Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to . 000-15701 (Commission file number) NATURAL ALTERNATIVES INTERNATIONAL, INC. (Exact name of registrant as specified in its charter) Delaware 84-1007839 (State of incorporation) (IRS Employer Identification No.) 1535 Faraday Ave Carlsbad, CA 92008 (760) 736-7700 ☒QUARTERLY REPORT PURSUAN ...

Financial Performance - For the first three months of fiscal 2023, net sales increased by 12% to $43.1 million compared to $38.3 million in the same period of fiscal 2022[89]. - Private-label contract manufacturing sales rose by 24% to $41.8 million, primarily driven by higher sales to the two largest customers[100]. - Patent and trademark licensing revenue decreased by 72% to $1.4 million, down from $4.8 million in the prior year, due to reduced orders and market factors[90]. - Gross profit margin declined to 12.5%, down from 21.6% in the prior year, reflecting increased manufacturing costs and unfavorable foreign exchange rates[100]. - Operating income fell by 64% to $1.5 million, with a corresponding decrease in operating income margin to 3.6% from 11.0%[100]. - Net income decreased by 68% to $1.1 million, representing 2.4% of net sales compared to 8.5% in the previous year[100]. - The company anticipates slight growth in consolidated net sales for fiscal 2023 compared to fiscal 2022, despite expected negative impacts on operating income from inflation and foreign exchange rates[93]. Investments and Development - The company is investing in research and development for the SR CarnoSyn® sustained release delivery system, targeting growth in the Wellness and Healthy Aging markets[91]. - A new high-volume powder blending and packaging facility is expected to be operational by mid-to-late fiscal year 2023, aimed at enhancing production capabilities[97]. Cash Flow and Financing - Days sales outstanding improved to 34 days in the first three months of fiscal 2023, down from 46 days in the prior year, indicating better cash flow management[108]. - Changes in inventory used $7.5 million in cash during the three months ended September 30, 2022, compared to $4.7 million in the prior year period[109]. - Cash used in investing activities was $7.8 million for the three months ended September 30, 2022, down from $18.3 million in the comparable prior year period[110]. - Cash provided by financing activities was $2.8 million for the three months ended September 30, 2022, compared to $10.0 million in the prior year period[111]. - As of September 30, 2022, the company had $3.4 million outstanding on its credit facility and $16.6 million available for borrowing[112]. - The company had $12.3 million in cash and cash equivalents as of September 30, 2022, sufficient to fund current working capital needs and capital expenditures for the next 12 months[114]. - There was no off-balance sheet debt or significant obligations that could materially affect the company's financial condition as of September 30, 2022[115]. - The company was in compliance with all financial and other covenants required under the Credit Agreement as of September 30, 2022[112]. - The decrease in borrowings was partially offset by an increase in the repurchase of treasury stock for the three months ended September 30, 2022[111]. - The primary reason for the decrease in cash used in investing activities was the purchase of a new manufacturing and warehouse facility in Carlsbad, CA[110]. Internal Controls - There were no changes in internal control over financial reporting that materially affected the company during the quarterly period ended September 30, 2022[119].

Part I [Business](index=5&type=section&id=Item%201.%20Business) NAI is a leading nutritional supplement formulator and manufacturer, primarily through private-label contract manufacturing and beta-alanine patent licensing, operating certified facilities in the US and Switzerland - The company's primary business is private-label contract manufacturing for the nutritional supplement industry, complemented by a patent and trademark licensing segment for its beta-alanine ingredient, CarnoSyn®[15](index=15&type=chunk) - NAI operates certified manufacturing facilities in Vista and Carlsbad, California, and Manno, Switzerland, holding certifications from TGA, NSF International, Health Canada, and Swissmedic for global distribution[20](index=20&type=chunk)[21](index=21&type=chunk)[26](index=26&type=chunk) Net Sales by Segment (Fiscal Years 2022 vs. 2021) | Segment | FY 2022 Sales ($ thousands) | % of Total | FY 2021 Sales ($ thousands) | % of Total | | :--- | :--- | :--- | :--- | :--- | | Private-label Contract Manufacturing | $154,798 | 91% | $164,310 | 92% | | Patent and Trademark Licensing | $16,168 | 9% | $14,210 | 8% | | **Total Net Sales** | **$170,966** | **100%** | **$178,520** | **100%** | - The company faces customer concentration risk, with **three private-label contract manufacturing customers** each accounting for over **10% of consolidated net sales**[40](index=40&type=chunk) - As of June 30, 2022, NAI employed **294 full-time employees in the U.S.** and **95 full-time employees in its Swiss subsidiary, NAIE**[58](index=58&type=chunk)[59](index=59&type=chunk) [Risk Factors](index=14&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks including supply chain disruptions from COVID-19, economic downturns, intense competition, dependency on key suppliers and customers, regulatory hurdles, and intellectual property litigation - The COVID-19 pandemic has caused and may continue to cause disruptions in supply chains, production, and labor availability, potentially impacting operational and financial performance[70](index=70&type=chunk)[71](index=71&type=chunk) - The company derives a significant portion of its revenue from a limited number of customers, with sales to the **three largest customers constituting approximately 72% of consolidated net sales in fiscal year 2022**[91](index=91&type=chunk) - A **single manufacturer in Japan** supplies all beta-alanine for the CarnoSyn® and SR CarnoSyn® business, creating a significant supplier dependency risk[85](index=85&type=chunk) - The company's ability to maintain or grow revenue from its patent and trademark licensing segment is highly dependent on its ability to defend its patents for beta-alanine (CarnoSyn® and SR CarnoSyn®)[94](index=94&type=chunk) - Officers and directors beneficially owned approximately **20% of outstanding common stock** as of June 30, 2022, with the CEO and Chairman, Mark LeDoux, and his affiliates owning about **16%**, giving them significant influence over corporate matters[110](index=110&type=chunk) [Properties](index=23&type=section&id=Item%202.%20Properties) As of June 30, 2022, NAI owns its Carlsbad, CA headquarters and a new powder facility, while leasing its primary US manufacturing site in Vista, CA, and Swiss facilities, all deemed adequate for operations Summary of Facilities as of June 30, 2022 | Location | Nature of Use | Square Feet | How Held | | :--- | :--- | :--- | :--- | | Vista, CA USA | Manufacturing, warehousing, packaging | 162,000 | Leased | | Manno, Switzerland | Manufacturing, warehousing, packaging | 95,990 | Leased | | Manno, Switzerland | Warehousing | 30,892 | Leased | | Carlsbad, CA USA | Corporate headquarters | 20,981 | Owned | | Carlsbad, CA USA | Powder filling, packaging, storage | 54,154 | Owned | - A new facility purchased in August 2021 in Carlsbad, CA is being converted into a high-volume powder blending and packaging facility, expected to be operational by **mid-fiscal 2023**[128](index=128&type=chunk) [Legal Proceedings](index=23&type=section&id=Item%203.%20Legal%20Proceedings) As of September 21, 2022, NAI and its subsidiary NAIE were not party to any material pending legal proceedings, with management not expecting current matters to materially adversely affect the business - As of **September 21, 2022**, the company was not a party to any material pending legal proceedings[126](index=126&type=chunk) [Mine Safety Disclosures](index=23&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[128](index=128&type=chunk) Part II [Market for Our Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=24&type=section&id=Item%205.%20Market%20for%20Our%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) NAI common stock trades on Nasdaq under "NAII"; the company has never paid and does not intend to pay cash dividends, instead retaining earnings for growth, and repurchased **37,305 shares** for **$0.4 million** in Q4 FY2022 - The company's common stock is traded on the Nasdaq Global Market under the symbol **"NAII"**[130](index=130&type=chunk) - NAI has never paid a dividend on its common stock and does not intend to in the foreseeable future, with a policy to retain all earnings for growth[132](index=132&type=chunk) Common Stock Repurchases (Quarter Ended June 30, 2022) | Period | Total Number of Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | April 1-30, 2022 | 4,359 | $11.64 | | May 1-31, 2022 | 15,114 | $10.20 | | June 1-30, 2022 | 17,832 | $10.56 | | **Total** | **37,305** | - | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=26&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) In FY2022, consolidated net sales decreased **4% to $171.0 million**, driven by a **6% decline** in private-label manufacturing due to a **40% reduction** from the largest customer, partially offset by a **14% increase** in licensing revenue, while net income remained flat at **$10.7 million** Consolidated Operating Results (Fiscal Years Ended June 30) | Metric ($ in thousands) | 2022 | 2021 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Total net sales | $170,966 | $178,520 | $(7,554) | (4)% | | Gross profit | $30,509 | $30,442 | $67 | 0% | | Income from operations | $13,679 | $13,672 | $7 | 0% | | Net income | $10,712 | $10,768 | $(56) | (1)% | - Private-label contract manufacturing sales decreased by **6% in FY2022**, mainly due to a **40% drop in sales** to the largest customer, whose revenue concentration fell from **51% to 32% of total net sales**[142](index=142&type=chunk)[153](index=153&type=chunk) - Patent and trademark licensing revenue grew **14% to $16.2 million in FY2022**, attributed to new customers, higher prices, and increased demand as athletic activities resumed post-COVID restrictions[143](index=143&type=chunk)[154](index=154&type=chunk) - For fiscal 2023, the company anticipates consolidated net sales to increase between **10.0% and 15.0%** compared to fiscal 2022, with operating income projected to be between **5.0% and 7.0% of net sales**[146](index=146&type=chunk) - Net cash from operating activities was **$11.9 million in FY2022**, down from **$20.8 million in FY2021**, while cash used in investing activities increased significantly to **$26.5 million** due to the purchase and retrofitting of a new manufacturing facility[158](index=158&type=chunk)[161](index=161&type=chunk) [Financial Statements and Supplementary Data](index=31&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) Audited consolidated financial statements for FY2022 and FY2021 are presented with an unqualified auditor's opinion, highlighting revenue recognition as a critical audit matter, and showing total assets increased to **$146.0 million** while liabilities rose to **$57.5 million** - The independent auditor, HASKELL & WHITE LLP, issued an **unqualified opinion** on the consolidated financial statements, identifying revenue recognition as a critical audit matter due to contract complexity and judgment[172](index=172&type=chunk)[177](index=177&type=chunk) Key Balance Sheet Data (as of June 30) | ($ in thousands) | 2022 | 2021 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $21,833 | $32,133 | | Total current assets | $76,746 | $80,348 | | Total assets | $146,003 | $120,281 | | **Liabilities & Equity** | | | | Total current liabilities | $23,261 | $22,072 | | Total liabilities | $57,483 | $40,198 | | Total stockholders' equity | $88,520 | $80,083 | Key Income Statement Data (for the year ended June 30) | ($ in thousands) | 2022 | 2021 | | :--- | :--- | :--- | | Net sales | $170,966 | $178,520 | | Gross profit | $30,509 | $30,442 | | Income from operations | $13,679 | $13,672 | | Net income | $10,712 | $10,768 | | Diluted EPS | $1.74 | $1.69 | - The business is divided into two reportable segments: private-label contract manufacturing and patent/trademark licensing, generating **$154.8 million in sales** and **$15.7 million in operating income** for the former, and **$16.2 million in sales** and **$6.8 million in operating income** for the latter in FY2022[308](index=308&type=chunk)[310](index=310&type=chunk) - The company has significant customer and supplier concentration, with **three customers accounting for 72% of net sales** and **one raw material supplier accounting for 17% of total raw material purchases in FY2022**[295](index=295&type=chunk)[296](index=296&type=chunk) [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=66&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) No disagreements with accountants on accounting and financial disclosure were reported during the period - None reported[318](index=318&type=chunk) [Controls and Procedures](index=66&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that the company's disclosure controls and internal control over financial reporting were effective as of June 30, 2022, with no material changes reported during the fourth quarter - Based on an evaluation as of **June 30, 2022**, the Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective[320](index=320&type=chunk) - Management's assessment concluded that the company's internal control over financial reporting was effective as of **June 30, 2022**, based on the COSO 2013 framework[323](index=323&type=chunk) [Other Information](index=66&type=section&id=Item%209B.%20Other%20Information) No other information was reported for this period - None[326](index=326&type=chunk) Part III [Directors, Executive Officers, Corporate Governance, Executive Compensation, Security Ownership, and Certain Relationships](index=66&type=section&id=Items%2010-14) Information for Items 10 through 14 is incorporated by reference from the definitive proxy statement for the Annual Meeting of Stockholders, scheduled to be filed by **October 28, 2022** - Information for Items 10, 11, 12, 13, and 14 is incorporated by reference from the definitive proxy statement for the Annual Meeting of Stockholders to be held on **December 2, 2022**[328](index=328&type=chunk) Part IV [Exhibits and Financial Statement Schedules](index=67&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists financial statements filed under Item 8 and provides an index of all exhibits filed with the report or incorporated by reference, including corporate governance documents, material contracts, and SEC-required certifications - This section contains the list of financial statements included in Item 8 and an index of all exhibits filed with the report[330](index=330&type=chunk)[331](index=331&type=chunk)[332](index=332&type=chunk)

PART I - FINANCIAL INFORMATION [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents Natural Alternatives International, Inc.'s unaudited condensed consolidated financial statements, including balance sheets, income statements, and cash flow statements, for the period ended March 31, 2022 [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets increased to **$135.5 million** by March 31, 2022, driven by higher property and equipment and inventories, while liabilities also rose due to a new mortgage note payable Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2022 (Unaudited) | June 30, 2021 | | :--- | :--- | :--- | | Cash and cash equivalents | $18,575 | $32,133 | | Inventories, net | $36,800 | $27,006 | | Property and equipment, net | $40,400 | $22,271 | | **Total current assets** | **$78,206** | **$80,348** | | **Total assets** | **$135,488** | **$120,281** | | Accounts payable | $17,838 | $11,893 | | Mortgage note payable | $9,863 | $0 | | **Total current liabilities** | **$24,368** | **$22,072** | | **Total liabilities** | **$50,411** | **$40,198** | | **Total stockholders' equity** | **$85,077** | **$80,083** | [Condensed Consolidated Statements of Income and Comprehensive Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income%20and%20Comprehensive%20Income) Q3 2022 net sales decreased to **$42.4 million**, but net income increased to **$2.5 million**, while nine-month net sales fell to **$118.4 million** with a slight decrease in net income Financial Performance Summary (in thousands, except per share data) | Metric | Q3 2022 | Q3 2021 | 9 Months 2022 | 9 Months 2021 | | :--- | :--- | :--- | :--- | :--- | | Net sales | $42,373 | $46,320 | $118,440 | $134,129 | | Gross profit | $7,393 | $6,836 | $22,220 | $22,515 | | Income from operations | $3,274 | $2,700 | $9,903 | $10,177 | | Net income | $2,504 | $1,916 | $7,607 | $7,806 | | Diluted EPS | $0.41 | $0.30 | $1.22 | $1.22 | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operations significantly decreased to **$3.1 million** for the nine months ended March 31, 2022, while cash used in investing surged to **$21.4 million**, primarily for property and equipment Cash Flow Summary (in thousands) | Activity | Nine Months Ended Mar 31, 2022 | Nine Months Ended Mar 31, 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $3,122 | $15,999 | | Net cash used in investing activities | ($21,438) | ($4,248) | | Net cash provided by (used in) financing activities | $4,758 | ($14,140) | | **Net decrease in cash and cash equivalents** | **($13,558)** | **($2,389)** | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) These notes detail accounting policies, highlight increased beta-alanine revenue, the acquisition of a **$17.5 million** manufacturing property, high customer concentration, and segment performance showing growth in licensing despite a decline in contract manufacturing - Beta-alanine (CarnoSyn®) related revenue, including raw material sales and royalties, was **$4.8 million** for Q3 2022 and **$13.5 million** for the nine months ended March 31, 2022, up from **$4.1 million** and **$9.6 million** in the respective prior-year periods[35](index=35&type=chunk) - On August 20, 2021, the company acquired a manufacturing and warehouse property in Carlsbad, California, for **$17.5 million** to be retrofitted into a powder blending and packaging facility[47](index=47&type=chunk) Net Sales by Business Segment (in thousands) | Segment | Q3 2022 | Q3 2021 | 9 Months 2022 | 9 Months 2021 | | :--- | :--- | :--- | :--- | :--- | | Private label contract manufacturing | $37,623 | $42,196 | $104,894 | $124,569 | | Patent and trademark licensing | $4,750 | $4,124 | $13,546 | $9,560 | | **Total Net Sales** | **$42,373** | **$46,320** | **$118,440** | **$134,129** | - Sales to the top three customers were highly concentrated. For the nine months ended March 31, 2022, Customer 1 accounted for **$40.1 million**, Customer 2 for **$22.8 million**, and Customer 3 for **$19.8 million** of net sales[68](index=68&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=26&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses a **12%** decline in nine-month net sales, primarily from contract manufacturing, partially offset by a **42%** increase in licensing revenue, while forecasting **18-21%** sales growth for Q4 2022 - Private-label contract manufacturing sales decreased **16%** in the first nine months of fiscal 2022, mainly due to a **44%** drop in sales to the largest customer, whose revenue concentration fell from **54%** to **34%** of total net sales[104](index=104&type=chunk) - Patent and trademark licensing revenue grew **42%** to **$13.5 million** in the first nine months of fiscal 2022, attributed to new customers, higher prices, and increased demand as athletic activities resumed post-COVID restrictions[105](index=105&type=chunk) - The company anticipates consolidated net sales for Q4 2022 to increase by **18.0% to 21.0%** compared to Q4 2021, with operating income as a percentage of net sales expected to be between **9.0% and 12.0%**[109](index=109&type=chunk) - Liquidity was impacted by a **$9.8 million** use of cash for inventory buildup and **$21.4 million** in capital expenditures, primarily for a new facility. The company secured a **$10.0 million** term loan to help fund the purchase[125](index=125&type=chunk)[126](index=126&type=chunk)[127](index=127&type=chunk) [Item 4. Controls and Procedures](index=32&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of March 31, 2022, with no material changes to internal control over financial reporting during the quarter - Based on an evaluation as of March 31, 2022, the Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective[134](index=134&type=chunk) - There were no changes in internal control over financial reporting during the quarter that materially affected, or are reasonably likely to materially affect, these controls[135](index=135&type=chunk) PART II - OTHER INFORMATION [Item 1. Legal Proceedings](index=33&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in ordinary course legal proceedings but does not anticipate a material adverse effect on its financial condition, with no material pending proceedings as of May 12, 2022 - The company is involved in ordinary course investigations, claims, and legal proceedings but does not expect them to have a material adverse effect on the business[138](index=138&type=chunk) - As of May 12, 2022, neither NAI nor its subsidiary NAIE were party to any material pending legal proceedings[139](index=139&type=chunk) [Item 1A. Risk Factors](index=33&type=section&id=Item%201A.%20Risk%20Factors) This section refers readers to the company's 2021 Annual Report on Form 10-K for a detailed discussion of comprehensive risk factors - The report refers readers to Item 1A of the 2021 Annual Report on Form 10-K for a detailed discussion of risk factors[140](index=140&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=33&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company did not sell unregistered equity securities but repurchased **179,810** common shares for **$2.3 million** under its authorized plan during the three months ended March 31, 2022 Common Stock Repurchases (Q3 2022) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | Jan 2022 | 106,058 | $13.29 | | Feb 2022 | 43,456 | $11.95 | | Mar 2022 | 30,296 | $11.24 | | **Total** | **179,810** | **-** | - On January 14, 2022, the Board of Directors authorized an additional **$3.0 million** for the stock repurchase plan, bringing the total authorized amount to **$18.0 million**[84](index=84&type=chunk) [Item 3. Defaults Upon Senior Securities](index=33&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon its senior securities during the period - None[143](index=143&type=chunk) [Item 5. Other Information](index=34&type=section&id=Item%205.%20Other%20Information) The company reported no other information required to be disclosed under this item - None[144](index=144&type=chunk) [Item 6. Exhibits](index=35&type=section&id=Item%206.%20Exhibits) This section indexes exhibits filed with the Form 10-Q, including CEO and CFO certifications and XBRL interactive data files - Exhibits filed with this report include Rule 13a-14(a)/15d-14(a) Certifications for the CEO and CFO, a Section 1350 Certification, and XBRL data files[147](index=147&type=chunk)

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 2021 NATURAL ALTERNATIVES INTERNATIONAL, INC. (Exact name of registrant as specified in its charter) 000-15701 Delaware 84-1007839 (State of incorporation) (IRS Employer Identification No.) 1535 Faraday Ave Carlsbad, CA 92008 (760) 736-7700 (Address of principal executive offices ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Exact name of registrant as specified in its charter) Delaware 84-1007839 (State of incorporation) (IRS Employer Identification No.) FORM 10-Q ☒ QUARTERLY REPORT pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2021 ☐ TRANSITION REPORT pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from to . 000-15701 ( ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ANNUAL REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 FOR THE FISCAL YEAR ENDED JUNE 30, 2021 000-15701 (Commission file number) NATURAL ALTERNATIVES INTERNATIONAL, INC. (Exact name of registrant as specified in its charter) Delaware 84-1007839 (State of incorporation) (IRS Employer Identification No.) 1535 Faraday Ave Carlsbad, CA 92008 (760) 744-7700 (Address of principal exec ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2021 000-15701 (Commission file number) NATURAL ALTERNATIVES INTERNATIONAL, INC. (Exact name of registrant as specified in its charter) Delaware 84-1007839 (State of incorporation) (IRS Employer Identification No.) 1535 Faraday Ave Carlsbad, CA 92008 (760) 736-7700 (Address of princ ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT (Exact name of registrant as specified in its charter) Delaware 84-1007839 (State of incorporation) (IRS Employer Identification No.) 1535 Faraday Ave Carlsbad, CA 92008 (760) 736-7700 (Address of principal executive offices) (Registrant's telephone number) | Securities registered pursuant to Section 12(b) of the Act: | | | | --- | --- | --- | | Title of Each Class | Trading Symbol(s) | Name ...

PART I [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) Unaudited Q1 FY2021 financial statements show increased assets and net income, with reduced operating cash flow due to working capital needs [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheets detail the company's financial position, showing an increase in total assets and liabilities Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2020 | June 30, 2020 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $27,366 | $30,478 | | Inventories, net | $35,165 | $27,972 | | Total current assets | $86,410 | $79,024 | | Total assets | $128,556 | $120,203 | | **Liabilities & Equity** | | | | Accounts payable | $17,769 | $12,509 | | Lines of credit – current | $10,000 | $10,000 | | Total current liabilities | $37,133 | $27,806 | | Total liabilities | $57,425 | $48,828 | | Total stockholders' equity | $71,131 | $71,375 | | Total liabilities and stockholders' equity | $128,556 | $120,203 | [Condensed Consolidated Statements of Income and Comprehensive Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income%20and%20Comprehensive%20Income) The income statements reflect a significant increase in net sales and net income for the quarter Condensed Consolidated Statement of Income (in thousands, except per share data) | Metric | Q1 FY2021 (ended Sep 30, 2020) | Q1 FY2020 (ended Sep 30, 2019) | | :--- | :--- | :--- | | Net sales | $39,726 | $29,195 | | Gross profit | $6,005 | $4,384 | | Income (loss) from operations | $2,085 | $(55) | | Net income | $2,258 | $96 | | Basic EPS | $0.35 | $0.01 | | Diluted EPS | $0.35 | $0.01 | [Condensed Consolidated Statements of Stockholders' Equity](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders%27%20Equity) Stockholders' equity slightly decreased due to stock repurchases and unrealized losses, despite net income - Total stockholders' equity slightly decreased from **$71.4 million** at June 30, 2020, to **$71.1 million** at September 30, 2020, primarily due to a **$1.7 million** repurchase of common stock and a **$1.1 million** unrealized loss on derivative instruments, which offset the **$2.3 million** in net income for the period[13](index=13&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Cash flows show a significant decrease in operating cash, leading to an overall net decrease in cash Condensed Consolidated Statement of Cash Flows (in thousands) | Cash Flow Activity | Three Months Ended Sep 30, 2020 | Three Months Ended Sep 30, 2019 | | :--- | :--- | :--- | | Net cash provided by operating activities | $110 | $4,593 | | Net cash used in investing activities | $(1,479) | $(1,118) | | Net cash used in financing activities | $(1,743) | $(15) | | Net (decrease) increase in cash | $(3,112) | $3,460 | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Key notes detail revenue streams, customer concentration, tax rates, and stock repurchase activities - Beta-alanine (CarnoSyn®) related raw material sales and royalty/licensing income was **$2.7 million** for the quarter, down from **$3.2 million** in the prior-year period[33](index=33&type=chunk) - The company has significant customer concentration, with one customer accounting for **60%** of net sales (**$24.0 million**) in the quarter ended Sep 30, 2020, up from **49%** in the prior year period[64](index=64&type=chunk)[104](index=104&type=chunk) Net Sales by Business Segment (in thousands) | Segment | Q1 FY2021 (ended Sep 30, 2020) | Q1 FY2020 (ended Sep 30, 2019) | | :--- | :--- | :--- | | Private-label contract manufacturing | $37,047 | $26,009 | | Patent and trademark licensing | $2,679 | $3,186 | | **Total Net Sales** | **$39,726** | **$29,195** | - The company's effective tax rate was **(28.0)%** for the quarter, primarily due to a discrete tax benefit related to the CARES Act and new Treasury regulations regarding GILTI[77](index=77&type=chunk)[79](index=79&type=chunk)[80](index=80&type=chunk) - On September 18, 2020, the Board authorized a **$2.0 million** increase to the stock repurchase plan, bringing the total authorization to **$12.0 million**, and during the quarter, the company repurchased **235,390 shares** for **$1.7 million**[85](index=85&type=chunk)[86](index=86&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=24&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q1 FY2021 sales growth, segment performance, and provides a positive fiscal 2021 outlook - The COVID-19 pandemic has positively impacted sales, particularly for immune and wellness products, and as a precautionary measure, the company withdrew **$10 million** from its credit facility to ensure liquidity[101](index=101&type=chunk)[102](index=102&type=chunk)[104](index=104&type=chunk) Results of Operations Summary (in thousands) | Metric | Q1 FY2021 | Q1 FY2020 | % Change | | :--- | :--- | :--- | :--- | | Total net sales | $39,726 | $29,195 | 36% | | Gross profit | $6,005 | $4,384 | 37% | | SG&A expenses | $3,920 | $4,439 | (12)% | | Income (loss) from operations | $2,085 | $(55) | 3,891% | | Net income | $2,258 | $96 | 2,252% | - Private-label contract manufacturing sales increased **42%** due to higher sales to the largest customer, including a new product, and sales to other new and existing customers[103](index=103&type=chunk)[115](index=115&type=chunk) - Patent and trademark licensing (CarnoSyn® beta-alanine) sales decreased **16%** due to some customers switching to generic beta-alanine and the negative impact of COVID-19 on the sports nutrition industry[105](index=105&type=chunk)[116](index=116&type=chunk) - The company expects annualized fiscal 2021 net sales to increase between **30% to 50%** compared to fiscal 2020, with an anticipated operating income of **5% to 7%** of net sales[109](index=109&type=chunk) - Net cash from operating activities was only **$0.1 million**, a significant decrease from **$4.6 million** in the prior-year period, primarily due to a **$7.2 million** increase in inventory to support anticipated sales[121](index=121&type=chunk)[123](index=123&type=chunk) [Item 4. Controls and Procedures](index=30&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls were effective with no material changes to internal controls during the quarter - Based on an evaluation as of September 30, 2020, the Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective[132](index=132&type=chunk) - There were no changes in internal control over financial reporting during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[133](index=133&type=chunk) PART II [Item 1. Legal Proceedings](index=31&type=section&id=Item%201.%20Legal%20Proceedings) The company reports no material pending legal proceedings as of November 10, 2020 - The company is not a party to any material pending legal proceedings as of November 10, 2020[137](index=137&type=chunk) [Item 1A. Risk Factors](index=31&type=section&id=Item%201A.%20Risk%20Factors) Investors are directed to review risk factors detailed in the company's 2020 Annual Report on Form 10-K - Investors are advised to review the risk factors detailed in the company's 2020 Annual Report on Form 10-K[138](index=138&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=31&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no unregistered equity sales and detailed common stock repurchases during the quarter Common Stock Repurchases (Q1 FY2021) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | July 2020 | 7,931 | $6.94 | | August 2020 | 216,492 | $7.37 | | September 2020 | 10,967 | $8.07 | | **Total** | **235,390** | **N/A** | - As of September 30, 2020, approximately **$1.96 million** remained available for future repurchases under the company's stock repurchase program[140](index=140&type=chunk) [Item 3. Defaults Upon Senior Securities](index=31&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) No defaults upon senior securities were reported for the period - None[141](index=141&type=chunk) [Item 5. Other Information](index=31&type=section&id=Item%205.%20Other%20Information) No other material information was reported for the period - None[142](index=142&type=chunk)[143](index=143&type=chunk) [Item 6. Exhibits](index=33&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the report, including CEO/CFO certifications and XBRL data files - Exhibits filed with this report include CEO and CFO certifications (Rule 13a-14(a)/15d-14(a) and Section 1350) and XBRL Interactive Data Files[145](index=145&type=chunk)