Cyanotech Reports Fourth Quarter and Fiscal 2002 Financial Results; Maturity Date of Convertible Debentures Extended.Business Editors & Health/Medical Writers KAILUA-KONA, Hawaii--(BW HealthWire)--May 15, 2002 Cyanotech Corporation (Nasdaq NMS See NetWare Management System. : CYAN), the world leader in producing high-value natural products from microalgae microalgae unicellular aquatic plants (phytoplankton), the starting point of the aquatic food chain. Include toxic microalgae which are important causes of marine fish mortalities, especially Alexandrium, Chaltonella, Heterosigma spp. , today announced financial results for the fourth quarter and fiscal year ended March 31, 2002, and the extension of the maturity date on its convertible debentures Convertible Debenture Any type of debenture that can be converted into some other security. Notes: For example, a convertible bond can be converted into stock. . Financial Results For the fourth quarter of fiscal 2002, net sales Net Sales The amount a seller receives from the buyer after costs associated with the sale are deducted. Notes: This amount is calculated by subtracting the following items from gross sales: merchandise returned for credit, allowances for damaged or missing goods, freight were $2,055,000 versus $1,755,000 for the fourth quarter of fiscal 2001. The net loss was $730,000, or ($0.04) per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share, compared to a net loss of $683,000, or ($0.04) per diluted share reported for the fourth quarter of fiscal 2001. In the fourth quarter of fiscal 2002, net sales increased but gross profit margins Gross profit margin Gross profit divided by sales, which is equal to each sales dollar left over after paying for the cost of goods sold. gross profit margin A measure calculated by dividing gross profit by net sales. , excluding depreciation expense, were 32% compared to 39% in the fourth quarter of fiscal 2001. This was the result of weather-related production decreases in November and December 2001 and, to a lesser degree, in January 2002. The Company values its inventory on a first-in, first-out first-in, first-out n. A method of inventory accounting in which the oldest remaining items are assumed to have been the first sold. In a period of rising prices, this method yields a higher ending inventory, a lower cost of goods sold, a higher gross basis, which resulted in higher costs for product produced in the third quarter of fiscal 2002 but sold during the fourth quarter of 2002. Additionally, Cyanotech reported increased costs from its research and development activities, primarily the cost of clinical trials during the fourth quarter; increased sales and marketing expense, largely related to the ongoing promotion of the Company's Nutrex-branded products (Spirulina spirulina Any cyanobacteria in the genus Spirulina. A traditional food source in parts of Africa and Mexico, spirulina is an exceptionally rich source of vitamins, minerals, and protein, and one of the few nonanimal sources of vitamin B12. and BioAstin(R)); and costs related to abandoned capital asset projects. Foreign sales accounted for 55% of total sales in the fourth quarter of fiscal 2002 compared to 49% in the prior year fourth quarter. Sales to Spirulina International, the Company's largest customer, increased to 20% of total sales during the fourth quarter, from 12% in the fourth quarter of fiscal 2001, and included the first shipment of BioAstin capsules for sale in continental Europe Continental Europe, also referred to as mainland Europe or simply the Continent, is the continent of Europe, explicitly excluding European islands and, at times, peninsulas. . For fiscal 2002, net sales were $8,235,000 versus $8,043,000 for fiscal 2001. The net loss was $2,589,000, or ($0.15) per diluted share, compared to a net loss of $1,067,000, or ($0.07) per diluted share reported for fiscal 2001. Despite the slight increase in net sales for the year, the net loss for the year increased from the prior year primarily due to lower gross margins on bulk Spirulina products, which resulted from lower average selling prices The average sales price of goods or commodities. Especially used in the retail sector and technology distribution. and increased production costs; the finished goods inventory write-off Write-Off A reduction in the value of an asset or earnings by the amount of an expense or loss. Companies are able to write off certain expenses that are required to run the business, or have been incurred in the operation of the business and detract from retained revenues. and adjustment of $454,000 recorded in the third quarter of fiscal 2002; and increased sales and marketing expense of $663,000 during the year. For the full year, gross profit margins, excluding depreciation expense, were 34% compared to 44% in fiscal 2001. The net loss in fiscal 2002 included depreciation expense of $1,319,000, net interest expense of $433,000, and an income tax benefit of $9,000, resulting in a loss before interest, taxes and depreciation (EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become ) of $846,000 for the year. This compares to positive EBITDA of $744,000 in the prior fiscal year. EBITDA for fiscal 2001 includes the net loss of $1,067,000, net interest expense of $497,000, depreciation expense of $1,322,000, and an income tax benefit of $8,000. Progress in Fiscal 2002 "Cyanotech made progress on several fronts during fiscal 2002, including expansion of its marketing channels and customer base, addition of marketing partners, and further scientific validation See validate. validation - The stage in the software life-cycle at the end of the development process where software is evaluated to ensure that it complies with the requirements. of the efficacy of its products. We believe the Company will benefit from these actions in fiscal 2003," said Gerald R. Cysewski, Ph.D., chairman, president and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. . "We entered fiscal 2003 with 68 Spirulina and astaxanthin culture ponds on 90 acres in full production and expect heightened productivity during the Spring and Summer months when there is less rainfall." Cyanotech made several key announcements in fiscal 2002 and thereafter that relate to its potential in fiscal 2003 and beyond, including: -- A recent clinical study of BioAstin showed improvement in the condition of patients with Carpal Tunnel Syndrome with patients using BioAstin reporting a reduction in both the severity and duration of pain. Cyanotech has received a patent for this use of BioAstin. The Occupational Safety and health Administration (OSHA) estimates that three million Americans suffer from Carpal Tunnel Syndrome. -- An earlier clinical trial linked BioAstin with preventing knee soreness after strenuous leg exercises. The study also showed a significantly stronger immune system response compared to the control group after exercise activity. -- Cyanotech received positive results from a clinical evaluation of BioAstin to measure its effectiveness for providing sunscreen protection from ultraviolet light. The study's conclusion was that BioAstin significantly increased the amount of ultraviolet light energy required to produce skin reddening following daily ingestion of BioAstin for two weeks. -- Adding to the body of scientific knowledge about Spirulina, new clinical evidence indicates a supportive role for Spirulina in fighting cancer by causing a statistically significant increase in both the number and the effectiveness of immune cells called natural killer cells. -- A BioAstin infomercial was tested in several markets in late April and early May 2002. Sales from the infomercial, however, were less than anticipated and the test results are being analyzed to refocus the infomercial to generate improved results. A new Bioastin website for direct retail ordering online was launched in April 2002 at www.bioastinxp.com -- As part of Cyanotech's expansion of sales channels, Twinlab Corporation introduced new product formulations containing Cyanotech's natural astaxanthin. Twinlab is a dietary supplement industry leader with extensive distribution in all major consumer channels and markets. -- To service the increasing customer base in Japan better, Cyanotech Japan YK was formed. Aquaculture feeding studies in Japan show that NatuRose is more effective than synthetic astaxanthin, particularly for "Tai" or Sea Bream, a major aquaculture product in Japan. Convertible Debentures Cyanotech reached an agreement with the holders of its 6% Convertible Debentures to extend the maturity date from April 30, 2002 to October 31, 2002. In exchange for the extension, the Company agreed to: reduce the conversion price from $1.50 per share to $1.00 per share; increase the interest rate during the remaining period the Debentures are outstanding from 6% to 10%; issue two-year warrants to the Debenture debenture (dəbĕn`chər), document acknowledging indebtedness. In Great Britain a debenture is practically the same as a bond, and debenture stock is similar to preferred stock. holders to purchase additional shares of common stock of Cyanotech in an amount equal to thirty (30%) percent of the shares into which the Debentures are convertible at an exercise price of $1.10 per share; and reduce the forced conversion price at which the Company can require the conversion of the Debentures from $3.00 per share to $1.50 per share. Although there can be no assurance in this regard, the Company hopes to see improved results in the near term and an increase in the price of its common stock. If the market price of the stock should be above $1.50 for the period specified in the Debenture agreements, the Company intends to exercise its forced conversion rights. As a result of this restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). , the Company will record a charge of approximately $236,000 in the quarter ending June 30, 2002, of which approximately $232,000 is a non-cash charge Non-Cash Charge A charge off, made by a company against earnings, that does not require an initial outlay of cash. Notes: Non-cash charges are typically against the depreciation, amortization, and depletion accounts on a company's balance sheet. . However, the exercise of all the warrants in the future (which may or may not occur) would result in additional cash proceeds to the Company of approximately $500,000. -- Cyanotech Corporation, the world's leader in microalgae technology, produces high-value natural products from microalgae, and is the world's largest commercial producer of natural astaxanthin (pronounced "asta-zan-thin") from microalgae. Products include BioAstin(R) natural astaxanthin, a powerful antioxidant antioxidant, substance that prevents or slows the breakdown of another substance by oxygen. Synthetic and natural antioxidants are used to slow the deterioration of gasoline and rubber, and such antioxidants as vitamin C (ascorbic acid), butylated hydroxytoluene with expanding applications as a human nutraceutical nu·tra·ceu·ti·cal n. A food or naturally occurring food supplement thought to have a beneficial effect on human health. nutraceutical ; NatuRose(R) natural astaxanthin for the aquaculture aquaculture, the raising and harvesting of fresh- and saltwater plants and animals. The most economically important form of aquaculture is fish farming, an industry that accounts for an ever increasing share of world fisheries production. and animal feed industries; Spirulina Pacifica(R), a nutrient-rich dietary supplement Noun 1. dietary supplement - something added to complete a diet or to make up for a dietary deficiency diet - a prescribed selection of foods vitamin pill - a pill containing one or more vitamins; taken as a dietary supplement ; and phycobiliproteins, which are fluorescent fluorescent having the quality of fluorescence. fluorescent antibody see fluorescence microscopy. fluorescent antibody test see fluorescence microscopy. pigments used in the immunological immunologic, immunological emanating from or pertaining to immunology. immunologic competence see immunocompetence. immunologic domains diagnostics (1) Software routines that test hardware components (memory, keyboard, disks, etc.). Diagnostics are often stored in ROM chips and activated on startup. (2) Error messages in a programmer's source code that refer to statements or syntax that the compiler or assembler market. Spirulina and BioAstin are sold directly online through www.nutrex-hawaii.com and www.bioastinxp.com as well as through resellers worldwide in over 30 countries. Corporate and product information is available at www.cyanotech.com SAFE HARBOR Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. -- Except for statements of historical fact, the statements in this press release are forward-looking. Such statements are subject to a number of risks and uncertainties that could cause actual results to differ materially from the statements made. These factors include, but are not limited to, general economic conditions, forecasts of sales in future periods, changes in sales levels to our largest customers, weather patterns, risks associated with the acceptance of new products, competition, foreign exchange fluctuations, government regulation, and other factors more fully detailed in the company's recent quarterly 10-Q and annual 10-K filings with the Securities and Exchange Commission. WEBCAST -- Cyanotech will hold a conference call on Wednesday, May 15, 2002 at 4:00 p.m. Eastern time to be broadcast live over the Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the . It can be accessed by all interested parties by linking from www.cyanotech.com or through the Investor Broadcast Network's Vcall Web site at www.vcall.com. To listen to the live call, please go to the Web site at least fifteen minutes prior to the start of the call to register, download To receive a file transmitted over a network. In any communications session, "download" means receive, and "upload" means send. The download/upload often implies a big/little scenario, in which data is being downloaded from the "big" server into the "little" user's computer. , and install any necessary audio software. For those who are not able to listen to the live broadcast, a replay will be available shortly after the call on the Vcall site and for 90 days thereafter.
Financial Highlights
(in thousands, except per share data)
4th Quarter Fiscal 2002 Three Months Ended Mar. 31,
2002 2001
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Income Statement Data
Net sales $ 2,055 $ 1,755
Gross profit $ 340 $ 380
Loss from operations $ (648) $ (584)
Loss before income taxes $ (739) $ (691)
Net loss $ (730) $ (683)
Net loss per common share, basic and diluted $ (0.04) $ (0.04)
Shares used in computing
net loss per common share 17,044 16,950
Fiscal Year 2002 12 Months Ended Mar. 31,
2002 2001
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Income Statement Data
Net sales $ 8,235 $ 8,043
Gross profit $ 1,562 $ 2,345
Loss from operations $ (2,185) $ (708)
Loss before income taxes $ (2,598) $ (1,075)
Net loss $ (2,589) $ (1,067)
Net loss per common share, basic and diluted $ (0.15) $ (0.07)
Shares used in computing
net loss per common share 17,033 15,997
At Mar. 31, 2002 Mar. 31, 2001
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Balance Sheet Data
Working capital $ 1,008 $ 4,177
Total assets $ 18,400 $ 21,423
Total long-term debt, including current
portion $ 4,308 $ 4,578
Stockholders' equity $ 13,191 $ 15,695
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