Cyanotech warned
about low stock price

The biotech company could face
delisting from the Nasdaq

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By Dave Segal
dsegal@starbulletin.com

Cyanotech Corp., whose stock has fallen into the depths of penny purgatory, has received a delisting warning from Nasdaq.

The faxed letter, in essence a shape-up or ship-out notification, is sent to companies whenever their stock trades below a $1 minimum bid price for 30 consecutive business days. The Nasdaq then provides a grace period of 90 calendar days for a company's stock to regain the $1 compliance level for 10 consecutive trading days. If a company is unable to meet the requirement, it must apply for listing on the less-liquid and lesser-regarded Nasdaq SmallCap Market.

Cyanotech's shares, which last closed at $1 on May 3, ended down 1 cent today at 80 cents and have been below the $1 level for 32 consecutive trading days

The letter informed the company that it has until Sept. 16 to meet the 10-day requirement of its stock's bid price reaching $1 or higher.

Ron Scott, chief financial officer of the Big Island aquaculture company, said that even though Cyanotech's intention is to remain on the Nasdaq National Market, investors shouldn't get too concerned about the delisting notice, even if Cyanotech temporarily drops down to the 700-plus-member SmallCap Market.

"I see the liquidity being perfectly acceptable on the SmallCap Market," Scott said. "In fact, we were on the SmallCap market when Cyanotech hit its all-time high of $14.88 in November 1995. I'm pretty confident we're going to regain compliance in the next year."

Scott said he expects Cyanotech to be in the red for the fiscal 2003 first quarter that ends this month before reaching break-even in the September quarter. He said he expects the company to be profitable in the December and March quarters. Scott's forecast for profitability in fiscal 2002 was dampened, he said, by inclement weather in December, January and February. The company ended the year with a loss of nearly $2.6 million.

Meanwhile, under Nasdaq rules, if a company drops from the National Market to the SmallCap market, it receives an additional 90-day grace period -- thus making for a total of 180 days -- to regain the $1 compliance and, upon meeting certain criteria, can be granted an additional 180 days. In Cyanotech's case, that means it has until Dec. 16 to regain compliance during the first grace period on the SmallCap Market and until June 16, 2003, under the additional 180-day period.

A company that has been dropped to the SmallCap Market can be moved back to the National Market if its stock holds the $1 level for 30 consecutive trading days and it has maintained compliance with all other listing requirements, which Cyanotech currently does.

Companies delisted entirely by Nasdaq are eligible for quotation on the Over the Counter Bulletin Board.

Scott said he's surprised that the stock hasn't been able to maintain the $1 level in light of recent developments with BioAstin, the company's microalgae-based dietary supplement.

In May, the company said clinical tests involving BioAstin showed improvement in patients with carpal tunnel syndrome as well as demonstrating a reduction in joint pain in people with rheumatoid arthritis. Additionally, Cyanotech had a patent approved in June for the use of astaxanthin to retard and prevent sunburn. Astaxanthin is produced from microalgae grown in Kona ponds.

"We've had a lot of good news lately that I thought would move the stock, but it hasn't," he said.