CYANOTECH CORP

Previous wording

Net Sales The net sales decrease of 1.3% for the current quarter compared to the same period last year was driven by a decrease in both astaxanthin and spirulina package sales and contract extraction revenue, partially offset by an increase in both astaxanthin and spirulina bulk sales. During the current quarter compared to the same period last year, we saw lower demand in packaged sales due to the timing of shipments, which was partially offset by higher demand in bulk sales due to both timing of customer orders and increased demand.

Current wording

The net sales increase of 19.3% for the current quarter compared to the same period last year was driven by an increase in both astaxanthin and spirulina package sales and bulk sales, partially offset by a decrease in contract extraction revenue. During the current quarter compared to the same period last year, we saw an increased demand in packaged sales primarily attributable to stronger e-commerce performance, reflecting the Company’s strategic focus on that channel and expanded digital marketing initiatives. Bulk sales increased due to both the timing of customer orders and higher overall demand.

Previous wording

Gross Profit Gross profit as a percent of net sales for the first quarter of fiscal 2026 increased by 5.5 percentage points compared to the same period last year, which was the result of higher production volumes, which resulted in lower production costs for the current year quarter.

Current wording

Gross profit as a percent of net sales for the second quarter of fiscal 2026 increased by 9 percentage points compared to the same period last year, which was the result of higher production volumes, which resulted in lower production costs for the current year quarter. In addition, the Company implemented price increases for certain Nutrex-brand packaged products during the quarter, which contributed to higher margins.

Previous wording

Income Taxes We did not record income tax expense for the first quarter of fiscal 2026 or 2025. We continue to carry a full valuation allowance on our net deferred tax assets.

Current wording

We did not record income tax expense for the second quarter of fiscal 2026 or 2025. We continue to carry a full valuation allowance on our net deferred tax assets.

Previous wording

The accompanying condensed consolidated financial statements, as of June 30, 2025 and March 31, 2025 and for the three months ended June 30, 2025 and 2024, have been prepared assuming we will continue as a going concern. The going concern assumption contemplates the realization of assets and satisfaction of liabilities in the normal course of business. We sustained operating losses and negative cash flows from operations for most of these same periods. Further, as discussed below, we were not in compliance with two debt covenant requirements as of March 31, 2025 and 2024. In June 2023, the Bank instituted a freeze on additional advances from the Line of Credit. These conditions raise substantial doubt about our ability to continue as a going concern. The condensed consolidated financial statements do not include any adjustments to the carrying amounts and classification of assets, liabilities, and reported expense that may be necessary if we were unable to continue as a going concern.

Current wording

The accompanying condensed consolidated financial statements, as of September 30, 2025 and March 31, 2025 and for the three and six months ended September 30, 2025 and 2024, have been prepared assuming we will continue as a going concern. The going concern assumption contemplates the realization of assets and satisfaction of liabilities in the normal course of business. We sustained operating losses and negative cash flows from operations for most of these same periods. Further, as discussed below, we were not in compliance with two debt covenant requirements as of March 31, 2025 and 2024. In June 2023, the Bank instituted a freeze on additional advances from the Line of Credit. These conditions raise substantial doubt about our ability to continue as a going concern. The condensed consolidated financial statements do not include any adjustments to the carrying amounts and classification of assets, liabilities, and reported expense that may be necessary if we were unable to continue as a going concern.

Previous wording

As of June 30, 2025, we had cash of $0.4 million and a negative working capital deficit of $0.3 million compared to cash of $0.3 million and working capital of $0.3 million as of March 31, 2025. We had the Line of Credit with the Bank that provided for borrowings up to $2 million on a revolving basis, however, as part of the covenant waiver as of March 31, 2023, the borrowings under the Line of Credit were frozen. On October 13, 2023, the Bank converted the Line of Credit to the 2023 Loan in the amount of $1.48 million with an original maturity date of August 30, 2024. As of June 30, 2025 and March 31, 2025, we had $0.6 million and $0.8 million, respectively, outstanding on the 2023 Loan, with a maturity date extended to March 31, 2026 (see Note 5).

Current wording

As of September 30, 2025, we had cash of $649,000 and working capital of $39,000 compared to $257,000 and $302,000, respectively, as of March 31, 2025. We had the Line of Credit with the Bank that provided for borrowings up to $2 million on a revolving basis, however, as part of the covenant waiver as of March 31, 2023, the borrowings under the Line of Credit were frozen. On October 13, 2023, the Bank converted the Line of Credit to the 2023 Loan in the amount of $1.48 million with an original maturity date of August 30, 2024. As of September 30, 2025 and March 31, 2025, we had $0.4 million and $0.8 million, respectively, outstanding on the 2023 Loan, with a maturity date extended to March 31, 2026.

Previous wording

We also have a loan facility with a related party that allows us to borrow up to $4.0 million on the Revolver. As of June 30, 2025 and March 31, 2025, we had $3.75 million and $3.0 million, respectively, of outstanding borrowings on the Revolver, which was included in line of credit – related party on the Condensed Consolidated Balance Sheets. The Revolver expires on April 12, 2026 (see Notes 5 and 12).

Current wording

We also have a loan facility with a related party that allows us to borrow up to $4.6 million on the Revolver. As of September 30, 2025 and March 31, 2025, we had $4.2 million and $3.0 million, respectively, of outstanding borrowings on the Revolver, which was included in line of credit – related party on the Condensed Consolidated Balance Sheets. The Revolver expires on April 12, 2027.

Previous wording

As of June 30, 2025, we had $2.9 million outstanding on the 2012 Loan that requires the payment of principal and interest monthly through August 2032. Pursuant to the 2012 Loan and the 2023 Loan, we are subject to annual financial covenants, customary affirmative and negative covenants and certain subjective acceleration clauses. As of March 31, 2025, our debt service coverage ratio and current ratio fell short of the Bank’s annual requirement. On June 4, 2025, the Bank provided us with a letter waiving the covenant violations as of March 31, 2025, but noting that the Bank reserves its right to declare a default in the future if any covenants remain out of compliance at applicable measurement dates.

Current wording

As of September 30, 2025, we had $2.8 million outstanding on the 2012 Loan that requires the payment of principal and interest monthly through August 2032. Pursuant to the 2012 Loan and the 2023 Loan, we are subject to annual financial covenants, customary affirmative and negative covenants, and certain subjective acceleration clauses. As of March 31, 2025, our debt service coverage ratio and current ratio fell short of the Bank’s annual requirement. On June 4, 2025, the Bank provided us with a letter waiving the covenant violations as of March 31, 2025, but noting that the Bank reserves its right to declare a default in the future if any covenants remain out of compliance at applicable measurement dates.

Previous wording

In April 2019, we obtained a loan in the amount of $1.5 million from a related party. The proceeds were used to pay down accounts payable and for general operating capital purposes. On April 12, 2021, December 14, 2022, August 14, 2023, August 9, 2024, and May 2, 2025, we amended this loan (see Notes 5 and 12). As of both June 30, 2025 and March 31, 2025, we had $1.0 million outstanding on the related party note. The loan matures on April 12, 2027.

Current wording

In April 2019, we obtained a loan in the amount of $1.5 million from a related party. The proceeds were used to pay down accounts payable and for general operating capital purposes. On April 12, 2021, December 14, 2022, August 14, 2023, August 9, 2024, May 2, 2025, and August 29, 2025 we amended this loan . As of both September 30, 2025 and March 31, 2025, we had $1.0 million outstanding on the related party note. The loan matures on April 12, 2027.

Previous wording

Funds generated by operating activities and available cash are our most significant sources of liquidity for working capital requirements, debt service and funding of maintenance levels of capital expenditures. We have developed our operating plan to produce a significant portion of our cash flows necessary to meet all financing requirements, with the remaining need from capital raising. Although we have a history of either being in compliance with debt covenants, or obtaining the necessary waivers, execution of our operating plan is dependent on many factors, some of which are not within our control. However, no assurances can be provided that we will achieve our operating plan and cash flow projections for the next fiscal years or our projected consolidated financial position as of June 30, 2026. Such estimates are subject to change based on future results and such change could cause future results to vary significantly from expected results.

Current wording

Funds generated by operating activities and available cash are our most significant sources of liquidity for working capital requirements, debt service and funding of maintenance levels of capital expenditures. We have developed our operating plan to produce a significant portion of our cash flows necessary to meet all financing requirements, with the remaining need sourced from capital raising. Although we have a history of either being in compliance with debt covenants, or obtaining the necessary waivers, execution of our operating plan is dependent on many factors, some of which are not within our control. However, no assurances can be provided that we will achieve our operating plan and cash flow projections for the next fiscal years or our projected consolidated financial position as of September 30, 2026. Such estimates are subject to change based on future results and such change could cause future results to vary significantly from expected results.

Previous wording

Cash Flows The following table summarizes our cash flows for the periods indicated ($ in thousands):

Current wording

The following table summarizes our cash flows for the periods indicated ($ in thousands):

Previous wording

Cash used in operating activities for the three months ended June 30, 2025 was primarily the result of a net loss of $0.9 million and an increase in inventories, partially offset by non-cash items of $0.6 million, and a decrease in accounts receivable.

Current wording

Cash used in operating activities for the six months ended September 30, 2025 was primarily the result of a net loss of $0.9 million less non-cash items of $1.1 million, and higher inventory and accounts receivable, partially offset by higher accounts payable.

Previous wording

Cash used in investing activities for the three months ended June 30, 2025 primarily includes costs for capital improvements at our Kona facility.

Current wording

Cash used in investing activities for the six months ended September 30, 2025 primarily includes costs for capital improvements at our Kona facility.

Previous wording

Cash provided by financing activities for the three months ended June 30, 2025 consists of additional draws on the related party line of credit of $0.8 million, partially offset by the paydown of $0.2 million on the 2023 Loan and $0.1 million of debt service payments.

Current wording

Cash provided by financing activities for the six months ended September 30, 2025 consists of additional draws on the related party line of credit of $1.2 million, partially offset by the paydown of $0.4 million on the short term debt and line of credit and $0.1 million paydown on term loans.

Previous wording

As of June 30, 2025, we had a negative working capital deficit of $0.3 million, a decrease of $0.6 million compared to March 31, 2025. The decrease was primarily due to a decrease in accounts receivable due to sales demand, timing of cash receipts and payments and the timing of production of inventories in the first three months of fiscal year 2026, as we continue to manage our production in line with sales demand and material supplies are being managed on a just-in-time basis. We also had additional draws on the related party line of credit.

Current wording

As of September 30, 2025, our working capital was approximately $39,000, a decrease of $263,000 from March 31, 2025. The decrease primarily reflects the timing of customer payments and production scheduling, as the Company continues to manage inventory and raw-material purchases on a just-in-time basis aligned with sales demand. We also had additional draws on the related party line of credit.

Previous wording

Our future results of operations and the other forward-looking statements contained in this Outlook, in particular the statements regarding revenues, gross margin and capital spending, involve a number of risks and uncertainties. In addition to the factors discussed above, any of the following could cause actual results to differ materially: business conditions and growth in the natural products industry and in the general economy; changes in customer order patterns; changes in demand for natural products in general; changes in weather conditions; changes in health and growing conditions of our astaxanthin and spirulina products; competitive factors, such as increased production capacity from competing spirulina and astaxanthin producers and the resulting impact, if any, on world market prices for these products; government actions and increased regulations both domestic and foreign; shortage of manufacturing capacity; and other factors beyond our control. Risk factors are discussed in detail in Part I, Item 1A of our Annual Report on Form 10-K for the year ended March 31, 2025.

Current wording

Our future results of operations and the other forward-looking statements contained in this Outlook, in particular the statements regarding revenues, gross margin and capital spending, involve a number of risks and uncertainties. In addition to the factors discussed above, any of the following could cause actual results to differ materially: business conditions and growth in the natural products industry and in the general economy; changes in customer order patterns; changes in demand for natural products in general; changes in weather conditions; changes in health and growing conditions of our astaxanthin and spirulina products; competitive factors, such as increased production capacity from competing spirulina and astaxanthin producers and the resulting impact, if any, on world market prices for these products; government actions and increased regulations both domestic and foreign; shortage of manufacturing capacity; and other factors beyond our control. Risk factors are discussed in detail in Part II, Item 1A of this quarterly report and in Part I, Item 1A of our Form 10-K report for the year ended March 31, 2025.

Previous wording

Our critical accounting policies and estimates are disclosed in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of our Annual Report on Form 10-K for the fiscal year ended March 31, 2025, filed with the SEC on June 20, 2025. In the three months ended June 30, 2025, there were no changes to the application of critical accounting policies previously disclosed in our most recent Annual Report on Form 10-K.

Current wording

Our critical accounting policies and estimates are disclosed in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of our Annual Report on Form 10-K for the fiscal year ended March 31, 2025, filed with the SEC on June 20, 2025. In the six months ended September 30, 2025, there were no changes to the application of critical accounting policies previously disclosed in our most recent Annual Report on Form 10-K.