Cyanotech Corporation

Aloha from Kona, Hawaii. Thank you for joining us today. I am Matt Custer, President and Chief Executive Officer of Cyanotech. 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 results to differ are listed in our publicly filed documents. For additional information, we encourage you to review our 10-Q and fiscal year 2022 10-K report filed with the Securities and Exchange Commission. I will turn it back to Matt for comments on the quarter. Matt?

Sales in the third quarter of 5,891,000 improved by 712,000, or 14%, compared to second quarter sales of 5,179,000, as we saw modest improvement in consumer movement on both finished goods and bulk sales. However, both of our online finished goods sales and our international bulk sales are still not performing to historical levels. On the international bulk sales, as the global supply chain issues eased, customers made adjustments to their inventory levels that impacted our sales. The inventory levels have improved but are still a headwind. We are focused on taking steps and making changes to improve these sales channels. The cash-saving initiatives that we implemented in the second quarter, including slowing production and reducing headcount, were not fully realized until late in the third quarter due to material lead times and payment terms. However, our working capital remains strong due to higher inventories that have long expiration dates. Now I'd like to turn the call over to Felicia to discuss the third quarter. Felicia, please.

Thank you, Matt, and good evening, everyone. Net sales for the third quarter of fiscal year 2023 were $5,891,000, compared to $9,459,000 for the third quarter of fiscal year 2022, a decrease of $3,568,000, or 38%, due to the reasons Matt mentioned. Gross profit for the third quarter of fiscal year 2023 was $1,764,000 with a gross profit margin of 29.9% compared to gross profit of $3,238,000 and a gross profit margin of 34.2% in the third quarter of fiscal year 2022. Gross profit as a percent of sales for the third quarter of fiscal year 2023 decreased by 4.3 percentage points compared to the same period last year as a result of higher cost per kilogram of astaxanthin and spirulina due to the impact of inflation on our underlying costs and lower production volumes, offset slightly by a reduction in cost based on the cost-saving initiatives we implemented. Operating loss for the third quarter was $404,000 compared to operating income of $508,000 last year, reflecting a decrease of $912,000 due to decreased sales and higher costs. Net loss for the current quarter was $598,000, or 10 cents per diluted share, compared to net income of $386,000, or 6 cents per diluted share in the prior year. The company had cash of $513,000 and working capital of $9.9 million as compared to $2.6 million and $11.4 million, respectively, as of March 31, 2022. I'll hand the call back to Matt for concluding comments. Matt?

We had a question from shareholders and investors, which we will now address. In the Q2 filing, an operating plan to produce cash flow requirements was mentioned. Can you please discuss the plan, its current status, and any changes to the plan going forward? We have implemented a number of cash-saving initiatives starting in Q3 of the current fiscal year. We have stopped or slowed production of inventory in alignment with current customer demand, reduced headcount primarily through attrition, and implemented furloughs for certain employees. We have also eliminated some discretionary selling, general, and administrative expenses. Thank you for attending the call. Aloha.