Financial Analysis

F. Debt On May 18, 2026, we entered into a new domestic credit facility with Legacy Corporate Lending, LLC (Legacy). This new credit facility includes a new real estate 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. The new credit facility is secured by all the assets of the Company, excluding NAIE's assets, and may be prepaid at any time. The new line of credit bears interest at a rate of 4.5% above the Term Secured Overnight Financing Rate (Term SOFR), while the real estate term loan was amortized over 15 years and initially bore interest at a fixed rate of 14.0% until such time as Legacy completed an appraisal and any necessary other documentation after which the interest rate reverted to 5.0% above Term SOFR . Effective July 14, 2026, NAI successfully completed the required appraisal and documentation thereby reducing the interest rate to 5% above Term SOFR. The credit facility also includes a 0.50% unused commitment fee and a one -time closing fee of 1.0% of the total committed credit amount. The term of this new credit facility is three years maturing on May 18, 2029. This credit facility contains covenants which restrict our ability to declare dividends to our shareholders and repurchase our common stock under the stock repurchase plan. The credit facility includes a fixed charge coverage ratio covenant requirement as defined in the Loan and Security Agreement …

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G. Income Taxes During fiscal 2026 , we recorded U.S.-based domestic tax expense of $0.1 million and foreign tax expense of $0.3 million. During fiscal 2025 , we recorded U.S.-based domestic tax benefit of $2.7 million and foreign tax expense of 0.1 million. During fiscal 2026 , we recorded a valuation allowance against net domestic deferred income tax assets of $5.6 million, representing the amount of our deferred income tax assets in excess of our domestic deferred income tax liabilities. We recorded the valuation allowance because management was unable to conclude, in light of the cumulative loss we have realized related to our US-based operations in recent years, that realization of the net deferred income tax asset was more likely than not. The valuation allowance recorded during fiscal 2026 primarily related to fiscal 2026 and changes in other deferred tax items recognized during fiscal 2026 . As a result of the recognition of these valuation adjustments, we have a $10.4 million net deferred tax asset offset by a valuation allowance of $10.4 million resulting in a net deferred tax asset of $0 as of June 30, 2026 . This valuation allowance did not have any effect on the tax expense and related liability recorded for operating income recognized by NAIE during the year ended June 30, 2026 . The following is a geographical breakdown of loss before income taxes (in thousands): 2026 2025 United States $ (21,956 ) $ (11,520 ) Foreign 1,691 780 Total loss before income taxes $ …

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"M. Contingencies 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 product liability, employment, intellectual property, 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, based on available information, we generally do not believe the resolution of these matters will result in a material adverse effect on our business, consolidated financial condition, or results of operations and the price of our common stock. However, a settlement payment or unfavorable outcome could adversely impact our results of operations. Our evaluation of the likely impact of these actions could change in the future, and we could have unfavorable outcomes we do not expect. Settlement of Legal Proceeding 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 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 a …

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D. Leases We currently lease our Vista, California and Manno, Switzerland product manufacturing and support facilities. At the inception of a contract, we assess whether the contract is, or contains, a lease. Our assessment is based on: ( 1 ) whether the contract involves the use of a distinct identified asset, ( 2 ) whether we obtain the right to substantially all the economic benefit from the use of the asset throughout the period of the contract, and ( 3 ) whether we have the right to direct the use of the asset during such time period. At inception of a lease, we allocate the consideration in the contract to each lease component based on its relative stand-alone price to determine the lease payments. On July 18, 2023, we entered into a Fourth Amendment to the Lease of our Vista, California manufacturing facility. The Fourth Amendment extended the term of the Lease by an additional ten years and five months commencing April 1, 2024. The amended lease covering two buildings and approximately 162,000 square feet resulted in an increase in base rent to $1.50 per square foot, after five free months of base rent beginning at the commencement of the extended term. NAI constructed substantial improvements to the facilities including but not limited to installation of an approximately $2.4 million solar electrical generating system on both buildings, and other substantial improvements. Pursuant to the Fourth Amendment, the Landlord has reimbursed NAI $1.1 million for these tenant …

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"Recently Adopted Accounting Pronouncements In December 2023, the FASB issued ASU 2023 - 09, ""Income Taxes (Topic 740 ): Improvements to Income Tax Disclosures"". The amendments in this update address investor requests for more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. This update also includes certain other amendments to improve the effectiveness of income tax disclosures. The amendments in ASU 2023 - 09 are effective for fiscal years beginning after December 15, 2024, with early adoption permitted. We adopted the new standard and the additional disclosure requirements in our annual financial statements for the year ended June 30, 2026 with prospective application contained in Note G. Recently Issued Accounting and Regulatory Pronouncements In December 2025, the FASB issued ASU 2025 - 12, Codification Improvements (""ASU 2025 - 12"" ). ASU 2025 - 12 addresses suggestions received from stakeholders regarding the Accounting Standards Codification and makes other incremental improvements to U.S. GAAP. The update represents changes to the Codification that clarify, correct errors in or make other improvements to a variety of topics that are intended to make it easier to understand and apply. ASU 2025 - 12 is effective for fiscal years beginning after December 15, 2026 and interim periods within those fiscal years. Entities are required to apply the amen …

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H. Employee Benefit Plans 401 (k) Plan We have a profit-sharing plan pursuant to Section 401 (k) of the Code, whereby participants may contribute a percentage of compensation not in excess of the maximum allowed under the Code. Effective January 1, 2022, all employees became eligible to participate in the plan the first of the month following 30 days of employment. Also effective, January 1, 2025, we match 50% of the first 6% of a participants compensation contributed to the plan. The total contributions under the plan charged to income from operations totaled $0.4 million for fiscal 2026 and $0.5 million for fiscal 2025 . Additionally, we have a discretionary profit-sharing plan pursuant to Section 401 (k) of the Code, whereby we may contribute an additional percentage of compensation. Employees are not required to contribute to the plan to receive the discretionary profit-sharing contribution. We did not make any discretionary profit-sharing contributions in fiscal 2026 or in fiscal 2025 . We have a Cafeteria Plan pursuant to Section 125 of the Code, whereby health care benefits are provided for active employees through insurance companies. Substantially all active full-time employees are eligible for these benefits. We recognize the cost of providing these benefits by expensing the annual premiums, which are based on benefits paid during the year. The premiums expensed to results from operations for these benefits totaled $1.6 million for the fiscal year ended June 30, 202 …

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N. Segment Information Our business consists of two segments for financial reporting purposes. The two segments are identified as (i) private-label contract manufacturing, which primarily relates to the provision of private-label contract manufacturing services to companies that market and distribute nutritional supplements and other health care products, and (ii) patent and trademark licensing, which primarily includes direct raw material sales and royalty income from our license and supply agreements associated with the sale and use of beta-alanine under our CarnoSyn, SR CarnoSyn, CarnoSyn 4X, and TriBsyn trademarks. The chief operating decision maker is the Company's Chief Executive Officer, who, in conjunction with senior management, evaluates segment performance based on a number of factors. The primary performance measures for each segment are net sales and income or loss from operations before corporate allocations. Operating income or loss for each segment does not include corporate general and administrative expenses, interest expense and other miscellaneous income and expense items. Corporate general and administrative expenses include, but are not limited to human resources, corporate legal, finance, information technology, and other corporate level related expenses, which are not allocated to any segment. Transfers of raw materials between segments are recorded at cost. The accounting policies of our segments are the same as those described in the summary of signi …

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I. Stockholders' Equity Treasury Stock On September 18, 2020, the Board of Directors authorized a $2.0 million increase to our stock repurchase plan (Repurchase Plan), thus bringing the total authorized repurchase amount to $12.0 million. On March 12, 2021, the Board of Directors authorized an additional $3.0 million increase to the Repurchase Plan, thus bringing the total authorized repurchase amount to $15.0 million. On January 14, 2022, the Board of Directors authorized an additional $3.0 million increase to the Repurchase Plan, thus bringing the total authorized repurchase amount to $18.0 million. Under the Repurchase Plan, we may, from time to time, purchase shares of our common stock, depending upon market conditions, in open market or privately negotiated transactions. Our new Credit Agreement with Legacy currently prohibits most stock repurchases (see Note F). As a result, until that restriction is modified or removed, we do not intend to purchase our shares other than our longstanding practice of purchasing shares from our employees in exchange for paying the employees withholding tax requirements upon vesting of restricted stock held by the employee. Treasury Stock repurchases for the year ended June 30, 2026 were as follows: Shares Average Cost Total Cost (in thousands) Shares purchased under Repurchase Plan $ $ Shares acquired from employees for restricted stock vesting 32,006 2.76 88 Total 32,006 $ 88 Treasury Stock repurchases for the year ended June 30, 2025 we …

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O. Subsequent Events In August 2026, one of our largest private-label contract manufacturing customers informed us of a material downward revision in their forecast of projected orders and purchases from us during our fiscal year 2027 caused by growing inventory levels on their behalf. As a result, we made considerable changes to our forecast for fiscal year 2027. 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 . Consequently, we anticipate we will not be able to comply with the 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 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. After careful consideration of the Company's current financial position and strategic objectives, management has determined the sale of the manufacturing facility located in Carlsbad, California 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 …

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