Cyanotech Reports Fourth Quarter and Fiscal 2006 Financial Results; Fiscal Year Sales Down 3%, Fourth Quarter Sales up 27%; Webcast is Scheduled for 5:30 pm EDT on May 24, 2006.KAILUA KONA, Hawaii -- Cyanotech Corporation (Nasdaq:CYAN), a world leader in producing high-value nutrition and health products from microalgae, today announced financial results for the fourth quarter and fiscal year 2006, ended March 31, 2006. Fourth Quarter of Fiscal 2006 Sales for the fourth quarter of fiscal 2006 were $3,252,000, up 27% from sales of $2,560,000 for the fourth quarter of fiscal 2005. Gross profit for the fourth quarter was $1,072,000, with gross profit margin 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. of 33%, compared to a gross profit of $714,000 and gross profit margin of 28% reported for the same quarter of the prior year. Net income for the fourth quarter was $194,000, or $0.01 per diluted share, compared to a net loss of $74,000, or ($0.00) per diluted share for the fourth quarter of fiscal 2005. Cash and cash equivalents and short-term investments were $2,535,000 as of March 31, 2006 compared to the March 31, 2005 balance of $3,005,000. Working capital was $5,525,000 at March 31, 2006 compared to $5,102,000 at March 31, 2005. "Higher revenue for the fourth quarter reflected increased order levels for 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. products and, to a lesser extent, for NatuRose and BioAstin," said Gerald R. Cysewski, Ph.D., Cyanotech's 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. . "Sales of Cyanotech's combined product lines increased compared to the fourth quarter of fiscal 2005. "As we noted last quarter, Cyanotech holds a leading share of the high-quality segment of the spirulina market, but purchasing patterns among our customers are variable. Fourth-quarter spirulina sales indicate strength in this core market. "BioAstin sales continued to expand in the fourth quarter of fiscal 2006 with a reduction of orders from one large customer more than offset by sales to new customers, as a result of our marketing program in this area. "NatuRose sales for the fourth quarter of fiscal 2006 to 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. markets in Japan were lower than the comparable period in fiscal 2005 as Sea Bream bream: see sunfish. bream European food and game fish (Abramis brama) of the carp family (Cyprinidae). Found in lakes and slow rivers, the bream lives in schools and eats worms, mollusks, and other small animals. sales remained reduced and growers used less natural astaxanthin in their feed. We now feel that this condition is likely to persist. Overall NatuRose sales were slightly higher compared to the fourth quarter of fiscal 2005 due to initial ordering by customers in other markets. We are seeking to expand NatuRose sales to additional markets, such as salmon feed producers whose customers seek an 'all-natural' designation for their products. "Sales of finished consumer products increased in the fourth quarter based on new international customers and increased sales in Hawaii." Fiscal Year 2006 For fiscal 2006, Cyanotech reported sales of $11,131,000, compared to sales of $11,445,000 for the prior fiscal year. Gross profit for fiscal 2006 was $3,299,000 with gross profit margin of 30%, compared to gross profit of $3,818,000 and gross profit margin of 33% for the prior fiscal year. Decreased gross profit for fiscal 2006 is attributable to increased natural astaxanthin and other per-unit production costs due to reduced production volumes reflecting customer demand. This condition will persist until order levels and production increase on a sustained basis. Additionally, Cyanotech has experienced higher costs for all aspects of operations, including imported materials and ingredients, due to higher energy costs, reflecting the Company's position as an island producer importing from and exporting to worldwide markets and over 40 countries. The Company reported a net loss of $268,000, or ($0.01) per diluted share for fiscal 2006 compared to net income of $486,000, or $0.02 per diluted share reported for the prior fiscal year. News Events in the Fourth Quarter During the fourth quarter, Cyanotech participated in the Natural Products Expo West trade show in Anaheim, California “Anaheim” redirects here. For Annaheim, see Annaheim, Saskatchewan. Anaheim is a city in Orange County, California, located 28 miles southeast of Los Angeles. where Dr. Cysewski conducted a standing-room-only seminar on "BioAstin(R) Natural Astaxanthin, Nature's Anti-Inflammatory(TM)." The presentation may be viewed on the Company's website at www.cyanotech.com Cyanotech also reported the results of two clinical studies of BioAstin during the quarter. One study evaluated the effects of BioAstin in humans for alleviating pain associated with Tennis Elbow tennis elbow - overuse strain injury (Tendonitis tendonitis /ten·do·ni·tis/ (ten?do-ni´tis) tendinitis. ten·do·ni·tis n. Variant of tendinitis. or lateral humeral epicondylitis lateral humeral epicondylitis n. See tennis elbow. ). The double-blind study double-blind study, n experimental technique in clinical research in which neither the researcher nor the patient knows whether the treatment administered is considered inactive (placebo) or active (medicinal). by an independent research group found that subjects who took BioAstin for 56 days showed a significant increase of 93% in grip strength Grip strength is the force applied by the hand to pull on or suspend from objects. Optimum-sized objects permit the hand to wrap around a cylindrical shape with a diameter from one to three inches. measurements (GSM (Global System for Mobile Communications) A digital cellular phone technology based on TDMA that is the predominant system in Europe, but also used worldwide. Developed in the 1980s, GSM was first deployed in seven European countries in 1992. ) without pain. This correlation of improved GSM without pain and use of BioAstin suggests that daily use may help alleviate pain associated with Tennis Elbow, and increase related mobility. A preliminary study measured the effects of BioAstin in humans in reducing systemic inflammation as measured by levels of C-Reactive Protein C-Reactive Protein Definition C-reactive protein (CRP) is a protein produced by the liver and found in the blood. Purpose C-reactive protein is not normally found in the blood of healthy people. (CRP C-reactive protein (CRP) A protein present in blood serum in various abnormal states, like inflammation. Mentioned in: Pelvic Inflammatory Disease CRP, n.pr See C-reactive protein. ) in blood serum Blood serum A component of blood. Mentioned in: Bites and Stings blood serum the residual fluid of blood after clotting has occurred. It is plasma after the fibrinogen has been removed. . The double-blind study by an independent research group found that subjects who took BioAstin for 56 days showed an average decrease in their measured CRP levels of over 20%. Subjects who took Placebo showed no such decrease. This finding was based on a small sample size and should be replicated in a larger study before firm conclusions can be reached. The finding of such a substantial average reduction in CRP after a regimen of BioAstin is a promising result that deserves further attention. C-Reactive Protein (CRP) is one of the acute phase proteins Acute-phase proteins are a class of proteins whose plasma concentrations increase (positive acute phase proteins) or decrease (negative acute phase proteins) in response to inflammation. This response is called the acute-phase reaction (also called acute phase response). that increase during systemic inflammation. Testing CRP levels in the blood may be a new way to assess cardiovascular disease Cardiovascular disease Disease that affects the heart and blood vessels. Mentioned in: Lipoproteins Test cardiovascular disease risk, according to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. the American Heart Association American Heart Association (AHA), n.pr a national voluntary health agency that has the goal of increasing public and medical awareness of cardiovascular diseases and stroke, and thereby reducing the number of associated deaths and disabilities. (www.americanheart.org). Previous studies have provided data suggesting that daily use of BioAstin can help alleviate pain associated with joint damage, specifically in carpal tunnel syndrome carpal tunnel syndrome: see repetitive stress injury. carpal tunnel syndrome (CTS) Painful condition caused by repetitive stress to the wrist over time. , rheumatoid arthritis rheumatoid arthritis Chronic, progressive autoimmune disease causing connective-tissue inflammation, mostly in synovial joints. It can occur at any age, is more common in women, and has an unpredictable course. and joint soreness after strenuous exercise. More information on the studies may be viewed at www.cyanotech.com Sales and Marketing Cyanotech initiated a broad-based public relations public relations, activities and policies used to create public interest in a person, idea, product, institution, or business establishment. By its nature, public relations is devoted to serving particular interests by presenting them to the public in the most campaign during the fourth quarter for BioAstin, the company's leading product for human nutrition and health. The program targets consumer media to promote growing consumer awareness of BioAstin and induce consumers to purchase the product from Cyanotech's customers, which include Vitamin Shoppe, Now Foods, Health Plus, Twin Laboratories, Jarrow Formulas, Pure Encapsulations, HVL/Douglass Labs, Derma der·ma n. See dermis. derma the corium, or true skin. E and Garden of Life, among others. About Cyanotech -- Cyanotech Corporation, a world leader in microalgae technology, produces BioAstin(R) Natural Astaxanthin and Hawaiian Spirulina Pacifica(R)--all natural, functional nutrients that enhance human health and nutrition, providing significant 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 , anti-inflammatory and immune response immune response n. An integrated bodily response to an antigen, especially one mediated by lymphocytes and involving recognition of antigens by specific antibodies or previously sensitized lymphocytes. benefits. NatuRose(R) Natural Astaxanthin is a natural pigment pigment, substance that imparts color to other materials. In paint, the pigment is a powdered substance which, when mixed in the liquid vehicle, imparts color to a painted surface. source that also promotes animal health and nutrition, primarily in aquaculture. Phycobiliproteins are fluorescent pigments used in medical diagnostic testing Diagnostic testing Testing performed to determine if someone is affected with a particular disease. Mentioned in: Von Willebrand Disease and research. Cyanotech produces these products from microalgae grown at its 90-acre facility in Hawaii using patented and proprietary technology and distributes them to nutritional supplement, nutraceutical, cosmeceutical cos·me·ceu·ti·cal n. A cosmetic that has or is purported to have medicinal properties. , and animal feed makers and marketers in more than 40 countries worldwide. Cyanotech was the first microalgae company in the world to obtain ISO (1) See ISO speed. (2) (International Organization for Standardization, Geneva, Switzerland, www.iso.ch) An organization that sets international standards, founded in 1946. The U.S. member body is ANSI. 9001:2000 certification. Visit www.cyanotech.com for more information. "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. " Statement under the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995 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, production problems caused by contamination, 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 Form 10-Q Form 10-Q See 10-Q. and annual form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. filings with the Securities and Exchange Commission. Cyanotech Corporation will hold a conference call on Wednesday, May 24, 2006 at 5:30 p.m. Eastern Time to be broadcast live over the Internet. It can be accessed by linking through the Investor Broadcast Network's VCall website at www.vcall.com or through Cyanotech's website, http://www.cyanotech.com. To access the simultaneous webcast, please go to either website at least 15 minutes prior to the start of the call to register, download, 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 and will be archived for a period of one calendar year.
CONSOLIDATED BALANCE SHEETS
March 31, 2006 and 2005
(Unaudited)
(in thousands, except share data) 2006 2005
----------------------------------------------------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 1,835 $ 2,005
Short-term investments 700 1,000
Accounts receivable, net of allowance for
doubtful accounts of $25 in 2006 and $46
in 2005 2,209 2,069
Refundable income taxes 16 97
Inventories 1,935 1,565
Prepaid expenses and other current assets 99 85
--------------------
Total current assets 6,794 6,821
Equipment and leasehold improvements, net 10,164 11,174
Other assets 515 547
--------------------
Total assets $ 17,473 $ 18,542
====================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 364 $ 355
Accounts payable 485 977
Accrued expenses 420 387
--------------------
Total current liabilities 1,269 1,719
Long-term debt, excluding current maturities 1,387 1,743
--------------------
Total liabilities 2,656 3,462
--------------------
Stockholders' equity:
Common stock of $.005 par value, authorized
30,000,000 shares; issued and outstanding
20,928,265 shares for 2006 and 20,896,265
shares for 2005 105 104
Additional paid-in capital 27,330 27,298
Accumulated other comprehensive income (loss)
- foreign currency translation adjustments (1) 27
Accumulated deficit (12,617) (12,349)
--------------------
Total stockholders' equity 14,817 15,080
--------------------
Total liabilities and stockholders'
equity $ 17,473 $ 18,542
====================
CYANOTECH CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
Three Months Twelve Months
Ended Ended
March 31, March 31,
--------------- ----------------
2006 2005 2006 2005
------- ------- ------- --------
NET SALES $3,252 $2,560 11,131 $11,445
COST OF PRODUCT SALES 2,180 1,846 7,832 7,627
------- ------- ------- --------
Gross profit 1,072 714 3,299 3,818
------- ------- ------- --------
OPERATING EXPENSES:
Research and development 48 92 192 257
Sales and marketing 343 310 1,331 1,202
General and administrative 462 402 1,883 1,797
------- ------- ------- --------
Total operating expenses 853 804 3,406 3,256
------- ------- ------- --------
Income (loss) from operations 219 (90) (107) 562
------- ------- ------- --------
OTHER INCOME (EXPENSE):
Interest income 10 6 46 31
Interest expense (44) (41) (180) (163)
Other income (expense), net 0 (11) (10) 15
------- ------- ------- --------
Total other expense, net (34) (46) (144) (117)
------- ------- ------- --------
Income (loss) before income taxes 185 (136) (251) 445
INCOME TAX EXPENSE (BENEFIT) (9) (62) 17 (41)
------- ------- ------- --------
NET INCOME (LOSS) $ 194 $ (74) $ (268) $ 486
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NET INCOME (LOSS) PER SHARE
Basic $ 0.01 $(0.00) $(0.01) $ 0.02
======= ======= ======= ========
Diluted $ 0.01 $(0.00) $(0.01) $ 0.02
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SHARES USED IN CALCULATION OF NET
INCOME (LOSS) PER SHARE:
Basic 20,919 20,877 20,904 20,784
======= ======= ======= ========
Diluted 20,955 20,877 20,904 20,979
======= ======= ======= ========
COMPREHENSIVE INCOME (LOSS):
Net income (loss) $ 194 $ (74) $ (268) $ 486
Other comprehensive loss (11) (13) (28) (3)
------- ------- ------- --------
$ 183 $ (87) $ (296) $ 483
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