Company Overview - Natural Alternatives International, Inc. (NAI) is a leading formulator, manufacturer, and marketer of nutritional supplements, headquartered in Carlsbad, California [6] - NAI offers a comprehensive partnership approach that includes scientific research, proprietary ingredients, product formulation, testing, marketing management, and regulatory review [6] Product Launch - NAI has introduced a new carnosine booster called TriBsyn™, which utilizes proprietary technology to enhance beta-alanine bioavailability and absorption while eliminating the common paresthesia sensation [2] - TriBsyn™ is positioned to appeal to a wide range of consumers, including older adults, vegetarians, and vegans, looking to increase their carnosine levels [2] Strategic Partnership - NAI has formed a distribution partnership with B&D Nutritional Ingredients, effective October 1, 2024, to distribute TriBsyn™ in the U.S. dietary supplement, functional food, and beverage markets [1][2] - B&D Nutritional Ingredients has been a prominent raw material distributor in the dietary supplement industry since 1993 and is recognized for its commitment to customer service [3][4] Market Positioning - TriBsyn™ is expected to enhance B&D's specialty ingredient portfolio, which includes clinically supported and unique dietary ingredients [4] - The partnership aims to drive awareness and growth of TriBsyn™, which was launched in August 2024 [3] Industry Context - B&D Nutritional Ingredients specializes in the sales, distribution, and marketing of high-quality dietary ingredients across various sectors, including dietary supplements and functional foods [4] - The dietary supplement industry is increasingly focused on innovative ingredients that support health benefits such as anti-aging, cognitive function, and physical activity [4]

Core Viewpoint - Natural Alternatives International, Inc. reported a significant decline in both net sales and profitability for the fourth quarter and fiscal year 2024, indicating challenges in their private-label contract manufacturing segment and overall market conditions [1][4]. Financial Performance - The company experienced a net loss of $1.9 million, or ($0.32) per diluted share, for Q4 FY 2024, compared to a net income of $2.0 million, or $0.35 per diluted share, in Q4 FY 2023 [1]. - For the fiscal year 2024, the net loss was $7.2 million, or ($1.23) per diluted share, compared to a net income of $2.5 million, or $0.43 per diluted share, for fiscal year 2023 [4]. - Net sales for Q4 FY 2024 decreased by $6.4 million, or 18%, to $29.5 million from $35.9 million in the same period last year [2]. - Annual net sales for FY 2024 decreased by $40.2 million, or 26%, to $113.8 million compared to $154.0 million in FY 2023 [5]. Segment Performance - Private-label contract manufacturing sales fell by 14% to $27.6 million in Q4 FY 2024, primarily due to reduced orders from a major customer aiming to cut excess inventory [2]. - CarnoSyn® beta-alanine royalty, licensing, and raw material sales revenue decreased by 48% to $1.85 million in Q4 FY 2024, down from $3.57 million in Q4 FY 2023, attributed to lower raw material sales and unfavorable volume rebate estimates [3]. Operational Insights - The company reported a loss from operations for both the three and twelve months ended June 30, 2024, mainly due to a slowdown in sales within the private-label contract manufacturing segment [6]. - Despite the current challenges, the company anticipates a significant increase in sales for fiscal 2025, projecting a net loss in the first half but expecting net income in the second half [6]. Cash and Working Capital - As of June 30, 2024, the company had cash of $12.0 million and working capital of $38.1 million, a decrease from $13.6 million and $41.1 million, respectively, as of June 30, 2023 [7]. Strategic Developments - The company re-opened its Carlsbad powder facility in Q4 FY 2024 to meet customer demands and is optimistic about new business opportunities, including the introduction of a new ingredient, TriBsynTM, at the ESPEN conference [8].

Financial Performance - Consolidated net sales for fiscal 2024 decreased by 26% to $113.8 million compared to $154.0 million in fiscal 2023[125]. - The company experienced a net loss of $7.2 million in fiscal 2024, compared to a net income of $2.5 million in fiscal 2023[133]. - Net sales for the year ended June 30, 2024, were $113,796,000, a decrease of 26% from $154,015,000 in 2023[161]. - Gross profit for 2024 was $6,865,000, down from $18,158,000 in 2023, reflecting a gross margin decline[161]. - The company reported a loss from operations of $8.5 million for fiscal 2024, compared to an income of $4.7 million in fiscal 2023[279]. - The total loss before income taxes for fiscal 2024 was $9.464 million, a decrease from a profit of $3.555 million in fiscal 2023[228]. Revenue Sources - Private-label contract manufacturing sales fell by 27% primarily due to reduced orders from larger customers, with revenue concentration from the largest customer increasing to 42% in fiscal 2024 from 40% in fiscal 2023[125][135]. - Patent and trademark licensing revenue decreased by 3% to $8.4 million in fiscal 2024, down from $8.7 million in fiscal 2023[126]. - Revenue recognized from beta-alanine raw material sales and royalty income was $8.4 million in fiscal 2024, compared to $8.7 million in fiscal 2023[196]. - The company’s private-label contract manufacturing segment generated $105.4 million in net sales for fiscal 2024, down from $145.3 million in fiscal 2023[279]. Expenses and Costs - Selling, general, and administrative expenses increased by 15% to $15.4 million in fiscal 2024, compared to $13.5 million in fiscal 2023[138]. - Gross profit margin for private-label contract manufacturing decreased by 6.9 percentage points in fiscal 2024, primarily due to unfavorable sales mix and increased per unit manufacturing costs[136]. - Operating expenses increased to $15,399,000 in 2024 from $14,869,000 in 2023, indicating a rise in selling, general, and administrative costs[161]. - Research and development expenses were $1.9 million for fiscal 2024, down from $2.1 million in fiscal 2023[199]. - Advertising costs incurred were $0.3 million in fiscal 2024, a decrease from $0.7 million in fiscal 2023[200]. Cash Flow and Liquidity - Net cash used in operating activities was $1.5 million in fiscal 2024, a decrease from $7.0 million in fiscal 2023[141]. - Cash used in investing activities decreased to $3.0 million in fiscal 2024 from $13.5 million in fiscal 2023 due to reduced capital expenditures[143]. - Cash provided in financing activities increased to $2.9 million in fiscal 2024 compared to $1.8 million used in fiscal 2023, driven by $3.4 million of outstanding short-term borrowing[143]. - As of June 30, 2024, the company had $12.0 million in cash and cash equivalents, down from $13.6 million in 2023[145]. Assets and Liabilities - Total current assets increased to $61.6 million in 2024 from $57.0 million in 2023, while total assets rose to $162.3 million from $134.2 million[159]. - Current liabilities increased to $23.5 million in 2024 from $15.9 million in 2023, with accounts payable rising to $12.7 million[159]. - The company reported a decrease in retained earnings to $72.97 million in 2024 from $80.18 million in 2023[159]. - The company had no significant off-balance sheet debt or obligations as of June 30, 2024[146]. Debt and Financing - As of June 30, 2024, the company had $3.4 million outstanding on its line of credit and $9.2 million on its term loan, compared to no balance on the line of credit and $9.5 million on the term loan as of June 30, 2023[181]. - The amended credit facility with Wells Fargo decreased total borrowing capacity to $12.5 million and increased the interest rate on borrowings to 2.25% above the daily simple SOFR rate[223]. - The company is negotiating a potential revised credit facility or waiver due to anticipated non-compliance with covenants in the first half of fiscal 2025[226]. Taxation - The company recorded a U.S.-based domestic tax benefit of $2.2 million in fiscal 2024, compared to a tax expense of $0.8 million in fiscal 2023[228]. - The effective tax rate for fiscal 2024 was approximately (23.7)%, compared to 29.1% in fiscal 2023[237]. - The company had net deferred tax assets of $3.170 million as of June 30, 2024, significantly up from $0.355 million in 2023[230]. Pension and Employee Benefits - The defined benefit pension plan's benefit obligation at the end of the year increased to $1,374,000 in 2024 from $1,364,000 in 2023, reflecting a change of 0.74%[245]. - The fair value of plan assets at the end of the year rose to $1,232,000 in 2024 from $1,025,000 in 2023, representing an increase of 20.18%[245]. - The net periodic benefit expense decreased to $46,000 in 2024 from $81,000 in 2023, a reduction of 43.21%[246]. - The company contributed $0.1 million to the defined benefit pension plan in 2024, compared to no contributions in 2023[246]. Operational Challenges - Inflationary pressures have led to increased costs for raw materials and operations, which are expected to continue impacting fiscal 2025[147]. - The company is monitoring the impact of the Israel-Hamas conflict on its operations and is evaluating alternative sources for raw materials sourced from the region[277]. Future Plans - The company plans to focus on expanding commercialization of its beta-alanine patent estate and developing new sales distribution channels in fiscal 2025[130]. - The company expects to adopt ASU 2023-07 on segment reporting in fiscal 2025, with no material impact anticipated on consolidated financial statements[171].

Core Insights - Natural Alternatives International, Inc. (NAI) and CarnoSyn® Brands will showcase their innovative product TriBsyn™ at the 46th ESPEN Congress on Clinical Nutrition & Metabolism in Milan, Italy from September 7-10, 2024, highlighting advancements in clinical nutrition and metabolism [1][2] Product Innovation - TriBsyn™ is a patent-pending formula designed to enhance beta-alanine bioavailability and absorption while eliminating the common paresthesia sensation associated with high doses of beta-alanine, targeting a diverse consumer base including older adults and vegans [2][3] - The product aims to address the growing demand for healthy aging and wellness solutions, focusing on muscle vitality, cognitive performance, and anti-aging support [3] Company Background - NAI is a leading formulator, manufacturer, and marketer of nutritional supplements, providing a comprehensive range of services including scientific research, proprietary ingredients, and product formulation [6] - CarnoSyn® Brands offers three clinically studied, patented ingredients, including CarnoSyn® instant release beta-alanine powder and SR CarnoSyn® sustained release beta-alanine tablets, with TriBsyn™ being the latest addition to their product line [5]

CARLSBAD, Calif., Aug. 07, 2024 (GLOBE NEWSWIRE) -- Exclusively from Natural Alternatives International, Inc. (NAI), CarnoSyn® Brands portfolio of patented ingredients presents TriBsyn™, a groundbreaking new carnosine booster utilizing CarnoSyn® beta-alanine and patent-pending technology to increase beta-alanine bioavailability and absorption while effectively eliminating beta-alanine related paresthesia. The proprietary TriBsyn™ formulation successfully removes the common paresthesia sensation associated w ...

CARLSBAD, Calif., May 14, 2024 (GLOBE NEWSWIRE) -- Natural Alternatives International, Inc. ("NAI") (NASDAQ:NAII), a leading formulator, manufacturer, and marketer of customized nutritional supplements, today announced a net loss of $1.6 million, or ($0.27) per diluted share, on net sales of $25.1 million for the third quarter of fiscal year 2024 compared to a net loss of $2.4 million, or ($0.41) per diluted share, in the third quarter of the prior fiscal year. Net sales during the three months ended March ...

PART I [PART I - FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) This section presents the unaudited condensed consolidated financial statements for the three and nine months ended March 31, 2024, with detailed notes [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements for the three and nine months ended March 31, 2024, including balance sheets, statements of operations, stockholders' equity, and cash flows [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets increased to **$153.2 million** while total liabilities grew to **$69.1 million**, leading to a decline in stockholders' equity to **$84.1 million** as of March 31, 2024 Condensed Consolidated Balance Sheets (in thousands) | | March 31, 2024 | June 30, 2023 | | :--- | :--- | :--- | | **Total current assets** | $54,361 | $57,010 | | **Total assets** | **$153,211** | **$134,152** | | **Total current liabilities** | $13,647 | $15,884 | | **Total liabilities** | **$69,112** | **$45,380** | | **Total stockholders' equity** | **$84,099** | **$88,772** | [Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20%28Loss%29%20Income) The company reported a net loss of **$5.3 million** for the nine months ended March 31, 2024, a significant decline from prior-year net income, driven by a 29% decrease in net sales Financial Performance (in thousands, except per share data) | Metric | Three Months Ended Mar 31, 2024 | Three Months Ended Mar 31, 2023 | Nine Months Ended Mar 31, 2024 | Nine Months Ended Mar 31, 2023 | | :--- | :--- | :--- | :--- | :--- | | **Net sales** | $25,136 | $32,699 | $84,307 | $118,121 | | **Gross profit** | $1,922 | $1,376 | $5,446 | $12,961 | | **(Loss) income from operations** | $(1,952) | $(2,488) | $(6,009) | $1,539 | | **Net (loss) income** | **$(1,578)** | **$(2,381)** | **$(5,343)** | **$485** | | **Diluted net (loss) income per share** | $(0.27) | $(0.41) | $(0.91) | $0.08 | [Condensed Consolidated Statements of Stockholders' Equity](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders%27%20Equity) Total stockholders' equity decreased to **$84.1 million** by March 31, 2024, primarily due to a **$5.3 million** net loss and common stock repurchases - For the nine months ended March 31, 2024, total stockholders' equity fell by **$4.7 million**, mainly due to a net loss of **$5.3 million**[19](index=19&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operating activities improved to **$1.2 million** for the nine months ended March 31, 2024, with cash and cash equivalents ending at **$12.4 million** Nine-Month Cash Flow Summary (in thousands) | Cash Flow Activity | Nine Months Ended Mar 31, 2024 | Nine Months Ended Mar 31, 2023 | | :--- | :--- | :--- | | **Net cash provided by (used in) operating activities** | $1,220 | $(470) | | **Net cash used in investing activities** | $(1,983) | $(13,191) | | **Net cash (used in) provided by financing activities** | $(434) | $7,388 | | **Net decrease in cash and cash equivalents** | $(1,197) | $(6,273) | | **Cash and cash equivalents at end of period** | $12,407 | $15,560 | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Detailed notes disclose accounting policies, a **28% increase** in beta-alanine revenue, a significant lease extension, credit facility amendments, high customer concentration, and supply chain risks - Revenue from beta-alanine raw material sales and royalty/licensing income increased to **$6.6 million** for the nine months ended March 31, 2024, up from **$5.2 million** in the prior-year period[39](index=39&type=chunk) - In July 2023, the company extended the lease for its Vista, CA manufacturing facility by ten years and five months, increasing the lease liability and Right of Use asset by approximately **$25.9 million**[55](index=55&type=chunk) - The company failed to meet certain financial covenants as of December 31, 2023, leading to a Fourth Amendment of its credit facility on February 13, 2024, which waived non-compliance, reduced borrowing capacity to **$12.5 million**, increased the interest rate, and suspended share repurchases[60](index=60&type=chunk)[61](index=61&type=chunk) - The company is monitoring the Israel-Hamas conflict for potential impacts on its supply chain, as it sources multiple raw materials from Israel[91](index=91&type=chunk) Customer Concentration (% of Consolidated Net Sales) | Customer | Nine Months Ended Mar 31, 2024 | Nine Months Ended Mar 31, 2023 | | :--- | :--- | :--- | | Customer 1 | $35,215 (41.8%) | $46,948 (39.7%) | | Customer 2 | $13,604 (16.1%) | $38,823 (32.9%) | | **Total** | **$48,819 (57.9%)** | **$85,771 (72.6%)** | Segment Performance - Nine Months Ended March 31 (in thousands) | Segment | Net Sales 2024 | Net Sales 2023 | (Loss) Income from Ops 2024 | Income from Ops 2023 | | :--- | :--- | :--- | :--- | :--- | | Private label contract manufacturing | $77,718 | $112,969 | $(2,367) | $6,264 | | Patent and trademark licensing | $6,589 | $5,152 | $2,592 | $1,485 | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=26&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes a **29% decline** in nine-month net sales to reduced private-label manufacturing orders, anticipates a full fiscal year net loss, and temporarily closed its Carlsbad facility - Net sales for the nine months ended March 31, 2024, were **29% lower** than the prior-year period, primarily due to a **31% decrease** in private-label contract manufacturing sales[97](index=97&type=chunk) - The company announced the temporary closure of its Carlsbad, California powder processing facility in August 2023 due to a customer's excess inventory and announced its reopening for May 2024[102](index=102&type=chunk) - Management anticipates a net loss in the fourth quarter of fiscal 2024 and an overall net loss for the full fiscal year[103](index=103&type=chunk) Results of Operations - Nine Months Ended March 31 (in thousands) | Metric | 2024 | 2023 | % Change | | :--- | :--- | :--- | :--- | | **Total net sales** | $84,307 | $118,121 | (29)% | | **Gross profit** | $5,446 | $12,961 | (58)% | | **(Loss) income from operations** | $(6,009) | $1,539 | (490)% | | **Net (loss) income** | $(5,343) | $485 | (1202)% | [Item 4. Controls and Procedures](index=31&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of March 31, 2024, with no material changes to internal controls over financial reporting - Based on an evaluation as of March 31, 2024, the Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective[124](index=124&type=chunk) - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[125](index=125&type=chunk) PART II [PART II - OTHER INFORMATION](index=32&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) This section covers other information including legal proceedings, risk factors, equity sales, defaults, and exhibits [Item 1. Legal Proceedings](index=32&type=section&id=Item%201.%20Legal%20Proceedings) The company reports no material pending legal proceedings as of May 14, 2024, despite involvement in various ordinary course legal matters - As of May 14, 2024, neither NAI nor its subsidiary NAIE were party to any material pending legal proceedings[129](index=129&type=chunk) [Item 1A. Risk Factors](index=32&type=section&id=Item%201A.%20Risk%20Factors) This section highlights new risks from geopolitical instability, including conflicts in Ukraine and the Middle East, which could impact supply chains and market volatility - The company's business operations may be adversely affected by ongoing geopolitical instability, including conflicts in Ukraine and the Middle East, which could lead to disruptions in the global supply chain, energy price fluctuations, and financial market volatility[131](index=131&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=32&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company did not sell any unregistered equity securities during the nine months ended March 31, 2024 - The company did not sell any unregistered equity securities during the three-month periods ended September 30, 2023, December 31, 2023, and March 31, 2024[132](index=132&type=chunk) [Item 3. Defaults Upon Senior Securities](index=32&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reports no defaults upon senior securities - None[133](index=133&type=chunk) [Item 5. Other Information](index=32&type=section&id=Item%205.%20Other%20Information) The company reports no other information for this item - None[134](index=134&type=chunk) [Item 6. Exhibits](index=33&type=section&id=Item%206.%20Exhibits) This section provides an index of exhibits filed with the Form 10-Q, including corporate governance documents, CEO/CFO certifications, and XBRL data files - The report includes certifications from the Chief Executive Officer and Chief Financial Officer, as well as Inline XBRL documents, filed as exhibits[135](index=135&type=chunk)

[Forward-Looking Statements](index=3&type=section&id=SPECIAL%20NOTE%20ABOUT%20FORWARD-LOOKING%20STATEMENTS) This report contains forward-looking statements about future events and financial performance, subject to risks and uncertainties - This report contains forward-looking statements regarding future events and financial performance. These statements are based on current views and assumptions and are subject to risks and uncertainties. Readers are cautioned not to place undue reliance on these statements[7](index=7&type=chunk) - Key areas covered by forward-looking statements include, but are not limited to: future financial results (net sales, income), customer relationships, sufficiency of cash flow, patent licensing revenues, inventory levels, operating efficiencies, and the impact of external factors like economic conditions[8](index=8&type=chunk) [PART I: FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%20FINANCIAL%20INFORMATION) [Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements for Q2 FY2024, including Balance Sheets, Statements of Operations, and Cash Flows [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets increased to **$155.7 million**, driven by operating lease assets, while liabilities also rose significantly Condensed Consolidated Balance Sheet Highlights (in thousands) | Balance Sheet Item | Dec 31, 2023 | June 30, 2023 | | :--- | :--- | :--- | | **Total Assets** | **$155,733** | **$134,152** | | Cash and cash equivalents | $16,595 | $13,604 | | Inventories, net | $19,596 | $29,694 | | Operating lease right-of-use assets | $44,994 | $20,369 | | **Total Liabilities** | **$70,278** | **$45,380** | | Long-term liability – operating leases | $46,701 | $18,965 | | **Total Stockholders' Equity** | **$85,455** | **$88,772** | [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20(Loss)%20Income) Net sales for Q2 FY2024 decreased **40%** year-over-year, resulting in a **net loss of $3.1 million** for the quarter Statement of Operations Summary (in thousands, except per share data) | Metric | Q2 FY2024 (3 months ended Dec 31, 2023) | Q2 FY2023 (3 months ended Dec 31, 2022) | YTD FY2024 (6 months ended Dec 31, 2023) | YTD FY2023 (6 months ended Dec 31, 2022) | | :--- | :--- | :--- | :--- | :--- | | **Net Sales** | **$25,202** | **$42,295** | **$59,171** | **$85,422** | | Gross Profit | $387 | $6,214 | $3,524 | $11,585 | | (Loss) Income from Operations | $(3,513) | $2,485 | $(4,057) | $4,027 | | **Net (Loss) Income** | **$(3,070)** | **$1,813** | **$(3,765)** | **$2,866** | | Diluted EPS | $(0.52) | $0.31 | $(0.64) | $0.49 | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Operating cash flow improved to **$4.8 million** due to inventory reduction, with lower investing activities Cash Flow Summary (Six Months Ended Dec 31, in thousands) | Cash Flow Activity | 2023 | 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $4,844 | $3,735 | | Net cash used in investing activities | $(1,707) | $(11,598) | | Net cash used in financing activities | $(146) | $(1,197) | | **Net increase (decrease) in cash** | **$2,991** | **$(9,060)** | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Notes detail inventory changes, lease extensions, credit facility amendments, and customer concentration - Revenue from beta-alanine raw material sales and royalty/licensing income was **$3.9 million** for the six months ended Dec 31, 2023, up from **$2.8 million** in the prior-year period[38](index=38&type=chunk) Inventories, net (in thousands) | Category | Dec 31, 2023 | June 30, 2023 | | :--- | :--- | :--- | | Raw materials | $14,443 | $20,946 | | Work in progress | $2,474 | $4,504 | | Finished goods | $3,485 | $4,928 | | **Total** | **$19,596** | **$29,694** | - On July 18, 2023, the company amended its Vista, CA manufacturing facility lease, extending it by over ten years. This resulted in an increase of approximately **$25.9 million** to both the lease liability and the Right of Use asset[53](index=53&type=chunk) - The company was not in compliance with certain financial covenants of its credit facility as of December 31, 2023. Subsequently, on February 13, 2024, it entered into a **Fourth Amendment and Waiver** with Wells Fargo, which waived non-compliance, reduced borrowing capacity to **$12.5 million**, increased the interest rate, modified covenants, and suspended share repurchases[63](index=63&type=chunk)[92](index=92&type=chunk) Customer Sales Concentration (in thousands) | Period | Customer 1 | Customer 2 | Customer 3 | Total from Top Customers | | :--- | :--- | :--- | :--- | :--- | | **6 Months Ended Dec 31, 2023** | $23,965 | $12,131 | <10% | $36,096 | | **6 Months Ended Dec 31, 2022** | $29,265 | $30,987 | $10,831 | $71,083 | Segment Performance (Six Months Ended Dec 31, in thousands) | Segment | Net Sales 2023 | Net Sales 2022 | (Loss) Income from Ops 2023 | Income from Ops 2022 | | :--- | :--- | :--- | :--- | :--- | | Private-label contract manufacturing | $55,239 | $82,615 | $(1,360) | $7,510 | | Patent and trademark licensing | $3,932 | $2,807 | $1,391 | $694 | [Management's Discussion and Analysis (MD&A)](index=24&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) MD&A discusses a **31%** sales decline due to reduced manufacturing, offset by licensing growth, and liquidity [Executive Overview](index=24&type=section&id=Executive%20Overview) Net sales fell **31%** due to manufacturing decline, partially offset by licensing growth, with a **net loss** expected for FY2024 - For the six months ended December 31, 2023, net sales were **31% lower** than the prior year period, with private-label contract manufacturing sales **decreasing 33%** and patent/trademark licensing revenue **increasing 40%**[98](index=98&type=chunk)[99](index=99&type=chunk) - The company announced the temporary closure of its Carlsbad, California powder processing facility in August 2023 due to a large customer's efforts to rebalance inventory. The facility is now expected to re-open late in the fourth fiscal quarter of 2024[103](index=103&type=chunk) - Management anticipates the company will experience a **net loss** in the second half of fiscal 2024 and an overall **net loss** for the full fiscal year 2024[104](index=104&type=chunk) [Results of Operations](index=26&type=section&id=Results%20of%20Operations) Q2 FY2024 net sales dropped **40%**, leading to a significant gross profit margin collapse and operating loss Results of Operations Highlights (in thousands) | Metric | Q2 FY2024 | Q2 FY2023 | % Change | YTD FY2024 | YTD FY2023 | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Total net sales | $25,202 | $42,295 | (40)% | $59,171 | $85,422 | (31)% | | Gross profit | $387 | $6,214 | (94)% | $3,524 | $11,585 | (70)% | | Gross profit % | 1.5% | 14.7% | - | 6.0% | 13.6% | - | | (Loss) income from operations | $(3,513) | $2,485 | (241)% | $(4,057) | $4,027 | (201)% | | Net (loss) income | $(3,070) | $1,813 | (269)% | $(3,765) | $2,866 | (231)% | | Diluted EPS | $(0.52) | $0.31 | $(0.64) | $0.49 | - The decrease in private-label contract manufacturing sales was primarily due to reduced orders from several larger customers working to lower their excess on-hand inventories[110](index=110&type=chunk) - The increase in patent and trademark licensing revenue was driven by more orders from existing customers and higher royalty income[111](index=111&type=chunk) [Liquidity and Capital Resources](index=28&type=section&id=Liquidity%20and%20Capital%20Resources) Cash from operations improved to **$4.8 million** due to inventory reduction, with **sufficient** liquidity for 12 months - Net cash provided by operating activities was **$4.8 million** for the six months ended Dec 31, 2023, compared to **$3.7 million** in the prior year period[116](index=116&type=chunk) - A reduction in inventory provided **$10.1 million** in cash during the first six months of fiscal 2024, compared to using **$3.6 million** in the prior year period[118](index=118&type=chunk) - As of February 13, 2024, a **Fourth Amendment and Waiver** to the credit facility waived prior non-compliance, decreased total borrowing capacity to **$12.5 million**, and required the company to suspend share repurchase and dividend activity[122](index=122&type=chunk) - The company believes its available cash of **$16.6 million**, potential cash flows, and credit facility will be **sufficient** to fund working capital and capital expenditures for at least the next 12 months[123](index=123&type=chunk) [Controls and Procedures](index=29&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls and procedures were **effective** as of December 31, 2023 - Based on an evaluation as of December 31, 2023, the Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were **effective**[127](index=127&type=chunk) - **No changes** occurred in internal control over financial reporting during the quarter ended December 31, 2023, that have materially affected, or are reasonably likely to materially affect, these controls[128](index=128&type=chunk) [PART II: OTHER INFORMATION](index=30&type=section&id=PART%20II%20OTHER%20INFORMATION) [Legal Proceedings](index=30&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various legal proceedings, **not expected to have a material adverse effect** - The company is party to various investigations, claims, and legal proceedings arising in the ordinary course of business but does not currently believe their resolution will result in a **not material adverse effect**[131](index=131&type=chunk) [Risk Factors](index=30&type=section&id=Item%201A.%20Risk%20Factors) New risk factors include **geopolitical instability**, potentially **disrupting supply chains** and financial performance - A new risk factor has been identified related to **geopolitical instability**. Ongoing conflicts in Ukraine and the Middle East (Israel-Hamas conflict) may lead to increased political, economic, and security risks, potentially **disrupting global supply chain** and impacting financial performance[134](index=134&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=30&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No **unregistered equity securities** were sold during the three-month periods ended September 30 and December 31, 2023 - There were **no sales** of unregistered equity securities during the quarter[135](index=135&type=chunk) [Exhibits](index=31&type=section&id=Item%206.%20Exhibits) This section indexes filed exhibits, including the **Fourth Amendment** to the Credit Agreement with Wells Fargo - The report includes several filed exhibits, most notably the **Fourth Amendment and Waiver** of Events of Default to the Credit Agreement with Wells Fargo, **effective** February 13, 2024[138](index=138&type=chunk) [Signatures](index=32&type=section&id=SIGNATURES) The report was **duly signed** on February 13, 2024, by the CEO and CFO - The report was **duly signed** on February 13, 2024, by Mark A. LeDoux, Chief Executive Officer, and Michael E. Fortin, Chief Financial Officer[139](index=139&type=chunk)[140](index=140&type=chunk)[142](index=142&type=chunk)

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 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. Washington, D.C. 20549 1535 Faraday Ave Carlsbad, CA 92008 (760) 736-7700 (Address of pri ...

Table of Contents 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 (Sta ...