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 10Q and fiscal year 2023 10K report filed with the Securities and Exchange Commission. I will turn it back to Matt for comments on the quarter. Matt?

The sales in the quarter are trending in the right direction with a 23.1% increase versus prior year. We generated cash flow from operations in the quarter of $0.8 million as we managed our spend in line with customer demand. We continue to focus on driving demand in the naturally derived algae space with existing and new customers as they prioritize transparency and sustainability in functional health. Our naturally farmed microalgae from our location in Hawaii with pristine waters and natural sourcing practices aligns with rising consumer objectives and growing demand for responsible, sustainable products. 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.

Net sales for the second quarter of fiscal 2024 were $6,373,000 compared to $5,179,000 for the second quarter of fiscal 2023. As Matt mentioned, this is a 23.1% increase over prior year. Gross profit for the second quarter of fiscal 2024 was $2,088,000, with a gross profit margin of 32.8%, compared to a gross profit of $1,790,000 and a gross profit margin of 34.6% in the second quarter of fiscal 2023. Gross profit as a percentage of net sales for the second quarter of fiscal 2024 was decreased by 1.8 percentage points compared to the same period last year as a result of higher costs due to lower production volumes related to lower sales. The second quarter operating loss of $632,000 was $205,000 lower than prior year operating loss of $837,000, reflecting higher sales in the current fiscal quarter. Net loss for the current quarter was $797,000, or 13 cents per diluted share, compared to net loss of $940,000, or 15 cents per diluted share, in the prior year. The company had cash of $1,236,000 and working capital of $4 million, as compared to $1 million and $5.4 million, respectively, as of March 31, 2023. Lower working capital is attributed to predominantly lower inventory as we're managing our purchases and production in line with customer demand.

I'll hand the call back to Matt to answer a few investor questions. Matt?

We received two questions this quarter.

Question one, is there a strategy to try to expand distribution channels for Astaxanthin and Bilastin? In August, the company created the new position of Chief Commercial Officer and was pleased to hire Colette Kukuk to assume that position. In her role, Colette is focused on improving the marketing, presentation, and sales within the extensive channels where we are already active. Look for new and clearer messaging, both text and image, in our public-facing materials online and in stores. Additionally, she is exploring potential opportunities in the pet food and supplement space. Question two, how likely is it that we will have a reverse split of our stock to maintain NASDAQ listing? The company is evaluating all options in the best interest of the shareholders. Thank you for attending the call. Aloha.