Cyanotech Corporation

Aloha from Kona, Hawaii. Thank you all for joining us today. We are pleased to report Cyanotech's second quarter fiscal year 2020 earnings results. I'm Jerry Sususki, Chief Executive Officer for Cyanotech and Nutrex. At this stage, I would like to introduce our new Chief Financial Officer, Brian Orlopp, who will make a safe harbor statement and review our financial results for the second quarter. We will respond to questions after Brian shares the quarter two results.

Thank you, Jerry. 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 Brian discusses the details of the quarter, I would like to point out that the second quarter of fiscal year 2020 achieved net sales of $7.7 million as compared to $7 million the same period last year, a $700,000 improvement from a year ago.

Thanks, Jerry. Now let's go through the results for the second quarter. As mentioned, total revenues for the quarter increased $736,000, or 10.6%, as compared to the prior year period, with $460,000 due to increased Athos Anthem sales of 10%, driven primarily from our successful Bounty Harvest sales promotion program earlier this quarter. Spirulina sales were up 5% from the same period last year. as sales were previously constrained by limited product availability. Other revenue sources include third-party extraction services of $140,000. Gross profit as a percentage of sales was 39.8% as compared to the same period last year of 32.9%, an increase of 6.9%. This is due primarily to improvements in production costs for both spirulina and astaxanthin for the current year compared to excessive prior year costs. Operating expenses decreased $635,000 from the same period of the prior year, primarily due to strategic cost initiatives, including lower promotional and market spending. Research and development expenses remained relatively consistent with the same time period of the prior year. Net income was $228,000 for the quarter versus a loss of $1.1 million for the same quarter last year, a direct result of improved sales and lower cost structure noted earlier. Diluted earnings were $0.04 in the current quarter compared to a loss of $0.20 per share in the prior year. As of September 30, 2019, the company had cash of $1.1 million and working capital of $7.3 million, as compared to $840,000 and $5.1 million, respectively, as of March 31, 2019. On August 30th, 2019, Cyanotech renewed its revolving credit agreement with the First Foundation Bank. This credit agreement allows us to borrow up to $2 million on a revolving basis. As of September 30th, 2019 and March 31st, 2019, the company has outstanding borrowings of $2 million on the line of credit. This line of credit is subject to renewal on August 30th, 2020. Now back to Jerry.

Since we did not receive any questions from investors or shareholders I would like to take this opportunity for concluding comments. Thank you very much. Accordingly, our Q2 net income has improved $1.4 million versus the same time period in the prior year, and on a six-months ended, a $2.5 million improvement versus last year. Our balance sheet stands stronger today as well. While we still face headwinds from competitor spirulina organic growth and the ongoing China-USA trade disputes affecting our international sales, we remain upbeat with the quarter-over-quarter improvements in our farms and earnings. Cyanotech has taken and will continue to take a proactive and disciplined approach addressing our challenges. The fundamental nature of agriculture and our competitor field will always present challenges, but will continue to be resolute in our path forward. our strategic focus remains committed to leveraging our quality reputation for global brand awareness and market penetration, sustainability of our production volume levels for both Astaxanthin and Spirulina, and continuing to support initiatives that advance our economic return in productivity and asset utilization. We thank you for joining the call today. Aloha!