Cyanotech Reports Financial Results for the First Quarter of Fiscal Year 2017

KAILUA KONA, Hawaii–(BUSINESS WIRE)–Cyanotech Corporation (Nasdaq Capital Market: CYAN), a world leader in
microalgae-based, high-value nutrition and health products, today
announced financial results for the first quarter of fiscal year 2017,
ended June 30, 2016.

First Quarter 2017

For the first quarter of fiscal year 2017 compared to the first quarter
of fiscal year 2016, net sales were $7,322,000 compared to $7,594,000, a
decrease of 3.6%. Gross profit was $2,821,000, with gross profit margin
of 38.5%, compared to gross profit of $2,924,000 and gross profit margin
of 38.5%. Operating loss was ($610,000) compared to operating loss of
($195,000). Net loss was ($691,000) or ($0.12) per diluted share,
compared to net loss of ($105,000) or ($0.02) per diluted share.
Contributing to the loss are legal fees related to various ongoing legal
matters which totaled $580,000 for the first quarter of fiscal 2017,
compared to $42,000 for the first quarter of fiscal 2016. Please review
the Company’s Form 10-Q for more detailed information.

Commenting on the first quarter of fiscal 2017 results (changes shown
vs. the first quarter of fiscal 2016), Gerry Cysewski, Ph.D.,
Cyanotech’s Interim President and CEO, noted:

“Net sales declined 3.6% for the quarter, driven by a 14% decrease in
our packaged products, offset by a 39% increase in bulk sales. The
decline in sales of packaged product compared to the same period last
year is the result of limits on the level of discounts offered in low
margin channels in the current quarter. This change, which resulted in a
19% decrease in astaxanthin sales and flat spirulina sales, is expected
to improve profitability in the long run.

“Sales of our bulk products increased 39%, made up of a 43% increase in
spirulina sales and a 25% increase in astaxanthin sales. The increase in
bulk sales was driven by increased demand from our international
customers, coupled with increased levels of astaxanthin inventory
available for sale.

“Our strategy continues to focus on growing the market for higher
margin, branded consumer products by emphasizing the higher nutritional
content of our Hawaiian spirulina and the benefits of our natural
astaxanthin over synthetics. Both are the #1 selling products in their
respective categories in the natural products channel.

“During the first quarter, BioAstin sales expanded into an additional 32
warehouse stores in Costco’s Texas region and now is available in 195
Costco warehouses, or roughly 40% of their domestic total.

“We also began extracting 100 percent of our astaxanthin product in our
new onsite extraction facility, saving considerable costs and time
compared to our earlier process of sending biomass to the mainland US
and to New Zealand for extraction.”

Trailing 12 Months ended June 30, 2016

For the trailing 12 months ended June 30, 2016 compared to the trailing
12 months ended June 30, 2015, net sales were $31,568,000 compared to
$33,779,000, a decrease of 6.5%. Gross profit was $11,763,000, with
gross profit margin of 37.3%, compared to gross profit of $14,331,000
and gross profit margin of 42.4%. Pretax loss was ($1,590,000) compared
to pretax income of $1,083,000, and net loss was ($4,981,000) or ($0.89)
per diluted share, compared to net income of $252,000 or $0.05 per
diluted share.

About Cyanotech Cyanotech Corporation, a world leader in
microalgae technology, produces BioAstin® Natural Astaxanthin and
Hawaiian Spirulina Pacifica®—all natural, functional nutrients that
leverage our experience and reputation for quality, building nutritional
brands which promote health and well-being. Cyanotech’s Spirulina
products offer complete nutrition, and augment energy and immune
response. They are FDA-reviewed and accepted as Generally Recognized as
Safe (GRAS) for use in food products. BioAstin’s superior antioxidant
activity and ability to support and maintain a natural anti-inflammatory
response enhance skin, muscle and joint health. All Cyanotech products
are produced from microalgae grown at our 90-acre facility in Kona,
Hawaii using patented and proprietary technology. Cyanotech sells its
products direct to consumers at retail locations in the United States
and online at www.nutrex-hawaii.com
and also distributes to nutritional supplement, nutraceutical and
cosmeceutical manufacturers and marketers worldwide and is GMP-certified
by the Natural Products AssociationTM. Visit www.cyanotech.com
for more information.

“Safe Harbor” Statement under the U.S. Private Securities Litigation
Reform Act of 1995
Besides statements of present fact and historical
fact, this press release may contain forward-looking statements.
Forward-looking statements relate to the future and are subject to
inherent uncertainties, risks and changes in circumstances that are
difficult to predict. Our actual results may differ materially from
those contemplated by forward-looking statements. We caution against
relying on forward-looking statements. Important factors that could
change actual, future results include: changes in sales levels to our
largest customers, weather patterns in Hawaii, production problems,
risks associated with new products, foreign exchange fluctuations, and
availability of financing, as well as national and global political,
economic, business, competitive, market and regulatory conditions. Other
factors are more fully detailed in the Company’s annual Form 10-K
filings with the Securities and Exchange Commission.

(Financial Tables Follow: The following tables do not contain
footnotes or other information contained in the Company’s Form 10-Q for
the period ended June 30, 2016, which can be found on the Cyanotech
website (www.cyanotech.com)
under Investors>Investor Filings upon filing. As such the following
Financial Tables are provided only as a guide and other factors are more
fully detailed in the Company’s annual Form 10-K filings with the
Securities and Exchange Commission.)

 

CYANOTECH CORPORATION

 

CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in
thousands, except par value)
(Unaudited)

   
June 30,
2016
March 31,
2016
ASSETS
Current assets:
Cash and cash equivalents $ 1,554 $ 1,240
Accounts receivable, net of allowance for doubtful accounts of $136
at June 30, 2016 and $136 at March 31, 2016
2,246 2,983
Inventories, net 8,388 7,856
Deferred tax assets 74 74
Prepaid expenses and other current assets   604   502
Total current assets 12,866 12,655
 
Equipment and leasehold improvements, net 17,458 17,796
Other assets   400   392
Total assets $ 30,724 $ 30,843
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Note payable $ 600 $
Current maturities of long-term debt 579 574
Customer deposits 65 117
Accounts payable 3,991 4,000
Accrued expenses   1,660   1,430
Total current liabilities 6,895 6,121
 
Long-term debt, net 6,653 6,790
Deferred tax liabilities 74 74
Deferred rent   34   30
Total liabilities   13,656   13,015
 
Commitments and contingencies
 
Stockholders’ equity:
Preferred stock of $0.01 par value, authorized 10,000,000 shares; no
shares issued and outstanding
Common stock of $0.02 par value, authorized 50,000,000 shares;
5,648,264 shares issued and outstanding at June 30, 2016 and
5,599,797 at March 31, 2016
113 112
Additional paid-in capital 31,515 31,585
Accumulated deficit   (14,560 )   (13,869 )
Total stockholders’ equity   17,068   17,828
Total liabilities and stockholders’ equity $ 30,724 $ 30,843
 

CYANOTECH CORPORATION

 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars
in thousands, except per share amounts)
(Unaudited)

 
Three Months Ended June 30,
2016   2015
 
NET SALES $ 7,322 $ 7,594
COST OF SALES   4,501   4,670
Gross Profit   2,821   2,924
 
OPERATING EXPENSES:
General and administrative 1,707 1,210
Sales and marketing 1,555 1,732
Research and development 166 177
Loss on disposal of equipment and leasehold improvements   3  
Total operating expenses   3,431   3,119
 
Loss from operations (610 ) (195 )
 
Interest expense, net   132   24
 
Loss before income tax (742 ) (219 )
 
INCOME TAX BENEFIT   (51 )   (114 )
 
NET LOSS $ (691 ) $ (105 )
 
NET LOSS PER SHARE:
Basic $ (0.12 ) $ (0.02 )
Diluted $ (0.12 ) $ (0.02 )
 
SHARES USED IN CALCULATION OF NET LOSS PER SHARE:
Basic   5,633   5,565
Diluted   5,633   5,565

Contacts

Cyanotech Corporation
Bruce Russell, 310-346-6131
brussell@cyanotech.com