NAI(NAII) - 2026 Q2 - Quarterly Report

Financial Performance - Net sales for the six months ended December 31, 2025, increased by 8% to $72.5 million compared to $67.2 million for the same period in 2024[102] - Private-label contract manufacturing sales rose by 9% during the six months ended December 31, 2025, primarily due to increased orders from existing customers and new customer shipments[102] - Patent and trademark licensing revenue decreased by 15% to $3.7 million for the six months ended December 31, 2025, down from $4.3 million in the prior year[103] - Gross profit for the six months ended December 31, 2025, increased by 75% to $6.9 million, with a gross profit margin of 9.5% compared to 5.8% in the prior year[111] - Selling, general and administrative expenses decreased by 1% to $8.5 million for the six months ended December 31, 2025, primarily due to reduced legal fees[115] - The company experienced a loss from operations of $1.6 million for the six months ended December 31, 2025, a 66% improvement compared to a loss of $4.6 million in the prior year[107] - The company anticipates a net loss for the full fiscal year 2026 due to declines in customer forecasted sales and delayed new product launches[107] Product Development - The new product TriBsyn™ was launched in August 2024, aimed at penetrating the Wellness and Healthy Aging markets with a unique formulation[104] Cash Flow and Liquidity - Net cash used in operating activities was $10.4 million for the six months ended December 31, 2025, compared to $3.4 million in the prior year[118] - Days sales outstanding improved to 41 days for the six months ended December 31, 2025, down from 46 days in the prior year[119] - Changes in inventory used $8.6 million in cash during the six months ended December 31, 2025, compared to providing $1.2 million in the prior year period[120] - Cash used in investing activities was $2.0 million for the six months ended December 31, 2025, compared to $1.4 million in the prior year period, primarily due to increased capital expenditures for solar energy equipment[122] - Cash provided by financing activities was $3.7 million for the six months ended December 31, 2025, compared to $1.4 million in the prior year period, due to increased usage of the credit facility[123] - As of December 31, 2025, the company had $10.0 million of borrowing capacity available on its credit facility, with outstanding borrowing of $5.8 million[124] - The company had $3.8 million in cash and cash equivalents as of December 31, 2025, and believes available cash and cash flows will be sufficient to fund current working capital needs for at least the next 12 months[125] - The company is in discussions with a potential new asset-based lender to provide an increased borrowing facility to support expected business growth[125] Financial Position - As of December 31, 2025, the company did not have any off-balance sheet debt or significant obligations that could materially affect its financial condition[126] - Recent accounting pronouncements are discussed in the notes to the consolidated financial statements, with no material effects on financial position or results of operations identified[127] Profitability Metrics - Private-label contract manufacturing gross profit margin increased by 2.7 percentage points during the three months ended December 31, 2025, and by 4.7 percentage points during the six months ended December 31, 2025, compared to the prior year periods[121] - Patent and trademark licensing gross profit margin decreased by 0.4 percentage points during the three months ended December 31, 2025, and by 1.0 percentage point during the six months ended December 31, 2025, compared to the prior year periods[121]