For the fiscal quarter ended Sept. 30 the maker of microalgae-based dietary supplements for humans and animals said sales rose nearly 41 percent to $2.84 million, compared with sales of $2.02 million in the second quarter of fiscal 2003.

The gain wasn't enough to push the company's bottom line into the black, although a net loss of $10,000 during the quarter marked an improvement over a year-ago loss of $151,000, or a penny a share.

Cyanotech, which employs about 65 people, was one of the state's earliest high-tech hopes when it launched in Kailua-Kona in the mid-1980s. Since then, it has struggled to achieve consistent profits.

In advance of the results, which were released after the markets closed, shares of Cyanotech closed up 2 cents at 48 cents a share on the Nasdaq SmallCap Market. Cyanotech is hoping to overturn a decision by the exchange to drop the company to the less regulated OTC Bulletin Board for failing to meet Nasdaq's minimum $1 per share bid price. The company is allowed to trade while it appeals the ruling.

"Our increased sales for the quarter ... combined with our management of costs, demonstrate Cyanotech's continuing focus on achieving profitability," said Gerald Cysewski, Cyanotech's chairman, president and chief executive. "We're extremely pleased with our continued progress for the second quarter and we feel that we can maintain this progress going forward."

Through the first six months of fiscal 2004 Cyanotech's sales rose 30 percent to $5.27 million. The company lost $151,000, or a penny a share, versus a loss of $1.33 million, or 8 cents a share, in the year-ago period. Cyanotech has lost money in all but three quarters since June 1997.

The company reported progress in cutting operating expenses, which rose $75,000 from the preceding first quarter, but remained down $173,000 from the second quarter of fiscal 2003. The company has reduced costs by cutting back on advertising expenses.

In addition, Cyanotech reported that its cash balance at the end of September had increased to $1.19 million, compared with $681,000 at the end of June. About $250,000 of that came from the release of certain fees by a Cyanotech lender during the quarter. Cyanotech's products include anti-oxidant BioAstin and NatuRose, which is used as a feed additive for sea bream.