UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarterly Period Ended June 30, 1997
Commission File Number 0-14602
CYANOTECH CORPORATION
(Exact name of registrant as specified in its charter)
NEVADA 91-1206026
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification Number)
73-4460 Queen Kaahumanu Hwy. #102, Kailua-Kona, HI 96740
(Address of principal executive offices)
(808) 326-1353
(Registrant's telephone number)
Check whether the registrant (1) filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days. Yes xx No
Number of common shares outstanding as of July 31, 1997:
Title of Class Shares Outstanding
-------------- ------------------
Common stock - $.005 par value stock 12,848,962
1
<PAGE>
CYANOTECH CORPORATION
FORM 10-Q
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements Page
Consolidated Balance Sheets (unaudited)
June 30, 1997 and March 31, 1997.............................3
Consolidated Statements of Income (unaudited)
Three month periods ended
June 30, 1997 and 1996.......................................4
Consolidated Statements of Cash Flows (unaudited)
Three month periods ended
June 30, 1997 and 1996.......................................5
Notes to Consolidated Financial Statements (unaudited)................6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.........................10
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.....................................14
SIGNATURES ............................................................15
2
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
CYANOTECH CORPORATION
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
<S> <C> <C>
June 30, March 31,
1997 1997
(Unaudited) (Audited)
Assets
Current assets:
Cash and cash equivalents $ 455 $ 2,775
Investment securities (note 2) 3,954 3,954
Accounts receivable 1,766 2,791
Inventories (note 3) 1,609 1,138
Prepaid expenses 127 155
Deferred tax assets 393 373
-------- --------
Total current assets 8,304 11,186
Equipment and leasehold improvements, net (note 5) 17,472 14,666
Other assets 249 163
-------- -------
Total assets $26,025 $26,015
======== ========
Liabilities and Stockholders' Equity
Current liabilities:
Current maturities of long-term debt $ 150 $ 150
Current maturities of capital lease obligations 130 130
Accounts payable 1,569 1,508
Other accrued liabilities 180 333
-------- --------
Total current liabilities 2,029 2,121
Long-term debt, excluding current maturities 325 363
Obligations under capital leases, excluding
current maturities 160 196
-------- --------
Total liabilities 2,514 2,680
-------- --------
Stockholders' equity:
Preferred stock (note 6) 1 1
Common Stock - 12,847,312 shares issued and outstanding
on June 30, 1997 and 12,712,682 shares issued and
outstanding on March 31, 1997 64 63
Additional paid-in capital 23,782 23,732
Accumulated deficit (336) (461)
-------- -------
Total stockholders' equity 23,511 23,335
-------- -------
Total liabilities and stockholders' equity $26,025 $26,015
======== ========
See accompanying notes to consolidated financial statements.
</TABLE>
3
<PAGE>
CYANOTECH CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
<S> <C> <C>
Three Months Ended
June 30, June 30,
1997 1996
--------- ----------
NET SALES $1,774 $2,455
COST OF PRODUCT SALES 902 985
---------- -----------
Gross Profit 872 1,470
---------- -----------
OPERATING EXPENSES:
Research and development 141 161
General and administrative 331 358
Sales and marketing 381 192
Total operating expenses 853 711
---------- ----------
Income from operations 19 759
---------- ----------
OTHER INCOME (EXPENSE):
Interest income 117 108
Interest expense (11) (22)
---------- -----------
Total other income 106 86
---------- -----------
NET INCOME $125 $845
========== ===========
NET INCOME PER COMMON SHARE $0.01 $0.05
========== ===========
Weighted average number of common shares
outstanding and common stock equivalents
(note 4) 16,721 16,353
========== ===========
</TABLE>
See accompanying notes to consolidated financial statements
4
<PAGE>
CYANOTECH CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
<S> <C> <C>
Three Months Ended
June 30, June 30,
1997 1996
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $125 $845
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Deferred income taxes (20) -
Depreciation and amortization 201 163
Net (increase) decrease in:
Accounts receivable 1,025 (684)
Inventories (471) (129)
Prepaid expenses and other assets (58) (94)
Net increase (decrease) in:
Accounts payable 61 (49)
Other accrued liabilities (153) (56)
------- -------
Net cash provided by (used in) operating activities 710 (4)
------- -------
CASH FLOWS FROM INVESTING ACTIVIES:
Investment in equipment and leasehold improvements (3,007) (1,254)
------- -------
Net cash used in investing activities (3,007) (1,254)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of common stock - 1,398
Net proceeds from exercise of warrants and options 51 318
Principal payments on capital lease obligations (36) (31)
Principal payments on long-term debt (38) (38)
------- -------
Net cash provided by (used in) financing activities (23) 1,647
------- -------
Net increase (decrease) in cash and cash equivalents (2,320) 389
Cash and cash equivalents at beginning of period 2,775 9,409
------- -------
Cash and cash equivalents at end of period $ 455 $9,798
======= =======
</TABLE>
See accompanying notes to consolidated financial statements
5
<PAGE>
CYANOTECH CORPORATION
FORM 10-Q
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30,1997
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form
10-Q and Regulation S-K. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. These financial
statements and notes should be read in conjunction with the Company's
financial statements contained in the Company's previously filed report
on Form 10-K for the year ended March 31, 1997.
The Company consolidates enterprises in which it has a controlling
financial interest. The accompanying consolidated financial statements
include the accounts of Cyanotech Corporation and its wholly-owned
subsidiary, Nutrex, Inc. All significant intercompany balances and
transactions have been eliminated in consolidation. While the financial
information furnished for the three month period ended June 30, 1997 is
unaudited, the statements in this report reflect all material items
which, in the opinion of management, are necessary for a fair
presentation of the results of operations for the interim periods
covered and of the financial condition of the Company at the dates of
the consolidated balance sheets. The operating results for the interim
period presented are not necessarily indicative of the results that may
be expected for the year ending March 31, 1998.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements, and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
significantly from those estimates.
2. INVESTMENT SECURITIES
Investment securities held as available-for-sale consist of the
following (fair value approximates amortized cost):
<TABLE>
<CAPTION>
<S> <C> <C>
June 30, March 31,
1997 1997
-------- ---------
U.S. Treasury securities $ 2,454 $ 2,454
Mortgage-backed securities 500 500
Other interest bearing securities 1,000 1,000
--------- ---------
$ 3,954 $ 3,954
========= =========
</TABLE>
6
<PAGE>
3. INVENTORIES
Inventories are stated at the lower of cost (which approximates
first-in, first-out) or market and consist of the following (dollars
in thousands):
<TABLE>
<CAPTION>
<S> <C> <C>
June 30 March 31,
1997 1997
--------- ---------
Raw Materials $ 147 $ 166
Work in process 362 362
Finished goods 802 346
Supplies 298 264
--------- ---------
$ 1,609 $ 1,138
========= =========
</TABLE>
4. NET INCOME PER COMMON SHARE INFORMATION
Net income per common share for the three month periods ended
June 30, 1997 and 1996 is computed based on net income after preferred
stock dividend requirements and the weighted average number of common
shares outstanding during the period, adjusted to reflect the assumed
exercise of outstanding stock options and warrants and the conversion
of preferred stock to the extent these items have a dilutive effect on
the computation. Primary and fully diluted net income per share herein
are the same.
5. EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Owned equipment and leasehold improvements are stated at cost.
Equipment under capital lease is stated at the lower of the present
value of the minimum lease payments or fair value of the equipment at
the inception of the lease. Depreciation and amortization are provided
using the straight-line method over the estimated useful lives for
furniture and fixtures and the shorter of the lease terms or estimated
useful lives for leasehold improvements and equipment under capital
lease as follows:
<TABLE>
<CAPTION>
<S> <C>
Equipment 3 to 10 years
Leasehold improvements Remaining lease term (3 to 29 years)
Furniture and fixtures 7 years
Equipment under capital lease term (3 to 5 years)
</TABLE>
7
<PAGE>
5. EQUIPMENT AND LEASEHOLD IMPROVEMENTS (continued)
Equipment and leasehold improvements consist of the following (dollars
in thousands):
<TABLE>
<CAPTION>
<S> <C> <C>
June 30, March 31,
1997 1997
-------- ---------
Equipment $ 6,678 $ 5,715
Leasehold improvements 12,743 10,935
Furniture and fixtures 71 67
Equipment under capital lease 602 602
-------- ---------
20,095 17,319
Less accumulated depreciation
and amortization (3,930) (3,729)
Construction in-progress 1,307 1,076
-------- ---------
Equipment and leasehold
improvements, net $17,472 $ 14,666
======== =========
</TABLE>
6. SERIES C PREFERRED STOCK
Series C preferred stock as of June 30, 1997 and March 31, 1997
consists of the following (dollars in thousands):
<TABLE>
<CAPTION>
<S> <C> <C>
June 30, March 31,
1997 1997
-------- ---------
Preferred stock, authorized 5,000,000
shares; $.001 par value, issued and
outstanding:
Series C, 8% cumulative, convertible;
734,977 shares on June 30 and
March 31, 1997; liquidation value $5.00
per share plus unpaid accumulated dividends $ 1 $ 1
======== =========
</TABLE>
7. ACCOUNTING CHANGES
TRANSFERS AND SERVICING OF FINANCIAL ASSETS AND EXTINGUISHMENT OF
LIABILITIES. In June 1996, the FASB issued SFAS No.125, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishment of
Liabilities". SFAS No. 125 generally is effective for transfers and
servicing of financial assets and extinguishment of liabilities
occurring after December 31, 1996, and is to be applied prospectively.
This Statement provides accounting and reporting standards for
transfers and servicing of financial assets and extinguishment of
liabilities based on consistent application of a financial-components
approach that focuses on control. It distinguishes transfers of
financial assets that are sales from transfers that are secured
borrowings. Management of the Company does not expect that adoption of
SFAS No. 125 will have a material impact on the Company's financial
position, results of operations or liquidity.
8
<PAGE>
EARNINGS PER SHARE. In February 1997, the FASB issued SFAS No. 128,
"Earnings per Share". SFAS No. 128 is effective for both interim and
annual periods ending after December 15, 1997. The Company will adopt
SFAS No. 128 in the third quarter of fiscal 1998. SFAS No. 128 requires
the presentation of "Basic" earnings per share, representing income
available to common shareholders divided by the weighted average number
of common shares outstanding during the period, and "Diluted" earnings
per share, which is similar to the current presentation of fully
diluted earnings per share. SFAS No. 128 requires restatement of all
prior period earnings per share presented. Management does not expect
adoption of SFAS No. 128 to have a material impact on the Company's
previously reported earnings per share, financial position, results of
operations or liquidity.
COMPREHENSIVE INCOME. In June 1997, the FASB issued SFAS No. 130,
"Reporting Comprehensive Income," which establishes standards for the
reporting and display of comprehensive income and its components in a
full set of general- purpose financial statements. SFAS No. 130 is
effective for fiscal years beginning after December 15, 1997. The
Company will adopt the provisions of SFAS No. 130 on April 1, 1998.
SFAS No. 130 requires reclassification of financial statements for
earlier periods provided for comparative purposes. Management does not
expect adoption of SFAS No. 130 will have a material effect of the
Company's financial statements, financial condition, results of
operations or liquidity.
SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION. In June 1997, the
FASB issued SFAS No. 131, "Disclosures about Segments of an Enterprise
and Related Information," which establishes standards for the way that
public business enterprises report information about operating segments
in annual financial statements and requires that those enterprises
report selected information about operating segments in interim
financial reports issued to shareholders. SFAS No. 131 is effective for
periods beginning after December 15, 1997. The Company will adopt the
provisions of SFAS No. 131 on January 1, 1998. SFAS No. 131 requires
restatement of comparative information presented for earlier periods.
Management does not expect adoption of SFAS No. 131 will have a
material effect of the Company's financial statements, financial
condition, results of operations or liquidity.
9
<PAGE>
CYANOTECH CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This report on Form 10-Q contains forward-looking statements regarding
the future performance of Cyanotech and future events that involve risks and
uncertainties that could cause actual results to differ materially from the
statements contained herein. This document, and the other documents that the
Company files from time to time with the Securities and Exchange Commission,
such as its reports on Form 10-K, Form 10-Q, Form 8-K, and its proxy materials,
contain additional important factors that could cause actual results to differ
from our current expectations and the forward-looking statements contained
herein.
RESULTS OF OPERATIONS - FIRST QUARTER OF 1998 COMPARED TO FIRST QUARTER OF 1997
The following table sets forth certain consolidated statement of income
data as a percentage of net sales for the periods indicated:
<TABLE>
<CAPTION>
<S> <C> <C>
Three Months Ended
June 30,
1997 1996
------ ------
Net Sales 100.0% 100.0%
Cost of product sales 50.8 40.1
------ ------
Gross profit 49.2 59.9
------ ------
Operating expenses:
Research and development 7.9 6.6
General and administrative 18.7 14.6
Sales and marketing 21.5 7.8
------ ------
Total operating expenses 48.1 29.0
------ ------
Income from operations 1.1 30.9
------ ------
Other income (expense):
Interest income 6.6 4.4
Interest expense (0.6) (0.9)
------ ------
Total other income (expense) 6.0 3.5
------ ------
Net Income 7.0% 34.4%
====== ======
</TABLE>
10
<PAGE>
NET SALES
Net sales for the three month period ended June 30, 1997 decreased 28%
to $1,774,000 from the $2,455,000 reported for the three month period ended June
30, 1996. This decrease is primarily due to a lack of sales to our largest
customer, a Hong Kong-based natural products marketing and distribution company,
and, to a lesser extent, lower sales to certain customers in Europe and Canada.
International sales represented 34% and 62% of total net sales for the
three month periods ended June 30, 1997 and 1996, respectively. Our largest
customer, a Hong Kong- based natural products marketing and distribution
company, purchases our packaged consumer products and sells them under a private
label through their multilevel marketing organization, primarily in mainland
China. This customer experienced a delay in its annual recertification process
and has been restricted by local governmental authorities from hosting any large
scale distributor meetings since May. These regulatory issues adversely impacted
our customer's ability to sell and, consequently, this customer did not purchase
any products from us during the first quarter. Based on recent discussions with
this customer, we anticipate that these regulatory issues may be resolved in the
near term and, if so, that this customer would resume its purchases, but there
can be no assurance in this regard. Moreover, this customer has indicated it
still is holding significant quantities of our products as inventory and that
future purchases from us would first require a reduction in such inventory
levels. As of the date of this report, this customer has not placed any product
orders for shipment in the second fiscal quarter and Management cannot predict
when, or to what extent, this customer will again resume purchasing products
from the Company.
GROSS PROFIT
Gross profit represents net sales less the cost of goods sold, which
includes the cost of materials, manufacturing overhead costs, direct labor
expenses and depreciation and amortization. Gross profit decreased 41% to
$872,000 for the three month period ended June 30, 1997, from $1,470,000 in the
comparable period of fiscal 1997. Our gross profit margin decreased to 49% for
the three month period ended June 30, 1997 compared to 60% for the comparable
period of fiscal 1996. This decrease in gross profit margin from the prior year
period is primarily attributable to lower bulk product selling prices in certain
market areas, an increase in Spirulina production costs, and start-up production
costs associated with our natural astaxanthin product, NatuRose.
OPERATING EXPENSES
Operating expenses were $853,000 during the three month period ended
June 30, 1997, an increase of 20% from $711,000 in the comparable period of
fiscal 1997, primarily because of increased Sales and Marketing expenses.
Operating expenses as a percentage of net sales were 48%, compared with 29% in
the prior year, primarily due to lower net sales.
RESEARCH AND DEVELOPMENT. Expenditures for research and development
were $141,000 for the three month period ended June 30, 1997, a decrease of 12%
from $161,000 for the comparable period of fiscal 1997. This decrease from the
prior year was primarily due to the transfer of certain personnel from research
and development to production with the commencement of NatuRose production in
March, 1997.
11
<PAGE>
GENERAL AND ADMINISTRATIVE. General and administrative expenses
decreased to $331,000 for the three month period ended June 30, 1997, a decrease
of 8% from $358,000 for the comparable period of fiscal 1997. This decrease from
the prior year was primarily due to a lower accrual of associate incentive
bonuses which are indexed to the Company's profitability.
SALES AND MARKETING. Sales and marketing expenses increased to
$381,000 for the three month period ended June 30, 1997, an increase of 98% from
$192,000 for the comparable period of fiscal 1997. This increase from the prior
year is primarily due to increased domestic and international sales and
promotion efforts.
NET INCOME
The Company recorded net income of $125,000 for the first quarter of
fiscal 1998, a decrease of 85% from $845,000 for the comparable period of fiscal
1997. This decrease is primarily attributable to lower sales of Spirulina bulk
and packaged consumer products, higher Spirulina production costs, and start-up
costs associated with our natural astaxanthin product, NatuRose.
VARIABILITY OF RESULTS
The Company was formed in 1983 and did not become profitable on an annual
basis until fiscal 1992. As of June 30, 1997, the Company's accumulated deficit
was $336,000. There can be no assurance that we will be consistently profitable
on either a quarterly or an annual basis. We have experienced quarterly
fluctuations in operating results and anticipate that these fluctuations may
continue in future periods. Future operating results may fluctuate as a result
of changes in sales levels to our largest customers, new product introductions,
government action, weather patterns, the mix between sales of bulk products and
packaged consumer products, start-up costs associated with new facilities,
expansion into new markets, sales promotions, competition, increased energy
costs, the announcement or introduction of new products by our competitors,
changes in our customer mix, and overall trends in the market for Spirulina
products and astaxanthin. While a significant portion of our expense levels are
relatively fixed, and the timing of increases in expense levels is based in
large part on our forecasts of future sales, if net sales are below expectations
in any given period, the adverse impact on results of operations may be
magnified by our inability to adjust spending quickly enough to compensate for
the sales shortfall. We may also choose to reduce prices or increase spending in
response to market conditions, which may have a material adverse effect on our
financial condition and results of operations.
LIQUIDITY AND CAPITAL RESOURCES
Our working capital decreased $2,790,000 during the first three months
of fiscal 1998 to $6,275,000 while our cash, cash equivalents and investment
securities balance decreased by $2,320,000 to $4,409,000. The decrease is
primarily attributable to increased capital expenditures for equipment and
leasehold improvements.
Cash flows provided by operating activities were $710,000 compared to
cash used by operating activities of $4,000 in fiscal 1997. The primary source
of first quarter fiscal 1998 cash flows from operating activities was a
reduction in accounts receivable offset primarily by an increase in inventory
and a reduction in other accrued liabilities.
12
<PAGE>
Cash flows used in investing activities during the first quarter were
$3,007,000 in fiscal 1998 compared to $1,254,000 in fiscal 1997. The primary
uses of cash flows in investing activities during 1998 were for capital
expenditures.
Cash flows used in financing activities were only $23,000 in fiscal
1998 compared to cash flows provided by financing activities of $1,647,000 in
fiscal 1997, primarily from the sale of common stock.
As of June 30, 1997, we had construction commitments totaling
$2,303,000, which we intend to fund from cash reserves, investment securities,
and anticipated cash flows from future operations. We presently estimate that
our existing capital resources, anticipated cash flows from future operations,
and existing credit facilities will be sufficient to fund current operations.
However, we plan to spend, subject to available financing, approximately $11.5
million on capital expenditures during the next two fiscal years, primarily to
continue the expansion of NatuRose production on the newly leased 88 acres, and
existing capital resources and anticipated cash flows from future operations
will not be sufficient to fund these capital expenditures. We are currently
seeking an increase in our credit facility to meet any anticipated shortfall. We
currently have a $1,000,000 bank line of credit which is collateralized by a
certificate of deposit and an additional $1,000,000 bank line of credit which is
collateralized by all the assets of the Company. As of June 30, 1997, there were
no borrowings under either of these credit lines.
OUTLOOK
THIS OUTLOOK SECTION CONTAINS A NUMBER OF FORWARD-LOOKING STATEMENTS, ALL
OF WHICH ARE BASED ON CURRENT EXPECTATIONS. ACTUAL RESULTS MAY DIFFER
MATERIALLY. SEE ALSO THE NOTE AT THE BEGINNING OF THIS ITEM 2.
The Company expects net sales for the second quarter to be slightly above
the prior years second fiscal quarter net sales of $2,812,000 assuming there are
no significant shipments to our customer in Hong-Kong. However, a shift in
product mix to greater sales of bulk products (for which average selling prices
have decreased since last year), and continued start-up costs associated with
the operation of the NatuRose production facility, are expected to reduce the
gross profit margin for the second quarter of fiscal 1998 below the 62% reported
during the comparable period of fiscal 1997. Gross profit margins for the
astaxanthin product are expected to be comparable to the current Spirulina gross
profit margins once the additional five acres of culture ponds (described below)
are in full production.
Cyanotech's strategy has been, and continues to be, to produce ever-higher
value natural products from microalgae. To continue the implementation of this
strategy, we plan to continue our emphasis on selling higher value packaged
Spirulina consumer products over Spirulina bulk products. Also in line with this
strategy, we introduced our natural astaxanthin product, NatuRose, during the
fourth quarter of fiscal 1997 and began full commercial production in March,
1997. During the second quarter of fiscal 1998, we will expand our NatuRose
capacity from five acres of culture ponds to 10 acres of culture ponds.
Construction is also underway on an additional 88-acre expansion for NatuRose
production. The first phase involves the rough leveling of the entire 88 acre
site, which should be completed by the end of September, 1997. The second phase
will include the construction of 25 acres of culture systems, together with a
processing facility sufficient to accommodate the entire 88 acre site. This
second phase is scheduled for completion in the Fall of 1998, subject to
obtaining additional financing on terms that are acceptable to the Company.
13
<PAGE>
Research and development costs are expected to increase throughout this
fiscal year as we continue to optimize the PhytoMax PCS(sm) technology and also
increase the research activities directed at the mosquitocide project.
In addition to expanding the production capacity and sales of natural
astaxanthin, we are continuing work on a genetically-engineered mosquitocide
product. During the first quarter, we successfully recruited Dr. Scott Franklin
from the University of Wyoming. At the University of Wyoming, Dr. Franklin
conducted extensive research on natural bacterial toxins for use against
mosquitoes and black flies and he will be leading the team to develop a natural
mosquitocide product. There can be no assurance that we can successfully develop
these or any other additional products, that any such products will be capable
of being produced in commercial quantities at reasonable cost, or that any such
products will achieve market acceptance.
The Company's future results of operations and the other forward-looking
statements contained in the outlook, in particular the statements regarding
revenues, gross margin, research and development, and capital spending, involve
a number of risks and uncertainties. In addition to the factors discussed above,
among the other factors that could cause actual results to differ materially are
the following: business conditions and growth in the natural products industry
and in the general economy; changes in customer order patterns, and changes in
demand for natural products in general; changes in weather conditions;
competitive factors, such as competing Spirulina producers increasing their
production capacity and their impact on world market prices for Spirulina;
government action in foreign countries; shortage of manufacturing capacity; and
unanticipated delays by contractors.
Cyanotech believes that it has the product offerings, facilities,
personnel, and competitive and financial resources for continued business
success, but future revenues, costs, margins and profits are all influenced by a
number of factors, as discussed above, all of which are inherently difficult to
forecast.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibits are furnished with this report:
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended
June 30, 1997.
14
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of
1934, the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CYANOTECH CORPORATION (Registrant)
August 12, 1997 By: /s/ Gerald R. Cysewski
--------------- --------------------------------
(Date) Gerald R. Cysewski
Chairman of the Board,
President and Chief Executive Officer
By: /s/ Ronald P. Scott
--------------------------------
Ronald P. Scott
Executive Vice President - Finance &
Administration
(Principal Financial and
Accounting Officer)
15
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 768408
<NAME> Cyanotech Corporation
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-1-1997
<PERIOD-END> JUN-30-1997
<CASH> 455
<SECURITIES> 3954
<RECEIVABLES> 1766
<ALLOWANCES> 0
<INVENTORY> 1609
<CURRENT-ASSETS> 520
<PP&E> 21402
<DEPRECIATION> 3930
<TOTAL-ASSETS> 26025
<CURRENT-LIABILITIES> 2029
<BONDS> 485
0
1
<COMMON> 64
<OTHER-SE> 23446
<TOTAL-LIABILITY-AND-EQUITY> 26025
<SALES> 1774
<TOTAL-REVENUES> 0
<CGS> 902
<TOTAL-COSTS> 902
<OTHER-EXPENSES> 853
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11
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<INCOME-TAX> 0
<INCOME-CONTINUING> 125
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</TABLE>
