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Note A - Basis of Presentation and Summary of Significant Accounting Policies | 6 Months Ended
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Dec. 31, 2020
Notes to Financial Statements |
Organization, Consolidation and Presentation of Financial Statements Disclosure and Significant Accounting Policies [Text Block] | A. Basis of Presentation and Summary of Significant Accounting Policies The accompanying interim unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10 -Q and with applicable rules and regulations. Pursuant to such rules and regulations, certain information and note disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (U.S. GAAP) have been condensed or omitted. In management's opinion, all adjustments necessary for a fair presentation of the financial position, results of operations, stockholders' equity, and cash flows have been included and are of a normal, recurring nature. The results of operations for the six months ended December 31, 2020 are not necessarily indicative of the operating results for the full fiscal year or for any future periods. You should read the financial statements and these notes, which notes are an integral part of the financial statements, together with our audited financial statements included in our Annual Report on Form 10 -K for the fiscal year ended June 30, 2020 ( “2020 Annual Report”). The accounting policies used to prepare the financial statements included in this Report are the same policies described in the notes to the consolidated financial statements in our 2020 Annual Report unless otherwise noted below. Recently Adopted Accounting Pronouncements We did not adopt any accounting pronouncements during the three or six months ended December 31, 2020. Recently Issued Accounting and Regulatory Pronouncements In November 2020, the SEC issued Release No. 33 - 10825, Modernization of Regulation S-K Items 101, 103, and 105, which release amends and clarifies certain of our financial reporting requirements. This release will primarily impact risk factor disclosures in our future Annual Reports. Other recently issued accounting pronouncements are not discussed in this Report as such pronouncements did not have, and are not believed by management to have, a material impact on our present or future financial statements. Net Income per Common Share We compute net income per common share using the weighted average number of common shares outstanding during the period, and diluted net income per common share using the additional dilutive effect of all dilutive securities. The dilutive impact of stock options and unvested restricted shares account for the additional weighted average shares of common stock outstanding for our diluted net income per common share computation. We calculated basic and diluted net income per common share as follows (in thousands, except per share data):
|  | Three Months Ended |  |  | Six Months Ended |
|  | December 31, |  |  | December 31, |
|  | 2020 |  |  | 2019 |  |  | 2020 |  |  | 2019 |
Numerator |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net income |  | $ | 3,632 |  |  | $ | 476 |  |  | $ | 5,890 |  |  | $ | 572 |
Denominator |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Basic weighted average common shares outstanding |  |  | 6,270 |  |  |  | 6,795 |  |  |  | 6,344 |  |  |  | 6,818 |
Dilutive effect of stock options and restricted stock |  |  | 135 |  |  |  | 91 |  |  |  | 94 |  |  |  | 117 |
Diluted weighted average common shares outstanding |  |  | 6,405 |  |  |  | 6,886 |  |  |  | 6,438 |  |  |  | 6,935 |
Basic net income per common share |  | $ | 0.58 |  |  | $ | 0.07 |  |  | $ | 0.93 |  |  | $ | 0.08 |
Diluted net income per common share |  | $ | 0.57 |  |  | $ | 0.07 |  |  | $ | 0.91 |  |  | $ | 0.08 |
We did not exclude any stock options or restricted stock shares for the three months ended December 31, 2020. During the six months ended December 31, 2020 we excluded shares relating to stock options totaling 90,000 and 116,658 shares of unvested restricted stock, as their impact would have been anti-dilutive. We did not exclude any stock options or restricted stock shares for the three or six months ended December 31, 2019 as none would have had an anti-dilutive impact. Revenue Recognition We record revenue based on a five -step model that includes: ( 1 ) identifying a contract with a customer; ( 2 ) identifying the performance obligations in that contract; ( 3 ) determining the total transaction price; ( 4 ) allocating that transaction price among the performance obligations; and ( 5 ) recognizing revenue as each of the various performance obligations are satisfied. Revenue is measured as the net amount of consideration expected to be received in exchange for fulfilling one or more performance obligations. We identify purchase orders from customers as contracts. The amount of consideration expected to be received, and thus revenue recognized, includes estimates of variable consideration, including estimates for early payment discounts and volume rebates. Such estimates are calculated using historical averages, adjusted for any expected changes due to current business conditions and experience. We review and update these estimates at the end of each reporting period and the impact of any adjustments is recognized in the period those adjustments are identified. In assessing whether collection of consideration from a customer is probable, we consider both the customer's ability and intent to pay that amount of consideration when it is due. Payment of invoices is due as specified in the underlying customer contracts, which is typically 30 days from the invoice date. Invoices are generally issued on the date of transfer of control of the products ordered to the customer. Revenue is recognized at the point in time that each of our performance obligations is fulfilled, and control of ordered products is transferred to the customer. This transfer occurs when the product is shipped, or in some cases, when the product is delivered to the customer. We provide early payment discounts to certain customers. Based on historical payment trends, we expect that these customers will continue to take advantage of these early payment discounts. The cost of these discounts is reported as a reduction to the transaction price of customer contracts. If the actual discounts differ from those estimated, the difference is also reported as a change in the transaction price. Except for product defects, no right of return exists on the sale of our products. We estimate returns based on historical experience and recognize a returns liability for any estimated returns. As of December 31, 2020, we have no liability recorded for estimated returns of products. We have an Exclusive Manufacturing Agreement with Juice Plus+, as amended and restated on March 31, 2019, ( the "JP Agreement”). Pursuant to the JP Agreement, Juice Plus+ has granted us exclusive rights to manufacture and supply them with certain of their products within 24 countries where Juice Plus+ currently sells those products. The JP Agreement is effective through August 6, 2025. As part of the JP Agreement, we provide Juice Plus+ a cash discount that is amortized ratably over the remaining life of the JP Agreement based on the full value of the cash discount expected to be given over the same period. We recorded $0.4 million of cash sales discount during the three months ended December 31, 2020 and $0.8 million during the six months ended December 31, 2020. We recorded $0.4 million of cash sales discount during the three months ended December 31, 2019 and $0.8 million for the six months ended December 31, 2019. We currently own certain U.S. patents, and each such patent's corresponding foreign patent applications. All of these patents and patent rights relate to the ingredient known as “beta-alanine”, which we market and sell under our CarnoSyn® and SR CarnoSyn® trade names. We recorded beta-alanine raw material sales and royalty and licensing income as a component of revenue in the amount of $2.8 million during the three months ended December 31, 2020 and $5.4 million during the six months ended December 31, 2020. We similarly recorded $4.3 million during the three months ended December 31, 2019 and $7.5 million during the six months ended December 31, 2019. These royalty income and raw material sale amounts resulted in royalty expense paid to the original patent holders from whom NAI acquired its patents and patent rights. We recognized royalty expense as a component of cost of goods sold in the amount of $0.1 million during the three months ended December 31, 2020 and $0.3 million during the six months ended December 31, 2020. We recorded $0.2 million during the three months ended December 31, 2019 and $0.4 million during the six months ended December 31, 2019. Stock-Based Compensation We had an omnibus equity incentive plan that was approved by our Board of Directors effective October 15, 2009 and approved by our stockholders at the Annual Meeting of Stockholders held on November 30, 2009 ( "2009 Plan"). The 2009 Plan expired on October 15, 2019. The Board of Directors approved a new omnibus equity incentive plan to be effective January 1, 2021 ( “2020 Plan”), which was approved by our stockholders at the Annual Meeting of Stockholders on December 4, 2020. Under the 2020 Plan, we may grant nonqualified and incentive stock options, restricted stock grants, restricted stock units, stock appreciation rights, and other stock-based awards to employees, non-employee directors and consultants. We did not grant any options during each of the three or six month periods ended December 31, 2020 and December 31, 2019. All remaining outstanding stock options are fully vested. During the three and six months ended December 31, 2020, 100,000 stock options were exercised. These exercises were cashless net exercises resulting in the issuance of 30,442 shares. No options were exercised during the three and six month period ended December 31, 2019. There were no option forfeitures during the three or six month periods ended December 31, 2020 or December 31, 2019. We did not grant any restricted stock shares during the three or six months ended December 31, 2020. During the three and six months ended December 31, 2019, we granted 5,000 shares of restricted stock shares to a new member of our management team. No restricted stock shares were forfeited during the three or six months ended December 31, 2020. During the three months ended December 31, 2019, there were no restricted stock forfeitures. During the six months ended December 31, 2019, 15,000 restricted stock shares were forfeited. Our net income included stock based compensation expense in connection with prior restricted stock grants of approximately $0.3 million for the three months ended December 31, 2020 and $0.7 million for the six months ended December 31, 2020. Our net income included stock based compensation expense of approximately $0.5 million for the three months ended December 31, 2019, and $0.9 million for the six months ended December 31, 2019. Deferred Compensation Plan Effective July 16, 2020, the Board of Directors approved and adopted a Non-Qualified Incentive Plan (the “Incentive Plan”). Pursuant to the Incentive Plan, the Human Resources Committee and the Board of Directors may make deferred cash payments or other cash awards (“Awards”) to directors, officers, employees and eligible consultants of NAI (“Participants”). These Awards are made subject to conditions precedent that must be met before NAI is obligated to make the payment. The purpose of the Incentive Plan is to enhance the long-term stockholder value of NAI by providing the Human Resources Committee and the Board of Directors the ability to make deferred cash payments or other cash awards to encourage Participants to serve NAI or to remain in the service of NAI, or to assist NAI to achieve results determined by the Human Resources Committee or the Board of Directors to be in NAI's best interest. The Incentive Plan authorizes the Human Resources Committee or the Board of Directors to grant to, and administer, unsecured and deferred cash Awards to Participants and to subject each Award to whatever conditions are determined appropriate by the Human Resources Committee or the Board of Directors. The terms of each Award, including the amount and any conditions that must be met to be entitled to payment of the Award are set forth in an Award Agreement between each Participant and NAI. The Incentive Plan provides the Board of Directors with the discretion to set aside assets to fund the Incentive Plan although that has not been done to date. On July 16, 2020, deferred cash awards of $1.0 million were granted to various officers, directors and employees of NAI pursuant to the Incentive Plan, each providing for three equal cash payments to the applicable Participant to be paid on the one year, and two year, and three year anniversary of the date of the grant of such Award (the “Award Date”); provided that, on the date of each payment (the “Payment Date”), the Participant has been since Award Date, and continues to be through the Payment Date, a member of our Board of Directors or an employee of NAI. In the event a Participant ceases to be an employee of NAI or a member of our Board of Directors prior to any Payment Date, no further payments shall be made in connection with the Award. Fair Value of Financial Instruments Except for cash and cash equivalents, as of December 31, 2020 and June 30, 2020, we did not have any financial assets or liabilities classified as Level 1. We classify derivative forward exchange contracts as Level 2 assets and liabilities. The fair value of our forward exchange contracts as of December 31, 2020 was a net liability of $3.6 million. The fair values were determined by obtaining pricing from our bank and corroborating those values with a third party bank. We also classify our outstanding line of credit balance as a Level 2 liability, as the fair value is based on inputs that can be derived from information available in publicly quoted markets. As of December 31, 2020, and June 30, 2020, we did not have any financial assets or liabilities classified as Level 3. We did not transfer any assets or liabilities between levels during the three and six months ended December 31, 2020 or the three and six months ended December 31, 2019. COVID- 19 Pandemic We continue to monitor and evaluate the risks to public health and the impact on overall global business activity related to the COVID- 19 pandemic, including its potential impacts on our employees, customers, suppliers and financial results. As the situation remains fluid, it is difficult to predict the duration and scope of the pandemic and its impact on our business. However, it may result in a material adverse impact to our financial position, operations and cash flows if conditions persist or worsen.

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- Definition The entire disclosure for the organization, consolidation and basis of presentation of financial statements disclosure, and significant accounting policies of the reporting entity. May be provided in more than one note to the financial statements, as long as users are provided with an understanding of (1) the significant judgments and assumptions made by an enterprise in determining whether it must consolidate a VIE and/or disclose information about its involvement with a VIE, (2) the nature of restrictions on a consolidated VIE's assets reported by an enterprise in its statement of financial position, including the carrying amounts of such assets, (3) the nature of, and changes in, the risks associated with an enterprise's involvement with the VIE, and (4) how an enterprise's involvement with the VIE affects the enterprise's financial position, financial performance, and cash flows. Describes procedure if disclosures are provided in more than one note to the financial statements. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -URI http://asc.fasb.org/topic&trid=2122149 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 810 -URI http://asc.fasb.org/topic&trid=2197479 Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -URI http://asc.fasb.org/topic&trid=2122369 Reference 4: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 275 -URI http://asc.fasb.org/topic&trid=2134479 + Details
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