10-Q: NAI Secures $31M Credit Facility

Natural Alternatives International, Inc. has entered into a new $31 million Loan and Security Agreement with Legacy Corporate Lending, LLC, replacing its previous credit facility with Wells Fargo.

Summary

• Natural Alternatives International, Inc. (NAI) has entered into a new Loan and Security Agreement with Legacy Corporate Lending, LLC, dated May 18, 2026.
• This new credit facility provides a term loan of $11 million and a working capital line of credit with a maximum capacity of $20 million.
• The new facility replaces NAI's previous credit line and term note with Wells Fargo Bank, N.A.
• The new credit facility is secured by all of NAI's domestic assets.
• The line of credit will bear interest at a rate of 4.5% above SOFR, and the term loan will initially bear interest at 14.0% above SOFR, reverting to 5.0% above SOFR after appraisal and documentation completion.
• The credit facility includes a 0.50% unused commitment fee and a 1.0% one-time closing fee.
• The term of the new credit facility is three years.
• A new financial covenant, the Fixed Charge Coverage Ratio, will be measured based on domestic operations only, starting September 30, 2026.
• NAI has repaid all prior indebtedness with Wells Fargo, terminating its previous credit line and term note.
• NAI also settled its remaining foreign currency hedge contracts, resulting in a $0.2 million loss, and terminated its hedging credit line with Wells Fargo, while seeking a replacement.

Sentiment

Score: 3

Explanation: StockSavvy.ai views this filing as cautiously negative due to the reported net losses and decreased gross profit margins, despite the positive development of securing a new credit facility.

Positives

• Secured a new $31 million credit facility, providing significant liquidity and refinancing existing debt.
• The new credit facility offers a three-year term, providing a stable financing runway.
• The company has successfully refinanced its debt with Wells Fargo, simplifying its financial structure.
• NAI is actively seeking a replacement for its terminated foreign currency hedging line of credit.

Negatives

• The company experienced a net loss of $4.311 million in the three months ended March 31, 2026, and $7.155 million in the nine months ended March 31, 2026.
• Gross profit margin decreased significantly in the three months ended March 31, 2026, primarily due to an unfavorable shift in product sales mix.
• Selling, general, and administrative expenses increased due to higher headcount and increased marketing for new products.
• The company has a valuation allowance against its net domestic deferred income tax assets due to recent losses in U.S. operations.
• NAI is facing potential impacts from geopolitical events and government trade tariffs, which could affect raw material availability and product costs.

Risks

• The company's financial performance is heavily reliant on a few large private-label contract manufacturing customers.
• A significant portion of revenue is derived from patent and trademark licensing, which decreased in the nine months ended March 31, 2026.
• The company sources key raw materials, like beta-alanine, from a limited number of suppliers, posing a risk if these suppliers are lost.
• Geopolitical events and trade tariffs could impact raw material availability, costs, and customer demand.
• The company is involved in a putative class action and PAGA action lawsuit with a tentative settlement of $1.25 million, which requires court approval.
• The IRS has questioned NAI's eligibility for the Employee Retention Tax Credit for the third quarter of 2021, although NAI believes it qualifies.

Future Outlook

The company anticipates increased sales revenue for the fourth quarter of fiscal 2026 compared to the prior year's fourth quarter and the current fiscal year's third quarter. However, it also expects to incur a net loss for the fourth quarter and for the full fiscal year 2026. Management believes the new credit facility, combined with existing cash and potential cash flows, will be sufficient to fund working capital and capital expenditures for at least the next 12 months.

Management Comments

• We believe TriBsyn and its patent-pending formulation will allow us to better penetrate the Wellness and Healthy Aging channel.
• 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 and patent pending products.
• Management believes unlocking the capital currently held in the headquarters facility will allow the Company to redeploy those proceeds toward new initiatives, fund working capital needs, and better position the Company for sustainable growth.

Industry Context

StockSavvy.ai notes that NAI's focus on expanding its beta-alanine product lines (CarnoSyn, SR CarnoSyn, CarnoSyn 4X, and TriBsyn) into Sports Nutrition, Wellness, Healthy Aging, and Medical food channels aligns with broader industry trends towards specialized nutritional ingredients and health-focused products. The company's strategy to diversify its customer base in private-label contract manufacturing is also a common approach in the industry to mitigate concentration risk.

Legal Proceedings

• A putative class action and California Private Attorney General Act action filed by three former employees seeking awards for similarly situated employees, with a tentative settlement of $1.25 million requiring court approval.

Stakeholder Impact

• Shareholders may be impacted by the continued net losses and the potential sale of the corporate headquarters building.
• Creditors (Wells Fargo) have been fully repaid, and a new credit facility has been established with Legacy Corporate Lending, LLC.
• Suppliers of raw materials, particularly beta-alanine, may be affected by trade tariffs and geopolitical events.
• Customers may face increased product costs due to tariffs passed through by NAI.

Next Steps

• Complete appraisal and documentation for the term loan to adjust the interest rate.
• Seek a replacement foreign currency hedging credit line.
• Continue sales and marketing efforts for CarnoSyn, SR CarnoSyn, CarnoSyn 4X, and TriBsyn beta-alanine products.
• Focus on improving operational efficiencies and managing costs to enhance profitability.
• Relocate personnel and systems from the corporate headquarters to other California properties.
• Pursue the sale of the company's corporate headquarters building.

Key Dates

Recommendation

While the new credit facility provides necessary liquidity and refinances existing debt, the company continues to report net losses and declining gross profit margins. The ongoing legal proceedings and potential impacts from geopolitical events and tariffs add further uncertainty. The company's ability to improve profitability and diversify its customer base will be key factors for future performance. Therefore, a 'hold' recommendation is appropriate pending signs of operational improvement and stabilization.

Keywords

Loan and Security Agreement, Credit Facility, Natural Alternatives International, Legacy Corporate Lending, Wells Fargo, Refinancing, Term Loan, Line of Credit, SOFR, Fixed Charge Coverage Ratio, Debt, Working Capital