Cyanotech gets
$1.55 million
capital infusion

The neutraceutical company will meet
an Oct. 31 deadline to retire some debt

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By Dave Segal
dsegal@starbulletin.com

Cyanotech Corp., facing an Oct. 31 deadline to retire about $1.2 million in 10 percent convertible subordinated debentures, said today it will meet that obligation after completing private financing for $1.55 million with a mainland group of unidentified current shareholders.

The Kona company, which makes nutritional products Spirulina and BioAstin out of microalgae as well as the animal feed NatuRose, sold $1.25 million in 10 percent convertible subordinated debentures, due Sept. 30, 2004, along with $300,000 of common stock. The proceeds from the new debentures, which are convertible into shares of Cyanotech common stock at 65 cents a share, will be used to retire the $1.238 million due from the previous debentures. The stock was issued at 40 cents a share.

"We're very happy to be able to complete this financing and essentially lift the cloud hanging over the company with the debentures being due on Oct. 31," said Gerald Cysewski, chairman, president and chief executive officer of Cyanotech.

Cyanotech said it plans to use the proceeds from the $300,000 issuance of common stock for working capital, which will include a public relations campaign to disseminate information about positive results the company obtained from its clinical trials with BioAstin.

"We had those clinical trials presented at the American College of Nutrition on Oct. 6 and they were very positive for carpal tunnel syndrome and rheumatoid arthritis," Cysewski said.

Cysewski also said the company, which prior to this financing had a cash balance of $284,000 as of Sept. 30, has reworked its infomercial on BioAstin to focus on joint pain. The infomercial the company released in April and May produced disappointing results. Cysewski said the revamped informercial will be marketed on a limited basis beginning Oct. 23 in the Southern California, Phoenix, and Portland, Ore., markets.

Despite today's announcement, Cyanotech's shares slipped 4 cents to 51 cents. Its stock, which was dropped by the Nasdaq to the SmallCap Market from the National Market last month for failing to stay at $1 or higher, is down 49 percent this year.

"It's very surprising (the stock is down today) because it's very good news that we have completed the financing," Cysewski said. "I certainly thought it would have indicated to shareholders and investors that the cloud hanging over the company has been removed."