Cyanotech Reports Financial Results for the First Quarter of Fiscal Year 2016

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 2016, ended June 30, 2015.

First Quarter 2016
For the first quarter of fiscal 2016 compared to the first quarter of fiscal 2015, net sales were $7,594,000 compared to $7,624,000. Gross profit was $2,924,000, with gross profit margin of 39%, compared to gross profit of $3,059,000 and gross profit margin of 40%. Operating loss was ($195,000) compared to an operating loss of ($1,048,000). Net loss was ($105,000) or ($0.02) per diluted share, compared to a net loss of ($381,000) or ($0.07) per diluted share.

Commenting on the first quarter 2016 results (changes shown vs. first quarter 2015), Brent Bailey, Cyanotech President and CEO, noted:

“Net sales of our Nutrex packaged consumer products grew +4% versus prior year. First quarter net sales growth of the Nutrex business, by channel, was:

“Due to the fact that we grow versus manufacture our raw material, production is often impacted by seasonal weather patterns. This was the case in the first quarter, as Nutrex net sales growth was impacted by a 20% reduction in Astaxanthin production due to less sunlight and an unusual level of mid-day cloud cover in Kona, HI. Further, an unfavorable customer mix, which is not expected to continue, increased promotional spending above normal levels resulting in a 4% reduction in Nutrex net sales.

“Several planned business-building investments also impacted our first quarter fiscal 2016 financial performance versus first quarter fiscal 2015:

• An increase of $498,000 in sales and marketing expense primarily to support the expanded Costco distribution
• Start-up costs of $170,000 related to the new extraction facility
• Increased R&D expenses of $61,000 for clinical trials and Research staff additions

“Major progress was made on key strategic initiatives in the first quarter:

• Our market shares continue to grow. BioAstin brand retail market share of Astaxanthin in the US natural products channel was 58% (+1 pt.). Our Nutrex brand market share of Spirulina was 49% (+4 pts.) in fiscal 2015.
• Based on the strong results to date, we will be expanding into the remaining 43 Costco Los Angeles region warehouses soon. At that time, BioAstin Astaxanthin will be available in approximately 23% of Costco’s domestic warehouses.
• We are making Astaxanthin production process changes that are expected to facilitate algae growth regardless of the level of sunlight and reduce the impact of other environmental factors on our output as well as increase capacity. Pond fill rates and harvests/month are already improving but the full benefits of these changes are not expected to be realized for 12-18 months.
• As a result of a multi-year effort by our exclusive Chinese distributor, A-Life/Samuels, we recently received the China Food and Drug Administration (CFDA) seal, which will allow our BioAstin brand Astaxanthin to be imported into China. We believe that BioAstin is the first Astaxanthin brand to receive the CFDA seal.
• The extraction plant commissioning is now complete.

“Each of these initiatives is an important element in realizing our potential.”

Trailing 12 Months
For the trailing 12 months ended June 30, 2015 compared to the trailing 12 months ended June 30, 2014, net sales were $33,779,000 compared to $29,397,000 an increase of 15%. Gross profit was $14,331,000, with gross profit margin of 42.4%, compared to gross profit of $11,670,000 and gross profit margin of 39.7%. Pretax income was $1,083,000 compared to a pretax loss of ($1,263,000), and net income was $252,000 or $0.05 per diluted share, compared to a net loss of ($696,000) or ($0.13) 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 Association^TM. 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, 2015, 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.)

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