Cyanotech Corporation

Aloha from Kona, Hawaii. Thank you all for joining us today on the earnings call for Sanitech Corporation. We are pleased to report Sanitech's third quarter fiscal year 2019 earnings results. On the call today, you have myself, Maui Morton, Chief Executive Officer for Sanitech Corporation and Nutrix Hawaii, and Mr. Brian Hall, our new Chief Financial Officer. I'd like to start the earnings calls with our corporate mission statement, which is fulfilling the promise of whole power through Hawaiian microalgae. So at this stage, I'm pleased to introduce our new Chief Financial Officer, Mr. Brian Olaf, who will make a safe how-to statement.

Thank you, Mawai. Let me start by saying our discussion today may include forward-looking statements. We do not undertake any obligation to update forward-looking statements either as a result of new information, future events, or otherwise. Our actual results may differ materially from what is described in these forward-looking statements. Some of the factors that may cause results to differ are listed in our publicly filed documents. For additional information, we encourage you to review our 10Q and 10K filings with the Security and Exchange Commission.

Thank you, Brian. Before I ask Brian to review our financial results for the third quarter, I would like to point out the third quarter achieved record sales for an individual quarter. by achieving over $10 million in net sales, a $894,000 improvement from a year ago. While we are encouraged by the record sales numbers for the quarter, we remain unsatisfied with current profit margins and will continue to focus on improving both margin and profitability going forward. Since we did not receive any questions from shareholders regarding the quarter through filing, I will conclude the call with a brief statement after Brian shares the financial results.

Thanks Moai. Now let's go through the results for the third quarter. As mentioned, total revenues for the quarter increased $894,000 or 9.8% as compared to the prior year period, with $658,000 due to increased spirulina sales, a 21.3% increase. Prior year quarter sales were previously constrained by limited product availability. Astaxanthin sales increased as well, $236,000, or 9%, as compared to the same quarter last year. Included in the astaxanthin sales is a $1.2 million increase in sales to Amazon and Costco, partially offset by a decrease in international sales of $700,000. Despite the sales increase, gross profit was $4.12 million, down $124,000 from the same quarter last year. Gross profit as a percentage of sales was 41% as compared to the same period last year of 46.3%, a decrease of 5.3%. This is primarily due to higher astaxanthin cost as a result of lower production of 18% as compared with the third quarter of fiscal 2018. Operating expenses increased $471,000 from the same period of the prior year, primarily attributable to higher advertising and promotional costs. General and administrative expenses remained consistent with the same time period of the prior year. Net income was $288,000 for the quarter versus $1.1 million for the same quarter last year. Diluted earnings were 5 cents in the current quarter compared to 19 cents per share in the prior year. Now back to Maura.

Thanks, Brian. Although we did not receive any questions from shareholders, I would like to take this opportunity to share a few concluding comments. We are pleased with our most recent quarterly sales performance, which reflects positively on our efforts during the past year. While the quarter's profitability is unsatisfactory, we are pleased with the quarter-over-quarter improvement in the top-line numbers. I do want to also reiterate that the unpredictable nature of agriculture will always present challenges for production here on the farm but we remain committed to improving stability of supply to support our farm to bottle value proposition we will continue to improve our cultivation techniques and technologies and remain committed to deepening our brand awareness in the consumer market we will also continue to explore potential new revenue opportunities including leveraging our unique supercritical extraction capacity and expertise to perform extraction services for other companies. With improved profitability, the company will be better positioned to self-fund the various opportunities for growth that we foresee in both the immediate future and the longer term. We thank you all for joining the call today. Aloha.