Cyanotech reports record quarterly financial results; net sales up 57 percent to $2.5 million; net income up 105 percent to $845,000.

KAILUA-KONA, Hawaii--(BUSINESS WIRE)--July 18, 1996--Cyanotech Corp. (NASDAQ/NMS:CYAN) reported record quarterly revenues and earnings for the first quarter of fiscal 1997, ended June 30, 1996.

For the first quarter of fiscal 1997 compared with the same period in fiscal 1996:

-- Net income increased 105 percent to a record $845,000 from

$413,000

-- Earnings per share increased 67 percent to 5 cents per share

(on 16.4 million shares) from 3 cents per share (on

14.2 million shares)

-- Net sales increased 57 percent to a record $2,455,000 from

$1,568,000

"The increase in net sales and net income reflects continued strong demand for Spirulina Pacifica in all major Cyanotech markets worldwide, with export shipments accounting for a record 62 percent of total first quarter net sales," said Gerald R. Cysewski, Ph.D., president and chief executive officer.

"We also achieved record production levels as a result of the added capacity from the 10 acres of culture ponds constructed in late 1995 and early 1996, and increased productivity due to process automation improvements."

Cysewski noted that Cyanotech is now constructing 21 acres of additional culture ponds that will expand production capacity by 50 percent from current capacity when completed in September 1996.

Cyanotech's chief financial officer, Ronald P. Scott, said, "Our gross profit percentage for the first quarter of fiscal 1997 was 60 percent compared to 50 percent in the prior fiscal-year period, primarily as a result of production economies and a slight shift in product mix to greater sales of the higher gross margin bulk Spirulina Pacifica products.

"Operating income for the first quarter was $759,000, or 31 percent of net sales, compared with $418,000, or 27 percent of net sales, in the prior fiscal-year period. As a result of the recently completed public offering and the first quarter net income, we ended the first quarter with working capital of $11.1 million."

During the first quarter of fiscal 1997, Cyanotech continued commercial development of natural astaxanthin and expects to be in commercial production by early 1997. Sales of synthetic astaxanthin to the aquaculture feed market are estimated to total more than $150 million annually and the company seeks to be the first major supplier of a natural product to this market.

The company also started laboratory development work on a genetically engineered, blue-green algae containing a natural bacterial toxin, Bti, which, Cyanotech believes, when applied to a mosquito-infested body of water could act as an effective and environmentally safe mosquito control agent.

The company plans to begin development of a pilot-scale production system during the second quarter of fiscal 1997. Natural astaxanthin and genetically engineered mosquitocide are new products for the company and many production issues must be resolved prior to commercial production.

There can be no assurance that the company will resolve such production issues or that the company will successfully complete pilot studies.

Cyanotech develops and commercializes natural products from microalgae. The company is currently producing microalgae products for the nutritional supplement and immunological diagnostics markets and is also developing microalgae-based products for the aquaculture feed/pigments and biopesticide markets.

Nutrex Inc., the company's wholly owned subsidiary, produces and markets a line of Spirulina-based nutritional products for the retail market. -0-

                          Cyanotech Corp.
                       Financial Highlights
          (in thousands, except per-share and other data)

First Quarter Fiscal 1997             Three Months Ended June 30
                                           1996           1995
Income Statement Data
Net sales                              $  2,455       $  1,568
Gross profit                           $  1,470       $    778
Income from operations                 $    759       $    418
Net income                             $    845       $    413
  per share                            $   0.05       $   0.03
Weighted average shares outstanding      16,353         14,242

At                                  June 30, 1996   March 31, 1996
Balance Sheet Data
Working capital                        $ 11,081       $  9,749
Total assets                           $ 22,103       $ 19,716
Total debt and capital lease
 obligations                           $  1,045       $  1,114
Stockholders' equity                   $ 19,877       $ 17,316

CONTACT: Cyanotech Corp., Kailua-Kona

Ronald P. Scott, 808/326-1353

or

Russell Communications

Bruce Russell, 310/216-1414