Cyanotech Corporation

Aloha from Kona, Hawaii. Thank you for joining us today. I am Matt Custer, President and Chief Executive Officer of Sinotech. Joining me on the call today is Felicia Layden, our Chief Financial Officer. I will turn the call over to Felicia to provide our forward-looking statement.

Thanks, Matt. 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 the results to differ are listed in our publicly filed documents. For additional information, we encourage you to review our 10Q and Fiscal Year 2022 10K report filed with the Securities and Exchange Commission. I will turn it back to Matt for comments on the quarter. Matt?

Q2 of 23 was a disappointing quarter. Our net sales of $5,179,000 were lower than the second quarter in fiscal year 22 by 45% due to a confluence of events, including the increased U.S. dollar exchange rate. affecting international sales, lower sales in the bulk business, primarily in Asia, due in part to inventory adjustments after the global supply chain issues eased and sales in e-commerce business due to timing of orders. Consumer movement this quarter is not fully reflected in the retail numbers because of these drivers. Our manufacturing operations were steady and on course with consistent spirulina and record astaxanthin cultivation. The reduction in sales reduced working capital by only $354,000, with an increase in debt of $239,000 compared to the same quarter in the prior fiscal year. We did draw $1.3 million on our revolver from First Foundation Bank. The company has been through challenging times before that have provided a roadmap to reduce our spend, control our inventory, and protect our working capital. As sales slowed, we took steps to address our cost structure, and we are also initiating renewed focus on our sales and marketing function. These steps, I believe, will position us for success when our sales normalize. Now I'd like to turn over the call to Felicia to discuss the second quarter. Felicia, please.

Thank you, Matt, and good evening, everyone. As Matt said, net sales for the second quarter of fiscal 2023 were $5,179,000 compared to $9,419,000 for the second quarter of fiscal year 2022. Gross profit for the second quarter of fiscal 2023 was $1,790,000, with a gross profit margin of 34.6%, compared to gross profit of $3,762,000 and a gross profit margin of 39.9% in the second quarter of fiscal year 2022. Gross profit as a percentage of sales for the second quarter of fiscal year 2023 decreased by 5.3 percentage points compared to the same period last year as a result of higher costs per kilogram of astaxanthin and spirulina due to the impact of inflation on our underlying costs. Our operating loss for the second quarter was $837,000 compared to operating income of $1,082,000 last year, reflecting a decrease of $1,919,000 due to decreased sales and higher costs. Net loss for the current quarter was $940,000, or 15 cents per diluted share, compared to net income of $970,000, or 16 cents per diluted share, in the prior year. The company had cash of $379,000 and working capital of $10.4 million, as compared to $2.6 million and $11.4 million, respectively, as of March 31, 2022. I will hand the call back to Matt for concluding comments. Matt?

We have not had any questions. Thank you for attending the call. Aloha.