UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

                Annual Report Pursuant to Section 13 or 15(d) of
                       the Securities Exchange Act of 1934

        For the fiscal year ended March 31, 1999 Commission file 0-146-02

                              CYANOTECH CORPORATION
             (Exact name of Registrant as specified in its charter)


          Nevada                                            91-1206026
(State or other jurisdiction of                        (I.R.S. Employer
incorporation or organization)                         Identification No.)

         73-4460 Queen Kaahumanu Hwy., Suite 102, Kailua-Kona, HI 96740
                    (Address of principal executive offices)

                                 (808) 326-1353
                         (Registrant's telephone number)

      Securities registered pursuant to Section 12(b) of the Exchange Act:
                                      NONE
      Securities registered pursuant to Section 12(g) of the Exchange Act:

                                 Title of class
                     Common Stock, Par value $.005 per share

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 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 X No

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation S-K is not contained herein and will not be contained, to the best
of the registrant's  knowledge,  in definitive  proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.

         At June 28, 1999, the aggregate market value of the registrant's Common
Stock held by non-affiliates of the registrant was approximately $ 16,406,000.

         At June 28,  1999,  the number of shares  outstanding  of  registrant's
Common Stock was 13,715,722.


                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of the  Registrant's  Annual Report to Stockholders for the fiscal year
ended March 31, 1999 are  incorporated  by reference into Part II and Part IV of
this Report.  Portions of the  Registrant's  Definitive  Proxy Statement for its
1999  Annual  Meeting  of  Stockholders,  to be filed  with the  Securities  and
Exchange  Commission  on or prior to July 29,  1999 and to be used in connection
with the Annual Meeting of Stockholders expected to be held August 26, 1999, are
incorporated by reference in Part III of this Form 10-K.



<PAGE>



                                     PART I


ITEM 1. BUSINESS

     Except for historical  information contained in this document,  the matters
discussed in this report contain forward  looking  statements that involve risks
and  uncertainties.  These  future  risks and  uncertainties  could cause actual
results to differ materially.

GENERAL

     Cyanotech  Corporation is a leader in the development and commercialization
of high value products derived from  microalgae.  Microalgae are a diverse group
of over  30,000  species  of  microscopic  plants  which  have a wide  range  of
physiological and biochemical  characteristics and naturally contain high levels
of proteins,  amino acids,  vitamins,  pigments and enzymes. Since 1983, we have
designed,  developed  and  implemented  proprietary  production  and  harvesting
technologies,  systems and processes  which  eliminate many of the stability and
contamination  problems frequently  encountered in the production of microalgae.
We  believe  that our  technology,  systems,  processes  and  favorable  growing
location  permit  year-round  harvesting  of our  microalgal  products in a cost
effective manner.

     We currently  produce natural  products from microalgae for the nutritional
supplement, aquaculture feed, and immunological diagnostics markets. Since 1985,
Cyanotech  has been  producing  microalgae-based  "Spirulina"  products  for the
vitamin and supplement market.  Spirulina  Pacifica(TM),  which is our principal
source  of  revenue,  is a unique  strain  of  Spirulina  developed  by us which
provides a vegetable-based,  highly absorbable source of natural  beta-carotene,
mixed carotenoids,  B vitamins, gamma linolenic acid ("GLA"), protein, essential
amino acids and other phytonutrients. We currently market our Spirulina products
in the United States and  thirty-seven  other countries  though a combination of
retail,  wholesale,  and private  label  channels.  In early 1997, we introduced
NatuRose(TM) to the worldwide aquaculture  industry.  NatuRose is our brand name
for natural  astaxanthin  (pronounced  "as-ta-zan-thin").  Astaxanthin  is a red
pigment from the microalgae, Haematococcus, and is used in aquaculture to impart
a pink to red  color to  pen-raised  fish and  shrimp.  NatuRose  competes  with
synthetic  astaxanthin  whose worldwide  annual sales are estimated at more than
$150 million.

     Cyanotech is also  developing  microalgae  for the  expression of native as
well as heterologous  proteins through  molecular  biology.  Because  microalgae
naturally  contain  high levels of  protein,  because  they have a uniform  cell
structure,  and because  they can grow up to 100 times  faster than land plants,
they offer unique advantages over plant,  bacterial or mammalian systems for the
expression  of  proteins.  Cyanotech  intends to continue to exploit the largely
untapped  commercial  opportunities of microalgae by producing  natural products
and also genetically  engineered products through molecular biology. Like higher
plants,  algal expression  systems can be produced on a large-scale with culture
volumes of up to 600,000 liters without  problems of  contamination by bacterial
endotoxins or animal viruses.  Unlike higher plants,  however, the time required
to grow transgenic  algae  expressing the desired protein is on the order of one
to two months rather than the one to two years that would be required in corn or
soybeans, for example.

     Since 1996,  Cyanotech has been pursuing the  development  of a genetically
engineered  biopesticide  for the control of  mosquitoes.  A natural  toxin from
Bacillus  thuringiensis  var.  israelensis  (Bti)  is being  transformed  into a
blue-green algae,  Synechococcus,  a food for mosquito larvae. When applied to a
mosquito-infested  body of  water,  the  algae  could  act as an  effective  and
environmentally safe means of control.



                                        2

<PAGE>

     In April 1998, the Company  signed an agreement  with The Scripps  Research
Institute  in La Jolla,  California  to develop a new compound for use in chiral
chemistry.  The genetically engineered Aldolase Catalytic Antibody was generated
in the Scripps laboratory and subsequently  expressed as a transgene in algae by
Scripps  scientists.  This antibody may have numerous potential  applications in
industrial synthesis,  including the synthesis of certain anti-cancer compounds.
Under the terms of the  exclusive  license  agreement,  Scripps will provide the
genetically  engineered,  live  microalgae  containing  the  catalytic  aldolase
protein to Cyanotech.  Cyanotech  would be  responsible  for  development of the
large scale  production  and  purification  process for the catalytic  antibody.
Development  tests are  presently  underway  to assess  the  feasibility  of the
proposed commercial product.

     In March of 1999, we announced  the  development  of a natural  astaxanthin
product for use as a human  dietary  supplement.  A growing  body of  scientific
literature is demonstrating that the antioxidant, astaxanthin, surpasses many of
the  antioxidant  benefits  of vitamin C,  vitamin  E,  beta-carotene  and other
carotenoids.

     Cyanotech  Corporation is incorporated in Nevada.  Our principal  executive
offices are located at 73-4460 Queen Kaahumanu Highway,  Suite 102, Kailua-Kona,
Hawaii  96740,  and our telephone  number is (808)  326-1353.  Unless  otherwise
indicated, all references in this report to the "Company," "we," and "Cyanotech"
refer  to  Cyanotech  Corporation,  a  Nevada  corporation,   its  wholly  owned
subsidiaries,  Nutrex, Inc., a Hawaii corporation,  and Cyanotech  International
FSC, Inc., a Barbados corporation.

INDUSTRY BACKGROUND

     Microalgae are a diverse group of microscopic plants that have a wide range
of physiological and biochemical  characteristics  and naturally contain,  among
other  things,  high levels of  proteins,  amino acids,  vitamins,  pigments and
enzymes.   Microalgae  have  the  following   properties  that  make  commercial
production  attractive:  (1) microalgae grow much faster than land grown plants,
often up to 100 times faster;  (2) microalgae have a uniform cell structure with
no bark, stems,  branches or leaves, which permits easier extraction of products
and higher  utilization of the microalgae cells; (3) the cellular  uniformity of
microalgae  makes it practical to manipulate and control  growing  conditions in
order to optimize a particular  cell  characteristic;  (4) microalgae  contain a
wide array of vitamins and other  important  nutrients;  (5) microalgae  contain
natural pigments; and (6) are a potential source of medical products.

     Current  commercial  applications  for  these  microscopic  plants  include
nutritional  products,  diagnostic  products,  aquaculture  feed  and  pigments,
natural food colorings and research grade  chemicals.  The Company believes that
microalgae  could  potentially  be  used  for  other  commercial   applications,
including   genetically   engineered   products   for   the   biopesticide   and
pharmaceutical  industries.  The most significant  microalgae  products produced
today are algae utilized as food supplements.

     While  many  unique  compounds  have been  identified  in  microalgae,  the
efficient  and cost  effective  commercial  production of microalgae is elusive.
Many  microalgae  culture  systems over the last 20 years have  failed.  Because
microalgae produced for food supplements are typically  cultivated and harvested
outdoors,  production is significantly  affected by climate,  weather conditions
and the chemical  composition of the culture media. Without consistent sunlight,
warm temperature,  low rainfall and proper chemical balance, microalgae will not
grow quickly,  resulting in longer harvesting cycles, decreased pond utilization
and increased cost. Furthermore, microalgal growth requires a very nutrient rich
environment.  The high  nutrient  levels  in the  ponds  promote  the  growth of
unwanted organisms, or "weeds," if the chemical composition of the ponds changes
from its required balance.  Once  contamination  occurs, a pond must be emptied,
cleaned and refilled,  a process that further  decreases  pond  utilization  and
increases production costs.

                                        3

<PAGE>
CYANOTECH'S TECHNOLOGY

     Since  1983,  we  have  designed,  developed  and  implemented  proprietary
production and harvesting technologies,  systems and processes which reduce many
of the  stability  and  contamination  problems  frequently  encountered  in the
production  of  microalgae.  This  proprietary  production  system  is  known as
Integrated  Culture Biology  Management (or "ICBM").  Through the application of
this  technology,  our  Spirulina  culture  ponds can be  productive  year-round
without any significant  loss in productivity due to  contamination.  We believe
that such an accomplishment remains unique to Cyanotech.

     In addition to the advantages of our ICBM  technology,  we have developed a
patented  system for the  recovery  of carbon  dioxide  from our  drying  system
exhaust  gas,  called  Ocean-Chill  Drying.  Since  microalgae  are  essentially
microscopic "plants," they require sunlight, water, carbon dioxide and nutrients
for optimal  growth.  By recovering  carbon  dioxide from the drying system that
would  otherwise be released  into the  atmosphere,  we can divert the recovered
carbon dioxide back to the algae cultures. This process provides us with another
significant  cost  advantage over other  microalgae  producers who must purchase
carbon dioxide. Moreover,  Ocean-Chill Drying dries microalgal products in a low
oxygen environment,  which protects oxygen sensitive nutrients.  In addition, we
have developed an automated Spirulina  processing system, which enables a single
operator to harvest and dry the Spirulina powder.

     Another major  advantage for us is the location of our production  facility
at the Hawaii  Ocean  Science and  Technology  ("HOST")  Park at Keahole  Point,
Hawaii. We believe that the combination of consistent warm temperature, abundant
sunlight,  and low  rainfall  at this  facility  makes  this a highly  favorable
location for the economical,  large-scale cultivation of microalgae. In contrast
to our facility,  microalgae  producers in other areas  lacking these  favorable
characteristics  stop  producing  for up to four  months a year  because of less
favorable  climate or weather  conditions.  At the HOST Park,  we have access to
cold,  clean, deep sea water that is pumped from a depth of 2,000 feet. This sea
water is used both as a source of  nutrients  for  microalgae  culture  and as a
cooling agent in the Ocean-Chill Drying process.  Additionally, our facility has
access to a complete  industrial  infrastructure  and is located 30 miles from a
deep water port and adjacent to an international airport.

     Applying our experience in cultivating and harvesting  Spirulina,  we began
commercial production of our natural astaxanthin product,  NatuRose,  during the
fourth  quarter of fiscal 1997.  Our efforts in NatuRose  production  during the
year  ended  March 31,  1999,  focused  on  working  to  improve  and refine our
methodology  for   cultivation.   This  effort  has  resulted  in  an  improved,
large-scale  photo-bioreactor  system, referred to as the BioDome Closed Culture
System,  or BioDome  CCS. We believe  this  improved  technology  will result in
reduced  production  costs,  increased  control  of  product  purity  and have a
positive effect on production yield. In early February 1999, we began conversion
of our astaxanthin production area to this system and expect to have our systems
fully converted by the fall of 1999.

     Our primary business  objective is to be the leading developer and producer
of microalgal  products in our existing and future markets.  We believe that the
combination of our ICBM technology,  our BioDome CCS technology, our Ocean-Chill
Drying process, our automated processing system and a favorable growing location
with year-round  production  capabilities,  can be  successfully  applied to the
commercial cultivation of many species of microalgae.

PRODUCTS

  Spirulina

     Our  principal  product,  accounting  for 91% and 95% of net  sales for the
years ended March 31, 1999 and 1998,  respectively,  is a nutritional microalgae
marketed as Spirulina Pacifica. Developed by us and sold worldwide to the health
and natural  foods market,  Spirulina  Pacifica is a unique strain of microalgae
that is a highly absorbable source of natural beta carotene,  mixed carotenoids,
B vitamins,  GLA, protein,  essential amino acids and other  phytonutrients.  We
believe we were the first Spirulina  producer to have its products and processes
certified  organic and we are the only  microalgae  producer to have its quality
system registered under the ISO 9002-94 standards.


                                        4

<PAGE>

     Cyanotech  produces Spirulina  Pacifica in three forms:  powder,  flake and
tablets.  Powder is used as an ingredient in nutritional  supplements and health
food drinks while flakes are used as a seasoning on various  foods.  Tablets are
consumed  daily as a dietary  supplement.  We also  produce and market a blended
product under the Hawaiian  Energizer name.  Hawaiian  Energizer tablets contain
Spirulina Pacifica, Bee Pollen and Siberian Ginseng.

     We anticipate that sales of our Spirulina  Pacifica  products will continue
to  constitute  a  substantial  portion of net sales  during  fiscal  2000.  Any
material  decrease  in the  overall  level of sales of, or the prices  for,  our
Spirulina  Pacifica  products,  whether  as a result of  competition,  change in
consumer demand,  increased  worldwide supply of Spirulina or any other factors,
would have a material  adverse effect on our business,  financial  condition and
results of operations.

  Natural Astaxanthin

     The fiscal  year ended  March 31,  1999 was the second  year of  commercial
production for our natural astaxanthin product,  NatuRose.  Astaxanthin is a red
pigment used primarily in the  aquaculture  industry to impart pink color to the
flesh of  pen-raised  fish and  shrimp.  The  astaxanthin  market  currently  is
dominated  by  a  single  producer,  Hoffmann-LaRoche,  who  produces  synthetic
astaxanthin  from  petrochemicals.  Hoffmann-LaRoche  currently  sells synthetic
astaxanthin  to the  aquaculture  industry  at  approximately  $2,500  per  pure
kilogram. As a result of continued growth in the world aquaculture industry, the
world market for  astaxanthin is estimated to currently  exceed $150 million per
year.  Although  sales of NatuRose for the fiscal year ended March 31, 1999 were
nominal,  we anticipate that such sales may constitute a significant  portion of
total sales in future periods.

  Phycobiliproteins

     Cyanotech also produces phycobiliproteins which are sold to the medical and
biotechnology  research  industry.   Phycobiliproteins  are  highly  fluorescent
pigments purified from microalgae. Their spectral properties make them useful as
tags or markers  in many kinds of  biological  assays,  such as flow  cytometry,
fluorescence  immunoassays and fluorescence microscopy. We anticipate that sales
of phycobiliproteins  will not represent a significant  component of total sales
in future periods.

PRODUCTS UNDER DEVELOPMENT

     We continue to develop our unique,  bio-engineered mosquitocide product and
our aldolase catalytic antibody.

     Transformation  of the microalgae,  Synechococcus,  to express the Bacillus
thuringiensis  var.   israelensis  (Bti)  mosquitocide  toxin  has  proven  more
difficult than  originally  anticipated  and we now expect  preliminary  data on
toxin expression  levels after mid-year 1999. The bacterial toxin of Bti is very
specific to mosquitoes and black flies, while the blue-green algae is a food for
mosquito  larvae.  We believe that when applied to a  mosquito-infested  body of
water, this bio-engineered product could act as an effective and environmentally
safe means of control.

     On the  aldolase  catalytic  antibody  project,  we  continue  to work with
research  scientists  from The Scripps  Research  Institute on expression of the
catalytic antibody gene. The genetically  engineered aldolase catalytic antibody
may have numerous potential applications in industrial synthesis,  including the
synthesis of certain  anti-cancer  compounds.  Under the terms of the  exclusive
license  agreement,  Scripps  will  provide  the  genetically  engineered,  live
microalgae  containing the catalytic aldolase protein to Cyanotech.  Development
tests  are  presently  underway  to  assess  the  feasibility  of  the  proposed
commercial product.


                                        5

<PAGE>

     In March 1999, we announced  development of a natural  astaxanthin  product
for use as a human  dietary  supplement  as an adjunct to NatuRose,  our natural
astaxanthin product for the commercial feed and aquaculture industries. There is
a growing body of  scientific  literature  demonstrating  that the  antioxidant,
astaxanthin, surpasses many of the antioxidant benefits of vitamin C, vitamin E,
beta-carotene  and other  carotenoids.  Scientific  studies have also shown that
natural  astaxanthin has up to 550 times the  antioxidant  activity of vitamin E
and 10  times  the  antioxidant  activity  of  beta-carotene.  We are  currently
evaluating the feasibility of the proposed  commercial  product and pursuing the
appropriate approvals from various government authorities.

     Development  of all  of  these  products  is  continuing  but  there  is no
assurance  that  commercial  products  will be achieved.  Cyanotech's  products,
potential products and its manufacturing and research  activities are subject to
varying  degrees of  regulation  by a number of  government  authorities  in the
United States and in other countries.  Our inability to successfully  develop or
commercialize  additional  products could have a material  adverse effect on our
business, financial condition and results of operations.

RESEARCH & DEVELOPMENT EXPENSES

     Cyanotech's  expertise  is in the  development  of  efficient,  stable  and
cost-effective  production  systems for  microalgal  products.  Our  researchers
investigate  specific  microalgae   identified  in  scientific   literature  for
potentially  marketable  products and then develop the  technology  to grow such
microalgae on a commercial scale.

     During  fiscal  1999,  the  Company  incurred   $895,000  in  research  and
development expenses,  compared with $677,000 and $587,000 in the years 1998 and
1997, respectively.  The Company intends to continue to develop new products and
prioritizes its research and development activities to focus on projects that it
believes will have the greatest market acceptance and achieve the highest return
on the Company's investment. Successful microalgal product development is highly
uncertain  and is  dependent on numerous  factors,  many of which are beyond the
Company's control. Products that appear promising in early phases of development
may be found to be  ineffective,  may be uneconomical  because of  manufacturing
costs or other  factors,  may be  precluded  from  commercialization  due to the
proprietary  rights  of  other  companies,  or may  fail  to  receive  necessary
regulatory approvals.

DISTRIBUTION AND INTERNATIONAL SALES

     The majority of our bulk  Spirulina  sales are to companies  with their own
Spirulina  product  lines.   Many  of  these  companies   identify  and  promote
Cyanotech's Hawaiian Spirulina in their products.  In the United States, we sell
directly to health food  manufacturers  and health  food  formulators.  Packaged
consumer products sell in the domestic market through an established health food
distribution  network.  Orders for packaged  consumer  products are taken at the
store level by one of 23 regional broker representatives and shipped through one
of 25 distributors.  In selected foreign  markets,  we have appointed  exclusive
sales distributors for both bulk Spirulina and packaged consumer products.

     In the years  ended  March 31,  1999,  1998 and 1997,  international  sales
accounted for approximately 40%, 44% and 62%, respectively, of our net sales. We
expect that international sales will continue to represent a significant portion
of our net sales.  Our business,  financial  condition and results of operations
may be  materially  adversely  affected  by  any  difficulties  associated  with
managing accounts receivable from international  customers,  tariff regulations,
imposition of governmental controls, political and economic instability or other
trade restrictions.  Although our international sales are currently  denominated
in United States dollars,  fluctuations  in currency  exchange rates could cause
our products to become  relatively  more  expensive to customers in the affected
country, leading to a reduction in sales in that country.

CUSTOMERS

Spirulina

     We market and sell our Spirulina products to a variety of customers,  which
range in size from $500 million in annual sales to small retail stores.  Several
of our major  customers are  businesses  that were  established  exclusively  to
market and sell Spirulina products.



                                        6

<PAGE>

     Approximately 11% of our net sales for the year ended March 31, 1999 was to
a single  customer,  Spirulina  International  B.V., a Spirulina  marketing  and
distribution  company based in Europe. Sales to this customer were less than 10%
of net sales for the years ended March 31, 1998 and 1997.

     We market and sell our Spirulina  products to a variety of other customers,
including:

     Health Food Manufacturers.  Health food manufacturers often use Cyanotech's
Spirulina products as a key ingredient in their Spirulina-based  products, or as
an ingredient in their health food  formulations.  These customers purchase bulk
powder or bulk tablets and package the products under their brand label for sale
to the health and natural food markets.  Many of the products  produced by these
customers are often marketed and sold  domestically in direct  competition  with
our Nutrex line of retail consumer products.

     Private Label Customers. We currently provide private label retail consumer
products  to  one  international  customer.   Products  for  this  customer  are
manufactured  only upon receipt of an order and no finished product  inventories
are maintained.

     Retail  Distributors.  Retail  distributors  act as product  wholesalers to
independent  and chain  retailers.  The majority of domestic Nutrex sales in the
year ended March 31, 1999 were to 25 distributors.

     Natural  Products  Distributors.  In the year ended March 31, 1999, we sold
bulk Spirulina products to sixteen domestic and ten foreign customers engaged in
the business of  distributing  natural raw  materials to health and natural food
manufacturers.  These  distributors  provide their  customers with  standardized
quality control,  warehousing and distribution services, and charge a mark-up on
the products for providing these services.  These distributors may differentiate
the products they sell,  but they generally  treat the products as  commodities,
with price being the major determining factor in their purchasing decision.

Natural Astaxanthin

     Our NatuRose  product is presently  being sold on a limited basis through a
network of agents and  distributors  directly to  aquaculture  farmers,  vitamin
suppliers,  aquaculture feed  manufacturers  and other end users in 15 countries
for use in aquaculture feed, poultry feed and pet feed industries.

COMPETITION

 Spirulina

     Our Spirulina Pacifica products compete with a variety of vitamins, dietary
supplements,  other algal products and similar nutritional products available to
consumers.  The nutritional  products market is highly competitive.  It includes
international,  national, regional and local producers and distributors, many of
whom have greater  resources  than  Cyanotech,  and many of whom offer a greater
variety of products. Our direct competition in the Spirulina market currently is
from  Dainippon Ink and Chemical  Company's  facility in California  and several
farms in China.  To a lesser extent,  we compete with numerous  smaller farms in
China,  India,  Thailand,  Cuba,  Brazil  and South  Africa.  Packaged  consumer
products  marketed under our Nutrex brand also compete with products marketed by
health food  manufacturing  customers of Cyanotech who purchase  bulk  Spirulina
from us and package it for retail sales. A decision by another  company to focus
on  Cyanotech's  existing  or target  markets or a  substantial  increase in the
overall  supply  of  Spirulina  could  have a  material  adverse  effect  on our
business,  financial  condition  and  results  of  operations.  There  can be no
assurance that we will not experience  competitive  pressure,  particularly with
respect  to  pricing,  that  could  adversely  affect  our  business,  financial
condition and results of operations.

                                        7

<PAGE>

Natural Astaxanthin

     Our natural  astaxanthin  product,  NatuRose,  competes  directly  with the
synthetic  astaxanthin product produced and marketed for the commercial feed and
aquaculture industry worldwide by Hoffmann-LaRoche.  In addition,  several other
companies  have  announced  plans to produce  commercial  quantities  of natural
astaxanthin  from  microalgae and Phaffia yeast. We believe that these companies
are presently only producing small quantities for test purposes. Although we are
unaware of any studies indicating that natural  astaxanthin has any benefits not
otherwise  provided by synthetic  astaxanthin,  we believe  there is  commercial
demand for a natural  astaxanthin  product  and that our  NatuRose  product  can
compete on the basis of product performance and price.

Phycobiliproteins

     Four major  competitors  manufacture  phycobiliprotein  products  for sale,
including Molecular Probes, Inc., Quantify, Inc., Martek Biosciences Corporation
and Prozyme,  Inc. Cyanotech competes with these companies on the basis of price
and quality. New synthetic  fluorescent compounds have been developed by a third
party  which  are  superior  to  phycobiliproteins  in  some  applications.  The
advantage of the  synthetic  compounds is their lower  molecular  weight and, in
some cases,  their lower cost.  While our  phycobiliprotein  products may not be
able to compete  effectively  against synthetic  compounds in some applications,
Cyanotech's  phycobiliproteins  have gained a  reputation  for high quality at a
competitive price.

GOVERNMENT REGULATION

     Cyanotech's products, potential products and its manufacturing and research
activities  are  subject  to  varying  degrees  of  regulation  by a  number  of
government  authorities in the United States and in other  countries,  including
the Food and Drug  Administration (the "FDA") pursuant to the Federal Food, Drug
and Cosmetic Act and by the  Environmental  Protection  Agency ("EPA") under the
Federal  Insecticide,   Fungicide,   and  Rodenticide  Act  ("FIFRA").  The  FDA
regulates, to varying degrees and in different ways, dietary supplements,  other
food products, diagnostic medical devices and pharmaceutical products, including
their  manufacture,   testing,  exportation,   labeling,  and,  in  some  cases,
advertising.  The EPA also rigorously regulates pesticides, among other types of
products.

     Cyanotech  is also  subject  to other  federal,  state  and  foreign  laws,
regulations  and policies with respect to labeling of its products,  importation
of organisms,  and occupational safety, among others. Federal, state and foreign
laws,  regulations  and policies are always subject to change and depend heavily
on   administrative   policies  and   interpretations.   We  work  with  foreign
distributors  to ensure  our  compliance  with  foreign  laws,  regulations  and
policies.  There can be no  assurance  that any changes with respect to federal,
state and foreign laws, regulations and policies, and, particularly with respect
to the FDA and EPA or other such regulatory  bodies,  with possible  retroactive
effect,  will not have a  material  adverse  effect on our  business,  financial
condition and results of  operations.  There can be no assurance that any of our
potential products will satisfy applicable regulatory requirements.

     The Federal Dietary Supplement Health and Education Act ("DSHEA") regulates
the use and marketing of dietary  supplements,  including vitamin products.  The
DSHEA covers only dietary  supplements  and contains a number of provisions that
differentiate  dietary  supplements  from other foods. The DSHEA also sets forth
standards for  adulteration  of dietary  supplements or ingredients  thereof and
establishes current food Good Manufacturing  Practices ("cGMP") requirements for
dietary supplements.  It also provides detailed requirements for the labeling of
dietary supplements,  including nutrition and ingredient labeling.  We currently
believe that Spirulina  Pacifica,  marketed as a dietary  supplement,  is exempt
from FDA regulation as a food additive.

                                        8

<PAGE>

     Our  Spirulina  manufacturing  processes  and  our  contract  bottlers  are
required  to adhere to cGMP as  prescribed  by the FDA.  We believe  that we are
currently in compliance  with all  applicable  cGMP and other food  regulations.
Compliance  with relevant cGMP  requirements  can be onerous and time consuming,
and there can be no assurance  that  Cyanotech can continue to meet relevant FDA
manufacturing  requirements for existing  products or meet such requirements for
any future  products.  Ongoing  compliance  with food cGMP and other  applicable
regulatory  requirements are monitored through periodic inspections by state and
federal  agencies,  including  the FDA,  the  Hawaii  Department  of Health  and
comparable  agencies  in  other  countries.  Our  processing  facility  is  also
inspected annually for organic certification by Quality Assurance  International
and for Kosher  certification  by the Kosher Overseers  Association.  The use of
Spirulina as a food  additive for seasoning on salads or pasta or for such other
food  uses has not been  cleared  by the FDA,  however,  the FDA has  recognized
Spirulina as a safe food. We currently market the product for these food uses on
the basis of our belief  that its use in these food  applications  is  generally
recognized as safe and therefore is not subject to FDA pre-market  clearances as
a food additive.

     Our natural astaxanthin product,  NatuRose,  has received clearance for use
as a feed and food color  additive in Japan and Canada and has received  organic
registration for use in feed in New Zealand but will need clearance for use as a
feed color additive in the United States. We are actively pursuing clearance for
use in the U.S.  markets and are  presently  in process with our petition to the
FDA and anticipate final approval by the fall of 1999. Our petition for approval
for the Canadian  Food  Industry  Agency was submitted in June 1998 and received
approval  in June 1999.  The  process of  obtaining  clearances  for a new color
additive is expensive and time consuming.  Extensive  information is required on
the toxicity of the additive, including carcinogenicity studies and other animal
testing.  No assurances can be given that any of our proposed  products intended
for use as a feed  additive  will be approved for use in the United  States on a
timely basis, if at all.

     As in vitro diagnostic medical device components, phycobiliprotein products
do not  currently  require  pre-market  clearances  by the  FDA.  However,  as a
component  of a medical  device,  they can be subject to other  various  medical
device requirements, including cGMP requirements.

     Work is continuing on our  genetically-engineered  mosquitocide project. We
are aware that any  resulting  product will be subject to validation of efficacy
though field trials. If proven effective,  any potential commercial product will
be  subject to  regulatory  approval  by the EPA for use in the  United  States.
However,  Bti is currently approved for use as a biopesticide by the EPA and the
World Health Organization.  We are uncertain of regulatory requirements in other
potential markets at this point.

PATENTS, LICENSES AND TRADEMARKS

     Although we regard our proprietary  technology,  trade secrets,  trademarks
and similar  intellectual  property as  critical  to our  success,  we rely on a
combination of trade secret,  contract,  patent,  copyright and trademark law to
establish and protect our rights in our products and technology. There can be no
assurance  that we will be able to protect  our  technology  adequately  or that
competitors  will not be able to develop similar  technology  independently.  In
addition,  the laws of certain  foreign  countries may not protect the Company's
intellectual  property  rights  to the same  extent  as the  laws of the  United
States.  Cyanotech has two United States patents issued to it. Litigation in the
United  States  or  abroad  may be  necessary  to  enforce  our  patent or other
intellectual  property  rights,  to protect our trade secrets,  to determine the
validity  and scope of the  proprietary  rights  of others or to defend  against
claims of  infringement.  Such litigation,  even if successful,  could result in
substantial  costs and diversion of resources and could have a material  adverse
effect  on  our  business,   results  of  operations  and  financial  condition.
Additionally,  if any such claims are asserted against us, we may seek to obtain
a license under the third party's intellectual  property rights. There can be no
assurance,  however,  that a license  would be available on terms  acceptable or
favorable to us, if at all.

     For  a  description  of  pending  patent  litigation,  see  Item  3,  Legal
Proceedings.

                                       9
<PAGE>

ASSOCIATES

     Cyanotech  employed 61  associates  as of March 31,  1999,  of which 58 are
full-time.  Approximately  38  associates  are  involved in the  harvesting  and
production process, 9 are involved in research and product development,  and the
remainder are involved in sales, administration and support. Management believes
that its  relations  with  its  associates  are  good.  We have not  experienced
difficulty in attracting personnel and none of our associates are represented by
a labor union.

INDUSTRY SEGMENTS AND EXPORT SALES

     The  Company  has no assets  outside of the United  States.  The  Company's
business  consists of one industry  segment and is grouped  into six  geographic
areas: United States,  Canada/South America, the Netherlands,  Europe, excluding
the Netherlands, China and  Asia/Pacific,  excluding China. The following table,
(dollars in thousands), summarizes the product sales revenues from  unaffiliated
customers in each of the six geographic regions:
<TABLE>
<CAPTION>
<S>                                     <C>                           <C>                           <C>
                                                 1999                           1998                       1997
                                        ------------------------      -----------------------       ----------------------

United States                               $  4,075         60%         $  4,297         56%         $  4,303         38%
Canada/South America                             426          6%              404          5%              851          8%
The Netherlands                                  717         11%              496          7               499          4%
Europe, excluding the Netherlands                498          7%              788         10%              793          7%
China                                             50          1%              358          5%             3905         34%
Asia/Pacific, excluding China                    972         15%             1284         17%             1048          9%
                                        ------------- ----------      ------------ ----------       ----------- ----------
Total Product Sales Revenues                $  6,738        100%          $ 7,627        100%          $11,399        100%
                                        ============= ==========      ============ ==========       =========== ==========
</TABLE>

     The  Company  believes  that  its  profit  margin  on  export  sales is not
significantly  different from that realized on sales in the United  States.  All
foreign product sales transactions are consummated in U.S. dollars.

     For the years ended March 31, 1999 and 1998, the Company incurred losses of
$2,557,000  and  $300,000,  respectively.  During  these two fiscal  years,  the
Company has  experienced  declining  sales which can be  attributed to increased
competition  for sales of Spirulina  products in all of its major  markets.  The
most significant  decline in sales revenue resulted from the loss of our largest
customer,  a Hong Kong-based  network  marketing  company,  in fiscal 1998. This
matter is  described  in detail in Item 7. The major  effect of the  decrease in
sales has been a  significant  decrease  in  liquidity.  Due to the  significant
decrease  in sales and the  decline in working  capital,  the  Company has taken
action  to  reduce  expenditures  and  obtain  additional  sources  of  external
financing while  concurrently  continuing to diversify its product offerings and
explore  opportunities  for expanding  the markets for its products.  Management
believes  that this  plan may  increase  revenues  and  return  the  Company  to
profitability.  Furthermore, as described in detail in Item 7, the Company is in
technical default on certain debt. The Company's continuation as a going concern
is  dependent  upon its  ability to  generate  sufficient  cash flow to meet its
obligations  on a  timely  basis,  to  comply  with the  terms of its  financing
agreement,  to obtain additional financing or refinancing as may be required, to
attain profitability,  or a combination thereof.  There can be no assurance that
these  efforts will be  successful or that the Company will return to generating
profit on either a quarterly or annual basis.


                                       10
<PAGE>
ITEM 2. PROPERTIES

     Cyanotech  Corporation is located in Kailua-Kona,  Hawaii, at the HOST Park
and also  owns a 2,500  square  foot  sales  office in a light  industrial  area
located  approximately  four miles from the HOST  Park.  The HOST Park  facility
consists of  approximately  183 leased acres.  Approximately  90 acres have been
fully  developed  and  contain  production  ponds,  a  processing   facility,  a
laboratory,  and  administrative  offices.  All  products  are  produced at this
facility.  The  property  is leased  from the  State of  Hawaii  under a 30-year
commercial  lease  expiring  in 2025.  During  1997,  we  reached a  preliminary
agreement  with the State of Hawaii to lease an  additional 93 acres at the HOST
Park,  which increased the total acreage under lease to 183 acres.  The State of
Hawaii has agreed to allow the  Company to lease this  additional  93 acres on a
year to year basis,  until such time that the Company  determines the need for a
longer lease term. Our current lease agreement is effective through December 31,
1999.  Subject to available funds, we plan to use this new property to construct
a larger NatuRose  production  facility and additional  culture ponds that would
use the BioDome CCS  technology.  We believe that there is sufficient  available
land at the HOST Park to meet our currently  planned  future needs.  Our Nutrex,
Inc. subsidiary maintains a sales office in Kailua-Kona, Hawaii.


ITEM 3. LEGAL PROCEEDINGS

     On July 13, 1998,  the Company filed a complaint  (Case No.  CV98-00600) in
United  States  District  Court  for the  District  of  Hawaii ("Court") against
Aquasearch,   Inc.  ("Aquasearch"),   seeking  declaratory  judgment  of  patent
noninfringement,  patent invalidity,  and  non-misappropriation of trade secrets
relating to closed culture production of astaxanthin. The complaint was filed in
response to assertions by Aquasearch regarding its alleged intellectual property
rights.  Aquasearch has answered the complaint and filed counter claims alleging
patent  infringement,  trade secret  misappropriation,  unfair  competition  and
breach  of  contract.  The  Court has  granted  Cyanotech's  motion to amend its
complaint against Aquasearch to add claims of  misappropriation of trade secrets
regarding open pond technology,  unfair  competition and breach of contract.  We
believe that the Cyanotech  technology  involved in this dispute is outmoded and
have discontinued its use. We are pursing this litigation vigorously.

     We maintain  product  liability  insurance in limited  amounts for products
involving  human  consumption.  In the opinion of  management,  broader  product
liability insurance coverage is prohibitively expensive at this time.


ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     No matters were submitted to a vote of the  stockholders  during the fourth
quarter of fiscal 1999.


                                     PART II


ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     The  information  required by this Item is incorporated by reference to the
Section  labeled  "Market  for Common  Equity and Related  Stockholder  Matters"
appearing in the Company's 1999 Annual Report to Stockholders.


ITEM 6. SELECTED FINANCIAL DATA

     The  information  required by this Item is incorporated by reference to the
Section labeled "Selected Financial Data" appearing in the Company's 1999 Annual
Report to Stockholders.


                                       11
<PAGE>



ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

         The  information  required by this Item is incorporated by reference to
the Section labeled "Management's Discussion and Analysis of Financial Condition
and Results of  Operations"  appearing in the  Company's  1999 Annual  Report to
Stockholders.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         We  have  not  entered into any transactions using derivative financial
instruments or derivative commodity instruments and believe that our exposure to
market risk associated with other financial instruments is not material.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The consolidated balance sheets of the Company and subsidiaries as of March
31,  1999 and 1998,  and the  related  consolidated  statements  of  operations,
stockholders'  equity,  and cash  flows for each of the years in the  three-year
period  ended  March 31,  1999,  together  with the  accompanying  notes and the
related Independent Auditors' Report, all contained in the Company's 1999 Annual
Report to Stockholders are incorporated herein by reference.


ITEM 9.  CHANGES  IN  AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
FINANCIAL DISCLOSURE

         Not applicable


                                    PART III


ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS;  COMPLIANCE WITH SECTION 16(A) OF THE
EXCHANGE ACT

(a)  IDENTIFICATION OF DIRECTORS

The  information  required by this Item is  incorporated  by reference  from the
Sections   captioned   "Proposal   One:   Election   of   Directors,"   "Certain
Transactions,"  "Security Ownership of Certain Beneficial Owners and Management"
and "Compliance with Section 16(a) of the Exchange Act" contained in Cyanotech's
definitive 1999 Proxy Statement.

(b)  IDENTIFICATION OF EXECUTIVE OFFICERS

The executive officers of Cyanotech and their ages and positions as of March 31,
1999 are as follows:
<TABLE>
<CAPTION>
                    Name                       Age                       Position
                    ----                       ---                       --------
<S>                                           <C>           <C>
Gerald R. Cysewski, Ph.D. .....................50           Chairman of the Board, President and Chief
                                                            Executive Officer
Glenn D. Jensen ...............................40           Vice President - Operations
Larry L. Line .................................51           Vice President - Sales and Marketing
                                                            President - Nutrex, Inc.
Kelly J. Moorhead .............................43           Vice President - Product Development
Ronald P. Scott ...............................44           Executive Vice President - Finance and
                                                            Administration, Secretary, Treasurer
</TABLE>


                                       12

<PAGE>
Dr.  Cysewski  co-founded  Cyanotech in 1983 and has served as a director  since
that time.  Since March 1990,  Dr.  Cysewski has served as  President  and Chief
Executive  Officer of Cyanotech  and in October  1990 was also  appointed to the
position of Chairman of the Board. From 1988 to November 1990, he served as Vice
Chairman  and from 1983 to June,  1996 he served as  Scientific  Director of the
Company. From 1980 to 1982, Dr. Cysewski was group leader of microalgae research
and development at Battelle Northwest, a major contract research and development
firm.  From  1976 to  1980,  Dr.  Cysewski  was an  assistant  professor  in the
Department of Chemical and Nuclear  Engineering at the University of California,
Santa  Barbara,  where he received a two-year  grant from the  National  Science
Foundation  to  develop a culture  system for  blue-green  algae.  Dr.  Cysewski
received his doctorate in Chemical Engineering from the University of California
at Berkeley.

Mr. Jensen has served as Vice  President - Operations  since May 1993. He joined
Cyanotech in 1984 as Process  Manager and was promoted to Production  Manager in
1991,  in which  position  he served  until his  promotion  to Vice  President -
Operations.  Prior to joining Cyanotech,  Mr. Jensen worked for three years as a
plant  engineer at a  Spirulina  production  facility,  Cal-Alga,  near  Fresno,
California,  which ceased to do business in 1983. Mr. Jensen holds a B.S. degree
in Health Science from California State University, Fresno.

Mr. Line  has served as Vice  President -  Sales and  Marketing and President of
Nutrex,  Inc.  since June,  1998.   Prior  to  joining  Cyanotech,  Mr. Line was
President of Renaissance  Executive  Forums, an advisory board service for chief
executives  in the San Jose,  California  area.  In addition,  he had a separate
management consulting and executive coaching practice that included domestic and
international   clients.  From  1978  through  1991,  he  acted  in  progressive
management roles for Syva Company, an international  medical diagnostics company
which was a subsidiary of Syntex  Corporation.  Mr. Line holds a B.A.  degree in
Chemistry from the California State University at Sacramento.

Mr.  Moorhead  has served as Vice  President - Product  Development  since June,
1998.  From October 1997 to June 1998,  he served as Vice  President - Sales and
Marketing  of the  Company and  President  of Nutrex,  Inc.  From August 1996 to
October 1997 he served as Vice President -  International  Sales.  From December
1991 to August  1996 he  served as Vice  President  - Sales  and  Marketing  and
President of Nutrex,  Inc. From August 1987 to December  1991, he served as Vice
President  -  Production  of the  Company.  Mr.  Moorhead  joined  Cyanotech  as
Production Biologist in December 1984. Prior to joining Cyanotech,  Mr. Moorhead
worked at the Oceanic Institute in Honolulu,  Hawaii where he conducted research
on production of Spirulina from agricultural  wastes.  Mr. Moorhead holds a B.S.
degree in Aquatic Biology from the University of California, Santa Barbara.

Mr.  Scott was  appointed  to the Board of  Directors of the Company in November
1995, has served as Executive Vice President - Finance and Administration  since
August 1995,  and has served as Secretary and Treasurer  since November 1990 and
June 1990,  respectively.  From December 1990 until August 1995 Mr. Scott served
as Vice President - Finance and Administration.  From September 1990 to December
1990,  Mr.  Scott  served as  Controller.  From 1989 to 1990,  he was  Assistant
Controller for PRIAM Corporation, a manufacturer of Winchester disk drives. From
1980 to 1989, he served in various accounting management positions with Measurex
Corporation,  a manufacturer of industrial  process control  systems.  Mr. Scott
holds a B.S. degree in Finance and Management from California State  University,
San Jose, and an M.B.A. degree from the University of Santa Clara.


ITEM 11. EXECUTIVE COMPENSATION

The  information  required by this Item is  incorporated  by reference  from the
section  captioned  "Executive  Compensation and Other  Information,"  "Director
Remuneration" and "Stockholder Return Performance Graph" contained in
Cyanotech's definitive 1999 Proxy Statement.


ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The  information  required by this Item is  incorporated  by reference  from the
section  captioned   "Security   Ownership  of  Certain  Beneficial  Owners  and
Management" contained in Cyanotech's definitive 1999 Proxy Statement.


                                       13

<PAGE>

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Not applicable.
                                     PART IV


ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)  (1).  The  following   Consolidated   Financial   Statements  of  Cyanotech
Corporation and its subsidiaries are incorporated  herein by reference  pursuant
to Item 8:
<TABLE>
<CAPTION>
<S>                                                                                             <C>
                                                                                        Page in 1999
                                                                                        Annual Report
                                                                                        To Stockholders

Independent Auditors' Report....................................................................24
Consolidated Balance Sheets as of March 31, 1999 and 1998........................................9
Consolidated Statements of Operations for each of the years
in the three-year period ended March 31, 1999...................................................10
Consolidated Statements of Stockholders' Equity for
each of the years in the three-year period ended March 31, 1999.................................11
Consolidated Statements of Cash Flows for each of the years
in the three-year period ended March 31, 1999...................................................12
Notes to Consolidated Financial Statements....................................................13-23
</TABLE>

(a) (2). The following  financial  statement schedule is included in this report
on the pages indicated below:


<TABLE>
<CAPTION>
<S>                                                                                             <C>
Schedule II Valuation and Qualifying Accounts...................................................17
Independent Auditors' Report on Schedule........................................................18
</TABLE>

Schedules not listed above are omitted  because of the absence of the conditions
under which they are required or because the required information is included in
the  consolidated   financial  statements  or  notes  thereto,  which  financial
statements are incorporated by reference.

(a) (3).  Index to exhibits


<TABLE>
<CAPTION>
<S>                      <C>
EXHIBIT NUMBER           DOCUMENT DESCRIPTION

  3.1                    Restated Articles of Incorporation. (Incorporated by reference to Exhibit 3.1  to the  Company's  Quarterly
                         Report on Form 10-QSB for the quarter ended December 31, 1996, file no. 0-14602.)
  3.2                    Bylaws of the Registrant, as amended. (Incorporated by reference to Exhibit 3.1 to the Company's  Quarterly
                         Report on Form 10-QSB for the quarter ended December 31, 1995, file no. 0-14602.)
  4.1                    Specimen Common Stock Certificate. (Incorporated by reference to Exhibit 4.1 to the  Company's Registration
                         Statement on Form SB-2 filed on February 28, 1996, file no. 333-00951.)
  4.2                    Terms of the Series C Preferred Stock as Revised 1991. (Incorporated by reference  to  Exhibit  4.1  to the
                         Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1990, file no. 0-14602.)

                                       14
<PAGE>
10.1                     1985 Incentive Stock Option Plan dated March 18, 1985, as amended.  (Incorporated  by  reference to Exhibit
                         4(d) to the Company's Registration Statement on Form S-8 filed on December 3, 1992, file no. 33-55310.)
10.2                     Stockholders Agreement dated as of May 17, 1993.(Incorporated by reference to Exhibit 10.8 to the Company's
                         Annual Report on Form 10-KSB for the fiscal year ended March 31, 1994, file no. 0-14602.)
10.3                     1994 Non-Employee Directors Stock Option and Stock Grant Plan. (Incorporated  by  reference to Exhibit 10.7
                         to the Company's Annual Report on Form 10-KSB for the fiscal year ended March 31, 1994, file no. 0-14602.)
10.4                     Term Loan Agreement dated April 1, 1995 between Spirulina International B.V. and the Company. (Incorporated
                         by reference to Exhibit 10.13 to the Company's Annual Report on Form 10-KSB for the fiscal year ended March
                         31, 1995, file no. 0-14602.)
10.5                     License  Agreement  by  and  between  The  University  of  Memphis  and  the  Company  dated June 19, 1995.
                         (Incorporated by reference to Exhibit 10.14 to the Company's Annual  Report  on  Form 10-KSB for the fiscal
                         year ended March 31, 1995, file no. 0-14602.)
10.6                     1995 Stock Option Plan for Cyanotech  Corporation  dated  August  9,  1995,  as  amended.  (Incorporated by
                         reference to Exhibit 4(C) to the Company's Registration  Statement  on  Form S-8 filed on October 27, 1995,
                         file no. 33-63789.)
10.7                     Sub-Lease Agreement between the Company and Natural Energy Laboratory of  Hawaii  Authority  dated December
                         29, 1995. (Incorporated by reference to  Exhibit 10.1  to the Company's Quarterly Report on Form 10-QSB for
                         the quarter ended December 31, 1995, file no. 0-14602.)
10.8                     Preferred  Stock  Conversion  and  Registration  Rights Agreement by and between the  Company and Firemen's
                         Insurance Company of Newark, New Jersey, dated as of  February  20,  1996.  (Incorporated  by  reference to
                         Exhibit 10.16 to the Company's Registration Statement on Form SB-2 as filed on February 28, 1996,  file no.
                         333-00951.)
10.9                     Registration Rights Agreement by and between the Company and American Cyanamid Company dated as of February
                         20, 1996.  (Incorporated by reference to Exhibit 10.17 to the Company's Registration Statement on Form SB-2
                         as filed on February 28, 1996, file no 333-00951.)
10.10                    License Agreement between The Scripps Research Institute and the Company dated April 14, 1998.(Incorporated
                         by reference to Exhibit 10.14 to the Company's Annual Report on  Form  10-K for the fiscal year ended March
                         31, 1998, file no. 0-14602.)
10.11                    Workout/suspension Agreement between the Company and Kiewit Pacific Co. dated March 30, 1998. (Incorporated
                         by reference to Exhibit 10.15 to the Company's Annual Report  on  Form 10-K for the fiscal year ended March
                         31, 1998, file no. 0-14602.)
10.12                    Security Agreement between the Company and Kiewit Pacific Co.  dated  January  1,  1998.  (Incorporated  by
                         reference to Exhibit 10.16 to the Company's Annual Report on Form 10-K for the fiscal year ended  March 31,
                         1998, file no. 0-14602.)
10.13                    Loan and Security Agreement and Schedule to the Loan and Security Agreement dated July 28, 1998 between the
                         Company and Coast Business Credit.  (Incorporated  by  reference to Exhibit 10.1 to the Company's Quarterly
                         Report on Form 10-Q for the quarter ended June 30, 1998, file no. 0-14602.)

                                       15

<PAGE>
10.14                    Workout/suspension Agreement between the Company and Kiewit Pacific Co. dated June 15, 1999.
11.1                     Statement re: Computation of Earnings per Share
13                       1999 Annual Report to Stockholders (portions only)
21.1                     Subsidiaries of the Company.
23.1                     Accountants' Consent
27                       Financial Data Schedule.
</TABLE>
(b)      Reports on Form 8-K

The Registrant did not file any reports on Form 8-K during the fourth quarter of
the 1999 fiscal year.

No Annual Report to Stockholders or proxy material has been sent to Stockholders
as  of  this  date.  Such  report  and  proxy  material  will  be  furnished  to
Stockholders  after the filing of this Form and copies of such materials will be
furnished to the Commission when they are sent to Stockholders.

                                       16

<PAGE>
<TABLE>
<CAPTION>
                                   Schedule II
                     Cyanotech Corporation and Subsidiaries
                Valuation and Qualifying Accounts (in thousands)
                    Years Ended March 31, 1999, 1998 and 1997
<S>                 <C>                      <C>                      <C>                      <C>                      <C>
                    Column A                 Column B                 Column C                 Column D                 Column E
                                                                      Additions
                                             Balance at     Charged to      Charged to                                  Balance at
                                             Beginning      Costs and       Other                                       End of
              Description                    of Year        Expenses        Accounts           Deductions               Year
Allowance for Doubtful Receivables
1999                                         $     10                5              --                3                 $     12
1998                                         $     --               10              --               --                 $     10
1997                                         $     --               --              --               --                 $     --
</TABLE>

                                       17
<PAGE>

                    INDEPENDENT AUDITORS' REPORT ON SCHEDULE




The Board of Directors
Cyanotech Corporation:

Under  date  of  May  14, 1999, except as to the second paragraph of note 3, the
second  paragraph of note 4 and the second paragraph of note 13, which are as of
July 13, 1999,  we  reported  on the  consolidated  balance  sheets of Cyanotech
Corporation  and  subsidiaries  as  of  March 31, 1999 and 1998, and the related
consolidated statements of operations,  stockholders'  equity and cash flows for
each of the years in the  three-year  period ended March 31, 1999,  as contained
in  the  1999  annual  report   to  stockholders.  These  consolidated financial
statements  and  our  report thereon are incorporated by reference in the annual
report  on  Form 10-K for the year ended March 31, 1999.  In connection with our
audits of the aforementioned consolidated financial statements,  we also audited
the related financial  statement  schedule as listed in the accompanying  index.
The  financial  statement  schedule  is  the  responsibility  of  the  Company's
management.  Our  responsibility  is to  express  an  opinion  on the  financial
statement schedule based on our audits.

In our opinion,  such financial statement schedule,  when considered in relation
to the  basic  consolidated  financial  statements  taken as a  whole,  presents
fairly, in all material respects, the information set forth therein.

The independent  auditors'  report on the consolidated  financial  statements of
Cyanotech  Corporation referred to above also contains an explanatory  paragraph
that  states  that the  consolidated  financial  statements  have been  prepared
assuming  that  Cyanotech  Corporation  will  continue  as a going  concern.  As
discussed in note 13 to the consolidated  financial statements,  the Company has
suffered  recurring losses from operations and has limited sources of additional
liquidity that raise  substantial doubt about its ability to continue as a going
concern.  Management's  plans in regard to these  matters are also  described in
note 13. The consolidated  financial statements and financial statement schedule
do not  include  any  adjustments  that might  result  from the  outcome of this
uncertainty.


/s/  KPMG LLP
Honolulu, Hawaii
May 14, 1999

                                       18

<PAGE>
                                   SIGNATURES

         Pursuant to the  requirements  of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the  undersigned,  thereunto duly  authorized,  on the 23rd day of
June, 1999.

                              CYANOTECH CORPORATION

                       By: /s/ Gerald R. Cysewski, Ph.D.
                           -----------------------------
                               Gerald R. Cysewski, Ph.D.
                                   Chairman of the Board,
                                   President and Chief
                                   Executive Officer

         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
this  report has been  signed  below by the  following  persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>

                Signatures                                     Title                                Date

<S>                                          <C>                                               <C>
/s/ Gerald R. Cysewski                       Chairman of the Board, President and              June 23, 1999
-------------------------                    Chief Executive Officer  (Principal               -------------
Gerald R. Cysewski, Ph.D.                    Executive Officer and Director)

/s/ Ronald P. Scott                          Executive Vice President - Finance and            June 23, 1999
-------------------------                    Administration, Secretary and Treasurer           -------------
Ronald P. Scott                              (Principal Financial and Accounting
                                             Officer and Director)


/s/ Eric R. Reichl                           Director                                          June 23, 1999
-------------------------                                                                      -------------
Eric R. Reichl

/s/ John T. Waldron                          Director                                          June 23, 1999
-------------------------                                                                      -------------
John T. Waldron

/s/ Paul C. Yuen                             Director                                          June 23, 1999
-------------------------                                                                      -------------
Paul C. Yuen
</TABLE>

                                       19