CYAN 10-K & 10-Q changes, risk factors and insider trading

Our success depends, to a significant extent, upon the services of our officers and key personnel, including qualified management, professional, scientific, and technical operating staff. The loss of any such personnel or the delay in the replacement of such personnel could significantly delay the achievement of our business objectives and could adversely affect our ability to do business or provide neededthe management.management needed. Attracting permanent skilled executives in Hawaii can be difficult due to limited qualified local qualified applicants. If we are unable to attract qualified candidates, or if the search process takes longer than expected, it could adversely impact our business.

Compliance with new and existing governmentalgovernment regulations could increase our costs significantly and adversely affect our results of operations.

Our two largest shareholders collectively own approximately 32.7%37.6% of our common stock. According to publicly filed beneficial ownership reports, as of the respective dates of such reports, Michael Davis, chairman of our board of directors, beneficially owned 1,356,8941,788,756 of shares representing a 19.5%24.8% beneficial ownership and the Rudolf Steiner Foundation ("RSF"), beneficially owned 917,133 shares representing a 13.2%12.7% beneficial ownership. The shares held by RSF were originally donated by a foundation affiliated with Mr. Davis or acquired from the proceeds of donations made by that foundation. In addition, Mr. Davis and RSF filed a Schedule 13D with the SEC on March 17, 2017, announcing the formation of a “group” among the two of them and certain of Mr. Davis’ affiliates under Section 13 of the Exchange Act. As part of the agreement between Mr. Davis and RSF, RSF has agreed not to sell, transfer or otherwise dispose of any of its shares in the Company unless RSF provides concurrent written notice to an affiliate of Mr. Davis and the Company at least three days prior to the consummation of any such sale, transfer or other disposition. On August 24, 2023, 424,621 shares of our common stock owned by Skywords Family Foundation, Inc. (“Skywords”) was donated to Ginungagap Foundation, a Delaware corporationFoundation (“Ginungagap”), a Delaware corporation, recognized as a tax-exempt organization. Mr. Davis serves as the President of both Skywords and Ginungagap and has recused himself from all matters related to the common stock owned by Ginungagap, including, without limitation, decisions to vote or dispose of Cyanotech common stock. Along with this recusal, the formation of this “group” was dissolveddissolved. In addition, on April 12, 2019, the Company borrowed $1.5 million from an entity affiliated with Mr. Davis pursuant to an unsecured promissory note. In April 2021, the Company amended the loan, which extended the expirationmaturity date to April 2024, converted $500,000 into revolving loans, adjusted the interest rate to reflect a floor of 5%, and granted a security interest in substantially all of the Company’s personal property assets, subject to limited exceptions. In December 2022, the Company amended the promissory note which extended the maturity date to April 2025 and increased the revolving line amount from $0.5 million to $1.0 million. In August 2023, the Company amended the loan to increase the revolving line amount from $1.0 million to $2.0 million. In August 2024, the Company further amended the loan to increase the revolving line amount from $2.0 million to $4.0 million and extend the maturity date to April 2026. As of both March 31, 20242025 and 2023,2024, $1.0 million remained due under this promissory note, and atas of March 31, 20242025 and 2023,2024, $1.25$3.0 million and $0.5$1.25 millionmillion, respectively, were outstanding on the revolving line, respectively.

The global cost of oil derived energy impacts us in several ways, and it may hinder our efforts to achieve profitability. Oil prices primarily impact us through the costs of electricity, transportation, materials and supplies which are tied to the cost of oil either directly or indirectly. The return of athe high cost of oil on a global basis may signal a prolonged economic downturn resulting in a material adverse effect on our business.

Our manufacturing processes require that we purchase significant quantities of energy from third parties, which results in the generation of greenhouse gases, either directly onsite or indirectly at electric utilities. Both domestic and international legislation to address climate change by reducing greenhouse gas emissions and establishing a price on carbon could create increases in energy costs and price volatility. Considerable international attention is now focused on the development of an international policy framework to address climate change. Proposed and existing legislative efforts to control or limit greenhouse gas emissions could affect our energy source and supply choices as well as increase the cost of energy and raw materials derived from sources that generate greenhouse gas emissions. If our suppliers are unable to obtain energy at a reasonable cost in the future, the cost of our raw materials could be negatively impactedimpacted, which could result in increased manufacturing costs.

We regard our proprietary technology, trade secrets, trademarks and similar intellectual property as important and we rely on a combination of trade secret, contract, copyright and trademark law to establish and protect our rights in our products and technology. However, there can be no assurance that we will be able to protect our technology adequately or that competitors will not be able to develop similar technology independently, particularly following the expiration of our patents relating to the use of astaxanthin. In addition, the laws of certain foreign countries may not protect our intellectual property rights to the same extent as the laws of the United States. Litigation in the United States or abroad may be necessary to enforce intellectual property rights, to protect our trade secrets, to determine the validity and scope of the proprietary rights of others or to defend against claims of infringement. Such litigation, even if successful, could result in substantial costs and diversion of resources and could have a material adverse effect on our business, results of operations and financial condition. Additionally, if any such claims are asserted against us, we may seek to obtainobtaining a license under the third party’s intellectual property rights. There can be no assurance, however, that a license would be available on terms acceptable or favorable to us, if at all.

In the ordinary course of business, we purchase insurance coverage (e.g., property and liability coverage) to protect us against loss of or damage to our properties and claims made by third parties and employees for property damage or personal injuries. However, the protection provided by such insurance is limited in significant respects and, in some instances, we have no coverage and certain of our insurance policies have substantial “deductibles” or limits on the maximum amounts that may be recovered. For example, if a volcanic eruption, tsunami, earthquake or other catastrophic natural disaster should occur, we may not be able to recover all facility restoration costs and revenues lost from business interruption. In addition, we maintain product liability insurance in limited amounts for all of our products involving human consumption; however, broader product liability coverage is prohibitively expensive. Insurers have also introduced new exclusions or limitations of coverage for claims related to certain perils including, but not limited to, mold and terrorism. If a series of losses occurred, such as from a series of lawsuits in the ordinary course of business each of which were subject to the deductible amount, or if the maximum limit of the available insurance were substantially exceeded, we could incur losses in amounts that would have a material adverse effect on our results of operations and financial condition.

We believe our cash to be provided from operations will be sufficient to meet a portion of our working capital and operating requirements for at least the next 12 months and may have to secure a commitment to fund the remaining gap, but we may experience unexpected reductions in sales due to changes in customer demand, customer purchasing practices, or other factors described in these Risk Factors. If we have an unexpected decline in sales, or we have other unexpected capital needs, we may need to raise additional funds. There is no guarantee that we will be able to secure such funding on acceptable terms, if at all. If we raise additional funds through the issuance of equity or convertible debt securities, the percentage ownership of our then current stockholders may be reduced. If we raise additional funds through the issuance of convertible debt securities, or through additional debt or similar instruments, such securities, debt, or similar instruments could have rights senior to those of our common stockholders and such instruments could contain provisions restricting our operations. If adequate funds are not available to satisfy either short-term or long-term capital requirements, we may be required to limit operations with adverse results.

In addition, the agreements governing our indebtedness include certain debt service and other financial covenants that we must satisfy. In previous years, we have defaulted on certain of these covenants and have received waivers of the defaults from the Bank. As of March 31, 2024,2025, the Company was not in compliance with the required debt service coverage and current ratios. The Company is currently seeking a waiver of such default,ratios, however, wewas cannotin providecompliance anywith assurancethe thatthird covenant. On June 4, 2025, the Bank willissued providea usletter waiving the covenant violations as of March 31, 2025. As of March 31, 2024, the Company was not in compliance with suchthe debt service coverage and current ratios. On September 12, 2024, the Bank issued a waiver.letter waiving the covenant violations as of March 31, 2024. As of March 31, 2023, the Company was not in compliance with the required debt service coverage ratio, but the Bank provided a waiver of the default on June 22, 2023 and implemented an immediate freeze on any and all further advances of the Revolving Credit Agreement (the “Credit Agreement”) through the maturity date. We cannot provide any assurance that the Bank wouldwill provide us with a waiver should we not be in compliance in the future. A failure to maintain compliance along with our lender not agreeing to a waiver for the non-compliance would cause the outstanding borrowings to be in default and payable on demand which would have a material adverse effect on us and our ability to continue as a going concern.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to provide a reader of our consolidated financial statements with a narrative of our financial condition, results of operations, liquidity and certain other factors that may affect our future results from the perspective of management.

We are an agricultural company and a world leader in the production of natural products derived from microalgae grown in complex and intricate agricultural systems on the Kona coast of Hawaii. We have a core competency in cultivating and processing microalgae into high-value, high-quality natural products for the human dietary supplement market. We are unique in that our microalgae are grown in open ponds which, similar to natural land and plant-based horticulture, require favorable weather conditions. In our case these conditions include consistent light, warm temperatures and low rainfall to achieve optimum production. Equally important is a nutrient-rich environment, which requires the proper control and balance of necessary nutrients to support growth and yields. Greater variability in these environmental factors more commonly occur in our winter growing season.

We will continue to focus on growing the market for our high quality, higher margin consumer products by emphasizing the higher nutritional content of our Hawaiian Spirulina Pacifica® and the multiple health benefits of our BioAstin® Hawaiian Astaxanthin®. We generated 18%, 27%21% and 32%18% of our revenues outside of the United States during the years ended March 31, 2024, 20232025 and 2022,2024, respectively. Competing in a global marketplace, we are influenced by the general economic conditions of the countries in which our customers operate, including adherence to our customers’ local governmental regulations and requirements. Since substantially all sales are made in U.S. currency, we have no material foreign exchange exposure.

Complex biological processes in the cultivation and processing of our microalgae are influenced by factors beyond our control—the weather, for example. As a result, we cannot assurebe sure that adequate production levels will be consistent period over period. To the extent that our production levels are not sufficient to absorb these costs on a period basis, we recognize abnormal and non-inventoriable production costs, including fixed cost variances from normal production capacity, as an expense in the period incurred. Abnormal amounts of freight, handling costs and wasted material (spoilage) are recognized as current-period charges and fixed production overhead costs are allocated to inventory based on the normal capacity of production facilities. Normal capacity is defined as the production expected to be achieved over a number of periods or seasons under normal circumstances, taking into account the loss of capacity resulting from planned maintenance. To offset increased production costs, we seek ways to increase production efficiencies in volume yield, potency, and quality consistent with our commitment to produce high-value, high-quality products.

We utilize several third-party contractors for the encapsulation of our gelcaps, molding of our gummies and for the packaging of our finished products. Although these services are available from a limited number of sources, we believe that we have the ability to use other parties if any of the current contractors become unavailable.

Results of Operations for the 2024, 2023,2025 and 20222024 Fiscal Years

The following tables present selected consolidated financial data for each of the past threetwo fiscal years ($ in thousands):

Gross Profit Gross profit as a percent of net sales decreasedincreased by 5.52.6 percentage points compared to fiscal 2023,year 2024, which was the result of higher cost per kilogram of astaxanthin and spirulina due to lower overall production volumes, aswhich wellresulted as write downs of purchased third party material and higher than normal excess capacity,in lower ofproduction cost or market adjustmentcosts for spirulinathe inventorycurrent write-offs.fiscal year.

Operating Expenses Operating expenses increaseddecreased $0.4$1.2 million, or 3.5%10.9% compared to fiscal year 2023.2024. Selling and marketing expenses increaseddecreased primarily due to higherlower online selling fees, offset by lower generaladvertising and administrativecommissions, andas well as lower research and development costs related to lower headcount.

Income Taxes We recorded an income tax expense of $18,000$8,000 in fiscal 2023year 2025 for state taxes, compared to income tax expense of $28,000$7,000 in fiscal 2022.2024.

The accompanying consolidated financial statements, as of and for the fiscal yearyears ended March 31, 20242025 and 2023,2024, 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 these same periods. Further,Furthermore, as discussed below, we were not in compliance with two debt covenant requirements atas of March 31, 2024 and one debt covenant requirement at March 31, 2023.2025. In June 2023, the Bank instituted a freeze on additional advances from the Revolving Credit Agreement.Agreement (the “Line of Credit”). These conditions raise substantial doubt about our ability to continue as a going concern. The 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.

As of March 31, 2024,2025, we had cash of $0.7$0.3 million and working capital of $2.0$0.3 million compared to $1.0$0.7 million and $5.4$2.0 million, respectively, atas of March 31, 2023.2024. We had the Line of Credit Agreement with the Bank that provided for borrowings up to $2.0 million on a revolving basis, however, as part of the covenant waiver atas of March 31, 2023, the borrowings under thisthe lineLine of creditCredit were frozen. On October 13, 2023, the Bank converted thisthe lineLine of creditCredit to a term loan in the amount of $1.48 million with aan original maturity date of August 30, 2024.2024 (the “2023 Loan”). As of March 31, 2025 and 2024, we had $1.24$0.8 million and $1.2 million, respectively, outstanding on this loan and as of March 31, 2023, we had outstanding borrowings of $1.54 million on the line2023 of credit.Loan (see Note 5 in the notes to consolidated financial statements).

We also have a loan facility with a related party that allows us to borrow up to $2.0$4.0 million on a revolving basis (the “Revolver”). AtAs of March 31, 20242025 and 2023,2024, we had $1.25$3.0 million and $0.5$1.25 million, respectively, of outstanding borrowings on the Revolver, which were included in line of credit – related party on the Consolidatedconsolidated Balancebalance Sheets.sheets. The Revolver expires on April 12, 20252026 (see Note 5 and 15 in the notes to consolidated financial statements).

As of March 31, 2024,2025, we had $3.2$3.0 million of debt (the "Term2012 LoansLoan") payable to the Bank that requirerequires the payment of principal and interest monthly through August 2032. Pursuant to the Term2012 LoansLoan and the2023 Credit Agreement,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. As of March 31, 2024, our debt service coverage ratio and current ratio fell short of the Bank’s annual requirement. WeOn areSeptember currently seeking a letter from the Bank waiving the covenant violations as of March 31,12, 2024, but noting there can be no assurance that the Bank will provide such a waiver and may declare a default if any covenants remain out of compliance at applicable measurement dates. As of March 31, 2023, our debt service coverage ratio fell short of the Bank’s annual requirement. On June 22, 2023, the Bank provided us with a letter waiving the covenant violationviolations as of March 31, 2023.2024.

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 and2022, August 14, 2023, and August 9, 2024, we amended this loan (see Note 5 and 15 in the notes to consolidated financial statements). As of both March 31, 20242025 and 2023,2024, we had $1.0 million outstanding on the related party note. The loan matures on April 12, 2025.2027.

We continue to experience a loss from operations asand the impacts from the macroeconomic environment ledcontinue to lower sales across our portfolio for the fiscal year ended March 31, 2024. Industry data shows that consumers intake of dietary supplements is not slowing down but may be trading down to private label brands to save on costs. The market for bulk material is increasingly price sensitive with many companies sourcing lower priced international ingredients. Beginning in the second quarter of fiscal year 2023 through the end of fiscal year ended 2024, we drewrely on our funding sourcessource to provide liquidity. To address the resulting continued cash flow challenges, we continue to monitor cost savings initiatives implemented in fiscal year 2023,2023. includingThis includes: stopping or slowing production of inventory in alignment with current customer demand,demand throughout the year, maintaining a reduced headcount and compensation, primarily through attrition and furloughs, respectively, and eliminating certain discretionary selling, general and administrative and research and development expenses. We have also made some additional changes in the sales and marketing team startingby withhiring thea ChiefHead Commercialof OfficerSales andto strengtheningstrengthen theour saleseCommerce team,footprint, updatingoptimize our marketing materialsefforts toand emphasizeimprove our competitiveretail strengths and raising capital by completing a private placement in the third quarter of fiscal 2024.strategy.

Inflationary factors such as increases in the costs of materials, utilities and labor directly affect our operations. We are also experiencing overall lower demand in packaged sales as consumers are feeling the impacts of higher inflation and are closely managing their discretionary spend.expenses. The exact impact on our results is difficult to isolate and quantify given the macroeconomic environment. Most of our leases provide for cost-of-living adjustments and require us to pay for insurance and maintenance expenses, all of which are subject to inflation. Additionally, our future lease costs for new facilities may include potentially escalating costs of real estate and construction. There is no assurance that we will be able to pass on increased costs to our customers.

Cash Flows The following table summarizes our cash flows from operating, investing and financing activities for each of the past threetwo fiscal years ($ in thousands):

Cash used in operating activities in fiscal 20242025 was primarily the result of a net loss of $5.3$3.2 million and an increase of $0.8$0.5 million in accounts receivable,inventories, offset partially by non-cash charges of $2.4$2.2 million and a decrease of $3.4 million in inventories.million.

Beginning in fiscal 2021 through fiscal year 2023, cultivation of astaxanthin was completed in the first six months of the fiscal year during the most productive months of the year due to the best growing conditions, compared to year-round cultivation in the prior fiscal years. In fiscal year 2024, cultivation of astaxanthin reverted back to year-round in order to manage staffing constraints.constraints, however, in fiscal year 2025, cultivation of astaxanthin was completed in the most productive nine months of the year. We calculate total production costs for the year based on normal capacity of production expected to be achieved in a year under normal circumstances. These costs are then allocated into inventory based on the period of production, not including abnormal production costs. Allocating fixed and overhead costs requires management’s judgement to determine when production is outside of the normal range of expected variation in production.

Equipment and leasehold improvements - Equipment and leasehold improvements are reported at cost less accumulated depreciation and amortization. Self-constructed leasehold improvements include design, construction and supervision costs. These costs are recorded in construction in progress and are transferred to equipment and leasehold improvements when construction is completed, and the facilities are placed in service. Long-lived assets, such as property and equipment and purchased intangibles subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized to the extent that the carrying amount exceeds the asset’s fair value. We recognized $5,000 impairment of long-lived assets as of March 31, 2025, but did not recognize any impairment of long-lived assets as of March 31, 2024. We recognized $5,000 impairment of long-lived assets as of March 31, 2023, which are included in other income (expense) on the consolidated statements of operations.

Stock-Based Compensation - We provide compensation benefits in the form of stock options, restricted stock units (“RSUs”) and restricted stock grants to employees and non-employee directors. Our stock-based compensation expense is based on the fair value of awards, adjusted for estimated forfeitures, and amortized on a straight-line basis over the requisite service period for stock options and restricted stock units (“RSUs”).RSUs. The fair value of stock options is estimated as of the date of grant using the Black-Scholes option-pricingoption pricing model. This model requires input assumptions for our expected dividend yield, expected stock price volatility, risk-free interest rate and the expected option term. Restricted stock and RSUs are valued at the fair value of our common stock as of the date of the grant. See Note 9 in the notes to our consolidated financial statements.

We are an agricultural company and a world leader in the production of natural products derived from microalgae grown in complex and intricate agricultural systems on the Kona coast of Hawaii. Incorporated in 1983, we are guided by the principle of providing beneficial, quality microalgal products for health and human nutrition in a technology enabled, reliable and environmentally sensitive operation. We are Good Manufacturing Practices (“GMP”) certified by the Merieux NutriSciences, reinforcing our commitment to quality in our products, quality in our relationships (with our customers, suppliers, employeesemployees, and the communities we live in), and quality of the environment in which we work. Our products include:

†These statements have not been evaluated by the Food and Drug Administration. This product is not intended to diagnose, treat, curecure, or prevent any disease.

Microalgae are a diverse group of microscopic plants that have a wide range of physiological and biochemical characteristics and contain, among other things, high levels of natural protein, amino acids, vitamins, pigmentspigments, and enzymes. Microalgae have the following properties that make commercial production attractive: (1) microalgae grow much faster than land grown plants, often up to 100 times faster; (2) microalgae have uniform cell structures with no bark, stems, branches or leaves, permitting easier extraction of products and higher utilization of the microalgae cells; and (3) the cellular uniformity of microalgae makes it practical to control the growing environment in order to optimize a particular cell characteristic. Efficient and effective cultivation of microalgae requires consistent light, warm temperatures, low rainfallrainfall, and proper chemical balance in a very nutrient-rich environment, free of environmental contaminants and unwanted organisms. This is a challenge that has motivated us to design, develop and implement proprietary production and harvesting technologies, systems and processes in order to commercially produce human dietary supplement products derived from microalgae.

Our production of these products at the 96-acre facility on the Kona Coast of the island of Hawaii provides several benefits. We selected the Keahole Point location in order to take advantage of relatively consistent warm temperatures, sunshine and low levels of rainfall needed for optimal cultivation of microalgae. This location also offers us access to cold deep ocean water, drawn from an offshore depth of 2,000 feet, which we use in our Ocean-Chill Drying system to eliminate the oxidative damage caused by standard drying techniques and as a source of trace nutrients for microalgal cultures. The area is also designated a Biosecure Zone, with tight control of organisms allowed into the area and free of genetically modified organisms (“GMO”). We believe that our technology, systems, processesprocesses, and favorable growing location generally permit year-round harvest of our microalgal products in a cost-effective manner.

Comparison of the Three Months Ended JuneSeptember 30, 2025 and 2024

Net Sales The net sales decreaseincrease of 1.3%19.3% for the current quarter compared to the same period last year was driven by aan decreaseincrease in both astaxanthin and spirulina package sales and contractbulk extraction revenue,sales, partially offset by ana increasedecrease in bothcontract astaxanthinextraction and spirulina bulk sales.revenue. During the current quarter compared to the same period last year, we saw loweran increased demand in packaged sales dueprimarily attributable to stronger e-commerce performance, reflecting the timingCompany’s ofstrategic shipments,focus whichon wasthat partiallychannel offsetand byexpanded higherdigital demandmarketing ininitiatives. bulkBulk sales increased due to both the timing of customer orders and increasedhigher overall demand.

Gross Profit Gross profit as a percent of net sales for the firstsecond quarter of fiscal 2026 increased by 5.59 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.

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

The accompanying condensed consolidated financial statements, as of JuneSeptember 30, 2025 and March 31, 2025 and for the three and six months ended JuneSeptember 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.

As of JuneSeptember 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$649,000 and working capital of $0.3$39,000 millioncompared 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 JuneSeptember 30, 2025 and March 31, 2025, we had $0.6$0.4 million and $0.8 million, respectively, outstanding on the 2023 Loan, with a maturity date extended to March 31, 2026 (see Note 5).2026.

We also have a loan facility with a related party that allows us to borrow up to $4.0$4.6 million on the Revolver. As of JuneSeptember 30, 2025 and March 31, 2025, we had $3.75$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, 2026 (see Notes 5 and 12).2027.

As of JuneSeptember 30, 2025, we had $2.9$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 covenantscovenants, 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.

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, and August 29, 2025 we amended this loan (see Notes 5 and 12). As of both JuneSeptember 30, 2025 and March 31, 2025, we had $1.0 million outstanding on the related party note. The loan matures on April 12, 2027.

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 JuneSeptember 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.

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

Cash used in operating activities for the threesix months ended JuneSeptember 30, 2025 was primarily the result of a net loss of $0.9 million less non-cash items of $1.1 million, and anhigher increaseinventory inand inventories,accounts receivable, partially offset by non-cash items of $0.6 million, and a decrease inhigher accounts receivable.payable.

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

Cash provided by financing activities for the threesix months ended JuneSeptember 30, 2025 consists of additional draws on the related party line of credit of $0.8$1.2 million, partially offset by the paydown of $0.2$0.4 million on the 2023short Loanterm debt and line of credit and $0.1 million ofpaydown debton serviceterm payments.loans.

As of JuneSeptember 30, 2025, we had a negativeour working capital deficitwas ofapproximately $0.3 million,$39,000, a decrease of $0.6$263,000 million compared tofrom March 31, 2025. The decrease was primarily due to a decrease in accounts receivable due to sales demand, timing of cash receipts and payments andreflects the timing of customer payments and production ofscheduling, inventories inas the firstCompany three months of fiscal year 2026, as we continuecontinues to manage our production in line with sales demandinventory and materialraw-material supplies are being managedpurchases on a just-in-time basis.basis aligned with sales demand. We also had additional draws on the related party line of credit.

Our results of operations and financial condition can be affected by numerous factors, many of which are beyond our control and could cause future results of operations to fluctuate materially as it has in the past. Future operating results may fluctuate as a result of changes in sales volumes to our largest customers, weather patterns, increased competition, increased materials, nutrient and energy costs, government regulationsregulations, and other factors beyond our control.

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 Annual Report on Form 10-K report for the year ended March 31, 2025.

As of JuneSeptember 30, 2025, we had no off-balance sheet arrangements or obligations.

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 threesix months ended JuneSeptember 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.