Cyanotech OKs reverse split

The move will help the firm get back in the good graces of the Nasdaq market

Cyanotech Corp., facing delisting from the Nasdaq SmallCap Market due to its low stock price and a delayed financial report, said yesterday its board had approved a 1-for-4 reverse stock split aimed at boosting the company's shares above the required $1 threshold.

The Kona-based company, a producer of nutritional products from microalgae, also said it is eliminating an unspecified number of middle management positions and restructuring its sales force.

Cyanotech said the reverse split is expected to become effective no later than Nov. 17.

The company's shares, pending the outcome of an appeal at an Oct. 12 Nasdaq hearing, are slated to be delisted on Nov. 26.

The company said yesterday the decision to conduct the reverse stock split was made "to bring the outstanding shares of common stock in line with the company's size and value and to bring the price of such stock into compliance with the Nasdaq listing requirement of at least $1 a share."

Cyanotech has reported that as of March 31, it had 62 full-time employees, including 44 in harvesting and production, two in research and development, and the remainder in sales, administration and support.

Cyanotech said it is having some difficulty in attracting entry-level operations personnel because of increased wage competition for workers stemming from demand in the state's construction industry.

The company's shares, which have been trading around an all-time low, closed yesterday at 43 cents, down 4 cents.

A reverse split, based on yesterday's closing price, would boost the shares to $1.72.

The company said the changes to middle management and its sales force are designed to bring salespeople into closer contact with customers and their needs. Cyanotech said the reduction of some of the middle management positions will increase communication and management effectiveness within the company's sales and production departments.

In addition, Cyanotech said it is conducting a search for an East Coast-based sales employee to provide a closer link with customers in the Atlantic. Cyanotech also said it plans to expand its scientific and accounting staffs.

Cyanotech said the new initiatives and restructuring is expected to allow Gerald Cysewski, chairman, president and chief executive, to focus more of his time on scientific developments and on improving the company's products and processes.

While the reverse split will take care of the low stock price, Cyanotech made no mention yesterday of when it would file its twice-delayed earnings report for the quarter ended June 30. The company also faces the threat of delisting over the delayed report.

Cyanotech has said the filing was delayed due to a technical accounting review by the company related its "historical treatment of certain inventory-related costs."

Chief Financial Officer Bill Maris said yesterday he could not comment any further.

In an Aug. 11 filing with the Securities and Exchange Commission, Cyanotech reported that it was estimating a fiscal first-quarter loss of $249,000, or 1 cent a share, for the period ended June 30, compared with net gain of $153,000, or 1 cent a share, in the year-earlier quarter.

Cyanotech said in the filing that the decrease in net income primarily was due to lower sales from decreased customer orders. The company also said some of its costs have increased from the year-earlier period.

It said that its estimates are subject to change pending the completion of its review of the inventory-related costs.

Cyanotech, which posted a fiscal 2006 net loss of $268,000 on $11.1 million in revenue, produces three main products. They are Spirulina, a whole microalgae rich in many nutrients, including antioxidants such as beta-carotene and zeaxanthin; BioAstin, a natural source of astaxanthin that has been shown to be a potent antioxidant, as well as having anti-inflammatory properties; and NatuRose, a source of natural astaxanthin for use in animal feeds.