Note 1 - Organization and Basis of Presentation

12 Months Ended

Mar. 31, 2022

Notes to Financial Statements

Business Description and Basis of Presentation [Text Block]

1. ORGANIZATION AND BASIS OF PRESENTATION

Cyanotech Corporation (the “Company”), located in Kailua-Kona, Hawaii, was incorporated in the state of Nevada on March 3, 1983 and is listed on the NASDAQ Global Select Market under the symbol “CYAN”. The Company is engaged in the production of natural products derived from microalgae for the dietary supplements market.

The Company is an agricultural company that produces high value natural products derived from microalgae grown in complex and intricate open-pond agricultural systems on the Kona coast of Hawaii.  The Company's products include Hawaiian Spirulina Pacifica®, a superfood with numerous benefits, including boosting the immune system and overall cellular health; and BioAstin® Hawaiian Astaxanthin®, a powerful antioxidant shown to support and maintain the body's natural inflammatory response.

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. The accompanying consolidated financial statements include the accounts of Cyanotech Corporation and its wholly owned subsidiary, Nutrex Hawaii, Inc. (“Nutrex Hawaii” or “Nutrex”). Intercompany balances and transactions have been eliminated in consolidation.

Liquidity and Capital Resources

As of March 31, 2022, the Company had cash of $2,589,000 and working capital of $11,443,000 compared to $3,767,000 and $9,298,000, respectively, at March 31, 2021. The Company has a Revolving Credit Agreement (the “Credit Agreement”) with First Foundation Bank (“the Bank”) that allows the Company to borrow up to $2,000,000 on a revolving basis. At March 31, 2022 and 2021, the Company had outstanding borrowings of $0 and $1,000,000, respectively, on the line of credit. The line of credit is subject to renewal on August 30, 2022, and the Company intends to renew or replace it with another line of credit on or before the expiration date.

As of March 31, 2022, the Company had $3,938,000 in long-term debt (“Term Loans”) payable to the Bank that require the payment of principal and interest monthly through August 2032. Pursuant to the Term Loans and the Credit Agreement, the Company is subject to annual financial covenants, customary affirmative and negative covenants and certain subjective acceleration clauses. As of March 31, 2022 and 2021, the Company met all required annual financial and debt covenants.

In response to the coronavirus (“COVID-19”) pandemic and the uncertainty surrounding the pandemic, in May 2020, the Company obtained a Paycheck Protection Program (“PPP”) loan in the amount of $1,381,000, under the Coronavirus Aid, Relief, and Economics Security Act (“CARES Act”). The proceeds were used for certain payroll costs in accordance with the PPP and the PPP Flexibility Act of 2020. In December 2020, the Company received notice of forgiveness of the PPP loan in whole, including all accrued interest to date (see Note 6). In April 2019, the Company obtained an unsecured subordinated loan in the amount of $1,500,000 from a related party. The proceeds were used to pay down accounts payable and for general operating capital purposes. On April 12, 2021, the Company amended this loan (see Notes 6 and 16). As of March 31, 2022, the Company had $1,000,000 outstanding on the related party note.

Funds generated by operating activities and available cash are expected to continue to be the Company's most significant sources of liquidity for working capital requirements, debt service and funding of maintenance levels of capital expenditures. In fiscal year 2020, the Company began a strategic cost savings initiative that included the elimination of positions through attrition and the elimination of open positions to create a leaner organization, and the Company continued the cost savings initiative throughout fiscal 2021. 

Based upon the Company's operating plan and related cash flow and financial projections, cash flows expected to be generated by operating activities and available financing are expected to be sufficient to fund the Company's operations through at least June 30, 2023, and the Company's debt service coverage ratio and current ratio covenants are expected to be in compliance with the annual Term Loans and Credit Agreement covenant requirements as of March 31, 2023, the next measurement date. However, no assurances can be provided that the Company will achieve its operating plan and cash flow projections for the next fiscal years or its projected consolidated financial position as of March 31, 2023. Such estimates are subject to change based on future results and such change could cause future results to vary significantly from expected results.