NATURAL ALTERNATIVES INTERNATIONAL INC
For the period ended Sep 30, 2025. Filed Nov 12, 2025.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2025 · Filed Nov 12, 2025
NAII$1.11-0.9%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2025-03-31; filed 2025-05-14.
0001437749-25-016911
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-09-30; filed 2025-11-12.
0001437749-25-034473
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 34 previous paragraphs and 34 current paragraphs.
12 unchanged; 20 reworded; 2 added; 2 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 5 previous and 5 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (2)
Current report
Although we realized positive income from operations during the first quarter of fiscal 2026 as compared to a loss from operations during the first quarter of fiscal 2025, we recorded an overall net loss during the first quarter of fiscal 2026 due to increased interest expense and unfavorable foreign exchange activity. The improvement in our results from operations was primarily driven by increased sales and gross profit while selling, general, and administrative expenses remained relatively flat. The improvement in gross profit is primarily related to improved utilization of our factory capacities, increased new and existing customer sales, and lower volume rebates. We continue to anticipate that we will experience a net loss in the first half of fiscal 2026, net income in the second half of fiscal 2026, and net income for the full fiscal 2026 year.
Current report
Our provision for income taxes during the three-month period ended September 30, 2025 increased to an expense of approximately $0.1 million when compared to a benefit for income taxes of approximately $0.4 million during the three months ended September 30, 2024. The increase in our provision for income taxes is primarily due to income before income taxes from our Swiss subsidiary NAIE, while the loss before income taxes from our U.S operations had no impact on our provision for income taxes due to a full valuation allowance on the domestic deferred tax asset from our U.S. operations during the three months ended September 30, 2025.
Removed paragraphs (2)
Previous report
While we grew our net sales during the three and nine months ended March 31, 2025 as compared to the prior year periods, we continued to experience a loss from operations due primarily to the underutilization of our factory capacities, lower beta-alanine royalty and licensing revenue, and increased operating expenses primarily related to legal costs and selling, general and administrative salaries and wages. Manufacturing costs were also negatively impacted by increased labor, foreign currency exchange rates, supplies, rent, and freight costs. Although our overall sales forecast for the fourth quarter of fiscal 2025 includes an increase in sales as compared to fiscal 2024, we anticipate we will experience an overall net loss for fiscal 2025.
Previous report
Our income tax benefit during the three-month period ended March 31, 2025 increased to approximately $0.5 million when compared to our tax benefit of approximately $0.4 million during the three months ended March 31, 2024. The increase in our tax benefit is primarily due to an increase in our loss before income taxes. Our income tax benefit during the nine-month period ended March 31, 2025 increased to $1.6 million compared to a tax benefit of $1.3 million in the comparable period during the prior fiscal year. The increase in our tax benefit during the comparable nine-month period is primarily due to an increase in our loss before income taxes.
Reworded paragraphs (20)
Previous wording
The following discussion and analysis are intended to help you understand our financial condition and results of operations for the three and nine months ended March 31, 2025. You should read the following discussion and analysis together with our unaudited condensed consolidated financial statements and the notes to the condensed consolidated financial statements included under Item 1 in this Report, as well as the risk factors and other information included in our 2024 Annual Report and other reports and documents we file with the SEC. 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.
Current wording
The following discussion and analysis are intended to help you understand our financial condition and results of operations for the three months ended September 30, 2025. You should read the following discussion and analysis together with our unaudited condensed consolidated financial statements and the notes to the condensed consolidated financial statements included under Item 1 in this Report, as well as the risk factors and other information included in our 2025 Annual Report and other reports and documents we file with the SEC. 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.
Previous wording
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, and royalty and licensing revenue generated from license and supply agreements with third parties, granting them the right to use our patents, trademarks and other intellectual property in connection with the distribution and use of the ingredient known as beta-alanine sold under our CarnoSyn® and SR CarnoSyn® trademarks, and TriBsyn™ trade name.
Current wording
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, and 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® and TriBsyn™ trademarks.
Previous wording
A cornerstone of our business strategy is to achieve long-term growth and profitability and to diversify our sales base. We have sought and expect to continue to seek to diversify our sales by developing relationships with additional, quality-oriented, private-label contract manufacturing customers, and commercializing our patent estate through sales of beta-alanine under our CarnoSyn® and SR CarnoSyn® trademarks, and our TriBsyn™ trade name, royalties from license agreements, and potentially additional contract manufacturing opportunities with licensees.
Current wording
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® and TriBsyn™ trademarks, royalties from license agreements, and potentially additional contract manufacturing opportunities with licensees.
Previous wording
During the nine months ended March 31, 2025, our net sales were 14% higher than in the nine months ended March 31, 2024. Private-label contract manufacturing sales increased 16% primarily due to increased orders from one of our larger customers and shipments to new customers. Revenue concentration for our largest private-label contract manufacturing customer as a percentage of total net sales for the nine months ended March 31, 2025 was 35%, and revenue concentration for our largest private-label contract manufacturing customer as a percentage of total net sales for the nine months ended March 31, 2024 was 42%. We expect our annualized fiscal 2025 revenue concentration for our largest customer to be lower as compared to our revenue concentration for our largest customer in fiscal 2024.
Current wording
During the three months ended September 30, 2025, our net sales were 14% higher than in the three months ended September 30, 2024. Private-label contract manufacturing sales increased 18% primarily due to increased orders from several of our existing customers and shipments to new customers. Revenue concentration for our largest private-label contract manufacturing customer as a percentage of total net sales for the three months ended September 30, 2025 was 38%, and revenue concentration for our largest private-label contract manufacturing customer as a percentage of total net sales for the three months ended September 30, 2024 was 37%. We expect our annualized fiscal 2026 revenue concentration for our largest customer to be lower as compared to our revenue concentration for our largest customer in fiscal 2025.
Previous wording
During the nine months ended March 31, 2025, patent and trademark licensing revenue decreased 9% to $6.0 million compared to revenue of $6.6 million for the nine months ended March 31, 2024. The decrease in patent and trademark licensing revenue during the nine months ended March 31, 2025, was primarily due to lower material sales partially offset by decreased volume rebates.
Current wording
During the three months ended September 30, 2025, patent and trademark licensing revenue decreased 34% to $1.7 million compared to revenue of $2.5 million for the three months ended September 30, 2024. The decrease in patent and trademark licensing revenue during the three months ended September 30, 2025, was primarily due to lower raw material sales partially offset by sales of our new TriBsyn™ product and increased royalty and licensing revenue.
Previous wording
We continue to invest in research and development for the expansion of our CarnoSyn® product offerings. We believe SR CarnoSyn® may provide a unique opportunity within the growing Wellness and Healthy Aging markets but acceptance of this product offering has been limited as we only offer this product in tablet form. In August 2024, we announced our new product called TriBsyn™. We believe TriBsyn™ may allow us to better penetrate the Wellness and Healthy Aging channel. This groundbreaking new product is a carnosine booster that utilizes CarnoSyn® beta-alanine and other patent-pending technology to increase beta-alanine bioavailability and absorption while effectively eliminating beta-alanine related paresthesia. This product is available as a raw material powder, which allows formulation flexibility for our customers. The elimination of paresthesia while maintaining efficacy of dosage creates a new opportunity to reach segments of the market that to date have been untapped, including older adults, vegetarians, and vegans. We believe our efforts to refine our formulations and product offerings will be positively received and result in significant opportunity for increased sales of our patented products. We are also working on several additional innovations we believe could lead to new patentable products for CarnoSyn® Brands in the future.
Current wording
We continue to invest in research and development for the expansion of our CarnoSyn® product offerings. We believe SR CarnoSyn® may provide a unique opportunity within the growing Wellness and Healthy Aging markets but acceptance of this product offering has been limited as we only offer this product in tablet form. In August 2024, we announced our new product called TriBsyn™. We believe TriBsyn™ and its patent-pending formulation will allow us to better penetrate the Wellness and Healthy Aging channel. This groundbreaking product is a carnosine booster that utilizes CarnoSyn® beta-alanine and other proprietary technology to increase beta-alanine bioavailability and absorption while effectively eliminating beta-alanine related paresthesia. This product is available as a raw material powder, which allows formulation flexibility for our customers. The elimination of paresthesia while maintaining efficacy of dosage creates a new opportunity to reach segments of the market that to date have been untapped, including older adults, vegetarians, and vegans. We believe our efforts to refine our formulations and product offerings will be positively received and result in significant opportunity for increased sales of our patented products. We are also working on several additional innovations we believe could lead to new patentable products for CarnoSyn® Brands in the future.
Previous wording
To protect and grow our CarnoSyn® product offerings, we incurred litigation and patent compliance expenses of approximately $0.3 million during the nine months ended March 31, 2025 and $0.2 million during the nine months ended March 31, 2024. Our legal expense associated with our CarnoSyn® business has remained relatively low as we have no active related litigation, and our current run-rate of expenses is primarily related to maintenance of our patent and trademark estate. Our ability to maintain or further increase our beta-alanine royalty and licensing revenue will depend in large part on our ability to develop a market for our sustained release form of beta-alanine marketed under our SR CarnoSyn® trademark and our new TriBsyn™ product, maintain our patent rights, the availability and 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 the remainder of fiscal 2025, 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®, and TriBsyn™, beta-alanine products.
Current wording
To protect and grow our CarnoSyn® product offerings, we incurred litigation and patent compliance expenses of approximately $0.1 million during the three months ended September 30, 2025 and $0.2 million during the three months ended September 30, 2024. Our legal expense associated with our CarnoSyn® business has remained relatively low as we have no active litigation, and our 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 develop a 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™ trademark, maintain our patent rights, the availability and 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 the remainder of fiscal 2026, 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®, and TriBsyn™, beta-alanine products.
Previous wording
The results of our operations for the three and nine months ended March 31 were as follows (dollars in thousands):
Current wording
The results of our operations for the three months ended September 30 were as follows (dollars in thousands):
Previous wording
Private-label contract manufacturing net sales increased 20% during the three months ended March 31, 2025, and increased 16% during the nine months ended March 31, 2025, when compared to the same periods in the prior year. The increase in net sales during the three months ended March 31, 2025 was primarily due to increased orders from several of our larger customers and shipments to new customers. The increase in net sales during the nine months ended March 31, 2025 was primarily due to increased orders from one of our larger customers and shipments to new customers.
Current wording
Private-label contract manufacturing net sales increased 18% during the three months ended September 30, 2025 when compared to the same period in the prior year. The increase in net sales during the three months ended September 30, 2025 was primarily due to increased orders from several of our existing customers and shipments to new customers.
Previous wording
Net sales from our patent and trademark licensing segment decreased 36% during the three months ended March 31, 2025, and decreased 9% during the nine months ended March 31, 2025, when compared to the same period in the prior year. The decrease in patent and trademark licensing revenue during the three months ended March 31, 2025, was primarily due to decreased orders from existing customers. The decrease in patent and trademark licensing revenue during the nine months ended March 31, 2025 was primarily due to a decrease in orders from existing customers, partially offset by decreased volume rebates.
Current wording
Net sales from our patent and trademark licensing segment decreased 34% during the three months ended September 30, 2025 when compared to the same period in the prior year. The decrease in patent and trademark licensing revenue during the three months ended September 30, 2025, was primarily due to decreased raw material orders from existing customers partially offset by sales of our new TriBsyn™ product and increased royalty and licensing revenue.
Previous wording
The change in gross profit margin for the three and nine months ended March 31, 2025, was as follows:
Current wording
The change in gross profit margin for the three months ended September 30, 2025, was as follows:
Previous wording
Selling, general and administrative expenses remained consistent at $3.9 million during the three months ended March 31, 2025 and March 31, 2024 and increased $1.0 million during the nine months ended March 31, 2025 as compared to the nine months ended March 31, 2024. The increase in selling, general, and administrative expenses during the nine months is primarily related to an increase in compensation and benefits expenses and legal expenses associated with new patent and tradename registrations.
Current wording
Selling, general and administrative expenses remained consistent at $4.1 million during the three months ended September 30, 2025 and September 30, 2024.
Previous wording
Other expense, net increased $0.5 million during the three and nine months ended March 31, 2025 when compared to the comparable period during the prior year. The increase is due to unfavorable foreign currency volatility and increased interest expense due to increased usage of our credit facility.
Current wording
Other expense, net decreased $0.1 million during the three months ended September 30, 2025 when compared to the comparable period during the prior year. The decrease is due to a reduction in foreign currency exchange losses.
Previous wording
Our primary sources of liquidity and capital resources are cash flows provided by operating activities and the availability of borrowings under our credit facilities. Net cash provided by operating activities was $2.6 million for the nine months ended March 31, 2025, compared to net cash provided by operating activities of $1.2 million in the comparable period during the prior fiscal year.
Current wording
Our primary sources of liquidity and capital resources are cash flows provided by operating activities and the availability of borrowing under our credit facilities. Net cash used in operating activities was $4.0 million for the three months ended September 30, 2025, compared to net cash used in operating activities of $3.4 million in the comparable period during the prior fiscal year.
Previous wording
At March 31, 2025, changes in accounts receivable, consisting of amounts due from our private-label contract manufacturing customers and our patent and trademark licensing activities, provided $5.2 million in cash compared to using $4.2 million of cash during the comparable nine-month period in the prior year. The change in cash flow activity in accounts receivable during the nine months ended March 31, 2025, primarily resulted from the timing of sales and related collections. Days sales outstanding was 41 days during the nine months ended March 31, 2025, as compared to 30 days for the prior year period.
Current wording
For the three months ended September 30, 2025, changes in accounts receivable, consisting of amounts due from our private-label contract manufacturing customers and our patent and trademark licensing activities, used $4.3 million in cash compared to using $0.7 million of cash during the comparable three-month period in the prior year. The change in cash flow activity in accounts receivable during the three months ended September 30, 2025, primarily resulted from the timing of sales and related collections. Days sales outstanding was 41 days during the three months ended September 30, 2025, as compared to 48 days for the prior year period.
Previous wording
Changes in inventory used $2.7 million in cash during the nine months ended March 31, 2025, compared to providing $8.6 million in the comparable prior year period. The change in cash related to inventory during the nine months ended March 31, 2025, was primarily related to the difference in the amount and timing of orders and anticipated sales as compared to the same period in the prior year. Changes in accounts payable and accrued liabilities provided $1.0 million in cash during the nine months ended March 31, 2025, compared to using $0.7 million during the nine months ended March 31, 2024. The change in cash flow activity related to accounts payable and accrued liabilities was primarily due to the timing of inventory receipts and payments.
Current wording
Changes in inventory used $5.8 million in cash during the three months ended September 30, 2025, compared to using $1.7 million in the comparable prior year period. The change in cash related to inventory during the three months ended September 30, 2025, was primarily related to the difference in the amount and timing of orders and anticipated sales as compared to the same period in the prior year. Changes in accounts payable and accrued liabilities provided $4.9 million in cash during the three months ended September 30, 2025, compared to using $2.3 million during the three months ended September 30, 2024. The change in cash flow activity related to accounts payable and accrued liabilities was primarily due to the timing of inventory receipts and payments.
Previous wording
Cash used in investing activities in the nine months ended March 31, 2025, was $2.2 million compared to $2.0 million in the comparable prior year period. The increase during the nine-months ended March 31, 2025 was related to increased capital expenditures primarily related to cost incurred to install solar energy generation equipment on our manufacturing facilities during the nine months ended March 31, 2025 as compared to the nine months ended March 31, 2024.
Current wording
Cash used in investing activities in the three months ended September 30, 2025, was $1.0 million compared to $0.3 million in the comparable prior year period. The increase during the three-months ended September 30, 2025 was related to increased capital expenditures primarily related to cost incurred to install solar energy generation equipment on our manufacturing facilities during the three months ended September 30, 2025 as compared to the three months ended September 30, 2024.
Previous wording
Cash used in financing activities for the nine months ended March 31, 2025, was $1.8 million compared to using $0.4 million in the comparable prior year period. The change in financing activities is primarily due to increased usage of our credit facility during the nine-month period ended March 31, 2025 compared to the nine-month period ended March 31, 2024.
Current wording
Cash provided by financing activities for the three months ended September 30, 2025, was $0.5 million compared to providing $1.9 million in the comparable prior year period. The change in financing activities is primarily due to decreased usage of our credit facility during the three-month period ended September 30, 2025 compared to the three-month period ended September 30, 2024.
Previous wording
As of March 31, 2025, we had $8.5 million of borrowing capacity available on our credit facility of which we had outstanding borrowings of $2.0 million. We also owed $9.0 million on a term loan secured by our Carlsbad, California powder processing and storage facility. As of June 30, 2024, we had outstanding borrowings of $3.4 million on our line of credit, and we also owed $9.2 million on our term loan.
Current wording
As of September 30, 2025, we had $10.0 million of borrowing capacity available on our credit facility of which we had outstanding borrowing of $2.5 million. We also owed $8.9 million on a term loan secured by our Carlsbad, California powder processing and storage facility. As of June 30, 2025, we had outstanding borrowing of $1.9 million on our line of credit, and we also owed $8.9 million on our term loan.
Previous wording
On March 31, 2025, we had $10.6 million in cash and cash equivalents of which, $10.0 million was held by NAIE. Overall, we believe our available cash, cash equivalents, potential cash flows from operations, and our line of credit will be sufficient to fund our current working capital needs and capital expenditures through at least the next 12 months. On March 31, 2025, we were not in compliance with the financial covenants related to net income requirements of the Fourth Amendment to our credit facility and a rolling four-quarter fixed charge ratio. In the fourth quarter of fiscal 2025, we anticipate we will not be in compliance with the financial covenants associated with the Fourth Amendment related to net income requirements and the fixed charge coverage ratio. We have a tentative agreement with Wells Fargo regarding proposed amended terms to our credit facility. Amended terms are anticipated to include waving all current and past covenant violations. We are still working with Wells Fargo on finalizing the formal amended credit agreement and expect to execute this amendment by early June 2025. On May 14, 2025, we executed a Fifth Amendment to our credit facility that extends the maturity date of our credit facility from May 23, 2025 to June 23, 2025. The extension of the maturity date of our credit facility will allow us to finalize the negotiations of an amended credit agreement while minimizing the risk of the credit facility expiring before the new agreement can be executed. Wells Fargo has advised us that during the period of negotiation they will consider our request for a new credit facility, they will not exercise any of their options due to our breach of the current Credit Agreement, and they reserve all of their rights. There can be no assurance we will be able to successfully negotiate a new credit facility, or what the differences in amount, cost and other factors may be. Please see Note F, Item 1 of Part I of this report for terms of our current modified line of credit.
Current wording
On September 30, 2025, we had $7.7 million in cash and cash equivalents of which $7.5 million was held by NAIE. On October 15, 2025, NAIE paid a dividend of $3.1 million to NAI which is subject to a 5% Swiss withholding tax. Overall, we believe our available cash, cash equivalents, potential cash flows from operations, and our line of credit will be sufficient to fund our current working capital needs and capital expenditures through at least the next 12 months. On June 20, 2025, we entered into an amended credit facility with Wells Fargo Bank, National Association ("Wells Fargo"). The amended credit facility extended the maturity date of our credit facility to December 31, 2026, decreased the maximum principal amount that can be borrowed from $12.5 million to $10.0 million, waived all prior events of default, prospectively waived the anticipated covenant violations for the quarter ending June 30, 2025, and modified the financial covenants for the first quarter of fiscal 2026 and beyond. We were not in compliance with the maximum net loss and fixed charge coverage ratio covenants of our credit agreement for the first quarter of fiscal 2026, and we anticipate we will not be able to comply with all of the covenants required under the modified Credit Agreement in the second quarter of fiscal 2026, primarily related to the impact on the fixed charge coverage ratio calculation due to the unexpected recognition of litigation expenses and a valuation allowance on our net domestic deferred tax assets during the fourth quarter of fiscal 2025. We have advised our lender and are currently negotiating a potential revision to our credit agreement. There can be no assurance we will be able to successfully complete the negotiation of a revised credit facility, or what the differences in amount, cost and other factors may be. Please see Note F, Item 1 of Part I of this report for terms of our current modified line of credit.