Cyanotech Reports Financial Results for the Fourth Quarter and Fiscal Year 2008

KAILUA KONA, Hawaii--(BUSINESS WIRE)--Cyanotech Corporation (Nasdaq:CYAN), a world leader in producing high-value nutrition and health products from microalgae, today announced financial results for the fourth quarter and fiscal year 2008, ended March 31, 2008.

Revenues for the fourth quarter of fiscal 2008 increased 47% to $3,414,000, compared to revenues of $2,330,000 for the fourth quarter of fiscal 2007. Gross profit for the current fourth quarter was $1,204,000, with gross profit margin of 35%, compared to a gross profit of $178,000 and gross profit margin of 8% reported for the same quarter of the prior year. Net income for the fourth quarter was $181,000, or $0.03 per diluted share, compared to net loss of $5,319,000, or ($1.02) per diluted share for the fourth quarter of fiscal 2007.

The Company recorded a non-cash impairment charge of $4,487,000 on certain production related equipment and leasehold improvements as required by SFAS No. 144 in the fourth quarter of fiscal 2007.

Sales for fiscal 2008 were $11,364,000, compared to sales of $9,683,000 for fiscal 2007. Gross profit for fiscal 2008 was $3,071,000, with gross profit margin of 27%, compared to a gross profit of $1,131,000 and gross profit margin of 12% reported for fiscal 2007. Net loss for fiscal 2008 was $1,139,000, or ($0.22) per diluted share, compared to net loss of $7,425,000, or ($1.42) per diluted share for fiscal 2007.

Cash and cash equivalents were $1,090,000 as of March 31, 2008 compared to the March 31, 2007 balance of $1,444,000. Working capital was $3,092,000 at March 31, 2008 compared to $3,361,000 at March 31, 2007.

“The past fiscal year has been challenging for Cyanotech. The Company endured increasing costs and experienced production shortfalls. In response, unprofitable business was discontinued, the workforce trimmed, and decisive steps were taken toward moving the Company in a positive direction,” said Andrew Jacobson, Cyanotech’s recently elected President and Chief Executive Officer. “As we look ahead to the new fiscal year we see promise and, yes, challenge. We will focus on building a stronger foundation to supply and service our ever-expanding market place. We will work to be more efficient and effective. Rising fuel and energy costs combined with a slowing US economy will require a focused team effort to achieve our objectives.”

“Fiscal 2009 will be my first year with the Company,” noted Mr. Jacobson, “and I look forward to the work of improving cultivation yields, reducing supply chain costs, expanding product offerings, delivering the highest quality products, and growing the business. At the same time we will strive toward growing our people, being best-in-class as we service our customers, developing strong relationships with suppliers, and delivering acceptable returns for our shareholders.”

About Cyanotech — Cyanotech Corporation, a world leader in microalgae technology, produces BioAstin® Natural Astaxanthin and Hawaiian Spirulina Pacifica®—all natural, functional nutrients that enhance human health and nutrition. Cyanotech's spirulina, FDA reviewed and accepted as Generally Recognized as Safe (GRAS) for use as a food ingredient, augments energy and immune response. BioAstin's benefits derive from its superior antioxidant activity and from its ability to support and maintain natural inflammatory response, enhancing skin, muscle and joint health. Cyanotech produces these products from microalgae grown at its 90-acre facility in Hawaii using patented and proprietary technology and distributes them to nutritional supplement, nutraceutical and cosmeceutical makers and marketers in more than 40 countries worldwide. Cyanotech was the first microalgae company in the world to obtain ISO 9001:2000. Visit www.cyanotech.com for more information.

“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995

Except for statements of historical fact, the statements in this press release are forward-looking. Such statements are subject to a number of risks and uncertainties that could cause actual results to differ materially from the statements made. These factors include, but are not limited to, general economic conditions, forecasts of sales in future periods, changes in sales levels to our largest customers, weather patterns, production problems caused by contamination, risks associated with the acceptance of new products, competition, foreign exchange fluctuations, government regulation, and other factors 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 Quarter and Fiscal Year ended March 31, 2008. As such the following Financial Tables are provided only as a guide and 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.)

CYANOTECH CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS March 31, 2008 and 2007
		2008			2007
		(in thousands, except share data)
ASSETS
Current assets:
Cash and cash equivalents		$	1,090		$	1,444
Accounts receivable, net of allowance for doubtful accounts of $23 in 2008 and 2007		1,934			1,587
Inventories		1,601			1,593
Prepaid expenses and other current assets		263			141
Total current assets		4,888			4,765
Equipment and leasehold improvements, net		4,269			4,701
Other assets		623			440
Total assets		$	9,780		$	9,906
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current maturities of long-term debt		$	567		$	398
Accounts payable		805			616
Accrued expenses		320			390
Customer deposit		104			—
Total current liabilities		1,796			1,404
Long-term debt, excluding current maturities		1,505			992
Other long-term liabilities		100			—
Total liabilities		3,401			2,396
Stockholders’ equity:
Common stock of $.02 par value, authorized 7,500,000 shares; issued and outstanding 5,242,270 shares at 2008 and 5,233,520 shares at 2007		105			105
Additional paid-in capital		27,337			27,333
Accumulated other comprehensive loss		(4		)	(8		)
Accumulated deficit		(21,059		)	(19,920		)
Total stockholders’ equity		6,379			7,510
Total liabilities and stockholders’ equity		$	9,780		$	9,906

CYANOTECH CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS Years ended March 31, 2008, 2007 and 2006
		2008			2007			2006
		(in thousands, except per share data)
Net sales		$	11,364		$	9,683		$	11,131
Cost of sales		8,293			8,552			8,071
Gross profit		3,071			1,131			3,060
Operating expenses:
Research and development		143			203			187
Sales and marketing		1,355			1,297			1,312
General and administrative		2,478			2,448			1,814
Impairment loss on equipment and leasehold improvements		—			4,487			—
Total operating expense		3,976			8,435			3,313
Loss from operations		(905		)	(7,304		)	(253		)
Other income (expense):
Interest income		24			59			46
Interest expense		(164		)	(186		)	(180		)
Other income (expense), net		(65		)	(3		)	(10		)
Total other expense, net		(205		)	(130		)	(144		)
Loss before income taxes		(1,110		)	(7,434		)	(397		)
Income tax expense (benefit)		29			(9		)	(6		)
Net loss		$	(1,139	)	$	(7,425	)	$	(391	)
Net loss per share:
Basic		$	(.22	)	$	(1.42	)	$	(0.07	)
Diluted		$	(.22	)	$	(1.42	)	$	(0.07	)
Shares used in calculation of net income loss per share:
Basic		5,242			5,234			5,226
Diluted		5,242			5,234			5,226