Cyanotech(CYAN) - 2023 Q2 - Quarterly Report

Financial Performance - Net sales for the three months ended September 30, 2022, were $5,179,000, a decrease of 45.0% compared to $9,419,000 for the same period in 2021[19] - Gross profit for the three months ended September 30, 2022, was $1,790,000, down 52.5% from $3,762,000 in the prior year[19] - The net loss for the three months ended September 30, 2022, was $(940,000), compared to a net income of $970,000 for the same period in 2021[19] - Basic net loss per share for the three months ended September 30, 2022, was $(0.15), compared to $0.16 for the same period in 2021[19] - The company reported a net loss of $1,412,000 for the six months ended September 30, 2022, compared to a net income of $1,491,000 for the same period in 2021[27] - Total net sales decreased to $5,179,000 for the six months ended September 30, 2022, down from $9,419,000 in the same period of 2021, representing a decline of approximately 45%[50] Assets and Liabilities - Total current assets decreased to $14,941,000 as of September 30, 2022, from $16,264,000 as of March 31, 2022, representing a decline of 8.1%[15] - Total liabilities decreased to $12,067,000 as of September 30, 2022, from $12,558,000 as of March 31, 2022, a reduction of 3.9%[15] - Total stockholders' equity as of September 30, 2022, was $18,286,000, down from $19,487,000 as of March 31, 2022, a decrease of 6.2%[15] - Cash and cash equivalents decreased significantly from $2,589,000 as of March 31, 2022, to $379,000 as of September 30, 2022, a decline of 85.3%[15] - The company had $3,588,000 in long-term debt as of September 30, 2022, with principal payments required monthly through August 2032[34] - The company’s line of credit outstanding balance was $1,300,000 as of September 30, 2022, compared to $0 at March 31, 2022[61] Operating Expenses - Operating expenses for the three months ended September 30, 2022, totaled $2,627,000, a slight decrease of 2.0% from $2,680,000 in the prior year[19] - Operating expenses for the three months ended September 30, 2022, were $2,627,000, accounting for 50.7% of net sales, compared to 28.5% in the prior year[104] - Operating expenses decreased by $0.1 million, or 2.0%, primarily due to lower incentive compensation expenses resulting from a net operating loss in the current quarter[107] - Operating expenses decreased by $0.4 million, or 6.3%, primarily due to lower advertising costs and incentive compensation[112] Sales and Revenue - One customer accounted for 48% of the company's total net sales for the three months ended September 30, 2022, indicating a high customer concentration risk[45] - The company recognized $91,000 in revenue from customer deposits during the six months ended September 30, 2022, compared to $49,000 in the same period of 2021[48] - Packaged sales of Astaxanthin decreased by 28.9% to $2,854,000, while Spirulina packaged sales fell by 40.9% to $1,061,000 for the three months ended September 30, 2022[105] - Bulk sales of Astaxanthin decreased by 34.6% to $333,000, and Spirulina bulk sales dropped by 73.7% to $784,000 for the same period[105] - Total packaged sales decreased by 28.9% to $8.951 million in September 2022 from $12.592 million in September 2021[110] - Total bulk sales decreased by 50.7% to $2.704 million in September 2022 from $5.483 million in September 2021[110] Cash Flow - Cash flows from operating activities showed a net cash used of $2,460,000 for the six months ended September 30, 2022, compared to a net cash provided of $426,000 in the prior year[27] - The company drew $1,300,000 on its line of credit during the second quarter of fiscal 2023 to address cash flow challenges[36] - Cash used in operating activities was $(2.460) million for the six months ended September 30, 2022, compared to $0.426 million in the same period last year[120] Tax and Compliance - The Company recorded an income tax expense of $3,000 for the six months ended September 30, 2022, compared to $14,000 for the same period in 2021[89] - The effective tax rate for the three months ended September 30, 2022, was 0%, compared to 1.1% for the same period in 2021[89] - The company has filed certifications of its CEO and CFO as required by the Sarbanes-Oxley Act, ensuring compliance with financial reporting standards[156] Internal Controls - The company's management evaluated the effectiveness of its disclosure controls and procedures, concluding they are effective as of the end of the reporting period[139] - The internal control over financial reporting was assessed as effective as of September 30, 2022, based on the 2013 Framework by the Committee of Sponsoring Organizations of the Treadway Commission[140] - There were no changes in internal control over financial reporting during the six months ended September 30, 2022, that materially affected its effectiveness[141] - Management acknowledges that disclosure controls and internal controls cannot prevent all errors and fraud, providing only reasonable assurance[142] - The inherent limitations of the control system include potential faulty judgments and the possibility of errors or fraud not being detected[143] Legal and Regulatory - No significant legal matters were outstanding as of September 30, 2022, indicating a stable legal environment for the company[146] - The company has not engaged in any unregistered sales of equity securities during the reporting period[148] - There were no defaults upon senior securities reported during the period[149] Future Outlook - Future gross profit margins may be impacted by lower production volumes and increased competition in the market[129] - The company plans to focus on higher margin consumer products while exploring opportunities for bulk sales orders domestically and internationally[128]