November 10, 2010 at 08:00 AM EST
Cyanotech Reports Financial Results for the Second Quarter and First Six Months of Fiscal 2011

Cyanotech Corporation (Nasdaq Capital Market: CYAN), a world leader in microalgae-based, high-value nutrition and health products, today announced financial results for the second quarter and first six months of fiscal 2011, ended September 30, 2010.

Second Quarter 2011

For the second quarter of fiscal 2011 compared to the second quarter of fiscal 2010, revenues were $3,834,000 compared to revenues of $3,925,000. Gross profit was $1,652,000, with gross profit margin of 43%, compared to gross profit of $1,762,000 and gross profit margin of 45%. Net income was $526,000, or $0.10 per diluted share, compared to $599,000, or $0.11 per diluted share.

Trailing 12 Months

For the trailing 12 months ended September 30, 2010, compared to the trailing 12 months ended September 30, 2009, revenues were $15,486,000 compared to revenues of $14,642,000. Gross profit was $6,449,000, with gross profit margin of 42%, compared to gross profit of $6,137,000 and gross profit margin of 42%. Net income was $1,304,000, or $0.26 per diluted share, compared to $1,369,000, or $0.26 per diluted share.

“We are pleased with Cyanotech’s solid performance in the second quarter of fiscal 2011, and we saw key positive trends reflecting our new sales and marketing initiatives,” said David I. Rosenthal, Interim President and CEO. “International sales of bulk products were down slightly in the second quarter, which we believe resulted from the timing of orders by major customers. At the same time, our U.S. mainland sales of Nutrex Hawaii-branded consumer products, in which we are focusing on retail outlets, grew 15% from the first quarter of fiscal 2011 to the second quarter. A portion of this success can be attributed to our new program instituted during the second quarter where we are actively educating domestic retailers on the benefits of Cyanotech’s products.”

Rosenthal added, “On the production side, we continue to generate good yields, which will enable us to meet increased demand for our products.”

Cash and cash equivalents were $783,000 at September 30, 2010 compared to the March 31, 2010 balance of $817,000. Working capital increased to $5,950,000 at September 30, 2010 compared to $4,942,000 at March 31, 2010.

For the second quarter of fiscal 2011 compared to the second quarter of fiscal 2010, Spirulina sales accounted for 49% of total revenues and natural Astaxanthin sales for 51%. International sales were 41% of total sales compared to 37%.

First Six Months 2011

For the first six months of fiscal 2011 compared to the first six months of fiscal 2010, revenues were $7,690,000 compared to revenues of $7,946,000. Gross profit was $3,311,000, with gross profit margin of 43%, compared to gross profit of $3,495,000 and gross profit margin of 44%. Net income was $925,000, or $0.17 per diluted share, compared to $1,012,000, or $0.19 per diluted share.

About CyanotechCyanotech Corporation, a world leader in microalgae technology, produces BioAstin® Natural Astaxanthin and Hawaiian Spirulina Pacifica®—all natural, functional nutrients that leverage our experience and reputation for quality, building nutritional brands which promote health and well-being. Cyanotech's Spirulina products offer complete nutrition, and augment energy and immune response. They are FDA reviewed and accepted as Generally Recognized as Safe (GRAS) for use in food products. BioAstin's superior antioxidant activity and ability to support and maintain a natural anti-inflammatory response enhance skin, muscle and joint health. All Cyanotech products are produced from microalgae grown at its 90-acre facility in Kona, Hawaii using patented and proprietary technology. Cyanotech distributes to nutritional supplement, nutraceutical and cosmeceutical manufacturers and marketers in more than 54 countries worldwide. Cyanotech was the first microalgae company in the world to obtain quality management standards ISO 9001:2000 certification and is GMP-certified by the Natural Products AssociationTM. Visit www.cyanotech.com for more information.

“Safe Harbor” Statement under the U.S. Private Securities Litigation Reform Act of 1995 Besides statements of present fact and historical fact, this press release may contain forward-looking statements. Forward-looking statements relate to the future and are subject to inherent uncertainties, risks and changes in circumstances which are difficult to predict. Our actual results may differ materially from those contemplated by forward-looking statements. We caution against relying on forward-looking statements. Important factors that could change actual, future results include: changes in sales levels to our largest customers, weather patterns in Hawaii, production problems, risks associated with new products, foreign exchange fluctuations, and availability of financing, as well as national and global political, economic, business, competitive, market and regulatory conditions. Other factors are more fully detailed in the Company’s recent Form 10-Q and annual Form 10-K filings with the Securities and Exchange Commission.

(Financial Tables Follow: The following tables do not contain footnotes or other information contained in the Company’s Form 10-Q for the period ended September 30, 2010. As such the following Financial Tables are provided only as a guide and other factors are more fully detailed in the Company’s Form 10-Q and annual Form 10-K filings with the Securities and Exchange Commission.)

CYANOTECH CORPORATION

CONSOLIDATED CONDENSED BALANCE SHEETS

(Dollars in thousands except par value and number of shares)

(Unaudited)

September 30,
2010
March 31,
2010
ASSETS
Current assets:
Cash and cash equivalents $ 783 $ 817
Accounts receivable, net of allowance for doubtful accounts of $10 at September 30, 2010 and March 31, 2010 2,130 2,064
Inventories, net 4,613 3,933
Prepaid expenses and other assets 155 400
Total current assets 7,681 7,214
Equipment and leasehold improvements, net 4,709 4,681
Other assets 263 253
Total assets $ 12,653 $ 12,148
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current maturities of long-term debt $ 200 $ 276
Line of credit 150 150
Customer deposits 10
Accounts payable 688 1,125
Accrued expenses 683 721
Total current liabilities 1,731 2,272
Long-term debt, less current maturities 656 756
Total liabilities 2,387 3,028
Commitments and contingencies
Stockholders’ equity:

Common stock of $0.02 par value, shares authorized 7,500,000; 5,391,968 shares issued and outstanding at September 30, 2010 and 5,252,572 shares at March 31, 2010

108 105
Additional paid-in capital 27,763 27,545
Accumulated deficit (17,605 ) (18,530 )
Total stockholders’ equity 10,266 9,120
Total liabilities and stockholders’ equity $ 12,653 $ 12,148

CYANOTECH CORPORATION

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

(Dollars in thousands, except per share amounts)

(Unaudited)

Three Months Ended
September 30,
Six Months Ended
September 30,
2010200920102009
NET SALES $ 3,834 $ 3,925 $ 7,690 $ 7,946
COST OF PRODUCT SALES 2,182 2,163 4,379 4,451
Gross profit 1,652 1,762 3,311 3,495
OPERATING EXPENSES:
General and administrative 643 778 1,406 1,674
Sales and marketing 393 303 776 624
Research and development 62 42 146 123
Total operating expenses 1,098 1,123 2,328 2,421
Income from operations 554 639 983 1,074
OTHER INCOME (EXPENSE):
Interest expense, net (18 ) (28 ) (39 ) (57 )
Other income, net 1 17
Total other expense, net (18 ) (28 ) (38 ) (40 )
Income before provision for income taxes 536 611 945 1,034
PROVISION FOR INCOME TAXES 10 12 20 22
NET INCOME $ 526 $ 599 $ 925 $ 1,012
NET INCOME PER SHARE:
Basic $ .10 $ .11 $ .17 $ .19
Diluted $ .10 $ .11 $ .17 $ .19
SHARES USED IN CALCULATION OF NET INCOME PER SHARE:
Basic 5,374 5,247 5,314 5,246
Diluted 5,390 5,308 5,333 5,300

Contacts:

Cyanotech Corporation
Bruce Russell
310-559-4955 x101
brussell@cyanotech.com
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