Cyanotech loses money
on lower revenue

Cyanotech Corp.'s sales of its nutritional microalgae products plunged 22.2 percent in the three months ending March 31 as the Kona-based company posted its first loss after five straight profitable quarters.

Lower bulk sales of Spirulina and NatuRose dragged down the company despite a pickup in BioAstin purchases and resulted in a fiscal fourth-quarter net loss of $74,000, or virtually no earnings per share, compared with a net gain of $441,000, or 2 cents a share, a year earlier.

Revenue declined to $2.6 million from $3.3 million.

Despite the losing quarter, Cyanotech finished with its second profitable year in a row. Until last year, the company had not had a profitable year since fiscal 1997.

Net income for the year rose 21.8 percent, to $486 million, or 2 cents a share, from $399 million, or 2 cents a share, in fiscal 2004. Revenue, though, decreased 1.2 percent for the year to $11.5 million from $11.6 million.

Cyanotech's stock, which briefly dipped under $1 earlier this month, has had difficulties in the past few years staying above that key threshold. In 2002, the stock was delisted from the Nasdaq National Market for failing to stay at $1 or higher and relegated to the Nasdaq SmallCap Market. The company then received a similar delisting warning from the Nasdaq SmallCap before it boosted its stock above $1. "Although our fiscal 2005 results did not meet our expectations, we were able to maintain revenue levels consistent with the prior year despite the impact of weather-related difficulties encountered by our Japan aquaculture customers," said Gerald Cysewski, chairman and chief executive of Cyanotech.

Cyanotech ended the quarter with higher backlog orders for Spirulina products than the same period a year ago. Spirulina, which has a lower profit margin than BioAstin and NatuRose, is used as a general health supplement.

BioAstin, taken for its natural astaxanthin benefits, has been shown in some company studies to be more than 500 times stronger than Vitamin E and is used as an anti-inflammatory. Clinical trials also have shown it to be effective in reducing symptoms of carpal tunnel syndrome, rheumatoid arthritis and other ailments.

NatuRose, an animal feed derived from natural astaxanthin, allows fish farmers to grow fish with a pink flesh pigmentation.

At the end of last year, the company finished converting six of its 54 Spirulina ponds to natural astaxanthin microalgae ponds to take advantage of the high unit sales prices of BioAstin and NatuRose. But Cyanotech said demand for Spirulina remains strong and the company is adjusting production to meet demand. The company also said that the increased capacity for natural astaxanthin production has allowed it to meet demand.