**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C.  20549**

 

**FORM 10-Q**

 

**Quarterly Report UnderSection 13 or 15(d)of the Securities Exchange Act of 1934**

 

**ForQuarterly Period Ended September 30, 2003**

 

**CommissionFile Number 0-14602**

 

**CYANOTECH CORPORATION**

(Exact name of registrantas specified in its charter)

 

| **NEVADA**                                                           |   | **91-1206026**                        |
|----------------------------------------------------------------------|--------|---------------------------------------|
| (State or other  jurisdiction  of incorporation or organization      |   | (IRS Employer  Identification Number) |
|                                                                 |   |                                  |
| **73-4460  Queen Kaahumanu Hwy. #102, Kailua-Kona, HI   96740** |
| (Address of principal  executive offices)                            |
|                                                                 |   |                                  |
| **(808)  326-1353**                                                  |
| (Registrant’s telephone  number)                                |

 

Checkwhether the registrant (1) filed all reports required to be filed bySection 13 or 15(d) of the Exchange Act during the past 12 months (or forsuch 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  ý  No  o

 

Indicate by check markwhether the registrant is an accelerated filer (as defined in Rule 12b-2 of theExchange Act).    Yes o  No ý

 

Number of common sharesoutstanding as of October 31, 2003:

 

| **Title of Class**              |   | **Shares Outstanding** |
|---------------------------------|--------|------------------------|
| Common stock -  $.005 par value |   | 18,316,701             |

 

 

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CYANOTECH CORPORATION

FORM 10-Q

 

INDEX

 
| PART I.   FINANCIAL INFORMATION |
|-------------------------------------------|
|                                      |   |
| Item 1.                                   | Financial Statements |
|                                      |   |
|                                      | Consolidated Balance Sheets  (unaudited)  As of September 30, 2003 and March 31, 2003 |
|                                      |   |
|                                      | Consolidated  Statements of Operations (unaudited)  For the three and six month periods ended September 30, 2003 and 2002 |
|                                      |   |
|                                      | Consolidated  Statements of Cash Flows (unaudited)  For the six month periods ended September 30, 2003 and 2002 |
|                                      |   |
|                                      | Notes to  Consolidated Financial Statements (unaudited) |
|                                      |   |
| Item  2.                                  | Management’s  Discussion and Analysis of Financial Condition and Results of Operations |
|                                      |   |
| Item  3.                                  | Quantitative  and Qualitative Disclosures About Market Risk |
|                                      |   |
| Item 4.                                   | Controls and  Procedures |
|                                      |   |
| PART II.  OTHER INFORMATION          |
|                                      |   |
| Item 1.                                   | Legal Proceedings |
|                                      |   |
| Item  4.                                  | Submission  of Matters to a Vote of Security Holders |
|                                      |   |
| Item 6.                                   | Exhibits and  Reports on Form 8-K |
|                                      |   |
| SIGNATURES                                |

 

2

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PART 1. FINANCIAL INFORMATION

Item 1. Financial Statements

 

CYANOTECHCORPORATION

CONSOLIDATED BALANCESHEETS

(Dollars inthousands except per share amounts)

(Unaudited)

 
|                                                                                                                                                           |   | **September 30,  2003** |   | **March 31,  2003** |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------|--------|--------------------------|--------|
|                                                                                                                                                           |   |                         |   |                     |   |
| ASSETS                                                                                                                                                         |   |                         |   |                     |   |
| Current  assets:                                                                                                                                               |   |                         |   |                     |   |
| Cash  and cash equivalents                                                                                                                                     |   | $                            | 1,193  |                     | $      | 579 |   |
| Accounts  receivable, net                                                                                                                                      |   | 1,730                        |   | 1,839                    |   |
| Refundable  income taxes                                                                                                                                       |   | 20                           |   | 9                        |   |
| Inventories  (see Note 2)                                                                                                                                      |   | 1,413                        |   | 1,400                    |   |
| Prepaid  expenses                                                                                                                                              |   | 164                          |   | 40                       |   |
| Total  current assets                                                                                                                                          |   | 4,520                        |   | 3,867                    |   |
|                                                                                                                                                           |   |                         |   |                     |   |
| Equipment  and leasehold improvements, net (see Note 3)                                                                                                        |   | 12,193                       |   | 12,777                   |   |
| Other  assets                                                                                                                                                  |   | 559                          |   | 838                      |   |
| Total  assets                                                                                                                                                  |   | $                            | 17,272 |                     | $      | 17,482 |   |
|                                                                                                                                                           |   |                         |   |                     |   |
| LIABILITIES  AND STOCKHOLDERS’ EQUITY                                                                                                                     |   |                         |   |                     |   |
| Current  liabilities:                                                                                                                                          |   |                         |   |                     |   |
| Current  maturities of long-term debt                                                                                                                          |   | $                            | 323    |                     | $      | 323 |   |
| Accounts  payable                                                                                                                                              |   | 866                          |   | 803                      |   |
| Accrued  expenses                                                                                                                                              |   | 410                          |   | 389                      |   |
| Total  current liabilities                                                                                                                                     |   | 1,599                        |   | 1,515                    |   |
|                                                                                                                                                           |   |                         |   |                     |   |
| Long-term  debt, excluding current maturities                                                                                                                  |   | 3,532                        |   | 3,694                    |   |
| Total  liabilities                                                                                                                                             |   | 5,131                        |   | 5,209                    |   |
|                                                                                                                                                           |   |                         |   |                     |   |
| Stockholders’  equity:                                                                                                                                    |   |                         |   |                     |   |
| Common  Stock of $0.005 par value,  authorized 25,000,000 shares; issued and outstanding 18,316,701 shares at  September 30, 2003 and March 31, 2003 |   | 92                           |   | 92                       |   |
| Additional  paid-in capital                                                                                                                                    |   | 25,418                       |   | 25,418                   |   |
| Accumulated other comprehensive income (loss) -  foreign currency translation  adjustments                                                                     |   | 16                           |   | (3                       | )      |
| Accumulated  deficit                                                                                                                                           |   | (13,385                      | )      | (13,234                  | )      |
| Total  stockholders’ equity                                                                                                                               |   | 12,141                       |   | 12,273                   |   |
|                                                                                                                                                           |   |                         |   |                     |   |
| Total  liabilities and stockholders’ equity                                                                                                               |   | $                            | 17,272 |                     | $      | 17,482 |   |

 

See accompanyingNotes to Consolidated Financial Statements.

 

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CYANOTECH CORPORATION

CONSOLIDATEDSTATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(Unaudited)

 
|                                        |   | **Three Months Ended  September 30,** |   | **Six Months Ended  September 30,** |   |
|---------------------------------------------|--------|--------------------------------------------|--------|------------------------------------------|--------|
|                                        |   | **2003**                                   |   | **2002**                                 |   | **2003** |   | **2002** |   |
|                                        |   |                                       |   |                                     |   |   |   |   |   |
| NET SALES                                   |   | $                                          | 2,840  |                                     | $      | 2,018 |   | $ | 5,268 |   | $ | 4,050 |   |
| COST OF PRODUCT SALES                       |   | 1,979                                      |   | 1,450                                    |   | 3,703 |   | 2,697 |   |
| Gross profit                                |   | 861                                        |   | 568                                      |   | 1,565 |   | 1,353 |   |
|                                        |   |                                       |   |                                     |   |   |   |   |   |
| OPERATING EXPENSES:                         |   |                                       |   |                                     |   |   |   |   |   |
| Research and development                    |   | 26                                         |   | 45                                       |   | 64 |   | 146 |   |
| Sales and marketing                         |   | 354                                        |   | 485                                      |   | 663 |   | 1,023 |   |
| General and administrative                  |   | 449                                        |   | 472                                      |   | 856 |   | 1,057 |   |
| Total operating expenses                    |   | 829                                        |   | 1,002                                    |   | 1,583 |   | 2,226 |   |
|                                        |   |                                       |   |                                     |   |   |   |   |   |
| Income (loss) from operations               |   | 32                                         |   | (434                                     | )      | (18 | ) | (873 | ) |
|                                        |   |                                       |   |                                     |   |   |   |   |   |
| OTHER INCOME (EXPENSE):                     |   |                                       |   |                                     |   |   |   |   |   |
| Interest income                             |   | 4                                          |   | 5                                        |   | 12 |   | 17 |   |
| Interest expense                            |   | (78                                        | )      | (123                                     | )      | (166 | ) | (247 | ) |
| Other income (expense), net                 |   | 32                                         |   | 12                                       |   | 3 |   | (222 | ) |
| Total other expense                         |   | (42                                        | )      | (106                                     | )      | (151 | ) | (452 | ) |
|                                        |   |                                       |   |                                     |   |   |   |   |   |
| Loss before income taxes                    |   | (10                                        | )      | (540                                     | )      | (169 | ) | (1,325 | ) |
|                                        |   |                                       |   |                                     |   |   |   |   |   |
| INCOME TAX BENEFIT                          |   | —                                     |   | —                                   |   | 18 |   | — |   |
|                                        |   |                                       |   |                                     |   |   |   |   |   |
| NET LOSS                                    |   | $                                          | (10    | )                                        | $      | (540 | ) | $ | (151 | ) | $ | (1,325 | ) |
|                                        |   |                                       |   |                                     |   |   |   |   |   |
| NET LOSS PER COMMON SHARE                   |   |                                       |   |                                     |   |   |   |   |   |
| Basic and diluted                           |   | $                                          | (0.00  | )                                        | $      | (0.03 | ) | $ | (0.01 | ) | $ | (0.08 | ) |
|                                        |   |                                       |   |                                     |   |   |   |   |   |
| SHARES USED IN CALCULATION OF:              |   |                                       |   |                                     |   |   |   |   |   |
| Basic and diluted net loss per Common Share |   | 18,317                                     |   | 17,562                                   |   | 18,317 |   | 17,413 |   |
|                                        |   |                                       |   |                                     |   |   |   |   |   |
| COMPREHENSIVE INCOME (LOSS):                |   |                                       |   |                                     |   |   |   |   |   |
| Net loss                                    |   | $                                          | (10    | )                                        | $      | (540 | ) | $ | (151 | ) | $ | (1,325 | ) |
| Other comprehensive income                  |   | 24                                         |   | 2                                        |   | 19 |   | 2 |   |
|                                        |   | $                                          | 14     |                                     | $      | (538 | ) | $ | (132 | ) | $ | (1,323 | ) |

 

See accompanyingNotes to Consolidated Financial Statements.

 

4

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CYANOTECH CORPORATION

CONSOLIDATEDSTATEMENTS OF CASH FLOWS

(Dollars in thousands)

(Unaudited)

 
|                                                                                       |   | **Six Months Ended  September 30,** |   |
|--------------------------------------------------------------------------------------------|--------|------------------------------------------|--------|
|                                                                                       |   | **2003**                                 |   | **2002** |   |
|                                                                                       |   |                                     |   |   |   |
| CASH FLOWS FROM OPERATING ACTIVITIES:                                                      |   |                                     |   |   |   |
| Net loss                                                                                   |   | $                                        | (151   | ) | $ | (1,325 | ) |
| Adjustments to reconcile net loss to net cash  provided by (used in) operating activities: |   |                                     |   |   |   |
| Depreciation and amortization                                                              |   | 671                                      |   | 655 |   |
| Allowance for doubtful accounts                                                            |   | 40                                       |   | 20 |   |
| Amortization of debt issue costs                                                           |   | 29                                       |   | 102 |   |
| Cumulative foreign exchange translation gains                                              |   | 19                                       |   | — |   |
| Issuance of stock in exchange for services                                                 |   | —                                   |   | 5 |   |
| Issuance and revision of warrants in connection  with extension of convertible debentures  |   | —                                   |   | 223 |   |
| Net (increase) decrease in:                                                                |   |                                     |   |   |   |
| Accounts receivable                                                                        |   | 69                                       |   | (161 | ) |
| Refundable income taxes                                                                    |   | (11                                      | )      | — |   |
| Inventories                                                                                |   | (13                                      | )      | (553 | ) |
| Prepaid expenses and other assets                                                          |   | (124                                     | )      | (54 | ) |
| Net increase (decrease) in:                                                                |   |                                     |   |   |   |
| Accounts payable                                                                           |   | 63                                       |   | 178 |   |
| Accrued expenses                                                                           |   | 21                                       |   | 190 |   |
| Net cash provided by (used in) operating  activities                                       |   | 613                                      |   | (720 | ) |
|                                                                                       |   |                                     |   |   |   |
| CASH FLOWS FROM INVESTING ACTIVITIES:                                                      |   |                                     |   |   |   |
| Investment in equipment and leasehold improvements                                         |   | (87                                      | )      | (181 | ) |
|                                                                                       |   |                                     |   |   |   |
| CASH FLOWS FROM FINANCING ACTIVITIES:                                                      |   |                                     |   |   |   |
| Release of long-term debt restricted cash deposit                                          |   | 250                                      |   | — |   |
| Net proceeds from sale of Common Stock                                                     |   | —                                   |   | 345 |   |
| Principal payments on long-term debt                                                       |   | (162                                     | )      | (148 | ) |
| Debt issue costs                                                                           |   | —                                   |   | (59 | ) |
| Net cash provided by financing activities                                                  |   | 88                                       |   | 138 |   |
|                                                                                       |   |                                     |   |   |   |
| Net increase (decrease) in cash and cash equivalents                                       |   | 614                                      |   | (763 | ) |
|                                                                                       |   |                                     |   |   |   |
| Cash and cash equivalents at beginning of period                                           |   | 579                                      |   | 1,051 |   |
|                                                                                       |   |                                     |   |   |   |
| Cash and cash equivalents at end of period                                                 |   | $                                        | 1,193  |   | $ | 288 |   |

 

See accompanyingNotes to Consolidated Financial Statements.

 

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CYANOTECH CORPORATION

FORM 10-Q

NOTES TO CONSOLIDATEDFINANCIAL STATEMENTS

As ofSeptember 30, 2003

(Unaudited)

 

1.                                       BASISOF PRESENTATION

 

The accompanying unaudited consolidated financialstatements have been prepared in accordance with accounting principlesgenerally accepted in the United States of America for interim financialinformation and with the instructions to Form 10-Q and Regulation S-X.  Accordingly, they do not include all of theinformation and footnotes required by generally accepted accounting principlesfor complete financial statements. These consolidated financial statements and notes should be read inconjunction with the Company’s consolidated financial statements contained inthe Company’s previously filed report on Form 10-K for the year endedMarch 31, 2003.

 

The Company consolidatesenterprises in which it has a controlling financial interest. The accompanyingconsolidated financial statements include the accounts of Cyanotech Corporationand its wholly-owned subsidiaries, Nutrex Hawaii, Inc. and Cyanotech JapanYK.  All significant intercompany balancesand transactions have been eliminated in consolidation. While the financialinformation furnished for the three and six month periods endedSeptember 30, 2003 is unaudited, the statements in this report reflect allmaterial items which, in the opinion of management, are necessary for a fairpresentation of the results of operations for the interim periods covered andof the financial condition of the Company at the dates of the consolidatedbalance sheets. The operating results for the interim period presented are notnecessarily indicative of the results that may be expected for the year endingMarch 31, 2004.

 

The preparation offinancial statements in conformity with accounting principles generallyaccepted in the United States of America requires management to make estimatesand assumptions that affect the reported amounts of assets and liabilities anddisclosure of contingent assets and liabilities at the date of the financialstatements, and the reported amounts of revenues and expenses during thereporting period.  Actual results could differsignificantly from those estimates.

 

2.                                       INVENTORIES

 

Inventories are stated atthe lower of cost (which approximates first-in, first-out) or market andconsist of the following (dollars in thousands):

 
|             |   | **September 30,  2003** |   | **March 31,  2003** |   |
|------------------|--------|------------------------------|--------|--------------------------|--------|
|             |   |                         |   |                     |   |
| Raw  materials   |   | $                            | 169    |                     | $      | 161 |   |
| Work  in process |   | 115                          |   | 117                      |   |
| Finished  goods  |   | 1,011                        |   | 1,028                    |   |
| Supplies         |   | 118                          |   | 94                       |   |
|             |   | $                            | 1,413  |                     | $      | 1,400 |   |

 

6

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3.                                       EQUIPMENTAND LEASEHOLD IMPROVEMENTS

 

Owned equipment and leaseholdimprovements are stated at cost. Depreciation and amortization are providedusing the straight-line method over the estimated useful lives for equipmentand furniture and fixtures and the shorter of the lease terms or estimateduseful lives for leasehold improvements as follows:

 
| Equipment              |   | 3 to 10 years  |
|------------------------|--------|----------------|
| Leasehold improvements |   | 10 to 23 years |
| Furniture and fixtures |   | 7 years        |

 

Equipment and leaseholdimprovements consist of the following (dollars in thousands):

 
|                                            |   | **September 30,  2003** |   | **March 31,  2003** |   |
|-------------------------------------------------|--------|------------------------------|--------|--------------------------|--------|
|                                            |   |                         |   |                     |   |
| Equipment                                       |   | $                            | 9,681  |                     | $      | 9,631 |   |
| Leasehold  improvements                         |   | 14,314                       |   | 14,173                   |   |
| Furniture  and fixtures                         |   | 83                           |   | 83                       |   |
|                                            |   | 24,078                       |   | 23,887                   |   |
| Less accumulated  depreciation and amortization |   | (12,011                      | )      | (11,341                  | )      |
| Construction  in-progress                       |   | 126                          |   | 231                      |   |
| Equipment  and leasehold improvements, net      |   | $                            | 12,193 |                     | $      | 12,777 |   |

 

 

4.                                       LONG-TERMDEBT

 

On July 29, 2003, the Company received approvalfrom the lender for the release of $250,000 of cash previously held as arestricted deposit in connection with the Company’s Term Loan Agreement (seesection in this report entitled “Liquidity and Capital Resources:  Term Loan Agreement”).   The use of these released funds isunrestricted and can used by the Company for working capital purposes.  A remaining $250,000 restricted cash depositcontinues to be held in an interest-bearing restricted cash account per theterms of the Term Loan and is included in Other Assets on the consolidatedbalance sheet at September 30, 2003.

 

EffectiveSeptember 30, 2003, the Company reached an agreement with the holder ofthe Company’s Convertible Debentures due September 30, 2004 (the“Debentures”) to extend the maturity date by one year to September 30,2005.  Per the terms of the extension,the interest rate for the Debentures shall remain at 10% per annum.   However, if the Company complies with allterms of the Debentures and reports earnings per share in a quarterly periodgreater than or equal to $0.01 per share (calculated on a fully diluted basisincluding all extraordinary and one-time charges, as defined), then theinterest rate for the Debentures for the following quarterly period shall bereduced to the lesser of: (a) 8% per annum; (b) the prime rate as announced byNorthern Trust Bank of California N.A. on the first day of such quarterlyperiod plus 2% per year; or (c) the maximum rate permitted by law.  All other terms of the Debentures remainunchanged from those described in the Company’s Annual Report on Form 10-K forthe year ended March 31, 2003.

 

7

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5.                                       EARNINGSPER SHARE

 

For the three and sixmonths ended September 30, 2003 and 2002 warrants and options to purchaseCommon Stock of the Company and Debentures convertible into shares of CommonStock were outstanding but were not included in the computation of diluted NetLoss Per Common Share because the inclusion of these securities would have hadan antidilutive effect on the Net Loss Per Common Share.  As of September 30, 2003, warrants andoptions to acquire 1,279,630 shares of the Company’s Common Stock andDebentures convertible into 1,923,077 shares of the Company’s Common Stock wereoutstanding.  As of September 30,of the previous year, warrants and options to acquire 1,401,030 shares of theCompany’s Common Stock and Debentures convertible into 1,238,000 shares of theCompany’s Common Stock were outstanding.

 

6.                                       STOCK-BASEDCOMPENSATION

 

The Company has adopted the disclosure-only provisions of Statement ofFinancial Accounting Standards (“SFAS”) No. 123 “Accounting for Stock-BasedCompensation” and applied the provisions of Accounting Principle Board OpinionNo. 25 in accounting for stock-based compensation.   Had compensation cost for stock options granted been determinedbased on the fair value method for measuring stock-based compensation, theCompany’s Net Loss and basic and diluted Net Loss Per Common Share would havebeen as follows:

 
|                                                                           |   | **Three Months Ended  September 30,** |   | **Six Months Ended  September 30,** |   |
|--------------------------------------------------------------------------------|--------|--------------------------------------------|--------|------------------------------------------|--------|
|                                                                           |   | **2003**                                   |   | **2002**                                 |   | **2003** |   | **2002** |   |
|                                                                           |   |                                       |   |                                     |   |   |   |   |   |
| Net loss, as reported                                                          |   | $                                          | (10    | )                                        | $      | (540 | ) | $ | (151 | ) | $ | (1,325 | ) |
| Less stock-based employee compensation determined  under the fair value method |   | (23                                        | )      | (20                                      | )      | (44 | ) | (40 | ) |
| Pro-forma net loss                                                             |   | $                                          | (33    | )                                        | $      | (560 | ) | $ | (195 | ) | $ | (1,365 | ) |
|                                                                           |   |                                       |   |                                     |   |   |   |   |   |
| Basic and diluted net loss per common share:                                   |   |                                       |   |                                     |   |   |   |   |   |
| As reported                                                                    |   | $                                          | (0.00  | )                                        | $      | (0.03 | ) | $ | (0.01 | ) | $ | (0.08 | ) |
| Pro-forma                                                                      |   | $                                          | (0.00  | )                                        | $      | (0.03 | ) | $ | (0.01 | ) | $ | (0.08 | ) |

 

7.                                       RECENTACCOUNTING PRONOUNCEMENTS

 

**Accounting for Certain Financial Instruments withCharacteristics of Both Liabilities and Equity** In May 2003,the Financial Accounting Standards Board (“FASB”) issued SFAS No. 150“Accounting for Certain Financial Instruments with Characteristics of BothLiabilities and Equity.”  SFAS No. 150requires issuers to classify as liabilities (or assets in some circumstance)three classes of freestanding financial instruments that embody obligations forthe issuer.  Generally, SFAS No. 150 iseffective for financial instruments entered into or modified after May 31,2003 and is otherwise effective at the beginning of the first interim periodbeginning after June 15, 2003.  Theadoption of SFAS No. 150 did not have a material effect on the Company’sfinancial condition, results of operations or liquidity.

 

8

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8.                                       GOINGCONCERN

 

The Company’sconsolidated financial statements have been prepared on a going concern basis,which assumes continuity of operations and realization of assets andliquidation of liabilities in the ordinary course of business.  For the six months ended September 30,2003, the Company incurred a net loss of $151,000.   During the years ended March 31, 2003, 2002 and 2001, theCompany incurred losses of $1,775,000, $2,589,000 and $1,067,000, respectively.  The Company’s working capital atSeptember 30, 2003 was $2,921,000 with cash and cash equivalents amountingto $1,193,000.  Net cash and cashequivalents provided by operating activities for the six months endedSeptember 30, 2003 was $613,000.  For the years ended March 31, 2003 and 2002, net cash and cashequivalents used in operating activities amounted to $502,000 and $567,000,respectively.

 

The Company’scontinuation as a going concern is dependent upon its ability to generatesufficient cash flow to meet its obligations on a timely basis, to comply withthe terms of its financing agreements, to obtain additional financing orrefinancing as may be required, to attain profitability, or a combinationthereof.  While the Company generatedcash and cash equivalents from operating activities for the six months endedSeptember 30, 2003, there can be no assurance that future efforts willcontinue to be successful or that the Company will have sufficient cashresources to support its future operations. The accompanying unaudited consolidated financial statements do notinclude any adjustments that might result from the outcome of this uncertainty.

 

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**Item 2.****           Management’sDiscussion and Analysis of Financial Condition and Results of Operations**

 

*This report on Form 10-Q contains forward-looking statementsregarding the future performance of Cyanotech and future events that involverisks and uncertainties that could cause actual results to differ materiallyfrom the statements contained herein. This document, and the other documentsthat the Company files from time to time with the Securities and ExchangeCommission, such as its reports on Form 10-K, Form 10-Q, Form 8-K, and itsproxy materials, contain additional important factors that could cause actual resultsto differ from the Company’s current expectations and the forward-lookingstatements contained herein.*

 

**Going Concern**

 

The Company’sconsolidated financial statements have been prepared on a going concern basis,which assumes continuity of operations and realization of assets andliquidation of liabilities in the ordinary course of business.  For the six months ended September 30,2003, the Company incurred a net loss of $151,000.  During the years ended March 31, 2003, 2002 and 2001, theCompany incurred losses of $1,775,000, $2,589,000 and $1,067,000,respectively.  The Company’s workingcapital at September 30, 2003 was $2,921,000 with cash and cashequivalents amounting to $1,193,000. Net cash and cash equivalents provided by operating activities for thesix months ended September 30, 2003 was $613,000.  For the years ended March 31, 2003 and2002, net cash and cash equivalents used in operating activities amounted to$502,000 and $567,000, respectively.

 

The Company’scontinuation as a going concern is dependent upon its ability to generatesufficient cash flow to meet its obligations on a timely basis, to comply withthe terms of its financing agreements, to obtain additional financing orrefinancing as may be required, to attain profitability, or a combinationthereof.  While the Company generatedcash and cash equivalents from operating activities for the six months endedSeptember 30, 2003, there can be no assurance that future efforts willcontinue to be successful or that the Company will have sufficient cashresources to support its future operations. The accompanying unaudited consolidated financial statements do notinclude any adjustments that might result from the outcome of this uncertainty.

 

**Critical Accounting Policies**

 

In response to theSecurity and Exchange Commission Release No. 33-8040, “Cautionary AdviceRegarding Disclosure about Critical Accounting Policies,” the Company hasidentified certain of its policies as being of particular importance to theunderstanding of its financial position and results of operations and whichrequire the application of significant judgment by the Company’smanagement.  What accounting policiesare critical was determined by considering those accounting policies thatinvolve the most complex or subjective decisions or assessments.  We identified our most critical accountingpolicies to be those related to inventory valuation, revenue recognition,equipment and leasehold improvements, income taxes and impairment of long-livedassets.  We state these criticalaccounting policies in the notes to consolidated financial statements in theCompany’s previously filed report on Form 10-K for the fiscal year endedMarch 31, 2003.  This discussionand analysis should be read in conjunction with such notes and our consolidatedfinancial statements and related notes included elsewhere in this report.

 

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**Contractual Obligations**

 

See “ContractualObligations” in “Management’s Discussion and Analysis of Financial Conditionand Results of Operations” incorporated by reference from the Company’s AnnualReport on Form 10-K for the year ended March 31, 2003.  There have been no significant changes incontractual obligations from March 31, 2003 to September 30, 2003other than those reported elsewhere in this Form 10-Q.

 

**Results of Operations**

 

The following table setsforth certain consolidated statements of operations data as a percentage of netsales for the periods indicated:

 
|                           |   | **Three  Months Ended  September 30,** |   | **Six Months  Ended  September 30,** |   |
|--------------------------------|--------|---------------------------------------------|--------|-------------------------------------------|--------|
|                           |   | **2003**                                    |   | **2002**                                  |   | **2003** |   | **2002** |   |
|                           |   |                                        |   |                                      |   |   |   |   |   |
| Net  sales                     |   | 100.0                                       | %      | 100.0                                     | %      | 100.0 | % | 100.0 | % |
| Cost  of product sales         |   | 69.7                                        |   | 71.9                                      |   | 70.3 |   | 66.6 |   |
| Gross  profit                  |   | 30.3                                        |   | 28.1                                      |   | 29.7 |   | 33.4 |   |
|                           |   |                                        |   |                                      |   |   |   |   |   |
| Operating  expenses:           |   |                                        |   |                                      |   |   |   |   |   |
| Research  and development      |   | 0.9                                         |   | 2.2                                       |   | 1.2 |   | 3.6 |   |
| Sales  and marketing           |   | 12.5                                        |   | 24.0                                      |   | 12.6 |   | 25.2 |   |
| General  and administrative    |   | 15.8                                        |   | 23.4                                      |   | 16.2 |   | 26.1 |   |
| Total  operating expenses      |   | 29.2                                        |   | 49.6                                      |   | 30.0 |   | 54.9 |   |
|                           |   |                                        |   |                                      |   |   |   |   |   |
| Income  (loss) from operations |   | 1.1                                         |   | (21.5                                     | )      | (0.3 | ) | (21.5 | ) |
|                           |   |                                        |   |                                      |   |   |   |   |   |
| Other  income (expense):       |   |                                        |   |                                      |   |   |   |   |   |
| Interest  income               |   | 0.1                                         |   | 0.2                                       |   | 0.2 |   | 0.4 |   |
| Interest expense               |   | (2.7                                        | )      | (6.1                                      | )      | (3.2 | ) | (6.1 | ) |
| Other  income (expense), net   |   | 1.1                                         |   | 0.6                                       |   | 0.1 |   | (5.5 | ) |
| Total  other expense           |   | (1.5                                        | )      | (5.3                                      | )      | (2.9 | ) | (11.2 | ) |
|                           |   |                                        |   |                                      |   |   |   |   |   |
| Loss before income taxes       |   | (0.4                                        | )      | (26.8                                     | )      | (3.2 | ) | (32.7 | ) |
|                           |   |                                        |   |                                      |   |   |   |   |   |
| Income  tax benefit            |   | —                                      |   | —                                    |   | 0.3 |   | — |   |
|                           |   |                                        |   |                                      |   |   |   |   |   |
| Net  loss                      |   | (0.4                                        | )%     | (26.8                                     | )%     | (2.9 | )% | (32.7 | )% |

 

**Second Quarter of Fiscal 2004 Compared to Second Quarter ofFiscal 2003**

 

*Net Sales*

 

Net sales for the threemonths ended September 30, 2003 were $2,840,000, a 41% increase from the$2,018,000 for the comparable period a year ago. Approximately half of thisincrease was generated from the Company’s subsidiary in Japan.  The increase was due to an almost triplingof sales in the Company’s bulk astaxanthin products, BioAstinâand NatuRoseâ resulting from significant sales volumeincreases in all bulk astaxanthin products. Sales of the Company’s other products remained comparable to the sameperiod a year ago.

 

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International salesrepresented 37% and 49% of net sales for the three months endedSeptember 30, 2003 and 2002, respectively.  For the three months ended September 30, 2003, no singlecustomer had net sales of 10% or more of total net sales.  For the three months endedSeptember 30, 2002, net sales to Spirulina International B.V. (“SpirulinaInt’l”), a European distributor of natural products accounted for 14% of netsales.

 

*Gross Profit*

 

Gross profit representsnet sales less cost of goods sold, which includes the cost of materials,manufacturing overhead costs, direct labor expenses and depreciation andamortization. Gross profit for the three months ended September 30, 2003was $861,000, an increase of 52% from the comparable period a year ago dueprimarily to increased sales.  As apercent of net sales, the gross profit margin of 30% was an increase of twobasis points from the same period a year ago.

 

*Operating Expenses*

 

Operating expenses forthe quarter ended September 30, 2003 were $829,000, a decrease of 17% fromthe comparable prior year period.  Thedecreased expenditures in the current year period were primarily due to reductionsin travel, third party contract services and advertising.  All categories showed reduced spending as aresult of the Company’s continuing cost containment program.  Research and development expenses for thequarter decreased to $26,000, down 42% from the $45,000 for the comparableprior year period.  Sales and marketingexpenses were $354,000 for the quarter, a decrease of 27% from the $485,000reported a year ago.  General andadministrative expenses were $449,000 for the quarter, down 5% from the$472,000 for the comparable period a year ago.

 

*Net Other Expense*

 

Net other expense for the quarter endedSeptember 30, 2003 declined by $64,000 from the comparable prior yearperiod primarily from a decrease in interest expense and the offset gainarising from exchange rate fluctuations on transactions of the Company’s Japansubsidiary which denominates its transactions in Yen.

 

*Income Taxes*

 

Aprovision for income taxes was not recorded in either the three months endedSeptember 30, 2003 or 2002 due to the Company’s taxable loss position inboth periods.

 

*Net Loss*

 

The Company recorded anet loss of $10,000 for the three months ended September 30, 2003,substantially lower than the net loss of $540,000 reported for the comparableprior year period.  Increases in netsales combined with lower operating expenses were the primary reasons for theimproved net loss position in the current year period.  The Company did, however, report income fromoperations of $32,000 for the three months ended September 30, 2003, whichcompares favorably to the loss from operations of $434,000 reported for thecomparable quarter of fiscal 2003.

 

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**Six Months Ended September 30, 2003 Compared to SixMonths Ended September 30, 2002**

 

*Net Sales*

 

Net sales for the sixmonths ended September 30, 2003 were $5,268,000, an increase of 30% fromthe comparable period a year ago.   Thegrowth resulted from significant increases in the Company’s bulk astaxanthin products,which had significant increases in sales volumes, slightly offset by reducedsales of packaged consumer products. International sales represented 47% and 51% of net sales for the sixmonth periods ended September 30, 2003 and 2002, respectively.  For the six months ended September 30,2003 and 2002, sales to Spirulina Int’l accounted for 10% and 16% of net sales,respectively.

 

*Gross Profit*

 

Gross profit increased16% to $1,565,000 for the six months ended September 30, 2003, from$1,353,000 for the comparable period a year ago.  However, as a percentage of sales, the gross profit margindropped to 30% for the current year period from 33% a year ago.  The decrease is attributable to a finishedgoods loss resulting from a problem at a contract extraction facility incurredin the first quarter of this fiscal year which was promptly remedied.

 

*Operating Expenses*

 

Operating expenses were$1,583,000 during the six months ended September 30, 2003, a decrease of$643,000 from the comparable period of fiscal 2003.   This represents a decrease of 29% from the operating expenses of$2,226,000 reported in the comparable prior year period.  Compared to the similar period of the priorfiscal year, research and development expenses decreased 56%, sales andmarketing expenses decreased 35% and general and administrative expensesdecreased 19%.  The decreases wereprimarily the result of current year spending reductions in third partycontract services, travel and advertising. In addition, the prior year included $110,000 for the production of atelevision infomercial, abandoned late in fiscal 2003.

 

*Net Other Expense*

 

Net other expense amounted to $151,000, a decrease of$301,000 or 67% from the comparable period a year ago.  The decrease is primarily attributable to$235,000 of costs recognized in the prior year period relating to theMay 2002 extension of the maturity date of the subordinated convertibledebentures issued in May 2000. Other factors in the decrease for the current year period were lowerinterest expense and the offsetting effect of gains arising from exchange ratefluctuations on transactions of the Company’s Japan subsidiary, which aredenominated in Yen.

 

*Income Taxes*

 

A provision for estimatedstate income tax refunds of $18,000 was recorded in the six months endedSeptember 30, 2003.  During thecomparable prior year period, no refunds were due the Company.

 

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*Net Loss*

 

For the six months endedSeptember 30, 2002, the Company recorded a net loss of $151,000 or $0.01per diluted share compared to a net loss of $1,325,000 or $0.08 per dilutedshare for the comparable period of the prior year.  The $1,174,000 improvement in the Company’s net loss position isprimarily attributable to increased net sales, containment of operatingexpenses and lower interest expense in the current year as well as eliminationof prior year costs relating to the debenture maturity extension and anabandoned infomercial project.

 

**Variability of Results**

 

The Company hasexperienced significant quarterly fluctuations in operating results andanticipates that these fluctuations may continue in future periods. Futureoperating results may fluctuate as a result of changes in sales levels to ourlargest customers, new product introductions, production difficulties, weather patterns,the mix between sales of bulk products and packaged consumer products, start-upcosts associated with new facilities, expansion into new markets, salespromotions, competition, increased energy costs, foreign exchange fluctuations,the announcement or introduction of new products by competitors, changes in ourcustomer mix, overall trends in the market for our products, governmentregulations and other factors beyond our control.  While a significant portion of our expense levels are relativelyfixed and the timing of increases in expense levels is based in large part onforecasts of future sales, if net sales are below expectations in any givenperiod, the adverse impact on results of operations may be magnified by ourinability to adjust spending quickly enough to compensate for the salesshortfall. We may also choose to reduce prices or increase spending in responseto market conditions, which may have a material adverse effect on financialcondition and results of operations.

 

**Liquidity and Capital Resources**

 

Working capital for thesix months ended September 30, 2003 increased by $569,000 to $2,921,000from $2,352,000 at March 31, 2003 primarily due to an increase in cash andcash equivalents.  For the six monthsended September 30, 2003, cash and cash equivalents increased by $614,000to $1,193,000 due to cash flows provided from operating activities and therelease of restricted funds of $250,000 in connection with the Company’slong-term debt partially offset by investments in equipment and leaseholdimprovements and principal payments on long-term debt.

 

Net cash and cashequivalents of $613,000 were provided by operations for the six months endedSeptember 30, 2003 in contrast to $720,000 used in operating activitiesfor the same period a year ago.  Theprimary reason for the increase in cash flows from operating activities was thesubstantial decrease in the Company’s net loss in the current fiscal yearcompared to the losses sustained during the prior fiscal year.

 

Cash used in investingactivities (for capital expenditures) decreased 52% to $87,000 for the sixmonths ended September 30, 2003 from $181,000 in the comparable prior yearperiod.

 

Cash from financingactivities amounted to $88,000 for the six months ended September 30,2003, a decrease from $138,000 for the comparable prior year period.  The decrease was primarily due to $345,000provided in the prior year period from the completion of a private placement ofthe Company’s Common Stock in May 2002 offset by the release, inJuly 2003, of $250,000 of restricted cash deposits by the Company’slong-term debt holder.

 

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*Term Loan Agreement*

 

The Company has a Term Loan Agreement (“Term Loan”) with a lenderproviding up to $3.5 million in credit facilities, secured by substantially allthe assets of the Company.  The TermLoan has a maturity date of May 1, 2010 and is payable in 120 equalmonthly principal and interest payments of approximately $48,000, commencingJune 1, 2000.  The interest rateunder this Term Loan, in the absence of a default under the agreement, is theprime rate, as defined, in effect as of the close of business on the first dayof each calendar quarter, plus 1% (at September 30, 2003, the prime ratewas 4.0%).

 

On July 29, 2003, the Company received approval from the lenderfor the release of $250,000 of cash previously held as a restricted deposit inconnection with the Term Loan.  The useof these released funds is unrestricted and can used by the Company for workingcapital purposes.  A remaining $250,000restricted cash deposit continues to be held in an interest-bearing restrictedcash account per the terms of the Term Loan and is included in Other Assets onthe consolidated balance sheet at September 30, 2003.  A warrant to purchase 20,000 shares of theCompany’s common stock was issued in conjunction with this Term Loan.  The warrant expires in April 2011 andhas an exercise price of $2.55 per share. The warrant may only be exercised after the Company has repaid the TermLoan in full.

 

*Convertible Debentures due September 30, 2004*

 

In October 2002, theCompany issued in a private placement (a) $1,250,000 principal amount of 10%Convertible Subordinated Debentures, due September 30, 2004 (the“Debentures), convertible into shares of the Company’s Common Stock at a priceof $0.65 per share and (b) 750,000 shares of Common Stock with proceeds to theCompany of $300,000.  Proceeds from theDebentures were used to retire convertible debentures of $1,238,000 due tomature on October 31, 2002.  Theremaining net proceeds from the issuance of Common Stock were used for workingcapital purposes.  Subsequent to thistransaction, the investor was elected to the Company’s Board of Directors.

 

EffectiveSeptember 30, 2003, the Company reached an agreement with the holder ofthe Debentures to extend the maturity date by one year to September 30,2005.  Per the terms of the extension,the interest rate for the Debentures shall remain at 10%.  However, if the Company complies with allterms of the Debentures and reports earnings per share in a quarterly periodgreater than or equal to $0.01 per share (calculated on a fully diluted basisincluding all extraordinary and one-time charges), then the interest rate forthe Debentures for the following quarterly period shall be reduced to thelesser of: (a) 8%; (b) the prime rate as announced by Northern Trust Bank ofCalifornia N.A. on the first day of such quarterly period plus 2%; or (c) themaximum rate permitted by law.  Allother terms of the Debentures remain unchanged from those described in theCompany’s Annual Report on Form 10-K for the year ended March 31, 2003.

 

**Recent Accounting Pronouncements**

 

In May 2003, the FASB issued SFAS No. 150 “Accounting for CertainFinancial Instruments with Characteristics of Both Liabilities andEquity.”  SFAS No. 150 requires issuersto classify as liabilities (or assets in some circumstance) three classes offreestanding financial instruments that embody obligations for the issuer.  Generally, SFAS No. 150 is effective forfinancial instruments entered into or modified after May 31, 2003 and isotherwise effective at the beginning of the first interim period beginningafter June 15, 2003.  The adoptionof SFAS No. 150 did not have a material effect on the Company’s financialcondition, results of operations or liquidity.

 

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**Other Material Events**

 

*Common Stock Listing*

 

For the year ended March 31, 2002, the Company’s Common Stock wastraded on the NASDAQ National Market. On June 17, 2002, the Company received a delisting warning letterfrom NASDAQ for failure to comply with the $1.00 per share minimum bidprice.  The Company was unable to regaincompliance with the minimum bid price by September 16, 2002 andsubsequently applied for and received listing for its Common Stock on theNASDAQ SmallCap Market.

 

Listingon the NASDAQ SmallCap Market provided the Company with specified grace periodto regain compliance with the $1.00 per share minimum bid pricerequirement.  On September 15,2003, the Company received notification from the NASDAQ Listing QualificationsDepartment that its Common Stock failed to comply with the minimum bid pricerequirement for continued listing pursuant to Marketplace Rule 4310(c)(4).  The Company requested a hearing before theNASDAQ Listing Qualification Panel (“Panel”) to appeal the ruling.  During the appeals process, the scheduleddelisting will be stayed and the Company’s Common Stock will continue to tradeon the NASDAQ SmallCap Market, pending the Panel’s decision.  The Company’s appeal was heard by the Panelon October 16, 2003 with no formal notification yet received.  While there can be no assurance that theCompany’s request for continued listing on the NASDAQ SmallCap Market will begranted, the Company is exploring various avenues to preserve the NASDAQlisting.

 

**Outlook**

 

*This outlook section contains a number offorward-looking statements, all of which are based on current expectations.Actual results may differ materially. See also the discussion of going concernuncertainty at the beginning of this Item 2.*

 

Cyanotech’s strategy hasbeen and continues to be, to successfully produce and market high-value naturalproducts from microalgae.  Our currentline of product offerings include Certified Organic and Naturally CultivatedSpirulina Pacificaâ in powder, flakeand tablet form, NatuRoseâ naturalastaxanthin powder for the animal nutrition market, BioAstinânatural astaxanthin in lipid extract form and micro-encapsulated beadlets forthe human nutrition and cosmetic industries and Phycobiliproteins for use inmedical diagnostics.  Information aboutour Company and our products can be viewed at www.cyanotech.com,www.nutrex-hawaii.com or www.phycobiliprotein.com.  Consumer products can be purchased online atwww.nutrex-hawaii.com.

 

For the second quarter offiscal 2004, Cyanotech achieved an increase in net sales of 17% from the levelreported in the first quarter of fiscal 2004. The increased sales level resulted primarily from increased sales ofboth natural astaxanthin products: NatuRose for the animal nutrition market, and BioAstin for the humannutrition and cosmetic markets. Results from the second quarter of fiscal 2004indicate that we are continuing to progress towards profitability, despite thenet losses incurred.  The quarter endedSeptember 30, 2003 is the fourth consecutive quarter with sales above $2.4million and gross profit in excess of $700,000.  Concurrently, due to continued efforts at improving our productionyields, we have maintained our ability to cultivate and manufacture our highquality products at the levels needed to serve our customers.

 

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During the quarter endedSeptember 30, 2003, Cyanotech Japan YK experienced continued growth insales of NatuRoseâ to the Japaneseaquaculture feed market over the levels achieved in the prior quarters.  Although we expect some seasonality effecton demand from quarter to quarter, we believe the trend of increasing salesthrough this subsidiary will continue into future quarters.

 

Our efforts in the humanapplication market for BioAstinânatural astaxanthin are continuing to show promising results.  We are working closely with industry-leadingcosmetic manufacturers, pharmaceutical companies offering brandednutraceuticals, direct marketing organizations and natural food supplementmanufacturers to integrate our BioAstinânatural astaxanthin into their offerings.

 

Our ongoing costcontainment efforts have reduced operating expenses, further contributing toour improved bottom line result. Operating expenses for the quarter ended September 30, 2003 werereduced by 17% from the levels reported for the comparable period of fiscal2003.  This reduction of expenses inconjunction with increased gross profit on higher sales resulted in income fromoperations of $32,000.  Such result isin sharp contrast to loss from operations of $434,000 reported for thecomparable quarter of the prior fiscal year. Due to such improved results from operations, the Company reported a netloss of $10,000 for the quarter ended September 30, 2003 and a net loss of$151,000 for the first six months of fiscal 2004.

 

The Company’s futureresults of operations and the other forward-looking statements contained inthis Outlook, in particular the statements regarding revenues, gross margin,research and development, and capital spending, involve a number of risks anduncertainties. In addition to the factors discussed above that could cause actualresults to differ materially are the following:  business conditions and growth in the natural products industryand in the general economy; changes in customer order patterns, outcome of theclinical trials for BioAstinâ, and changes in demandfor natural products in general; changes in weather conditions; competitivefactors, such as competing Spirulina and astaxanthin producers increasing theirproduction capacity and their impact on world market prices for Spirulina andastaxanthin; government actions; shortage of manufacturing capacity; and otherfactors beyond our control.  Riskfactors are discussed in detail in exhibit 99.1, hereto included in thisreport.

 

Cyanotech believes thatit has the product offerings, facilities, personnel, and competitive andfinancial resources for improved results, but future revenues, costs, marginsand profits are all influenced by a number of factors, as discussed above, allof which are inherently difficult to forecast.

 

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**Item3.****           Quantitativeand Qualitative Disclosures About Market Risk**

 

We have not entered intoany transactions using derivative financial instruments or derivative commodityinstruments and believe that our exposure to market risk associated with otherfinancial instruments is not material.

 

**Item4.  Controls and Procedures**

 

In accordance with Item 307 of Regulation S-K promulgated by theSecurities and Exchange Commission, the Chairman of the Board, President andChief Executive Officer (“CEO”) and the Chief Financial Officer (“CFO”) of theCompany (the “Certifying Officers”) have conducted an evaluation of theCompany’s disclosure controls and procedures as of September 30,2003.  As defined under Sections13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the“Exchange Act”), the term “disclosure controls and procedures” refers tocontrols and other procedures of an issuer that are designed to ensure thatinformation required to be disclosed by the issuer in the reports that it filesor submits under the Exchange Act is recorded, processed, summarized andreported, within the time periods specified in the Commission’s rules andforms.  Disclosure controls andprocedures include, without limitation, controls and procedures designed toensure that information required to be disclosed by an issuer in the reportsthat it files or submits under the Exchange Act is accumulated and communicatedto the issuer’s management, including its principal executive officer orofficers and principal financial officer or officers, or persons performingsimilar functions, as appropriate to allow timely decisions regarding requireddisclosure.

 

Based on that evaluation, the CEO and CFO have concluded that theCompany’s disclosure controls and procedures are effective to providereasonable assurance that material information relating to the Company is madeknown to management, including the CEO and CFO, during the period when thisreport was being prepared.  Subsequentto the date of their evaluation, there were no significant changes in theCompany’s internal controls or in other factors that could significantly affectthe disclosure controls, including any corrective actions with regard tosignificant deficiencies and material weaknesses.

 

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**PART II.****                                                OTHERINFORMATION**

 

Item 1.                                                             LegalProceedings

 

None

 

Item 4.                                                             Submissionof Matters to a Vote of Security Holders

 

On August 21, 2003,the following matters were submitted to a vote of stockholders entitled to voteat the Company’s Annual Meeting of Stockholders:

 

a)              Thefollowing directors were elected to serve until the next Annual Meeting oruntil their successors are elected: Gerald R. Cysewski, Michael A. Davis, DavidI. Rosenthal, Ronald P. Scott, John T. Waldron and Paul C. Yuen, all directorsreceiving at least 15,678,170 votes and there were no more than 322,904 votesagainst or abstaining.

 

b)             Ratificationof the selection of KPMG LLP as the Company’s independent auditors for thefiscal year ending March 31, 2004. The vote on the ratification was 15,010,480 for, 147,821 against and842,773 abstaining.

 

Item 6.                                                             Exhibitsand Reports on Form 8-K

 

a)              Thefollowing exhibits are furnished with this report:

 

31.1         Certificationby the Chief Executive Officer pursuant toRule 13a-14(a)/15d-14(a) of the Exchange Act

 

31.2         Certificationby the Chief Financial Officer pursuant toRule 13a-14(a)/15d-14(a) of the Exchange Act

 

32.1         Certificationby the Chief Executive Officer pursuant to 18 U. S. C. Section 1350, asadopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

32.2         Certificationby the Chief Financial Officer pursuant to 18 U. S. C. Section 1350, asadopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

99.1         RiskFactors

 

b)             Reportson Form 8-K

 

On September 15, 2003, the Company receivednotification from the NASDAQ Listing Qualifications Department that its CommonStock failed to comply with the minimum bid price requirement for continuedlisting pursuant to Marketplace Rule 4310(c)(4).  A report on Form 8-K was filed on September 15 in conjunctionwith the Company’s press release announcing notification from NASDAQ.

 

OnOctober 30, 2003, the Company filed a report on Form 8-K in conjunctionwith the Company’s press release announcing the financial results of theQuarter ended September 30, 2003.

 

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**SIGNATURES**

 

In accordance with therequirements of the Securities Exchange Act of 1934, the registrant caused thisreport to be signed on its behalf by the undersigned, thereunto dulyauthorized.

 

 
|                    | CYANOTECH CORPORATION  (Registrant) |   |
|-------------------------|-------------------------------------|--------|
|                    |                                |
|                    |                                |
| November 12,  2003 |                                |   | By: | /s/ | Gerald R. Cysewski |   |
| (Date)                  |                                |   |   | Gerald R. Cysewski  Chairman of the Board,  President and Chief Executive Officer |
|                    |                                |   |   |
|                    |                                |   |   |
|                    |                                | By:    | /s/ | Jeffrey H. Sakamoto |   |
|                    |                                |   | Jeffrey H. Sakamoto  Vice President – Finance & Administration  (Principal Financial and Accounting Officer) |
|                         |                                     |        |  |  |  |  |  |

 

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