Impending delisting has
Cyanotech reviewing options

Cyanotech Corp., with less than a month remaining to boost its stock price to at least $1, is weighing the ramifications of a reverse split in order to keep its shares listed on the Nasdaq SmallCap Market.

Cyanotech The Kona nutraceutical company, which plans to report second-quarter earnings next week, needs to keep its stock at $1 or higher for 10 consecutive business days prior to Sept. 10 to retain its Nasdaq SmallCap listing. That means Cyanotech's stock needs to close at that threshold by the end of trading on Aug. 26. It closed yesterday at 45 cents.

"I don't know if in the long run it does much good for shareholders and the value of the stock," Chief Financial Officer Jeff H. Sakamoto said. "However, that being said, we certainly have to consider it and we do have to make a decision about what we're going to do.

"Our other option is to just let it ride and be delisted. We can appeal if we are delisted in September, and if we have at that time a plan in place to do a reverse split, the Nasdaq committee will probably allow us to remain listed until the transaction is completed, or at least will ponder it."

Cyanotech, which had 23 consecutive losing quarters through March 31, hasn't had a profitable three-month period since its 1998 fiscal first quarter ending June 30, 1997. The producer of microalgae nutritional products Spirulina and BioAstin and feed product NatuRose was delisted from the Nasdaq National Market on Sept. 23, 2002, for failing to keep its stock price at $1 or higher and moved to the Nasdaq SmallCap Market. Cyanotech was given until June 16, 2003, to reach $1 on the Nasdaq SmallCap and, when it didn't, was given a 90-day extension. That extra time period is now about to run out.

If Cyanotech is delisted, it would be traded on the less-liquid Over The Counter Bulletin Board. Sakamoto said if the company opts for the reverse split, it likely would match the 1-for-5 reverse split that Cyanotech implemented in December 1990, when it likewise was trying to avoid being delisted from the Nasdaq SmallCap.

Sakamoto regards reverse splits as a Band-Aid because historically it hasn't paid off for companies.

"If you look at the historical effects of reverse splits for most companies, unless the companies have a valid plan for improving their operations, it's a temporary issue," Sakamoto said. "Usually, within a year or two after any reverse split, there is kind of a shift back down to the original price of the stock. I see a reverse split as being a temporary measure more than anything else. I don't know if it's something we want to pursue. I will have to defer to the board on this and the president, Gary Cysewski."

Sometimes, though, reverse splits serve their purpose. Inc., which implemented a 1-for-6 reverse split in June, has tripled this year. Iomega Corp., maker of the Zip drive, installed a 1-for-5 reverse split in October 2001 and has nearly doubled since that time. However, AT&T Corp. did a 1-for-5 reverse split last December and has lost about a quarter of its value since.

Currently, two of the 11 other stocks in the Bloomberg Honolulu Star-Bulletin index trade over the counter. They are Mera Pharmaceuticals Inc. and Ceatech USA Inc., both of which have never had a profitable quarter. Hawaiian Airlines' parent, Hawaiian Holdings Inc., soon could join them.


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