cyan20240930

cyan20240930_10q.htm

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒

Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For Quarterly Period Ended September 30, 2024

☐

Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Transition Period From to

Commission File Number 0-14602

CYANOTECH CORPORATION

(Exact name of registrant as specified in its charter)

Nevada	91-1206026
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification Number)

73-4460 Queen Kaahumanu Hwy. #102, Kailua-Kona, HI 96740

(Address of principal executive offices)

(808) 326-1353

(Registrant’s telephone number)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act: None

Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.:

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☒	Smaller reporting company ☒
	Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November 1, 2024, the number of shares outstanding of the registrant’s common stock was 7,155,858.

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Report and other presentations made by Cyanotech Corporation (“CYAN”) and its subsidiary contain “forward-looking statements,” which include statements that are predictive in nature, depend upon or refer to future events or conditions, and usually include words such as “expects,” “anticipates,” “intends,” “plan,” “believes,” “predicts”, “estimates” or similar expressions. In addition, any statement concerning future financial performance, ongoing business strategies or prospects and possible future actions are also forward-looking statements. Forward-looking statements are based upon current expectations and projections about future events and are subject to risks, uncertainties and the accuracy of assumptions concerning CYAN and its subsidiary (collectively, the “Company”), the performance of the industry in which CYAN does business, and economic and market factors, among other things. These forward-looking statements are not guarantees of future performance. You should not place undue reliance on forward-looking statements.

Forward-looking statements speak only as of the date of the Report, presentation or filing in which they are made. Except to the extent required by the Federal Securities Laws, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Our forward-looking statements in this Report include, but are not limited to:

●

Statements relating to our business strategy;

●

Statements relating to our business objectives; and

●

Expectations concerning future operations, profitability, liquidity and financial resources.

These forward-looking statements are subject to risk, uncertainties and assumptions about us and our operations that are subject to change based on various important factors, some of which are beyond our control, including those factors described in Item 2 of Part I of this quarterly report and in Item 1A of Part I of the Company’s Annual Report on Form 10-K filed on June 26, 2024. Additionally, the following factors, among others, could cause our financial performance to differ significantly from the goals, plans, objectives, intentions and expectations expressed in our forward-looking statements:

●

The added risks associated with or attributed to the current local, national and world economic conditions, including but not limited to, the volatility of crude oil prices, inflation and currency fluctuations;

●

Access to available and reasonable financing on a timely basis;

●

The Company’s inability to generate enough revenues to meet its obligations or repay maturing indebtedness; and

●

Failure of capital projects to operate as expected or meet expected results.

It is not possible to predict or identify all potential risks and uncertainties and the above referenced factors and list do not comprise a complete list of all potential risks and uncertainties. Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in any forward-looking statement contained in this report. All forward-looking statements speak only as of the date of this report and are expressly qualified in their entirety by the cautionary statements included in or incorporated by reference into this report. Except as is required by law, the Company expressly disclaims any obligation to publicly release any revisions to forward-looking statements to reflect events after the date of this report. Throughout this report, Cyanotech Corporation, together with its subsidiary, are referred to as “the Company.”

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CYANOTECH CORPORATION

FORM 10-Q

INDEX

PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements	4
	Condensed Consolidated Balance Sheets as of September 30, 2024 and March 31, 2024 (unaudited)	4
	Condensed Consolidated Statements of Operations for the three and six months ended September 30, 2024 and 2023 (unaudited)	5
	Condensed Consolidated Statements of Stockholders’ Equity for the three and six months ended September 30, 2024 and 2023 (unaudited)	6
	Condensed Consolidated Statements of Cash Flows for the six months ended September 30, 2024 and 2023 (unaudited)	7
	Notes to Condensed Consolidated Financial Statements (unaudited)	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 4.	Controls and Procedures	26

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	27
Item 1A	Risk Factors	27
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	27
Item 3.	Defaults upon Senior Securities	27
Item 5.	Other Information	27
Item 6.	Exhibits	28

SIGNATURES		29

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

CYANOTECH CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

(Unaudited)

	September 30, 2024			March 31, 2024
ASSETS
Current assets:
Cash	$	780		$	707
Accounts receivable, net of allowance for credit losses of $11 as of September 30, 2024 and March 31, 2024		1,592			2,102
Inventories		7,185			7,313
Prepaid expenses and other current assets		568			469
Total current assets		10,125			10,591

Equipment and leasehold improvements, net		9,505			10,109
Operating lease right-of-use assets, net		4,161			4,284
Other assets		122			128
Total assets	$	23,913		$	25,112

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	2,132		$	1,439
Accrued expenses		619			757
Customer deposits		272			198
Operating lease obligations, current portion		533			530
Short term debt - bank		1,000			1,240
Line of credit – related party		2,000			1,250
Current maturities of long-term debt		3,019			3,140
Total current liabilities		9,575			8,554

Long-term debt – related party		1,000			1,000
Long-term operating lease obligations		3,646			3,744
Total liabilities		14,221			13,298

Commitments and contingencies

Stockholders’ equity:
Preferred stock of $0.01 par value, authorized 10,000,000 shares; no shares issued and outstanding		—			—
Common stock of $0.02 par value, authorized 50,000,000 shares; issued and outstanding 7,142,700 shares at September 30, 2024 and 6,947,246 shares at March 31, 2024		143			139
Additional paid-in capital		34,802			34,576
Accumulated deficit		(25,253	)		(22,901	)
Total stockholders’ equity		9,692			11,814
Total liabilities and stockholders’ equity	$	23,913		$	25,112

See accompanying notes to condensed consolidated financial statements

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CYANOTECH CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands)

(Unaudited)

	Three Months Ended September 30,						Six Months Ended September 30,
	2024			2023			2024			2023

Net sales	$	5,845		$	6,373		$	11,743		$	11,519
Cost of sales		4,366			4,285			8,787			7,899
Gross profit		1,479			2,088			2,956			3,620

Operating expenses:
General and administrative		1,244			1,160			2,513			2,434
Sales and marketing		1,073			1,385			2,238			2,661
Research and development		137			175			221			366
Total operating expenses		2,454			2,720			4,972			5,461

Loss from operations		(975	)		(632	)		(2,016	)		(1,841	)

Interest expense, net		(175	)		(163	)		(336	)		(323	)

Loss before income taxes		(1,150	)		(795	)		(2,352	)		(2,164	)

Income tax expense		—			2			—			2

Net loss	$	(1,150	)	$	(797	)	$	(2,352	)	$	(2,166	)

Net loss per share:
Basic	$	(0.16	)	$	(0.13	)	$	(0.34	)	$	(0.34	)
Diluted	$	(0.16	)	$	(0.13	)	$	(0.34	)	$	(0.34	)

Shares used in calculation of net loss per share:
Basic		7,004			6,366			6,976			6,328
Diluted		7,004			6,366			6,976			6,328

See accompanying notes to condensed consolidated financial statements

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CYANOTECH CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

Three months ended September 30, 2024 and 2023

	Common Stock Shares			Common Stock Amount		Additional Paid-in Capital			Accumulated Deficit			Total Stockholders’ Equity
	(in thousands, except share data)
Balances at June 30, 2024		6,948,379		$	139	$	34,624		$	(24,103	)	$	10,660
Issuances of common stock for Directors Stock Grants		116,049			2		92			—			94
Issuances of common stock to Directors in lieu of cash for current year board fees		13,334			—		10			—			10
Issuances of common stock to Directors in lieu of cash for prior year board fees		53,333			1		39						40
Issuances of vested shares of restricted stock		18,608			1		(5	)		—			(4	)
Shares withheld for tax payments		(7,003	)		—		—			—			—
Share-based compensation expense		—			—		42			—			42
Net loss		—			—		—			(1,150	)		(1,150	)
Balances at September 30, 2024		7,142,700		$	143	$	34,802		$	(25,253	)	$	9,692

Balances at June 30, 2023		6,291,086		$	126	$	33,917		$	(19,003	)	$	15,040
Issuances of common stock for Directors Stock Grants		159,493			3		123			—			126
Issuances of vested shares of restricted stock		35,718			—		(11	)		—			(11	)
Shares withheld for tax payments		(12,518	)		—		—			—			—
Share-based compensation expense		—			—		49			—			49
Net loss		—			—		—			(797	)		(797	)
Balances at September 30, 2023		6,473,779		$	129	$	34,078		$	(19,800	)	$	14,407

Six months ended September 30, 2024 and 2023

	Common Stock Shares			Common Stock Amount		Additional Paid-in Capital			Accumulated Deficit			Total Stockholders’ Equity
	(in thousands, except per share data)
Balances at March 31, 2024		6,947,246		$	139	$	34,576		$	(22,901	)	$	11,814
Issuances of common stock for Directors Stock Grants		116,049			2		92			—			94
Issuances of common stock to Directors in lieu of cash for current year board fees		13,334			—		10			—			10
Issuances of common stock to Directors in lieu of cash for prior year board fees		53,333			1		39						40
Issuances of vested shares of restricted stock		20,456			1		(5	)		—			(4	)
Shares withheld for tax payments		(7,718	)		—		—			—			—
Share-based compensation expense		—			—		90			—			90
Net loss		—			—		—			(2,352	)		(2,352	)
Balances at September 30, 2024		7,142,700		$	143	$	34,802		$	(25,253	)	$	9,692

Balances at March 31, 2023		6,271,971		$	125	$	33,856		$	(17,634	)	$	16,347
Issuances of common stock for Directors Stock Grants		159,493			3		123			—			126
Issuances of common stock to Directors in lieu of cash for prior year board fees		17,672			—		15			—			15
Issuances of vested shares of restricted stock		37,996			1		(12	)		—			(11	)
Shares withheld for tax payments		(13,353	)		—		—			—			—
Share-based compensation expense		—			—		96			—			96
Net loss		—			—		—			(2,166	)		(2,166	)
Balances at September 30, 2023		6,473,779		$	129	$	34,078		$	(19,800	)	$	14,407

See accompanying notes to condensed consolidated financial statements

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CYANOTECH CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

(Unaudited)

	Six Months Ended September 30,
	2024			2023
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(2,352	)	$	(2,166	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization		751			811
Amortization of debt issue costs and other assets		13			15
Amortization of operating leases right-of-use assets		140			242
Share-based compensation expense		194			222
Provision for credit losses		—			11
Net (increase) decrease in assets:
Accounts receivable		510			(110	)
Inventories		128			1,116
Prepaid expenses and other assets		(100	)		49
Net increase (decrease) in liabilities:
Accounts payable		651			437
Accrued expenses		(98	)		(188	)

SEC Form 10-Q filed by Cyanotech Corporation