NAI(NAII) - 2024 Q3 - Quarterly Report

PART I PART I - FINANCIAL INFORMATION 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 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 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 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 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] Condensed Consolidated Statements of Cash Flows 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 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] - 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] - 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][61] - The company is monitoring the Israel-Hamas conflict for potential impacts on its supply chain, as it sources multiple raw materials from Israel[91] 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 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] - 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] - Management anticipates a net loss in the fourth quarter of fiscal 2024 and an overall net loss for the full fiscal year[103] 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 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] - 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] PART II PART II - OTHER INFORMATION This section covers other information including legal proceedings, risk factors, equity sales, defaults, and exhibits Item 1. Legal Proceedings 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] Item 1A. Risk Factors 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] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 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] Item 3. Defaults Upon Senior Securities The company reports no defaults upon senior securities - None[133] Item 5. Other Information The company reports no other information for this item - None[134] Item 6. Exhibits 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]