Shares of Kailua, Kona-based Cyanotech fell 6 cents to 43 cents after the earnings were released yesterday, and the company remains in danger of being delisted by from the Nasdaq stock exchange.

The exchange has warned Cyanotech that it may be delisted after Sept. 10 if it can't keep its stock price above $1 per share for at least 10 consecutive trading days.

Cyanotech reported a loss of $141,000, or 1 cent per share, in the three months ended June 30, compared with a loss of $785,000, or 5 cents per share, a year ago.

The company pointed to a 19 percent year-on-year increase in net sales as a sign of strength in another losing quarter. Cyanotech has lost money in all but three quarters since June 1997. Net sales in the most recent quarter were $2.43 million, up from $2.03 million a year ago.

"This is the third consecutive quarter with sales over $2.4 million, which indicates to us that the market for our company's products is improving," said Gerald Cysewski, president and CEO.

The company said operating expenses fell to $754,000 compared with $1.22 million for the comparable prior-year period. However, the company's gross profit margin fell to 29 percent from 39 percent in the same quarter a year ago. That means that Cyanotech made 29 cents for every dollar it got from sales, as opposed to 39 cents a year ago.

Cysewski said that sales of NatuRose natural astaxanthin through Cyanotech Japan have improved steadily since this subsidiary was established in January 2002. NatuRose is used as a feed additive for sea bream.

"While not as well-known as the salmon industry, this market holds tremendous potential for our natural astaxanthin product and has become a significant part of our business in a relatively short period of time," he said.

Cyanotech shares (ticker symbol CYAN) have lost 7.5 percent this year. The share price has been below $1 since May 2002. The technology-laden Nasdaq exchange has a rule that allows the exchange to remove a company if its price remains below $1.

Nasdaq spokesman Wayne Lee said if the exchange decides to delist, the company has seven days to appeal and then Nasdaq would have 45 days to set a hearing. If the company presents a viable business plan at the hearing, the exchange could allow it to remain listed.

Delisting could lead to less trading in the stock, less visibility for the company and the loss of analyst coverage, Lee said.