Cyanotech Corp., a Kona-based producer of health dietary supplements from microalgae, swung to a loss of $1.4 million in the fourth quarter from a profit of $277,000 in the year-earlier period as sales dropped significantly.
Sales fell 33.7% in the fiscal quarter that ended March 31 to $5.4 million from $8.1 million in the year-earlier quarter.
The full year for fiscal 2023 showed a similar trend as the company posted a loss of $3.4 million compared with a profit of $2.2 million in fiscal 2022. Sales during that time frame declined 35.6% to $23.2 million from $36 million.
Cyanotech also reported in a 10-K regulatory filing with the U.S. Securities and Exchange Commission that its auditor, Grand Thornton LLP, has raised substantial doubt about the company’s ability to continue as “a going concern.” The filing showed that Cyanotech had a loss from operations resulting in net cash outflows from operating activities of $2.1 million for the year ended March 31, and that as of that date it was not in compliance with one of its debt covenants and may not be in compliance in future periods.
The lender, however, did provide a waiver of Cyanotech’s obligation to meet and maintain the covenant and implemented an immediate freeze on further advances of credit on the revolving credit agreement through the maturity date.
“Fiscal year 2023 was a challenging year as a result of a number of macroeconomic events and timing of sales,” Cyanotech President and CEO Matthew Custer said in a recent statement. “Consumers shifted their spend(ing) from goods to experiences and services. Lower sales in the bulk business were due in part to inventory adjustments after the global supply chain issues eased and lower sales in the e-commerce business were driven by a difference in strategy implemented by our third-party distributor.”
Custer said Cyanotech’s manufacturing operations produced consistent and high-quality algae, but the cost per kilo for spirulina in particular was a drag on the gross margin as the company reduced production volume that resulted in a higher cost per kilo to align with consumer demand.
In the fourth quarter, Custer said the company generated cash flow of $583,000 from operations as a result of the cash-saving initiatives that Cyanotech implemented in the second quarter, including slowing production and reducing head count.
“Despite the disappointing sales figures, I am hopeful for the future,” he said. “We are well positioned to meet customer needs in the growing market for naturally derived high value nutritional products.”
Cyanotech produces BioAstin, Hawaiian Astaxanthin and Hawaiian Spirulina Pacifica.
On June 15, Cyanotech received a letter from Nasdaq notifying the company that it had regained compliance to continue being listed on the exchange.
That followed a notification to Cyanotech by Nasdaq on May 2 that for the previous 30 consecutive business days the stock’s bid price had closed below the minimum $1 per share listing requirement. The company, which was facing potential delisting, had until Oct. 30 to regain compliance by having its bid price close at $1 or higher for 10 consecutive business days.
Since regaining listing compliance, however, the company’s stock has since fallen below $1, hitting a 52-week low of 80.5 cents on June 28. Cyanotech’s stock, which fell 2 cents to 83 cents on Wednesday, has been below $1 for the past five trading days.
FOURTH-QUARTER LOSS
$1.4 million
YEAR-EARLIER NET
$277,000
