Cyanotech produces a profit

Kona-based Cyanotech Corp. said yesterday it swung to a profit for the fourth quarter but posted its third-straight annual loss.

Fourth-quarter net $181,000 Year-earlier loss $5.3 million

It was the first quarter this year the company posted a profit.

Net income for the quarter was $181,000 , or 3 cents a share, compared to a loss of $5.3 million, or $1.02 a share, a year ago. The company, which makes nutritional products from microalgae, recorded a noncash impairment charge of $4.5 million in the year-earlier quarter on production-related equipment and leasehold improvements.

Revenue for the quarter jumped 47 percent to $3.4 million from $2.3 million a year ago.

The loss for fiscal 2008, which ended March 31, was $1.1 million, or 22 cents a share, compared with a loss of $7.4 million, or $1.42 a share, in fiscal 2007. Revenue was $11.4 million for the year, up 17 percent from last year's $9.7 million. The company's last annual profit was $601,000 in 2005.

"The company endured increasing costs and experienced production shortfalls," Andrew Jacobson, who was named Cyanotech's president and chief executive in May, said in a statement. "In response, unprofitable business was discontinued, the work force trimmed and decisive steps were taken toward moving the company in a positive direction."

Last year, Cyanotech delayed earnings results several times due to an internal accounting probe that resulted in three years of restated earnings, and discontinued a wholly owned Japanese subsidiary because of poor sales of NatuRose, an astaxanthin used in animal feeds.

Cash and cash equivalents were $1 million as of March 31, down from the year-earlier balance of $1.4 million.

In December, Cyanotech laid off 13 employees, or about 20 percent of its 64 full-time employee work force, shortly after Gerald Cysewski, Cyanotech's founder, stepped down as chairman, president and CEO to become chief scientific officer.

During the 2007 fiscal year, the company experienced decreased astaxanthin production volumes due to an imbalance in factors involved in the production of microalgae. The resulting production shortfalls "dramatically increased" the company's fiscal year production costs, it said. Cyanotech's BioAstin product, which uses the antioxidant astaxanthin, accounted for 42 percent, 24 percent and 27 percent of net sales for the 2008, 2007 and 2006 fiscal years, respectively.

"Our desire to stabilize future production levels has not yet been achieved," the company said in its annual regulatory filing.

As of March 31, Cyanotech had an accumulated deficit of approximately $21 million. The past three years account for approximately 42 percent of the company's accumulated deficit since inception.

"If an extended period of net losses continues, our negative cash flow will likewise, and may hamper current operations and prevent us from sustaining or expanding our business," the company said in the filing.