Cyanotech Reports Financial Results for Fiscal 1999.

KAILUA-KONA, Hawaii--(BUSINESS WIRE)--June 29, 1999--

Cyanotech Corporation (NASDAQ/NM:CYAN) today announced financial results for the fourth quarter and fiscal 1999, ended March 31, 1999.

For the fourth quarter, the Company reported net sales of $1,775,000, gross profit of $271,000, a net loss of $765,000 and a net loss per common share of $0.06. This compares to net sales of $2,236,000, gross profit of $838,000 a net loss of $85,000, and a net loss per common share of $0.01 for the same quarter in fiscal 1998.

For fiscal 1999, the Company reported net sales of $6,738,000, gross profit of $973,000, a net loss of $2,557,000, and a net loss per common share of $0.21. This compares to net sales of $7,627,000, gross profit of $3,137,000, a net loss of $300,000, and a net loss per common share of $0.05 for fiscal 1998.

"The Company's reduced performance for the fourth quarter and fiscal year resulted from lower sales of bulk and packaged Spirulina Pacifica(TM) products. Total sales of Spirulina have been increasing over the past three quarters, but the average selling prices and gross profit have been negatively impacted due to continued pricing pressures from foreign and domestic producers. Sales of NatuRose(TM) natural astaxanthin rose only moderately during the fiscal year from the prior fiscal year," said Gerald R. Cysewski, Ph.D., chairman, president and CEO. "During the fourth quarter and again in April 1999, we downsized our operations to bring them in line with current revenue levels, with expected annual production and operating expense savings of approximately $1 million (at expected production levels). We have not, however, reduced our production capabilities or disrupted corporate development plans.

"We are implementing an asset management program with an aggressive inventory reduction plan, scaling back Spirulina production to approximately 50% of capacity in order to bring Spirulina inventory in line with current sales volume," added Dr. Cysewski. "If Spirulina sales volume continues at the current rate, we expect to resume producing at or near full capacity later this year."

During the fourth quarter, Cyanotech announced plans to pursue a natural astaxanthin product, a powerful antioxidant, for use as a human dietary supplement. A growing body of scientific literature indicates that astaxanthin in capsule form surpasses many of the antioxidant benefits of vitamin C, vitamin E, beta-carotene and other carotenoids with up to 550 times the antioxidant activity of vitamin E and 10 times the antioxidant activity of beta-carotene. The Company has not received Food and Drug Administration (FDA) approval to begin selling the human astaxanthin product as a dietary supplement, but expects a response to its application by mid-summer. In anticipation of FDA approval, Cyanotech is negotiating with several domestic and foreign companies for the sale and distribution of this new product.

In the R&D area, Cyanotech continues to pursue development of its unique, bio-engineered mosquitocide product and its aldolase catalytic antibody. Transformation of the microalgae, Synechococcus, to express the Bti mosquitocide toxin has proven more difficult than originally anticipated and the Company now expects preliminary data on toxin expression levels after mid-year. On the aldolase catalytic antibody project, the Company continues to work with researchers from The Scripps Research Institute on expression of the catalytic antibody gene.

Cyanotech Corporation produces high-value natural products from microalgae. The Company's products include Spirulina Pacifica(TM), a nutrient-rich dietary supplement; NatuRose(TM), a natural astaxanthin product used in the worldwide aquaculture industry; and phycobiliproteins, which are fluorescent pigments used in the immunological diagnostics market. The Company is also developing microalgae-based products for the biopesticide markets and, through an exclusive license agreement with The Scripps Research Institute, a patented aldolase catalytic antibody with potential applications in industrial synthesis for the manufacture of pharmaceuticals, fine chemicals and agricultural products. Cyanotech is the only microalgae company in the world to have an ISO 9002 Registered Quality System. Additional company and product information is available on Cyanotech's World Wide Web site at www.cyanotech.com.

Certain statements in this report set forth management's intentions, plans, beliefs, expectations or predictions of the future based on current facts and analyses. Actual results may differ materially from those indicated in such statements, due to a variety of factors including reduced product demand, increased competition, government action, weather conditions, and other factors. Additional information on factors that may affect the business and financial results of the Company and may cause actual results to differ from current expectations can be found in filings of the Company with the Securities and Exchange Commission. -0-

                         Financial Highlights
                (in thousands, except per share data)

Fourth Quarter Fiscal 1999                Three Months Ended Mar. 31,
                                               1999           1998
Income Statement Data
Net sales                                   $  1,775       $  2,236
Gross profit                                $    271       $    838
Income (loss) from operations               $   (859)      $     73
Net income (loss) before taxes              $   (940)      $     90
Income tax benefit (expense)                $    175       $   (175)
Net loss                                    $   (765)      $    (85)
Loss available to common stockholders       $   (825)      $   (155)
Net loss per common share basic and diluted $  (0.06)      $  (0.01)
Shares used in computing
  net loss per common share                   13,604         13,120


Fiscal 1999                                 12 Months Ended Mar. 31,
                                               1999           1998
Income Statement Data
Net sales                                   $  6,738       $  7,627
Gross profit                                $    973       $  3,137
Loss from operations                        $ (2,642)      $   (300)
Loss before taxes                           $ (2,846)      $   (125)
Income tax benefit (expense)                $    289       $   (175)
Net loss                                    $ (2,557)      $   (300)
Loss available to common stockholders       $ (2,795)      $   (589)
Net loss per common share basic and diluted $  (0.21)      $  (0.05)
Shares used in computing
  net loss per common share                   13,602         12,409


Balance Sheet Data
At                                      March 31, 1999  March 31, 1998

Working capital                             $  1,417       $  2,596
Total assets                                $ 23,621       $ 25,667
Total debt and capital lease obligations    $  1,774       $  1,283
Stockholders' equity                        $ 20,707       $ 23,174