CYANOTECH CORP

Unless otherwise indicated, all references in this report to the “Company”, “we”, “us”, “our”, and “Cyanotech” refer to Cyanotech Corporation and its wholly owned subsidiary, Nutrex Hawaii, Inc. (“Nutrex Hawaii” or “Nutrex”), a Hawaii corporation.

General

We are a global leader in premium quality, sustainable microalgae cultivation, producing high-value natural ingredients and dietary supplement products for health and wellness. Incorporated in 1983, we are guided by the principle of providing beneficial, quality microalgal products for health and human nutrition in a technology enabled, reliable and environmentally sensitive operation. We are Good Manufacturing Practices ("GMP") certified by Merieux NutriSciences, reinforcing our commitment to quality in our products, quality in our relationships (with our customers, suppliers, employees and the communities we live in), and quality of the environment in which we work. Our products include:

†These statements have not been evaluated by the Food and Drug Administration. This product is not intended to diagnose, treat, cure or prevent any disease.

Microalgae are a diverse group of microscopic plants that have a wide range of physiological and biochemical characteristics and contain, among other things, high levels of natural protein, amino acids, vitamins, pigments and enzymes. Microalgae have the following properties that make commercial production attractive: (1) microalgae grow much faster than land grown plants, often up to 100 times faster; (2) microalgae have uniform cell structures with no bark, stems, branches or leaves, permitting easier extraction of products and higher utilization of the microalgae cells; and (3) the cellular uniformity of microalgae makes it practical to control the growing environment in order to optimize a particular cell characteristic. Efficient and effective cultivation of microalgae requires consistent light, warm temperatures, low rainfall and proper chemical balance in a very nutrient-rich environment, free of environmental contaminants and unwanted organisms. This is a challenge that has motivated us to design, develop and implement proprietary production and harvesting technologies, systems and processes in order to commercially produce human dietary supplement products derived from microalgae.

Our production of these products at our 96-acre facility on the Kona Coast of the island of Hawaii provides several benefits. We selected the Keahole Point location in order to take advantage of relatively consistent warm temperatures, sunshine and low levels of rainfall needed for optimal cultivation of microalgae. This location also offers us access to cold deep ocean water, drawn from an offshore depth of 2,000 feet, which we use in ourOcean-Chill Drying system to eliminate the oxidative damage caused by standard drying techniques and as a source of trace nutrients for microalgal cultures. The area is also designated a Biosecure Zone, with tight control of organisms allowed into the area and free of genetically modified organisms ("GMO"). We believe that our technology, systems, processes and favorable growing location generally permit year-round harvest of our microalgal products in a cost-effective manner.

Our Business

We operate entirely in one operating segment, the cultivation and production of microalgae into high-value, high-quality natural health and nutrition products. We cultivate, on a large-scale basis, two microalgal species from which our two major product lines, natural astaxanthin products and spirulina products, are derived. We record revenue and cost of sales information by product category, but do not record operating expenses by such product category.

The following table sets forth, for the two fiscal years ended March 31, the net sales contributed by each of our major product lines and extraction and research and development (“R&D”) services:

Cost of sales for contract extraction and R&D services for the years ended March 31, 2025 and 2024 were $634,000 and $358,000, respectively.

Natural Astaxanthin Products

We commenced commercial production of natural astaxanthin in 1997 and in 1999BioAstin®, our natural astaxanthin product was cleared for sale in the U.S. Dietary Supplement market, and in 2007, was approved for sale in Europe. Astaxanthin represented approximately 65% of our net sales in the fiscal year ended March 31, 2025. Astaxanthin’s antioxidant properties are believed to surpass many of the antioxidant properties of vitamin C, vitamin E, beta-carotene and other carotenoids. Independent scientific studies indicate that in certain models, natural astaxanthin has up to 100 times the antioxidant activity of vitamin E and 4 times the antioxidant activity of beta-carotene. In addition, a growing body of scientific literature suggests that natural astaxanthin has beneficial properties as an anti-inflammatory, with additional benefits for joint, skin, eye and immune health.

BioAstin® is generally recognized as safe ("GRAS") as determined by the United States Food and Drug Administration ("FDA"). Our all naturalBioAstin®* *is cultivated without the use of herbicides or pesticides and is not genetically modified ("non-GMO"). In fiscal 2012, we applied for a new dietary ingredient ("NDI"), with the United States FDA, providing for a daily dosage of 12mg of astaxanthin which was reviewed without comment.BioAstin® holds several independent third-party quality certifications including: iGen Non-GMO, Gluten Intolerance Group’s Gluten Free, Detox Project Glyphosate Free, Informed Choice, and Halal and Vegan.org for vegan products, that were products produced up to and including the fiscal year ended March 31, 2025.

We produce natural astaxanthin fromHaematococcus pluvialis microalgae grown in a combination of fresh water and a metered amount of nutrient-rich deep ocean water (containing essential trace elements), drawn from a depth of 2,000 feet below sea level, supplemented with nutrients. As these algae are extremely susceptible to contamination by unwanted algae, protozoa and amoebae, we developed a proprietary system known as thePhytoDome Closed Culture System orPhytoDome CCS to overcome this problem. Using this proprietary system at the early culture stage, we have generally been able to grow consistently large volumes of contaminant-freeHaematococcus culture, subject to quarterly seasonality.

For the final stage of cultivation, theHaematococcus algae is transferred to open ponds where an environmental stress is applied causing the algae to form spores which accumulate high levels of astaxanthin. The astaxanthin crop in each pond is circulated by paddlewheels to keep an even blend of nutrients in suspension and a uniform exposure of the algae to sunlight, which is a major component of cultivation. Once ready for harvest, the media containing these spores is transported through underground pipes to our astaxanthin processing building where the culture media and algal spores are separated. Astaxanthin is produced in a batch-mode and each cultivation pond must be completely drained and thoroughly cleaned between cycles.

The harvested algal spores are dried to flakes or a fine powder. During processing, the spores are cracked in a proprietary system to assure efficient extraction of astaxanthin. Natural astaxanthin is processed further utilizing a high-pressure supercritical carbon dioxide extraction process at our facility in Kona. The resulting product is a water insoluble lipid extract used in the production of gelcaps.

All natural astaxanthin products undergo a prescribed set of microbiological food product tests to ensure safety and quality. We use third party contract manufacturers for the encapsulation, molding of gummies and packaging of gelcaps and gummies. All third-party contract manufacturers are audit inspected by our Quality Department and are required to comply with the FDA GMP regulations. These contract manufacturers hold independent third party GMP certifications.

BioAstin® is sold primarily as a packaged consumer product through Nutrex Hawaii to natural product distributors, retailers and online channels, or directly to consumers. It is also sold in liquid lipid form as a raw ingredient to dietary supplement manufacturers, health food formulators and cosmetic manufacturers.BioAstin® gelcaps are sold in bulk quantities to distributors. We sellBioAstin®* *consumer products in gelcap form, including a vegan gelcap, and condition specific health formats and in 2024, we introduced sugar-free and vegan gummies enhanced with Vitamin D3.

BioAstin® competes directly with similar products marketed by other manufacturers including Fuji Chemical of Japan, Algalif of Iceland, AlgaTechnologies of Israel and BGG of China. In the general category of dietary supplements,BioAstin® also competes with a variety of vitamins, dietary supplements and other antioxidant products available to consumers. The dietary supplement products market is highly competitive and includes international, national, regional and local producers and distributors, many of whom have greater resources than we have, and many of whom offer a greater variety of products.

The potential benefits of astaxanthin to human health are continuing to emerge. As one of the most potent and bioactive biological antioxidants found in nature, the number of potential roles of natural astaxanthin for human health is growing. Much research has been published in recent years on the beneficial roles of antioxidants in our health, in the aging process and on specific health conditions. The full efficacy ofBioAstin® as a human nutraceutical supplement requires further significant clinical study. Independent antioxidant research and prior clinical trials show promising human applications.

Spirulina Products

We have been producing a strain of spirulina microalgae marketed asHawaiian Spirulina Pacifica® since 1984*. Hawaiian Spirulina Pacifica*® represents approximately 32% of our net sales in the fiscal year ended March 31, 2025.Hawaiian Spirulina Pacifica® is a nutrient-rich superfood dietary supplement, proving a plant-based, highly absorbable source of protein, natural beta-carotene, mixed carotenoids, B vitamins, gamma linolenic acid, essential amino acids and other phytonutrients.

Hawaiian Spirulina Pacifica® is produced in three forms: powder and tablets, and in 2024, we introduced gummies. Powder is used as an ingredient in dietary supplements and health beverages. Powder, tablets and gummies are consumed as a daily dietary supplement. All forms are sold in bulk quantities and as packaged consumer products under the Nutrex Hawaii label and as private label consumer packaged products.

Hawaiian Spirulina Pacifica® is GRAS for addition to a variety of foods as determined by the United States FDA. Our all naturalHawaiian Spirulina Pacifica®* *is cultivated without the use of herbicides or pesticides, is Non-GMO Project verified, is certified Kosher by Organized Kashrus Laboratories of Brooklyn, New York and is certified Halal by the Islamic Food and Nutrition Council of America.Hawaiian Spirulina Pacifica® holds additional independent third-party quality certifications including: Gluten Intolerance Group’s Gluten Free, Detox Project Glyphosate Free, and is certified Vegan through Vegan.org. It also holds the highest, Class A safety rating from the Dietary Supplement Information Expert Committee (DSI-EC) of the United States Pharmacopeia.

OurHawaiian Spirulina Pacifica® is cultivated in fresh water and supplemented with other major required nutrients. We recycle the media and all freshwater input in our spirulina production process.

The spirulina crop in each pond is circulated by paddlewheels to keep an even blend of nutrients in suspension and a uniform exposure of the algae to sunlight, which is a major component of cultivation. Our ponds are engineered to maintain the right media depth for sunlight to permeate each crop completely, facilitating rapid growth. The design of our cultivation ponds promotes efficient growing conditions, allowing theHawaiian Spirulina Pacifica® algae to reproduce rapidly. Each pond can be harvested, on average, in nine days.

Once ready for harvest, a majority of the spirulina algae are pumped from a pond to our processing building where the crop is separated from the culture media. The culture remaining in the ponds serves as an inoculum for the next growth cycle. Harvested spirulina is washed with fresh water and filtered before moving to the drying stage. Culture media separated from spirulina algae during processing are conserved and recycled. OurIntegrated Culture Biology Management (“ICBM”) technology for microalgae cultivation has proven to be a reliable and stable operating environment, allowing us to grow and harvest spirulina without significant contamination by unwanted microorganisms and without associated loss of productivity.

Hawaiian Spirulina Pacifica® powder is dried via our low-oxygenOcean-Chill Drying process, thereby preserving high levels of antioxidant carotenoids and other nutrients sensitive to heat and oxygen. The rapid drying process results in a dark green powder. Spirulina powder is generally difficult to form into tablets, and most tablet manufacturers either add high amounts (from 10% to 30%) of inert substances to “glue” the tablet together or use a heat granulation process that destroys nutrients. In contrast, ourHawaiian Spirulina Pacifica® tablets contain a maximum of 2% of such substances and are produced in cold press compression tablet-making machines.

Each production lot ofHawaiian Spirulina Pacifica®* is sampled and subjected to thorough quality control analyses including testing for moisture, carotenoids, minerals, color and taste, among others. Further, each lot of ourHawaiian* Spirulina Pacifica®* undergoes a prescribed set of microbiological tests to ensure the absence of contaminants, including total aerobic bacteria, coliform bacteria, Salmonella and E. coli. TheHawaiian* Spirulina Pacifica® powder, tablets and gummies are packaged to extend shelf life and ensure product freshness. Our packaged consumer products are bottled and labeled by third party contractors in California. These contractors are subject to regular government inspections and hold Drug Manufacturing Licenses & Processed Food Registrations with the State of California Department of Health. These contract manufacturers hold independent third party GMP certifications.

The majority of our bulk spirulina is sold to international health food manufacturers and formulators, many of whom identify and promote ourHawaiian Spirulina Pacifica®* *in their products. Such customers purchase bulk powder or bulk tablets and package these products under their brand label for sale to the health and natural food markets in their countries. Some of the brands produced by these customers are marketed and sold in direct competition with the packaged consumer products sold through our Nutrex Hawaii subsidiary in international channels. In the domestic market, Nutrex Hawaii packaged consumer products are sold through natural product distributors, retailers and online channels, or directly to consumers. In selected international markets, we have exclusive sales distributors for both our bulk and packaged consumer products.

OurHawaiian Spirulina Pacifica® products compete with a variety of vitamins, dietary supplements, other algal products and similar nutritional products available to consumers. The dietary supplement products category is highly competitive and includes international, national, regional and local producers and distributors, many of whom have greater resources than Cyanotech and many of whom offer a greater variety of products.

Our direct competition in the spirulina market is currently from Parry Nutraceuticals, a division of Murugappa Group of India, Earthrise Nutritionals, LLC and several farms in China.

In addition, there are numerous other smaller farms throughout the world. As one of the largest producers of spirulina, and the only producer of spirulina in Hawaii, our challenge is to increase our market share among customers who seek the high-quality products we produce while concurrently adjusting our product mix to meet our revenue and profitability targets.

Contract Extraction and Research and Development Services (“contract services”)

As a result of capacity improvements that we made to our best-in-class, 1,000 bar, supercritical carbon dioxide extraction system, we began offering contract extraction services to third-party producers of astaxanthin biomass in fiscal 2019.

Due to our knowledge and expertise in cultivating microalgae combined with excess production capacity, we began offering R&D services to third parties in fiscal 2023.

Total contract services and R&D services revenue represented approximately 4% and 3% of our net sales in fiscal years ended March 31, 2025 and 2024, respectively.

Major Customers

Two customers individually accounted for 31% and 10% of our total net sales for the fiscal year ended March 31, 2025. Two customers individually accounted for 34% and 17% of our total net sales for the fiscal year ended March 31, 2024.

Research and Development

Our expertise for many years has been in the development of efficient, stable and cost-effective production systems for microalgal products. We have learned production levels from our systems may not be sustainable across periods of days, weeks, or even months. Accordingly, we typically investigate each specific microalgae identified in the scientific literature for potentially marketable products and for solutions to production stability and efficiency challenges and then strive to develop the technology to grow such microalgae on a commercial scale or to incorporate procedures or technology to improve production stability and efficiency. Successful microalgal product developments and technical solutions are highly uncertain and dependent on numerous factors, many beyond our control. Products and solutions or improvements that appear promising in early phases of development may be found to be ineffective, may be uneconomical because of manufacturing costs or other factors, may be precluded from commercialization due to the proprietary rights of other companies, or may fail to receive necessary regulatory approvals. Our R&D expenses were $0.4 million and $0.7 million for the years ended March 31, 2025 and 2024, respectively.

Patents, Trademarks and Licenses

We previously held four United States patents: one on aspects of our production methods and three relating to usage of ourBioAstin® products. Our production method patent, which was directed to microalgae production technology, expired in April 2016. Our other three patents, which were utility patents relating to the use of astaxanthin in ourBioAstin® products, expired in December 2019, February 2020 and April 2020.

Although we view our proprietary rights as important, we currently believe that a loss of patent rights is not likely to have a material adverse effect on our present business as a whole. Instead, our commercial results mainly depend upon our trade secrets, know-how, other non-patent proprietary rights, customer relationships, our climate and our location. As a result, we feel that our competitors will not be able to implement competing technology covered by our former patents without our same combination of non-patented attributes.

We have registered trademarks in the U.S. and in some foreign markets, such as the European Union. Our operations are not dependent upon any single trademark, although some trademarks are identified with a number of our products and are important in the sale and marketing of such products.

Regulations

Several governmental agencies regulate various aspects of our business and our products in the United States, including the FDA, the Federal Trade Commission (“FTC”), the Consumer Product Safety Commission, the State of Hawaii Department of Health, the Department of Agriculture, the Environmental Protection Agency (“EPA”), the United States Postal Service, state attorney general offices and various agencies of the states and localities in which our products are sold. We believe we are in compliance with all material government regulations which apply to our products and operations. However, we are not able to predict the nature of any future laws, regulations, interpretations or applications, nor can we predict what effect future changes would have on our business.

Our international customers are subject to similar governmental agency regulations in their various geographic regions. Compliance by our customers with such local regulations is beyond our control and we cannot predict their ability to maintain such compliance. However, we strive to assist our customers in meeting local regulations pertaining to the use and sale of our products whenever possible.

Environmental Matters

In 2002, we were issued under the Endangered Species Act (“ESA”) an Incidental Take Permit (“ITP”) by the United States Department of Interior Fish and Wildlife Service (“FWS”). The ESA defines “incidental take” as “incidental to, and not for the purpose of, the carrying out of an otherwise lawful activity.” This permit authorizes incidental take of the endangered Hawaiian stilt (Himantopus mexicanus knudseni) that is anticipated to occur as a result of ongoing operations and maintenance at our Kona facility. As a mandatory component for the issuance of such permit, we submitted and maintain a Habitat Conservation Plan (“HCP”) to ensure that the effects of the permitted action on listed species are adequately minimized and mitigated.

The HCP called for the creation of a nesting and breeding ground for the Hawaiian stilt to offset any take activity. We have complied with these requirements since 2002. The breeding program was so successful that the increase in the Hawaiian stilt population in the area became a potential hazard for the adjacent State airport facility. We disassembled the stilt habitat and are mitigating “take” by using standard non-lethal hazing devices to discourage nesting and breeding.

A requirement of the ITP is to provide insurance coverage for funding the project for the term of the ITP. Our insurance broker was unable to locate an underwriter who would provide such a bond. As permitted by law, the FWS waived this requirement recognizing that this HCP did not involve a significant capital expenditure. However, under Hawaii state law, no waiver provision is available. A new ITP was issued by the US Department of the Interior effective June 1, 2019; the permit expires June 1, 2035.

Employees

As of March 31, 2025, we employed 83 people. Of the total, 32 are involved in harvesting, production and quality, with the remainder in maintenance, shipping, sales, administration and support. None of our employees are subject to collective bargaining agreements. Management believes that its relations with employees are good.

Company Website and SEC Filings

Our corporate website iswww.cyanotech.com. There we make available copies of Cyanotech documents, news releases and our filings with the Securities Exchange Commission (the “SEC”), including financial statements. Also included are copies of the Board of Directors Code of Conduct, the Company’s Code of Conduct and Ethics, the Nominating and Corporate Governance Committee Charter, the Compensation Committee Charter and the Charter and Powers of the Audit Committee. We also maintain the websitewww.nutrex-hawaii.com dedicated to our wholly owned subsidiary, Nutrex Hawaii, Inc. On that website,Hawaiian Spirulina Pacifica® andBioAstin® are sold directly online. The information found on our websites, unless otherwise indicated, is not part of this or any other report we file or furnish to the SEC.