Natural Alternatives International Inc: Form 10-K for the period ended Jun 30, 2026

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®, SR CarnoSyn®, CarnoSyn® 4X and TriBsyn® trademarks. We previously sold a branded version of our SR CarnoSyn® Wellness tablet product under a brand we created called SustainedRx® and a product named Perfect Synergy®. This product was sold directly to consumers through Amazon and our own direct to consumer website. This brand was discontinued during fiscal 2025 as it was not commercially successful. We also sell SR CarnoSyn® tablet products and TriBsyn® capsule products that are offered as business-to-business private label products.

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.

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, and further expansion of our patent estate. We recently expanded our licensed product offerings with patent applications associated with a new form of CarnoSyn® beta-alanine trademarked as CarnoSyn® 4X and TriBsyn®. We directly sell CarnoSyn®, SR CarnoSyn®, CarnoSyn® 4X, and TriBsyn® 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 manufacturing operations are located in Vista and Carlsbad, California and include manufacturing and distribution, sales and marketing, in-house formulation, laboratory services, and research and development.

Our Vista, California manufacturing facilities maintain third-party certifications supporting the manufacture of dietary supplements and nutritional products for domestic and international markets. The facilities have maintained annual Good Manufacturing Practices (GMP) registration through the NSF Dietary Supplements Certification Program since 2002 and have been certified under the NSF Certified for Sport® program since 2009, enabling the manufacture of products bearing the NSF Certified for Sport® mark. The facilities are also recognized by Health Canada as compliant with the Good Manufacturing Practices requirements of the Canadian Natural Health Products Regulations, supporting customers who market products in Canada.

Our Vista, California facilities are certified as an Organic Processor and Handler by Natural Food Certifiers (NFC) under the USDA National Organic Program, allowing the manufacture and packaging of certified organic products. These facilities are also registered with the California Department of Public Health as an organic processor and maintain certifications to manufacture Kosher and Halal products. These certifications are maintained through periodic inspections and renewals.

In April 2021, NAI became the first company to achieve certification under the Supplement Safety & Compliance Initiative (SSCI), an industry benchmarking program focused on supply chain safety, traceability, and quality management. NAI's SSCI certification was most recently renewed in May 2026.

In August 2021, NAI acquired a manufacturing and warehouse facility in Carlsbad, California, which was retrofitted as a dedicated high-volume powder blending and packaging facility and commenced full operations in April 2023. The Carlsbad facility is certified under the NSF Dietary Supplements Certification Program, the NSF Certified for Sport® program, the SSCI program, the NFC Organic program, and maintains certifications to manufacture Kosher and Halal products.

NAIE operates a manufacturing, packaging, warehousing, distribution, and analytical laboratory facility in Manno, Switzerland. The facility is licensed and periodically inspected by the Swissmedic Authority of Bern, Switzerland and operates in compliance with applicable pharmaceutical Good Manufacturing Practice (GMP) requirements. NAIE manufactures and packages food supplements and nutritional products under these quality standards. Swissmedic conducts periodic inspections to verify continued compliance, with the most recent inspection completed in September 2025. The facility also maintains FSSC 22000 certification, demonstrating compliance with internationally recognized food safety management system requirements. The certification was most recently renewed in April 2026. We believe these licenses, certifications, and manufacturing capabilities strengthen our relationships with existing customers and support opportunities to develop new business.

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:

• 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 developing relationships with additional quality-oriented customers;
• Expanding the commercialization of our beta-alanine patent and trademark estate in Sports Nutrition, Wellness and Healthy Aging and Medical food channels with our CarnoSyn®, SR CarnoSyn®, CarnoSyn® 4X, and TriBsyn® beta-alanine product lines; exploiting new contract manufacturing opportunities, license and royalty agreements, and protecting our proprietary rights; and
• Consolidating our facilities and factories to 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 customers' nutritional supplements and their adherence to label claims through education provided by direct sales and direct-to-consumer marketing programs. We believe our GMP 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, a significant portion of our business relies 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 our existing patented ingredients into additional markets and the introduction of new beta-alanine product offerings. Currently, the majority of our CarnoSyn® sales are to companies operating in the Sports Nutrition market, where products are primarily formulated with the instant-release form of beta-alanine. We believe several additional markets and distribution channels represent significant growth opportunities for our SR CarnoSyn®, CarnoSyn® 4X, and TriBsyn® product offerings. We believe SR CarnoSyn® provides a superior delivery system for CarnoSyn® beta-alanine due to its sustained-release profile, which supports higher daily dosing and improved muscle carnosine retention. However, this product is currently limited to solid-dose tablet formulations, reducing the potential for customization by our target customers. With the introduction of CarnoSyn® 4X and TriBsyn®, along with their patent-pending formulations, we believe we are well positioned to expand our presence in the Wellness and Healthy Aging markets. This groundbreaking product is a carnosine booster that utilizes CarnoSyn® beta-alanine and proprietary technology to enhance beta-alanine bioavailability and absorption while effectively eliminating beta-alanine related paresthesia. Available as a raw material powder, it offers formulation flexibility for our customers. By eliminating paresthesia while maintaining an efficacious dosage, this product creates new opportunities to reach previously untapped market segments, including older adults, vegetarians, and vegans. It is well suited for a wide range of applications, including ready-to-drink beverages, protein drinks, dairy-based products, gummies, and medical nutrition products. We are also developing several additional innovations that could result in new patentable products for the CarnoSyn® Brands portfolio. Our patents covering instant-release beta-alanine expired in July 2026. However, our patents for SR CarnoSyn® extend through 2036, and we have patent applications pending for our TriBsyn® and CarnoSyn® 4X products.

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 customers' preferences.

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®, SR CarnoSyn®, CarnoSyn® 4X, TriBsyn®, 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):

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, 2026 were $2.3 million, compared to $1.8 million for the fiscal year ended June 30, 2025.

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 customers’ 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 couple of years, 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, uncertainty remains high related in part to existing and potentially increased tariffs. Throughout fiscal 2027, we expect upward pricing pressures will continue for raw materials, packaging components, and other costs as a result of limited supplies of various ingredients and the impact of inflationary factors, including higher labor, transportation costs, and tariffs on goods we import from overseas.

Sourcing of raw materials for our business has also been impacted by various geo-political conflicts, including the 2026 Iran War in the Middle East, the Russo-Ukrainian war in Eastern Europe, and ongoing conflicts in Sudan and Syria. These conflicts have impacted the availability and pricing of certain raw materials that we purchase along with impacts to lead times associated with materials brought in by ocean freight. We have actively worked with our customers to identify alternative sources of these materials, which has mostly mitigated the impact of these conflicts.

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.

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 (i.e. drug store chains, supermarkets, and mass market discount retailers), ecommerce, health and natural food stores, and direct sales channels (i.e. 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 compliance with debt covenants or in the event of non-compliance with our debt covenants; our ability to obtain amendments, waivers, or modifications from our lenders on acceptable terms, or at all;
• the sufficiency of our available cash, cash equivalents and restricted cash, including continued access to borrowings under our credit facilities, 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 recover the carrying value of long-lived assets and accurately estimate their impairment if and when circumstances arise;
• our ability to maintain adequate inventory levels to meet our customers' 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 or our customers' 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;
• how we manufacture, package, distribute, import, export, sell and store our or our customers' 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 in compliance with the FDA mandated GMP's.

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 or our customers' 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 and our customers' products in certain European countries are 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 customers’ products for a particular market or may be unavailable for certain products or product ingredients. These regulations may limit our or our customers' 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 or our customers' ability to sell products and thus, adversely impact our financial position and results of operations.

Intellectual Property

Trademarks. We have developed and use trademarks in our business, particularly relating to corporate, brand and product names. We own 61 registered trademarks; including 13 registrations in the U.S. Seven of these U.S. registrations are incontestable. Federal registration of a trademark in the United States affords the owner nationwide exclusive trademark rights to 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 48 foreign registered trademarks covering 40 foreign countries, including registrations for CarnoSyn®, SR CarnoSyn®, CarnoSyn® 4X or TriBsyn® in Australia, Brazil, Canada, China, Cuba, Hong Kong, the European Union, Israel, Japan, Mexico, New Zealand, South Korea, Switzerland, the United Kingdom and Vietnam. Our registered trademarks include CarnoSyn® and the SR CarnoSyn® logos in Switzerland. We also claim common law ownership and protection of certain trademarks based upon our continued use of the tradenames. In some countries, such as the United States, common law can provide some protection of a name or mark within the particular geographic area in which it is continually and deliberately used.

We believe our registered trademarks and our tradenames constitute valuable assets adding to the recognition of our products and services in the marketplace. These and other proprietary rights have been and may 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 trademark 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 two U.S. patents and one corresponding non-U.S. patent registered in countries throughout North America and Europe. 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 made ongoing royalty payments to the prior owners of the patents until expiration of those patents in July 2026. 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®, SR CarnoSyn®, CarnoSyn® 4X and TriBsyn® trademarks were primarily related to the direct sale of the raw material beta-alanine and totaled $7.9 million in fiscal 2026. We incurred patent compliance expenses of approximately $0.4 million during fiscal 2026 primarily in connection with our efforts to procure, protect and support our proprietary rights and patent estate. We expect to continue to incur these types of compliance expenses during fiscal 2027 and beyond.

Employees

As of June 30, 2026, we employed 219 employees in the U.S., 46 who were employed in research, laboratory and quality control, 10 in sales and marketing, and 162 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, 2026, we had 11 temporary personnel in the U.S.

As of June 30, 2026, NAIE employed an additional 82 employees and 11 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®, SR CarnoSyn®, CarnoSyn® 4X and TriBsyn® beta-alanine raw material orders. Future revenue trends may not follow historical patterns. The market price of our common stock may be adversely affected by these seasonal factors.

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 primarily associated with the sale and license of beta-alanine under our CarnoSyn®, SR CarnoSyn®, CarnoSyn® 4X and TriBsyn® 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 and our customers' products are sold and in which we operate. For more information about these and other risks, please see Item 1A in this report.

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 Business and Industry

We have experienced multiple years of operating losses, negative operating cash flows, increased dependence on our credit facilities, and there is substantial doubt about our ability to continue as a going concern.

As of June 30, 2026, we had $7.5 million in cash, cash equivalents and restricted cash of which $6.3 million was held by NAIE. On October 15, 2025, NAIE paid a dividend of $3.1 million to NAI which was subject to a 5% Swiss withholding tax.

On May 18, 2026, we entered into a new domestic credit facility with Legacy Corporate Lending, LLC ("Legacy"). The new credit facility includes a fixed charge coverage ratio covenant requirement, based on only domestic operations, and pursuant to the Loan and Security Agreement will be measured for the first time based on the nine months ending September 30, 2026. We will not be able to comply with this covenant required under the Loan and Security Agreement as of September 30, 2026 due to one of our largest private-label contract manufacturing customer's material downward revisions to their forecast of projected orders and purchases from us during our fiscal year 2027. We have informed the lender of our pending non-compliance with the fixed charge coverage ratio, and are collaborating with them, but there is no assurance our lender will agree to a waiver, amendment, or other remedy, or the difference in amount, cost or other factors may be.

In addition to a focus on revenue growth and cost reduction, we have listed our corporate headquarters for sale and are actively marketing the property for sale. In addition, the Board of Directors also approved management to sell our manufacturing facility in Carlsbad, California which is a more specialized property, and we anticipate may not be sold quickly. There is no assurance our efforts to sell our corporate headquarters or also our manufacturing facility will result in a sale, when such sale(s) may be completed, or whether favorable price or terms will be achieved.

If we are unable to improve operating results, or cannot work out a remedy for our pending non-compliance with this debt covenant, or cannot sell either or both properties, there may be continued deterioration in our financial position and more substantial doubt about our ability to continue as a going concern.

A significant or prolonged economic downturn could have 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. Although Russia and Ukraine did not account for any of our net sales in FY 2026 or FY 2025, 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 and the Middle East. We will continue to evaluate impacts of the conflict on our customers, suppliers, employees, and operations.

In February 2026, the launch of Operation Epic Fury escalated conflict between the U.S. alongside Israeli forces targeting Iran. In response, blockades of vital maritime chokepoints such as the Strait of Hormuz have caused the global price level of commodities including fuel and energy to increase. Conflict with Iran was preceded by armed conflict between Israel and Hamas that began in October 2023. Israel accounts for a small portion of our global net sales, but we also source multiple raw materials that come from Israel. While we do not anticipate this conflict will have a significant impact on our net sales, we are continually communicating with our customers and suppliers who may be impacted by this conflict, and we are evaluating options for alternative ingredient sources and/or holding safety stock of impacted materials to limit the effect this conflict may have on our ability to obtain the ingredients sourced from this region.

Recently, these conflicts have resulted in market uncertainty and volatility, and this 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, tariffs and trade disputes, fuel and energy costs, 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 and debt markets and natural disasters. Any sudden or rapid destabilization of global economic conditions could adversely 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.

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 our 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 an offset of such increases or if 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 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 and our customers' 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 or our customers' 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 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 and our customers' 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, 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. In August of 2021, we acquired 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. In addition, the Board of Directors also approved management to sell our manufacturing facility in Carlsbad, California which is a more specialized property, and we anticipate may not be sold quickly. 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.

We source our beta-alanine raw material as well as certain manufacturing activities from third parties. 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.

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 are subject to the burden of complying with a wide variety of national and local laws, including multiple and possibly overlapping or 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:

• import and export controls;
• custom duties and tariffs;
• 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 2026 and fiscal 2025, 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®, SR CarnoSyn®, CarnoSyn® 4X and TriBsyn® products 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 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 alternative 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 customers' 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 2026 as a result of limited supplies of various ingredients, tariffs, and inflationary factors, including higher labor and transportation costs. We expect these upward pressures to continue through fiscal 2027. 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.

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 international conflicts, 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®, SR CarnoSyn®, CarnoSyn® 4X and TriBsyn® 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, 2026, sales to our two largest customers were approximately 52% of our consolidated net sales. We cannot predict with any certainty if sales to these customers will increase or decrease in the future. Subsequent to June 30, 2026 and prior to filing this Form 10-K, one of our largest customers informed us of a material downward revision to their forecast of their projected orders and purchases from us during our fiscal year 2027 primarily caused by their growing inventory levels. Please see disclosure of Subsequent Events in Note O, Part II in Item 8 on this Form 10-K.

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. We reopened this facility in May 2024 based on new orders received from this customer but there can be no certainty that this, or any other customer, will not experience similar circumstances that require them to reduce or discontinue orders in the future. In addition, the Board of Directors also approved management to sell our manufacturing facility in Carlsbad, California which is a more specialized property, and we anticipate may not be sold quickly.

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.

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 (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 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 defend our patents and commercialize the sale of beta-alanine under our instant release CarnoSyn® trademark, our sustained release SR CarnoSyn® patents and trademark, and any additional patents we may seek related to CarnoSyn® 4X and TriBsyn®.

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®. Our final patent for this version of CarnoSyn® expired in July 2026. Our patent and trademark licensing revenue decreased from $8.1 million in fiscal 2025 to $7.9 million in fiscal 2026 due to a decrease in trademarked material sales, partially offset by increased orders of other raw material sales. There is no assurance we will be successful maintaining our historical CarnoSyn® instant release beta-alanine sales levels or grow future sales volumes of CarnoSyn® instant release beta-alanine. 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®, CarnoSyn® 4X and TriBsyn® are superior delivery systems for CarnoSyn® beta-alanine as they allow for increased daily dosing, improved muscle retention and bioavailability of carnosine. Our patents related to SR CarnoSyn® extend through 2036, and we believe SR CarnoSyn® beta-alanine and the introduction of CarnoSyn® 4X and TriBsyn® high-bioavailability beta-alanine are 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 these new forms of beta-alanine or that we will be successful launching new products utilizing SR CarnoSyn®, CarnoSyn® 4X or TriBsyn® beta-alanine.

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 and our customers' products we produce 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 and often our customers' products we manufacture 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. In certain European countries, the sale of our products and our customers' products we manufacture are 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 can adversely affect our results of operations.

During the 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 needed to be in place in order for our facilities to remain operational. While we already had robust quality standards and procedures, we 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, 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.

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 most of its foreign trading partners including China, Japan, India, Russia, Vietnam, South Korea, Australia, the European Union, Canada, Mexico 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 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 business and our customers’ businesses, the availability of beta-alanine, and the cost of other raw materials we use in our customers’ 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.

Risks Related to Litigation

We could be exposed to employment litigation matters such as but not limited to wage and hour claims, which may be costly and could materially adversely affect our operations.

As an employer responsible for employees in the United States and in Switzerland, we are subject to operate in accordance with employment laws that prevail in several jurisdictions. Legal actions can be brought against us with or without merit from current or past employees and the resolution of these uncertain matters could result in the expenditure of significant financial and managerial resources. Settlement payments or unfavorable outcomes could adversely impact our results of operations. Our evaluation of the likely impact of these actions could be different from actual outcomes that may be unfavorable and unexpected.

In December 2023, we were sued by three former employees in two separate, but substantially identical matters brought by the same law firm. The lawsuits were filed as a putative class action and a Private Attorney General Act ("PAGA") action seeking awards for all similarly situated employees going back ten years or more. We responded to these actions and agreed to submit the matters for mediation. On July 3, 2025, the mediation took place, and a tentative settlement agreement was reached whereby we agreed to contribute a maximum of $1.25 million. The court has consolidated the two actions. The settlement was brought before the court and an attempt to contact all similarly situated employees was made for them to participate at their discretion. The court agreed to the settlement. Payment was remitted in the first quarter of fiscal year 2027, and final court approval and termination of the proceedings is expected to take place in February 2027. Although we were not found liable and did not admit any liability, we accrued the maximum settlement amount in our results of operations as of June 30, 2025, along with estimated related legal fees of approximately $150,000. During the year ended June 30, 2026, we accrued additional estimated related legal fees of $44,000.

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 or our customers' products involves a 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 or our customers' products contain contaminants; we or our customers provide consumers with inadequate instructions about product use; or we provide inadequate warning about side effects or interactions of our or our customers' 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 be able to continue such insurance coverage, or such insurance coverage will be adequate to cover any liability we may incur, or 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 or our customers' 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 2026, we incurred approximately $0.4 million in patent litigation and prosecution expense and expect these expenses to be between $0.1 million and $0.3 million during fiscal 2027. 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 20% of our outstanding shares of common stock as of June 30, 2026. Approximately 15% of the outstanding shares of common stock are beneficially owned by Mark LeDoux and his family. 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.

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 the Company 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 integrating an acquired company’s employees, products or operations, 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 increased during fiscal 2026 as compared to fiscal 2025 and our loss from operations increased during the same period. There can be no assurance our net sales will further improve in the near term, or we will earn a profit in any given year. We experienced three years of net losses in fiscal years 2026, 2025, and 2024 and may incur losses in the future. We experienced negative cash flows from operating activities in fiscal years 2026 and 2024. 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 for fiscal 2027. Fluctuations in our operating results may adversely affect the share price of our common stock.

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., and this 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.

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 domestic and Swiss lines of credit would be sufficient to meet our working capital needs. Furthermore, if we fail to maintain certain loan covenants, we may no longer have access to our credit lines. Under the terms of our domestic credit facility, there are limits on our ability to create, incur or assume additional indebtedness without the approval of our lender. Our domestic credit line terminates on May 18, 2029 and there is no guarantee we will be able to extend or renew this credit line on favorable terms or at all. Although our Swiss line of credit is subject to an indefinite term, the lender reserves the right to refuse utilization of the credit facility without termination of the credit agreement in the event of a change in circumstances.

On May 18, 2026, we entered into a new domestic credit facility with Legacy. The new credit facility includes a fixed charge coverage ratio covenant requirement as defined in the Loan and Security Agreement that is based on only domestic operations and will first be measured for the nine months ending September 30, 2026. We anticipate we will not be able to comply with the covenant required under the Loan and Security Agreement as of September 30, 2026 due to one of our largest customer's material downward revisions to their forecast of projected orders and purchases from us during our fiscal year 2027. We have informed Legacy of our pending non-compliance with the fixed charge coverage ratio, and there is no assurance that a waiver, amendment, or remedy will be available or what the difference in amount, cost or other factors may be.

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.

If we were unable to raise additional capital or to obtain additional financing when we want to or need to, that 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.

Risk Management and Strategy

As part of our overall enterprise risk management function, we have implemented and currently maintain various information security processes designed to identify, assess and manage material risks related to information technology, including cybersecurity threats to our critical computer networks, third-party hosted services, and our critical data, (“Information Systems”). Our Information Systems risk management process evaluates and mitigates cybersecurity risks in alignment with our business objectives and operational needs.

We periodically engage third-party consultants and service providers to obtain an independent assessment regarding internal efforts to prevent threats to our Information Systems. Continuous vigilance over safeguarding the Company’s Information Systems has resulted in our current approach and these assessments are shared with our Audit Committee.

Technology

To mitigate the occurrence of an incident as defined by the Company’s formal documentation, which classifies and defines the properties of potential threats, the Company has in place a host of defenses which include, but are not limited to, the use of gateway consoles in all our global locations, limited access to key Information Systems from in-office networks or VPN with multi-factor authentication by means of a third-party mobile identity management tool to limit access to authorized users.

Process

To manage potential cybersecurity threats, we have established an Incident Response Plan that is designed to control the internal workflow of a reported incident. This plan formalizes incidence response stages such that reporting, identification, scope, response, and recovery are executed in a timely manner and identifies the order and coordination of internal and external communication. In addition, the Company addresses crisis management and business continuity with respect to Information Systems to ensure reliable redundancy and recovery of backed-up databases.

Management is not aware of any material security breaches on its Information Systems and risks from cybersecurity threats have not previously materially affected us. Certain of our vendors have experienced cyberattacks in the past and the threat and development of cyberattacks is continuous. It is impossible to say with certainty whether the Company’s efforts will prevail in a coordinated attack on its Information Systems. Currently, we expect the risks from cybersecurity threats will continue, but are not reasonably likely to materially affect us mostly due to our profile and not because our defenses are impenetrable or the efforts of criminals will not become more sophisticated. A cybersecurity attack on our Information Systems could have a material negative impact upon our business, results of operations or financial condition. For additional information about cybersecurity risks, see Item *1A. “*Risk Factors.”

Governance

Role of the Board

The Audit Committee of our Board of Directors (the “Board”) has the responsibility for the oversight of risk management, including those risks related to cybersecurity. The Board holds strategic planning sessions with senior management to discuss strategies, key challenges, risks and opportunities for mitigation. The involvement of our Board in setting our business strategy is a key part of its oversight of risk management, its assessment of management’s appetite for risk, and its determination of what constitutes an appropriate level of risk for us. Our senior management attends meetings of our Board and its committees, communicates with the Board and its members regularly between Board meetings, and as otherwise needed, are available to address any questions or concerns raised by our Board on risk management and any other matters.

Role of Management

Our senior management, with the oversight of the Board, is responsible for the day-to-day management of the material risks the Company faces, including those related to cybersecurity. We believe it is important to work at all levels of the Company’s hierarchy to manage cybersecurity risks and threats. Therefore, all users must use an online IT ticketing system, which is monitored around the clock, to report any incidents. Qualified individuals in IT determine what resources to allocate to each case and escalation of an incident, if deemed necessary. The Systems Administrators and IT Director, who has more than 19 years of experience with the Company architecting, managing, and securing enterprise databases, systems automation, and ERP environments, communicates on a day-to-day basis with the President who would bring any material cybersecurity issues to the attention of the Company’s Chief Executive Officer, the Audit Committee, and the Board of Directors.

This table summarizes our facilities as of June 30, 2026. We believe our facilities are adequate to meet our operating requirements for the foreseeable future.

(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 Amendment to the Lease covering this facility. The Amendment, effective April 1, 2024, extended 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 Amendment to the Lease covering this facility that became effective January 1, 2023 and extended the Lease through December 31, 2032.

(4) This facility is used by NAIE for additional warehouse storage. On June 9, 2026, NAIE provided notification of terminating this lease effective December 31, 2026.

(5) We purchased our Carlsbad, California corporate headquarters in March 2016. This asset is classified as held for sale as of June 30, 2026.

(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. The Board of Directors also approved management to sell this facility which is a more specialized property, and we anticipate may not be sold quickly.

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, and sometimes a matter is subsequently determined to be of greater risk. 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 and the price of our common stock. Our evaluation of the likely impact of these actions could change in the future, routinely do change, 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.

In December 2023, we were sued by three former employees in two separate, but substantially identical matters brought by the same law firm. The lawsuits were filed as a putative class action and a Private Attorney General Act ("PAGA") action seeking awards for all similarly situated employees going back ten years or more. We responded to these actions and agreed to submit the matters for mediation. On July 3, 2025, the mediation took place, and a tentative settlement agreement was reached whereby we agreed to contribute a maximum of $1.25 million. The court has consolidated the two actions. The settlement was brought before the court and an attempt to contact all similarly situated employees was made for them to participate at their discretion. The court agreed to the settlement. Payment was remitted in the first quarter of fiscal year 2027, and final court approval and termination of the proceedings is expected to take place in February 2027. We accrued the maximum settlement amount in our results of operations as of June 30, 2025, along with estimated related legal fees of approximately $150,000. During the year ended June 30, 2026, we accrued additional estimated related legal fees of $44,000.

As of September 28, 2026 with exception of these two consolidated matters, 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. At any given time, we may be involved in one or more 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.

The following discussion and analysis is intended to help you understand our financial condition and results of operations as of our fiscal years ending June 30, 2026 and 2025. 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, herbal and other nutritional supplements, as well as other health care products, to consumers both within and outside the U.S. Historically, our revenue has been largely dependent on sales to two or three private-label contract manufacturing customers and subject to variations in the timing of such customers’ orders, which in turn is impacted by such customers’ internal marketing programs, supply chain management, entry into new markets, new product introductions, the demand for such customers’ products, and general industry and economic conditions. Our revenue also includes raw material sales, 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®, SR CarnoSyn®, CarnoSyn® 4X and TriBsyn® 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®, SR CarnoSyn®, CarnoSyn® 4X and TriBsyn® trademarks, royalties from license agreements, and potentially additional contract manufacturing opportunities with licensees.

During fiscal 2026, our consolidated net sales were 10% higher than in fiscal 2025. Private-label contract manufacturing net sales increased 11% primarily due to increased orders from one of our largest customers and several of our other existing customers, partially offset by reduced orders from other existing customers. Revenue concentration from our largest private-label contract manufacturing customer as a percentage of our total net sales was 28% in fiscal 2026, and revenue concentration from our largest private-label contract manufacturing customer as a percentage of total net sales in fiscal 2025 was 33%.

During fiscal 2026, patent and trademark licensing revenue decreased 2% to $7.9 million as compared to $8.1 million for fiscal 2025. The decrease in patent and trademark licensing revenue was primarily due to a decrease in beta-alanine-based material sales from existing customers, partially offset by increased orders of other raw material sales.

We continue to invest in research and development to expand our CarnoSyn® Brands product portfolio. In August 2024, we announced a new product called TriBsyn®, a clinically supported carnosine booster designed for daily wellness that delivers more than four times the bioavailability of standard beta-alanine without the paresthesia commonly associated with traditional formulations. We believe TriBsyn® and its patent-pending formulation will enable us to better penetrate the Wellness and Healthy Aging market. On April 20, 2026, we launched CarnoSyn® 4X, which utilizes the same microencapsulation technology as TriBsyn® and is specifically positioned for the Sports Nutrition market. On May 4, 2026, we announced expanded market applications for TriBsyn®, unlocking new opportunities across the beverage, dairy, and medical nutrition categories. With these expanded capabilities, TriBsyn® is well suited for ready-to-drink beverages, protein drinks, dairy-based products, gummies, and medical nutrition applications. Both CarnoSyn® 4X and TriBsyn® combine CarnoSyn® beta-alanine with proprietary technology to enhance beta-alanine bioavailability and absorption while effectively eliminating beta-alanine-related paresthesia. Available as raw material powders, they provide formulation flexibility for our customers. By eliminating paresthesia while maintaining an efficacious dosage, these products create new opportunities to reach previously untapped market segments, including older adults, vegetarians, and vegans. We believe our continued efforts to refine our formulations and expand our product portfolio will be well received and create significant opportunities to increase sales of our patented and patent-pending products.

To protect and grow our CarnoSyn® product offerings, we incurred patent compliance expenses of approximately $0.4 million during fiscal 2026 and fiscal 2025. Our legal expense associated with our CarnoSyn® business has remained relatively low as we have no related active litigation, and the current run-rate of expenses is primarily related to maintenance and expansion 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 expand the market for our sustained release form of beta-alanine marketed under our SR CarnoSyn® trademark and our new beta-alanine product marketed under our TriBsyn® and CarnoSyn® 4X trademarks, 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 2027, 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®, SR CarnoSyn®, CarnoSyn® 4X and TriBsyn® beta-alanine products.

While we grew our net sales during fiscal 2026, we experienced a loss during fiscal 2026 that was primarily due to underutilization of our available factory capacities which also led to an impairment charge of one of our facilities and related assets. The growth in net sales is primarily related to increased existing private label contract manufacturing customer sales that also drove improved factory utilization, partially offset by a decrease in patent and trademark licensing net sales. Selling, general and administrative expenses during fiscal 2026 increased as compared to fiscal 2025 primarily due to a reserve allowance recorded on the final Employee Retention Tax Credit claim as we no longer believe we will be able to collect this remaining amount without substantial legal fees, an increase in advertising expense to promote our CarnoSyn® 4X and TriBsyn® product offerings, and an increase in compensation expense related to increased headcount required to support the growth in sales, partially offset by a settlement associated with a class action claim recorded during fiscal 2025. Consolidated net loss during fiscal 2026 increased primarily due to the recognition of a non-cash impairment charge of $10.4 million to write down property and equipment to reflect the lower of their estimated fair values or carrying amount as of June 30, 2026. Although our overall sales forecast for fiscal 2027 includes an expected increase in sales as compared to fiscal 2026, we currently anticipate we will experience a net loss for fiscal 2027.

During fiscal 2027, 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 developing relationships with additional quality-oriented customers;
• Expanding the commercialization of our beta-alanine patent and trademark estate in Sports Nutrition, Wellness and Healthy Aging and Medical food channels with our CarnoSyn®, SR CarnoSyn®, CarnoSyn® 4X and TriBsyn® beta-alanine product lines; exploiting new contract manufacturing opportunities, license and royalty agreements, and protecting our proprietary rights; and
• Consolidating our facilities and factories to improve operational efficiencies and manage costs and business risks to improve profitability.

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 is disclosed in Note A of Item 8, Organization and Summary of Significant Accounting Policies, of the notes to the consolidated financial statements.

Impairment Loss — During fiscal 2026 in our Private-label contract manufacturing segment, we observed a decline in the fair value of our manufacturing facility we own in Carlsbad, California compared to its carrying value, negative cash flow results from operating activities in fiscal years 2026 and 2024, an adverse change in the business climate as a result of one of our largest customer's downward revisions of forecasted orders, and expected negative cash flow results for fiscal year 2027. These factors indicated the carrying value of certain long-lived assets might not be fully recoverable. Consequently, we performed an evaluation of the recoverability of this asset group. Based on this evaluation, we determined the carrying amount of our manufacturing facility in Carlsbad, California exceeded the projected undiscounted future cash flows from that facility. Accordingly, we determined an impairment loss due to the carrying value of this asset group as of June 30, 2026 being in excess of the sum of expected cash flows over the forecasted useful life of the facility subject to fair value limitations. As a result, we recognized a non-cash impairment charge of $10.4 million presented as a separate line item, Impairment loss, on the consolidated statements of operations and comprehensive loss to write down property and equipment, to reflect the lower of their estimated fair values or carrying amounts as of June 30, 2026. This charge significantly increased our operating loss for fiscal year 2026 but had no immediate impact on our cash position or liquidity. For estimates of fair values, we relied on significant unobservable inputs categorized as Level 3 within the fair value hierarchy such as third-party real estate experts for building and land fair values as of June 5, 2026, and a third-party appraiser's report for Machinery and Equipment as of January 28, 2026, which we received as part of our debt refinancing in May 2026 and do not represent fair values as of June 30, 2026. It is possible the assumptions and underlying estimates used to determine the fair value of this asset group will change in the future, and such changes could result in a material difference from the impairment loss recognized in these 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.

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).

(NM) Not meaningful as base is zero.

Private-label contract manufacturing sales increased 11% primarily due to increased orders from one of our largest customers and shipments to existing customers, partially offset by lower sales from other existing customers. Revenue concentration from our largest private-label contract manufacturing customer as a percentage of our total net sales was 28% in fiscal 2026, and revenue concentration from our largest private-label contract manufacturing customer as a percentage of total net sales in fiscal 2025 was 33%.

Net sales from our patent and trademark licensing segment decreased 2% during fiscal 2026. The decrease in patent and trademark licensing revenue was primarily due to a decrease in beta-alanine-based material sales from existing customers, partially offset by increased orders of other raw material sales.

The change in gross profit margin for the year ended June 30, 2026, was as follows:

1 Private-label contract manufacturing gross profit margin contribution decreased 0.1 percentage points in fiscal 2026 as compared to fiscal 2025. The decrease in gross profit as a percentage of net sales for private-label contract manufacturing is primarily related to an unfavorable shift in product sales mix, increased manufacturing costs and a reserve allowance placed on the remaining Employee Retention Tax Credit receivable balance of $0.8 million charged to cost of goods sold, net of associated fees and taxes, partially offset by an increase in sales volume which decreased our capacity underutilization, along with favorable foreign currency exchange rate fluctuations.

2 During fiscal 2026, patent and trademark licensing gross profit margin contribution decreased 0.8 percentage points as compared to fiscal 2025. The decrease in gross profit margin during the year ended June 30, 2026 is 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, excluding impairment loss and litigation settlement expenses, increased $0.7 million, or 5% to $17.3 million in fiscal 2026 as compared to $16.5 million in fiscal 2025. This increase is primarily due to a $0.4 million net expense to establish a reserve allowance on the remaining Employee Retention Tax Credit receivable balance offset by the reversal of associated fees and taxes. Other increases include advertising expense to promote our CarnoSyn® 4X and TriBsyn® product offerings and an increase in compensation expense related to increased headcount required to support the growth in sales.

During fiscal 2026 in our Private-label contract manufacturing segment, we observed a decline in the fair value of our manufacturing facility we own in Carlsbad, California compared to its carrying value, negative cash flow results from operating activities in fiscal years 2026 and 2024, an adverse change in the business climate as a result of one of our largest customer's downward revisions of forecasted orders, and expected negative cash flow results for fiscal year 2027. These factors indicated the carrying value of certain long-lived assets might not be fully recoverable. Consequently, we performed an evaluation of the recoverability of this asset group. Based on this evaluation, we determined the carrying amount of our manufacturing facility in Carlsbad, California exceeded the projected undiscounted future cash flows from that facility. Accordingly, we determined an impairment loss due to the carrying value of this asset group as of June 30, 2026 being in excess of the sum of expected cash flows over the forecasted useful life of the facility subject to fair value limitations. As a result, we recognized a non-cash impairment charge of $10.4 million presented as a separate line item, Impairment loss, on the consolidated statements of operations and comprehensive loss to write down property and equipment, to reflect the lower of their estimated fair values or carrying amounts as of June 30, 2026. This charge significantly increased our operating loss for fiscal year 2026 but had no immediate impact on our cash position or liquidity. For estimates of fair values, we relied on significant unobservable inputs categorized as Level 3 within the fair value hierarchy such as third-party real estate experts for building and land fair values as of June 5, 2026, and a third-party appraiser's report for Machinery and Equipment as of January 28, 2026, which we received as part of our debt refinancing in May 2026 and do not represent fair values as of June 30, 2026. It is possible the assumptions and underlying estimates used to determine the fair value of this asset group will change in the future, and such changes could result in a material difference from the impairment loss recognized in these financial statements.

Fiscal 2025 results of operations also included a $1.4 million expense associated with an accrued litigation settlement and related legal costs associated with a PAGA claim of which an additional $44,000 of related legal fees was incurred during fiscal 2026.

Other expense, net, decreased $0.6 million during fiscal 2026 as compared to fiscal 2025. The decrease is primarily due to favorable foreign currency exchange rates, partially offset by an increase in interest expense related to increased interest rates and usage of our credit facility under the terms of our domestic credit agreement.

We recorded an income tax provision of $0.4 million during fiscal 2026 as compared to $2.8 million in fiscal 2025. The decrease in our income tax provision is primarily driven by a $4.8 million valuation allowance that was recognized in fiscal 2025 against our net domestic deferred income tax asset, as well as continuation of a full valuation allowance on our domestic deferred income tax asset throughout fiscal 2026.

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 used in operating activities was $8.9 million in fiscal 2026 compared to net cash provided by operating activities of $5.9 million in fiscal 2025.

For the year ended June 30, 2026, changes in accounts receivable used $6.0 million in cash compared to providing $2.2 million in fiscal 2025. The change in cash used in accounts receivable during fiscal 2026 primarily resulted from the timing of sales and the related collections. Days sales outstanding increased to 45 days during fiscal 2026 compared to 44 days during fiscal 2025.

Inventory used $5.9 million in cash during fiscal 2026 compared to $0.6 million in fiscal 2025. 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 2026 as compared to fiscal year 2025. Changes in accounts payable and accrued liabilities provided $4.1 million in cash during fiscal 2026 compared to providing $2.9 million during fiscal 2025. 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 2026 was $3.7 million compared to $3.6 million in fiscal 2025. The primary reason for this change is due to increased capital expenditures. Capital expenditures in fiscal 2026 and in fiscal 2025 included costs incurred to install solar energy generation equipment on our manufacturing facilities as well as normal expenditures to support equipment and activities in our facilities in California and Switzerland.

Cash provided by financing activities in fiscal 2026 was $7.8 million, compared to $2.0 million used in fiscal 2025. The change in financing activities includes borrowings of $66.7 million on our short-term line of credit in fiscal 2026 compared to borrowings of $31.0 million in fiscal 2025. The change in financing activities also includes borrowings of $11.0 million on our long-term debt in fiscal 2026 compared to no additional borrowings in fiscal 2025. Offsetting these borrowings are repayments of $60.9 million on our short-term line of credit in fiscal 2026 compared to repayments of $32.5 million in fiscal 2025. The change in financing activities also includes repayments of $9.0 million as part of refinancing our real estate loan in fiscal 2026 compared to repayments of $0.3 million in fiscal 2025.

On May 18, 2026, we entered into a new credit facility with Legacy Corporate Lending, LLC (“Legacy”). This new credit facility includes a new term loan for $11.0 million and a working capital line of credit with a maximum borrowing capacity of $20.0 million subject to a borrowing-base calculation. On June 17, 2026, our subsidiary NAIE entered into a new credit line with UBS Switzerland AG (“UBS”) with maximum borrowing capacity of CHF 2.0 million. Please see Note F in Item 8 of this report for terms of our two new credit facilities.

As of June 30, 2026, we had $17.7 million available of the maximum borrowing capacity under the terms of our Legacy credit line of which we had outstanding borrowings of $7.7 million. We also owed $10.9 million on the new term loan secured by our Carlsbad, California powder processing and storage facility. As of June 30, 2025, we had $9.9 million available of the maximum borrowing capacity on our previous credit facility of which we had outstanding borrowings of $1.9 million. We also owed $8.9 million on the previous term loan.

As of June 30, 2026, NAIE had no outstanding borrowings and was in compliance with the debt covenants of its UBS credit facility.

Going Concern

Management evaluated whether conditions and events, considered in aggregate, raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date our financial statements are issued.

As of June 30, 2026, we had $7.5 million in cash, cash equivalents and restricted cash of which $6.3 million was held by NAIE. On October 15, 2025, NAIE paid a dividend of $3.1 million to NAI which was subject to a 5% Swiss withholding tax.

On May 18, 2026, we entered into a new domestic credit facility with Legacy. The new credit facility includes a fixed charge coverage ratio covenant requirement as defined in the Loan and Security Agreement that is based on only domestic operations and will first be measured for the nine months ending September 30, 2026. We anticipate we will not be able to comply with the covenant required under the Loan and Security Agreement as of September 30, 2026 due to one of our largest private-label contract manufacturing customer's material downward revisions to their forecast of projected orders and purchases from us during our fiscal year 2027. We have informed Legacy of our pending non-compliance with the fixed charge coverage ratio, and there is no assurance that a waiver, amendment, or remedy will be available or what the difference in amount, cost or other factors may be.

Management identified the following conditions that raised substantial doubt about the Company’s ability to continue as a going concern:

• Continued net losses and negative operating cash flows;
• A forecasted inability to meet the financial covenant requirements of Legacy for the nine months ending September 30, 2026; and
• Our inability to satisfy amounts owed under the current credit facility and term loan with cash currently available in the event Legacy elects to exercise its rights under the credit facility in the event of non-compliance regarding default actions against the Company.

To address these conditions, management has implemented the following actions:

• We currently have our corporate headquarters classified as held for sale of which we expect to generate net positive cash flow from a future sale;
• Management continues to focus on growing sales through the expansion of existing customer relationships and new customer relationships;
• Management is evaluating cost containment and reduction opportunities in an effort to improve financial results while also improving working capital usage;
• After careful consideration of the Company's current financial position and strategic objectives, management has determined the sale of our Carlsbad, California manufacturing facility is in the best interests of the Company and its stockholders. The Board of Directors has concluded that divesting this real property asset will provide the Company with additional liquidity needed to manage cash flows and reduce the overall debt load while improving capacity utilization. In light of the Company's recent operating challenges, management believes unlocking the capital currently held in this facility will allow the Company to extinguish the outstanding term-note on this property, reduce persistent excess capacity in our contract manufacturing segment, and better size the Company for sustainable growth. Management believes production can be effectively consolidated into our Vista, California manufacturing facility with no disruptions to production of customers' products; and
• Initiated a comprehensive review process to explore strategic alternatives focused on maximizing shareholder value including evaluating a full range of strategic growth paths, potential mergers, acquisitions, joint ventures, or a strategic sale of the Company.

Management has prepared cash flow projections incorporating these plans, as well as projected sales growth reflecting our best estimates of future operating performance and liquidity needs. Management believes these plans will allow the Company to mitigate the current conditions that have raised substantial doubt about the Company’s ability to continue as a going concern. While management plans to take the actions noted above, there can be no assurance we will be successful in our efforts to obtain a waiver, amendment, or obtain alternative financing or avoid future issues maintaining compliance with financial covenants.

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

Off-Balance Sheet Arrangements

As of June 30, 2026, 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 2026, we experienced continued price increases for product raw material, and other increased operational costs related to inflationary pressure to a higher degree than in fiscal 2025. We currently believe increasing raw material and product cost pricing pressures will continue throughout fiscal 2027 as a result of limited supplies of various ingredients, the effects of higher labor and transportation costs, interest rates, tariffs, and global fuel and energy costs. We anticipate current inflation rates will have a negative impact on our fiscal 2027 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.

(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 our President and Chief Operating Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2026. Based on such evaluation, our Chief Executive Officer and President concluded our disclosure controls and procedures were effective as of June 30, 2026.

(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, 2026. 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, 2026 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 concluded our internal control over financial reporting was effective as of June 30, 2026 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, 2026 that have materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting.