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Cyanotech Reports Financial Results for the First Quarter of Fiscal Year 2019

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Cyanotech Corporation (Nasdaq Capital Market: CYAN), a world leader in
microalgae-based, high-value nutrition and health products, announced
financial results for the first quarter of fiscal year 2019, ended June
30, 2018.

First Quarter Fiscal 2019

For the first quarter of fiscal 2019 compared to the first quarter of
fiscal 2018, net sales were $7,145,000 compared to $8,809,000. Gross
profit was $1,836,000, with gross profit margin of 25.7%, compared to
gross profit of $3,603,000 and gross profit margin of 40.9%. Operating
loss was ($1,167,000) compared to operating income of $620,000. Net loss
was ($1,275,000) or ($0.22) per diluted share, compared to net income of
$501,000 or $0.09 per diluted share.

Commenting on the first quarter fiscal 2019 results (changes shown vs.
the first quarter of fiscal 2018), Cyanotech's Chief Executive Officer,
Mawae Morton, said:

"Cyanotech's results for the quarter reflect the impact of a spirulina
production shutdown and re-inoculation that was required during this
time period. The re-inoculation process limited spirulina supply, which
impacted us from both a cost and a sales standpoint. The lower spirulina
production levels in both Q4 of fiscal 2018 (-63% compared to Q4 of
fiscal 2017) and in Q1 of the current fiscal year (-76% compared to Q1
of fiscal 2018) had a negative impact on the current quarter's
performance. In addition to a 14.7% decrease in sales volume, the lower
production levels resulted in a $1.1 million increase in costs in the
current quarter which reduced gross margin by -14.9 points.
Additionally, spirulina inventory on hand at the end of the quarter
includes $0.6 million of higher overhead costs that will be amortized in
the next quarter and will negatively impact gross profit and margin.
Despite the supply disruption, ongoing demand for our Hawaiian Spirulina
remains strong.

"Net sales decreased 19% for the quarter, driven by a 17% decrease in
our packaged products and a 29% decrease in bulk sales. 12% of the
decrease in sales of our packaged products was the result of lower
supply of spirulina, and 5% was due to the quarterly variance year to
year in the timing of international orders for astaxanthin. The decrease
in sales of our bulk products is primarily the result of the lack of
available spirulina supply.

"We will continue to put emphasis on our Nutrex Hawaii consumer products
to introduce them to a broader consumer market, improve consumer
awareness of astaxanthin, leverage our experience and reputation for
quality, and build nutritional brands which promote health and
well-being."

Commenting on production, Gerald R. Cysewski, Ph.D., Cyanotech's founder
and Chief Scientific Officer, said, "In April 2018, we undertook a
complete re-inoculation of our spirulina ponds. During the
re-inoculation period, which was completed in mid-May, there was no
spirulina production. For various reasons reported upon earlier, this
re-inoculation took longer than previous such cultivation adjustments
but the algae is now responding favorably and yielding more normal
levels of production.

"In addition, increased activity of the Kilauea Volcano on the Island of
Hawaii began May 3, 2018. Although the increased volcanic activity is
located approximately 50 miles away from Cyanotech and has had minimal
effect on the Company's production, during some wind patterns a light
volcanic haze (VOG) blows over Cyanotech's facilities. VOG does not
affect product quality but can reduce light levels by about 10% at
ground level. Reduced light levels reduce growth of microalgae and can
negatively impact production levels. We have not observed significant
VOG related production issues to date, but we continue to monitor light
levels and other growing conditions."

Trailing 12 Months

For the trailing 12 months ended June 30, 2018 compared to the trailing
12 months ended June 30, 2017, net sales were $32,451,000 compared to
$33,529,000. Gross profit was $11,604,000, with gross profit margin of
35.8%, compared to $13,006,000 and 38.8%. Net loss was ($751,000) or
($0.13) per diluted share, compared to net loss of ($23,000) or ($0.00)
per diluted share.

Please review the Company's Form 10-Q for the period ended June 30, 2018
for more detailed information.

 

 

— Cyanotech will host a Skype broadcast at 8 p.m. EDT on Tuesday,
August 14 to respond to questions about its operating results and
other topics of interest. Interested parties are asked to submit
questions to questions@cyanotech.com
before 12 p.m. EDT on Tuesday, August 14. The Company will respond
only to relevant questions relating to the Company's first quarter
fiscal 2019 financial performance, and will not be accepting any
questions or comments during the broadcast.

 

To join the broadcast, please browse http://cyanotech.com/meet
approximately five minutes prior to the start time.

 

About Cyanotech — Cyanotech Corporation, a world leader in
microalgae technology for over 30 years, produces BioAstin® Hawaiian
Astaxanthin® and Hawaiian Spirulina Pacifica®. These all natural,
dietary ingredients and supplements leverage our experience and
reputation for quality, building nutritional brands which promote health
and well-being. The Company's mission is to fulfill the promise of whole
health through Hawaiian microalgae. Cyanotech's BioAstin® offers
superior antioxidant activity which supports skin, eye and joint health,
as well as recovery from exercise*. Cyanotech's Spirulina products offer
nutrition that supports cardiovascular health and immunity.* All
Cyanotech products are produced from microalgae grown at our 90-acre
facility in Kona, Hawaii using patented and proprietary technology and
are Generally Recognized as Safe (GRAS) for use in food products.
Cyanotech sells its products direct to consumers at retail locations in
the United States and online at www.nutrex-hawaii.com
and also distributes to dietary supplement, nutraceutical and
cosmeceutical manufacturers and marketers. The Company is regulated by
the FDA. Visit www.cyanotech.com
for more information.

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

"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 that 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 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 June 30, 2018, which can be found on the Cyanotech
website (www.cyanotech.com)
under Investors>Investor Filings upon filing. As such the following
Financial Tables are provided only as a guide and other factors are more
fully detailed in the Company's annual Form 10-K filings with the
Securities and Exchange Commission.

CYANOTECH CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
 

(In thousands, except per share amounts)

(Unaudited)

           
June 30,
2018
March 31,
2018
ASSETS
Current assets:
Cash $ 935 $ 1,329
Accounts receivable, net of allowance for doubtful accounts of $27
at June 30, 2018 and $27 at March 31, 2018
2,804 2,664
Inventories, net 9,487 9,034
Prepaid expenses and other current assets   593   590
Total current assets 13,819 13,617
 
Equipment and leasehold improvements, net 15,432 15,734
Restricted cash 65
Other assets   280   291
Total assets $ 29,531 $ 29,707
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Line of credit $ 1,250 $ 500
Current maturities of long-term debt 660 655
Customer deposits 300 133
Accounts payable 3,735 3,527
Accrued expenses   1,000   892
Total current liabilities 6,945 5,707
 
Long-term debt, less current maturities 5,636 5,790
Other long-term liabilities   98   103
Total liabilities   12,679   11,600
 
Commitments and contingencies
 
Stockholders' equity:
Preferred stock of $0.01 par value, authorized 10,000,000 shares; no
shares issued and outstanding
Common stock of $0.02 par value, authorized 50,000,000 shares;
5,788,887 shares issued and outstanding at June 30, 2018 and
5,772,032 at March 31, 2018
116 115
Additional paid-in capital 32,070 32,051
Accumulated deficit   (15,334 )   (14,059 )
Total stockholders' equity   16,852   18,107
Total liabilities and stockholders' equity $ 29,531 $ 29,707
 
CYANOTECH CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 

(In thousands, except per share amounts)

(Unaudited)

     
Three Months Ended June 30,
2018       2017
 
NET SALES $ 7,145 $ 8,809
COST OF SALES   5,309   5,206
Gross Profit   1,836   3,603
 
OPERATING EXPENSES:
General and administrative 1,372 1,352
Sales and marketing 1,423 1,489
Research and development   208   142
Total operating expenses   3,003   2,983
 
(Loss) income from operations (1,167 ) 620
 
Interest expense, net   130   108
 
(Loss) income before income tax (1,297 ) 512
 
INCOME TAX (BENEFIT) EXPENSE   (22 )   11
 
NET (LOSS) INCOME $ (1,275 ) $ 501
 
NET (LOSS) INCOME PER SHARE:
Basic $ (0.22 ) $ 0.09
Diluted $ (0.22 ) $ 0.09
 
SHARES USED IN CALCULATION OF NET (LOSS) INCOME PER SHARE:
Basic   5,785   5,685
Diluted   5,785   5,719
 

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