		87,773		$	16.81
Granted		135,850		$	10.99
Vested		(25,896	)	$	16.81
Forfeited		(11,500	)	$	16.81
Nonvested at June 30, 2022		186,227		$	12.56
Available for grant at June 30, 2022		472,377

Restricted stock grants, granted to members of our Board of Directors and certain key members of our management team, vest over a period of years from the date of grant and the unvested shares cannot be sold or otherwise transferred and the right to receive dividends, if declared by our Board of Directors, is forfeitable until the shares become vested. The total remaining unrecognized compensation cost related to unvested restricted stock shares amounted to $2.0 million at June 30, 2023 and the weighted average remaining requisite service period of unvested restricted stock shares was 2.1 years.

XML

Note J - Commitments

12 Months Ended

Jun. 30, 2023

Notes to Financial Statements

Commitments Disclosure [Text Block]

J. Commitments

We lease a total of approximately 162,000 square feet at our manufacturing facility in Vista, California from an unaffiliated third party under a non-cancelable operating lease. On July 31, 2013, we executed a third amendment to the lease for our manufacturing facility in Vista, California. As a result of this amendment, our facility lease has been extended through March 2024.

NAIE leases facility space in Manno, Switzerland from two unaffiliated third parties. The leased spaces total approximately 125,000 square feet. We primarily use the facilities for manufacturing, packaging, warehousing and distributing nutritional supplement products for the European and Asian marketplaces. On July 1, 2019, NAIE extended the lease on its main manufacturing facility for an additional five years through June 30, 2024. On May 4, 2022, NAIE further extended the lease on its main manufacturing facility for a new term of ten years effective January 1, 2023 with a new expiration date of December 31, 2032, with an option to extend one year.

On November 5, 2018, NAIE entered into a lease with Sofinol SA for approximately 2,870 square meters of commercial warehouse space in a building located on the property adjacent to the leasehold for the primary existing NAIE facility in Manno, Switzerland. NAIE uses the space primarily for raw material storage. The lease is for an initial five-year term commencing on January 1, 2019 and NAIE can terminate the lease with 12 months advance notice given on June 30th or December 31st each year of the initial term. At the end of the initial term the lease transfers to an indefinite tenancy at the same rental rate terminable by NAIE or the landlord upon 12 months' advance notice. This initial term of this lease ends on December 31, 2023 and as of June 30, 2023, we have not provided notification of terminating this lease so the term automatically extended to December 31, 2024.

Minimum rental commitments (exclusive of property tax, insurance and maintenance) under all non-cancelable operating leases with initial or remaining lease terms in excess of one year, including the lease agreements referred to above, are set forth below as of June 30, 2023 (in thousands): 

											There-
	2024		2025		2026		2027		2028		after		Total
Gross minimum rental commitments	$	2,868	$	1,369	$	1,369	$	1,369	$	1,369	$	6,162	$	14,506

Rental expense totaled $3.3 million for the fiscal year ended June 30, 2023 and $3.4 million for the fiscal year ended June 30, 2022.

XML

Note K - Economic Dependency

12 Months Ended

Jun. 30, 2023

Notes to Financial Statements

Concentration Risk Disclosure [Text Block]

K. Economic Dependency

We had substantial net sales to certain customers during the fiscal years ended June 30 shown in the following table. The loss of any of these customers, or a significant decline in sales or the growth rate of sales to these customers, or in their ability to make payments when due, could have a material adverse impact on our net sales and net income. Net sales to any one customer representing 10% or more of the respective year’s consolidated net sales were as follows (dollars in thousands):

	Fiscal 2023		Fiscal 2022
Customer 1	$	61,646	$	37,218
Customer 2		48,066		54,599
Customer 3		(a)		31,552
	$	109,712	$	123,369

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

Accounts receivable from these customers totaled $1.8 million at June 30, 2023 and $10.7 million at June 30, 2022.

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

	Year ended June 30,
	2023					2022
			% of Total					% of Total
	Raw Material		Raw			Raw Material		Raw
	Purchases by		Material			Purchases by		Material
	Supplier		Purchases			Supplier		Purchases
Supplier 1	$	11,487		13	%	$	14,065		17	%
	$	11,487		13	%	$	14,065		17	%

XML

Note L - Derivatives and Hedging

12 Months Ended

Jun. 30, 2023

Notes to Financial Statements

Derivative Instruments and Hedging Activities Disclosure [Text Block]

L. Derivatives and Hedging

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

During the year ended June 30, 2023 and prior, we entered into forward contracts designated as cash flow hedges primarily to protect against the foreign exchange risks inherent in our forecasted sales of products at prices denominated in currencies other than the U.S. dollar. These contracts are expected to be settled through September 2024. For derivative instruments that are designated and qualify as cash flow hedges, we record the effective portion of the gain or loss on the derivative in accumulated other comprehensive income (OCI) as a separate component of stockholders’ equity and subsequently reclassify these amounts into earnings in the period during which the hedged transaction is recognized in earnings.

For foreign currency contracts designated as cash flow hedges, hedge effectiveness is measured using the spot rate. Changes in the spot-forward differential are excluded from the test of hedge effectiveness and are recorded currently in earnings as revenue. We measure effectiveness by comparing the cumulative change in the hedge contract with the cumulative change in the hedged item as well as ensuring the assumptions we made at hedge inception have not materially changed. No hedging relationships were terminated as a result of ineffective hedging for the years ended June 30, 2023 and June 30, 2022.

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

As of June 30, 2023, the notional amounts of our foreign exchange contracts accounted for as cash flow hedges were $31.7 million (€28.4 million). As of June 30, 2023, a net gain of approximately $0.2 million offset by approximately $0.1 million of deferred taxes, related to derivative instruments designated as cash flow hedges was recorded in OCI. As of June 30, 2022, a net loss of approximately $2.3 million, offset by approximately $0.5 million of deferred taxes, related to derivative instruments designated as cash flow hedges was recorded in OCI. It is expected that $0.2 million of the gross gain as of June 30, 2023, will be reclassified into earnings in the next 12 months along with the earnings effects of the related forecasted transactions.

During the year ended June 30, 2023, we recognized $0.5 million of net gains in OCI, reclassified $3.1 million of gains and forward point amortization from OCI to Net Sales. During the year ended June 30, 2022, we recognized $5.4 million of net gains in OCI, reclassified $3.0 million of gains and forward point amortization from OCI to Net Sales.

For foreign currency contracts not designated as cash flow hedges, changes in the fair value of the hedge are recorded directly to foreign exchange gain or loss in other income in an effort to offset the change in valuation of the underlying hedged item. During the year ended June 30, 2023, we entered into forward contracts in order to hedge foreign exchange risk associated with our lease liability at NAIE, which is denominated in Swiss Francs (CHF). As of June 30, 2023, the notional amounts of our foreign exchange contracts not designated as cash flow hedges were approximately $12.3 million (CHF 11.1 million).

We are exposed to interest rate fluctuations related to our $10.0 million Term Note with Wells Fargo, which carries a variable interest rate of 1.80% above the SOFR rolling 30-day average. To manage our exposure to this variable rate, on August 23, 2021, we entered into a floored interest rate swap that fixes our all-in rate on this loan to 2.4% for the first three years of the term loan. Fluctuations in the relation of our contractual swap rate to current market rates are recorded as an asset or liability with an offset to OCI at the end of each reporting period. Interest expense is adjusted for the difference between the actual SOFR spread and the swap contractual rate such that our effective interest expense for each period is equal to our hedged rate of 2.4%.

XML

Note M - Contingencies

12 Months Ended

Jun. 30, 2023

Notes to Financial Statements

Legal Matters and Contingencies [Text Block]

M. Contingencies

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

COVID-19 Pandemic

The Company continues to monitor and evaluate the risks to public health and the impact on overall global business activity related to the COVID-19 pandemic, including 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.

XML

Note N - Segment Information

12 Months Ended

Jun. 30, 2023

Notes to Financial Statements

Segment Reporting Disclosure [Text Block]

N. Segment Information

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

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

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

	2023		2022
Net Sales
Private-label contract manufacturing	$	145,294	$	154,798
Patent and trademark licensing		8,721		16,168
	$	154,015	$	170,966

	2023			2022
Income from Operations
Private-label contract manufacturing	$	9,488		$	15,667
Patent and trademark licensing		3,021			6,780
Income from operations of reportable segments		12,509			22,447
Corporate expenses not allocated to segments		(7,796	)		(8,768	)
	$	4,713		$	13,679

	2023		2022
Assets
Private-label contract manufacturing	$	102,495	$	115,649
Patent and trademark licensing		31,657		30,354
	$	134,152	$	146,003

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

Net sales by geographic region, based on the customers’ location, for the two years ended June 30 were as follows (in thousands):

	2023		2022
United States	$	109,277	$	115,255
Markets outside the United States		44,738		55,711
Total net sales	$	154,015	$	170,966

Products manufactured by NAIE accounted for 79% of consolidated net sales in markets outside the U.S. in fiscal 2023 and 84% in fiscal 2022. No products manufactured by NAIE were sold in the U.S. during the fiscal years ended June 30, 2023 and 2022.

Long-lived assets by geographic region, based on the location of the company or subsidiary at which they were located or made, for the two years ended June 30 were as follows (in thousands):

	2023		2022
United States	$	53,536	$	43,769
Europe		20,674		22,505
Total Long-Lived Assets	$	74,210	$	66,274

Total assets by geographic region, based on the location of the company or subsidiary at which they were located or made, for the two years ended June 30 were as follows (in thousands):

	2023		2022
United States	$	89,167	$	83,443
Europe		44,985		62,560
Total Assets	$	134,152	$	146,003

Capital expenditures by geographic region, based on the location of the company or subsidiary at which they were located or made, for the two years ended June 30 were as follows (in thousands):

	2023		2022
United States	$	13,210	$	25,383
Europe		314		1,105
Total Capital Expenditures	$	13,524	$	26,488

XML

Note O - Subsequent Events

12 Months Ended

Jun. 30, 2023

Notes to Financial Statements

Subsequent Events [Text Block]

O. Subsequent Events

On July 18, 2023, we entered into a Fourth Amendment to Lease amending and extending the term of the lease of its Vista, California manufacturing facilities. The Fourth Amendment extends the term of the Lease by an additional ten years and five months commencing April 1, 2024. The amended Lease covering two buildings and approximately 162,000 square feet will result in an increase in base rent to $1.50 per square foot, after five free months of base rent beginning at the commencement of the extended term. NAI intends to construct substantial improvements to the facilities including but not limited to installation of an approximately $2.3 million solar electrical generating system on both buildings, and other substantial improvements. Pursuant to the Fourth Amendment, the Landlord will reimburse NAI for up to $1.1 million of these tenant improvements to the buildings.

On August 16, 2023, we announced the temporary closure of our new high-speed powder processing facility in Carlsbad, California due to excess inventory on hand at one of our largest customer’s and their efforts to rebalance supply and demand. We expect this facility will re-open and our prior level of operations will resume late in our third fiscal quarter of 2024, but there can be no assurance this customer will resolve its supply and demand issues in the timeframe expected or what level of business we will have with this customer if they purchase from us in the future. Closure of this plant will contribute to an anticipated net loss in the first half of fiscal 2024, net income in the second half, and an overall net loss in fiscal 2024. If this customer is unable to resolve its inventory issues in this timeframe, or our sales forecast is not realized we will likely experience a continuing material decrease in revenues during fiscal year 2024.

On September 15, 2023, our Board of Directors adopted a Clawback Policy requiring recoupment of certain executive compensation in the event of an accounting restatement resulting from material noncompliance with financial reporting requirements under the federal securities laws.

XML

Significant Accounting Policies (Policies)

12 Months Ended

Jun. 30, 2023

Accounting Policies [Abstract]

Consolidation, Subsidiaries or Other Investments, Consolidated Entities, Policy [Policy Text Block]

Subsidiaries

On January 22, 1999, Natural Alternatives International Europe S.A., a Swiss Corporation (NAIE) was formed as our wholly-owned subsidiary, based in Manno, Switzerland. In September 1999, NAIE opened a manufacturing facility and currently possesses manufacturing capability in encapsulation, powders, tablets, finished goods packaging, quality control laboratory testing, warehousing, distribution and administration.

Consolidation, Policy [Policy Text Block]

Principles of Consolidation

The consolidated financial statements include the accounts of Natural Alternatives International, Inc. (NAI) and our wholly-owned subsidiary, NAIE. All intercompany accounts and transactions have been eliminated. The functional currency of NAIE, our foreign subsidiary, is the U.S. Dollar. Certain accounts of NAIE have been translated at either current or historical exchange rates, as appropriate, with gains and losses included in the consolidated statements of operations.

New Accounting Pronouncements, Policy [Policy Text Block]

Recently Adopted Accounting Pronouncements

As of June 30, 2023, there have been no adopted accounting pronouncements issued by the FASB that materially impact the Consolidated Financial Statements of the Company.

Recently Issued Accounting and Regulatory Pronouncements

In June of 2016, the FASB issued ASU 2016-13 titled "Financial Instruments - Credit Losses (Topic 326)." This directive introduced a novel approach to assessing impairments known as the "current expected credit loss model" or "CECL." Unlike the previous standard, which focused on incurred losses, CECL centers on anticipated losses. Under this framework, organizations are obligated to acknowledge an allowance corresponding to their estimate of expected credit losses. The CECL model is applicable to a wide range of financial instruments, including debt instruments, trade receivables, lease receivables, financial guarantee contracts, and other loan commitments. Notably, there is no minimum threshold for recognizing impairment losses, and it mandates the evaluation of expected credit losses even for assets with minimal risk of loss. Future evaluations of credit losses will take this guidance into account. The adoption of ASU 2016-13 is not presently expected to significantly impact our consolidated financial statements upon its July 1, 2023 effective date.

Reclassification, Comparability Adjustment [Policy Text Block]

Reclassifications

Certain amounts in the prior period consolidated financial statements have been reclassified to conform to the current period presentation. These reclassifications had no effect on reported net income.

Employee Retention Tax Credit [Policy Text Block]

Employee Retention Tax Credit

In March 2020, the Coronavirus Aid, Relief, and Economic Security Act was signed into law, providing numerous tax provisions and other stimulus measures, including the Employee Retention Tax Credit (“ERTC”). The Tax Payer Certainty and Disaster Tax Relief Act of 2020 and the American Rescue Plan Act of 2021 extended the availability of the ERTC. Under these expanded measures, we determined during fiscal 2023 that we qualified for the ERTC for the first three quarters of calendar 2021 and filed amended payroll tax returns that are expected to result in a net refund of $3.5 million. Although we don’t anticipate receiving the funds related to these amended returns until sometime in fiscal 2024, we recorded a receivable and recognized a benefit for this amount in our Consolidated Statements of Operations and Comprehensive Income in fiscal 2023 by applying the loss recovery model as codified by Accounting Standards Codification (“ASC”) section 450 “Contingencies” that indicates that an asset related to a recovery should be recognized when the recovery is determined to be probable. We recorded this benefit as a reduction to our payroll tax expense in the current year with $2.2 million of the benefit offsetting cost of goods sold and $1.3 million offsetting other selling, general and administrative expenses.

Cash and Cash Equivalents, Policy [Policy Text Block]

Cash and Cash Equivalents

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

Fair Value Measurement, Policy [Policy Text Block]

Fair Value of Financial Instruments

Fair value is defined as the exchange price that would be received to sell an asset or paid to transfer a liability (i.e., the “exit price”) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. We use a three-level hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from independent sources. Unobservable inputs are inputs that reflect our assumptions about the inputs that market participants would use in pricing the asset or liability and are developed based on the best information available under the circumstances.

The fair value hierarchy is broken down into three levels based on the source of inputs. In general, fair values determined by Level 1 inputs use quoted prices (unadjusted) in active markets for identical assets or liabilities that we have the ability to access. We classify cash, cash equivalents, and marketable securities balances as Level 1 assets. The approximate fair value of cash and cash equivalents, accounts receivable, accounts payable and short-term borrowings is equal to book value due to the short-term nature of these items. Fair values determined by Level 2 inputs are based on quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active and models for which all significant inputs are observable or can be corroborated, either directly or indirectly by observable market data. Level 3 inputs are unobservable inputs for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability. These include certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

Except for cash and cash equivalents, as of June 30, 2023 and June 30, 2022, we did not have any financial assets or liabilities classified as Level 1. We classify derivative forward exchange contracts as Level 2 assets and liabilities. The fair values were determined by obtaining pricing from our bank.

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

	June 30,		June 30,
	2023		2022
Euro Forward Contract– Current Assets	$	250	$	3,144
Swiss Franc Forward Contract – Current Assets		140		109
Total Derivative Contracts – Current Assets		390		3,253
Interest Swap – Other noncurrent Assets		532		453
Euro Forward Contract– Other noncurrent Assets		15		561
Total Derivative Contracts – Other noncurrent Assets		547		1,014
Fair Value Net Asset – all Derivative Contracts	$	937	$	4,267

We also classify any outstanding line of credit and term loan balance as a Level 2 liability, as the fair value is based on inputs that can be derived from information available in publicly quoted markets. As of June 30, 2023, and June 30, 2022, 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 2022 or fiscal 2023.

Accounts Receivable [Policy Text Block]

Accounts Receivable

We perform ongoing credit evaluations of our customers and adjust credit limits based on payment history and customer credit-worthiness. An allowance for estimated doubtful accounts is maintained based on historical experience, including identified customer credit issues. We monitor collections regularly and adjust the allowance for doubtful accounts as necessary to recognize any changes in credit exposure. Upon conclusion that a receivable is uncollectible, we record the respective amount as a charge against allowance for doubtful accounts. To date, such doubtful accounts reserves, in the aggregate, have been adequate to cover collection losses.

In December 2022, we entered into an agreement to settle the remaining outstanding balance with a former customer whose accounts receivable balance was fully reserved in March 2020. As of the date of the agreement, the remaining amount due from this customer was $3.4 million dollars and as part of the settlement, we agreed to a reduced amount of $1.4 million. This reduced amount is to be paid based on an agreed upon payment schedule and if all payments are made as agreed the entire balance will be considered paid in full. As of June 30, 2023, the former customer made all scheduled payments totaling $850,000 and we have adjusted our accounts receivable reserve along with the corresponding accounts receivable balance such that the amount in excess of the settlement amount has been written-off and the reserve associated with the unpaid portion of the settlement is no longer reserved for.

Inventory, Policy [Policy Text Block]

Inventories

We operate primarily as a private-label contract manufacturer. We build products based upon anticipated demand or following receipt of customer specific purchase orders. From time to time, we build inventory for private-label contract manufacturing customers under a specific purchase order with delivery dates that may subsequently be rescheduled or canceled at the customer’s request. We value inventory at the lower of cost (first-in, first-out) or net realizable value on an item-by-item basis, including costs for raw materials, labor and manufacturing overhead. We establish reserves equal to all or a portion of the related inventory to reflect situations in which the cost of the inventory is not expected to be recovered. This requires us to make estimates regarding the market value of our inventory, including an assessment for excess and obsolete inventory. Once we establish an inventory reserve in a fiscal period, the reduced inventory value is maintained until the inventory is sold or otherwise disposed of. In evaluating whether inventory is stated at the lower of cost or net realizable value, management considers such factors as the amount of inventory on hand, the estimated time required to sell such inventory, the remaining shelf life and efficacy, the foreseeable demand within a specified time horizon and current and expected market conditions. Based on this evaluation, we record adjustments to cost of goods sold to adjust inventory to its net realizable value.

Property, Plant and Equipment, Policy [Policy Text Block]

Property and Equipment

We state property and equipment at cost. Depreciation of property and equipment is provided using the straight-line method over their estimated useful lives, generally ranging from 1 to 39 years. We amortize leasehold improvements using the straight-line method over the shorter of the useful life of the improvement or the term of the lease. Maintenance and repairs are expensed as incurred. Significant expenditures that increase economic useful lives of property or equipment are capitalized and expensed over the useful life of such expenditure.

Impairment or Disposal of Long-Lived Assets, Policy [Policy Text Block]

Impairment of Long-Lived Assets

We periodically evaluate the carrying value of long-lived assets to be held and used when events and circumstances indicate that the carrying amount of an asset may not be recovered. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. During fiscal 2023 and 2022, we recognized no impairment losses.

Derivatives, Policy [Policy Text Block]

Derivative Financial Instruments

We may use derivative financial instruments in the management of our foreign currency exchange risk inherent in our forecasted sales denominated in Euros and our long-term lease liability denominated in Swiss Francs. We may hedge our foreign currency exposures by entering into offsetting forward exchange contracts. To the extent we use derivative financial instruments that meet the relevant criteria, we account for them as cash flow hedges. Foreign exchange derivative instruments that do not meet the criteria for cash flow hedge accounting are marked-to-market through the Consolidated Statements of Operations and Comprehensive Income. Historically, our cash flow derivative instruments related to our Euro sales have met the criteria for hedge accounting, while our derivative instruments related to our long-term lease liability have not.

We recognize any unrealized gains and losses associated with derivative instruments accounted for as cash flow hedges in income in the period in which the underlying hedged transaction is realized. To the extent the derivative instrument is deemed ineffective we would recognize the resulting gain or loss in income at that time. As of June 30, 2023, we held derivative contracts designated as cash flow hedges primarily to protect against the foreign exchange risks inherent in our forecasted sales of products at prices denominated in currencies other than the U.S. Dollar, which is primarily the Euro. As of June 30, 2023, the notional amounts of our foreign exchange contracts were $31.7 million (€28.4 million). These contracts will mature over the next 15 months.

As of June 30, 2023, we held foreign currency contracts not designated as cash flow hedges primarily to protect against changes in valuation of our long-term lease liability. As of June 30, 2023, the notional amounts of our foreign currency contracts not designated as cash flow hedges were $12.3 million (CHF 11.1 million). These contracts will mature in the first quarter of fiscal year 2024.

Pension and Other Postretirement Plans, Policy [Policy Text Block]

Defined Benefit Pension Plan

We formerly sponsored a defined benefit pension plan. Effective June 21, 1999, we adopted an amendment to freeze benefit accruals to the participants. The plan obligation and related assets of the plan are presented in the notes to the consolidated financial statements. Plan assets, which consist primarily of marketable equity and debt instruments, are valued based upon third party market quotations. Independent actuaries, through the use of a number of assumptions, determine plan obligations and annual pension expense. Key assumptions in measuring the plan obligations include the discount rate and estimated future return on plan assets. In determining the discount rate, we use an average long-term bond yield. Asset returns are based on the historical returns of multiple asset classes to develop a risk free rate of return and risk premiums for each asset class. The overall rate for each asset class was developed by combining a long-term inflation component, the risk free rate of return and the associated risk premium. A weighted average rate is developed based on the overall rates and the plan’s asset allocation.

Revenue [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, volume rebates, and contractual discounts. Such estimates are calculated using historical averages adjusted for any expected changes due to current business conditions and experience. We review and update these estimates at the end of each reporting period and the impact of any adjustments are recognized in the period the adjustments are identified. In assessing whether collection of consideration from a customer is probable, we consider both the customer's ability and intent to pay the amount of consideration when it is due. Payment of invoices is due as specified in the underlying customer agreement, which is typically 30 days from the invoice date. Invoices are generally issued on the date of transfer of control of the products ordered to the customer.

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

We recognize revenue in certain circumstances before delivery to the customer has occurred (commonly referred to as bill-and-hold transactions). Products sold under bill-and-hold arrangements are recorded as revenue when risk of ownership has been transferred to the customer, but the product has not shipped due to a substantive reason, typically at the customer’s request. The product must be separately identified as belonging to the customer, ready for physical transfer to the customer, and we cannot have the ability to redirect the product to another customer.

We provide early payment discounts to certain customers. 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.

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

	June 30, 2022		Additions		Revenue Recognized			Customer Refunds			June 30, 2023
Contract Liabilities (Customer Deposits)	$	140	$	317	$	(137	)	$	(3	)	$	317
	June 30, 2021		Additions		Revenue Recognized			Customer Refunds			June 30, 2022
Contract Liabilities (Customer Deposits)	$	1,721	$	140	$	(1,721	)	$	—		$	140

Except for product defects, no right of return exists on the sale of our products. We estimate returns based on historical experience and recognize a returns liability for any estimated returns. As of June 30, 2023, we have $0 in our returns reserve.

We currently own certain U.S. patents, and each patent’s corresponding foreign patent applications. All of these patents and patent rights relate to the ingredient known as beta-alanine marketed and sold under our CarnoSyn® 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 $8.7 million during fiscal 2023 and $16.2 million during fiscal 2022. These royalty income and raw material sale amounts resulted in royalty expense paid to the original patent holders from whom NAI acquired its patents and patent rights. We recognized royalty expense as a component of cost of goods sold in the amount of $0.3 million during fiscal 2023 and $0.7 million during fiscal 2022.

Cost of Goods and Service [Policy Text Block]

Cost of Goods Sold

Cost of goods sold includes raw material, labor, manufacturing overhead, and royalty expense.

Shipping and Handling Costs [Policy Text Block]

Shipping and Handling Costs

We include fees earned on the shipment of our products to customers in sales and include costs incurred on the shipment of product to customers in costs of goods sold.

Research and Development Expense, Policy [Policy Text Block]

Research and Development Costs

As part of the services we provide to our private-label contract manufacturing customers, we may perform, but are not obligated to perform, certain research and development activities related to the development or improvement of their products. While our customers typically do not pay directly for this service, the cost of this service is included as a component of the price we charge to manufacture and deliver their products. We also direct and participate in clinical research studies, often in collaboration with scientists and research institutions, to validate the benefits of a product and provide scientific support for product claims and marketing initiatives.

Research and development costs are expensed when incurred. Our research and development expenses for the last two fiscal years ended June 30 were $2.1 million for fiscal 2023 and $2.5 million for fiscal 2022. These costs were included in selling, general and administrative expenses and cost of goods sold.

Advertising Cost [Policy Text Block]

Advertising Costs

We expense the production costs of advertising the first time the advertising takes place. We incurred and expensed advertising costs in the amount of $0.7 million during the fiscal year ended June 30, 2023 and $1.1 million during fiscal 2022. These costs were included in selling, general and administrative expenses.

Income Tax, Policy [Policy Text Block]

Income Taxes

To determine our quarterly provision for income taxes, we use an estimated annual effective tax rate that 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 as discrete items 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.

We record valuation allowances to reduce our deferred tax assets to an amount that we believe is more likely than not to be realized. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will ultimately be realized based on whether future taxable income will be generated during the periods in which those temporary differences become deductible. During the year ended June 30, 2023, there was no change to our valuation allowance.

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

We account for uncertain tax positions using the more-likely-than-not recognition threshold. It is our policy to establish reserves based on management’s assessment of exposure for certain positions taken in previously filed tax returns that may become payable upon audit by tax authorities. Our tax reserves are analyzed quarterly and adjustments are made as events occur that we believe warrant adjustments to the reserves. Our practice is to recognize interest and/or penalties related to income tax matters in income tax expense. As of June 30, 2023 and June 30, 2022, we did not record any tax liabilities for uncertain tax positions.

Share-Based Payment Arrangement [Policy Text Block]

Stock-Based Compensation

We had an omnibus equity incentive plan that was approved by our Board of Directors effective October 15, 2009, and approved by our stockholders at the Annual Meeting of Stockholders held on November 30, 2009 (the "2009 Plan"). The 2009 Plan expired on October 15, 2019. The Board of Directors approved a new omnibus equity incentive plan that became effective January 1, 2021 (the “2020 Plan”), which was approved by our stockholders at the Annual Meeting of Stockholders on December 4, 2020. Under the 2020 Plan, we may grant nonqualified and incentive stock options, restricted stock grants, restricted stock units, stock appreciation rights, and other stock-based awards to employees, non-employee directors and consultants.

We estimate the fair value of stock option awards at the date of grant using the Black-Scholes option valuation model. The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. Option valuation models require the use of highly subjective assumptions. Black-Scholes uses assumptions related to volatility, the risk-free interest rate, the dividend yield (which we assume to be zero, as we have not paid any cash dividends) and employee exercise behavior. Expected volatilities used in the model are based on the historical volatility of our stock price. The risk-free interest rate is derived from the U.S. Treasury yield curve in effect in the period of grant. The expected life of stock option grants is derived from historical experience. The fair value of restricted stock shares granted is based on the market price of our common stock on the date of grant. We amortize the estimated fair value of our stock awards to expense over the related vesting periods.

We recognize forfeitures as they occur.

Use of Estimates, Policy [Policy Text Block]

Use of Estimates

Our management has made a number of estimates and assumptions relating to the reporting of assets and liabilities, revenue and expenses, and the disclosure of contingent assets and liabilities to prepare these consolidated financial statements in conformity with U.S. generally accepted accounting principles (GAAP). Actual results could differ from those estimates and our assumptions may prove to be inaccurate.

Earnings Per Share, Policy [Policy Text Block]

Net Income per Common Share

We compute basic 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 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):

	For the Years Ended June 30,
	2023		2022
Numerator
Net income	$	2,522	$	10,712
Denominator
Basic weighted average common shares outstanding		5,863		6,117
Dilutive effect of stock options and restricted stock shares		14		38
Diluted weighted average common shares outstanding		5,878		6,155
Basic net income per common share	$	0.43	$	1.75
Diluted net income per common share	$	0.43	$	1.74

During the year ended June 30, 2023, we excluded 60,497 shares of unvested restricted stock, as their impact would have been anti-dilutive. For the year ended  June 30, 2022 we excluded restricted stock totaling 93,114. We excluded no shares related to stock options in the years ended June 30, 2023 and June 30, 2022.

Concentration Risk, Credit Risk, Policy [Policy Text Block]

Concentrations of Credit Risk

Financial instruments that subject us to concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable. We place our cash and cash equivalents with highly rated financial institutions. Credit risk with respect to receivables is primarily concentrated with our three largest customers, whose receivable balances collectively represented 47.4% of gross accounts receivable at June 30, 2023 and 52.4% at June 30, 2022. 

Additionally, amounts due related to our beta-alanine raw material sales were 21.4% of gross accounts receivable at June 30, 2023 and 5.4% of gross accounts receivable at June 30, 2022. Concentrations of credit risk related to the remaining accounts receivable balances are limited due to the number of customers comprising our remaining customer base.

XML

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

12 Months Ended

Jun. 30, 2023

Notes Tables

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

	June 30,		June 30,
	2023		2022
Euro Forward Contract– Current Assets	$	250	$	3,144
Swiss Franc Forward Contract – Current Assets		140		109
Total Derivative Contracts – Current Assets		390		3,253
Interest Swap – Other noncurrent Assets		532		453
Euro Forward Contract– Other noncurrent Assets		15		561
Total Derivative Contracts – Other noncurrent Assets		547		1,014
Fair Value Net Asset – all Derivative Contracts	$	937	$	4,267

Contract with Customer, Contract Asset, Contract Liability, and Receivable [Table Text Block]

	June 30, 2022		Additions		Revenue Recognized			Customer Refunds			June 30, 2023
Contract Liabilities (Customer Deposits)	$	140	$	317	$	(137	)	$	(3	)	$	317
	June 30, 2021		Additions		Revenue Recognized			Customer Refunds			June 30, 2022
Contract Liabilities (Customer Deposits)	$	1,721	$	140	$	(1,721	)	$	—		$	140

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

	For the Years Ended June 30,
	2023		2022
Numerator
Net income	$	2,522	$	10,712
Denominator
Basic weighted average common shares outstanding		5,863		6,117
Dilutive effect of stock options and restricted stock shares		14		38
Diluted weighted average common shares outstanding		5,878		6,155
Basic net income per common share	$	0.43	$	1.75
Diluted net income per common share	$	0.43	$	1.74

XML

Note B - Inventories (Tables)

12 Months Ended

Jun. 30, 2023

Notes Tables

Schedule of Inventory, Current [Table Text Block]

	2023			2022
Raw materials	$	20,946		$	28,196
Work in progress		4,504			1,948
Finished goods		4,928			2,842
Reserves		(684	)		(511	)
	$	29,694		$	32,475

XML

Note C - Property and Equipment (Tables)

12 Months Ended

Jun. 30, 2023

Notes Tables

Property, Plant and Equipment [Table Text Block]

	Depreciable
	Life
	In Years	2023			2022
Land	NA	$	8,940		$	7,645
Building and building improvements	7 – 39		24,712			17,415
Machinery and equipment	3 – 12		41,460			40,131
Office equipment and furniture	3 – 5		6,522			5,970
Vehicles	3		227			211
Leasehold improvements	1 – 20		22,641			21,626
Total property and equipment			104,502			92,998
Less: accumulated depreciation and amortization			(50,661	)		(48,425	)
Property and equipment, net		$	53,841		$	44,573

XML

Note D - Leases (Tables)

12 Months Ended

Jun. 30, 2023

Notes Tables

Lease, Cost [Table Text Block]

Supplemental Cash Flows Information	2023		2022
Cash paid for amounts included in the measurement of operating lease liabilities	$	3,291	$	3,289
Increase in operating lease liabilities and right-of-use assets due to lease remeasurement		906		8,513

XML

Note E - Other Comprehensive Income (Tables)

12 Months Ended

Jun. 30, 2023

Notes Tables

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

	Year Ended June 30, 2023
				Unrealized			Unrealized
				Gains			Gains
				(Losses)			(Losses)
	Defined			on			on
	Benefit			Cash Flow			Swap
	Pension Plan			Hedges			Derivative			Total
Balance as of June 30, 2022	$	(444	)	$	1,795		$	348		$	1,699
OCI/OCL before reclassifications		8			538			79			625
Amounts reclassified from OCI		78			(3,086	)		—			(3,008	)
Tax effect of OCI activity		(22	)		643			(20	)		601
Net current period OCI/OCL		64			(1,905	)		59			(1,782	)
Balance as of June 30, 2023	$	(380	)	$	(110	)	$	407		$	(83	)

	Year Ended June 30, 2022
				Unrealized			Unrealized
				Gains			Gains
				(Losses)			(Losses)
	Defined			on			on
	Benefit			Cash Flow			Swap
	Pension Plan			Hedges			Derivative			Total
Balance as of June 30, 2021	$	(538	)	$	(23	)	$	—		$	(561	)
OCI/OCL before reclassifications		17			5,370			454			5,841
Amounts reclassified from OCI		113			(3,011	)		—			(2,898	)
Tax effect of OCI activity		(36	)		(541	)		(106	)		(683	)
Net current period OCI/OCL		94			1,818			348			2,260
Balance as of June 30, 2022	$	(444	)	$	1,795		$	348		$	1,699

XML

Note F - Debt (Tables)

12 Months Ended

Jun. 30, 2023

Notes Tables

Schedule of Maturities of Long-Term Debt [Table Text Block]

	2024		2025		2026		2027		2028		Thereafter		Total
Future Debt Payments	$	312	$	296	$	305	$	315	$	325	$	7,964	$	9,517

XML

Note G - Income Taxes (Tables)

12 Months Ended

Jun. 30, 2023

Notes Tables

Schedule of Income before Income Tax, Domestic and Foreign [Table Text Block]

	2023		2022
United States	$	2,588	$	9,152
Foreign		967		4,507
Total income before income taxes	$	3,555	$	13,659

Schedule of Components of Income Tax Expense (Benefit) [Table Text Block]

	2023			2022
Current:
Federal	$	843		$	1,297
State		211			(1	)
Foreign		221			900
		1,275			2,196
Deferred:
Federal		(246	)		501
State		4			250
Foreign		—			—
		(242	)		751
Total provision for income taxes	$	1,033		$	2,947

Schedule of Deferred Tax Assets and Liabilities [Table Text Block]

	2023			2022
Deferred tax assets:
Inventory capitalization	$	220		$	373
Inventory reserves		164			113
Lease liability		2,018			2,139
Net operating loss carry forward		433			242
Accrued compensation		166			458
Capitalized research and experimentation		412			—
Accrued contingent fee		219			—
Stock-based compensation		81			66
Forward contracts		56			—
Tax credit carry forward		229			43
Allowance for bad debt		1			795
Interest expense		103			—
Other, net		87			—
Total gross deferred tax assets		4,189			4,229
Deferred tax liabilities:
Withholding taxes		(401	)		(1,133	)
Fixed assets		(1,451	)		(1,523	)
Forward contracts		—			(541	)
Lease asset		(1,951	)		(2,073	)
Other, net		(31	)		(179	)
Deferred tax liabilities		(3,834	)		(5,449	)
Net deferred tax assets (liabilities)	$	355		$	(1,220	)

Schedule of Effective Income Tax Rate Reconciliation [Table Text Block]

	2023			2022
Income taxes computed at statutory federal income tax rate	$	749		$	2,868
State income taxes, net of federal income tax expense		90			174
Permanent differences		8			85
Foreign tax rate differential		18			(47	)
Tax credits		(347	)		(124	)
FDII export sales incentive		—			(46	)
Stock based compensation		61			37
Global intangible low-taxed income (GILTI)		355			—
Return to provision - differences		99
Income tax provision as reported	$	1,033		$	2,947
Effective tax rate		29.1	%		21.6	%

XML

Note H - Employee Benefit Plans (Tables)

12 Months Ended

Jun. 30, 2023

Notes Tables

Changes in Projected Benefit Obligations, Fair Value of Plan Assets, and Funded Status of Plan [Table Text Block]

	2023			2022
Change in Benefit Obligation:
Benefit obligation at beginning of year	$	1,438		$	1,820
Interest cost		46			39
Actuarial loss		(29	)		(276	)
Benefits paid		(91	)		(145	)
Benefit obligation at end of year	$	1,364		$	1,438
Change in Plan Assets:
Fair value of plan assets at beginning of year	$	1,094		$	1,429
Actual return on plan assets		22			(190	)
Employer contributions		—			—
Benefits paid		(91	)		(145	)
Plan expenses		—			—
Fair value of plan assets at end of year	$	1,025		$	1,094
Reconciliation of Funded Status:
Difference between benefit obligation and fair value of plan assets	$	(339	)	$	(344	)
Unrecognized net actuarial loss in accumulated other comprehensive income		409			495
Net amount recognized	$	70		$	151
Projected benefit obligation	$	1,364		$	1,438
Accumulated benefit obligation	$	1,364		$	1,438
Fair value of plan assets	$	1,025		$	1,094

Schedule of Net Benefit Costs [Table Text Block]

	2023			2022
Interest cost	$	46		$	39
Expected return on plan assets		(42	)		(69	)
Recognized actuarial loss		50			63
Settlement loss		27			50
Net periodic benefit expense	$	81		$	83

Schedule of Amounts Recognized in Other Comprehensive Income (Loss) [Table Text Block]

	2023			2022
Net loss	$	(8	)	$	(17	)
Settlement loss		(28	)		(50	)
Amortization of net loss		(50	)		(63	)
Plan expenses		—			—
Total recognized in other comprehensive loss	$	(86	)	$	(130	)
Total recognized in net periodic benefit cost and other comprehensive loss	$	(5	)	$	(47	)

Schedule of Expected Benefit Payments [Table Text Block]

2024	$	739
2025		264
2026		13
2027		106
2028		30
2029-2033		105
Total benefit payments expected to be paid	$	1,257

Defined Benefit Plan, Assumptions [Table Text Block]

	2023			2022
Discount rate		4.89	%		4.39	%
Expected long-term rate of return		6.24	%		6.10	%
Compensation increase rate		N/A			N/A

Schedule of Weighted Average Allocation of Assets Related to Defined Benefit Plans Disclosure [Table Text Block]

							Target
	2023			2022			Allocation
Equity securities		64	%		49	%		53	%
Debt securities		14	%		20	%		41	%
Commodities		12	%		0	%		0	%
Other		10	%		31	%		6	%
		100	%		100	%		100	%

Schedule of Allocation of Plan Assets [Table Text Block]

			Quoted
			Prices in
			Active
			Markets for		Significant		Significant
			Identical		Observable		Unobservable
			Assets		Inputs		Inputs
	Total		(Level 1)		(Level 2)		(Level 3)
Equity securities(1)	$	653	$	653	$	—	$	—
Debt securities(2)	$	141	$	141	$	—	$	—
Other(3)	$	231	$	231	$	—	$	—
Total	$	1,025	$	1,025	$	—	$	—

XML

Note I - Stockholders' Equity (Tables)

12 Months Ended

Jun. 30, 2023

Notes Tables

Class of Treasury Stock [Table Text Block]

	Shares		Average Cost		Total Cost (in thousands)
Shares purchased under Repurchase Plan		140,812	$	9.19	$	1,294
Shares acquired from employees for restricted stock vesting		23,587		8.86		209
Total		164,399			$	1,503

	Shares		Average Cost		Total Cost (in thousands)
Shares purchased under Repurchase Plan		406,817	$	12.76	$	5,190
Shares acquired from employees for restricted stock vesting		28,263		11.08		313
Total		435,080			$	5,503

Share-Based Payment Arrangement, Restricted Stock and Restricted Stock Unit, Activity [Table Text Block]

			Weighted
	Number of		Average Grant
	Shares –		Date Fair
	2009 Plan		Value
Nonvested at June 30, 2022		1,666	$	8.50
Granted		—	$	—
Vested		1,666	$	8.50
Forfeited		—	$	—
Nonvested at June 30, 2023		—	$	—
Available for grant at June 30, 2023		—

				Weighted
	Number of			Average Grant
	Shares –			Date Fair
	2020 Plan			Value
Nonvested at June 30, 2022		186,227		$	12.56
Granted		123,000		$	8.79
Vested		(71,146	)	$	13.04
Forfeited		(14,399	)	$	11.69
Nonvested at June 30, 2023		223,682		$	10.39
Available for grant at June 30, 2023		349,377

				Weighted
	Number of			Average Grant
	Shares –			Date Fair
	2009 Plan			Value
Nonvested at June 30, 2021		61,324		$	11.47
Granted		—		$	—
Vested		(51,326	)	$	11.52
Forfeited		(8,332	)	$	10.88
Nonvested at June 30, 2022		1,666		$	8.50
Available for grant at June 30, 2022		—

				Weighted
	Number of			Average Grant
	Shares –			Date Fair
	2020 Plan			Value
Nonvested at June 30, 2021		87,773		$	16.81
Granted		135,850		$	10.99
Vested		(25,896	)	$	16.81
Forfeited		(11,500	)	$	16.81
Nonvested at June 30, 2022		186,227		$	12.56
Available for grant at June 30, 2022		472,377

XML

Note J - Commitments (Tables)

12 Months Ended

Jun. 30, 2023

Notes Tables

Lessee, Operating Lease, Liability, to be Paid, Maturity [Table Text Block]

											There-
	2024		2025		2026		2027		2028		after		Total
Gross minimum rental commitments	$	2,868	$	1,369	$	1,369	$	1,369	$	1,369	$	6,162	$	14,506

XML

Note K - Economic Dependency (Tables)

12 Months Ended

Jun. 30, 2023

Supplier Concentration Risk [Member]

Notes Tables

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

	Year ended June 30,
	2023					2022
			% of Total					% of Total
	Raw Material		Raw			Raw Material		Raw
	Purchases by		Material			Purchases by		Material
	Supplier		Purchases			Supplier		Purchases
Supplier 1	$	11,487		13	%	$	14,065		17	%
	$	11,487		13	%	$	14,065		17	%

Customer Concentration Risk [Member]

Notes Tables

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

	Fiscal 2023		Fiscal 2022
Customer 1	$	61,646	$	37,218
Customer 2		48,066		54,599
Customer 3		(a)		31,552
	$	109,712	$	123,369

XML

Note N - Segment Information (Tables)

12 Months Ended

Jun. 30, 2023

Notes Tables

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

	2023		2022
Net Sales
Private-label contract manufacturing	$	145,294	$	154,798
Patent and trademark licensing		8,721		16,168
	$	154,015	$	170,966

	2023			2022
Income from Operations
Private-label contract manufacturing	$	9,488		$	15,667
Patent and trademark licensing		3,021			6,780
Income from operations of reportable segments		12,509			22,447
Corporate expenses not allocated to segments		(7,796	)		(8,768	)
	$	4,713		$	13,679

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

	2023		2022
Assets
Private-label contract manufacturing	$	102,495	$	115,649
Patent and trademark licensing		31,657		30,354
	$	134,152	$	146,003

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

	2023		2022
United States	$	109,277	$	115,255
Markets outside the United States		44,738		55,711
Total net sales	$	154,015	$	170,966

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

	2023		2022
United States	$	53,536	$	43,769
Europe		20,674		22,505
Total Long-Lived Assets	$	74,210	$	66,274

Assets by Geographic Areas [Table Text Block]

	2023		2022
United States	$	89,167	$	83,443
Europe		44,985		62,560
Total Assets	$	134,152	$	146,003

Capital Expenditures by Geographic Areas [Table Text Block]

	2023		2022
United States	$	13,210	$	25,383
Europe		314		1,105
Total Capital Expenditures	$	13,524	$	26,488

XML

Note A - Organization and Summary of Significant Accounting Policies (Details Textual) € in Millions, SFr in Millions	1 Months Ended	6 Months Ended	12 Months Ended
	Dec. 31, 2022 USD ($)	Jun. 30, 2023 USD ($)	Jun. 30, 2023 USD ($) shares	Jun. 30, 2022 USD ($) shares	Jun. 30, 2023 EUR (€)	Jun. 30, 2023 CHF (SFr)
Income Tax Return Receivable		$ 3,500,000	$ 3,500,000
Accounts Receivable, Original Amount of Settled Receivable	$ 3,400,000
Accounts Receivable, Amount Settled	$ 1,400,000
Accounts Receivable, Increase (Decrease) in Amount		850,000
Asset Impairment Charges, Total			0
Contract with Customer, Refund Liability		0	0
Sales, Royalty and Licensing Revenue			8,700,000	$ 16,200,000
Royalty Expense			300,000	700,000
Research and Development Expense			2,100,000	2,500,000
Advertising Expense			$ 700,000	$ 1,100,000
Customer Concentration Risk [Member] | Accounts Receivable [Member]
Number of Major Customers			3
Customer Concentration Risk [Member] | Accounts Receivable [Member] | Beta-alanine Raw Material [Member]
Concentration Risk, Percentage			21.40%	5.40%
Customer Concentration Risk [Member] | Accounts Receivable [Member] | Three Customers [Member]
Concentration Risk, Percentage			47.40%	52.40%
Restricted Stock [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount (in shares) | shares			60,497	93,114
Foreign Exchange Contract [Member] | Not Designated as Hedging Instrument [Member]
Derivative, Notional Amount		12,300,000	$ 12,300,000			SFr 11.1
Foreign Exchange Contract [Member] | Cash Flow Hedging [Member]
Derivative, Notional Amount		$ 31,700,000	$ 31,700,000		€ 28.4
Maximum Remaining Maturity of Foreign Currency Derivatives (Year)			15 years
Minimum [Member]
Property, Plant and Equipment, Useful Life (Year)		1 year	1 year		1 year	1 year
Maximum [Member]
Property, Plant and Equipment, Useful Life (Year)		39 years	39 years		39 years	39 years
Fair Value, Inputs, Level 1 [Member]
Fair Value, Net Asset (Liability), Total		$ 0	$ 0	$ 0
Fair Value, Inputs, Level 3 [Member]
Fair Value, Net Asset (Liability), Total		$ 0	0	$ 0
Cost of Sales [Member]
Income Tax Recovery			2,200,000
Selling, General and Administrative Expenses [Member]
Income Tax Recovery			$ 1,300,000

XML

Note A - Organization and Summary of Significant Accounting Policies - Fair Value of Derivative Instruments Classified As Level 2 Assets and Liabilities (Details) - USD ($) $ in Thousands	Jun. 30, 2023	Jun. 30, 2022
Forward contracts	$ 390	$ 3,144
Fair Value, Inputs, Level 2 [Member]
Forward contracts	390	3,253
Derivative assets, noncurrent asset	547	1,014
Fair Value Net Asset – all Derivative Contracts	937	4,267
Fair Value, Inputs, Level 2 [Member] | Euro Forward Contract [Member]
Forward contracts	250	3,144
Derivative assets, noncurrent asset	15	561
Fair Value, Inputs, Level 2 [Member] | Swiss Franc Forward Contract [Member]
Forward contracts	140	109
Fair Value, Inputs, Level 2 [Member] | Interest Rate Swap [Member]
Derivative assets, noncurrent asset	$ 532	$ 453

XML

Note A - Organization and Summary of Significant Accounting Policies - Contract Liabilities and Revenue Recognized (Details) - USD ($) $ in Thousands	12 Months Ended
	Jun. 30, 2023	Jun. 30, 2022
Contract Liabilities (Customer Deposits), balance	$ 140	$ 1,721
Contract Liabilities (Customer Deposits), addition	317	140
Contract Liabilities (Customer Deposits), revenue recognized	(137)	(1,721)
Contract Liabilities (Customer Deposits), customer refunds	(3)	0
Contract Liabilities (Customer Deposits), balance	$ 317	$ 140

XML

Note A - Organization and Summary of Significant Accounting Policies - Calculation of Basic and Diluted Net Income Per Common Share (Details) - USD ($) $ / shares in Units, $ in Thousands	12 Months Ended
	Jun. 30, 2023	Jun. 30, 2022
Numerator
Net income	$ 2,522	$ 10,712
Denominator
Basic weighted average common shares outstanding (in shares)	5,863,083	6,117,044
Dilutive effect of stock options and restricted stock shares (in shares)	14,000	38,000
Diluted weighted average common shares outstanding (in shares)	5,877,559	6,155,118
Basic net income per common share (in dollars per share)	$ 0.43	$ 1.75
Diluted net income per common share (in dollars per share)	$ 0.43	$ 1.74

XML

Note B - Inventories - Summary of Inventories (Details) - USD ($) $ in Thousands	Jun. 30, 2023	Jun. 30, 2022
Raw materials	$ 20,946	$ 28,196
Work in progress	4,504	1,948
Finished goods	4,928	2,842
Reserves	(684)	(511)
Inventories, net	$ 29,694	$ 32,475

XML

Note C - Property and Equipment (Details Textual) - USD ($) $ in Millions	12 Months Ended
	Jun. 30, 2023	Jun. 30, 2022
Depreciation	$ 4.3	$ 4.2

XML

Note C - Property and Equipment - Summary of Property and Equipment (Details) - USD ($) $ in Thousands	Jun. 30, 2023	Jun. 30, 2022
Property and equipment, gross	$ 104,502	$ 92,998
Less: accumulated depreciation and amortization	(50,661)	(48,425)
Property and equipment, net	$ 53,841	44,573
Minimum [Member]
Depreciable Life In Years (Year)	1 year
Maximum [Member]
Depreciable Life In Years (Year)	39 years
Land [Member]
Property and equipment, gross	$ 8,940	7,645
Building and Building Improvements [Member]
Property and equipment, gross	$ 24,712	17,415
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	$ 41,460	40,131
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	$ 6,522	5,970
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	$ 227	211
Depreciable Life In Years (Year)	3 years
Leasehold Improvements [Member]
Property and equipment, gross	$ 22,641	$ 21,626
Leasehold Improvements [Member] | Minimum [Member]
Depreciable Life In Years (Year)	1 year
Leasehold Improvements [Member] | Maximum [Member]
Depreciable Life In Years (Year)	20 years

XML

Note D - Leases (Details Textual)	Jun. 30, 2023	Jun. 30, 2022
Operating Lease, Weighted Average Remaining Lease Term (Year)	5 years 3 months 18 days	6 years 3 months 18 days
Operating Lease, Weighted Average Discount Rate, Percent	4.12%	4.12%

XML

Note D - Leases - Lease Cash Flow Information (Details) - USD ($) $ in Thousands	12 Months Ended
	Jun. 30, 2023	Jun. 30, 2022
Cash paid for amounts included in the measurement of operating lease liabilities	$ 3,291	$ 3,289
Increase in operating lease liabilities and right-of-use assets due to lease remeasurement	$ 906	$ 8,513

XML

Note E - Other Comprehensive Income - Other Comprehensive (Loss) Income (Details) - USD ($) $ in Thousands	12 Months Ended
	Jun. 30, 2023	Jun. 30, 2022
Balance	$ 88,520	$ 80,083
Balance	88,772	88,520
Accumulated Defined Benefit Plans Adjustment Attributable to Parent [Member]
Balance	(444)	(538)
OCI/OCL before reclassifications	8	17
Amounts reclassified from OCI	78	113
Tax effect of OCI activity	(22)	(36)
Net current period OCI/OCL	64	94
Balance	(380)	(444)
Accumulated Gain (Loss), Net, Cash Flow Hedge, Parent [Member]
Balance	1,795	(23)
OCI/OCL before reclassifications	538	5,370
Amounts reclassified from OCI	(3,086)	(3,011)
Tax effect of OCI activity	643	(541)
Net current period OCI/OCL	(1,905)	1,818
Balance	(110)	1,795
Accumulated Gain (Loss), Net, Swap Derivative, Parent [Member]
Balance	348	0
OCI/OCL before reclassifications	79	454
Amounts reclassified from OCI	0	0
Tax effect of OCI activity	(20)	(106)
Net current period OCI/OCL	59	348
Balance	407	348
AOCI Attributable to Parent [Member]
Balance	1,699	(561)
OCI/OCL before reclassifications	625	5,841
Amounts reclassified from OCI	(3,008)	(2,898)
Tax effect of OCI activity	601	(683)
Net current period OCI/OCL	(1,782)	2,260
Balance	$ (83)	$ 1,699

XML

Note F - Debt (Details Textual)			12 Months Ended
	Aug. 20, 2021 USD ($)	Aug. 18, 2021 USD ($)	Jun. 30, 2023 USD ($)	Jun. 30, 2022 USD ($)	Dec. 31, 2021 USD ($)	Aug. 23, 2021	Jun. 30, 2021 USD ($)	May 24, 2021 USD ($)	Jan. 31, 2021 USD ($)
Payments to Acquire Property, Plant, and Equipment, Total			$ 13,524,000	$ 26,488,000
Interest Costs Capitalized			198,000	171,000
Interest Rate Swap [Member]
Derivative, Fixed Interest Rate		2.40%				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 Capital Expenditures Limitation, Amount, After Twelve Years			$ 25,000,000.0	$ 7,500,000
Debt Instrument Covenant Minimum, Net Income Required		$ 1.00
Debt Instrument Covenant, Fixed Charge Coverage Ratio			1.25
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			$ 9,517,000
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 F - Debt - Future Debt Payments (Details) - Wells Fargo Bank, N.A. [Member] - Credit Agreement [Member] - Term Loan [Member] $ in Thousands	Jun. 30, 2023 USD ($)
Future Debt Payments, 2024	$ 312
Future Debt Payments, 2025	296
Future Debt Payments, 2026	305
Future Debt Payments, 2027	315
Future Debt Payments, 2028	325
Future Debt Payments, thereafter	7,964
Future Debt Payments, total	$ 9,517

XML

Note G - Income Taxes (Details Textual) - USD ($) $ in Thousands	12 Months Ended
	Jun. 30, 2023	Jun. 30, 2022
Federal, State and Local Income Tax Expense (Benefit), Gross, Continuing Operations	$ 800	$ 2,000
Foreign Income Tax Expense (Benefit), Continuing Operations	200	$ 900
Operating Loss Carryforwards	$ 5,600
Effective Income Tax Rate Reconciliation, Percent	29.10%	21.60%
Dividends and Interest Paid	$ 14,700
Valuation Allowance, Deferred Tax Asset, Increase (Decrease), Amount		$ 0
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent	21.00%
Fiscal Years After June 30, 2021 [Member]
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent	21.00%
Foreign Tax Authority [Member] | Swiss Federal Tax Administration (FTA) [Member]
Effective Income Tax Rate Reconciliation, Percent	23.00%
Effective Income Tax Rate Reconciliation, Repatriation of Foreign Earnings, Percent	5.00%
Effective Income Tax Rate Reconciliation, Repatriation of Foreign Earnings, Amount	$ 700

XML

Note G - Income Taxes - Geographical Breakdown of Income Before Income Taxes (Details) - USD ($) $ in Thousands	12 Months Ended
	Jun. 30, 2023	Jun. 30, 2022
Total income before income taxes	$ 3,555	$ 13,659
Domestic Tax Authority [Member]
United States	2,588	9,152
Foreign Tax Authority [Member]
United States	$ 967	$ 4,507

XML

Note G - Income Taxes - Provision for Income Taxes (Details) - USD ($) $ in Thousands	12 Months Ended
	Jun. 30, 2023	Jun. 30, 2022
Current:
Federal	$ 843	$ 1,297
State	211	(1)
Foreign	221	900
Total Current	1,275	2,196
Deferred:
Federal	(246)	501
State	4	250
Foreign	0	0
Total deferred	(242)	751
Total provision for income taxes	$ 1,033	$ 2,947

XML

Note G - Income Taxes - Net Deferred Tax Assets and Deferred Tax Liabilities (Details) - USD ($) $ in Thousands	Jun. 30, 2023	Jun. 30, 2022
Deferred tax assets:
Inventory capitalization	$ 220	$ 373
Inventory reserves	164	113
Lease liability	2,018	2,139
Net operating loss carry forward	433	242
Accrued compensation	166	458
Capitalized research and experimentation	412	0
Accrued contingent fee	219	0
Stock-based compensation	81	66
Deferred Tax Assets, Derivative Instruments	56	0
Tax credit carry forward	229	43
Allowance for bad debt	1	795
Interest expense	103	0
Other, net	87	0
Total gross deferred tax assets	4,189	4,229
Deferred tax liabilities:
Withholding taxes	(401)	(1,133)
Fixed assets	(1,451)	(1,523)
Forward contracts	0	(541)
Lease asset	(1,951)	(2,073)
Other, net	(31)	(179)
Deferred tax liabilities	(3,834)	(5,449)
Net deferred tax assets (liabilities)	355	1,220
Net deferred tax assets (liabilities)	$ (355)	$ (1,220)

XML

Note G - Income Taxes - Reconciliation of Income Tax Provision (Details) - USD ($) $ in Thousands	12 Months Ended
	Jun. 30, 2023	Jun. 30, 2022
Income taxes computed at statutory federal income tax rate	$ 749	$ 2,868
State income taxes, net of federal income tax expense	90	174
Permanent differences	8	85
Foreign tax rate differential	18	(47)
Tax credits	(347)	(124)
FDII export sales incentive	0	(46)
Stock based compensation	61	37
Global intangible low-taxed income (GILTI)	355	0
Return to provision - differences	99
Total provision for income taxes	$ 1,033	$ 2,947
Effective Income Tax Rate Reconciliation, Percent	29.10%	21.60%

XML

Note H - Employee Benefit Plans (Details Textual) - USD ($)		12 Months Ended
	Jan. 01, 2004	Jun. 30, 2023	Jun. 30, 2022
Health Insurance Plan Premium Expense		$ 1,700,000	$ 1,400,000
Deferred Compensation Arrangement with Individual, Cash Award Granted, Amount		$ 600,000	$ 300,000
Number of Years Compensation Used for Benefit Obligation Assumptions (Year)		5 years
Defined Benefit Plan, Assumptions Used Calculating Benefit Obligation, Discount Rate		4.89%	4.39%
Defined Benefit Plan, Plan Assets, Contributions by Employer		$ 0	$ 0
Defined Benefit Plan, Expected Amortization, Next Fiscal Year		$ 40,000
Large-cap Funds [Member]
Defined Benefit Plan Equity Securities by Type, Percentage		50.00%
Developed Market Funds [Member]
Defined Benefit Plan Equity Securities by Type, Percentage		26.00%
Mid-cap Funds [Member]
Defined Benefit Plan Equity Securities by Type, Percentage		18.00%
Small Cap Funds [Member]
Defined Benefit Plan Equity Securities by Type, Percentage		6.00%
Fixed Income Funds [Member]
Defined Benefit Plan Equity Securities by Type, Percentage		34.00%
Developed Market Fixed Income Funds [Member]
Defined Benefit Plan Equity Securities by Type, Percentage		66.00%
First Contributions [Member]
Defined Contribution Plan, Employer Matching Contribution, Percent of Match	100.00%
Defined Contribution Plan, Employer Matching Contribution, Percent of Employees' Gross Pay		5.00%
Profit-sharing Plan [Member]
Defined Contribution Plan, Employer Discretionary Contribution Amount		$ 700,000	500,000
Discretionary Profit-sharing Plan [Member]
Defined Contribution Plan, Employer Discretionary Contribution Amount		$ 0	$ 300,000

XML

Note H - Employee Benefit Plans - Defined Benefit Pension Plan's Funded Status and Amount Recognized (Details) - USD ($) $ in Thousands	12 Months Ended
	Jun. 30, 2023	Jun. 30, 2022
Change in Benefit Obligation:
Benefit obligation at beginning of year	$ 1,438	$ 1,820
Interest cost	46	39
Actuarial loss	(29)	(276)
Benefits paid	(91)	(145)
Benefit obligation at end of year	1,364	1,438
Change in Plan Assets:
Fair value of plan assets at beginning of year	1,094	1,429
Actual return on plan assets	22	(190)
Defined Benefit Plan, Plan Assets, Contributions by Employer	0	0
Benefits paid	(91)	(145)
Plan expenses	0	0
Fair value of plan assets at end of year	1,025	1,094
Reconciliation of Funded Status:
Difference between benefit obligation and fair value of plan assets	(339)	(344)
Unrecognized net actuarial loss in accumulated other comprehensive income	409	495
Net amount recognized	70	151
Projected benefit obligation	1,364	1,438
Accumulated benefit obligation	1,364	1,438
Fair value of plan assets	$ 1,025	$ 1,094

XML

Note H - Employee Benefit Plans - Components Included in Defined Benefit Pension Plan's Net Periodic Benefit Expense (Details) - USD ($) $ in Thousands	12 Months Ended
	Jun. 30, 2023	Jun. 30, 2022
Interest cost	$ 46	$ 39
Expected return on plan assets	(42)	(69)
Recognized actuarial loss	50	63
Settlement loss	27	50
Net periodic benefit expense	$ 81	$ 83

XML

Note H - Employee Benefit Plans - Summary of Changes in Plan Assets and Benefit Obligation (Details) - USD ($) $ in Thousands	12 Months Ended
	Jun. 30, 2023	Jun. 30, 2022
Net loss	$ (8)	$ (17)
Settlement loss	(28)	(50)
Amortization of net loss	(50)	(63)
Plan expenses	(0)	(0)
Total recognized in other comprehensive loss	(86)	(130)
Total recognized in net periodic benefit cost and other comprehensive loss	$ (5)	$ (47)

XML

Note H - Employee Benefit Plans - Benefit Payments Expected to be Paid (Details) $ in Thousands	Jun. 30, 2023 USD ($)
2024	$ 739
2025	264
2026	13
2027	106
2028	30
2029-2033	105
Total benefit payments expected to be paid	$ 1,257

XML

Note H - Employee Benefit Plans - Weighted-average Rates Used In Determining Defined Benefit Pension Plan's Net Pension Costs (Details)	12 Months Ended
	Jun. 30, 2023	Jun. 30, 2022
Discount rate	4.89%	4.39%
Expected long-term rate of return	6.24%	6.10%

XML

Note H - Employee Benefit Plans - Defined Benefit Pension Plan's Weighted Average Asset Association and Weighted Average Target Allocation (Details)	Jun. 30, 2023	Jun. 30, 2022
Weighted-average asset allocation	100.00%	100.00%
Target allocation	100.00%
Equity Securities [Member]
Weighted-average asset allocation	64.00%	49.00%
Target allocation	53.00%
Debt Securities [Member]
Weighted-average asset allocation	14.00%	20.00%
Target allocation	41.00%
Commodity Contract [Member]
Weighted-average asset allocation	12.00%	0.00%
Target allocation	0.00%
Other Contract [Member]
Weighted-average asset allocation	10.00%	31.00%
Target allocation	6.00%

XML

Note H - Employee Benefit Plans - Fair Values by Asset Category of Defined Benefit Pension Plan (Details) - USD ($) $ in Thousands		Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2021
Fair value by asset category		$ 1,025	$ 1,094	$ 1,429
Fair Value, Inputs, Level 1 [Member]
Fair value by asset category		1,025
Fair Value, Inputs, Level 2 [Member]
Fair value by asset category		0
Fair Value, Inputs, Level 3 [Member]
Fair value by asset category		0
Equity Securities [Member]
Fair value by asset category	[1]	653
Equity Securities [Member] | Fair Value, Inputs, Level 1 [Member]
Fair value by asset category	[1]	653
Equity Securities [Member] | Fair Value, Inputs, Level 2 [Member]
Fair value by asset category	[1]	0
Equity Securities [Member] | Fair Value, Inputs, Level 3 [Member]
Fair value by asset category	[1]	0
Debt Securities [Member]
Fair value by asset category	[2]	141
Debt Securities [Member] | Fair Value, Inputs, Level 1 [Member]
Fair value by asset category	[2]	141
Debt Securities [Member] | Fair Value, Inputs, Level 2 [Member]
Fair value by asset category	[2]	0
Debt Securities [Member] | Fair Value, Inputs, Level 3 [Member]
Fair value by asset category	[2]	0
Other Contract [Member]
Fair value by asset category	[3]	231
Other Contract [Member] | Fair Value, Inputs, Level 1 [Member]
Fair value by asset category	[3]	231
Other Contract [Member] | Fair Value, Inputs, Level 2 [Member]
Fair value by asset category	[3]	0
Other Contract [Member] | Fair Value, Inputs, Level 3 [Member]
Fair value by asset category	[3]	$ 0

[1] This category is comprised of publicly traded funds, of which 50% are large-cap funds, 26% are developed and emerging market funds, 18% are mid-cap funds, and 6% are small-cap funds.

[2] This category is comprised of publicly traded funds, of which 34% are U.S. fixed income funds and 66% are corporate and foreign market fixed income funds.

[3] This category is comprised of commodities and cash alternatives.

XML

Note I - Stockholders' Equity (Details Textual) - USD ($) $ in Millions				12 Months Ended
	Jan. 14, 2022	Mar. 12, 2021	Sep. 18, 2020	Jun. 30, 2023
Stock Repurchase Program, Additional Authorized Amount	$ 3	$ 3	$ 2
Stock Repurchase Program, Authorized Amount	$ 18	$ 15	$ 12
Restricted Stock [Member]
Share-Based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Amount				$ 2
Share-Based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Period for Recognition (Year)				2 years 1 month 6 days

XML

Note I - Stockholders' Equity - Treasury Stock Repurchases (Details) - USD ($) $ / shares in Units, $ in Thousands	12 Months Ended
	Jun. 30, 2023	Jun. 30, 2022
Treasury Stock Acquired, Shares (in shares)	164,399	435,080
Treasury Stock Acquired, Average Cost (in dollars per share)
Treasury Stock Acquired, Total Cost	$ 1,503	$ 5,503
Stock Repurchase Plan [Member]
Treasury Stock Acquired, Shares (in shares)	140,812	406,817
Treasury Stock Acquired, Average Cost (in dollars per share)	$ 9.19	$ 12.76
Treasury Stock Acquired, Total Cost	$ 1,294	$ 5,190
Stock Repurchased from Employee for Restricted Stock Vesting [Member]
Treasury Stock Acquired, Shares (in shares)	23,587	28,263
Treasury Stock Acquired, Average Cost (in dollars per share)	$ 8.86	$ 11.08
Treasury Stock Acquired, Total Cost	$ 209	$ 313

XML

Note I - Stockholders' Equity - Restricted Stock (Details) - Restricted Stock [Member] - $ / shares	12 Months Ended
	Jun. 30, 2023	Jun. 30, 2022
The 2009 Omnibus Stock Incentive Plan [Member]
Nonvested, Shares (in shares)	1,666	61,324
Nonvested, weighted-average grant date fair value (in dollars per share)	$ 8.50	$ 11.47
Granted, Shares (in shares)	0	0
Granted, weighted-average grant date fair value (in dollars per share)	$ 0	$ 0
Vested, Shares (in shares)	1,666	51,326
Granted, weighted-average grant date fair value (in dollars per share)	$ 8.50	$ 11.52
Forfeited, Shares (in shares)	0	(8,332)
Forfeited, weighted-average grant date fair value (in dollars per share)	$ 0	$ 10.88
Nonvested, Shares (in shares)	0	1,666
Nonvested, weighted-average grant date fair value (in dollars per share)	$ 0	$ 8.50
Available for grant, Shares (in shares)	0	0
Vested, Shares (in shares)	(1,666)	(51,326)
The 2020 Omnibus Stock Incentive Plan [Member]
Nonvested, Shares (in shares)	186,227	87,773
Nonvested, weighted-average grant date fair value (in dollars per share)	$ 12.56	$ 16.81
Granted, Shares (in shares)	123,000	135,850
Granted, weighted-average grant date fair value (in dollars per share)	$ 8.79	$ 10.99
Vested, Shares (in shares)	71,146	25,896
Granted, weighted-average grant date fair value (in dollars per share)	$ 13.04	$ 16.81
Forfeited, Shares (in shares)	(14,399)	(11,500)
Forfeited, weighted-average grant date fair value (in dollars per share)	$ 11.69	$ 16.81
Nonvested, Shares (in shares)	223,682	186,227
Nonvested, weighted-average grant date fair value (in dollars per share)	$ 10.39	$ 12.56
Available for grant, Shares (in shares)	349,377	472,377
Vested, Shares (in shares)	(71,146)	(25,896)

XML

Note J - Commitments (Details Textual) $ in Millions	12 Months Ended
	Jun. 30, 2023 USD ($) ft²	Jun. 30, 2022 USD ($)	Nov. 05, 2018 m²
Operating Lease, Expense | $	$ 3.3	$ 3.4
California 1 [Member]
Operating Lease Facility Area (Square Foot)	162,000
SWITZERLAND | Natural Alternatives International Europe SA [Member]
Operating Lease Facility Area (Square Foot)	125,000
Lessee, Operating Lease, Term of Contract (Year)	5 years
SWITZERLAND | Natural Alternatives International Europe SA [Member] | Sofinol SA [Member]
Operating Lease Facility Area (Square Foot) | m²			2,870
Lessee, Operating Lease, Term of Contract (Year)			5 years

XML

Note J - Commitments - Minimum Rental Commitments (Details) $ in Thousands	Jun. 30, 2023 USD ($)
2024	$ 2,868
2025	1,369
2026	1,369
2027	1,369
There-after	6,162
Total	$ 14,506

XML

Note K - Economic Dependency (Details Textual) - USD ($) $ in Millions	Jun. 30, 2023	Jun. 30, 2022
Three Customers [Member]
Accounts Receivable, after Allowance for Credit Loss	$ 1.8	$ 10.7

XML

Note K - Economic Dependency - Substantial Net Sales to Certain Customers (Details) - USD ($) $ in Thousands		12 Months Ended
		Jun. 30, 2023	Jun. 30, 2022
Net sales		$ 154,015	$ 170,966
Customer Concentration Risk [Member] | Revenue Benchmark [Member]
Net sales		109,712	123,369
Customer Concentration Risk [Member] | Revenue Benchmark [Member] | Customer 1 [Member]
Net sales		61,646	37,218
Customer Concentration Risk [Member] | Revenue Benchmark [Member] | Customer 2 [Member]
Net sales	[1]	$ 48,066	54,599
Customer Concentration Risk [Member] | Revenue Benchmark [Member] | Customer 3 [Member]
Net sales			$ 31,552

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

XML

Note K - Economic Dependency - Substantial Net Purchase From Certain Suppliers (Details) - Supplier Concentration Risk [Member] - Raw Material Purchases [Member] - USD ($) $ in Thousands	12 Months Ended
	Jun. 30, 2023	Jun. 30, 2022
Raw Material Purchases by Supplier	$ 11,487	$ 14,065
% of Total Raw Material Purchases	13.00%	17.00%
Supplier 1 [Member]
Raw Material Purchases by Supplier	$ 11,487	$ 14,065
% of Total Raw Material Purchases	13.00%	17.00%

XML

Note L - Derivatives and Hedging (Details Textual) $ in Thousands, € in Millions, SFr in Millions		12 Months Ended
	Aug. 18, 2021 USD ($)	Jun. 30, 2023 USD ($)	Jun. 30, 2022 USD ($)	Jun. 30, 2023 EUR (€)	Jun. 30, 2023 CHF (SFr)	Aug. 23, 2021
Deferred Tax Assets, Derivative Instruments		$ 56	$ 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%
Wells Fargo Bank, N.A. [Member] | Credit Agreement [Member] | Term Loan [Member]
Debt Instrument, Face Amount	$ 10,000
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%
Cash Flow Hedging [Member]
Other Comprehensive Income (Loss), Cash Flow Hedge, Gain (Loss), before Reclassification and Tax		$ 500	5,400
Derivative Instruments, Gain (Loss) Reclassified from Accumulated OCI into Interest Income, Effective Portion, Net		3,100	3,000
Foreign Exchange Contract [Member] | Not Designated as Hedging Instrument [Member]
Derivative, Notional Amount		12,300			SFr 11.1
Foreign Exchange Contract [Member] | Cash Flow Hedging [Member]
Derivative, Notional Amount		31,700		€ 28.4
Accumulated Other Comprehensive Income (Loss) Cumulative Cash Flow Hedges, Gain (Loss)		200	(2,300)
Deferred Tax Assets, Derivative Instruments		100	$ 500
Foreign Currency Cash Flow Hedge Gain (Loss) to be Reclassified During Next 12 Months		$ 200
Interest Rate Swap [Member]
Derivative, Fixed Interest Rate	2.40%					2.40%

XML

Note N - Segment Information (Details Textual) $ in Thousands	12 Months Ended
	Jun. 30, 2023 USD ($)	Jun. 30, 2022 USD ($)
Number of Reportable Segments	2
Revenue from Contract with Customer, Including Assessed Tax	$ 154,015	$ 170,966
Non-US [Member]
Revenue from Contract with Customer, Including Assessed Tax	44,738	55,711
UNITED STATES
Revenue from Contract with Customer, Including Assessed Tax	$ 109,277	$ 115,255
Products Manufactured by NAIE [Member] | Non-US [Member] | Product Concentration Risk [Member] | Revenue Benchmark [Member]
Concentration Risk, Percentage	79.00%	84.00%
Products Manufactured by NAIE [Member] | UNITED STATES
Revenue from Contract with Customer, Including Assessed Tax	$ 0	$ 0

XML

Note N - Segment Information - Operating Results by Business Segment (Details) - USD ($) $ in Thousands	12 Months Ended
	Jun. 30, 2023	Jun. 30, 2022
Revenue from Contract with Customer, Including Assessed Tax	$ 154,015	$ 170,966
Income from operations	4,713	13,679
Operating Segments [Member]
Income from operations	12,509	22,447
Corporate, Non-Segment [Member]
Income from operations	(7,796)	(8,768)
Private Label Contract Manufacturing [Member]
Revenue from Contract with Customer, Including Assessed Tax	145,294	154,798
Private Label Contract Manufacturing [Member] | Operating Segments [Member]
Income from operations	9,488	15,667
Patent and Trademark Licensing [Member]
Revenue from Contract with Customer, Including Assessed Tax	8,721	16,168
Patent and Trademark Licensing [Member] | Operating Segments [Member]
Income from operations	$ 3,021	$ 6,780

XML

Note N - Segment Information - Assets by Business Segment (Details) - USD ($) $ in Thousands	Jun. 30, 2023	Jun. 30, 2022
Total Assets	$ 134,152	$ 146,003
Private Label Contract Manufacturing [Member]
Total Assets	102,495	115,649
Patent and Trademark Licensing [Member]
Total Assets	$ 31,657	$ 30,354

XML

Note N - Segment Information - Net Sales by Geographic Region (Details) - USD ($) $ in Thousands	12 Months Ended
	Jun. 30, 2023	Jun. 30, 2022
Net sales	$ 154,015	$ 170,966
UNITED STATES
Net sales	109,277	115,255
Non-US [Member]
Net sales	$ 44,738	$ 55,711

XML

Note N - Segment Information - Long-lived Assets by Geographical Region (Details) - USD ($) $ in Thousands	Jun. 30, 2023	Jun. 30, 2022
Long-Lived Assets	$ 74,210	$ 66,274
UNITED STATES
Long-Lived Assets	53,536	43,769
Europe [Member]
Long-Lived Assets	$ 20,674	$ 22,505

XML

Note N - Segment Information - Total Assets by Geographical Region (Details) - USD ($) $ in Thousands	Jun. 30, 2023	Jun. 30, 2022
Total Assets	$ 134,152	$ 146,003
UNITED STATES
Total Assets	89,167	83,443
Europe [Member]
Total Assets	$ 44,985	$ 62,560

XML

Note N - Segment Information - Capital Expenditures by Geographical Region (Details) - USD ($) $ in Thousands	12 Months Ended
	Jun. 30, 2023	Jun. 30, 2022
Payments to Acquire Property, Plant, and Equipment, Total	$ 13,524	$ 26,488
UNITED STATES
Payments to Acquire Property, Plant, and Equipment, Total	13,210	25,383
Europe [Member]
Payments to Acquire Property, Plant, and Equipment, Total	$ 314	$ 1,105

XML

Note O - Subsequent Events (Details Textual) - Subsequent Event [Member] - California 1 [Member]	Jul. 18, 2023 USD ($) ft²
Lessee, Operating Lease, Lease Not yet Commenced, Term of Contract (Year)	10 years 4 months 24 days
Number of Real Estate Properties	2
Area of Real Estate Property (Square Foot) | ft²	162,000
Operating Lease, Base Rent Per Square Foot	$ 1.50
Tenant Improvements	2,300,000
Reimbursements For Tenant Improvements [Member]
Tenant Improvements	$ 1,100,000