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 December 31, 2000

                         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 January 31, 2001:

            Title of Class                              Shares Outstanding
            --------------                              ------------------
     Common stock - $.005 par value stock                   16,949,702



                                        1

<PAGE>




                              CYANOTECH CORPORATION
                                    FORM 10-Q

                                      INDEX

PART I.  FINANCIAL INFORMATION


Item 1.  Financial Statements                                               Page
                                                                            ----

         Consolidated Balance Sheets (unaudited)
                  December 31, 2000 and March 31, 2000 . . . . . . . . . . . . 3

         Consolidated Statements of Operations (unaudited)
                  Three and nine month periods ended
                  December 31, 2000 and 1999. . . . . . . . . . . . . . . . . .4

         Consolidated Statements of Cash Flows (unaudited)
                  Nine month periods ended
                  December 31, 2000 and 1999. . . . . . . . . . . . . . . . . .5

         Notes to Consolidated Financial Statements (unaudited). . . . . . .. .6

Item 2.  Management's Discussion and Analysis of Financial
           Condition and Results of Operations . . . . . . . . . . . . . . . .11


PART II. OTHER INFORMATION

Item 1.          Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . 19

Item 6.          Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . .19



SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20

                                        2

<PAGE>




PART I. FINANCIAL INFORMATION
     Item 1.   Financial Statements
<TABLE>
<CAPTION>
                                                 CYANOTECH CORPORATION
                                              CONSOLIDATED BALANCE SHEETS
                                   (Dollars in thousands, except per share amounts)
                                                      (Unaudited)

                                                                          December 31,             March 31,
ASSETS                                                                       2000                    2000
                                                                        --------------          --------------
Current assets:
<S>                                                                     <C>                     <C>
     Cash and cash equivalents                                          $       1,814           $         405
     Accounts receivable, net                                                   1,602                   1,613
     Refundable income taxes                                                       --                     154
     Inventories  (note 2)                                                      2,106                   1,609
     Prepaid expenses                                                              65                      50
                                                                        ---------------         --------------
              Total current assets                                              5,587                   3,831

Equipment and leasehold improvements, net (note 3)                             15,018                  15,746
Other assets                                                                    1,129                     112
                                                                        --------------          --------------
              Total assets                                              $      21,734           $      19,689
                                                                        ==============          ==============
LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
     Current maturities of long-term debt                               $         215           $         186
     Accounts payable                                                             386                   1,130
     Other accrued liabilities                                                    188                     421
                                                                        --------------          --------------
              Total current liabilities                                           789                   1,737

Long-term debt, excluding current maturities
     Term Loan                                                                  3,167                   1,307
     Convertible debentures                                                     1,250                      --
Deferred revenue                                                                  141                      --
                                                                        --------------          --------------
              Total liabilities                                                 5,347                   3,044
                                                                        --------------          --------------

Stockholders' equity:
     Cumulative preferred stock, Series C, of $.001 par value
        Authorized 5,000,000 shares; issued and outstanding 0 shares
        at December 31, 2000 and 471,031 shares at March 31, 2000                 --                        1
     Common Stock of $0.005 par value, authorized 25,000,000
        shares;  issued and outstanding 16,949,702 shares at
        December 31, 2000 and 14,582,297 shares at  March 31, 2000                85                       73
     Additional paid-in capital                                               24,489                   24,374
     Accumulated deficit                                                      (8,187)                  (7,803)
                                                                        -------------           --------------
              Total stockholders' equity                                      16,387                   16,645
                                                                        -------------           --------------

                    Total liabilities and stockholders' equity          $     21,734            $      19,689
                                                                        =============           ==============
</TABLE>
          See accompanying notes to consolidated financial statements.


                                        3

<PAGE>



<TABLE>
<CAPTION>
                                                   CYANOTECH CORPORATION
                                           CONSOLIDATED STATEMENTS OF OPERATIONS
                                          (In thousands, except per share amounts)
                                                        (Unaudited)

                                                                     Three Months Ended                     Nine Months Ended
                                                                         December 31,                           December 31,
                                                                     2000            1999                   2000            1999
                                                                ------------    ------------            ------------    ------------
<S>                                                             <C>             <C>                     <C>             <C>
NET SALES                                                       $     1,762     $     2,037             $     6,288     $     5,132
COST OF PRODUCT SALES                                                 1,295           1,525                   4,323           4,227
                                                                ------------    ------------            ------------    ------------
                Gross Profit                                            467             512                   1,965             905
                                                                ------------    ------------            ------------    ------------
OPERATING EXPENSES:
        Research and development                                         63             124                     203             446
        General and administrative                                      400             393                   1,104           1,117
        Sales and marketing                                             253             274                     782             659
        Impairment of long-lived assets                                  --           2,796                      --           2,796
                                                                ------------    ------------            ------------    ------------
                Total operating expenses                                716           3,587                   2,089           5,018
                                                                ------------    ------------            ------------    ------------
        Loss from operations                                           (249)         (3,075)                   (124)         (4,113)
                                                                ------------    ------------            ------------    ------------

OTHER INCOME (EXPENSE):
        Interest income                                                  24               2                      84               7
        Interest expense                                               (164)           (118)                   (429)           (224)
        Other income, net                                                67              --                      85               3
                                                                ------------    ------------            ------------    ------------
                   Total other expense                                  (73)           (116)                   (260)           (214)
                                                                ------------    ------------            ------------    ------------

                   Loss before income taxes                            (322)         (3,191)                   (384)         (4,327)
                   Income taxes                                          --               3                      --               3
                                                                -----------    ------------             ------------    ------------
NET LOSS                                                        $      (322)    $    (3,188)            $      (384)    $    (4,324)
                                                                ============    ============            ============    ============

NET LOSS PER COMMON SHARE
     Basic and Diluted                                          $     (0.02)    $     (0.24)            $     (0.02)    $     (0.33)


SHARES USED IN CALCULATION OF:
     Basic and Diluted                                               16,465          13,778                  15,693          13,713

</TABLE>
          See accompanying notes to consolidated financial statements

                                        4

<PAGE>
<TABLE>
<CAPTION>
                                                      CYANOTECH CORPORATION
                                              CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                         (in thousands)
                                                           (Unaudited)
                                                                                           Nine Months Ended
                                                                                              December 31,
                                                                                      2000                  1999
                                                                                  ------------          ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                                               <C>                   <C>
          Net loss                                                                $      (384)          $    (4,324)
          Adjustments to reconcile net loss to net cash provided by
          (used in) operating activities:
                    Depreciation and amortization                                         994                    983
                    Impairment of capital assets                                           --                  2,796
                    Amortization of debt issue costs                                      117                     93
                    Issuance of stock in exchange for services                             10                    118
                    Net (increase) decrease in:
                            Accounts receivable                                            11                   (331)
                            Refundable income taxes                                       154                    112
                            Inventories                                                  (497)                   338
                            Prepaid expenses and other assets                             (35)                   (60)
                    Net increase (decrease) in:
                            Accounts payable                                             (744)                    42
                            Deferred revenue                                              141                     --
                            Other accrued liabilities                                    (233)                   154
                                                                                  ------------          -------------
Net cash provided by (used in) operating activities                                      (466)                    41
                                                                                  ------------          -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
          Investment in equipment and leasehold improvements                             (266)                  (326)
                                                                                  ------------          -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
          Proceeds from issuance of term loan debt                                      3,500                     --
          Proceeds from issuance of convertible debentures                              1,250                     --
          Net proceeds from exercise of warrants and options                                6                     15
          Net proceeds from issuance of common stock                                       --                    119
          Principal payments on long-term debt                                         (1,611)                  (150)
          Debt issue costs                                                               (493)                    --
          Restricted cash deposit                                                        (500)                    --
          Cost of conversion of series C preferred
               stock to common stock                                                      (11)                    --
          Borrowings on short-term revolving
               line of credit, net                                                         --                    165
          Principal payments on capital lease obligations                                  --                    (67)
                                                                                  ------------          -------------
Net cash provided by financing activities                                               2,141                     82
                                                                                  ------------          -------------
Net increase (decrease) in cash and cash equivalents                                    1,409                   (203)
Cash and cash equivalents at beginning of period                                          405                    323
                                                                                  ------------          -------------
Cash and cash equivalents at end of period                                        $     1,814           $        120
                                                                                  ============          =============
Supplemental disclosure of non-cash financing activity - issuance
     of warrants in connection with issuance of long-term debt                    $       121           $         --
                                                                                  ============          =============
</TABLE>
          See accompanying notes to consolidated financial statements.

                                        5

<PAGE>



                              CYANOTECH CORPORATION
                                    FORM 10-Q
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                December 31, 2000
                                   (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-X.  Accordingly,  they do not include all of the
         information  and footnotes  required by generally  accepted  accounting
         principles  for  complete  financial  statements.   These  consolidated
         financial  statements and notes should be read in conjunction  with the
         Company's  consolidated financial statements contained in the Company's
         previously filed report on Form 10-K for the year ended March 31, 2000.

         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  and nine  month  periods  ended
         December 31, 2000 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, 2001.

         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.       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>
                                                December 31, 2000        March 31, 2000
                                                -----------------       ----------------
<S>                                             <C>                     <C>
                Raw materials                   $              85       $            72
                Work in process                               193                   278
                Finished goods                              1,654                 1,060
                Supplies                                      174                   199
                                                -----------------       ----------------
                                                $           2,106       $         1,609
                                                =================       ================
</TABLE>

                                        6

<PAGE>

3.       EQUIPMENT AND LEASEHOLD IMPROVEMENTS

         Owned  equipment  and  leasehold   improvements  are  stated  at  cost.
         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 as follows:


         Equipment                                 3 to 10 years
         Leasehold improvements                   10 to 26 years
         Furniture and fixtures                          7 years


         Equipment and leasehold improvements consist of the following (dollars
         in thousands):
<TABLE>
<CAPTION>
                                                                 December 31, 2000        March 31, 2000
                                                                -------------------     -------------------
<S>                                                             <C>                     <C>
         Equipment                                              $            9,110      $            8,961
         Leasehold improvements                                             13,873                  13,642
         Furniture and fixtures                                                 83                      83
                                                                -------------------     -------------------
                                                                            23,066                  22,686
         Less accumulated depreciation and amortization                     (8,377)                 (7,383)
         Construction in-progress                                              329                     443
                                                                -------------------     -------------------
         Equipment and leasehold improvements, net              $           15,018      $           15,746
                                                                ===================     ===================
</TABLE>


4.       SERIES C PREFERRED STOCK

         During the quarter ended December 31, 2000, all  outstanding  shares of
         Series C preferred  stock were converted into common stock. As a result
         of this conversion,  cumulative dividends in arrears on these converted
         shares, totaling approximately $2.1 million, are no longer payable.

         Series C preferred stock was convertible  into common stock at the rate
         of one share of preferred stock for five shares of common stock through
         February  23,  2002,  after  which date the  conversion  feature was no
         longer applicable.  Series C preferred stock had voting rights equal to
         the number of shares of common stock into which it was  convertible and
         had a  preference  in  liquidation  over all other  series of preferred
         stock  of $5 per  share  plus any  accumulated  but  unpaid  dividends.
         Holders of Series C  preferred  stock were  entitled  to 8%  cumulative
         annual dividends at the rate of $.40 per share.

                                        7

<PAGE>



5.       EARNINGS (LOSS) PER SHARE

         During the three and nine  months  ended  December  31,  2000 and 1999,
         warrants and options to purchase shares of Common Stock of the Company,
         and convertible preferred stock were outstanding, but were not included
         in the  computation  of Diluted net loss per common  share  because the
         inclusion of these securities would have had an antidilutive  effect on
         the net loss per common  share.  During the three and nine months ended
         December 31, 2000,  convertible  debentures were outstanding,  but were
         not  included in the  computation  of diluted net loss per common share
         because  the  inclusion  of  these   instruments   would  have  had  an
         antidilutive  effect on the net loss per common  share.  As of December
         31,  2000,  warrants  and  options to acquire  1,003,830  shares of the
         Company's  common stock and debentures  convertible into 833,333 shares
         of the  Company's  common  stock were  outstanding.  As of December 31,
         1999,  warrants and options to acquire  792,800 shares of the Company's
         common stock and preferred stock  convertible  into 2,975,155 shares of
         the Company's common stock were outstanding.

         Following is a reconciliation of the numerators and denominators of the
         Basic and  Diluted  EPS  computations  for the  periods  presented  (in
         thousands except share data):
<TABLE>
<CAPTION>
                                                            Three Months Ended                      Nine Months Ended
Basic and Diluted Earnings (Loss) per share                     December 31,                           December 31,
                                                            2000            1999                    2000            1999
                                                        ------------    ------------            ------------    ------------
<S>                                                     <C>             <C>                     <C>             <C>
Net loss                                                $      (322)    $    (3,188)            $      (384)    $    (4,324)
Less: Requirement for Preferred Stock
dividends                                                        --             (59)                     --            (179)
                                                        ------------    ------------            ------------    ------------
Loss to Common stockholders                             $      (322)    $    (3,247)            $      (384)    $    (4,503)
                                                        ============    ============            ============    ============
Weighted average Common Shares outstanding                16,465,070      13,778,374              15,693,242      13,713,121
                                                        ============    ============            ============    ============
Net Loss per Common Share                               $     (0.02)    $     (0.24)            $     (0.02)    $     (0.33)
                                                        ============    ============            ============    ============
</TABLE>

                                        8

<PAGE>



6.       RECENT ACCOUNTING PRONOUNCEMENTS

         ACCOUNTING FOR DERIVATIVE  INSTRUMENTS AND HEDGING ACTIVITIES.  In June
         1998, the Financial Accounting Standards Board (FASB) issued  Statement
         of Financial  Accounting  Standard  (SFAS)  No.  133,   Accounting  for
         Derivative  Instruments  and  Hedging  Activities,"  which  establishes
         accounting  and  reporting standards for derivative instruments and for
         hedging activities.  SFAS No. 133 requires that an entity recognize all
         derivatives  as  either  assets  or  liabilities  in  the  statement of
         financial  position and measure those  instruments at fair value.  SFAS
         No. 133 is  effective for all fiscal quarters of fiscal years beginning
         after  June 15, 1999.  In  July 1999,  the  FASB issued SFAS  No.  137,
         "Accounting   for  Derivative  Instruments  and  Hedging  Activities  -
         Deferral  of  the  Effective  Date  for  FASB  Statement  No.  133,  an
         Amendment of FASB  Statement No. 133",  which defers the effective date
         of SFAS No. 133 to be effective for all fiscal quarters of fiscal years
         beginning  after June 15, 2000. In June 2000,  the FASB issued SFAS No.
         138, "Accounting for Certain Derivative Instruments and Certain Hedging
         Activities,  An Amendment of FASB Statement No 133," which  addresses a
         limited  number  of  issues  causing  implementation  difficulties  for
         certain  entities that apply SFAS No. 133. The Company  currently holds
         no derivative instruments, nor is it currently participating in hedging
         activities. Management does not expect SFAS No. 133, as amended by SFAS
         No. 137 and SFAS No. 138,  to have a material  effect on the  Company's
         financial condition, results of operations or liquidity.

         ACCOUNTING  FOR  CERTAIN  TRANSACTIONS  INVOLVING  STOCK  COMPENSATION.
         In March 2000, the FASB issued FASB Interpretation No. 44,  "Accounting
         for   Certain   Transactions   involving   Stock   Compensation,    and
         Interpretation of  APB  Opinion  No. 25."  FASB  Interpretation  No. 44
         clarifies  the  application  APB  Opinion  No.  25  for certain  issues
         involving  employee  stock  compensation  and  is  generally  effective
         July 1, 2000. The Company adopted the provisions of FASB Interpretation
         No. 44 effective  July 1, 2000.  Adoption of FASB Interpretation No. 44
         has had no  material  effect  on  the  Company's  financial  condition,
         results of operations or liquidity.

         ACCOUNTING  FOR  TRANSFERS  AND  SERVICING  OF  FINANCIAL   ASSETS  AND
         EXTINGUISHMENTS OF LIABILITIES. In September 2000, the FASB issued SFAS
         No. 140,  "Accounting  for Transfers and Servicing of Financial  Assets
         and Extinguishments of Liabilities, a replacement of FASB Statement no.
         125."  SFAS  No.  140 is  effective  for  transfers  and  servicing  of
         financial  assets and  extinguishments  of liabilities  occurring after
         March  31,  2001.  SFAS  No.  140  is  effective  for  recognition  and
         reclassification   of  collateral  and  for  disclosures   relating  to
         securitization  transactions  and  collateral  for fiscal  years ending
         after December 15, 2000.  Management  does not expect  adoption of SFAS
         No. 140 to have a material effect on the Company's financial condition,
         results of operations or liquidity.

         REVENUE  RECOGNITION  IN FINANCIAL  STATEMENTS  In December  1999,  the
         Securities  and  Exchange  Commission  (SEC)  issued  Staff  Accounting
         Bulletin (SAB) No. 101, "Revenue Recognition in Financial  Statements."
         The SAB  summarizes  certain of the SEC staff's views in applying  U.S.
         generally  accepted  accounting  principles  to revenue  recognition in
         financial  statements.  In June 2000, the SEC issued SAB No 101B, which
         delays the  implementation  date of SAB No. 101 until no later than the
         fourth quarter of fiscal years  beginning after December 15, 1999.  The
         Company  adopted the  provisions of SAB No. 101 effective December  31,
         2000.  Adoption  of SAB No.  101 did not have a material  effect on the
         Company's financial  condition,  results of operations or liquidity.

                                        9

<PAGE>



7.       CONTINGENCIES

         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 later 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.

         On December 30, 1999,  the Court  denied  Cyanotech  motion for summary
         judgment of  non-infringement  and patent invalidity as to Aquasearch's
         U.S.  Patent  No. 5,541,056 and granted  Aquasearch's  partial  summary
         judgment motion finding that Cyanotech  infringes its patent. The Court
         also granted  Aquasearch's partial summary judgment motion finding that
         Cyanotech  misappropriated  Aquasearch  trade  secrets and  committed a
         breach  of  contract.  In  response,   Cyanotech  filed  a  motion  for
         reconsideration  on January 14, 2000, with the Court. On March 3, 2000,
         United  States  District  Court  Judge Alan C. Kay  denied  Cyanotech's
         motion for reconsideration.

         On August  29,  2000,  Cyanotech  filed a motion  for  partial  summary
         judgment for the  invalidity of the  Aquasearch  patent No.  5,541,056,
         based on prior art. On December 4, 2000,  United States  District Court
         Judge  Alan C.  Kay  denied  Cyanotech's  motion  for  partial  summary
         judgment for the invalidity of Aquasearch's patent No. 5,541,056.  With
         the denial of this motion, the matter, if not settled, will go before a
         jury at a trial  scheduled for September 2001.  Although  resolution of
         this matter is uncertain,  management does not expect that damages,  if
         any,  against  Cyanotech  will have a  material  adverse  effect on the
         Company's  consolidated  financial  position,  results of operations or
         liquidity.


                                       10

<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 the  Company's  current  expectations  and the  forward-looking  statements
contained herein.

Results of Operations

         The  following  table  sets forth  certain  consolidated  statement  of
operations data as a percentage of net sales for the periods indicated:
<TABLE>
<CAPTION>
                                                        Three Months Ended    Nine Months Ended
                                                           December 31,          December 31,
                                                         2000       1999       2000       1999
                                                        ------     ------     ------     ------
<S>                                                     <C>        <C>        <C>        <C>
        Net Sales                                       100.0 %    100.0 %    100.0 %    100.0 %
        Cost of product sales                            73.5       74.9       68.8       82.4
                                                        ------     ------     ------     ------
                Gross profit                             26.5       25.1       31.2       17.6
                                                        ------     ------     ------     ------
        Operating expenses:
                Research and development                  3.6        6.1        3.2        8.7
                General and administrative               22.7       19.3       17.6       21.8
                Impairment of capital assets               --      137.3         --       54.4
                Sales and marketing                      14.4       13.4       12.4       12.8
                                                        ------     ------     ------     ------
                Total operating expenses                 40.7      176.1       33.2       97.7
                                                        ------     ------     ------     ------

                Loss from operations                    (14.2)    (151.0)      (2.0)     (80.1)
                                                        ------     ------     ------     ------
        Other income (expense):
                Interest income                           1.4        0.1        1.3        0.1
                Interest expense                         (9.3)      (5.8)      (6.8)      (4.4)
                Other income, net                         3.8         --        1.4        0.1
                                                        ------     ------     ------     ------
                Total other expense                      (4.1)      (5.7)      (4.1)      (4.2)
                                                        ------     ------     ------     ------
                Loss before income taxes                (18.3)    (156.7)      (6.1)     (84.3)
                Income taxes                               --        0.2         --         --
                                                        ------     ------     ------     ------
        Net loss                                        (18.3) %  (156.5) %    (6.1) %   (84.3) %
                                                        ======     ======     ======     ======

</TABLE>
                                       11

<PAGE>

THIRD QUARTER OF FISCAL 2001 COMPARED TO THIRD QUARTER OF FISCAL 2000

Net Sales

         Net sales for the three month period ended  December 31, 2000 decreased
14% to $1,762,000, from $2,037,000 in the comparable period of fiscal 2000. This
decrease  in net  sales  is  primarily  due to  lower  sales  of bulk  Spirulina
Pacifica(R)  tablets,  offset in part by higher  sales of both  NatuRose(R)  and
BioAstin(TM) natural astaxanthin products.

         International  sales represented 52% and 49% of total net sales for the
three  month  periods  ended  December  31,  2000 and 1999,  respectively.  This
increase was primarily  due to higher  European and Asian sales in proportion to
total net sales.

         The major factor  causing lower net sales during the three month period
ended December 31, 2000 was lower sales of bulk Spirulina  Pacifica  products to
our largest customer,  Spirulina  International B.V. (Spirulina  International).
Sales to this  customer  accounted for 5% of total net sales for the three month
period  ended  December 31, 2000,  compared to 17% in the  comparable  period of
fiscal 2000. Spirulina  International has indicated that they expect to purchase
Spirulina  Pacifica products from the Company at the same level, or greater,  in
calendar  2001,  as they did in  calendar  2000,  and  that  they  expect  their
purchases to continue to fluctuate  from quarter to quarter in response to their
seasonal business conditions and other factors.

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  9% to
$467,000 for the three month period ended  December 31, 2000,  from  $512,000 in
the comparable period of fiscal 2000. However, our gross profit margin increased
to 27% for the three month period ended  December 31, 2000,  compared to 25% for
the comparable  period of fiscal 2000. This increase in gross profit margin from
the prior year period is primarily attributable to higher sales of higher margin
packaged consumer products and phycobiliproteins.

Operating Expenses

         Operating  expenses were  $716,000  during the three month period ended
December 31, 2000, a decrease of 80% from $3,587,000 in the comparable period of
fiscal 2000.  This  decrease was primarily  due to the  recognition  of an asset
impairment  charge  of  $2,796,000  in the prior  fiscal  year,  related  to the
Company's  strategic  decision to discontinue  joint venture  negotiations  with
Norsk Hydro ASA. In compliance with SFAS No. 121, "Accounting for the Impairment
of Long-Lived  Assets and for Long-Lived  Assets to be Disposed Of", the Company
was    obligated    to   record   the   asset    impairment    charge   on   the
construction-in-progress  balance  relating to a 93-acre  astaxanthin  expansion
project  during the three month period ended December 31, 1999. If the effect of
this  impairment  charge is omitted for the  purposes of  comparison,  operating
expenses  during the three month  period ended  December  31, 1999,  amounted to
$791,000.

         Research and Development  Research and development expenses amounted to
$63,000 for the three month  period  ended  December 31, 2000, a decrease of 49%
from $124,000 for the comparable  period of fiscal 2000.  This decrease from the
prior year was due to reduced personnel expenditures,  lower supply and material
costs and  reduced  outside  service and  consulting  expenses,  resulting  from
suspension  of  research  work on the  mosquitocide  project  and  the  Aldolase
Catalytic Antibody 38C2 project during the third quarter of fiscal 2000.

                                       12

<PAGE>

Other Expense

         Other  expense  amounted to $73,000 for the three  month  period  ended
December 31, 2000,  a decrease of $43,000 from the  comparable  period of fiscal
2000,  due  primarily  to higher  interest  income and other  income  offsetting
increased  interest  expense  generated  by  higher  debt  and  amortization  of
capitalized debt issuance costs.

Income Taxes

         No  provision  for income taxes was recorded for the three month period
ended  December 31, 2000,  due to the  Company's  taxable  loss  position.  This
compares  to an income tax  benefit of $3,000  recorded  for the same  period of
fiscal 2000.

Net Loss

         The Company  recorded a net loss of $322,000 for the three months ended
December 31, 2000,  compared to the net loss of  $3,188,000  for the  comparable
period of fiscal 2000. Of the  $3,188,000 net loss reported for the period ended
December 31, 1999,  $2,796,000 represents the effect of the aforementioned asset
impairment  charge.  If the  effect of this  impairment  charge is  omitted  for
comparison  purposes,  the  Company  recorded a loss of  $392,000  for the three
months ended  December 31, 1999.  The current  year's net loss of $322,000 shows
improvement  of 18% over such loss of $392,000.  This  improvement  in result is
primarily  attributable  to  decreased  research  and  development  expenses and
increased  other income and interest  income,  offset in part by higher interest
expense.


NINE  MONTHS  ENDED DECEMBER 31, 2000 COMPARED TO NINE MONTHS ENDED DECEMBER 31,
1999

Net Sales

         Net sales for the nine month period ended  December 31, 2000  increased
23% from  $5,132,000 in the comparable  period of fiscal 2000,  primarily due to
increased sales in all categories of products.

         International  sales represented 56% and 48% of total net sales for the
nine month periods ended December 31, 2000 and 1999, respectively. This increase
was primarily due to higher sales of bulk Spirulina  Pacifica powder and tablets
to our largest customer,  a European  distributor of natural products.  Sales of
bulk  Spirulina  Pacifica  products to this customer,  Spirulina  International,
accounted  for 21% of total net sales for the nine month period  ended  December
31, 2000 compared to 19% of total net sales for the comparable  period of fiscal
2000.

Gross Profit

         Gross profit  increased  117% to  $1,965,000  for the nine month period
ended December 31, 2000, from the comparable prior year period. Our gross profit
margin  increased  to 31% for the nine month  period  ended  December  31, 2000,
compared to 18% for the  comparable  prior year period.  This  increase in gross
profit margin from the prior year period is primarily  attributable to increased
sales of higher margin bulk Spirulina Pacifica tablets and decreased  production
costs resulting from operating at more optimal production levels.

                                       13

<PAGE>



Operating Expenses

         Operating  expenses were $2,089,000  during the nine month period ended
December 31, 2000, as compared to $5,018,000, in the comparable period of fiscal
2000. The  aforementioned  asset impairment  charge of $2,796,000 is included in
the prior fiscal year's  operating  expenses.  In compliance  with SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of", the Company was obligated to record the asset impairment charge
on the  construction-in-progress  balance  relating to the  93-acre  astaxanthin
expansion  project.  If the effect of this impairment charge is omitted from the
prior year's results for comparison purposes, operating expenses during the nine
month period ended  December 31, 1999  amounted to  $2,222,000.  The decrease in
comparable operating expenses excluding the impairment charge was due to reduced
research and  development  expenses for the nine month period ended December 31,
2000, partially offset by increased sales and marketing expenses.

         Research and Development  Research and development expenses amounted to
$203,000 for the nine month  period  ended  December 31, 2000, a decrease of 54%
from $446,000 for the comparable  period of fiscal 2000.  This decrease from the
prior year was primarily due to reduced personnel expenditures, lower supply and
material costs and reduced  outside service and consulting  expenses,  resulting
from suspension of the aforementioned  suspension of certain projects during the
third quarter of fiscal 2000.

         Sales and Marketing   Sales and marketing expenses amounted to $782,000
for the nine month  period  ended  December  31,  2000,  an increase of 19% from
$659,000 for the comparable  period of fiscal 2000. This increase from the prior
year is due to higher  sales  consulting  services,  travel  expenses  and sales
commissions.

Other Expense

         Other  expense  amounted to $260,000  for the nine month  period  ended
December  31,  2000,  an  increase of 22% from  $214,000  for the same period of
fiscal 2000,  primarily from an increase in interest expense generated by higher
outstanding debt and amortization of debt issue costs,  offset in part by higher
interest income and other income.

Income Taxes

         No  provision  for income  taxes was recorded for the nine month period
ended  December 31, 2000,  due to the  Company's  taxable  loss  position.  This
compares  with an income tax benefit of $3,000  recorded  for the same period of
fiscal 2000.

Net Loss

         The Company  recorded a net loss of $384,000  for the nine months ended
December 31, 2000,  compared to the net loss of  $4,324,000  for the  comparable
period of fiscal 2000. Of the  $4,324,000  net loss reported for the nine months
ended December 31, 1999,  $2,796,000 represents the effect of the aforementioned
asset  impairment  charge.  If the  effect of this  asset  impairment  charge is
omitted for comparison  purposes,  the Company recorded a loss of $1,528,000 for
the nine months ended  December 31, 1999.  Comparison of the current  year's net
loss of $384,000 shows an improvement of 75% over such loss of $1,528,000.  This
improvement is primarily  attributable to improved margins on increased sales in
all product  categories and lower research and development  expenses,  offset in
part by greater interest  expense on higher  outstanding  debt,  amortization of
capitalized  debt  issue  costs  together  with  increased  sales and  marketing
expenses.

                                       14

<PAGE>



VARIABILITY OF RESULTS

         The Company  has  experienced  significant  quarterly  fluctuations  in
operating results and anticipates 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,   production
difficulties,  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,  foreign exchange  fluctuations,  the announcement or introduction of new
products by  competitors,  changes in our customer  mix,  overall  trends in the
market for our products,  government  regulations  and other factors  beyond our
control. 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
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  financial
condition and results of operations.


LIQUIDITY AND CAPITAL RESOURCES

         Our working  capital for the nine month period ended  December 31, 2000
increased  by  $2,704,000  to  $4,798,000  from  $2,094,000  at March 31,  2000,
primarily as a result of the  convertible  debenture and term loan  transactions
that were  completed  during  the  quarter  ended June 30,  2000.  Cash and cash
equivalents of $405,000 at March 31, 2000, increased by $1,409,000 to $1,814,000
at December 31, 2000 primarily  because of the net funding provided by financing
activities of $2,141,000.

         Cash used in  operating  activities  during  the first  nine  months of
fiscal 2001  amounted  to  $466,000  compared  with cash  provided by  operating
activities of $41,000 for the comparable period of fiscal 2000. The primary uses
of cash flows in  operating  activities  during the first nine  months of fiscal
2001 were  payments  on  outstanding  current  liabilities  and an  increase  of
finished goods inventories in anticipation of increased sales.

         Cash used in investing activities (for capital expenditures) during the
first nine months of fiscal 2001  decreased by $60,000  compared to $326,000 for
the comparable period of fiscal 2000.

         Cash provided by financing  activities  during the first nine months of
fiscal 2001  amounted  to  $2,141,000,  compared  to $82,000 for the  comparable
period  of fiscal  2000.  The  primary  sources  of cash  flows  from  financing
activities during the first nine months of fiscal 2001 were proceeds from a term
loan   agreement  of  $3,500,000  and  proceeds  from  issuance  of  convertible
debentures  of  $1,250,000,  offset in part by repayment  of  long-term  debt of
$1,611,000,  debt issuance  costs of $493,000 paid in connection  with obtaining
the term loan and the convertible  debentures and the deposit of $500,000 of the
loan proceeds in an interest-bearing  restricted cash account as required by the
term loan agreement.


                                       15

<PAGE>



Term Loan Agreement

         On April 21, 2000,  the Company  executed a Term Loan  Agreement  (Term
Loan)  which  provided  up to $3.5  million  in credit  facilities,  secured  by
substantially  all the assets of the Company.  The Term Loan has a maturity date
of May 1,  2010 and is  payable  in 120 equal  monthly  principal  and  interest
payments of  approximately  $48,000,  commencing June 1, 2000. The interest rate
under this Term Loan,  in the absence of a default under the  agreement,  is the
prime rate,  as defined,  in effect as of the close of business on the first day
of each calendar  quarter,  plus 1% (at April 21, 2000, the prime rate was 9.5%;
at December 31, 2000,  the prime rate was 10.0%).  Interest is calculated on the
unpaid  balance of  principal  based on a  straight-line  amortization  schedule
commencing  May 1, 2000.  As required  by the terms of the term loan  agreement,
$500,000  from  the  loan  proceeds has been  deposited  in an  interest-bearing
restricted cash account.

         A warrant to purchase  20,000 shares of the Company's  common stock was
issued in  conjunction  with this Term Loan  agreement.  The warrant  expires in
April 2011 and has an exercise price of $2.55 per share. The warrant may only be
exercised after the Company has repaid the Term Loan in full.

         On  April  26,  2000,  approximately  $1,593,000  of the  $3.5  million
proceeds  from  this  Term  Loan  was  used to repay  the  balance  outstanding,
including  interest and related fees,  under the Loan and Security  Agreement of
July 1998.

Convertible Debentures

         On May 2, 2000, the Company completed a private placement of $1,250,000
principal amount 6% convertible subordinated debentures due April 30, 2002. This
transaction  provided net proceeds to the Company of approximately $1.1 million.
Interest on these debentures is payable quarterly,  in arrears, on April 1, July
1, October 1, and January 2 in each year  commencing  on July 1, 2000, at a rate
of 6% per annum.  The debentures are convertible  into shares of common stock of
the Company at a conversion  price equal to $1.50 per share, the market price of
the Company's common stock at the date of issuance.  Warrants to purchase 83,334
shares of the Company's  common stock were issued to the placement  agent of the
debentures, exercisable for five years from the issue date, at $1.80 per share.

         The Company  believes  that working  capital  provided by its Term Loan
Agreement,  convertible debentures and estimated cash flows from operations will
be sufficient to sustain operations for calendar 2001.


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.


                                       16

<PAGE>



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.

         Cyanotech's  strategy has been and  continues to be, to produce  higher
value natural products from microalgae.

         During the nine months ended December 31, 2000,  the Company  continued
its aquaculture  industry sales efforts for NatuRose  natural  astaxanthin  into
Chile and Japan.  We believe that our efforts in both of these  markets may lead
to increased  sales of NatuRose in future  periods.  In August 2000, the Company
received approval from the United States Food and Drug Administration  (FDA) for
the use of  NatuRose  natural  astaxanthin  as a color  additive  in the feed of
salmon and trout to  enhance  the color of their  flesh.  This  approval  allows
Cyanotech  to sell  NatuRose  to US salmon  and trout  producers  and to foreign
producers whose products are destined for the US market.

         BioAstin,  our  natural  astaxanthin  product  for the human  nutrition
market,  was introduced in January 2000. The total market that human astaxanthin
products potentially could address is estimated to exceed $1.5 billion annually.
Increased  sales of  BioAstin  during the first nine  months of this fiscal year
contributed to the  improvement in results  compared to the results of the first
nine months of the prior fiscal year.  The Company has filed patent  application
for the use of BioAstin in the  treatment  of fever  blisters  (cold  sores) and
canker sores,  carpal tunnel syndrome,  ultraviolet  (UV) radiation  sensitivity
(sunburn), and relief of muscle soreness. Our strategy is to combine the results
of clinical  trials with patent  protection and to develop  strategic  alliances
with companies that target the specific  areas of our product  application.  The
Company has one clinical trial underway  assessing the effectiveness of BioAstin
in relieving  carpal tunnel syndrome.  This  double-blind,  randomized  clinical
trial is expected to produce  preliminary results by the end of the fiscal year.
We anticipate  launching one additional  clinical trial by the end of the fiscal
year to assess the  effectiveness of BioAstin for relief of delayed onset muscle
soreness,  which results from intense physical activity.  We are also developing
the protocol for a clinical trial to assess the  effectiveness  of BioAstin as a
systemic  sunscreen for protection  from  ultraviolet  light but, at the present
time,  an appropriate research center has not been located and engaged.  We will
be monitoring the results of these studies closely to uncover potential  uses of
BioAstin for other applications.

         On  November  1,  2000,  the  Company  announced  that it had signed an
agreement  with  Kyowa  Engineering  Co.  (KEC),  (http://www.kyowa.co.jp),  for
distribution of BioAstin in Japan.  This  semi-exclusive,  three-year  agreement
calls for an upfront  payment to Cyanotech  and an  additional  payment prior to
initiation of two additional clinical trials to assess BioAstin's  effectiveness
for specific  health  issues.  Thereafter,  KEC will purchase  BioAstin  softgel
capsules from Cyanotech, as well as pay a royalty to Cyanotech on their sales.

         On December 18, 2000,  the Company  reported that a major  shareholder,
Fireman's Insurance Company (Fireman's) of Newark, NJ, an indirect, wholly owned
subsidiary of CNA Financial Corporation,  had converted its remaining balance of
Series C Convertible Preferred Stock of Cyanotech Corporation into common stock.
Fireman's held 595,031  shares of Series C Preferred  Stock as of March 1998 and
has been  converting  these shares into common stock since February  2000,  with
471,031  shares  converted  in  fiscal  2001.  The  595,031  shares  of Series C
Preferred  Stock were  equivalent to 2,975,155  shares of the  Company's  common
stock. According to CNA Financial Corporation,  all but 605,000 of the converted
shares were sold in open market  transactions during the period February 2000 to
December  2000. As a benefit to Cyanotech,  a total of $2.1 million of preferred
stock  dividends  that  were  in  arrears  are no  longer  payable  due to  this
conversion.

                                       17

<PAGE>

         The   Company's   future   results   of   operations   and  the   other
forward-looking   statements  contained  in  this  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 actions;  shortage of manufacturing  capacity;
and other factors beyond our control.

         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.

                                       18

<PAGE>



PART II.          OTHER INFORMATION


Item 1.           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  answered the complaint and filed  counter  claims  alleging
patent  infringement,  trade secret  misappropriation,  unfair  competition  and
breach of  contract.  The Court later  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.

         On  December  30,  1999,  the  United  States   District  Court  denied
Cyanotech's  motion  for  summary  judgment  of   non-infringement   and  patent
invalidity as to Aquasearch,  Inc's  ("Aquasearch") U.S. Patent No 5,541,056 and
granted  Aquasearch's  related motion that Cyanotech  infringes its patent.  The
Court also granted  Aquasearch's  partial  summary  judgment motion finding that
Cyanotech  misappropriated  Aquasearch  trade  secrets and committed a breach of
contract.  In response,  Cyanotech filed a motion for reconsideration on January
14, 2000, with the Court.  On March 3, 2000,  United States District Court Judge
Alan C. Kay denied Cyanotech's motion for reconsideration.

         On August  29,  2000,  Cyanotech  filed a motion  for  partial  summary
judgment for the invalidity of the  Aquasearch  patent No.  5,541,056,  based on
prior art. On December 4, 2000,  United States  District Court Judge Alan C. Kay
ruled that there were  questions  of fact to be decided  and,  for that  reason,
denied Cyanotech's  motion.  With the denial of this motion, the matter,  unless
settled, will go before a jury at a trial scheduled for September 2001. Although
the  resolution  of this matter is  uncertain,  management  does not expect that
damages,  if any,  against  Cyanotech will have a material adverse effect on the
Company's consolidated financial position, results of operations or liquidity.


Item 6.           Exhibits and Reports on Form 8-K

         (a)      No exhibits are furnished with this report.

         (b)      Reports on Form 8-K

                  No  reports on Form 8-K were filed  during the  quarter  ended
                  December 31, 2000.


                                       19

<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)



   February 12, 2001             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)















                                       20