Climate Change Data

Environmental Metrics

Environmental Achievements

• Completion of a 33% expansion in Astaxanthin ponds

Social Achievements

• Improved benefit programs and a compensation structure calibrated to companies of our size in order to attract and retain the talent

Climate Goals & Targets

Environmental Challenges

• Spirulina production was very disappointing in the first three quarters, resulting in a $1.2 million profit hit related to unabsorbed overhead.
• Unable to keep up with Astaxanthin demand
• Increased price competition due to the large number of spirulina suppliers
• Fluctuations in quarterly operating results due to weather-related cultivation difficulties, fluctuations in customer demand, changes in energy costs, changes in raw material costs, production problems, contamination, effects of weather on ability to meet customer demand, timing of promotional activities, introduction of new products, changes in pricing policies, changes in seasonal trends, changes in government regulation, fluctuation in foreign currency exchange rates, global economic and political conditions, and other factors beyond our control.

Mitigation Strategies

• Production levels improved significantly in the 4th quarter (Spirulina)
• Secured financing to build an extraction plant in Kona which should be completed by early fiscal 2015 and will significantly reduce costs and shorten Astaxanthin production lead times
• New hires in senior level marketing and supply chain roles to complement our existing expertise
• Focusing on developing new products and releasing product improvements specifically in the “greens” category with Hawaiian Spirulina
• Building brand awareness and driving trial by translating our Hawaiian success in a test market on the US mainland and by testing special advertising vehicles there
• Building public knowledge and trust in our products through the development of new scientific claims
• Implemented process changes and ordered additional process equipment for culture media which should gradually increase production levels and help ensure more sustainable production over the long term.

Supply Chain Management

Climate-Related Risks & Opportunities

Physical Risks

• weather, disease, and contamination
• catastrophic natural disasters such as earthquakes, tsunamis, hurricanes and volcanic eruptions
• shortages of water, electric power and fuels

Environmental Metrics

Climate Goals & Targets

Environmental Challenges

• Environmental restrictions, soil and water conditions, levels of sunlight and seasonal weather patterns, particularly heavy rain, wind and other hazards
• Consumer perception of our products due to adverse scientific research or findings, publicity regarding nutritional supplements, litigation, regulatory investigations or other events, conditions and circumstances involving the Company which receive national media coverage
• Effects of competition, including tactics and locations of competitors and operating and market competition
• Demand for our products, the quantities and qualities thereof available for sale and levels of customer satisfaction, including significant unforeseen fluctuations in global demand for products similar to our products
• Our dependence on the experience, continuity and competence of our executive officers and other key employees
• 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
• Changes in domestic and/or foreign laws, regulations or standards, affecting nutraceutical products or our methods of operation
• 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
• Failure of capital projects to operate as expected or meet expected results
• Changes in laws, corporate governance requirements and tax rates, regulations, accounting standards and the application to us or the nutritional products industry of new decisions by courts, regulators or other government authorities
• Legal costs associated with any legal proceedings, and the potential direct and indirect cost and other effects on our business or financial condition resulting from any legal proceedings
• Risk associated with the geographic concentration of our business
• Acts of war, terrorist incidents or natural disasters
• Fresh water is critical to the production of our natural astaxanthin and spirulina production, while we have not experienced any constraint on fresh water availability, future availability could be negatively impacted by significant growth in the local population as well as by throughput constraints on the water delivery infrastructure owned by the County of Hawaii
• Our facilities in Hawaii are located adjacent to a major airport, and an aircraft disaster could disrupt our operations
• Unfavorable publicity or consumer perception of our products and any similar products distributed by other companies could have a material adverse effect on our business
• Increased competition in our industry could result in price reductions, reduced gross profit margin or loss of market share, any of which could have a material effect on our business, results of operations and financial condition
• Our dependence on the unique abilities and knowledge of our officers and key personnel
• Our operations are vulnerable because we have limited personnel and redundancy and backup systems in our data management function
• The loss of a major customer could result in a material reduction in our revenues and profitability
• We could be subject to breaches of our information technology systems, which could damage our reputation and customer relationships
• Compliance with new and existing governmental regulations could increase our costs significantly and adversely affect our results of operations
• If we fail to comply with the reporting obligations of the Exchange Act and Section 404 of the Sarbanes Oxley Act, or if we fail to maintain adequate internal control over financial reporting, our business, financial condition, and results of operations, and investors’ confidence in us, could be materially and adversely affected
• Our three largest shareholders own a substantial portion of our common stock and could exert substantial influence over our business, particularly if any of them choose to work together
• Some provisions of our charter documents and Nevada law may discourage an acquisition of us by others, even if the acquisition may be in the best interest of our stockholders
• A significant or prolonged economic downturn could have a material adverse effect on our results of operations
• Our quarterly operating results may vary from quarter to quarter, which may result in increased volatility of our share price
• Our global operations expose us to complex management, foreign currency, legal, tax and economic risks, which we may not be able to address quickly and adequately
• Climate change initiatives could materially and adversely affect our business, financial condition, and results of operations
• If we fail to protect our intellectual property rights or if we infringe upon the intellectual property rights of others our business may be harmed
• Our insurance liability coverage is limited and may not be adequate to cover potential losses
• Our ability to develop and market new products or modify existing products and production methods may be adversely affected if we lose the services of or cannot replace certain employees knowledgeable in advanced scientific and other fields
• We may need to raise additional capital in the future which may not be available
• We have incurred significant losses in the past
• Our stock price is volatile, which could result in substantial losses for investors purchasing shares of our common stock
• Recent European Union regulations include stringent requirements for health claims on food and supplement labels

Mitigation Strategies

• We recycle fresh water in our production process where possible and continue to explore further recycling opportunities
• We have met with officials of the County of Hawaii to assess the fresh water situation and evaluate the probability of future risks
• We have implemented strategies that we believe will allow for continued and increasing sales of our products in the European Union
• During Fiscal 2017, the Company implemented additional training programs for the personnel responsible for reviewing customer purchase orders in order to clarify and confirm transfer of title and risk of loss when customer purchase orders terms are vague or missing, including appropriate review and approval procedures as well as additional quarter end closing and review procedures to confirm delivery dates for all FOB Destination shipments

Supply Chain Management

Climate-Related Risks & Opportunities

Physical Risks

• extreme weather

Transition Risks

• regulatory changes, market shifts

Environmental Metrics

Climate Goals & Targets

Environmental Challenges

• Environmental restrictions, soil and water conditions, levels of sunlight and seasonal weather patterns, particularly heavy rain, wind and other hazards
• Consumer perception of our products due to adverse scientific research or findings, publicity regarding nutritional supplements, litigation, regulatory investigations or other events, conditions and circumstances involving the Company which receive national media coverage
• Effects of competition, including tactics and locations of competitors and operating and market competition
• Demand for our products, the quantities and qualities thereof available for sale and levels of customer satisfaction, including significant unforeseen fluctuations in global demand for products similar to our products
• Our dependence on the experience, continuity and competence of our executive officers and other key employees
• 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
• Changes in domestic and/or foreign laws, regulations or standards, affecting nutraceutical products or our methods of operation
• 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
• Failure of capital projects to operate as expected or meet expected results
• Changes in laws, corporate governance requirements and tax rates, regulations, accounting standards and the application to us or the nutritional products industry of new decisions by courts, regulators or other government authorities
• Legal costs associated with any legal proceedings, and the potential direct and indirect cost and other effects on our business or financial condition resulting from any legal proceedings
• Risk associated with the geographic concentration of our business
• Acts of war, terrorist incidents or natural disasters
• Shortages of water, electric power and fuels in Hawaii
• Increased price of deep ocean water from the State of Hawaii
• Breaches of information technology systems
• Compliance with new and existing governmental regulations
• Loss of a major customer
• Significant or prolonged economic downturn
• Global cost of oil derived energy
• Inability to protect intellectual property rights or infringement upon the intellectual property rights of others
• Limited insurance liability coverage
• Loss of services of or inability to replace certain employees knowledgeable in advanced scientific and other fields
• Need to raise additional capital
• Significant losses in the past
• Volatility of stock price
• Complex management, foreign currency, legal, tax and economic risks in global operations
• Climate change initiatives
• Stringent requirements for health claims on food and supplement labels in the European Union

Mitigation Strategies

• Developed proprietary production and harvesting technologies, systems and processes
• Selected Keahole Point location for consistent warm temperatures, sunshine and low rainfall
• Access to cold deep ocean water for Ocean-Chill Drying system
• Designated Biosecure Zone, free of genetically modified organisms (GMO’s)
• Adopted several water savings strategies
• Re-inoculation of spirulina ponds to correct nutrient levels and stabilize production
• Implemented strategies to allow for continued and increasing sales of our products in the European Union

Supply Chain Management

Climate-Related Risks & Opportunities

Physical Risks

• Extreme weather

Transition Risks

• Regulatory changes to reduce greenhouse gas emissions; establishing a price on carbon

Environmental Metrics

ESG Focus Areas

• Environmental Sustainability
• Quality and Safety
• Innovation

Environmental Achievements

• Improved weather conditions led to suitable growing conditions and production metrics reverting to historical norms.
• Implemented water savings strategies to mitigate fresh water supply challenges.

Social Achievements

• Acquired the former Cellana Demonstration Facility, providing upgraded lab space and facilitating research and development efforts.
• Maintained good employee relations.

Governance Achievements

• Completed accounting for the income tax effects of the Tax Cuts and Jobs Act.
• Adopted ASU No. 2017-09, ASU No. 2016-18, and ASU No. 2016-15.

Climate Goals & Targets

Environmental Challenges

• Environmental factors (water restrictions, low temperatures) and cultivation miscalculations led to production problems with Spirulina and Astaxanthin.
• Higher production costs and lower sales resulted in a net loss.
• Dependence on a few major customers.
• Potential changes in Amazon's procurement practices.
• Vulnerability to natural disasters and aircraft disasters.
• Unfavorable publicity or consumer perception of products.
• Highly competitive nutritional products market.
• Dependence on key personnel.
• Limited personnel and redundancy in data management.
• Compliance with governmental regulations.
• Significant losses in the past.
• Potential need to raise additional capital.
• Risk of not being able to refinance, extend, or repay senior indebtedness.
• Volatility of quarterly operating results.
• Fixed expenses.
• Global operations expose the company to complex management, foreign currency, legal, tax, and economic risks.
• Climate change initiatives.
• Intellectual property protection.
• Limited insurance liability coverage.
• Potential loss of key employees.
• Recent European Union regulations on health claims.

Mitigation Strategies

• Strategic cost cutting and inventory management measures.
• Re-inoculation of spirulina ponds to correct nutrient levels and stabilize production.
• Water recycling systems.
• Acquisition of the Cellana Demonstration Facility to improve research and development.
• Implementation of water savings strategies.
• Temporary reduction of astaxanthin production to manage inventory levels.
• Strategic cost cutting and elimination of positions.
• Obtained an unsecured loan to pay down accounts payable and for general operating capital.

Supply Chain Management

Climate-Related Risks & Opportunities

Physical Risks

• Heavy rain, wind, and other hazards

Transition Risks

• Legislation to address climate change by reducing greenhouse gas emissions and establishing a price on carbon

Environmental Metrics

ESG Focus Areas

• Environmental Sustainability
• Social Responsibility
• Governance

Environmental Achievements

• Maintained a Biosecure Zone, free of herbicides and pesticides
• Utilized Ocean-Chill Drying system to eliminate oxidative damage caused by standard drying techniques
• Recycled fresh water in spirulina production process

Social Achievements

• Employs 95 people full-time
• Good relations with employees
• Introduced a new ‘Farm Grown’ seal program highlighting the farm's unique aspects and employees

Governance Achievements

• Compliance with all material government regulations
• Board of Directors Code of Conduct and Company’s Code of Conduct and Ethics publicly available on website

Climate Goals & Targets

Environmental Challenges

• COVID-19 pandemic impact on customer demand, supply chain, and sales expansion
• Agricultural process risks: weather, disease, contamination, water availability
• Dependence on key personnel
• High fixed costs
• Competition in the nutritional supplements market
• Concentration of sales among a few major customers
• Potential for legal proceedings
• Limited insurance coverage
• Need for additional capital
• Past losses and potential for future losses
• Stock price volatility
• Complex management of global operations
• Climate change initiatives and their impact on energy costs
• Intellectual property protection
• Compliance with governmental regulations
• Single location vulnerability to natural disasters
• Freshwater availability and cost
• European Union regulations on health claims

Mitigation Strategies

• Adjustments to continue operations during the pandemic
• Proprietary production and harvesting technologies, systems, and processes
• Water saving strategies
• Strategic cost-cutting initiatives
• Re-inoculation of spirulina ponds
• Focus on growing higher-margin consumer products
• Implementation of remote working arrangements, varied procedures and protocols at facilities, social distancing, protective screens and face masks, visitor and travel restrictions
• Water recycling systems
• Debt refinancing and waivers
• Related party loan to address cash flow shortage
• Cost cutting measures

Supply Chain Management

Climate-Related Risks & Opportunities

Transition Risks

• Legislation to reduce greenhouse gas emissions

Environmental Metrics

Climate Goals & Targets

Environmental Challenges

• COVID-19 pandemic impacting supply chain, demand, and ability to expand into new markets.
• Agricultural process risks: weather, disease, contamination, water availability.
• Dependence on fresh and cold ocean water; potential shortages or price increases.
• Operating entirely in one business segment at a single production facility.
• Vulnerability to natural disasters and aircraft accidents.
• Unfavorable publicity or consumer perception of products.
• Highly competitive dietary supplement market with larger competitors.
• Limited personnel and redundancy in data management.
• Dependence on key personnel.
• Loss of a major customer or change in procurement practices.
• Risk of information technology system breaches.
• Compliance with governmental regulations.
• Significant losses in the past.
• Global operations expose us to complex management, foreign currency, legal, tax and economic risks.
• Climate change initiatives could materially and adversely affect our business.
• Potential inability to protect intellectual property rights or infringement on others' rights.
• Limited insurance liability coverage.
• Need to raise additional capital in the future.
• Inability to refinance, extend, or repay senior indebtedness.
• Quarterly operating results may vary.
• Significant portion of expenses are relatively fixed.
• Recent European Union regulations include stringent requirements for health claims on food and supplement labels.

Mitigation Strategies

• Implementing remote working arrangements, varying procedures and protocols at various facilities, social distancing, the use of protective screens and face masks and imposing visitor and travel restrictions.
• Water savings strategies.
• Strategic cost savings initiative.
• New ITP issued by the US Department of the Interior effective June 1, 2019; the permit expires June 1, 2035.
• Water recycling systems.
• Insurance coverage (limited).
• Cost cutting initiatives.
• Strategies to allow for continued and increasing sales of our products in the European Union.

Supply Chain Management

Climate-Related Risks & Opportunities

Transition Risks

• Legislation to address climate change by reducing greenhouse gas emissions and establishing a price on carbon.

Environmental Metrics

ESG Focus Areas

• Not disclosed

Environmental Achievements

• Not disclosed

Social Achievements

• Not disclosed

Governance Achievements

• Not disclosed

Climate Goals & Targets

Environmental Challenges

• Lower demand resulting from higher inflation and consumers shifting their spend from goods to services.
• Global supply chain constraints resulting in higher than normal inventory levels for bulk customers.
• Decrease in packaged sales due to the timing of shipments to a significant customer.
• Higher cost per kilogram of astaxanthin and spirulina due to inflation and lower spirulina production volumes.
• Fresh water availability and quality.
• Cost of electricity tied to the global price of crude oil.

Mitigation Strategies

• Implemented cost savings initiatives, including stopping or slowing production of inventory, reducing headcount and compensation, and eliminating certain discretionary selling, general and administrative expenses.
• Developed additional water recycling systems to utilize fresh water efficiently.

Supply Chain Management

Supplier Audits: Not disclosed

Responsible Procurement

• Not disclosed

Climate-Related Risks & Opportunities

Physical Risks

• Not disclosed

Transition Risks

• Not disclosed

Opportunities

• Not disclosed

Reporting Standards

Frameworks Used: Null

Certifications: iGen Non-GMO, Gluten Intolerance Group’s Gluten Free, Detox Project Glyphosate Free, Informed Choice, Non-GMO Project verified, Kosher, Halal, Vegan

Third-party Assurance: Not disclosed

UN Sustainable Development Goals

• Not disclosed

Not disclosed

Sustainable Products & Innovation

• Not disclosed

Awards & Recognition

• Not disclosed

Environmental Metrics

Climate Goals & Targets

Environmental Challenges

• Lower demand resulting from higher inflation and consumers reducing spend in non-discretionary areas.
• International customers delayed or reduced orders due to the appreciation of the U.S. dollar impacting exchange rates.
• Bulk customers have higher than normal inventory levels due to lower demand and global supply chain constraints.
• Decrease in packaged sales due to the timing of shipments to a significant customer in the prior year.
• Higher cost per kilogram of astaxanthin and spirulina due to inflation.
• Lower spirulina production volumes.
• Fresh water availability could be negatively impacted by significant growth in the local population and throughput constraints on water delivery infrastructure.

Mitigation Strategies

• Implemented cost savings initiatives, including stopping or slowing production of inventory, reducing headcount and compensation, and eliminating certain discretionary selling, general and administrative expenses.
• Developed additional water recycling systems to utilize fresh water efficiently.

Supply Chain Management

Climate-Related Risks & Opportunities

Physical Risks

• Unfavorable weather patterns
• Catastrophic natural disasters such as earthquakes, tsunamis, hurricanes and volcanic eruptions

Transition Risks

• Legislation to address climate change by reducing greenhouse gas emissions and establishing a price on carbon

Environmental Metrics

ESG Focus Areas

• Not disclosed

Environmental Achievements

• Not disclosed

Social Achievements

• Not disclosed

Governance Achievements

• Not disclosed

Climate Goals & Targets

Environmental Challenges

• Sustained operating losses and negative cash flows.
• Non-compliance with a debt covenant requirement at March 31, 2023, resulting in a freeze on additional advances from the Credit Agreement.
• Lower sales across the majority of the Company's portfolio due to macroeconomic impacts.
• Lower demand from consumers due to higher inflation.

Mitigation Strategies

• Cost savings initiatives: stopping or slowing inventory production, maintaining reduced headcount and compensation (through attrition and furloughs), eliminating discretionary selling, general, and administrative expenses.
• Developing an operating plan to produce cash flows to meet financing requirements.

Supply Chain Management

Supplier Audits: Not disclosed

Responsible Procurement

• Not disclosed

Climate-Related Risks & Opportunities

Physical Risks

• Not disclosed

Transition Risks

• Not disclosed

Opportunities

• Not disclosed

Reporting Standards

Frameworks Used: Null

Certifications: GMP certified by Merieux NutriSciences

Third-party Assurance: Not disclosed

UN Sustainable Development Goals

• Not disclosed

Not disclosed

Sustainable Products & Innovation

• Not disclosed

Awards & Recognition

• Not disclosed

Environmental Metrics

ESG Focus Areas

• Not disclosed

Environmental Achievements

• Not disclosed

Social Achievements

• Not disclosed

Governance Achievements

• Not disclosed

Climate Goals & Targets

Environmental Challenges

• Lower sales across portfolio due to macroeconomic environment and increased price sensitivity in the bulk material market.
• Higher cost per kilogram of astaxanthin and spirulina due to lower production volumes, write-downs of purchased material, and excess capacity.
• Lower demand resulting from higher inflation and consumers shifting spending from goods to services.
• Global supply chain constraints leading to higher than normal inventory levels for bulk customers.
• Freshwater availability concerns due to potential population growth and infrastructure constraints.
• Increased energy costs tied to global crude oil prices.
• Variability in production levels due to uncontrollable factors like weather.
• Staffing constraints impacting astaxanthin cultivation.

Mitigation Strategies

• Cost savings initiatives: slowing inventory production, reduced headcount and compensation, eliminating discretionary expenses.
• Sales and marketing team changes: new Chief Commercial Officer, strengthened sales team, updated marketing materials.
• Capital raising through a private placement.
• Water recycling systems to utilize freshwater efficiently.
• Increased focus on production efficiencies in volume yield, potency, and quality.
• Shifting to year-round astaxanthin cultivation to manage staffing constraints (previously only first six months).

Supply Chain Management

Supplier Audits: Not disclosed

Responsible Procurement

• Not disclosed

Climate-Related Risks & Opportunities

Physical Risks

• Not disclosed

Transition Risks

• Increased energy costs and price volatility due to climate change legislation.

Opportunities

• Not disclosed

Reporting Standards

Frameworks Used: Null

Certifications: GMP (Merieux NutriSciences), iGen Non-GMO, Gluten Intolerance Group’s Gluten Free, Detox Project Glyphosate Free, Informed Choice, Non-GMO Project Verified, Kosher (Organized Kashrus Laboratories), Halal (Islamic Food and Nutrition Council of America), Vegan (Vegan.org), Class A safety rating (DSI-EC of the United States Pharmacopeia)

Third-party Assurance: Not disclosed

UN Sustainable Development Goals

• Not disclosed

Not disclosed

Sustainable Products & Innovation

• Not disclosed

Awards & Recognition

• Not disclosed