CYANOTECH CORP (Form: 10-Q, Received: 11/12/2015 17:42:48)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒

Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For Quarterly Period Ended September 30, 2015

☐

Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Transition Period From to

Commission File Number 0-14602

CYANOTECH CORPORATION

(Exact name of registrant as 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)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ☐	Accelerated filer ☐

Non-accelerated filer ☐	Smaller reporting company ☒
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Number of common shares outstanding as of November 12, 2015:

Title of Class		Shares Outstanding
Common stock - $0.02 par value		5,596,797

CYANOTECH CORPORATION

FORM 10-Q

INDEX

PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements (unaudited)	3
	Condensed Consolidated Balance Sheets as of September 30, 2015 and March 31, 2015	3
	Condensed Consolidated Statements of Operations for the three and six month periods ended September 30, 2015 and 2014	4
	Condensed Consolidated Statements of Cash Flows for the six month periods ended September 30, 2015 and 2014	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	19
Item 4.	Controls and Procedures	19

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	20
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	20
Item 3.	Defaults upon Senior Securities	20
Item 5.	Other Information	20
Item 6.	Exhibits	20
SIGNATURES		21

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

CYANOTECH CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands except par value and number of shares)

(Unaudited)

	September 30, 201 5			March 31, 201 5
ASSETS
Current assets:
Cash and cash equivalents	$	2,062		$	2,226
Accounts receivable, net of allowance for doubtful accounts of $28 at September 30, 2015 and $6 at March 31, 2015		4,226			3,258
Inventories, net		6,169			5,678
Deferred tax assets		315			315
Prepaid expenses and other current assets		463			317
Total current assets		13,235			11,794

Equipment and leasehold improvements, net		17,534			14,754
Restricted cash		—			486
Deferred tax assets		3,373			3,035
Other assets		778			846
Total assets	$	34,920		$	30,915

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current maturities of long-term debt	$	560		$	234
Customer deposits		97			31
Accounts payable		3,994			2,926
Accrued expenses		1,160			1,124
Total current liabilities		5,811			4,315

Long-term debt, excluding current maturities		7,335			5,109
Deferred rent		7			8
Total liabilities		13,153			9,432

Commitments and contingencies

Stockholders’ equity:
Common stock of $0.02 par value, shares authorized 50,000,000; 5,580,099 shares issued and outstanding at September 30, 2015 and 5,564,799 shares at March 31, 2015		112			111
Additional paid-in capital		31,221			30,846
Accumulated deficit		(9,566	)		(9,474	)
Total stockholders’ equity		21,767			21,483

Total liabilities and stockholders’ equity	$	34,920		$	30,915

See accompanying Notes to Condensed Consolidated Financial Statements.

CYANOTECH CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in thousands, except per share amounts)

(Unaudited)

	Three Months Ended September 30,						Six Months Ended September 30,
	201 5			201 4			201 5			201 4

NET SALES	$	8,516		$	7,946		$	16,110		$	15,570
COST OF SALES		5,416			4,011			10,086			8,576
Gross profit		3,100			3,935			6,024			6,994

OPERATING EXPENSES:
General and administrative		1,486			2,170			2,696			4,917
Sales and marketing		1,616			1,462			3,348			2,696
Research and development		166			105			343			221
(Gain) loss on disposal of equipment and leasehold improvements		(29	)		3			(29	)		13
Total operating expenses		3,239			3,740			6,358			7,847

Income (loss) from operations		(139	)		195			(334	)		(853	)

Interest expense, net		(51	)		(23	)		(75	)		(49	)

Income (loss) before income tax		(190	)		172			(409	)		(902	)

INCOME TAX EXPENSE (BENEFIT)		(204	)		109			(318	)		(584	)

NET INCOME (LOSS)	$	14		$	63		$	(91	)	$	(318	)

NET INCOME (LOSS) PER SHARE:
Basic	$	0.00		$	0.01		$	(0.02	)	$	(0.06	)
Diluted	$	0.00		$	0.01		$	(0.02	)	$	(0.06	)

SHARES USED IN CALCULATION OF NET INCOME (LOSS) PER SHARE:
Basic		5,568			5,493			5,566			5,491
Diluted		6,047			5,668			5,566			5,491

See accompanying Notes to Condensed Consolidated Financial Statements.

CYANOTECH CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

(Unaudited)

	Six Months Ended September 30,
	201 5			201 4

CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(91	)	$	(318	)
Adjustments to reconcile net loss to net cash provided by operating activities:
(Gain) loss on disposal of equipment and leasehold improvements		(29	)		13
Depreciation and amortization		637			582
Amortization of debt issue costs and other assets		29			24
Share based compensation expense		324			431
Provision for doubtful accounts		22			—
Deferred income tax benefit		(338	)		(584	)
Net (increase) decrease in assets:
Accounts receivable		(990	)		(300	)
Inventories		(491	)		(716	)
Prepaid expenses		(146	)		(107	)
Other assets		39			—
Net increase (decrease) in liabilities:
Customer deposits		66			4
Accounts payable		1,068			1,053
Accrued expenses		36			258
Deferred rent		(1	)		—
Net cash provided by operating activities		135			340

CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from restricted cash		486			277
Investment in equipment and leasehold improvements		(3,214	)		(2,001	)
Net cash used in investing activities		(2,728	)		(1,724	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short term notes payable		500			—
Payment of short term notes payable		(500	)		—
Proceeds from long-term debt, net of costs		2,580			—
Capitalized leases		(174	)		—
Payments for debt issuance costs		94			—
Principal payments on long-term debt		(122	)		(102	)
Proceeds from stock options exercised		51			32
Net cash provided by (used in) financing activities		2,429			(70	)

Net decrease in cash and cash equivalents		(164	)		(1,454	)

Cash and cash equivalents at beginning of period		2,226			4,312

Cash and cash equivalents at end of period	$	2,062		$	2,858

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest	$	180		$	149
Income taxes	$	21		$	5

See accompanying Notes to Condensed Consolidated Financial Statements.

CYANOTECH CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015

(Unaudited)

1.	BASIS OF PRESENTATION

The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information pursuant to the instructions to Form 10-Q and Regulation S-X of the Securities and Exchange Commission (SEC). These interim condensed consolidated financial statements are unaudited and, in the opinion of management, include all adjustments (consisting of normal recurring adjustments and accruals) necessary to present fairly the Condensed Consolidated Balance Sheets, Condensed Consolidated Statements of Operations, and Condensed Consolidated Statements of Cash Flows for the periods presented in accordance with GAAP. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full fiscal year. The Condensed Consolidated Balance Sheet as of March 31, 2015 was derived from the audited consolidated financial statements. These condensed consolidated financial statements and notes should be read in conjunction with the Company’s audited consolidated financial statements for the year ended March 31, 2015, contained in the Company’s annual report on Form 10-K as filed with the SEC on July 15, 2015, as amended by Amendment No. 1 to the Company’s annual report on Form 10-K/A, filed August 27, 2015 (as amended, the “Company’s 10-K”).

The accompanying condensed consolidated financial statements include the accounts of Cyanotech Corporation and its wholly owned subsidiary, Nutrex Hawaii, Inc. (“Nutrex Hawaii” or “Nutrex”, collectively the “Company”). All significant intercompany balances and transactions have been eliminated in consolidation.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosures of any contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the periods reported. Management reviews these estimates and assumptions periodically and reflects the effect of revisions in the period that they are determined to be necessary. Actual results could differ from those estimates and assumptions.

Recent Accounting Pronouncements

In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date , which defers the effective date of ASU 2014-09 by one year to December 15, 2017 for interim and annual reporting periods beginning after that date and permitted early adoption of the standard, but not before the original effective date. We are currently reviewing the revised guidance and assessing the potential impact on our consolidated financial statements.

In July 2015, the FASB issued ASU No. 2015-11, Inventory: Simplifying the Measurement of Inventory , that requires inventory not measured using either the last in, first out (LIFO) or the retail inventory method to be measured at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable cost of completion, disposal, and transportation. The new standard will be effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years, and will be applied prospectively. Early adoption is permitted. The Company is evaluating the impact that this standard will have on its consolidated financial statements.

In April 2015, the FASB issued ASU No. 2015-03, “ Interest – Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs ,” which requires debt issuance costs related to a recognized debt liability to be presented in the balance sheet as a direct deduction from the debt liability rather than as an asset. ASU 2015-03 is effective on for fiscal years beginning after December 15, 2015. Early adoption is permitted. Upon adoption, an entity must apply the new guidance retrospectively to all prior periods presented in the financial statements, and must provide certain disclosures about the change in accounting principle, including the nature of and reason for the change, the transition method, a description of the prior-period information that has been retrospectively adjusted and the effect of the change on the financial statement line items (that is, debt issuance cost asset and the debt liability). The implementation of this guidance is not expected to have a material impact on the Company’s consolidated financial statements.

In May 2014, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) 2014-09, " Revenue from Contracts with Customers ," related to revenue recognition. The underlying principle of the new standard is that a business or other organization will recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects what it expects in exchange for the goods or services. The standard also requires more detailed disclosures and provides additional guidance for transactions that were not addressed completely in prior accounting guidance. ASU 2014-09 provides alternative methods of initial adoption.

Other recently issued accounting pronouncements did not or are not believed by management to have a material impact on the Company’s present or future financial statements.

2.	INVENTORIES

Inventories are stated at the lower of cost or market. Cost is determined by the first-in, first-out method. Inventories consist of the following:

	September 30, 201 5		March 31, 201 5
	(in thousands)
Raw materials	$	273	$	931
Work in process		2,787		1,509
Finished goods(1)		2,859		2,895
Supplies		250		343
	$	6,169	$	5,678

(1)

Net of reserve for obsolescence of $4,000 and $4,000 at September 30, 2015 and March 31, 2015, respectively.

The Company recognizes abnormal production costs, including fixed cost variances from normal production capacity, as an expense in the period incurred. $83,000 of non-inventoriable fixed costs and $225,000 in extraction operations start-up costs were charged to cost of sales for the three months ended September 30, 2015. $395,000 of extraction operations start-up costs and $127,000 of non-inventoriable fixed costs were charged to cost of sales for the six months ended September 30, 2015. There were no abnormal production costs charged to cost of sales for the three months ended September 30, 2014. For the six months ended September 30, 2014, there were $64,000 of abnormal production costs and $17,000 of non-inventoriable fixed costs charged to cost of sales.

3.	EQUIPMENT AND LEASEHOLD IMPROVEMENTS, NET

Equipment and leasehold improvements are stated at cost. Depreciation and amortization are provided using the straight-line method over the estimated useful lives for equipment and furniture and fixtures, or the shorter of the land lease term or estimated useful lives for leasehold improvements as follows:

	Years
Equipment	3	to	10
Furniture and fixtures	3	to	7
Leasehold improvements	10	to	25

Equipment and leasehold improvements consist of the following:

	September 30, 201 5			March 31, 201 5
	(in thousands)
Equipment	$	10,832		$	9,782
Leasehold improvements		10,372			10,216
Furniture and fixtures		349			298
		21,553			20,296
Less accumulated depreciation and amortization		(13,186	)		(12,549	)
Construction-in-progress		9,167			7,007
Equipment and leasehold improvements, net	$	17,534		$	14,754

The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of such assets may not be recoverable. Recoverability of these assets is measured by a comparison of the carrying amount to forecasted undiscounted future cash flows expected to be generated by the asset. If the carrying amount exceeds its estimated future cash flows, then an impairment charge is recognized to the extent that the carrying amount exceeds the asset’s fair value. Management has determined no asset impairment existed as of September 30, 2015. The Company recognized a gain on disposal of assets in the amount of $29,000 for the three and six months ended September 30, 2015, respectively. The Company recognized a loss on disposal of assets in the amount of $3,000 and $13,000 for the three and six months ended September 30, 2014, respectively.

The Company has capitalized $78,000 and $137,000 of interest for the three and six months ended September 30, 2015, respectively. $57,000 and $112,000 of interest was capitalized for the three and six month period ended September 30, 2014.

4 .	ACCRUED EXPENSES

Accrued expenses consist of the following:

	September 30, 201 5		March 31, 201 5
	(in thousands)
Wages, bonus and profit sharing	$	933	$	930
Customer rebates		74		74
Other expenses		153		120
	$	1,160	$	1,124

5 .	LONG-TERM DEBT

Long-term debt consists of the following:

	September 30, 201 5			March 31, 201 5
	(in thousands)
Term loans	$	7,721		$	5,343
Capital lease		174			—
Less current maturities		(560	)		(234	)
Long-term debt, excluding current maturities	$	7,335		$	5,109

Term Loan Agreements

The Company executed a loan agreement with a lender providing for $2,500,000 in aggregate credit facilities (the “2015 Loan”) secured by substantially all the Company’s assets, pursuant to a Term Loan Agreement dated July 30, 2015 (the “2015 Loan Agreement”). The 2015 Loan Agreement is evidenced by a promissory note in the amount of $2,500,000, the repayment of which is partially guaranteed under the provisions of a United States Department of Agriculture (“USDA”) Rural Development Guarantee program. The proceeds of the 2015 Loan were used to pay off a $500,000 short term note payable that matured on September 18, 2015 and acquire new processing equipment and leasehold improvements at its Kona, Hawaii facility.

The provisions of the 2015 Loan require the payment of principal and interest until its maturity on September 1, 2022, the obligation fully amortizes over seven (7) years. Interest on the 2015 Loan accrues on the outstanding principal balance at an annual variable rate equal to the published Wall Street Journal prime rate (3.25% at September 30, 2015) plus 2.0% and is adjustable on the first day of each calendar quarter and fixed for that quarter. At no time shall the annual interest rate be less than 6.00%. The 2015 Loan has a prepayment penalty of 5% for any prepayment made prior to the first anniversary of the date of the 2015 Loan Agreement, which penalty is reduced by 1% each year thereafter until the fifth anniversary of such date, after which there is no prepayment penalty. The balance under the 2015 Loan was $2,500,000 at September 30, 2015.

The 2015 Loan includes a one-time origination and guaranty fee totaling $113,900 and an annual renewal fee payable in the amount of 0.50% of the USDA guaranteed portion of the outstanding principal balance as of December 31 of each year, beginning December 31, 2015. The USDA has guaranteed 80% of all amounts owing under the 2015 Loan. The Company is subject to financial covenants and customary affirmative and negative covenants. The Company was in compliance with these financial covenants at September 30, 2015.

The Company executed a loan agreement with a lender providing for $5,500,000 in aggregate credit facilities (the “2012 Loan”) secured by substantially all the Company’s assets, pursuant to a Term Loan Agreement dated August 14, 2012 (the “2012 Loan Agreement”). The 2012 Loan Agreement is evidenced by promissory notes in the amounts of $2,250,000 and $3,250,000, the repayment of which is partially guaranteed under the provisions of a USDA Rural Development Guarantee program. The proceeds of the 2012 Loan were used to acquire new processing equipment and leasehold improvements at its Kona, Hawaii facility.

The provisions of the 2012 Loan require the payment of interest only for the first 12 months of the term; thereafter, and until its maturity on August 14, 2032, the obligation fully amortizes over nineteen (19) years. Interest on the 2012 Loan accrues on the outstanding principal balance at an annual variable rate equal to the published Wall Street Journal prime rate (3.25% at September 30, 2015) plus 1.0% and is adjustable on the first day of each calendar quarter and fixed for that quarter. At no time shall the annual interest rate be less than 5.50%. The 2012 Loan has a prepayment penalty of 5% for any prepayment made prior to the first anniversary of the date of the 2012 Loan Agreement, which penalty is reduced by 1% each year thereafter until the fifth anniversary of such date, after which there is no prepayment penalty. The balance under the 2012 Loan was $5,144,000 at September 30, 2015. Proceeds from the 2012 Loan were classified as restricted cash until they were drawn upon to acquire new processing equipment and leasehold improvements.

The 2012 Loan includes a one-time origination and guaranty fee totaling $214,500 and an annual renewal fee payable in the amount of 0.25% of the USDA guaranteed portion of the outstanding principal balance as of December 31 of each year, beginning December 31, 2012. The USDA has guaranteed 80% of all amounts owing under the 2012 Loan. The Company is subject to financial covenants and customary affirmative and negative covenants. The Company was in compliance with these financial covenants at September 30, 2015.

Capital Lease

In July 2015, the Company executed a capital lease agreement with Huntington Technology Finance providing for $174,000 in equipment, secured by the equipment financed. The capital lease matures in March 2018 and is payable in 60 equal monthly payments. The interest rate under this capital lease is 6.57%. The balance under this lease was $167,000 and $0 at September 30, 2015 and March 31, 2015, respectively.

In March 2015, the Company executed a capital lease agreement with Thermo Fisher Financial providing for $86,000 in equipment, secured by the equipment financed. The capital lease matures in March 2018 and is payable in 36 equal monthly payments. The interest rate under this capital lease is 6.5%. The balance under this lease was $73,000 and $84,000 at September 30, 2015 and March 31, 2015, respectively.

Future principal payments under the term loans and capital lease agreements as of September 30, 2015 are as follows:

Payments Due	(in thousands)
Next 12 Months	$	560
Year 2		581
Year 3		600
Year 4		620
Year 5		650
Thereafter		4,884
Total principal payments	$	7,895

6 .	OPERATING LEASES

The Company leases facilities, equipment and land under operating leases expiring through 2035. The land lease provides for contingent rentals in excess of minimum rental commitments based on a percentage of the Company’s sales. Management has accrued for the estimated contingent rent as of September 30, 2015.

Future minimum lease payments under all non-cancelable operating leases at September 30, 2015 are as follows:

Payments Due	(in thousands)
Next 12 Months	$	462
Year 2		406
Year 3		401
Year 4		403
Year 5		361
Thereafter		4,563
Total minimum lease payments	$	6,596

7 .	SHARE-BASED COMPENSATION

The Company accounts for share-based payment arrangements using fair value. If an award vests or becomes exercisable based on the achievement of a condition other than service, such as for meeting certain performance or market conditions, the award is classified as a liability. Liability-classified awards are remeasured to fair value at each balance sheet date until the award is settled. The Company currently has no liability-classified awards. Equity-classified awards, including grants of employee stock options, are measured at the grant-date fair value of the award and are not subsequently remeasured unless an award is modified. The cost of equity-classified awards is recognized in the statement of operations over the period during which an employee is required to provide the service in exchange for the award, or the vesting period. All of the Company’s stock options are service-based awards, and because the Company’s stock options are “plain vanilla,” as defined by the U.S. Securities and Exchange Commission in Staff Accounting Bulletin No. 107, they are reflected only in equity and compensation expense accounts.

Stock Options

As of September 30, 2015, the Company had three equity-based compensation plans: the Independent Director Stock Option and Restricted Stock Grant Plan (the “2014 Directors Plan”); the 2005 Stock Option Plan (the “2005 Plan”); and the 2004 Independent Director Stock Option and Stock Grant Plan (the “2004 Directors Plan”). The Company’s equity based compensation plans provide for the awarding of stock options and shares of restricted common stock for eligible employees, certain outside consultants and independent directors.

On August 28, 2014, the Company’s shareholders approved the 2014 Directors Plan. This plan authorizes the Board of Directors to provide additional incentive to the Company’s independent directors through equity based compensation in the form of stock options and restricted stock. Awards under the 2014 Directors Plan are limited to the authorized amount of 350,000 shares. As of September 30, 2015, there were 333,439 shares available for grant under the 2014 Directors Plan.

The 2005 Plan terminated on August 21, 2015. As a result, no additional awards will be issued under this plan.

The 2004 Directors Plan was terminated on August 28, 2014. As a result, no additional awards will be issued under this plan.

The following table presents shares authorized, available for future grant and outstanding under each of the Company’s plans:

	As of September 30, 201 5
	Authorized		Available		Outstanding

2014 Plan		350,000		333,439		—
2005 Plan		1,402,916		—		1,402,916
2004 Directors Plan		12,000		—		12,000
Total		1,764,916		333,439		1,414,916

All stock option grants made under equity-based compensation plans were issued at exercise prices no less than the Company’s closing stock price on the date of grant. Options under the 2005 Plan and 2014 Directors Plan were determined by the Board of Directors or the Stock Option and Compensation Committee of the Board in accordance with the provisions of the respective plans. The terms of each option grant include vesting, exercise, and other conditions are set forth in a Stock Option Agreement evidencing each grant. No option can have a life in excess of ten (10) years. The Company records compensation expense for employee stock options based on the estimated fair value of the options on the date of grant using the Black-Scholes option-pricing model. The model requires various assumptions, including a risk-free interest rate, the expected term of the options, the expected stock price volatility over the expected term of the options and the expected dividend yield. Compensation expense for employee stock options is recognized ratably over the vesting term. Compensation expense recognized for options issued under the 2005 Plan was $161,000 and $324,000 for the three and six months ended September 30, 2015, respectively. Compensation expense recognized for options issued under the 2005 Plan was $160,000 and $353,000 for the three and six months ended September 30, 2014, respectively. No compensation expense was recognized under the 2014 Directors Plan for the three and six months ended September 30, 2015. Compensation expense recognized for restricted stock issued under the 2014 Directors Plan was $78,000 for the three and six months ended September 30, 2014. All share-based compensation has been classified as general and administrative expense in the consolidated statement of operations.

A summary of option activity under the Company’s stock plans for the six months ended September 30, 2015 is presented below:

Option Activity	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in Years)		Aggregate Intrinsic Value
Outstanding at March 31, 2015		1,433,216		$	4.08		6.4	$	6,221,909
Granted		—			—
Exercised		(15,300	)		3.27		-		45,330
Forfeited or expired		(3,000	)		5.84		-		12,180
Outstanding at September 30, 2015		1,414,916			4.08		5.9		2,754,604
Exercisable at September 30, 2015		881,750			3.86		5.7		1,889,940

The aggregate intrinsic value in the table above is before applicable income taxes and represents the excess amount over the exercise price optionees would have received if all options had been exercised on the last business day of the period indicated, based on the Company’s closing stock price of $5.94 for such day.

A summary of the Company’s non-vested options for the six months ended September 30, 2015 is presented below:

Nonvested Options	Shares			Weighted Average Grant-Date Fair Value
Nonvested at March 31, 2015		614,416		$	3.25
Granted		—			—
Vested		(78,250	)		3.45
Forfeited or expired		(3,000	)		4.04
Nonvested at September 30, 2015		533,166			3.22

The following table summarizes the weighted average characteristics of outstanding stock options as of September 30, 2015:

			Outstanding Options						Exercisable Options
Range of Exercise Prices			Number of Shares		Remaining Life (Years)		Weighted Average Price		Number of Shares		Weighted Average Price
$1.60	-	3.70		383,720		5.0	$	2.93		383,720	$	2.93
$3.71	-	4.42		693,696		5.9		3.82		316,780		3.82
$4.43	-	5.40		117,500		7.4		5.00		56,000		5.05
$5.41	-	7.08		220,000		6.8		6.43		125,250		6.26
Total stock options				1,414,916		5.9		4.08		881,750		3.86

There were no stock options and restricted shares granted during the three and six months ended September 30, 2015. There were 45,000 stock options and 16,561 restricted shares granted during the three and six months ended September 30, 2014. There were 13,198 restricted shares issued on October 19, 2015.

The range of fair value assumptions related to options granted during the year ended March 31, 2015 were as follows:

	2015
Exercise Price	$	4.72
Volatility		64.00	%
Risk Free Rate		1.74	%
Vesting Period (years)		3
Forfeiture Rate		4.51	%
Expected Life (in years)		5.73
Dividend Rate		0	%

As of September 30, 2015, total unrecognized stock-based compensation expense related to all unvested stock options was $1,240,000, which is expected to be expensed over a weighted average period of 2.3 years.

8 .	INCOME TAXES

We utilize our estimated annual effective tax rate to determine our provision (benefit) for income taxes for interim periods. The income tax provision (benefit) is computed by multiplying the estimated annual effective tax rate by the year to date pre-tax book income (loss). Our effective tax rate differs from the statutory rate of 34% as a result of non deductible stock option expense and the state taxes (net of federal benefit) and permanent differences. Our effective tax rate was 107.4% and 77.8% for the three and six months ended September 30, 2015, respectively, and 63.4% and 64.7% for the three and six months ended September 30, 2014, respectively.

The Company is subject to taxation in the United States and two state jurisdictions. The preparation of tax returns requires management to interpret the applicable tax laws and regulations in effect in such jurisdictions, which could affect the amount of tax paid by the Company. Management, in consultation with its tax advisors, files its tax returns based on interpretations that are believed to be reasonable under the circumstances. The income tax returns, however, are subject to routine reviews by the various taxing authorities. As part of these reviews, a taxing authority may disagree with respect to the tax positions taken by management (“uncertain tax positions”) and therefore may require the Company to pay additional taxes. Management evaluates the requirement for additional tax accruals, including interest and penalties, which the Company could incur as a result of the ultimate resolution of its uncertain tax positions. Management reviews and updates the accrual for uncertain tax positions as more definitive information becomes available from taxing authorities, completion of tax audits, expiration of statute of limitations, or upon occurrence of other events.

As of September 30, 2015, there was no liability for income tax associated with unrecognized tax benefits. The Company recognizes accrued interest related to unrecognized tax benefits as well as any related penalties in interest income or expense in its consolidated condensed statements of operations, which is consistent with the recognition of these items in prior reporting periods.

With few exceptions, the Company is no longer subject to U.S. federal, state, local, and non-U.S. income tax examination by tax authorities for tax years before 2010.

10.

EARNINGS PER SHARE

Basic earnings per share is computed on the basis of the weighted average number of common shares outstanding. Diluted earnings per share is computed on the basis of the weighted average number of common shares outstanding plus the potentially dilutive effect of outstanding stock options using the “treasury stock” method.

Reconciliations between the numerator and the denominator of the basic and diluted earnings per share computations for the three months ended September 30, 2015 and 2014 are as follows:

	Three Months Ended September 30, 201 5
	Net Income		Shares		Per Share
	(Numerator)		(Denominator)		Amount
	(in thousands)
Basic income per share	$	14		5,568	$	0.00
Effect of dilutive securities—Common stock options		—		479		—
Diluted income per share	$	14		6,047	$	0.00

	Three Months Ended September 30, 2014
	Net Income		Shares		Per Share
	(Numerator)		(Denominator)		Amount
	(in thousands)

Basic income per share	$	63		5,493	$	0.01
Effect of dilutive securities — Common stock options		—		175		—
Diluted income per share	$	63		5,668	$	0.01

Reconciliations between the numerator and the denominator of the basic and diluted earnings per share computations for the six months ended September 30, 2014 and 2013 are as follows:

	Six Months Ended September 30, 2015
	Net Income			Shares		Per Share
	(Numerator)			(Denominator)		Amount
	(in thousands)
Basic loss per share	$	(91	)		5,566	$	(0.02	)
Effect of dilutive securities—Common stock options		—			—		—
Diluted loss per share	$	(91	)		5,566	$	(0.02	)

	Six Months Ended September 30, 201 4
	Net Income			Shares		Per Share
	(Numerator)			(Denominator)		Amount
	(in thousands)
Basic loss per share	$	(318	)		5,491	$	(0.06	)
Effect of dilutive securities — Common stock options		—			—		—
Diluted loss per share	$	(318	)		5,491	$	(0.06	)

Basic and diluted earnings per share are the same in periods of a net loss, because common share equivalents are anti-dilutive when a net loss is recorded. Diluted earnings per share does not include the impact of common stock options totaling 134,063 and 632,642 for the three months ended September 30, 2015 and 2014, respectively, and 105,000 and 632,642 for the six months ended September 30, 2015 and 2014, respectively, as the effect of their inclusion would be anti-dilutive.

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

FORWARD-LOOKING STATEMENTS

This Report and other presentations made by Cyanotech Corporation (“CYAN”) and its subsidiary contain “forward-looking statements,” which include statements that are predictive in nature, depend upon or refer to future events or conditions, and usually include words such as “expects,” “anticipates,” “intends,” “plan,” “believes,” “predicts”, “estimates” or similar expressions. In addition, any statement concerning future financial performance, ongoing business strategies or prospects and possible future actions are also forward-looking statements. Forward-looking statements are based upon current expectations and projections about future events and are subject to risks, uncertainties and the accuracy of assumptions concerning CYAN and its subsidiary (collectively, the “Company”), the performance of the industry in which CYAN does business, and economic and market factors, among other things. These forward-looking statements are not guarantees of future performance. You should not place undue reliance on forward-looking statements.

Forward-looking statements speak only as of the date of the Report, presentation or filing in which they are made. Except to the extent required by the Securities Exchange Act of 1934 (the “Exchange Act”), we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Our forward-looking statements in this Report include, but are not limited to:

●

Statements relating to our business strategy;

●

Statements relating to our business objectives; and

●

Expectations concerning future operations, profitability, liquidity and financial resources.

These forward-looking statements are subject to risk, uncertainties and assumptions about us and our operations that are subject to change based on various important factors, some of which are beyond our control. The following factors, among others, could cause our financial performance to differ significantly from the goals, plans, objectives, intentions and expectations expressed in our forward-looking statements:

●

Environmental restrictions, soil and water conditions, levels of sunlight and seasonal weather patterns, particularly heavy rain, wind and other hazards;

●

Consumer perception of our products due to adverse scientific research or findings, publicity regarding nutritional supplements, litigation, regulatory investigations or other events, conditions and circumstances involving the Company which receive national media coverage;

●

Effects of competition, including tactics and locations of competitors and operating and market competition;

●

Demand for our products, the quantities and qualities thereof available for sale and levels of customer satisfaction, including significant unforeseen fluctuations in global demand for products similar to our products;

●

Our dependence on the experience, continuity and competence of our executive officers and other key employees;

●

The added risks associated with or attributed to the current local, national and world economic conditions, including but not limited to, the volatility of crude oil prices, inflation and currency fluctuations;

●

Changes in domestic and/or foreign laws, regulations or standards, affecting nutraceutical products or our methods of operation;

●

Access to available and reasonable financing on a timely basis;

●

The Company’s inability to generate enough revenues to meet its obligations or repay maturing indebtedness;

●

Failure of investment in capital projects to operate as expected or meet expected results;

●

Changes in laws, corporate governance requirements and tax rates, regulations, accounting standards and the application to us or the nutritional products industry of new decisions by courts, regulators or other government authorities;

●

Legal costs associated with any legal proceedings, and the potential direct and indirect cost and other effects on our business or financial condition resulting from any legal proceedings;

●

The risk associated with the geographic concentration of our business;

●

Acts of war, terrorist incidents or natural disasters; and

Other risks or uncertainties described elsewhere in this Report and in other periodic reports previously and subsequently filed by us with the Securities and Exchange Commission.

Overview:

We are a world leader in the production of high value natural products derived from microalgae. Incorporated in 1983, we are guided by the principle of providing beneficial, quality microalgal products for health and human nutrition in a sustainable, reliable and environmentally sensitive operation. We are GMP (Good Manufacturing Practices) certified by the Natural Products Association™, reinforcing our commitment to quality in our products, quality in our relationships (with our customers, suppliers, co-workers and the communities we live in), and quality of the environment in which we work. Our products include:

●

Hawaiian BioAstin® natural astaxanthin - a powerful dietary antioxidant shown to support and maintain the body’s natural inflammatory response, to enhance skin, and to support eye and joint health. It has expanding applications as a human nutraceutical and functional food ingredient; and

●

Hawaiian Spirulina Pacifica® - a nutrient-rich dietary supplement used for extra energy, a strengthened immune system, cardiovascular benefits and as a source of antioxidant carotenoids

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 provide human nutritional products derived from microalgae.

Our production of these products at the 90-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 our Ocean-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, free of pesticides and herbicides. 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.

Results of Operations

The following tables present selected consolidated financial data for each of the periods indicated ($ in thousands):

	Three Months Ended						Six Months Ended
	September 30,						September 30,
	201 5			201 4			201 5			201 4
Net sales	$	8,516		$	7,946		$	16,110		$	15,570
Net sales increase		7.2	%					3.5	%
Gross profit	$	3,100		$	3,935		$	6,024		$	6,994
Gross profit as % of net sales		36.4	%		49.5	%		37.4	%		44.9	%
Operating expenses	$	3,239		$	3,740		$	6,358		$	7,847
Operating expenses as % of net sales		38.0	%		47.1	%		39.5	%		50.4	%
Operating (loss) income	$	(139	)	$	195		$	(334	)	$	(853	)
Operating (loss) income as % of net sales		(1.6	)%		2.5	%		(2.1	)%		(5.5	)%
Income tax (benefit) expense	$	(204	)	$	109		$	(318	)	$	(584	)
Net (loss) income	$	14		$	63		$	(91	)	$	(318	)

Net sales by product
Packaged sales
Astaxanthin packaged	$	5,119		$	3,585		$	9,627		$	7,930
Astaxanthin packaged sales increase		42.8	%					21.4	%
Spirulina packaged	$	1,744		$	2,208		$	3,325		$	3,699
Spirulina packaged sales increase		(21.0	)%					(10.1	)%
Total Packaged sales	$	6,863		$	5,793		$	12,952		$	11,629
Total Packaged sales increase		18.5	%					11.4	%

Bulk sales
Astaxanthin bulk	$	417		$	708		$	751		$	1,458
Astaxanthin bulk sales decrease		(41.1	)%					(48.5	)%
Spirulina bulk	$	1,236		$	1,445		$	2,407		$	2,483
Spirulina bulk sales increase (decrease)		(14.5	)%					(3.1	)%
Total Bulk sales	$	1,653		$	2,153		$	3,158		$	3,941
Total Bulk sales (decrease)		(23.2	)%					(19.9	)%

Comparison of the Three Months Ended September 30, 2015 and 2014

Net Sales The net sales growth of 7% for the quarter was driven by a 19% increase in our packaged products consistent with our focus and investment in the consumer packaged goods side of our business. Within this growth, sales of packaged spirulina decreased 21% and sales of packaged astaxanthin increased 43%. The decrease in packaged spirulina sales is due to the timing of orders compared to prior year. Sales of our bulk products decreased 23%, comprised of a 15% decrease in sales of bulk spirulina and a 41% decrease in sales of bulk astaxanthin. The decrease in bulk astaxanthin sales is a result of lower inventory due to lower production in the first two quarters of fiscal 2016, coupled with higher demand for our packaged products. International sales represented 29% of net sales for the three months ended September 30, 2015 compared to 30% for the same period a year ago. One customer accounted for 17% and 14% of total net sales for the three months ended September 30, 2015 and 2014, respectively.

Gross Profit Our gross profit percent of net sales decreased by 13.1 percentage points in the current quarter. Gross profit was impacted by a 41% decrease in astaxanthin production when compared to the strong performance in the second quarter of last year, which resulted in a higher cost per kilo sold. Additionally, gross profit was unfavorably impacted by $308,000 in non-inventoriable costs, including $225,000 related to start-up costs on our new extraction facility. Due to the fact that we grow our raw material, production is often impacted by seasonal weather patterns, and this was the case in the first two quarters of fiscal 2016, as production was impacted by lower sunlight and an unusual level of mid-day cloud cover in Kona, HI as a result of the El Nino conditions we are experiencing. There were no non-inventoriable costs in the second quarter of fiscal 2015. The decline in gross profit was also due to changes in our customer mix, which resulted in higher overall sales allowances and reduced gross profit by over $400,000 in the three months ended September 30, 2015 compared with the same period in 2014.

Operating Expenses Operating expenses decreased by $501,000 for the second quarter compared to the same period in last year. Included in this is a decrease in general and administrative expenses of $684,000, or 32%, including a decrease in legal costs of $830,000 due to the settlement of matters in the third quarter of the prior fiscal year, offset by an increase of $266,000 in accounting and auditing fees relating to our year end audit. Sales and marketing expenses increased $154,000, or 11%, due to an increase in brand development costs and demonstration programs for our packaged products.

Income Taxes We recorded an income tax benefit of $204,000 in the current quarter compared to income tax expense of $109,000 for the same period last year. Our effective tax rate was 107.4% for the current quarter and 63.4% for the same period last year. The effective tax rate in the current year differs from the statutory rate of 34% as a result of state taxes (net of federal benefit) and permanent differences, primarily employee stock option expenses that are not deductible for tax purposes.

Comparison of the Six Months Ended September 30, 2015 and 2014

Net Sales The net sales growth of 4% for the first six months of this year was driven by an 11% increase in our packaged products consistent with our focus and investment in the consumer packaged goods side of our business. Within this growth, sales of packaged spirulina decreased 10% and sales of packaged astaxanthin increased 21%. The decrease in packaged spirulina sales is due to the timing of orders compared to prior year. Sales of our bulk products decreased 20%, comprised of a 3% decrease in sales of bulk spirulina and a 49% decrease in sales of bulk astaxanthin. The decrease in bulk astaxanthin sales is a result of the lower production, coupled with higher demand for our packaged products. International sales represented 28% of net sales for the six months ended September 30, 2015 compared to 27% for the same period a year ago. One customer accounted for 16% and 12% of total net sales for the six months ended September 30, 2015 and 2014, respectively.

Gross Profit Our gross profit percent of net sales decreased by 7.5 percentage points in the first six months of this year. Gross profit was also impacted by a 33% decrease in astaxanthin production when compared to the strong performance in the first six months of last year, which resulted in a higher cost per kilo sold. Additionally, gross profit was unfavorably impacted by $522,000 in non-inventoriable costs, including $395,000 related to start-up costs on our new extraction facility. Due to the fact that we grow our raw material, production is often impacted by seasonal weather patterns. This was the case in the first two quarters of fiscal 2016, as production was impacted by lower sunlight and an unusual level of mid-day cloud cover in Kona, HI. Gross profit in the second quarter of fiscal 2015 included non-inventoriable costs of $81,000. The decline in gross profit was also due to changes in our customer mix, which resulted in higher overall sales allowances and reduced gross profit by over $500,000 in the six months ended September 30, 2015 compared with the same period in 2014.

Operating Expenses Operating expenses decreased by $1,489,000 for the six months ended September 30, 2015, compared to the same period last year. Included in this is a decrease in general and administrative expenses of $2,221,000, or 45%, mainly due to a decrease in legal costs of $2,342,000 due to the settlement of matters in the third quarter of the prior fiscal year. Sales and marketing expenses increased $652,000, or 24%, due to an increase in brand development costs and demonstration programs for our packaged products.

Income Taxes We recorded income tax benefit of $318,000 for the first six months of this year compared to a benefit of $584,000 for the same period last year. Our effective tax rate was 77.8% for the first six months compared to 64.7% for the same period last year. The effective tax rate in the current year differs from the statutory rate of 34% as a result of state taxes (net of federal benefit) and permanent differences, primarily employee stock option expenses that are not deductible for tax purposes.

Liquidity and Capital Resources

Cash Flows The following table summarizes our cash flows for the periods indicated ($ in thousands):

	Six months ended September 30
	2015			2014
Total cash (used in) provided by:
Operating activities	$	135		$	340
Investing activities		(2,728	)		(1,724	)
Financing activities		2,429			(70	)

Decrease in cash and cash equivalents	$	(164	)	$	(1,454	)

Cash provided by operating activities decreased $205,000 compared to the same period last year due primarily to an increase in receivables, offset by a smaller increase in inventory and reduced tax benefit as compared with the prior year.

Cash used in investing activities in the current period includes capital expenditures of $3,214,000 for leasehold improvements and equipment acquisitions at our Kona facility compared to $2,001,000 during the same period last year. In the current year, $486,000 was funded by restricted cash compared to $277,000 last year.

Cash provided by financing activities in the period consists of proceeds from new long term debt of $2.5 million and a capital lease of $174,000, along with stock options exercised and principal payments on debt in the normal course of business.

Sources and Uses of Capital

At September 30, 2015, our working capital was $7.4 million, a decrease of $0.1 million compared to March 31, 2015. The decrease is due to a lower cash balance as a result of investments in equipment and leasehold improvements. Cash and cash equivalents at September 30, 2015 totaled $2,062,000, a decrease of $164,000 compared to March 31, 2015.

On July 30, 2015, the Company executed the 2015 Loan Agreement with a lender providing for $2,500,000 in aggregate credit facilities secured by substantially all the Company’s assets. The 2015 Loan is evidenced by a promissory note in the amount of $2,500,000 and was secured under the provisions of a USDA Rural Development Guarantee program. Proceeds of the 2015 Loan were used to fund our capital projects related to increasing our astaxanthin production capacity.

Our results of operations and financial condition can be affected by numerous factors, many of which are beyond our control and could cause future results of operations to fluctuate materially as it has in the past. Future operating results may fluctuate as a result of changes in sales volumes to our largest customers, weather patterns, increased competition, increased materials, nutrient and energy costs, government regulations and other factors beyond our control.

A significant portion of our expense levels are relatively fixed, so the timing of increases in expenses is based in large part on forecasts of future sales. If net sales are below expectations in any given period, the adverse impact on results of operations may be magnified by our inability to adjust spending quickly enough to compensate for the sales shortfall. We may also choose to reduce prices or increase spending in response to market conditions, which may have a material adverse effect on financial condition and results of operations.

Based upon our current operating plan, analysis of our consolidated financial position and projected future results of operations, we believe that our operating cash flows, cash balances, and working capital will be sufficient to finance current operating requirements, debt service requirements, and routine planned capital expenditures, for the next twelve (12) months. We expect liquidity in the remainder of fiscal 2016 to be generated from operating cash flows.

Outlook

This outlook section contains a number of forward-looking statements, all of which are based on current expectations. Actual results may differ materially.

Our strategic direction has been to position the Company as a world leader in the production and marketing of high-value natural products from microalgae. We are vertically aligned, producing raw materials in the form of microalgae processed at our 90-acre facility in Hawaii, and integrating those raw materials into finished products. In fiscal 2016, our primary focus is on building our consumer brands, increasing our astaxanthin production volume and improving the consistency of our production for both astaxanthin and spirulina. We will continue to put emphasis on our Nutrex Hawaii consumer products to introduce them to a broader consumer market, and leverage our experience and reputation for quality, building nutritional brands which promote health and well-being. The foundation of our nutritional products is naturally cultivated Hawaiian Spirulina Pacifica® in powder and tablet form; and BioAstin® Hawaiian Astaxanthin™ antioxidant in extract, softgel caplet and micro-encapsulated beadlet form. Information about our Company and our products can be viewed at www.cyanotech.com and www.nutrex-hawaii.com. Consumer products can also be purchased online at www.nutrex-hawaii.com.

We are focused on sustainability of production levels in order to promote growth in our astaxanthin and spirulina product lines. Our goal is to continue to improve and expand these lines to meet the demand of consumers. We will continue to promote the nutritional superiority of Hawaiian grown microalgae to maintain and expand market share. Significant sales variability between periods and even across several periods can be expected based on historical results.

Rising crude oil prices in prior years resulted in increased nutrient, utility and transportation costs which reflect and respond to oil prices. We feel that these conditions are likely to continue and/or reoccur from time to time in the future, and consequently, we are putting greater focus on prudent cost controls and expense avoidance.

Gross profit margin percentages going forward will be impacted by production volumes and continued pressure on input costs and greater competition in the market place. This could cause margins to decline in future periods. We will continue to focus on higher margin consumer products that promote health and well-being. We are dedicated to continuous improvements in process and production methods to stabilize and increase production levels for the future.

Producing the highest quality microalgae is a complex biological process which requires balancing numerous factors including microalgal strain variation, temperature, acidity, nutrient and other environmental considerations, some of which are not within our control. An imbalance or unexpected event can occur resulting in production levels below normal capacity. The allocation of fixed production overheads (such as depreciation, rent and general insurance) to inventories is determined based on normal production capacity. When our production volumes are below normal capacity limits, certain fixed production overhead costs cannot be inventoried and are recorded immediately in cost of sales. In addition, when production costs exceed historical averages, we evaluate whether such costs are one-time-period charges or an ongoing component of inventory cost.

To manage our cash resources effectively, we will continue to balance production in light of sales demand, minimizing the cost associated with build-ups in inventory when appropriate. We could experience unplanned cash outflows and may need to utilize other cash resources to meet working capital needs. A prolonged downturn in sales could impair our ability to generate sufficient cash for operations and minimize our ability to attract additional capital investment which could become necessary in order to expand facilities, enter into new markets or maintain optimal production levels.

Our future results of operations and the other forward-looking statements contained in this Outlook, in particular the statements regarding revenues, gross margin and capital spending, involve a number of risks and uncertainties. In addition to the factors discussed above, any of the following could cause actual results to differ materially: business conditions and growth in the natural products industry and in the general economy; changes in customer order patterns; changes in demand for natural products in general; changes in weather conditions; competitive factors, such as increased production capacity from competing spirulina and astaxanthin producers and the resulting impact, if any, on world market prices for these products; government actions and increased regulations both domestic and foreign; shortage of manufacturing capacity; and other factors beyond our control. Risk factors are discussed in detail in Item 1A in the Company’s 10-K.

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. However, previously experienced imbalances in the highly complex biological production systems, together with volatile energy costs and rapidly changing world markets, suggest a need for continuing caution with respect to variables beyond our reasonable control. Therefore, we cannot, and do not attempt to, provide any definitive assurance with regard to our technology, systems, processes, location, or cost-effectiveness.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Not applicable.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our chief executive officer (“CEO”) and chief financial officer (“CFO”), we have evaluated the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15(d)-15(e) of the Exchange Act as of the end of the period covered by this Report. Based on that evaluation, our CEO and CFO have concluded that our disclosure controls and procedures are effective to provide reasonable assurance that information we are required to disclose in reports we file or submit under the Exchange Act is (1) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (2) accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosures.

Management’s Report on Internal Control over Financial Reporting.

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). The Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our management evaluated the effectiveness of our internal control over financial reporting as of September 30, 2015. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in “Internal Control - Integrated Framework” (2013 Framework)., Management’s assessment identified a material weakness in internal control over financial reporting. Based on that assessment, management concluded that our internal control over financial reporting was not effective as of September 30, 2015.

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. In its assessment of the effectiveness of internal control over financial reporting as of September 30, 2015, the Company determined the following control deficiency that constituted the material weakness:

During the year end closing procedures for fiscal year 2015, our external auditors identified invoices containing delivery terms of FOB Origin for which we had accepted customer purchase orders with vague terms or terms that indicated FOB Destination which were not delivered to the customer by March 31, 2015. We did not have controls in place to identify, clarify and resolve conflicts of terms between our customers’ purchase orders and our invoices. This design deficiency in our internal control over financial reporting resulted in the recognition of revenue before transfer of title had occurred.

As a result of this finding, we have undertaken the following actions to address the material weakness:

●

Implemented additional training programs for the personnel responsible for reviewing customer purchase orders in order to clarify and confirm transfer of title and risk of loss when customer purchase orders terms are vague or missing, including appropriate review and approval procedures.

●

Implemented additional quarter end closing and review procedures to confirm delivery dates for all FOB Destination shipments.

Changes to Internal Control Over Financial Reporting

There was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarterly period ended September 30, 2015 that, except as noted above, has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Limitations on the Effectiveness of Controls.

Our management, including our Chief Executive Officer and Chief Financial Officer, do not expect that our disclosure controls and procedures or our internal controls over financial reporting will prevent all errors and all fraud. A control system no matter how well designed and implemented, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues within a company are detected. The inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistakes. Controls can also be circumvented by the individual acts of some persons, or by collusion of two or more people. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

This Form 10-Q should be read in conjunction with Item 9A “Controls and Procedures” of the Company’s 10-K.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

From time to time the Company may become party to lawsuits and claims that arise in the ordinary course of business relating to employment, intellectual property, and other matters. There were no significant legal matters outstanding at September 30, 2015.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults upon Senior Securities

None.

Item 5. Other Information

On November 12, 2015, the Company issued a press release announcing the Company’s financial condition and results of operations for the quarter ended September 30, 2015. A copy of the press release is furnished as Exhibit 99.1 to this Quarterly Report on Form 10-Q, and is incorporated herein by reference. The information contained in Exhibit 99.1 hereto shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and shall not be incorporated by reference into any filings made by the Company under the Securities Act of 1933, as amended, or the Exchange Act, except as may be expressly set forth by specific reference in such filing.

Item 6. Exhibits

a) The following exhibits are furnished with this report:

	4.1	Term Loan Agreement between First Foundation (“Bank”) and both Registrant and Nutrex Hawaii, Inc. (“Nutrex”).

	4.2	Promissory Note in favor of Bank in the amount of $2,500,000 issued by Registrant and Nutrex, dated July 30, 2015.

	4.3	Mortgage, Security Agreement and Financing Statement between Registrant and Bank.

	4.4	Assignment of Lessor’s Interest in Leases and Rents between Registrant and Bank.

	4.5	Security Agreement and UCC Financing Statement between Registrant and Bank.

	4.6	Security Agreement and UCC Financing Statement between Nutrex and Bank.

	4.7	United States Department of Agriculture Rural Development Conditional Commitments.

	4.8	Hazardous Substances Certificate and Indemnity Agreement.

	4.9	Sublessor’s Consent to Mortgage of Sublease K-4; Estoppel Certificate and Subordination Agreement.

	31.1	Certifications of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 signed as of November 12, 2015.

	31.2	Certifications of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 signed as of November 12, 2015.

	32	Certifications of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 signed as of November 12, 2015.

	99.1	Press Release dated November 12, 2015

	101	The following financial statements from Cyanotech Corporation’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2015, formatted in XBRL (eXtensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Operations, (iii) the Condensed Consolidated Statements of Cash Flows, and (iv) Notes to Condensed Consolidated Financial Statements.

SIGNATURES

In accordance with the requirements of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	CYANOTECH CORPORATION
	(Registrant)


November 12, 2015	By:	/s/ Brent D. Bailey
(Date)		Brent D. Bailey
		President and Chief Executive Officer and Director


November 12, 2015	By:	/s/ Jole Deal
(Date)		Jole Deal
		Vice President — Finance & Administration and CFO
		(Principal Financial and Accounting Officer)

EXHIBIT INDEX

Exhibit Number		Description
4.1		Term Loan Agreement between First Foundation (“Bank”) and both Registrant and Nutrex Hawaii, Inc. (“Nutrex”).

4.2		Promissory Note in favor of Bank in the amount of $2,500,000 issued by Registrant and Nutrex, dated July 30, 2015.

4.3		Mortgage, Security Agreement and Financing Statement between Registrant and Bank.

4.4		Assignment of Lessor’s Interest in Leases and Rents between Registrant and Bank.

4.5		Security Agreement and UCC Financing Statement between Registrant and Bank.

4.6		Security Agreement and UCC Financing Statement between Nutrex and Bank.

4.7		United States Department of Agriculture Rural Development Conditional Commitments.

4.8		Hazardous Substances Certificate and Indemnity Agreement.

4.9		Sublessor’s Consent to Mortgage of Sublease K-4; Estoppel Certificate and Subordination Agreement.

31.1		Certifications of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 signed as of November 12, 2015.

31.2		Certifications of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 signed as of November 12, 2015.

32		Certifications of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 signed as of November 12, 2015.

99.1		Press Release dated November 12, 2015

101		The following financial statements from Cyanotech Corporation’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2015, formatted in XBRL (eXtensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Operations, (iii) the Condensed Consolidated Statements of Cash Flows, and (iv) Notes to Condensed Consolidated Financial Statements

Exhibit 4.1

TERM LOAN AGREEMENT

THIS AGREEMENT, is made on July 30, 2015 , by and between FIRST FOUNDATION BANK, a California corporation, whose mailing address is 18101 Von Karman Avenue, Suite 750, Irvine, California 92612 (the "Lender"), and CYANOTECH CORPORATION, a Nevada corporation, and NUTREX HAWAII, INC., a Hawaii corporation, both of whose mailing address is 73-4460 Queen Kaahumanu Highway, Suite 102, Kailua-Kona, Hawaii 96740 (individually and collectively, the "Borrower");

W I T N E S S E T H :

WHEREAS, the Borrower has applied to the Lender for a loan (the "Loan"), up to the principal amount of TWO MILLION FIVE HUNDRED THOUSAND AND NO/100 DOLLARS ($2,500,000.00) in order to provide working capital for payments of any remaining legal fees and to finance anticipated cost overruns from operations; and

WHEREAS, the Lender is willing to make a loan to the Borrower on the terms and conditions hereinafter set forth and in full reliance upon the representations and warranties made by the Borrower in this Agreement;

NOW, THEREFORE, the Borrower and the Lender, in consideration of the mutual covenants hereinafter set forth and intending to be legally bound, hereby agree as follows:

Section 1. The Loan . Subject to the terms and conditions of this Agreement, the Lender agrees to lend and the Borrower agrees to borrow from the Lender the principal sum not to exceed TWO MILLION FIVE HUNDRED THOUSAND AND N0/100 DOLLARS ($2,500,000.00).

The obligation of the Borrower to repay the Loan, together with accrued interest thereon, shall be evidenced by that certain Promissory Note (the "Note"), in form and substance satisfactory to the Lender, duly executed and delivered by the Borrower to the Lender.

Interest shall accrue on the outstanding principal balance of the Note, and monthly payments of principal and interest shall be paid by Borrower in accordance with the terms of the Note.

Interest shall be calculated daily on the basis of the actual number of days elapsed over a 365-day year.

All payments shall be applied first to accrued interest, then to the principal balance and then to any charges payable by the Borrower.

The maturity date for the Note shall be on September 0 1 , 2022 , at which time the entire outstanding balance, plus all accrued but unpaid interest shall be due and payable in full.

Not later than the Closing Date, as hereinafter defined, the Borrower shall have paid a nonrefundable loan fee to the Lender in the amount of TWENTY-FIVE THOUSAND AND NO/100 DOLLARS ($25,000.00), of which $12,500.00 shall be payable to Hawaii Lending Specialists, LLC, doing business as Commercial and Business Lending, and $12,500.00 shall be payable to the Lender. The Borrower shall have also paid the USDA Guarantee fee in the amount of SIXTY THOUSAND AND NO/100 DOLLARS ($60,000.00).

In addition to the initial USDA Guarantee fee, the United States Department of Agriculture Rural Development ("USDA") requires an annual fee of 0.50% based on the outstanding guaranty balance as of December 31st of each year, (i.e. , eighty percent (80%) of the Loan principal balance outstanding). This annual fee shall be paid by the Lender to the USDA.

To secure the due and punctual payment of the Note, and the performance of any and all obligations of the Borrower under the "Loan Documents" (as hereinafter defined), the Borrower will deliver or cause to be delivered to the Lender on or before the Closing Date:

(a) A Mortgage, Security Agreement and Financing Statement (the "Mortgage"), in form and content satisfactory to the Lender, dated concurrently with the Note, duly executed and acknowledged by CYANOTECH CORPORATION, as "Mortgagor", constituting at all times a valid and subsisting second lien upon the leasehold property located at 73-860 Makako Bay Drive, Kailua-Kona, Hawaii 96740, identified by Tax Map Key No. (3) 7-3-043-063 (the "Property"), and on all structures and improvements constructed and located thereon and a valid and subsisting security interest in any and all other personal property now owned or hereafter acquired by the Mortgagor, and incorporated in the improvements or otherwise situated upon the Property.

(b) An Assignment of Lessor's Interest in Leases and Rents (the "Assignment"), in form and content satisfactory to the Lender, dated concurrently with the Note, duly executed and acknowledged by Mortgagor, as assignor, unconditionally and absolutely assigning to the Lender all of the Mortgagor's right, title and interest in and to any leases, rents and proceeds arising out of the Property.

(c) Two Security Agreements (collectively, the "Security Agreement"), in form and content satisfactory to the Lender, duly executed and acknowledged by each respective Borrower, as debtor, constituting at all times valid and subsisting liens on all of the assets and personal property of each Borrower, including, but not limited to, all furnishings, fixtures and equipment relating to or used in connection with the Property (the "Collateral").

(d) Two UCC Financing Statements (collectively, the "Financing Statement"), in form and content satisfactory to the Lender perfecting the Lender's security interest in and to the Collateral, including but not limited to, personal property related to the Property.

(e) The United States Department of Agriculture Rural Development Unconditional Guarantee -Business and Industry Guaranteed Loan Program for an eighty percent (80%) guarantee of the Loan (the "USDA Guarantee").

(f) A Hazardous Substances Certificate and Indemnity Agreement (the "Indemnity Agreement"), in form and content satisfactory to the Lender, duly executed and acknowledged by Borrower.

(g) Sublessor's Consent to Mortgage of Sublease K-4; Estoppel Certificate and Subordination Agreement dated July 30, 2015 (the "Consent to Mortgage") given by the NATURAL ENERGY LABORATORY OF HAWAII AUTHORITY, STATE OF HAWAII, as Sublessor.

This Agreement, the Note, the Mortgage, the Assignment, the Security Agreement, the Financing Statement, the USDA Guarantee, the Indemnity Agreement, the Consent to Mortgage and all other documents contemplated by or necessary to effect the purposes of this Agreement are herein sometimes collectively called the "Loan Documents".

The execution of the principal Loan Documents shall take place at the office of the Lender, at such time or times as shall be mutually agreed upon by the Lender and the Borrower. The date of filing and recordation of the Mortgage and the Assignment is herein referred to as the "Closing Date".

Section 2. Representations and Warranties by the Borrower . The Borrower represents and warrants to the Lender that:

2.1 Organization, Standing and Authority of Borrower . CYANOTECH CORPORATION is a corporation duly registered, validly existing and in good standing under the laws of the State of Nevada. NUTREX HAWAII, INC., is a corporation duly registered, validly existing and in good standing under the laws of the State of Hawaii. Each Borrower shall provide the Lender with (i) resolutions and/or other documentation duly authorizing the execution and delivery of the documents required to be executed by such corporation; (ii) copies of its articles of incorporation certified by the State of Hawaii or Nevada, as applicable; and (iii) its by-laws. Each corporation has all requisite power and authority to carry on the business and to own the property that it now carries on and owns. Each Borrower has all requisite power and authority to execute and deliver the Loan Documents and to observe and perform all of the provisions and conditions thereof. No other corporate action of the Borrower is required to the execution and delivery of the Loan Documents. Each Borrower shall conduct and carry on its business in substantially the same field of activity as has been originally planned and as documented in the USDA loan application.

2.2 Title to the Property. The Mortgagor now has good, marketable title to the Property, free and clear of all defects, liens and encumbrances, excepting only liens for taxes, assessments of governmental charges or levies not yet delinquent or payable without penalty or interest, and such liens and encumbrances as may be approved by the Lender.

2.3 Tax Returns and Payments . All tax returns and reports of the Borrower required by law to be filed have been duly filed and all taxes, assessments, contributions, fees and other governmental charges (other than those presently payable without penalty or interest and those which have been disclosed to the Lender, but which are currently being contested in good faith) upon the Borrower or upon its properties or assets or income which are due and payable, have been paid.

2.4 Litigation . There is no action, suit, proceeding or investigation pending at law or in equity or before any federal, state, territorial, municipal or other governmental department, commission, board, bureau, agency or instrumentality or, to the knowledge of the Borrower, threatened against or affecting the Borrower or the Property which might materially affect the Borrower's ability to perform its obligations under the Loan Documents.

2.5 Financial Statements . All financial statements heretofore delivered to the Lender by the Borrower are true and correct in all respects, have been prepared in accordance with generally accepted accounting principles consistently applied ("GAAP"), and fairly represent the financial condition of the Borrower as of the dates thereof; no material, adverse changes have occurred in the financial condition reflected therein since the respective dates thereof; and no additional borrowings have been made by the Borrower other than borrowing approved by the Lender.

2.6 Utility Services . All utility services necessary for servicing of the improvements and the operation and use thereof for their intended purposes are available at the boundary of the Property, including, but not limited to, water supply, storm and sanitary sewer facilities, electric and telephone facilities.

2.7 Access. The Property is contiguous to publicly dedicated streets, roads or highways; and vehicular access from the Property is permitted to all such publicly dedicated streets, roads or highways.

2.8 Character of Representations and Warranties . None of the financial statements or any certificate or statement furnished to the Lender by or on behalf of the Borrower in connection with the Loan, and none of the representations and warranties in this Agreement, contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained therein or herein not misleading. To the best of the knowledge of the Borrower, there is no fact which materially adversely affects or in the future (so far as the Borrower can now foresee) may materially adversely affect the ability of the Borrower to observe or perform its obligations under the Loan Documents which has not been set forth herein or in a certificate or opinion of counsel or other written statement furnished to the Lender by or on behalf of the Borrower.

2.9 Compliance with Law . The consummation of the transactions contemplated by the Loan Documents will not conflict with or result in a breach of any law, statute, ordinance, regulation, order, writ, injunction, decree or judgment of any court or governmental instrumentality, domestic or foreign.

Section 3. Conditions of the Lender's Obligation . The Lender's obligation to make the Loan hereunder is subject to the fulfillment, to the Lender's satisfaction prior to or on the Closing Date, of the following conditions:

3.1 Representations and Warranties True at Closing. The representations and warranties contained in this Agreement and otherwise made by or on behalf of the Borrower in connection with the Loan shall be true and correct as of the Closing Date.

3.2 No Event of Default . There shall exist at the Closing Date hereunder no condition or event which would constitute an Event of Default, as defined herein, or which, after notice or lapse of time or both, would constitute an Event of Default.

3.3 Performance. The Borrower shall have performed and complied with all agreements and conditions contained herein and required to be performed and complied with prior to or at the Closing Date.

3.4 Title Insurance . The Borrower shall have delivered to the Lender policies of title insurance on ALTA form (the "Title Policy"), including such indorsements as the Lender may require, issued by a title insurance company (the "Title Insurer") and reinsured by such number of additional title insurance companies as the Lender may require, in form, substance and amount (which shall not be less than the full principal amount of the Note) satisfactory to the Lender, insuring (or agreeing to insure) that the Mortgage constitutes a valid second lien on the Property, free and clear of all defects, liens, encumbrances and exceptions to title whatsoever, except such as are shown on Exhibit "A" attached to the Mortgage and such additional matters as the Lender may approve. The Title Policy shall effect full coverage against losses arising out of encroachments against boundary or setback lines, against losses from existing mechanics' or materialmen's liens and subsequent mechanics' and materialmen's liens which may gain priority over the Mortgage or which may attach to the Property, losses arising out of the violation of zoning ordinances and regulations and such other losses with respect to which the Lender may require coverage. The Title Policy shall contain no exclusions, stipulations or exceptions not theretofore approved by the Lender. The Lender hereby notifies the Borrower that the Borrower is free to procure such policy from any title insurer or insurers authorized to do business in the State of Hawaii.

3.5 Chattel Lien Report . The Borrower shall have delivered to the Lender a chattel lien report by a substantial, financially responsible corporate title searcher, in form and substance satisfactory to the Lender, advising the Lender that a search of the public records discloses, as of the Closing Date, no judgments, pending actions in state or federal court, security agreements, chattel mortgages, financing statements, title retention agreements, notices or certificates of tax liens or other instruments or documents (except the Mortgage and the Assignment described hereinabove) filed or recorded against the Borrower or the Property.

3.6 Insurance; Insurance Certificates . The Borrower shall have delivered to the Lender evidence of public liability and other insurance, including, but not limited to, fire insurance or all risk insurance, and flood, hurricane and such other hazard insurance as may be required by the Lender, all in form and amount satisfactory to the Lender and bearing such endorsements as shall be deemed necessary by the Lender. The Borrower hereby acknowledges the Lender's execution of this Agreement as written notice to the Borrower that the Borrower is free to procure all insurance required hereunder or under any of the other loan documents from any insurance company authorized to do business in the State of Hawaii. All losses payable under such fire, flood, hurricane and hazard insurance shall be payable to the Lender as named additional insured/mortgagee, pursuant to a standard mortgagee clause . Copies of all such policies or certificates of insurance in respect thereof shall be deposited with the Lender. Each insurer shall agree, by endorsement upon the policy or policies issued by it or by independent instruments furnished to the Lender, that it will give the Lender at least thirty (30) days' prior written notice before any such policy or policies shall be altered or cancelled, and that no act or default of the Borrower or any other person shall affect the right of the Lender to recover under such policy or policies in case of loss or damage. In case of loss or damage to the Property either by fire or other cause, the Borrower shall promptly repay the Loan in full or use all available insurance proceeds for the restoration of the Property to its former condition, at the option of the Lender .

3.7 Appraisal s . The Lender shall have received appraisal reports, in form and substance satisfactory to the Lender, by a recognized real estate appraiser(s) acceptable to the Lender, relating to the Property. The Lender shall have the right to obtain at the Borrower's expense, reappraisals of the Property from any certified appraiser designated by the Lender, from time to time, whenever such reappraisals may be (a) required by any law, rule or regulation applicable to the conduct of the Lender's business, (b) requested or directed by any governmental authority charged with the administration of such law, rule or regulation or the Lender's compliance thereof, whether or not such request or direction has the force of law, or (c) when reasonably deemed appropriate by the Lender.

3.8 Current Financial Statements . The Borrower shall have delivered current financial statements satisfactory to the Lender, showing that no adverse changes have occurred in its financial conditions since the date of the financial statements previously delivered to the Lender. All financial statements shall be provided to the Lender within ninety (90) days after the close of each fiscal year . Further, during the term of the Loan, all financial statements provided to the Lender will be true and correct in all respects, and prepared in accordance with GAAP, which fairly represent the financial condition of the Borrower as of the dates thereof; no material adverse changes will have occurred in the financial condition reflected therein since the respective dates thereof; and no additional borrowings will have been made by the Borrower other than borrowing approved by the Lender.

3.9 Evidence of Tax Payments; Tax Clearance Certificate . If requested, the Lender shall have received a Tax Clearance Certificate issued by the Department of Taxation of the State of Hawaii certifying that all taxes due to the State of Hawaii by the Borrower up to and including a date within twenty (20) days of the Closing Date have been paid.

3.10 Environmental Survey. The Lender shall have received an environmental questionnaire, acceptable to Lender, indicating that all land that is to be collateral is free of any material amounts of hazardous or toxic substances or materials, within the definition of all federal, state, or local statutes, ordinances and regulations applicable to the land, including without limitation, the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), the Resource Conservation and Recovery Act (RCRA), and any other environmental requirements all as amended to the Closing Date, or describing whether any environmentally hazardous materials or toxic substances, including, but not limited to asbestos, has been or are placed, located, held, manufactured or stored on or under the Property, except as provided therein. The Lender reserves the right to decline the Loan if the report and/or subsequent examination reveals the existence or prospect of environmentally hazardous materials in amounts or of a nature unacceptable to the Lender, in its sole discretion.

3.12 ADA Compliance . The Lender must be satisfied that the Property is in compliance with the Americans With Disabilities Act ("ADA"). Additionally, the Loan Documents will provide for the Borrower's indemnification of the Lender against all liabilities or costs which the Lender may incur resulting from the Property's non-compliance with the ADA including, but not limited to, costs incurred to bring the Property into ADA compliance.

3 . 13 Commitment for USDA Guarantee. The Lender shall have received and satisfactorily reviewed and accepted a United States Department of Agriculture ("USDA") Rural Development ("RD") Conditional Commitment ("Conditional Commitment") for Guarantee equal to

80% of the Loan.

3.14 Trade Confirmation . The Lender shall have received a Trade Confirmation from McDonald USAF, LP for the purchase of the 80% USDA Guaranteed portion of the Loan.

Section 4. Other Covenants of the Borrower . The Borrower covenants and agrees with the Lender as follows:

4.1 Information. The Borrower shall (a) furnish to the Lender with reasonable promptness such data and information, financial or otherwise, concerning the Borrower as from time to time may reasonably be requested by the Lender, including but not limited to, Borrower's audited fiscal year end financial statements, in a form acceptable to the Lender, due within ninety (90) days of the business fiscal year end, such financial statements will contain, at a minimum, a balance sheet and a profit and loss statement reflecting the financial condition of Borrower as of its year end, which Lender shall obtain from Borrower, analyze and provide copies of such statements with a detailed written analysis to USDA within one hundred twenty (120) days; (b) promptly notify the Lender of any condition or event which constitutes a breach or event of default of any covenant, condition, warranty, representation or provision of any of the Loan Documents and of any materially adverse change in the financial condition of the Borrower; and (c) permit any authorized representative of the Lender, upon reasonable notice to Borrower, to inspect the Borrower's books of account (and to make extracts or copies therefrom) and to discuss the Borrower's affairs, finances and accounts with its accountants, agents, officers and accounting department representatives, all at such reasonable times and as often as the Lender may reasonably request.

4.2 Financial Covenants.

(a) Borrower shall maintain, on an annual basis, a Debt Service Coverage Ratio of at least 1.25:1.00. For the purposes of this Agreement, the "Debt Service Coverage Ratio" shall be defined as Net Profit plus Depreciation plus Depletion plus Amortization divided by Total Debt Service, all determined in accordance with generally accepted accounting principles.

(b) Borrower shall maintain, on an annual basis, a Current Ratio of at least 2.10:1.00. For the purposes of this Agreement, the "Current Ratio" shall be defined as Current Assets divided by Current Liabilities.

(c) Borrower shall maintain, on an annual basis, a Debt-to-Tangible Net Worth not more than 2.00:1.00. For the purposes of this Agreement, the "Debt-to-Tangible Net Worth" shall be defined as Total Liabilities divided by Tangible Net Worth. "Tangible Net Worth" shall be defined as Total Assets minus Total Liabilities minus Intangible Assets.

(d) Borrower shall not invest in additional fixed asset purchases in an annual aggregate of more than $500,000.00 without approval of the Lender .

4.3 Payment of Taxes. The Borrower shall pay or cause to be paid all taxes, assessments or other governmental charges levied upon any of its properties or assets, or in respect of its income before the same become delinquent except that the Borrower will have the right to contest assessments and other charges in the manner provided herein.

4.4 Litigation . The Borrower will give the Lender prompt notice of:

(a) Any litigation or claims of any kind in excess of FIFTY THOUSAND AND NO/1 00 DOLLARS ($50,000 . 00) which might subject the Borrower to any liability , whether covered by insurance or not; and

(b) All complaints and charges filed by any governmental agency or any other party affecting the Property, or exercising supervision or control of the Borrower, or its respective businesses or assets which may impair the security of the Lender or adversely affect any of its right hereunder.

4 . 5 Compliance with Loan Documents and Other Documents . Borrower shall duly perform and observe all covenants, conditions, undertakings and obligations to be performed by the Borrower under the Loan Documents.

4.6 Indemnification of the Lender . The Borrower shall indemnify and hold the Lender harmless from any and all claims asserted against the Lender by any person, entity or governmental authority arising out of or in connection with the sale or use of the Property. The Lender shall be entitled to appear in any action or proceeding to defend itself against such claims and all costs incurred by the Lender in connection therewith, including attorneys' fees, shall be reimbursed by the Borrower to the Lender within ten (10) days after presentment, as provided herein . Any failure to so reimburse the Lender within the specified time period shall constitute an Event of Default under this Agreement, and the unreimbursed amount shall thereupon be added to the Loan and shall bear interest at the rate then in effect thereunder until paid.

The Lender shall, at its sole option, be entitled to settle or compromise any asserted claim against it, and such settlement shall be binding upon the Borrower for purposes of this indemnification. Payment thereof by the Lender or the payment by the Lender of any judgment or claim successfully perfected against the Lender shall constitute an additional principal advance under the Loan, shall bear interest at the Note rate and shall be payable upon demand of the Lender. The agreements contained in this section shall survive repayment of the Loan and shall survive the termination of any other portions of this Agreement.

4.7 Other Projects . The Borrower shall not enter into any agreements, arrangements or ventures which shall impair its ability to perform its obligations under the Loan Documents.

4.8 Indebtedness . The Borrower shall not create, assume or guarantee or become or remain liable for or committed to incur, directly or indirectly, any indebtedness except:

(a) Indebtedness in respect of the Loan Documents;

(b) Indebtedness for taxes, assessments, governmental charges or levies to the extent that payment thereof shall not at the time be required to be made in accordance with the provisions herein;

(c) Indebtedness incurred in the ordinary course of business which will not materially impair the ability of the Borrower to repay the Loan; and

(d) Indebtedness approved by the Lender.

4.9 Mortgages, Liens and Encumbrances . Without the Lender's prior written consent, the Borrower shall not incur or suffer to be created or incurred or to exist any encumbrance, mortgage, security interest, pledge, lien or charge of any kind upon the Property, whether now owned or hereafter acquired, or transfer all or any of the same for the purpose of subjecting the same to the payment of any indebtedness or performance of any other obligation or acquire or have an option to acquire any property or assets upon conditional sale or other title retention agreement, device or arrangement; PROVIDED, HOWEVER, that the Borrower may create or incur or suffer to be created or incurred or to exist:

(a) Liens for taxes or assessments for governmental charges or levies if payment thereof shall not at the time be required to be made in accordance with the provisions herein;

(b) The lien and security interest of the Mortgage; and

The Borrower shall have the right to apply for additional loans and advances from the Lender to be secured by an additional mortgage on the Property depending upon which mortgages are in full force and effect at the time such new proceeds are disbursed by the Lender; provided that the Borrower shall not be in default under any terms and conditions of this Agreement, the Note, Mortgage and all other Loan Documents.

4.10 Merger or Sale . Without prior written approval of the Lender, the Borrower shall not enter into any merger or consolidation or assign, transfer, sell, lease or otherwise dispose of all or a substantial part of its assets except in the course of its business as planned and as documented in the USDA loan application. Any sale or disposition of business or collateral property must be approved by the Lender and RD, except for inventory sold in the ordinary course of Borrower’s business. The Borrower will not purchase or sell, assign, lease or otherwise dispose of (whether in one transaction or in a series of transactions) the Property or any interest therein or any assets (whether now owned or hereafter acquired) to, any person, other than as permitted by the Loan Documents. Without limiting the foregoing, within thirty (30) days of receipt by the Lender of a written proposal by the Borrower for the sale of the Property or any other assets, the Lender shall consider such proposal in its sole discretion, independent of the reasonableness of such proposal, and shall have the right to approve or reject such proposal. A sale or transfer of fifty percent (50%) or more of the stock of any Borrower shall constitute a sale of the Borrower's assets and will require the prior written consent of the Lender.

4.11 Investments, Loans and Advances . The Borrower shall not directly or indirectly purchase or acquire any stock or other securities of or make or permit to remain outstanding any loan or advance to or permit outside investment and loans or advances to stockholders, owners, officers, or affiliates without the prior written consent of Lender. Loans from stockholders, owners, officers or affiliates must be subordinated to the guaranteed Loan or converted to membership interest. No payments are to be made on these debts unless the Loan is current and in good standing.

4.12 Anticipation of Payment. The Borrower shall not pay or discharge any of its obligations (other than the Note) prior to the maturity thereof, and shall not intentionally cause an accelerated maturity of any obligation.

4.13 Use of Proceeds; Margin Stock Regulations . Borrower will use the proceeds of this Loan solely for the purposes specified in this Agreement. No part of the proceeds of this Loan will be used for the purpose of purchasing or acquiring any "margin stock" within the meaning of Regulation U of the Board of Governors of the Federal Reserve System or for any other purpose which would be inconsistent with Regulations T, U, X or any other regulations of such Board of Governors, or for any purposes prohibited by any statute, rule or regulation.

4.14 Depository Accounts. Borrower shall establish a depository relationship with Lender which shall continue throughout the term of the Loan, unless contrary to any federal, state or local law or regulation.

4.15 Cross-Default . Borrower's default or breach under any note or agreement in which Lender has an interest shall be a breach under the Loan Documents and Lender may invoke any of the remedies permitted by the Loan Documents .

4.16 Dividend Payments . Dividend payments shall be limited to an amount that, when taken, will not adversely affect the Borrower's repayment ability. No dividend payment shall be made unless (a) an after-tax profit was made in the preceding fiscal year; (b) the Borrower is and shall remain in compliance with all covenants of the Loan and USDA Conditional Commitment; (c) all Borrower's debts are paid to a current status; and (d) prior written concurrence of the Lender is obtained. This is not intended to apply to dividend payments to cover personal tax liability resulting from profitability of the business.

4.17 Compensation of Officer(s) . Compensation of officers and owners shall be limited to an amount that, when taken, shall not adversely affect the Borrower's repayment ability. This amount shall not be increased year to year unless (a) an after-tax profit was made in the preceding fiscal year; (b) the Borrower is and shall remain in compliance with all covenants of the Loan and Conditional Commitment; (c) all Borrower debts are paid to a current status; and (d) prior written concurrence of the Lender is obtained.

Section 5. Default; Remedies on Default .

5 . 1 Events of Default. If any of the following events (herein called "Events of

Default") shall occur:

(a) The Borrower shall default in the payment of principal or interest when due on the Note and such default shall continue for ten (10) days after notice thereof has been mailed to Borrower;

(b) The Borrower shall default in the performance of or compliance with any term, covenant, condition or provision contained in any of the Loan Documents and such default shall not have been remedied within thirty (30) days after the Lender or any other person notifies the Borrower or the Borrower acquires knowledge of such default, unless the Lender determines that such default cannot be cured within thirty (30) days and that the Borrower is proceeding promptly and diligently to cure such default;

(c) The Borrower shall become insolvent or shall make an assignment for the benefit of creditors, or shall fail generally to pay its debts as they become due, or shall become the subject of an order for relief in an involuntary case under the bankruptcy laws as now or hereafter constituted and such order shall remain in effect and unstayed for a period of sixty (60) consecutive days, or shall commence a voluntary proceeding under the bankruptcy laws as now or hereafter constituted, or shall file any petition or answer seeking for itself any arrangement, composition, adjustment, liquidation, dissolution or similar relief to which it may be entitled under any present or future statutes, law or regulation, or shall file any answer admitting the material allegations of any petition filed against it in any such proceedings; or the Borrower shall seek or consent to or acquiesce in the appointment of or taking possession by, any custodian, trustee, receiver or liquidator of all or a substantial part of its properties or assets; or within sixty (60) days after commencement of any proceedings against it seeking any arrangement, composition, adjustment, liquidation, dissolution or similar relief to which it may be entitled under any present or future statutes, law or regulation, such proceedings shall not have been dismissed; or within sixty (60) days after the appointment of, or taking possession, by, any custodian, trustee, receiver or liquidator of any or of all or a substantial part of the properties or assets of the Borrower without its consent or acquiescence, any such appointment or possession shall not have been vacated or terminated;

(d) There shall be any attachment, execution or other judicial seizure of, or affecting, the properties and assets of the Borrower or affecting the Property or the collateral, or any part thereof involving in excess of $100,000.00, unless the Borrower sets aside, dissolves, bonds off or otherwise eliminates such attachment, execution or seizure within sixty (60) days of its occurrence;

(e) Any third person shall obtain an order or decree in any court of competent jurisdiction enjoining or prohibiting the Borrower or the Lender from performing this Agreement or any Loan Document and such proceedings shall not be discontinued and such decree shall not be vacated within sixty (60) days after the granting thereof;

(f) There shall be a sale, transfer, hypothecation, assignment or conveyance of the Lender's collateral or any portion thereof or interest therein, by the Borrower without the Lender's prior written consent, except as otherwise provided in the Loan Documents;

(g) Any representation made by or on behalf of the Borrower herein or otherwise in writing in connection with the Loan shall prove to have been false or incorrect in any material respect on the date as of which such representation was made;

(h) The Lender shall reasonably determine that there has been an adverse change in the financial condition of the Borrower;

(i) A final judgment which alone or with other outstanding final judgments against the Borrower exceeds in the aggregate ONE HUNDRED THOUSAND AND NO/100 DOLLARS ($100,000.00) and shall not be discharged or have execution thereof stayed pending appeal within thirty (30) days after entry of such judgment or shall not be discharged within thirty (30) days after the expiration of any such stay;

(j) The Borrower shall default in the repayment of any indebtedness in excess of$100,000 . 00 owed to the Lender or any other person or entity and such default shall not be waived or remedied within thirty (30) days after the occurrence thereof or such further time permitted for the remedying of such default under the applicable documents or shall result in the acceleration of such indebtedness;

(k) Any governmental authority shall adversely classify the Loan or take any action or enact any rules which, in the Lender's judgment, may adversely affect the ability of the Borrower to repay the Loan; PROVIDED, HOWEVER, the occurrence of the foregoing shall not constitute an Event of Default so long as the Borrower either (i) promptly undertakes to reverse, stay or rescind such action or ruling and effects such result within ninety (90) days from the date of such action, or (ii) promptly takes all steps necessary to comply with such action or ruling and thereby substantially mitigates, in the Lender's judgment, the adverse effect of such governmental action or rule within ninety (90) days of its occurrence;

(1) All or any material portion of the Property shall be condemned, seized or appropriated without compensation and the Borrower shall not, within thirty (30) days after such condemnation, seizure or appropriation, initiate and thereafter diligently prosecute appropriate action to contest in good faith the validity of such condemnation, seizure or appropriation;

(m) If any Borrower dissolves, liquidates, winds up its affairs or otherwise terminates its existence, or claims non-liability or disclaims liability under this Loan; or

(n) The USDA shall fail to execute a Loan Note Guarantee or shall revoke or amend its Guarantee in favor of the Lender;

The Lender shall give written notice of any such Event of Default to the Borrower.

5.2 Additional Security. When any event shall have occurred which, in the determination of the Lender, may adversely affect the observance or performance of any agreement or covenant on the part of the Borrower to be observed and performed under the Loan Documents, the Borrower shall furnish, within ten (10) days of written request by the Lender, additional security or equity funds which, in the opinion of the Lender, will be adequate to protect the Lender against any such loss. In addition, upon the occurrence of such event, the Lender may advance funds or agree to undertake to advance funds to any third party to eliminate or reduce the risk of loss resulting from such event. Such agreement or agreements by the Lender shall be in such form and have such content, the funds advanced shall be in such amount, and such advances shall be made at such time or times and upon such terms and conditions as the Lender, in its judgment, deems appropriate, necessary or useful to eliminate, reduce or indemnify the Lender against any such danger. All sums paid or agreed to be paid by the Lender pursuant to such agreements or undertakings shall be for the account of the Borrower and shall be without prejudice to the Borrower's rights, if any, to receive such funds from the party to whom paid. The Borrower shall reimburse the Lender, upon demand, for any such sums paid by the Lender, together with interest at the rate applicable to the Loan from the date of payment until the date of reimbursement. Such advances shall be secured by the Loan Documents.

5.3 Right of Contest . The Borrower shall have the right to contest in good faith any claim, demand, levy or assessment by a third party the assertion of which would constitute an Event of Default hereunder; PROVIDED, HOWEVER, any such contest shall be prosecuted diligently and in a manner not prejudicial to the Lender hereunder; and, upon demand by the Lender, the contesting party shall make suitable provision by payment to the Lender or by bond satisfactory to the Lender for the possibility that the contest will be unsuccessful. Such provision shall be made within ten (10) days after demand therefor and, if made by payment of funds to the Lender, the amount so deposited shall be disbursed in accordance with the resolution of the contest either to the Borrower or the adverse claimant.

5.4 Marshaling. The Borrower hereby waives, to the extent permitted by law, any and all rights to require any security given hereunder to be marshaled and agrees and acknowledges that after the occurrence of any Event of Default, the Lender may, in its sole and absolute discretion, proceed to enforce its rights under the Loan Documents and to realize on any or all of the security for the Loan or any portion or portions thereof, irrespective of the differing nature of such security and whether or not the same constitutes real or personal property.

5.5 Right of Set-Off. Whenever a default exists, the Lender is authorized to set-off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by the Lender to or for the credit or the account of the Borrower against any and all of Borrower's obligations under this Agreement, whether or not then due and payable. The Lender shall be deemed to have exercised its right of set-off immediately at the time of its election even though any charge therefor is made or entered on the Lender's records subsequent to that time. All costs, and expenses, including, without limitation, reasonable attorney's fees, paid or incurred by the Lender in connection with any such set-off shall be paid by the Borrower following Lender's demand.

Whether or not a default has occurred, Borrower authorizes Lender to charge any account Borrower maintains with Lender for the amount of any principal or interest owing under this Agreement on the date on which it is due .

Section 6. Miscellaneous Provisions .

6 . 1 Time of Payment . All prepayments and payments of principal under this Loan shall be credited against the Loan or credited to payment of other obligations of the Borrower under the Loan Documents on the date of receipt by the Lender so long as:

(a) the payment is received by the Lender prior to noon, Hawaii Standard Time; and

(b) the form or payment is in federal funds or other immediately available funds.

If condition (a) is not satisfied and condition (b) is satisfied, the payment will be credited on the first business day following the date or receipt by the Lender of the instrument of payment. If condition (a) is satisfied, credit will be made on the first business day which the Lender actually receives the funds represented by the instrument of payment.

6.2 Authority to File Notices. The Borrower irrevocably appoints, constitutes and designates the Lender its attorney-in-fact to file or record any notice of completion or cessation of labor or any other notice that the Lender deems necessary or desirable to protect its interest hereunder or under any other Loan Document. Such power shall be deemed coupled with an interest and shall be irrevocable while any sum remains due and owing under any of the Loan Documents or any obligation of the Borrower thereunder remains unperformed.

6.3 The Lender's Right to Sell Participations in the Loan . The Lender may at any time sell, assign, transfer, negotiate, grant participations in, or otherwise dispose of, to any one or more other lender or lenders (herein called "Participants"), all or any part of the indebtedness of the Borrower at any time outstanding under any of the Loan Documents subject to the USDA requirement that the Lender retain a minimum of five percent (5%) of the total USDA guaranteed Loan amount. The amount required to be retained must be of the unguaranteed portion of the Loan. The Borrower acknowledges and agrees that any such disposition will give rise to an obligation of the Borrower to each Participant and that, in such event, each Participant shall, for all purposes hereof, be entitled to the benefits of the Loan Documents and all other documents, instruments and agreements therein described, as its interest may appear. The Borrower hereby authorizes the Lender and each Participant, in case of default by the Borrower hereunder, to proceed directly by right of offset, banker's lien or otherwise against any assets of the Borrower which may at the time of such default be in the hands of the Lender or any Participant, to the full extent of their respective interests in the Loan; PROVIDED, HOWEVER, that the total amount realized by all lenders upon the exercise of such rights shall not exceed the then total obligations of the Borrower under the Loan Documents. The Borrower shall, from time to time at the request of any Participant, execute and deliver, or cause to be executed and delivered, to the Lender and any Participant or to such party or parties as the Lender and any Participant may designate, any and all such further instruments as may in the opinion of the Lender and any Participant be necessary or desirable to give full force and effect to such disposition, including, but not limited to, a new note or new notes to be issued in exchange for the Note and such estoppel certificates or other instruments as may be requested from the Borrower to evidence the continuing validity of the Loan Documents and the absence of any default by the Lender thereunder. In addition, the Borrower shall furnish the Lender all financial and other information relating to the Loan, the Property or the Borrower as may be requested by any Participant or prospective Participant. Notwithstanding the foregoing, Borrower acknowledges that no Participant shall be deemed a direct lender or co-lender with the Lender.

6.4 Proceedings, Surveys and Documents Must Be Satisfactory to the Lender. All proceedings taken in connection with the transactions provided for herein, all surveys, appraisals and any other documents, papers, drawings and other things required or contemplated by this Agreement and the person or persons responsible for the execution and preparation thereof shall be satisfactory to the Lender, and the Lender's counsel shall have received copies (or certified copies where appropriate in such counsel's judgment) of all documents which it may request in connection therewith.

6.5 Actions . The Lender shall have the right to commence, appear in or defend any action or proceeding purporting to affect the rights, duties or liabilities of the parties hereunder, or the disbursement of any Loan funds. In connection therewith, the Lender may incur and pay reasonable costs and expenses, including, but not limited to, reasonable attorneys' fees. The Borrower shall pay to the Lender on demand all such expenses and the Lender is authorized to disburse funds from the Loan for such purposes.

6.6 Timeliness; Term of Agreement; Survival of Representations and Warranties . Time is of the essence in this Agreement. This Agreement shall continue in full force and effect until all indebtedness of the Borrower to the Lender under the Loan Documents shall have been paid in full, and all obligations of the Borrower under the Loan Documents shall have been fully observed and performed. All representations and warranties contained herein or made in writing by or on behalf of the Borrower in connection with the Loan shall survive the execution and delivery of the Loan Documents and any investigation at any time made by, through or on behalf of the Lender. All statements contained in any certificate or other instrument delivered to the Lender on behalf of the Borrower pursuant hereto or otherwise in connection with the Loan shall constitute representations and warranties hereunder.

6.7 Amendments and Waiver s . Neither this Agreement nor any provision hereof may be amended, waived, discharged or terminated orally, but only by an instrument in writing, signed by the party against whom enforcement of the amendment, waiver, discharge or termination is sought. The affirmative and negative covenants of the Borrower are solely for the benefit of the Lender, who may waive or fail to enforce any or all of them without affecting the liability of the Borrower.

6.8 Remedies Are Cumulative . All rights, powers and remedies herein given to the Lender are cumulative and not alternative, are in addition to all rights, powers and remedies afforded by statutes or rules of law and may be exercised concurrently, independently, or successively in any order whatsoever. Without limiting the generality of the foregoing, the Lender may enforce any one or more of the Loan Documents without enforcing all of them concurrently or in any particular order .

6.9 No Waiver . No failure, forbearance or delay on the part of the Lender in exercising any power or right under any of the Loan Documents shall operate as a waiver of the same or any other power or right, and no single or partial exercise of any such power or right shall preclude any other or further exercise thereof or the exercise of any other such power or right. No advance of Loan proceeds by the Lender hereunder shall constitute a waiver of any of the conditions precedent to the Lender's obligations to make further advances, nor, in the event the Borrower is unable to satisfy any such condition, shall any such waiver have the effect of precluding the Lender from thereafter declaring such inability to be an Event of Default as provided in this Agreement.

6.10 No Joint Venture . The execution of this Agreement, the making of the Loan and the exercise of any rights hereunder are not intended and shall not be construed to create a partnership or joint venture between the Lender and the Borrower.

6.11 Consents of the Lender . In all events where the consent of the Lender is required under the terms of any Loan Document, the Lender shall grant or refuse such consent within a reasonable period of time following the receipt of such request, in writing and accompanied by all documents and information required by the Lender for the purpose of its review and consideration of the Borrower's request for consent or approval and its consent will not be unreasonably or arbitrarily withheld or delayed. The standard to be applied in determining whether the Lender's granting or denial of consent is reasonable shall be the standard of prudent banking practice, taking into consideration all circumstances prevailing at the time any such consent or approval shall be requested, including (without limitation thereto) the size and nature of the Loan and any laws and regulations applicable to the Lender or any of the Participants. No consent or approval shall be effective unless and until given by the Lender in writing, executed by a duly authorized agent of the Lender.

6.12 Notices . All notices, requests, demands or documents which are required or permitted to be given or served hereunder shall be in writing and personally delivered, or sent by registered or certified mail addressed as follows:

To BORROWER at:	CYANOTECH CORPORATION
	73-4460 Queen Kaahumanu Highway, Suite 102
	Kailua-Kona Hawaii 96740
	Attention: Jole Deal

	NUTREX HAWAII, INC.
	73-4460 Queen Kaahumanu Highway, Suite 102
	Kailua-Kona, Hawaii 96740

	with a copy to:	Gregory Nasky
		Goodsill Anderson Quinn & Stifel LLP
		999 Bishop Street, Suite 1600
		Honolulu, Hawaii 96813


To LENDER at	FIRST FOUNDATION BANK
	18101 Von Karman Avenue, Suite 750
	Irvine, California 92612

The addresses may be changed from time to time by the addressee by serving notice as heretofore provided. Service of such notice or demand shall be deemed complete on the date of actual delivery as shown by the addressee's registry or certification receipt or at the expiration of the third day after the date of mailing, whichever is earlier in time.

6.13 Entire Agreement . The Loan Documents constitute all of the agreements between the parties relating to the Loan and supersede all other prior or concurrent oral or written letters, agreements or understandings.

6.14 Assignment; Parties in Interest. The Lender shall have the right to assign its interest in this Agreement to any subsequent holder or holders of the Note without the consent of the Borrower. The Borrower shall not assign this Agreement without the prior written consent of the Lender. All of the terms and provisions of this Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors and assigns, and, in particular, shall inure to the benefit of and be enforceable by the holder or holders from time to time of the Note or any part thereof or interest therein.

6.15 Headings of Paragraphs . The headings of paragraphs and subparagraphs herein are inserted only for convenience and reference and shall in no way define, limit or describe the scope or intent of any provision of this Agreement.

6.16 Applicable Law. This Agreement is executed and delivered in and shall be construed and enforced in accordance with the laws of the State of Hawaii.

6.17 Waiver of Right to Jury Trial; No Offset by Borrower . The Lender and Borrower knowingly and voluntarily waive the right to trial by jury in any lawsuit, action or proceeding arising out of or related to this Agreement. The Borrower waives the right to offset its liability under this Agreement, including, but not limited to, the right to assert any counterclaim it may have against the Lender, it being agreed that the Borrower's liability to the Lender under this Agreement shall be distinct and independent of any liability owed by the Lender to the Borrower.

6.18 Severability . If any provision of this Agreement or the other Loan Documents is held to be invalid or unenforceable, the validity and enforceability of the other provisions of this Agreement and the other Loan Documents will remain unaffected.

6.19 Terms and Conditions of This Agreement Supplement Other Loan Documents . The terms and conditions of this Agreement and the covenants, representations and warranties of the Borrower under this Agreement shall not be deemed to supersede, amend or modify the obligations and duties of the Borrower under the other Loan Documents. The terms and conditions of this Loan Agreement and the covenants, representations and warranties of the Borrower hereunder merely supplement and do not supplant or supersede provisions of similar effect or subject matter in the other Loan Documents.

6.20 Agents . In exercising any rights under this Agreement or the other Loan

Documents, the Lender may act through its employees, agents or independent contractors.

6.21 Patriot Act Notice . Federal law requires all financial institutions to obtain, verify, and record information that identifies each person establishing an account (loan or deposit) relationship with such financial institution. In the course of processing this credit facility and the application therefor, Lender has and may, in the future, ask for Borrower's name, address, date of birth, and other information that will allow Lender to identify you. Lender may also ask to see your driver's license or other identifying documents. Each Borrower by executing this instrument agrees to comply with all such requests.

6.22 Counterparts . The parties hereto agree that this instrument may be executed in counterparts, each of which shall be deemed an original, and said counterparts shall together constitute one and the same agreement, binding all of the parties hereto, notwithstanding all of the parties are not signatory to the original or the same counterparts. For all purposes, including, without limitation, recordation, filing and delivery of this instrument, duplicate unexecuted and unacknowledged pages of the counterparts may be discarded and the remaining pages assembled as one document.

IN WITNESS WHEREOF, the Lender and the Borrower have executed this Agreement on the day and year first above stated.

FIRST FOUNDATION BANK	CYANOTECH CORPORATION,
	a Nevada corporation


By /s/ Christopher M. Naghibi	By /s/ Gerald Cysewski
CHRISTOPHER M. NAGHIBI	GERALD CYSEWSKI
Its Chief Credit Officer	Its Executive Vice President
Lender
	By /s/ Jolé Deal
	JOLE DEAL
	Its Chief Financial Officer


	NUTREX HAWAII, INC.,
	a Hawaii corporation

	By /s/ Gerald Cysewski
	GERALD CYSEWSKI
	Its Executive Vice President

	By /s/ Jolé Deal
	JOLE DEAL
	Its Chief Financial Officer

Borrower

Exhibit 4.2

PROMISSORY NOTE

Loan No . 22000167

U.S. $2,500,000.00 Honolulu, Hawaii

Dated: July 30, 2015

FOR VALUE RECEIVED, the undersigned, CYANOTECH CORPORATION, a Nevada corporation, and NUTREX HAWAII, INC., a Hawaii corporation (individually and collectively, "Borrower"), promise to pay FIRST FOUNDATION BANK, a California corporation ("Bank") or order, the principal sum of TWO MILLION FIVE HUNDRED THOUSAND AND N0/100 DOLLARS ($2,500,000.00) or so much thereof as is disbursed, with interest on the unpaid principal balance from the date of disbursement under this Note, until paid, at the rate specified below. All payments shall be payable at Two Waterfront Plaza,

500 Ala Moana Boulevard, Suite 2A, Honolulu, Hawaii 96813, or such other place as the Note holder may designate.

During the term of this Note from the date of disbursement hereunder, principal and interest shall be paid in consecutive monthly installments in the amount of THIRTY-SIX THOUSAND FIVE HUNDRED TWENTY-TWO AND N0/100 DOLLARS ($36,522.00) commencing on October 01, 2015, and to be paid on the 1st day of each month thereafter.

During the term of this Note, the amount of the monthly installments shall equal that amount sufficient to fully amortize the unpaid balance of this Note, together with interest at the applicable rate, computed as and when provided below, in equal monthly installments over a period of seven (7) years (the "Amortization Period"), effective as of the date of disbursement hereunder. The amount of the monthly installments shall be re determined and fixed when the interest rate changes as stated below, and all payments will be due on the 1st day of each month commencing on October 01, 2015, until this Note has been paid in full. All remaining indebtedness, if not sooner paid, shall be due and payable on September 01, 2022, the maturity date.

Interest shall be calculated on the basis of a 365-day year.

All payments shall be applied first to accrued interest, then to the principal balance and then to any charges payable by the Borrower.

During the term of this Note, the interest rate shall be determined based upon the "Prime Rate" as defined below. The "Prime Rate" means the variable rate of interest that is two percent (2.00%) per annum in excess of the variable rate of interest, on a per annum basis, which is announced and/or published in the Money Rates section in the Western Edition of the Wall Street Journal from time to time as its Prime Rate ("WSJ Prime Rate"). The interest rate shall be initially established and then adjusted and fixed quarterly based upon the Prime Rate on April1 ^st , July 1 ^st , October 1 ^st and January 1 ^st . If the WSJ Prime Rate becomes unavailable, the Lender may designate a reasonable substitute index after notice to the Borrower.

Notwithstanding anything to the contrary stated above, in no event shall any interest rate on the Note be less than SIX PERCENT (6.00%) per annum. If at any time, as a result of any change to the WSJ Prime Rate or the spread added thereto, calculation of such interest rate results in a rate less than 6.00%, then such interest rate on the outstanding principal balance of this Note shall instead be 6.00% per annum until calculation of such interest rate results in a rate greater than 6.00% per annum, in which case the interest rate shall be as calculated.

If any monthly installment under this Note is not paid when due and remains unpaid for ten (10) days after written notice thereof is mailed to the Borrower, the entire principal amount outstanding and accrued interest thereon shall at once become due and payable at the option of the Note holder, without notice or demand. The Note holder may exercise this option to accelerate during any Event of Default (as defined in the Term Loan Agreement executed concurrently herewith) by Borrower regardless of any prior forbearance.

It is expressly understood and agreed that a default by Borrower under any loan extended to Borrower by Note holder shall be deemed a default of any or all of the loans and Note holder may elect to exercise and enforce any and all remedies as may be provided herein and available to Note holder at law or in equity.

Borrower shall pay to the Note holder a late charge of FIVE PERCENT (5%) of any monthly installment not received by the Note holder within ten (10) days after the installment is due. Such charge may be imposed only once on each delinquent installment, and is compensation to the holder for the additional costs and lost opportunities resulting from the delay.

In the event of any Event of Default, including in the repayment of the indebtedness evidenced by this Note, if the holder of this Note shall engage an attorney to enforce this Note or to collect the indebtedness evidenced hereby, whether or not an action is commenced, the Borrower shall be liable to the holder for all costs of collection and charges allowed by law, together with a reasonable sum as and for an attorney's fee, and any payments of those costs, charges and fees by the holder shall be an indebtedness under this Note.

Borrower shall pay a prepayment fee during the first five (5) years of this Note as follows:

(a) FIVE PERCENT (5%) of the principal amount prepaid if prepaid during the first year of this Note;

(b) FOUR PERCENT (4%) of the principal amount prepaid if prepaid during the second year of this Note;

(d) TWO PERCENT (2%) of the principal amount prepaid if prepaid during the fourth year of this Note;

(e) ONE PERCENT (1%) of the principal amount prepaid if prepaid during the fifth year of this Note.

The prepayment fee expires after the first five years of this Note. Thereafter, Borrower may prepay the principal amount outstanding in whole or in part, without charge, provided that, Borrower gives the Note holder at least twenty (20) days prior written notice of any prepayment in excess of $100,000.00. Any partial prepayment shall be applied against the principal amount outstanding and shall not postpone the due date of any subsequent monthly installments or change the amount of such installments, unless the Note holder shall otherwise agree in writing.

Presentment, demand, protest, notice of dishonor and protest are hereby waived by all makers, sureties, guarantors and endorsers hereof. This Note shall be the joint and several obligation of all makers, sureties, guarantors and endorsers, and shall be binding upon them and their successors and assigns .

Any notice to Borrower provided for in this Note shall be given by mailing such notice by certified mail addressed to Borrower at the Borrower's Address stated below, or to such other address as Borrower may designate by written notice to the Note holder. Any notice to the Note holder shall be given by mailing such notice by certified mail, return receipt requested, to the Note holder at the address stated in the first paragraph of this Note, or at such other address as may have been designated by notice to Borrower.

The indebtedness evidenced by this Note is secured by that certain Mortgage, Security Agreement and Financing Statement and Assignment of Lessor's Interest in Leases and Rents executed concurrently herewith. Reference is made to the Mortgage, Security Agreement and Financing Statement and Term Loan Agreement executed concurrently herewith for rights as to acceleration of the indebtedness evidenced by this Note.

This Note shall be governed by and construed in accordance with the laws of the

State of Hawaii.

Notwithstanding any provision to the contrary, the rate of interest which Borrower shall be required to pay to Note holder shall in no event, contingency or circumstance exceed the maximum rate permitted under the laws of the State of Hawaii. If, from any circumstance whatsoever, performance by Borrower of any obligation under this Note at the time performance shall be due (including, without limiting the generality of the foregoing, the payment of any fee, charge or expense paid or incurred by Borrower which shall be held to be interest), shall involve transcending the limits of validity prescribed by law, then, automatically, such obligation to be performed shall be reduced to the limit of such validity prescribed by law. If, notwithstanding the foregoing limitations, an excess interest shall at the maturity of the Note be determined to have been received, the same shall be deemed to have been held as additional security. The foregoing provisions shall never be superseded or waived and shall control every other provision of all agreements between Note holder and Borrower.

The parties hereto agree that this instrument may be executed in counterparts, each of which shall be deemed an original, and said counterparts shall together constitute one and the same agreement, binding all of the parties hereto, notwithstanding all of the parties are not signatory to the original or the same counterparts. For all purposes, including, without limitation, recordation, filing and delivery of this instrument, duplicate unexecuted and unacknowledged pages of the counterparts may be discarded and the remaining pages assembled as one document.

Borrower's Address:	CYANOTECH CORPORATION,
	a Nevada corporation
73-4460 Queen Kaahumanu Highway
Suite 102	By /s/ Gerald Cysewski
Kailua-Kona, Hawaii 96740	GERALD CYSEWSKI
	Its Executive Vice President

	By /s/ Jolé Deal
	JOLE DEAL
	Its Chief Financial Officer


	NUTREX HAWAII, INC.,
	a Hawaii corporation

73-4460 Queen Kaahumanu Highway	By /s/ Gerald Cysewski
Suite 102	GERALD CYSEWSKI
Kailua-Kona, Hawaii 96740	Its Executive Vice President

	By /s/ Jolé Deal JOLE DEAL Its Chief Financial Officer


	Borrower

Exhibit 4.3

LAND COURT SYSTE M

REGULAR SYSTEM

AFI'ER RECORDATION, RETURN BY MAIT.... ( ) PICKUP ( ) Total No. of Pages: 28

Tax Map Key No. (3) 7-3-043-063

MORTGAGE, SECURITY AGREEMENT

AND FINANCING STATEMENT

MORTGAGOR:

CYANOTECH CORPORATION, a Nevada corporation, whose mailing address is 73-4460 Queen Kaahumanu Highway, Suite 102, Kailua-Kona, Hawaii 96740

MORTGAGEE:

FIRST FOUNDATION BANK, a California corporation, whose mailing address is 18101 Von Karman Avenue, Suite 750, Irvine, California 92612

PROPERTY:

73-860 Makako Bay Drive, Kailua-Kona, Hawaii 96740, more particularly described in the attached Exhibit "A"

BORROWER:

CYANOTECH CORPORATION, a Nevada corporation, and NUTREX HAWAII, INC., a Hawaii corporation

MORTGAGE, SECURITY AGREEMENT

AND FINANCING STATEMENT

KNOW ALL MEN BY THESE PRESENTS:

THAT on JUL 3 0 2015 , CYANOTECH CORPORATION, a Nevada corporation, whose mailing address is 73-4460 Queen Kaahumanu Highway, Suite 102, Kailua-Kona, Hawaii 96740, hereinafter called the "Mortgagor", in consideration of the sum of TWO MILLION FIVE HUNDRED THOUSAND AND NO/100 DOLLARS ($2,500,000.00) loaned by FIRST FOUNDATION BANK . a California corporation, whose mailing address is 18101 Von Karman Avenue, Suite 750, Irvine, California 92612, hereinafter called the "Mortgagee", and in order to secure the repayment thereof according to the terms of the Promissory Note executed concurrently herewith by Mortgagor and NUTREX HAWAII, INC., a Hawaii corporation, hereinafter individually and collectively called "Borrower" (hereinafter called the "Note"), including any extensions, modifications or renewals thereof, and also in order to secure the repayment of any and all other indebtedness now or hereafter owing by the Borrower to the Mortgagee, does hereby grant, bargain, sell, assign, convey and mortgage unto the Mortgagee, its successors and assigns, all of that certain property more particularly described in Exhibit "A" attached hereto and made a part hereof.

TOGETHER WITH all right, title and interest of the Mortgagor in and to all goods now owned or hereafter acquired which are or are to become fixtures on the premises described in Exhibit "A", and the improvements now on or hereafter placed on such premises, and all additions thereto, and all purchases and substitutions made to the improvements or fixtures located on the real property, and all rights, easements, tenements, privileges, hereditaments and appurtenances belonging or appertaining to the property, and the reversions, remainders, rents, issues, profits and proceeds thereof, and all of the estate, right, title and interest of the Mortgagor, both at law and in equity, therein and thereto, and TOGETHER, ALSO, WITH all other, further or additional title, estate or interest which may hereafter be acquired by the Mortgagor in and to the property described in Exhibit "A".

TOGETHER, ALSO, WITH all rights of the Mortgagor to assume or reject any executory contracts relating to said property under Title 11, United States Code, or any rules or regulations pertaining to bankruptcy or insolvency.

TO HAVE AND TO HOLD the said property unto the Mortgagee forever, as to all property owned by the Mortgagor in fee, and for the entire unexpired term as to all property held by the Mortgagor under a lease or term of years.

And the Mortgagor hereby covenants with the Mortgagee that the Mortgagor is the lawful owner of the fee or leasehold estate hereby mortgaged, the same being valid and in no way void or voidable, and is the owner absolutely of all personal property which may be hereby mortgaged; that the Mortgagor has good right and lawful authority to encumber or sell, assign and convey the same; that all rents, covenants, conditions and provisions in any lease or grant of easement or other interest herein mentioned which are to be paid, observed and performed by the Mortgagor have been paid, observed and performed up to the date hereof; that the property is free from all encumbrances excepting only such encumbrances, if any, as may be specifically described in Exhibit "A"; that the Mortgagor shall quietly enjoy and possess the same and that the Mortgagor will warrant and defend the same unto the Mortgagee against any and all lawful claims of all persons whomsoever, excepting only claims arising out of such encumbrances, if any, as may be specifically described.

Nevertheless this conveyance is intended as a Mortgage upon the property mortgaged to secure the payment of the amounts hereinabove mentioned, with interest thereon, and if the Mortgagor or Borrower shall pay all indebtedness hereby secured, of which indebtedness the records of the Mortgagee shall be prima facie evidence, and otherwise will and faithfully perform and observe all of the covenants, conditions and agreements herein contained and pay the cost of release hereof, and such release shall be properly executed by the Mortgagee, this Mortgage shall become void.

AND THE MORTGAGOR AND BORROWER, for the consideration aforesaid, hereby covenant and agree to and with the Mortgagee as follows:

(1) To pay unto the Mortgagee, without notice or demand being made upon it, all amounts that may be owing from time to time by Borrower to Mortgagee pursuant to the aforesaid Note, whether such be payments of principal or interest in lawful money of the United States of America;

(2) To permit no waste on said premises; to keep the mortgaged property in good condition and repair and restore and replace all improvements (now or hereafter on the premises) damaged or destroyed by any cause whatsoever; to comply with all laws, rules and regulations made by governmental authority and applicable thereto; to keep the same free from statutory liens of every kind; to observe and perform all obligations of Mortgagor with respect to tenants or occupants of the property; and to do or to permit or suffer to be done thereto nothing that may in any way impair or weaken the security hereby created;

(3) To pay before they become delinquent all lease rent or other charges payable by Mortgagor as to any leasehold covered by this Mortgage, and taxes and assessments of every type or nature that may be levied, assessed or imposed upon said property or any part thereof or any interest therein, or with respect to any indebtedness secured hereby, notwithstanding any law heretofore or hereafter enacted imposing payment of the whole or any part thereof upon the Mortgagee. Mortgagor will upon request deposit the receipts therefor with the Mortgagee, and upon any breach of this covenant or the passage of any applicable law imposing payment of the whole or any part of any of the aforesaid taxes upon the Mortgagee and making this covenant legally inoperative or upon the rendering by any court of last resort of a decision that this covenant is legally inoperative, then, and in any such event, all indebtedness hereby secured, without any deduction, at the option of the Mortgagee, shall become immediately due and collectible notwithstanding anything to the contrary contained in this Mortgage, or in any note or other obligation secured hereby, or in any law hereafter enacted;

(4) To maintain or cause to be maintained commercially available general liability insurance and general property damage insurance with minimum coverage equal to $2,500,000.00 - or the replacement value, whichever is less, against claims for personal injury or death or property damage suffered by others occurring upon, in or about any mortgaged property, or upon, in or about the adjoining streets and passageways thereof, and naming Mortgagee as an additional insured. All such insurance shall be in such amounts and form as may from time to time be required by the Mortgagee and shall contain an agreement by the insurer that the insurance will not be cancelled or changed without at least thirty (30) days' prior written notice to Mortgagee. All insurance provided for in this paragraph or elsewhere in this instrument shall be effected under valid and enforceable policies issued by insurance companies authorized to do business in the State of Hawaii;

(5) The Mortgagor will assist in the preparation of and execute from time to time, alone or with the Mortgagee, and authorize the filing and/or recording of any financing statements, mortgages or other instruments, and do such further acts as the Mortgagee may request to establish and maintain the lien hereof and the perfection of the security interests of the Mortgagee in the mortgaged property, including all renewals, additions, substitutions, improvements to the same, and the proceeds thereof, and otherwise to protect the same against rights and interests of third parties, and will pay all expenses, including reasonable attorneys' fees, incurred by the Mortgagee, whether in litigation or otherwise, to sustain the lien or priority of this Mortgage, or to protect or enforce any of the Mortgagee's rights hereunder, or for any title insurance policy covering the mortgaged property, all such sums to be paid on demand, together with interest thereon at the default rate then applicable under said Note, all of which shall be secured hereby and be a second lien on the property subject hereto;

(6) In the event that the mortgaged property has been encumbered by any lien or mortgage prior or senior to this Mortgage, or by any lease in which Mortgagor is the landlord or the tenant, the Mortgagor shall perform any obligation thereunder and pay any indebtedness secured by such lien or mortgage without default, shall observe and perform all of the terms, covenants or conditions of such lease, lien or mortgage, and shall keep the Mortgagee indemnified against all actions, proceedings, costs (including reasonable attorneys' fees), demands and damages which may be incurred by reason of failure to do so. The Mortgagor further covenants with the Mortgagee not to amend any such lease, lien or mortgage without prior written consent of the Mortgagee. Mortgagor will (a) promptly notify the Mortgagee in writing of any default by the Mortgagor in the performance or observance of any of the terms, covenants or conditions on the part of the Mortgagor to be performed or observed under any lease, or any lien or mortgage prior or senior to this Mortgage or of the occurrence of any event which, regardless of the lapse of time, would constitute a default under the same; (b) promptly notify the Mortgagee in writing of the giving of any notice under any such lease, lien or mortgage of the default of the Mortgagor thereunder in the performance or observance of any of the terms, covenants or conditions on the part of the Mortgagor to be performed or observed under said lease, lien, mortgage or obligation thereby secured and promptly cause a copy of each such notice to be delivered to the Mortgagee; (c) in case any proceeds of insurance upon the property subject to such lease, lien or mortgage or any part thereof, or the proceeds of any award for the taking...in eminent domain of the mortgaged property, or any part thereof , are deposited with any person other than the Mortgagee pursuant to the requirements of such lease, lien or mortgage, promptly notify the Mortgagee in writing of the name and address of the person with whom such proceeds have been deposited and the amount so deposited; (d) promptly, after the execution and delivery of this Mortgage, notify such lessor, lienor or mortgagee in writing of the execution and delivery hereof and of the name and address of the Mortgagee and deliver a copy of this Mortgage to such lessor, lienor or mortgagee; and (e) promptly notify the Mortgagee in writing of any request made by either party to such lease, lien or mortgage to the other party thereto for arbitration or appraisal proceedings pursuant to such lease, lien or mortgage, and of the institution of any arbitration or appraisal proceedings, and promptly deliver to the Mortgagee a copy of the determination of the arbitrators or appraisers in each such proceeding;

(7) Mortgagor shall keep all improvements now or hereafter on said real property and all personal property subject hereto insured against hazards of such type or types and in such amount or amounts and in such forms of insurance as may be from time to time required by the Mortgagee, including fire insurance, flood insurance and hurricane insurance. All such policies of insurance shall (i) be carried in the name of Mortgagee and the mortgagee under any senior mortgage on the property, (ii) contain a standard mortgagee clause, and (iii) provide that the proceeds on account of any loss shall be payable to Mortgagee (except as any senior mortgage otherwise requires). All such policies shall provide, inter alia , that the insurance shall not be cancelled without at least thirty (30) days' prior written notice to the Mortgagee or invalidated as to the interest of Mortgagee by any act or neglect of any person owning the property insured, or by any foreclosure or other proceedings, or by any change in the ownership of the insured properties, or by occupation for purposes more hazardous than permitted by such policy. All policies or true copies with certificates from the insurance companies that the same are in effect shall be deposited with Mortgagee. Upon Mortgagee's request and unless otherwise prohibited by law, Mortgagor shall promptly restore, replace or rebuild any part of the improvements now or hereafter constructed or placed on the mortgaged property which may be damaged or destroyed by any casualty whatsoever, and the Mortgagor shall make up any deficiency between the cost thereof and any insurance proceeds. All insurance proceeds received by or under the control of the Mortgagee on account of damage or destruction to any mortgaged property received by Mortgagee and all recoveries of any type by Mortgagee for design or construction defects or other damages that relate to any mortgaged property, less the cost, if any, incurred by Mortgagee with respect thereto, shall, unless the Mortgagor is in default under the terms of this Mortgage, be applied toward the payment of the cost of repairing, restoring or rebuilding the mortgaged property so damaged or destroyed according to the original plans and specifications, or such others as may be approved by the Mortgagee, on proof sufficient to the Mortgagee that the sum requested is justly required to reimburse Mortgagor or is justly due to the contractor, materialmen, laborers, engineers, architects or other persons rendering services or materials, that the amount of such proceeds remaining in the hands of Mortgagee will be sufficient on completion of the work to pay for the same in full, and that there has not been filed with respect to the mor _ tgaged property any mechanics' or other lien. Upon the completion of the work and payment in full therefor, or upon any failure on the part of Mortgagor promptly to commence or continue the work, or if the Mortgagor is in default under any of the terms of this Mortgage, Mortgagee shall apply the amount of any such proceeds then or thereafter in the hands of Mortgagee to the payment of any indebtedness secured by this Mortgage, whether or not then due;

(8) Mortgagor shall not cause or allow the mortgaged property to become subject to any lien, mortgage or security interest of any type, other than the lien of this Mortgage and liens if any, described in the attached Exhibit "A". The Mortgagor shall furnish the Mortgagee with a copy of all leases hereafter entered into by Mortgagor as lessor promptly after their execution.

AND IT IS FURTHER AGREED AS FOLLOWS:

(A) That the Mortgagee shall have the right to enter and inspect the mortgaged property; that in the event of failure of the Mortgagor to pay, observe or perform any of the terms, covenants or conditions herein contained or contained in any lease, grant, prior or senior mortgage or other instrument referred to herein and on the part of the Mortgagor to be observed and performed, including, without limiting the generality of the foregoing, failure to keep the mortgaged property in good condition and repair, or to pay rent, taxes and assessments before the same become delinquent or any interest or penalty accrues thereon, or to effect said insurance and deliver the policy or policies aforesaid, or in the event there exists or shall arise at any time any claim, lien or encumbrance on said property or any part thereof, or in the event there shall exist or arise at any time during the continuance of this Mortgage any statutory lien on said property or any part thereof, the Mortgagee may, without notice or demand and without prejudice to any other right herein contained, perform such term, covenant or condition, including making such repairs as may seem advisable to the Mortgagee, the cost of which shall constitute an advance, or paying such rent, taxes and assessments or effecting such insurance or payment of such claim, lien, encumbrance or statutory lien. The sum or sums so advanced shall be immediately due and payable, regardless of the validity of such taxes, assessments insurance, claim, lien, encumbrance or statutory lien, and shall, with interest thereon at the default rate then applicable under said Note, from time to time of such advance, be secured hereby;

(B) If the mortgaged property or any part thereof shall be condemned, the Mortgagee may appear and defend any such suit and is hereby irrevocably authorized to collect all of the proceeds, which shall be consistent with the Mortgagor's condemnation rights and remedies under the Lease more particularly described in Exhibit "A" attached hereto, and Mortgagee may apply the proceeds upon any obligation secured hereby. All costs, expenses and attorneys' fees paid or incurred by the Mortgagee in the course of such proceedings shall constitute an advance hereunder.

Notwithstanding any taking by eminent domain, alteration of the grade of any street or other injury to or decrease in value of the mortgaged property by any public or quasi- public authority or corporation, the Mortgagor will continue to pay interest on the entire principal sum hereby secured until an award or payment from such authority or corporation shall have been actually received by the Mortgagee, and any reduction in the principal sum resulting from the application by the Mortgagee of such award or payment as hereinafter set forth shall be deemed to take effect only on the date of such receipt. Any such award or payment shall be applied in such proportions and priority as the Mortgagee, in the Mortgagee's sole discretion, may elect, to the payment of principal and interest on the Note, whether or not then due and payable, or any sums secured by this Mortgage, or to the payment to the Mortgagor, on such terms as the Mortgagee may specify, to be used for the sole purpose of altering, restoring or rebuilding any part of the mortgaged property which may have been altered, damaged or destroyed as a result of any such taking, alteration of grade or other injury to the mortgaged property. If, prior to the receipt by the Mortgagee of such award or payment, the mortgaged property shall have been sold on foreclosure of this Mortgage, the Mortgagee shall have the right to receive such award or payment to the extent of the mortgage debt remaining unsatisfied after such sale of the mortgaged property, with legal interest thereon and reasonable attorneys' fees, costs and disbursements incurred by the Mortgagee in connection with the collection of such award or payment. Should all or any part of the mortgaged property be taken by eminent domain, the Mortgagor hereby assigns to the Mortgagee, and forthwith upon payment thereof will cause to be deposited with the Mortgagee, the award for any mortgaged property so taken.

(C) In the Event of Default as defined in the Term Loan Agreement of even date herewith or in the event of default in the repayment of amounts owing pursuant to said Note or in the payment of any other indebtedness secured hereby, or in the repayment of any disbursement authorized by the terms of this Mortgage and actually made by any holder of the same, and such default shall continue for ten (10) days after notice thereof has been mailed to Mortgagor, or in the performance or observance of any covenant, condition or agreement herein or in said Note contained or in the performance or observance of the terms of any other obligation owed by Mortgagor to Mortgagee and such default shall continue for thirty (30) days after written notice of default has been mailed to Mortgagor, unless the Mortgagee determines that such default cannot be cured within thirty (30) days and that the Mortgagor is proceeding promptly and diligently to cure such default; or if the Mortgagor then holding title to all or any part of the mortgaged property (or any of them, if there be more than one) shall be adjudicated a bankrupt or an insolvent or shall file or have filed against it (unless the same is dismissed within sixty (60) days of its filing) any petition or answer seeking relief as a debtor under any law for the relief or aid of debtors or shall enter into any arrangement or composition with creditors; or if a receiver shall be appointed with respect to the property herein described; or if the mortgaged property or any part thereof shall be seized or levied upon under any legal process or under claim of legal right; then in each such event the whole amount of all indebtedness owing by or chargeable to the Mortgagor under any provision of this Mortgage or intended to be secured hereby shall, at the option of the Mortgagee, become at once due and payable without notice (any provision or terms thereof to the contrary notwithstanding), and any delay or failure on the part of the Mortgagee thereto shall not comprise a waiver of that option as to that or any subsequent default by Mortgagee. In each such event, with or without foreclosure, the Mortgagee shall have the immediate right to receive and collect all rents, income and profits from the property hereby mortgaged whether then due or accrued or to become due and said rents, income and profits are hereby assigned to the Mortgagee and said Mortgagee is hereby irrevocably appointed the attorney-in-fact of the Mortgagor in the name of the Mortgagor, or in the name of the Mortgagee, to demand, sue for, collect, recover and receive all such rents, income and profits, to compromise and settle claims for rents, income or profits upon such terms and conditions as to the Mortgagee may seem proper, or to enter into, renew or terminate leases or tenancies, and the Mortgagee may, in the sole discretion of the Mortgagee, foreclose this Mortgage: (a) by civil action, with the immediate right to a receivership with the aforesaid powers upon ex parte order and without bond pending foreclosure; (b) by judicial action or power of sale, with or without entry and possession, by advertisement and sale of all or any portion or portions of the mortgaged property, either as a whole or in parcels or units, and on such terms as to payment and credit, partial credit and security for payment as the Mortgagee may approve, having first given notice as required by law, at public auction in Kana, State of Hawaii, unless at the time of such sale the law requires, notwithstanding this provision, that the sale be held elsewhere, in which event such sale shall be held wherever required by such law, and may either in the name of the Mortgagee or as the attorney-in-fact of the Mortgagor for such purpose hereby irrevocably appointed, give valid receipts for the purchase money and effectually assign, transfer and convey the property so sold to the purchaser or purchasers absolutely and forever; or (c) by any other remedy then provided by law. Any foreclosure shall forever bar the Mortgagor and all persons claiming under the Mortgagor from all right, title and interest in said property at law and in equity, notwithstanding any provision of law to the contrary now existing or hereafter enacted, the Mortgagor expressly waiving the benefits thereof, and no foreclosure sale shall impair or affect the lien of this Mortgage on any portion of the mortgaged property remaining or any other remedy of the Mortgagee for the recovery of any indebtedness remaining after application of said monies. Out of the proceeds of any foreclosure sale, the Mortgagee may deduct all costs and expenses of any remedy pursued, including reasonable attorneys' fees, may pay and discharge any lien, either prior or junior to this Mortgage, on said property and retain or be awarded all sums necessary to repay advances authorized hereunder and to satisfy all indebtedness of the Mortgagor to the Mortgagee whether or not then due, rendering to the Mortgagor the surplus, if any, provided that, in the event that there exists any contingent liability of the Mortgagor because of said sale, at the time of said sale, any surplus shall be retained by the Mortgagee in trust, in the estimated amount of that liability, until the liability is satisfied or terminated. If such proceeds shall be insufficient to discharge the foregoing in full, the Mortgagee may have any other legal recourse against the Mortgagor and Borrower for the deficiency as permitted by applicable law. This Mortgage shall not prevent nor be deemed to prevent the Mortgagee, in the event of default, from pursuing any other remedy whatsoever against the Mortgagor or Borrower for the collection of the indebtedness hereby secured and interest thereon and the Mortgagee may, at the option of the Mortgagee, pursue any other course to collect said indebtedness and interest thereon and resort to any assets of the Mortgagor or Borrower whatsoever without first resorting to, and without prejudice to the right to later resort to, the mortgaged property pursuant hereto;

(D) That any and all advances made by the Mortgagee to or for the account of the Mortgagor after the date hereof, together with interest thereon, shall be secured by this Mortgage, and all of the covenants and agreements in this Mortgage contained shall apply to such further advances as well as to all other indebtedness secured hereby, whether or not at the time such advance or advances are made there shall be then any outstanding indebtedness owing by the Mortgagor to the Mortgagee, unless a release of this Mortgage shall have been executed by the Mortgagee prior to the time of such advance or advances;

(E) That in the event the Mortgagee shall engage an attorney either to enforce this Mortgage, whether or not an action is commenced, or to collect the indebtedness or disbursements secured hereby, or any part thereof, whether by foreclosure of this Mortgage or otherwise and whether or not such proceedings are subsequently abandoned, there shall become due, and the Mortgagor agrees to pay in addition to the cost and charges allowed by law, a reasonable sum as and for any attorneys' fees and costs of collection as an additional indebtedness hereunder, together with interest from the date those costs, charges and fees are paid by the Mortgagee, at the rate specified in Paragraph (A) above, and it is agreed that this Mortgage shall stand as security therefor;

(F) That in the event of a sale of said property or any part or parts thereof under and by virtue of the default provisions of this Mortgage, the purchaser or purchasers thereof shall have immediate and peaceable possession of the same and that if the Mortgagor remains in possession after the effective date of such sale such possession shall be construed as a tenancy at sufferance only, giving unto the purchaser all remedies, by way of summary possession or otherwise, conferred by law in such case;

(G) That until any default, the Mortgagor may hold and enjoy the mortgaged property and receive the rents, income and profits thereof; that in the event the ownership of or any interest in the mortgaged property, or any part thereof, becomes vested in a person other than the Mortgagor, the Mortgagee may, without notice to the Mortgagor or any intervening successor, deal with a successor or successors-in-interest with reference to this Mortgage, and the debt hereby secured, in the same manner as with the Mortgagor without discharging or in any way affecting the liability of the Mortgagor or any successor or successors-in-interest hereunder or upon any indebtedness hereby secured, and the Mortgagor (and each of them if there be more than one) and any successor-in-interest to the whole, or any part of the mortgaged property, hereby waive diligence, presentment, demand and notice of dishonor and consent to extensions of time, surrender or substitution of security, failure to apply deposit or other forbearance, without notice, with respect to any indebtedness hereby secured, such waiver or consent to be effective regardless of whether or not he, she, it or they is or are at such time the owner or owners of the mortgaged property;

(H) That in the event of a continuing default hereunder and on demand of the Mortgagee, in addition to payments of principal and interest payable under the terms of all notes or other indebtedness secured hereby, the Mortgagor will pay monthly to the Mortgagee, a sum equal to the taxes, assessments, lease rentals and hazard insurance premiums next due with respect to the mortgaged property or any interest therein and required hereby to be paid by Mortgagor (all as estimated by the Mortgagee), less all sums already paid therefor, divided, in each case, by the number of months to elapse before one month prior to the date when each such tax, assessment, rental or premium will become delinquent, such payments to satisfy to the extent thereof the obligations hereunder of the Mortgagor with respect to such payments and such sums to be held by the Mortgagee in trust to pay said taxes, assessments, lease rentals and premiums before the same become delinquent; it being further covenanted and agreed by the Mortgagor that, if the total of the payments made by the Mortgagor to the Mortgagee with respect to taxes, assessments, lease rentals and hazard insurance premiums shall not be sufficient to pay all taxes, assessments, lease rentals of every kind and premiums on hazard insurance due with respect to the mortgaged property or any interest therein and required hereby to be paid by the Mortgagor when the same shall become due and payable, then the Mortgagor shall pay any amount necessary to make up the deficiency on or before the date when the payment of such taxes, assessments, lease rentals and hazard insurance premiums shall be due; and it being further agreed that in the event that the entire indebtedness secured hereby shall be paid in full or this Mortgage shall be foreclosed as herein provided, then, and in any such event, any balance remaining in the funds accumulated by the Mortgagee with respect to such taxes, assessments, lease rentals and hazard insurance premiums shall be credited to the account of the Mortgagor; provided that no such demand shall be made unless this Mortgage shall be in default;

(I) That the Mortgagee or any person in behalf of the Mortgagee may be the purchaser at any foreclosure sale, and no purchaser shall be answerable for the application of the purchase money; that the Mortgagee shall have the right to enforce one or more remedies hereunder or any other lawful remedy the Mortgagee may have, successively or concurrently, including the right to foreclose this Mortgage with respect to any portion of the mortgaged property without thereby impairing the lien of this Mortgage on the remainder of the mortgaged property or affecting the remedies of the Mortgagee available with respect thereto; that the Mortgagee shall have the right and is hereby expressly authorized to make application of any payments made to the Mortgagee, and any rents, income and profits collected by the Mortgagee upon any indebtedness of the Mortgagor to the Mortgagee as provided herein regardless of the date thereof; that acceptance of any payment by the Mortgagee shall not be deemed a waiver of any default of the Mortgagor then existing, except to the extent cured by such payment, nor as a waiver of any right to declare all indebtedness secured hereby at once due and payable because of any default then existing and not cured by such payment; that as to any lease, grant of easement or other instrument referred to herein under which the Mortgagor has an estate or interest which is less than fee simple absolute, the term "mortgaged property" and similar terms shall include such indenture of lease, grant of easement or other instrument and all extensions thereof and amendments thereto, and all of the estate, right, title and interest of the Mortgagor in and to the property covered thereby and in and to all tenements.• hereditaments, rights, easements, privileges and appurtenances belonging or in anyway appertaining to such property, and in and to all buildings, structures, fixtures and other improvements now on and all which may hereafter be on such property; that the terms "advances", "costs" and "expenses", wherever herein used, shall include reasonable attorneys' fees and recording fees whenever incurred; that the term "indebtedness" and similar terms as used herein shall mean and include all notes, loans, advances, interest, claims, demands, obligations and liabilities whatsoever, however arising, and whether owing by the Mortgagor (or any of them if there be more than one) individually or jointly with others, and whether absolute or contingent, liquidated or unliquidated and whenever contracted, accrued or payable; that where there is more than one Mortgagor, all obligations hereunder shall be binding upon them jointly and severally; that where the Mortgagor is married, the execution hereof by the spouse shall bind the spouse individually and constitute a quitclaim and release to the Mortgagee of all interest of the spouse in the mortgaged property by way of dower, curtesy, community property or otherwise and that these presents shall be equally binding upon and inure to the benefit of the heirs, personal representatives, successors and assigns of the Mortgagor and the Mortgagee, respectively, and shall be so construed that wherever applicable with reference to any of them the use of the singular number shall include the plural number, the use of the plural number shall include the singular number, and the use of any gender shall include either or both of the other genders;

(J) That the Mortgagor, upon request made either personally or by mail, shall certify, by a writing duly acknowledged, to the Mortgagee, or to any proposed assignee of this Mortgage, the amount of principal and interest then owing on this Mortgage and whether any offsets or defenses exist against the Mortgage debt, within six (6) days in case the request is made personally, or within ten (10) days after the mailing of such request in case the request is made by mail;

(K) That all notices, demands or documents which are required or permitted to be given or served hereunder shall be in writing and personally delivered or sent by registered or certified mail addressed as follows:

To:

CYANOTECH CORPORATION

73-4460 Queen Kaahumanu Highway, Suite 102

Kailua-Kona, Hawaii 96740

with a copy to: Gregory Nasky

Goodsill Anderson _ Quinn & Stifel LLP

999 Bishop Street, Suite 1600

Honolulu, Hawaii 96813

To:

FIRST FOUNDATION BANK

18101 Von Karman Avenue, Suite 750

Irvine, California 92612

Such addresses may be changed from time to time by the addressee by serving notice as provided above. Service of such notice or demand shall be deemed complete upon the earlier of the date of actual delivery or the third day after the date of mailing if mailed in Hawaii;

(L) That in the event of the adoption or amendment, after the date of this instrument, of any law of the State of Hawaii, other than a law providing for the imposition of a tax on, according to, or measured by income, which in any way shall change the manner of taxation or of the collection of taxes on mortgages or debts secured by mortgages to the end that directly or indirectly Mortgagee shall be required to pay on account of this Mortgage or the indebtedness secured hereby any tax other than taxes of the kind or character now imposed by the laws of the State of Hawaii and other than a tax on, according to, or measured by income, the holder of this Mortgage, at any time after such adoption or amendment of such law, may give written notice to Mortgagor that the said holder elects to have the indebtedness secured by this Mortgage become due and payable six (6) months from the giving of such notice unless Mortgagor, within the said six (6) months' period, shall agree in writing to pay the amount of such new taxes; and in the event Mortgagor, within such six (6) months' period, so agrees to pay the amount of such new taxes, such agreement of Mortgagor shall be deemed from the date thereof to be a covenant and obligation of Mortgagor under this Mortgage for all purposes, and in the event Mortgagor fails within said six (6) months' period to so agree to pay such new taxes, the indebtedness secured by this Mortgage shall become due and payable upon the last day of the six (6) months' period. If at any time Mortgagor's agreement to pay the amount of such new taxes shall be prohibited by law or the payment of the same by Mortgagor would make the transaction usurious, then the indebtedness secured hereby shall become due and payable six (6) months after the giving of written notice by the holder of this Mortgage and the Note secured hereby that it elects to have the indebtedness secured hereby become due and payable;

(M) That this Mortgage is governed by and shall be construed in accordance with the laws of the State of Hawaii;

(N) If any of the property subject to this Mortgage shall be conveyed or assigned by the Mortgagor to any other party, or if substantially all of the property described in Exhibit "A" shall be leased for a term longer than five (5) years, or if the Mortgagor shall agree to make such lease, conveyance or assignment then, unless the Mortgagee shall in writing accept the written undertaking of the said other party to assume and discharge all obligations of this Mortgage and discharge the Mortgagor from further liability with respect thereto, which decision shall be based solely on reasonable banking standards then in effect, all of the indebtedness hereby secured shall at once become due and payable at the option of the Mortgagee (any provision or term thereof to the contrary notwithstanding), and delay or failure

on the part of the Mortgagee to demand such payments shall not prejudice the Mortgagee's right thereto;

(O) With respect to environmental matters which may have, which may now, or which may in the future affect Mortgagor and/or the mortgaged property, Mortgagor makes the following representations, warranties and agreements which shall survive any foreclosure of the mortgaged property and the payoff of the indebtedness secured hereby:

(1) Environmental and Industrial Hygiene Compliance . Mortgagor represents and warrants that, as of the date of this Mortgage, the mortgaged property is not in violation of any federal, state or local law, ordinance or regulation relating to industrial hygiene or to the environmental conditions on, under or about the mortgaged property, including, but not limited to, soil and groundwater conditions. Mortgagor further represents and warrants that, to the best of its knowledge, no third party has used, generated, manufactured, stored or disposed of on, under or about the mortgaged property, or transported to or from the mortgaged property any flammable explosives, radioactive materials, hazardous wastes, toxic substances or related materials ("Hazardous Materials") in violation of applicable law. Hazardous Materials shall include, but shall not be limited to, substances defined as "hazardous substances" in the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended, 42 U.S.C. Sections 9601-9657; the Hazardous Materials Transportation Authorization Act of 1994, as amended, 49 U.S.C. Sections 5101 et seq.; and the Resource Conservation and Recovery Act of 1976, as amended, 42 U.S.C. Sections 6901-6992; Clean Water Act; Clear Air Act; Toxic Substances Control Act; Safety of Public Water Systems Act, as amended or modified from time to time, and any similar state or local laws, ordinances and all regulations now or hereafter promulgated or published.

(2) Hazardous Materials Disclosure. Mortgagor represents and warrants that, during the period of its ownership of the mortgaged property, there has been no disposal, release or threatened release of Hazardous Materials on, from or under the mortgaged property in violation of applicable law. Mortgagor further represents and warrants that it has no knowledge of any presence, disposal, release or threatened release of any Hazardous Materials on, from or under the mortgaged property in violation of applicable law that may have occurred prior to its acquisition of title to the mortgaged property.

(3) No Hazardous Waste Litigation. Mortgagor represents and warrants that, during the period of its ownership of the mortgaged property, there has been no litigation or administrative enforcement actions or proceedings brought or threatened to be brought, nor have any settlements been reached by or with any party or parties, public or private, concerning the presence, disposal, release or threatened release of any Hazardous Materials on, from or under the mortgaged property.

(4) Indemnification Related to Hazardous Materials. Mortgagor agrees to indemnify and hold Mortgagee, its directors, officers, employees, agents and any successors, harmless from and against any and all claims, damages and liabilities arising in connection with the presence, use, storage, disposal or transporting of any Hazardous Materials on, under, to, from or about the mortgaged property. Mortgagee shall have the right to join and participate in any such legal proceedings, and Mortgagor agrees to pay any attorneys' fees and costs which may be incurred by Mortgagee.

(5) Notices Concerning Hazardous Materials Violations. Mortgagor agrees to immediately advise Mortgagee in writing of (a) any and all enforcement, cleanup, remedial, removal or other governmental or regulatory actions instituted, completed or threatened pursuant to any applicable federal, state or local laws, ordinances or regulations relating to any Hazardous Materials affecting the mortgaged property; and (b) all claims made or threatened by any third party against Mortgagor or the mortgaged property relating to damage, contribution, cost recovery compensation, loss or injury resulting from any Hazardous Materials.

(P) Anything to the contrary notwithstanding, this Mortgage and the rights of the Mortgagee hereunder and its interests in and to the mortgaged property are subject to that certain senior mortgage referred to in Exhibit "A" attached hereto; and this Mortgage is made upon the express condition that if any default shall be made in the payment of any indebtedness or other obligation secured by or in the performance or observance of any covenant or condition contained in said senior mortgage, then the entire unpaid balance of all indebtedness secured by this Mortgage, together with interest thereon, shall, at the option of the Mortgagee hereof, at once become due and payable and this Mortgage may be foreclosed at the option of the Mortgagee as if default had been made in the performance of these presents; and this Mortgage is made upon the further express condition that the Mortgagee hereof has the right, at its option, to make payments or performance to said senior mortgagee of any indebtedness of other obligation secured by said senior mortgage in order to protect the Mortgagee's own position, and any sums so paid shall be deemed to be additional indebtedness from the Mortgagor to the Mortgagee and secured by this Mortgage.

(Q) ADA Compliance. So long as this Mortgage remains outstanding, the Mortgagor will, at its own cost and expense, in respect of the mortgaged property described in Exhibit A hereto: (i) comply with all requirements of the federal Americans With Disabilities Act ("ADA"), as amended from time to time, and the rules promulgated thereunder ("Rules"), to the extent applicable to the Mortgagor's ownership, management, operation, leasing, use, construction, reconstruction, repair, remodeling, rehabilitation or alteration of the mortgaged property described in Exhibit A hereto, or any part thereof; (ii) immediately provide to the Mortgagee written notice (and immediately provide to the Mortgagee copies) of any and all notices of actual, potential or alleged violations under the ADA or Rules and any and all governmental investigations or regulatory actions instituted or threatened, regarding the ADA or Rules; and (iii) furnish to the Mortgagee, from time to time whenever reasonably requested by the Mortgagee, an ADA Compliance Assessment, in form reasonably acceptable to the Mortgagee, made by an architect or engineer having a good reputation for skill and experience in the field of ADA compliance and otherwise reasonably acceptable to the Mortgagee. In the event that a purchaser of the mortgaged property at foreclosure or by conveyance in lieu of foreclosure incurs any compliance expenses or other expenses (including reasonable fees of legal counsel) or liabilities as a result of the failure of the mortgaged property to comply with the requirements of the ADA and the Rules at the date of the purchaser's acquisition thereof, the Mortgagor shall indemnify the purchaser against all reasonable expenses and liabilities so incurred by the purchaser; and these indemnification provisions shall survive said foreclosure or conveyance in lieu of foreclosure.

(R) Compliance with and Preservation of Lease. (a) The Mortgagor will: (i) pay the rent reserved by the Lease more particularly described in Exhibit "A" attached hereto (the "Lease") as the same becomes due and payable; (ii) promptly perform and observe all of the covenants, conditions and agreements required to be performed and observed by the lessee under the Lease, and do all things necessary to preserve and keep unimpaired its rights thereunder; (iii) promptly notify the Mortgagee in writing of any default by the Mortgagor in the performance or observance of any of the covenants, conditions and agreements on the part of the lessee to be performed or observed under the Lease or of the occurrence of any event which, regardless of the lapse of time, would constitute a default thereunder; (iv) promptly notify the Mortgagee in writing of the giving of any notice by the lessor under the Lease of the default of the lessee thereunder in the performance or observance of any of the covenants, conditions and agreements on the part of the lessee to be performed or observed under the Lease and promptly cause a copy of each such notice given by the lessor to the lessee to be delivered to the Mortgagee; (v) promptly notify the Mortgagee in writing of the commencement of a proceeding under the federal bankruptcy laws by or against the Mortgagor or the lessor under the Lease; (vi) if any of the indebtedness secured hereby remains unpaid at the time when notice may be given by the lessee under the Lease of the exercise of any right to renew or extend the term of the same, promptly give notice to the lessor under the Lease of the exercise of such right of extension or renewal; (vii) in case any proceeds of insurance upon the Mortgaged Property or any part thereof are deposited with any person other than the Mortgagee pursuant to the requirements of the Lease, promptly notify the Mortgagee in writing of the name and address of the person with whom such proceeds have been deposited and the amount so deposited; (viii) promptly after the execution and delivery of this Mortgage, notify the lessor under the Lease in writing of the execution and delivery hereof and of the name and address of the Mortgagee and deliver a copy of this Mortgage to the lessor; and (ix) promptly notify the Mortgagee in writing of any request made by either party to the Lease to the other party thereto for arbitration or appraisal proceedings pursuant to the Lease, and of the institution of any arbitration or appraisal proceedings and promptly deliver to the Mortgagee a copy of the determination of the arbitrators or appraisers in each such proceeding.

(b) The Mortgagor will not surrender the Lease or the Mortgagor's leasehold estate and interest therein, nor terminate or cancel the Lease, and will not, without the prior written consent of the Mortgagee, modify, change, supplement, alter or amend the Lease, either orally or in writing, and as further security for the repayment of the indebtedness secured hereby and for the performance of the covenants, conditions and agreements contained in this Mortgage and in the Lease, the Mortgagor hereby assigns to the Mortgagee all of its rights, privileges and prerogatives as lessee under the Lease to terminate, cancel, modify, change, supplement, alter or amend the Lease and any such termination, cancellation, modification, change, supplement, alteration or amendment of the Lease, without the prior written consent thereto by the Mortgagee, shall be void and of no force and effect. Without limiting the generality of the foregoing, the Mortgagor will not reject the Lease pursuant to 11 U.S.C. § 365(a), as amended, or any successor law, or allow the Lease to be deemed rejected by inaction and lapse of time, and will not elect to treat the Lease as terminated by the lessor's rejection of the Lease pursuant to 11 U.S.C. § 365(h)(l), as amended, or any successor law, and as further security for the repayment of the indebtedness secured hereby and for the performance of the covenants, conditions and agreements contained in this Mortgage and in the Lease, the Mortgagor hereby assigns to the Mortgagee all of the rights, privileges and prerogatives of the Mortgagor and the Mortgagor's bankruptcy trustee to deal with the Lease, which rights may arise as a result of the commencement of a proceeding under the federal bankruptcy laws by or against the Mortgagor or the lessor under the Lease, and any exercise of such rights, privileges or prerogatives by the Mortgagor or the Mortgagor's bankruptcy trustee without the prior written consent thereto by the Mortgagee shall be void and of no force and effect.

As further security for the Mortgagee, the Mortgagor hereby agrees to deliver to the Mortgagee a copy of the Lease and all supplements thereto and amendments thereof, to be retained by the Mortgagee until the indebtedness secured hereby is fully paid, So long as there is no breach of or default under any of the covenants, conditions or agreements contained in this Mortgage to be performed by the Mortgagor, or in the performance by the Mortgagor of any of the covenants, conditions and agreements, in the Lease to be performed by the lessee thereunder, the Mortgagee shall have no right to terminate, cancel, modify, change, supplement, alter or amend the Lease. No release or forbearance of any of the Mortgagor's obligations as lessee under the Lease, whether pursuant to the Lease or otherwise, shall release the Mortgagor from any of its obligations under this Mortgage, including, but not limited to, the Mortgagor's obligations with respect to the payment of rent as provided for in the Lease and the observance and performance of all of the covenants, conditions and agreements contained in the Lease to be observed and performed by the lessee thereunder. Unless the Mortgagee shall otherwise expressly consent in writing, the fee title to the premises demised by the Lease and the leasehold estate thereunder shall not merge, but shall always remain separate and distinct, notwithstanding the union of such estates either in the Mortgagor or in a third party by purchase or otherwise.

---THE NEXT PAGE IS THE SIGNATURE PAGE---

IN WITNESS WHEREOF, the Mortgagor, the Borrower and the Mortgagee have executed these presents on the day and year first above written.

FIRST FOUNDATION BANK

CYANOTECH CORPORATION,

a Nevada corporation

By /s/ Christopher M. Naghibi	By /s/ Gerald Cysewski
CHRISTOPHER M. NAGHIBI	GERALD CYSEWSKI
Its EVP/Chief Credit Officer	Its Executive Vice President
Mortgagee

	By /s/ Jolé Deal
	JOLE DEAL Its Chief Financial Officer

	Mortgagor/Borrower

	NUTREX HAWAII, INC., a Hawaii corporation


	By /s/ Gerald Cysewski GERALD CYSEWSKI Its Executive Vice President


	By /s/ Jolé Deal JOLE DEAL Its Chief Financial Officer


	Borrower

EXHIBIT"A"

THAT CERTAIN UNRECORDED SUBLEASE NO. K-4

SUBLESSOR:	NATURAL ENERGY LABORATORY OF HAWAII, A BODY CORPORATE AND A PUBLIC INSTRUMENTALITY OF THE STATE OF HAWAII ORGANIZED PURSUANT TO HAWAII REVISED STATUTES, CHAPTER 227D

SUBLESSEE:	CYANOTECH CORPORATION, A NEVADA CORPORATION

DATED:	DECEMBER 29, 1995

TERM:	THIRTY (30) YEARS, COMMENCING - ON JANUARY 1, 1996

THE FOREGOING UNRECORDED SUBLEASE NO. K-4 WAS AMENDED BY THE FOLLOWING:

UNRECORDED SUPPLEMENTAL AGREEMENT NO.1 TO AMEND SUBLEASE K-4 DATED NOVEMBER 21, 1996.

THE FOREGOING UNRECORDED SUBLEASE NO. K-4 AND UNRECORDED SUPPLEMENTAL AGREEMENT WERE SET FORTH BY THE FOLLOWING:

SHORT FORM SUBLEASE NO. K-4

EFFECTIVE AS OF:	DECEMBER 29, 1995
RECORDED:	DOCUMENT NO. 2000-056138

UNRECORDED SUPPLEMENTAL AGREEMENT NO.2 TO MODIFY SUBLEASE NO. K-4 DATED MARCH 9, 2012, BUT EFFECTIVE AS OF FEBRUARY 1, 2012. THE TERM OF THE SUBLEASE IS 40 YEARS COMMENCING JANUARY 1, 1996, UP TO DECEMBER 31, 2035, UNLESS SOONER TERMINATED.

THE REAL PROPERTY IN THE FOREGOING SUBLEASE AS AMENDED, BEING DESCRIBED AS FOLLOWS:

PARCEL FIRST:

ALL OF THAT CERTAIN PARCEL OF LAND SITUATE ON THE WESTERLY SIDE OF KEAHOLE AIRPORT AND THE EASTERLY SIDE OF THE ROADWAY TO THE NATURAL ENERGY LABORATORY AT KALAOA 1ST TO 4TH AND OOMA 1ST, NORTH KONA, ISLAND AND COUNTY OF HAWAII, STATE OF HAWAIT, BEING PARCEL H-1 A PORTION OF PARCEL "A" (C.S.F . NO. 19968) ALL OF LEASE PARCEL "G" AND PARCEL H-2 A PORTION OF LOT 9 A PORTION OF H.S.S. PLAT 315-A (C.S.F. NO. 19934), AND BEING MORE PARTICULARLY DESCRIBED AS FOLLOWS:

BEGINNING AT THE SOUTHWEST CORNER OF THIS LEASED PARCEL OF LAND BEING ALONG THE EASTERLY SIDE OF THE MAIN ROADWAY TO THE NATURAL ENERGY LABORATORY, THE COORDINATES OF SAID POINT OF BEGINNING REFERRED TO GOVERNMENT SURVEY TRIANGULATION STATION "AKAHIPUU" BEING 9,099.64 FEET SOUTH AND 29,930.02 FEET WEST AND RUNNING BY AZIMUTHS MEASURED CLOCKWISE FROM TRUE SOUTH :

1.	213°	29'	15.0"	825.97	FEET ALONG LEASED PARCEL "A" TO A POINT;

2.	123°	29'	15.0"	249.34	FEET ALONG THE REMAINDER OF PARCEL "A" TO A POINT;

					THENCE, ALONG THE REMAINDER OF THE NATURAL ENERGY LABORATORY SITE, H.S.S. PLAT 315-A (C.S.F. NO. 19934) FOR THE FOLLOWING FOUR (4) COURSES;

3.	184°	50'	25.0"	974.90	FEET TO A POINT;

					THENCE, ALONG A CURVE TO THE RIGHT HAVING A RADIUS OF 440.00 FEET, THE CHORD AZIMUTH AND DISTANCE BEING:

4.	205°	30'	12.5"	310.53	FEET TO A POINT;

5.	226°	10'	00.0"	527.04	FEET TO A POINT;

6.	274°	50'	25.0"	749.21	FEET TO A POINT;

7.	4°	50'	25.0"	3,501.37	FEET ALONG THE WESTERLY SIDE OF KEAHOLE AIRPORT (C.S.F. NO. 19137) TO A POINT;

					THENCE, ALONG THE REMAINDER OF LOT 9, ALONG A CURVE TO THE RIGHT HAVING A RADIUS OF 435.00 FEET, THE CHORD AZIMUTH AND DISTANCE BEING:

8.	30°	13'	39.5"	373.00	FEET TO A POINT;

9.	55°	36'	54.0"	72.78	FEET ALONG THE REMAINDER OF LOT 9 TO A POINT;

10.	1 45°	36'	54.0"	1726.08	FEET ALONG THE EASTERLY SIDE OF THE MAIN ROADWAY TO THE NATURAL ENERGY LABORATORY TO A POINT;

11.	123°	29'	15.0"	86.79	FEET ALONG THE EASTERLY SIDE OF THE -"MAINROADWY - TO - THE - NATURAL ENERGY LABORATORY TO THE POINT OF BEGINNING AND CONTAINING AN AREA OF 90.067 ACRES, MORE OR LESS.

EXCEPTING ANY PORTION OF THE LAND CREATED BY ACCRETION AND ALSO ANY PORTION LYING BELOW THE SHORELINE AS DEFINED BY HAWAII LAW AND/OR CERTIFIED BY THE STATE OF HAWAII DEPARTMENT OF LAND AND NATURAL RESOURCES.

PARCEL SECOND:

EASEMENT "1-A" FOR ROADWAY PURPOSES. PARCEL THIRD:

EASEMENT "6" FOR UTILITY PURPOSES, SAID EASEMENT "6" BEING MORE PARTICULARLY DESCRIBED IN THAT CERTAIN SHORT FORM SUBLEASE NO. K-4 EFFECTIVE AS OF DECEMBER 29, 1995, RECORDED APRIL 26, 2000 AS REGULAR SYSTEM DOCUMENT NO. 2000-056138 OF OFFICIAL RECORDS.

SUBJECT, HOWEVER, to the following:

1.	Title to all mineral and metallic mines reserved to the State of Hawaii.

2.	Shoreline setback lines as they may be established by the State Land Use Commission or by the various Counties pursuant to the Hawaii Revised Statutes .

3.	Easement "2-A", for roadway purposes, as described in or disclosed by the Short Form Sublease No. K-4 recorded April 26, 2000 as Regular System Document No. 2000- 056138 of Official Records.

4.	Easement "3", for electrical purposes, as described in or disclosed by the Short Form Sublease No. K-4 recorded April 26, 2000 as Regular System Document No. 2000- 056138 of Official Records.

5.	Easement "5", for electrical purposes, as described in or disclosed by the Short Form Sublease No. K-4 recorded April 26, 2000 as Regular System Document No. 2000- 056138 of Official Records.

An unrecorded State of Hawaii Department of Land and Natural Resources General Le as e No. s5619 dated - July 13, 2001, exe cuted by state of Hawaii ("LESSOR" ); by its Board of Land and Natural Resources ("BOARD"), as Lessor, and Natural Energy Laboratory of Hawaii, a body corporate and politic and an instrumentality and agency of the State of Hawaii, as Lessee, for a term forty-five (45) years, commencing on July 3, 2011, up to and including July 2, 2045.

The foregoing unrecorded General Lease No. S-5619 was amended by Unrecorded Amendment of General Lease No. S-5619, dated December 11, 2006 and Second Amendment of General Lease No. S-5619, dated January 10, 2013.

7.	The failure to comply with any of the terms, provisions, conditions and reservation of that certain Sublease No. K-4, more particularly described herein.

Terms and conditions as set forth in the Notice of Dedication, wherein Owner/Lessor: State of Hawaii, by its Board of Land and Natural Resources, Lessee/Sublessor: Natural Energy Laboratory of Hawaii, a body corporate and a public Instrumentality of the State of Hawaii and Sublessee: Cyanotech Corporation, a Nevada corporation dedicates the premises described herein for nonspeculative residential use for a period of ten years effective. Said Notice recorded February 26, 2008 as Regular System Document No. 2008-028149 of Official Records.

9.	The terms and provisions contained in the document entitled "Nondisturbance and Attornment Agreement" recorded October 27, 2008 as Regular System Document No. 2008-165170 of Official Records.

10.	A mortgage to secure an original principal indebtedness of $5,500,000.00, and any other amounts or obligations secured thereby.

Dated:

August 14, 2012

Mortgagor:	Cyanotech Corporation, a Nevada corporation
Mortgagee:	Pacific Rim Bank, a Hawaii corporation

Recorded September 07, 2012 as Regular System Document No. A-46330408 of Official Records.

A Consent to Mortgage of Sublease No. K-4 under General Lease No. S-5619 thereto given by State of Hawaii, by the Board of Land and Natural Resources, acting pursuant to Section 171-22, Hawaii Revises Statutes, as amended recorded September 07,2012 as Regular System Document No. A-46330412 of Official Records.

Sublessor's Consent to Mortgage of Sublease K-4; Estoppel Certificate and Subordination Agreement Recorded September 24,2012 as Regular System Document No. A-46500120 of Official Records.

11.	The Assignment of Lessor's Interest in Leases and Rents, as additional security for the payment of the indebtedness in the amount of $5,500,000.00, which was recorded September 07,2012 as Regular System Document No. A-46330409 of Official Records.

12.	A financing statement

Debtor:	Cyanotech Corporation, a Nevada corporation
Secured Party:	Pacific Rim Bank

Recorded September 07, 2012 as Regular System Document No. A-46330410 of Official Records.

13.	A financing statement

Debtor:	Nutrex Hawaii, Inc., a Hawaii corporation
Secured Party:	Pacific Rim Bank

Recorded September 07,2012 as Regular System Document No. A-46330411 of Official Records.

14.	The terms and provisions contained in the Estoppel Certificate recorded September 07, 2012 as Regular System Document No. A-46330413 of Official Records.

TOGETHER, ALSO, with all of Mortgagor's rights, easements, privileges and appurtenances thereto belonging, and all the rents, issues, profits and proceeds thereof, and all of the estate, right, title and interest of the Mortgagor, both at law and in equity, in said property.

END OF EXHJBIT "A"

Exhibit 4.4

LAND COURT SYSTEM

REGULAR SYSTEM

AFTER RECORDATION, RETURN BY MAIL ( ) PICKUP ( ) Total No. of Pages: 16

Tax Map Key No. (3) 7-3-043-063

ASSIGNMENT OF LESSOR'S INTEREST IN LEASES AND RENTS ASSIGNOR:

C Y ANOTECH CORPORATION, a Nevada corporation, whose mailing address is 73-4460 Queen Kaahumanu Highway, Suite 102, Kailua-Kona, Hawaii 96740

ASSIGNEE:

FIRST FOUNDATIO N BANK, a California corporation, whose mailing address is 18101 Von Karman Avenue, Suite 750, Irvine, California 92612

PROPERTY:

73-860 Makako Bay Drive, Kailua-Kona, Hawaii 96740, more particularly described in the attached Exhibit "A"

BORROWER:

CYANOTECH CORPORATION, a Nevada corporation, and NUTREX HAWAII, INC., a Hawaii corporation

ASSIGNMENT OF LESSOR'S INTEREST IN LEASES AND RENTS

THIS ASSIGNMENT, made on July 30, 2015 by CYANOTECH CORPORATION , a Nevada corporation, whose mailing address is 73-4460 Queen Kaahumanu Highway, Suite 102, Kailua-Kana, Hawaii 96740, hereinafter referred to as "Assignor", to FIRST FOUNDATION BANK, a California corporation, whose mailing address is 18101 Von Karman Avenue, Suite 750,Irvine, California 92612, hereinafter referred to as "Assignee";

W I T N E S S E T H :

THAT the Assignor, for good and valuable consideration, receipt whereof is hereby acknowledged, hereby grants, transfers and assigns to the Assignee the entire interest of the Assignor in and to any and all tenant leases now or hereafter in effect demising any portion of the premises or improvements located on the premises described in Exhibit "A" attached hereto and incorporated herein by reference.

TOGETHER WITH all rents, income and profits arising from the leases and renewals thereof and together with all rents, income and profits for the use and occupation of the premises described in the leases or in the mortgage hereinafter referred to and, at the option of the Assignee, for all leases upon said premises which may be executed in the future during the term of this Assignment.

TOGETHER, ALSO, WITH all rights of the Assignor to assume or reject any of those existing or future leases under Title 11 of the United States Code or its successor statute.

THIS ASSIGNMENT is made for the purpose of securing:

A. The payment of the principal sum, or so much thereof as may be advanced thereunder from time to time, interest and other indebtedness evidenced by that certain Promissory Note executed concurrently herewith, and any amendments, extensions or renewals thereof (hereafter the "Note"), in the amount of TWO MILLION FIVE HUNDRED THOUSAND AND N0/100 DOLLARS ($2,500,000.00) made by Assignor and NUTREX HAWAII, INC., a Hawaii corporation (hereinafter individually and collectively, "Borrower"), to Assignee, and secured, inter alia , by a Mortgage, Security Agreement and Financing Statement (hereafter the "Mortgage") executed concurrently herewith by and between Assignor, as Mortgagor, and Assignee, as Mortgagee.

B. Payment of all other sums with interest thereon becoming due and payable to the Assignee under the provisions of this Assignment or of said Note or Mortgage.

C. The performance and discharge of each and every obligation, covenant and agreement of the Borrower and Assignor contained herein or in said Note or Mortgage.

THE ASSIGNOR WARRANTS that the Assignor is the sole owner of the entire lessor's interest in the leases; that the leases are valid and enforceable and have not been altered, modified or amended in any manner whatsoever save as herein set forth; that the lessees named therein are not in default under any of the terms, covenants or conditions thereof; that no rent or fees reserved in the leases have been assigned or anticipated and that no rent for any period subsequent to the date of this Assignment has been collected in advance of the time when the same became due under the terms of the leases.

THE ASSIGNOR COVENANTS with the Assignee to observe and perform all the obligations imposed upon the lessor under the leases and not to do or permit to be done anything to impair the security thereof; not to collect any of the fees, rent, income and profits arising or accruing under the leases or from the premises described in said Mortgage in advance of the time when the same shall become due; not to execute any other assignment of lessor's interest in the leases or assignment of rents arising or accruing from the leases or from the premises described in said Mortgage; not to subordinate the leases to any mortgage or other encumbrance or permit, consent or agree to such subordination without Assignee's prior written consent; not to alter, modify or change the terms of the leases or give any consent or exercise any option required or permitted by such terms without the prior written consent of Assignee, or cancel or terminate the leases or accept a surrender thereof or convey or transfer or suffer or permit a conveyance or transfer of the premises demised thereby or of any interest therein so as to effect directly or indirectly, proximately or remotely a merger of the estates and rights of, or a termination or diminution of the obligations of lessees thereunder; not to alter, modify or change the terms of any guaranty of the leases or cancel or terminate such guaranty without the prior written consent of the Assignee; at the Assignee's request to assign and transfer to the Assignee any and all subsequent leases upon all or any part of the premises described in the leases or said Mortgage; and to execute and deliver at the request of the Assignee all such further assurances and assignments in the premises as the Assignee shall from time to time require.

THIS ASSIGNMENT is made on the following terms, covenants and conditions:

1. Notwithstanding that this instrument is a present assignment of the leases and of said rents and other rights, it is understood and agreed that so long as there shall exist no default by the Borrower or Assignor in the payment of the principal sum, interest and indebtedness secured hereby and by said Note or Mortgage or in the performance of any obligation, covenant or agreement herein or in said Note or Mortgage or in the leases contained on the part of the Assignor to be performed, the Assignor shall have the permission to manage the demised premises in the ordinary course of business and to collect at the time of, but not prior to, the date provided for the payment thereof, all fees, rents, income and profits arising under the leases or from the premises described herein and to retain, use and enjoy the same, but this permission terminates immediately upon receipt of a written notification from the Assignee of (a) the occurrence of an Event of Default as described in Paragraph 2 below and (b) Assignee's election to terminate said permission. This Assignment is intended not as a pledge nor a security interest requiring the transfer of possession but as an absolute assignment conditioned only on whether the Assignor and Borrower default as provided in Paragraph 2 below or performs as provided in Paragraph 4 below.

2. Upon or at any time after default which is not timely cured in the payment of the principal sum, interest and indebtedness secured hereby and by said Note or Mortgage or in the performance of any obligation, covenant or agreement herein or in said Note or Mortgage or leases contained on the part of the Borrower and Assignor to be performed ("Event of Default"), the Assignee without in any way waiving such default may, at its option, without notice and without regard to the adequacy of the security for the said principal sum, interest and indebtedness secured hereby and by said Note or Mortgage, either in person or by agent, with or without bringing any action or proceeding, or by a receiver appointed by a court, take possession of the premises described in the leases and/or Mortgage and have, hold, manage, license, lease and operate the same on such terms and for such period of time as the Assignee may deem proper and either with or without taking possession of said premises, in its own name, demand, sue for or otherwise collect and receive all fees, rents, income and profits of said premises, including those past due and unpaid, with full power to make from time to time all alterations, renovations, repairs or replacements thereto or thereof as may seem proper to the Assignee, and to apply such fees, rents, income and profits to the payment of all expenses of managing the premises, including, without being limited thereto, the salaries, fees and wages of a managing agent and such other employees as the Assignee may deem necessary or desirable and all expenses of operating and maintaining the premises, including, without being limited thereto, all taxes, charges, claims, assessments, water and sewer fees and any other liens, and premiums for all insurance which the Assignee may deem necessary or desirable, and the cost of all alterations, renovations, repairs or replacements, and all expenses incident to taking and retaining possession of the premises as the Assignee may reasonably determine to be appropriate, any custom or use to the contrary notwithstanding. The exercise by the Assignee of the option granted it in this paragraph and the collection of the rents, income and profits and the application thereof as herein provided shall not be considered a waiver of any Event of Default by the Borrower or Assignor under said Note, Mortgage, the leases or this Assignment.

3. The Assignee sha11 not be liable for any loss sustained by the Assignor resulting from the Assignee's failure to let the premises after default or from any other act or omission of the Assignee in managing the premises after an Event of Default unless such loss is caused by gross negligence, the willful misconduct and bad faith of the Assignee. Nor shall the Assignee be obligated to perform or discharge any obligation, duty or liability under the leases or under or by reason of this Assignment and the Assignor shall, and does hereby agree, to indemnify the Assignee for, and to hold the Assignee harmless from any and all liability, loss or damage which may or might be incurred under the leases or under or by reason of this Assignment and from any and all claims and demands whatsoever which may be asserted against the Assignee by reason of any alleged obligations or undertakings on its part to perform or discharge any of the terms, covenants or agreements contained in the leases, except for any of the foregoing arising from the Assignee's gross negligence or willful misconduct. Should the Assignee incur any such liability under the leases or under or by reason of this Assignment or in defense of any such claims or demands, the amount thereof, including costs, expenses and reasonable attorneys' fees, shall be secured by the Mortgage and the Assignor shall reimburse the Assignee therefor immediately upon demand and upon the failure of the Assignor to do so, the Assignee may, at its option, declare all sums secured hereby and by said Note and Mortgage immediately due and payable. And it is further understood that this Assignment shall not operate to place responsibility for the control, care, management or repair of said premises upon the Assignee, nor for the carrying out of any of the terms and conditions of the lease; nor shall it operate to make the Assignee responsible or liable for any waste committed on the property by the lessees, tenants or any other parties, or for any dangerous or defective condition of the premises, or for any negligence in the management, upkeep, repair or control of said tenant, licensee, stranger or other third party, except for any of the foregoing arising from the Assignee's gross negligence or willful misconduct.

4. Upon payment in full of the principal sum, interest and indebtedness secured hereby and by said Note and Mortgage, this Assignment shall become and be void and of no effect and Assignor shall then have the right to have Assignee indicate such status by the execution and delivery of a cancellation of this Assignment; but the affidavit, certificate, letter or statement of any officer, agent or attorney of the Assignee showing that any part of said principal, interest or indebtedness remains unpaid shall be and constitute prima facie evidence of the validity, effectiveness and continuing force of this Assignment and any person may, and is hereby authorized to, rely thereon. The Assignor hereby authorizes and directs the lessees named in the leases or any other or future licensee(s), lessee(s) or occupant(s) of the premises described therein or in said Mortgage, upon receipt from the Assignee of written notice to the effect that the Assignee is then the holder of said Note and Mortgage and that an Event of Default exists thereunder or under this Assignment to pay over to the Assignee all fees, rents, income and profits arising or accruing under the leases or from the premises described therein or in said Mortgage and to continue so to do until otherwise notified by the Assignee .

5. The Assignee may take or release other security for the payment of said principal sum, interest and indebtedness, may release any party primarily or secondarily liable therefor and may apply any other security held by it to the satisfaction of such principal sum, interest or indebtedness without prejudice to any of its rights under this Assignment.

6. The term "lease" or "leases" as used herein means the lease agreements or rental agreements hereby assigned or, at the option of the Assignee, any extension or renewal thereof and any lease subsequently executed during the term of this Assignment covering the premises described in the leases or said Mortgage or any part thereof.

7. Nothing contained in this Assignment and no act done or omitted by the Assignee pursuant to the powers and rights granted it hereunder shall be deemed to be a waiver by the Assignee of its rights and remedies under said Note or Mortgage, and this Assignment is made and accepted without prejudice to any of the rights and remedies possessed by the Assignee under the terms of said Note or Mortgage. The right of the Assignee to collect said principal sum, interest and indebtedness and to enforce any other security therefor held by it may be exercised by the Assignee either prior to, simultaneously with, or subsequent to any action taken by it hereunder.

8. In case of any conflict between the terms of this instrument and the terms of the Mortgage described above, the terms of the Mortgage shall prevail, but the Assignee shall have the right at its sole option to resort to this Assignment or said Mortgage as convenience may dictate and may enter the premises in whole or in part under either the said Mortgage or this Assignment as Assignee shall determine.

9. This Assignment shall be governed by and shall be construed in accordance with the laws of the State of Hawaii. If any provision of this Assignment is held to be invalid or unenforceable, such will not affect the validity or enforceability of the other provisions of this Assignment.

10. The parties hereto agree that this instrument may be executed in counterparts, each of which shall be deemed an original, and said counterparts shall together constitute one and the same agreement, binding all of the parties hereto, notwithstanding all of the parties are not signatory to the original or the same counterparts. For all purposes, including, without limitation, recordation, filing and delivery of this instrument, duplicate unexecuted and unacknowledged pages of the counterparts may be discarded and the remaining pages assembled as one document.

THIS ASSIGNMENT, together with the covenants and warranties herein contained, shall inure to the benefit of the Assignee and any subsequent holder of said Note and Mortgage and shall be binding upon the Assignor, its successors and assigns, and any subsequent owner of the mortgaged premises.

IN WITNESS WHEREOF, the Assignor and Assignee have caused these presents to be executed on the day and year first above written.

CYANOTECH CORPORATION, a Nevada corporation

By /s/ Gerald Cysewski

GERALD CYSEWSKI

Its Executive Vice President

By /s/ Jolé Deal

JOLE DEAL

Its Chief Financial Officer

Assignor

FIRST FOUNDATION BANK

By /s/ Christopher M. Naghibi

CHRISTOPHER M. NAGHIBI

Its Chief Credit Officer

Assignee

EXHIBIT"A"

THAT CERTAIN UNRECORDED SUBLEASE NO. K-4

SUBLESSOR:	NATURAL ENERGY LABORATORY OF HAWAII, A BODY CORPORATE AND A PUBLIC INSTRUMENTALITY OF THE STATE OF HAWAII ORGANIZED PURSUANT TO HAWAII REVISED STATUTES, CHAPTER 227D

SUBLESSEE:	CYANOTECH CORPORATION, A NEVADA CORPORATION

DATED:	DECEMBER 29, 1995

TERM:	THIRTY (30) YEARS, COMMENCING - ON JANUARY 1, 1996

THE FOREGOING UNRECORDED SUBLEASE NO. K-4 WAS AMENDED BY THE FOLLOWING:

UNRECORDED SUPPLEMENTAL AGREEMENT NO.1 TO AMEND SUBLEASE K-4 DATED NOVEMBER 21, 1996.

THE FOREGOING UNRECORDED SUBLEASE NO. K-4 AND UNRECORDED SUPPLEMENTAL AGREEMENT WERE SET FORTH BY THE FOLLOWING:

SHORT FORM SUBLEASE NO. K-4

EFFECTIVE AS OF:	DECEMBER 29, 1995
RECORDED:	DOCUMENT NO. 2000-056138

THE REAL PROPERTY IN THE FOREGOING SUBLEASE AS AMENDED, BEING DESCRIBED AS FOLLOWS:

PARCEL FIRST:

1.	213°	29'	15.0"	825.97	FEET ALONG LEASED PARCEL "A" TO A POINT;

2.	123°	29'	15.0"	249.34	FEET ALONG THE REMAINDER OF PARCEL "A" TO A POINT;

					THENCE, ALONG THE REMAINDER OF THE NATURAL ENERGY LABORATORY SITE, H.S.S. PLAT 315-A (C.S.F. NO. 19934) FOR THE FOLLOWING FOUR (4) COURSES;

3.	184°	50'	25.0"	974.90	FEET TO A POINT;

					THENCE, ALONG A CURVE TO THE RIGHT HAVING A RADIUS OF 440.00 FEET, THE CHORD AZIMUTH AND DISTANCE BEING:

4.	205°	30'	12.5"	310.53	FEET TO A POINT;

5.	226°	10'	00.0"	527.04	FEET TO A POINT;

6.	274°	50'	25.0"	749.21	FEET TO A POINT;

7.	4°	50'	25.0"	3,501.37	FEET ALONG THE WESTERLY SIDE OF KEAHOLE AIRPORT (C.S.F. NO. 19137) TO A POINT;

					THENCE, ALONG THE REMAINDER OF LOT 9, ALONG A CURVE TO THE RIGHT HAVING A RADIUS OF 435.00 FEET, THE CHORD AZIMUTH AND DISTANCE BEING:

8.	30°	13'	39.5"	373.00	FEET TO A POINT;

9.	55°	36'	54.0"	72.78	FEET ALONG THE REMAINDER OF LOT 9 TO A POINT;

10.	1 45°	36'	54.0"	1726.08	FEET ALONG THE EASTERLY SIDE OF THE MAIN ROADWAY TO THE NATURAL ENERGY LABORATORY TO A POINT;

11.	123°	29'	15.0"	86.79	FEET ALONG THE EASTERLY SIDE OF THE -"MAINROADWY - TO - THE - NATURAL ENERGY LABORATORY TO THE POINT OF BEGINNING AND CONTAINING AN AREA OF 90.067 ACRES, MORE OR LESS.

PARCEL SECOND:

EASEMENT "1-A" FOR ROADWAY PURPOSES. PARCEL THIRD:

SUBJECT, HOWEVER, to the following:

1.	Title to all mineral and metallic mines reserved to the State of Hawaii.

2.	Shoreline setback lines as they may be established by the State Land Use Commission or by the various Counties pursuant to the Hawaii Revised Statutes .

3.	Easement "2-A", for roadway purposes, as described in or disclosed by the Short Form Sublease No. K-4 recorded April 26, 2000 as Regular System Document No. 2000- 056138 of Official Records.

4.	Easement "3", for electrical purposes, as described in or disclosed by the Short Form Sublease No. K-4 recorded April 26, 2000 as Regular System Document No. 2000- 056138 of Official Records.

5.	Easement "5", for electrical purposes, as described in or disclosed by the Short Form Sublease No. K-4 recorded April 26, 2000 as Regular System Document No. 2000- 056138 of Official Records.

7.	The failure to comply with any of the terms, provisions, conditions and reservation of that certain Sublease No. K-4, more particularly described herein.

9.	The terms and provisions contained in the document entitled "Nondisturbance and Attornment Agreement" recorded October 27, 2008 as Regular System Document No. 2008-165170 of Official Records.

10.	A mortgage to secure an original principal indebtedness of $5,500,000.00, and any other amounts or obligations secured thereby.

Dated:

August 14, 2012

Mortgagor:	Cyanotech Corporation, a Nevada corporation
Mortgagee:	Pacific Rim Bank, a Hawaii corporation

Recorded September 07, 2012 as Regular System Document No. A-46330408 of Official Records.

Sublessor's Consent to Mortgage of Sublease K-4; Estoppel Certificate and Subordination Agreement Recorded September 24,2012 as Regular System Document No. A-46500120 of Official Records.

11.	The Assignment of Lessor's Interest in Leases and Rents, as additional security for the payment of the indebtedness in the amount of $5,500,000.00, which was recorded September 07,2012 as Regular System Document No. A-46330409 of Official Records.

12.	A financing statement

Debtor:	Cyanotech Corporation, a Nevada corporation
Secured Party:	Pacific Rim Bank

Recorded September 07, 2012 as Regular System Document No. A-46330410 of Official Records.

13.	A financing statement

Debtor:	Nutrex Hawaii, Inc., a Hawaii corporation
Secured Party:	Pacific Rim Bank

Recorded September 07,2012 as Regular System Document No. A-46330411 of Official Records.

14.	The terms and provisions contained in the Estoppel Certificate recorded September 07, 2012 as Regular System Document No. A-46330413 of Official Records.

END OF EXHJBIT "A"

Exhibit 4.5

SECURITY AGREEMENT

THIS SECURITY AGREEMENT ("Security Agreement") made on July 30, 2015 by and between CYANOTECH CORPORATION, a Nevada corporation, whose mailing address is 73-4460 Queen Kaahumanu Highway, Suite 102, Kailua-Kana, Hawaii 96740 (hereafter called the "Debtor"), and FIRST FOUNDATION BANK, a California corporation, whose mailing address is 18101 Von Karman Avenue, Suite 750, Irvine, California 92612 (hereafter called the "Secured Party"),

W I T N E S S E T H :

To secure the repayment of a loan made by the Secured Party to the Debtor and NUTREX HAWAII, INC., a Hawaii corporation (hereinafter individually and collectively called the "Borrower") in the principal amount of TWO MILLION FIVE HUNDRED THOUSAND AND NO/I 00 DOLLARS ($2,500,000.00), together with interest thereon, which loan is evidenced by that certain Promissory Note of even date herewith executed by the Borrower, and payable to the Secured Party, the provisions of such Note and any modifications, extensions or renewals thereof being secured hereby, being incorporated herein by reference, and being hereinafter referred to as the "Note";

AND ALSO to secure the performance and observance by the Debtor and Borrower of all of the covenants, conditions and agreements required to be performed by the Debtor under this Agreement, the Mortgage, Security Agreement and Financing Statement (hereinafter called the "Mortgage") and the Term Loan Agreement (hereinafter called the "Loan Agreement"), both executed by the Borrower and the Secured Party concurrently herewith and under any other documents or instruments executed concurrently herewith by the Debtor and Borrower (the Note, the Mortgage, the Loan Agreement and this Security Agreement being hereinafter collectively called the "Loan Documents"), and the payment by the Borrower to the Secured Party of all sums expended or advanced by the Secured Party pursuant to any term or provision of any of the Loan Documents, the provisions of which documents and all amendments thereto being incorporated herein by reference;

AND ALSO to secure the payment by the Borrower to the Secured Party of all other sums now or hereafter loaned or advanced by the Secured Party to the Borrower, or expended by the Secured Party for the account of the Debtor or Borrower, or otherwise owing by the Borrower to the Secured Party, directly or indirectly, on any and every account whatsoever;

THE DEBTOR DOES HEREBY grant, assign, convey, transfer, deliver and set over to the Secured Party, its successors and assigns, absolutely and forever, the following described property, TOGETHER WITH a security interest, as that term is defined in the Uniform Commercial Code (Chapter 490, Hawaii Revised Statutes, as amended), in such property, whether now owned or hereafter acquired, upon the terms and conditions hereinafter set forth:

FIRST: All of Debtor's right, title and interest in and to all personal property of any kind, including without limitation all goods, equipment, machinery, office equipment, software, building materials, furniture, appliances, fixtures and trade fixtures, together with all parts, components, fittings, attachments, accessories, special tools, devices, appurtenances, accessions, renewals, replacements and reconstructions of all or any part thereof, either now owned or hereafter acquired, and wherever located, and all proceeds thereof.

SECOND: All of Debtor's right, title and interest in and to all present and future accounts (as those terms are respectively defined in Section 490:9- 102, Hawaii Revised Statutes, as amended, or hereafter defined under the Uniform Commercial Code ("UCC")), including without limitation health-care-insurance receivables, all contracts arising from Debtor's business (the "Contracts"), receivables, invoices and general intangibles, now or hereafter entered into or owned by Debtor and in all proceeds thereof.

THIRD: All of Debtor's right, title and interest in and to all goods comprising Debtor's inventory, including raw materials, work in process and material used or consumed in Debtor's business and stock in trade, either in possession of the Debtor, warehouseman, bailee or any person, including all inventory acquired by return or repossession and all products and all proceeds of such inventory.

FOURTH: All of Debtor's right, title and interest in and to all instruments, whether negotiable or non-negotiable, securities, and all other investment documents and other writings evidencing a right to the payment of money, documents, such as documents of title and receipts and chattel paper (whether tangible or electronic), deposit accounts, letter-of-credit rights, as well as the proceeds of all such instruments, documents and chattel paper.

FIFTH: All of Debtor's right, title and interest in and to all binders or policies of insurance of any kind (the "Insurance Policies"), covering premises which may be used or occupied by Debtor, and all binders or policies of insurance covering any of the personal property of the Debtor and any and all riders, amendments, extensions, renewals, supplements or revisions of such binders or policies, Insurance Policies, insurance claims and the proceeds thereof.

SIXTH: All right, title and interest of the Debtor in and to any and all existing and future contracts involving or relating to the property located at 73-860 Makako Bay Drive, Kailua-Kona, Hawaii 96740, identified by Tax Map Key No. (3) 7-3-043-063, which is more particularly described in the Mortgage and is hereafter called the "Property", and the structures and improvements thereon, or any of the other items of Collateral described herein, including any and all modifications and extensions thereof.

Together with all of the Debtor's rights and remedies thereunder and the benefit of all covenants therein.

SEVENTH: All right, title and interest of the Debtor in and to any and all awards or payments, including interest thereon, and the right to receive the same, which may be made with respect to the premises by any public or quasi- public authority or corporation as a result of (a) the exercise of the right of eminent domain, (b) the alteration of the grade of any street, or (c) any other injury to or decrease in the value of the Property, to the extent of all amounts which may be secured by the Mortgage at the date of receipt of any such award or payment by the Secured Party, including the counsel fees, costs and disbursements incurred by the Secured Party in connection with the collection of such award or payment, the Debtor agreeing to execute and deliver, from time to time, such further instruments as may be requested by the Secured Party to confirm such assignment to the Secured Party of any such award or payment;

EIGHTH: All right, title and interest of the Debtor in and to all advertising and promotional materials, management contracts, building permits, other permits, licenses, soils tests, appraisals, ledgers, books, journals, software and any other documents, materials or personal property of any kind now or hereafter existing for the Property and belonging to the Debtor.

The Contracts and the Insurance Policies are hereinafter sometimes collectively called the "Contracts". All articles of property described hereinabove are hereinafter sometimes collectively called the "Personal Property". The Contracts and the Personal Property are herein sometimes collectively called the "Collateral".

TOGETHER WITH all right, title and interest of the Debtor in, and to use, lease or dispose of, the Collateral as well as any proceeds deriving from such Collateral;

TO HAVE AND TO HOLD the same unto the Secured Party and its successors and assigns, absolutely and forever, as security as aforesaid;

UPON CONDITION that if the Borrower shall well and truly pay to the Secured Party the principal amount of the Note, with interest and other charges, if any, according to its provisions and effect and shall discharge any and all obligations that now or hereafter may be or become owing, directly or indirectly, by the Borrower and Debtor to the Secured Party under the Loan Documents on any and every account, whether or not the same are matured, of which obligations the books of the Secured Party shall be prima facie evidence, and if the Borrower and Debtor shall fully and faithfully perform and observe all of the covenants, conditions and agreements to be performed and observed by the Debtor and Borrower in the Loan Documents, including this Security Agreement, and any and every other instrument or document secured hereby, and if the Debtor shall pay the cost of release, the Secured Party will, upon request of the Debtor, release the Collateral from the security interest created by this Agreement and these presents shall be void, it being understood, however, that an affidavit, certificate, letter or statement of any officer of the Secured Party showing that any part of the indebtedness remains unpaid or any terms, covenants, conditions, and agreements remain unperformed shall constitute conclusive evidence of the validity, effectiveness and continuing force of this Security Agreement.

Subject to the terms hereof, until the happening of an "Event of Default" as defined in the Loan Agreement, the Debtor shall be entitled to use and to possess the Collateral.

BUT, if any "Event of Default" as defined in the Loan Agreement shall occur which is not timely cured or waived, then the Secured Party, without obligation to do so and without releasing or waiving any of its rights, shall have the right, power and authority, without notice, presentment or demand to declare the unpaid principal amount of the Note and any other indebtedness secured hereby, whether matured or not, together with any interest thereon accrued and unpaid, to be immediately due and payable, and such indebtedness and interest shall thereupon become and be immediately due and payable, and shall bear interest until fully paid at the rate specified in the Note to be paid in the event of default, and the Secured Party may, at its option, without notice and irrespective of whether declaration of default is required to be delivered to any party named in the Loan Documents or other instrument or obligations securing the Note or secured hereunder or whether remedies under other security instruments have been exercised, exercise all right and remedies contained in the Loan Documents, including this Security Agreement, or any other security instruments and obligations and shall have all rights and remedies available to the Secured Party under the Uniform Commercial Code or other applicable laws.

Without limiting the generality of the foregoing, upon the occurrence of an Event of Default which is not timely cured or waived:

(a) The Secured Party may, at the Secured Party's option and at the Debtor's expense, either in the Secured Party's own right or in the name of the Debtor and in the same manner and to the same extent that the Debtor might reasonably so act if this Security Agreement had not been made, (i) demand, sue for, collect, recover, receive and otherwise enforce payment of all proceeds and other sums due and payable from the Collateral, the Debtor hereby requesting and instructing all other parties to the Contracts or liable to the Debtor in connection with the Collateral to make all payments then due or which may thereafter become due thereunder or thereby to the Secured Party, and the Debtor further agreeing that the receipt by the Secured Party of any such payments shall be a complete release and discharge of the obligor or obligors thereof to the extent of the payment or payments so made; (ii) do all things requisite, convenient or necessary to enforce the performance and observance of any and all other covenants, agreements, conditions, terms and provisions of the Contracts, and to exercise all the rights, remedies and privileges of the Debtor contained in the Contracts or arising from the Collateral or any part thereof, including, but not limited to, the making, modifying, amending, enforcing, cancelling, surrendering or accepting the surrender of, terminating or extending any of the Contracts now or hereafter in effect, and also including the compromising, waiving, excusing, or in any manner releasing or discharging of any obligation of any party to or arising from the Collateral; (iii) take possession of the books, papers and accounts of the Debtor, wherever located, relating to the Collateral; (iv) receive, and the Debtor will forthwith surrender to the Secured Party, the possession of the Collateral, and, to the extent permitted by law, the Secured Party may itself or by such officers or agents as it may appoint (A) manage or operate the Collateral or any part thereof, (B) exclude the Debtor, its agents and servants therefrom, (C) make, enforce, modify and accept the surrender of any Contracts or leases covering all or any portion of the Property, (D) obtain and evict tenants, fix or modify purchase prices or rents, fill any and all vacancies and lease the Property or Personal Property, or any part thereof, and (E) do all acts, including the making of contracts, which the Secured Party deems necessary for the care or management of the Property or Personal Property; (v) sue or otherwise collect and receive monies; and (vi) do all other things requisite, convenient or necessary to require the other parties to the Contracts to perform the same or which the Secured Party deems proper to protect the security given hereunder.

(b) The Secured Party may foreclose this Security Agreement in the manner now or hereafter provided or permitted by law, including treatment of the Collateral as real property subject to judicial foreclosure pursuant to Chapter 667, Hawaii Revised Statutes, as amended, and shall have the immediate right to receivership on ex parte order and without bond pending foreclosure, and may sell, assign, transfer or otherwise dispose of the Collateral at public or private sale, in whole or in part, and the Secured Party may, in its own name or as the irrevocably appointed attorney-in-fact of the Debtor, effectually assign and transfer the Collateral, or any part thereof, absolutely and execute and deliver all necessary assignments, deeds, conveyances, bills of sale and other instruments with power to substitute one or more persons or corporations with like power; and, if the Secured Party so instructs the Debtor, the Debtor shall assemble, without expense to the Secured Party, all of the Collateral at a convenient place on the Island of Hawaii, at the Secured Party's option, and the Debtor shall ratify and confirm any such sale or transfer by delivering all proper instruments to such persons or corporations as may be designated in any such request. Any such foreclosure sale, assignment or transfer shall, to the extent permitted by law, be a perpetual bar, both at law and in equity, against the Debtor and all persons and entities lawfully claiming by or through or under the Debtor. Any such sale may be adjourned from time to time. The Secured Party shall give the Debtor notice of any public or private sale as may be required by the UCC and in any event no less than ten (10) days. Upon any sale, the Secured Party may bid for and purchase the Collateral, or any part thereof, and upon compliance with the terms of sale, may hold, retain and possess and dispose of the Collateral, in its absolute right without further accountability, and any purchaser, including the Secured Party, at any such sale may, if permitted by law, after allowing for the proportion of the total purchase price required to be paid in cash for the costs and expenses of the sale, commissioner's compensation and other charges, in paying purchase money, turn in the Note, including interest and charges thereon, in lieu of cash, up to the amount which shall, upon distribution of the net proceeds of such sale, be payable thereon.

In case of any Event of Default which is not timely cured or waived, neither the Debtor nor anyone claiming by, through or under the Debtor, to the extent the Debtor may lawfully so agree, shall or will set up, claim or seek to take advantage of any appraisement, valuation, stay, extension or redemption law now or hereafter in force in any locality where any of the Collateral is situated in order to prevent or hinder the enforcement of this Security Agreement, or the absolute sale of the Collateral or the final and absolute putting into possession thereof, immediately after such sale, of the purchasers thereat; and the Debtor in the Debtor's own right and for all who may claim under the Debtor, hereby waives, to the full extent that the Debtor may lawfully do so, the benefit of all such laws and any and all right to have the estates comprised in the security intended to be created hereby marshalled upon any enforcement of the lien hereof and agrees that the Secured Party or any court having jurisdiction to foreclose such lien may sell the Collateral in parts or as an entirety. The Secured Party may apply the proceeds of any such sale first, to the costs and expenses of such sale and all proceedings in connection therewith, including counsel fees; next, to the payment of any disbursements made by the Secured Party for taxes or assessments or other charges prior to the security interest of this Security Agreement which the Secured Party shall deem it expedient to pay; next, to the repayment of any other disbursements made by the Secured Party according to the terms hereof; and next, to the payment of the unpaid principal or any interest or other charges on the Note, and any other obligations of the Debtor under the Loan Documents; and the remainder, if any, shall be paid over to the Debtor. If such proceeds shall be insufficient to discharge the entire indebtedness owing by the Debtor under this Security Agreement, the Loan Documents and any other instrument or obligation secured hereunder, the Secured Party may have any other legal recourse against the Debtor for the deficiency.

Nothing in this Agreement or the Note shall affect or impair the right, which is unconditional and absolute, of the holder of the Note to enforce payment of the principal or any interest on the Note and all fees, charges and other sums due under the Loan Documents at or after the date therein expressed as the date when the same shall become due, or the obligation of the Debtor secured hereunder, which is likewise unconditional and absolute, to pay such amounts at the respective times and places therein expressed.

A. DEBTOR'S WARRANTIES . The Debtor warrants and represents to the Secured Party as follows:

1. The Debtor is a party to each of the Contracts and is the absolute and sole owner of the interest in and to the Collateral subject to this Security Agreement and Permitted Liens (as defined in the Loan Agreement executed concurrently herewith), and, subject to the terms thereof, with full right and title to assign the same to the Secured Party and to grant the Secured Party a security interest in the same and the sums due or to become due thereunder; the Debtor has to date fully and faithfully performed and observed all of the terms, obligations, covenants, conditions and warranties to be performed and observed by the Debtor thereunder and no event has occurred and is continuing which constitutes, or with notice or the passage of time would constitute, a default thereunder; the Contracts are genuine, valid, subsisting and enforceable upon all parties thereto according to their terms; the Debtor has not alienated, assigned, pledged, transferred, mortgaged or otherwise encumbered any of the rights or interests of the Debtor in the Collateral, including the sums due or to become due thereunder, except for Permitted Liens; there have been no amendments or modifications to any of the Contracts; no financing statement or any other lien or encumbrance covering any of the Collateral is on file in the Bureau of Conveyances of the State of Hawaii, or is otherwise outstanding, except for Permitted Liens; the other parties to the Contracts have no offsets, counterclaims or defenses against the Debtor, whether arising out of the Contracts or otherwise; no payments of any kind required thereunder have been anticipated, discounted, waived, released or set-off; no parties thereto have been discharged, excused or released; no claims under the Contracts have been compromised; the Debtor has not accepted any payments under any of the Contracts, except as permitted by the terms thereof; all payments thereunder are current; and nothing in any of the Contracts would prevent the Secured Party from enforcing any of the rights and remedies that the Debtor might have if this Security Agreement had not been executed.

2. The Debtor is the lawful owner or lessee of the Personal Property and has the right to the use and possession of the Personal Property and has good right to grant or convey the same as security under this Security Agreement; the Personal Property is free and clear of any lien or right prior to or on a parity with the lien of this Security Agreement, except as noted above; the Debtor will, on behalf of the Secured Party, defend forever against any claims or demands thereon made by all persons; and there exist no offsets, counterclaims or defenses to the Debtor's rights therein or thereto.

3. The Debtor's exact and correct legal name is as set forth in the first paragraph of this Security Agreement. The Debtor is registered and in good standing in the State of Hawaii .

B. DEBTOR'S COVENANTS. The Debtor hereby covenants and agrees with the Secured Party as follows:

1. Payment of Taxes, Assessments, Etc. The Debtor will punctually pay and discharge, or cause to be paid and discharged from time to time as the same shall become due, all taxes, rates, assessments, impositions, duties and other charges of every description to which the Collateral, or any part thereof, may during the term of this Security Agreement become liable by authority of law, other than such taxes and other obligations subject to Permitted Protests (as defined in the Loan Agreement executed concurrently herewith). The Debtor will, upon request, deposit copies of the receipts therefor with the Secured Party at least thirty (30) days prior to the final date such taxes, rates, assessments, impositions, duties and other charges may be paid without penalty, other than such taxes and other obligations subject to Permitted Protests.

2. Preservation of Contract s . Other than in the Debtor's ordinary course of business, without the prior written consent of the Secured Party, the Debtor will not: (a) modify, change, alter, extend, terminate, cancel, tender or accept surrender of any of the Contracts; (b) reduce, discount, compromise, settle, waive, release or set-off the amount of any sums payable thereunder, vary the terms of payment or otherwise change, alter or modify the same, or consent to the subordination of interest of any part thereto, or waive, excuse, condone or in any manner release or discharge any party thereunder of or from their respective obligations, covenants, conditions and agreements required to be performed; (c) execute any agreement which would prevent the Secured Party from acting as the Debtor, as provided herein; nor (d) alienate, assign, pledge, transfer or encumber any of the rights or interests of the D ebtor therein or thereto, including the sums due or to become due thereunder, other than pursuant to Permitted Liens.

3. Performance. The Debtor will fully and faithfully abide by, observe and discharge, perform and enforce the performance of the terms, obligations, covenants, conditions, agreements and warranties required to be performed and observed under each of the Contracts, in respect of the Personal Property and under the Loan Documents, including this Security Agreement, and any other instrument secured hereunder, and will give prompt notice to the Secured Party of any default thereunder, whether by the Debtor or by any party thereto, together with an accurate and complete copy of any notice either received or sent by the Debtor. The Debtor will not anticipate, discount, compromise, settle, waive, release or set off any sums due under the Contracts or in respect of the Personal Property or receive any sums in any manner inconsistent with the provisions of the Contracts or this Security Agreement.

4. Indemnification . The Debtor will indemnify and hold and save the Secured Party harmless from and against any and all liability, loss, damage or expense of whatever kind or nature, including attorneys' fees, which the Secured Party may at any time sustain or incur hereunder, including, but not limited to, any claims or demands whatsoever which may be asserted against the Secured Party as a result of any failure on the part of the Debtor to perform, observe or discharge its obligations under any of the Contracts or involving any of the Collateral, other than any of the foregoing arising from Secured Party's gross negligence or willful misconduct. Prior to the actual entry and taking possession of any property by the Secured Party, this Security Agreement shall not operate to place responsibility upon the Secured Party for the control, care, management or repair of any property constituting security hereunder.

5. Enforcement and Collection. The Debtor will, at no cost to the Secured Party, diligently enforce and secure the performance and observance of each and every obligation, covenant, condition, and agreement of the other parties under all the Contracts.

6. Duplicate Originals. At the request of the Secured Party, the Debtor will furnish to the Secured Party a duplicate original of each Contract now existing or hereafter executed by the Debtor.

7. Litigation. The Debtor will appear in and defend any action or proceeding at law or in equity affecting in any manner all or part of the Collateral; and in such event the Debtor will pay all costs, charges and expenses, including cost of evidence of title and attorneys' fees incurred, and will fully indemnify the Secured Party from and against any loss, damage or expense, including attorneys' fees, sustained or incurred by the Secured Party as a Result of any failure on the part of the Debtor to comply with its obligations under this paragraph.

8. Liens. The Debtor will maintain the valid security interest of the Secured Party in the Collateral and the sums due thereunder, free and clear of all liens, claims and encumbrances that may be, or are threatened to be, made prior to or on a parity with the security interest of the Secured Party herein, except for Permitted Liens, liens for taxes or assessments not yet payable or payable without penalty so long as payable, and liens subject to Permitted Protests . The Debtor will not claim any credit on interest payable on the Note or on any other payment secured hereby for any portion of the taxes assessed against the Collateral, and the provisions of any law entitling the Debtor to such credit are hereby expressly waived by the Debtor to the extent they may be lawfully waived. The Debtor will not release any liens on its assets without at least thirty (30) days' prior written notice to the Secured Party.

9. Further Assurances. The Debtor authorizes the Secured Party to file financing statements describing the Collateral, continuation statements, amendments and any other related documents. The Debtor will assist in the preparation of and will execute and acknowledge from time to time, alone or with the Secured Party, and deliver, file or record any further instruments, including security agreements, financing or continuation statements, mortgages or other instruments, and do such further acts as the Secured Party may reasonably request to confirm, establish, continue, maintain and perfect the security interest created by this Security Agreement and to subject the Collateral to the lien hereof, including all renewals, additions, substitutions, replacements or betterments thereto and all proceeds therefrom, and otherwise to protect the same against the rights and interests of third parties, and to execute all documents and perform all acts necessary to enforce the Contracts and to make the same binding, the Debtor agreeing to pay the cost of preparing, filing and recording the same.

10. Acknowledgment of Debt. The Debtor, within ten (10) days after request by the Secured Party in writing, will furnish to the Secured Party, or to any proposed assignee of this Security Agreement, a written statement duly acknowledged of the amount due under this Security Agreement and the Note and due under any material Contract, and whether any offsets, counterclaims or defenses exist against the secured debt.

11. Personal Property. The Debtor agrees: (a) to keep all Personal Property intact and in good condition, order and repair; (b) at the Debtor's own expense to replace any portion thereof which may be broken or become obsolete or worn out or unfit for use; (c) to comply with all laws, rules and regulations made by governmental authority and applicable thereto; (d) not to commit or suffer any strip or waste of the Personal Property; and (e) not to alienate, assign, pledge, transfer or encumber any of the rights or interests of the Debtor therein and thereto, except for Permitted Liens.

12. Insurance. The Debtor will, in the name and for the benefit of the Secured Party, during the term of this Security Agreement, keep all of the Personal Property insured against hazards of such type or types and in such amount or amounts and form of policy as the Secured Party may from time to time reasonably require and will deposit the policies with the Secured Party. The Debtor further agrees to keep paid in advance all premiums and costs of all insurance required hereunder and, upon demand of the Secured Party, will furnish evidence of payment of such premiums. The Debtor, not less than thirty (30) days prior to the expiration date of each policy, shall deliver to the Secured Party a renewal policy or policies, accompanied by evidence of payment satisfactory to the Secured Party. All insurance required hereunder shall be effected under valid and enforceable policies issued by insurance companies authorized to do business in the State of Hawaii, the Debtor hereby acknowledging receipt of written notice from the Secured Party that the Debtor is free to procure any such insurance from any insurance company so authorized. The Secured Party shall not be responsible for such insurance or for the collection of any insurance monies, or for the insolvency of any insurer or insurance underwriter. The amount collected from any fire or other insurance policy may be applied by the Secured Party upon any indebtedness secured hereby and in such order as the Secured Party may determine, or, at the option of the Debtor, the entire amount so collected, or any part thereof, may be applied to the restoration of the Personal Property, without being deemed a payment on any of the indebtedness secured hereby. Such application or restoration shall not cure or waive any default or notice of default hereunder or invalidate any act done pursuant to such notice. No lien upon any of such policies of insurance, or upon any refund or return premium which may be payable on the cancellation or termination thereof, shall be given to anyone other than the Secured Party, except by proper endorsement affixed to such policy and approved by the Secured Party. In the event of loss or physical damage to the Personal Property, the Debtor shall give immediate notice thereof by mail to the Secured Party, and the Secured Party may make proof of loss if the same is not made promptly by the Debtor. In the event of foreclosure of this Security Agreement, or other transfer of title to the Collateral in the extinguishment of the indebtedness secured hereby, all right, title and interest of the Debtor in and to any insurance policies then in force shall pass to the purchaser or the grantee. All such policies or other contracts for such insurance issued by the respective insurers shall, to the extent obtainable, be without contribution and contain an agreement by the insurer that the policy or other contract shall not be cancelled or materially changed without at least thirty (30) days' prior written notice to the Secured Party.

13. Change in Status. The Debtor will not change its location or place of organization or its name without at least thirty (30) days' prior written notice to the Secured Party. The Debtor shall keep the Secured Party timely advised with respect to any such changes, and the Secured Party shall have no affirmative obligation to know about any such changes.

C. MUTUAL COVENANTS . The Debtor and the Secured Party mutually covenant and agree each with the other as follows:

1. Secured Party Not Obligated To Perform. Neither the acceptance of this Security Agreement by the Secured Party, nor the exercise of any rights hereunder by the Secured Party, shall be construed in any way as an assumption by the Secured Party of any obligations, responsibilities or duties of the Debtor arising from the Collateral assigned hereunder or otherwise bind the Secured Party to the performance of any of the terms and provisions contained in any of the Contracts or of any obligations respecting the Personal Property, it being expressly understood that the Secured Party shall not be obligated to perform, observe or discharge any obligation, responsibility, duty or liability of the Debtor under any of the Collateral, including, but not limited to, appearing in or defending any action, expending any money or incurring any expenses in connection therewith.

2. Right of Secured Party To Defend Action Affecting Security. The Secured Party may, at the Debtor's expense, appear in and defend any action or proceeding at law or in equity purporting to affect the Secured Party's security interest under this Security Agreement.

3. Right of Secured Party To Prevent or Remedy Default. If the Debtor shall fail to perform any of the covenants, conditions and agreements required to be performed and observed by the Debtor under the Loan Documents, including this Security Agreement, the Contracts, or any other instruments secured hereby, or in respect of the Personal Property, the Secured Party (a) may, but shall not be obligated to, take action the Secured Party deems necessary or desirable to prevent or remedy any such default by the Debtor or otherwise to protect the security interest of the Secured Party under this Security Agreement, and (b) shall have the absolute and immediate right to enter in and upon or take possession of the Property, Collateral or any part thereof to such extent and as often as the Secured Party, in its sole discretion, deems necessary or desirable in order to prevent or to cure any such default by the Debtor, or otherwise to protect the security of this Security Agreement. The Secured Party may advance or expend such sums of money for the account of the Debtor, as the Secured Party in its sole discretion deems necessary for any such purpose.

4. Secured Party's Expenses. All advances, costs, expenses, charges and attorneys' fees which the Secured Party may make, pay or incur under any provision of this Security Agreement for the protection of its security or for the enforcement of any of its rights hereunder, or in foreclosure proceedings commenced and subsequently dismissed, or in any dispute or litigation in which the Secured Party or the holder of the Note may become involved by reason of or arising out of the Loan Documents, including this Security Agreement, or any other instrument secured hereby, or the Collateral or the care and management of the Collateral, shall be paid by the Debtor to the Secured Party, upon demand, and shall bear interest until paid at the rate specified by the Note to be paid in the event of default thereunder, all of which obligations shall be additional charges upon the Collateral and be equally secured hereby.

5. Secured Party's Right of Set-Off. Upon the occurrence of any Event of Default, or if the Secured Party shall be served with garnishee process in which the Debtor shall be named as defendant, whether or not the Debtor shall be in default hereunder at the time, the Secured Party may, but shall not be required to, set off any indebtedness owing by the Secured Party to the Debtor against any indebtedness secured hereby, without first resorting to the security hereunder and without prejudice to any other rights or remedies of the Secured Party or its security interest herein.

6. No Waiver. In case the Secured Party shall have proceeded to enforce any right or remedy hereunder and such proceedings shall have been discontinued or abandoned for any reason, then in every such case, the Debtor and the Secured Party shall be restored to their former positions and rights hereunder with respect to the Collateral, and all rights, remedies and powers of the Secured Party shall continue as if no such proceeding had been taken. No failure or delay on the part of the Secured Party in exercising any right, remedy or power under this Security Agreement or in giving or insisting upon strict performance by the Debtor hereunder or in giving notice hereunder shall operate as a waiver of the same or any other power or right, and no single or partial exercise of any such power or right shall preclude any other or further exercise thereof or the exercise of any other such power or right. The Secured Party, notwithstanding any such failure, shall have the right thereafter to insist upon the strict performance by the Debtor of any and all of the terms and provisions of this Security Agreement to be performed by the Debtor. The collection and application of proceeds, the entering and taking possession of the Collateral, and the exercise of the rights of the Secured Party contained in the Loan Documents, including this Security Agreement, shall not cure or waive any default, or affect any notice of default or invalidate any acts done pursuant to such notice. No waiver by the Secured Party of any breach or default of or by any party hereunder, shall be deemed to alter or affect the Secured Party's rights hereunder with respect to any prior or subsequent defaults.

7. Remedies. No right or remedy herein reserved to the Secured Party is intended to be exclusive of any other right or remedy, but each and every such remedy shall be cumulative and is not in lieu of but shall be in addition to any other rights or remedies given under this Security Agreement. Any and all of the Secured Party's rights and remedies may be exercised from time to time and as often as such exercise is deemed necessary or desirable by the Secured Party.

8. Right of Secured Party To Extend Time of Payment, Substitute, Release Security, Etc. Without affecting the liability of any person, including the Debtor, for the payment of any indebtedness secured hereby, or the lien of this Security Agreement on the Collateral, or the remainder thereof, for the full amount of any indebtedness unpaid, the Secured Party may from time to time, without notice or without affecting or impairing any of the Secured Party's rights under this Security Agreement: (a) release any person liable for the payment of any of the indebtedness, (b) extend the time or otherwise alter the terms of payment of any of the indebtedness or accept a renewal note or notes to evidence such an extension or alteration, (c) accept additional security therefor of any kind, including (but not limited to) deeds of trust or mortgages, (d) alter, substitute or release from any security interest or lien held by the Secured Party any property securing the indebtedness secured hereby to its several securities therefor in such order and manner as it may deem fit, (e) join in granting any easement or creating any restriction thereon, or (f) join in any extension, subordination or other agreement affecting this Security Agreement or the lien or charge thereof.

D. MISCELLANEOUS

1. Terms Commercially Reasonable. The terms of this Security Agreement shall be deemed commercially reasonable within the meaning of the Uniform Commercial Code.

2. Definitions. The terms "advances", "costs" and "expenses" shall include, but shall not be limited to, attorneys' fees whenever incurred. The terms "indebtedness" and "obligations" shall mean and include, but shall not be limited to, all claims, demands, obligations and liabilities whatsoever, however arising, whether owing by the Debtor individually or as a partner, or jointly or in common with any other party, and whether absolute or contingent, and whether owing by the Debtor as principal debtor or as a co-maker or as endorser, liquidated or unliquidated, and whenever contracted, accrued or payable. In this Security Agreement, whenever the context so required, the neuter gender includes the masculine or feminine, and the singular number includes the plural and vice versa.

3. Paragraph Headings. The headings of paragraphs herein are inserted only for convenience and shall in no way define, describe or limit the scope or intent of any provisions of this Security Agreement.

4. Change , Amendment , Etc. No change, amendment, modification, cancellation or discharge or any provision of this Security Agreement shall be valid unless consented to in writing by the Secured Party.

5. Assignment of Secured Party's Interest. The Secured Party shall have the right to assign its interest in this Security Agreement to any subsequent holder of the Note.

6. Parties in Interest. As and when used herein, the term "Debtor" shall mean and include the Debtor and its successors and permitted assigns, and the term "Secured Party" shall mean and include the Secured Party herein named and its successors and assigns, and all covenants and agreements herein shall be binding upon and inure to the benefit of the Debtor, the Secured Party and their respective successors and permitted assigns. Where there is more than one entity identified as the "Debtor", the obligations of each such entity shall be joint and several.

7. Applicable Laws; Severability. This Security Agreement shall be governed by and shall be construed and interpreted under and pursuant to the laws of the State of Hawaii. If any provision of this Security Agreement is held to be invalid or unenforceable, the validity or enforceability of the other provisions of this Security Agreement shall remain unaffected.

8. Notices. All notices, demands or documents which are required or permitted to be given or served hereunder shall be deemed to be delivered when a record has been (a) personally delivered, (b) received by telecopy, (c) received through the Internet, or (d) sent by registered or certified mail addressed as follows:

To:

CYANOTECH CORPORATION

73-4460 Queen Kaahumanu Highway, Suite 102

Kailua-Kona, Hawaii 96740

Attention: JOLE DEAL

With a copy to: Gregory Nasky

Goodsill Anderson Quinn & Stifel LLP

999 Bishop Street, Suite 1600

Honolulu, Hawaii 96813

To:

FIRST FOUNDATION BANK

18101 Von Karman Avenue, Suite 750

Irvine, California 92612

9. Waiver Of Right To Jury Trial. THE DEBTOR WAIVES ITS RIGHT TO A JURY TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS AGREEMENT, ANY RIGHTS, REMEDIES, OBLIGATIONS, OR DUTIES HEREUNDER, OR THE PERFORMANCE OR ENFORCEMENT HEREOF OR THEREOF. Except as prohibited by law, the Debtor waives any right which it may have to claim or recover in any litigation referred to in the preceding sentence any special, exemplary, punitive or consequential damages or any damages other than, or in addition to, actual damages.

10. Counterparts. This Security Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original, but all of which shall constitute one and the same instrument, and in making proof of this Security Agreement, it shall not be necessary to produce or account for more than one such counterpart.

11. Terms and Conditions of This Security Agreement Supplement Other Loan Documents. The terms and conditions of this Security Agreement applicable to the Debtor and the covenants, representations and warranties of the Debtor under this Security Agreement shall not be deemed to supersede, amend or modify the obligations and duties of the Debtor or other parties under the Loan Agreement and the covenants, representations and warranties of the Debtor hereunder merely supplement and do not supplant or supersede provisions of similar effect or subject matter in the other Loan Documents.

---THE NEXT PAGE IS THE SIGNATURE PAGE---

IN WITNESS WHEREOF, the Debtor and the Secured Party have executed these presents on the day and year first above written.

CYANOTECH CORPORATION, a Nevada corporation

By /s/ Gerald Cysewski

GERALD CYSEWSKI

Its Executive Vice President

By /s/ Jolé Deal

JOLE DEAL

Its Chief Financial Officer

Debtor

FIRST FOUNDATION BANK

By /s/ Christopher M. Naghibi

CHRISTOPHER M. NAGHIBI

Its Chief Credit Officer

Secured Party

Exhibit 4.6

SECURITY AGREEMENT

THIS SECURITY AGREEMENT ("Security Agreement") made on July 30, 2015 by and between NUTREX HAWAII, INC., a Hawaii corporation, whose mailing address is 73-4460 Queen Kaahumanu Highway, Suite I 02, Kailua-Kona, Hawaii 96740 (hereafter called the "Debtor"), and FIRST FOUNDATION BANK, a California corporation, whose mailing address is 18101 Von Karman Avenue, Suite 750, Irvine, California 92612 (hereafter called the "Secured Party"),

W I T N E S S E T H :

To secure the repayment of a loan made by the Secured Party to the Debtor and CYANOTECH CORPORATION, a Nevada corporation (hereinafter individually and collectively called the "Borrower") in the principal amount of TWO MILLION FIVE HUNDRED THOUSAND AND N0/100 DOLLARS ($2,500,000.00), together with interest thereon, which loan is evidenced by that certain Promissory Note of even date herewith executed by the Borrower, and payable to the Secured Party, the provisions of such Note and any modifications, extensions or renewals thereof being secured hereby, being incorporated herein by reference, and being hereinafter referred to as the "Note";

AND ALSO to secure the performance and observance by the Debtor and Borrower of all of the covenants, conditions and agreements required to be performed by the Debtor under this Agreement, the Mortgage, Security Agreement and Financing Statement (hereinafter called the "Mortgage") executed by CYANOTECH CORPORATION, as mortgagor, and the Secured Party concurrently herewith, and the Term Loan Agreement (hereinafter called the "Loan Agreement") executed by the Borrower and the Secured Party concurrently herewith and under any other documents or instruments executed concurrently herewith by the Debtor and Borrower (the Note, the Mortgage, the Loan Agreement and this Security Agreement being hereinafter collectively called the "Loan Documents"), and the payment by the Borrower to the Secured Party of all sums expended or advanced by the Secured Party pursuant to any term or provision of any of the Loan Documents, the provisions of which documents and all amendments thereto being incorporated herein by reference;

FIRST: All of Debtor's right, title and interest in and to all personal property of any kind, including without limitation all goods, all equipment, machinery, office equipment, software, building materials, furniture, appliances, fixtures and trade fixtures, together with all parts, components, fittings, attachments, accessories, special tools, devices, appurtenances, accessions, renewals, replacements and reconstructions of all or any part thereof, either now owned or hereafter acquired, and wherever located, and all proceeds thereof.

SECOND: All of Debtor's right, title and interest in and to all present and future accounts (as those terms are respectively defined in Section 490:9-

102, Hawaii Revised Statutes, as amended, or hereafter defined under the Uniform Commercial Code ("UCC")), including without limitation health-care-insurance receivables, all contracts arising from Debtor's business (the "Contracts"), receivables, invoices and general intangibles, now or hereafter entered into or owned by Debtor and in all proceeds thereof.

TOGETHER WITH all right, title and interest of the Debtor in, and to use, lease or dispose of, the Collateral as well as any proceeds deriving from such Collateral;

TO HAVE AND TO HOLD the same unto the Secured Party and its successors and assigns, absolutely and forever, as security as aforesaid;

Subject to the terms hereof, until the happening of an "Event of Default" as defined in the Loan Agreement, the Debtor shall be entitled to use and to possess the Collateral.

Without limiting the generality of the foregoing, upon the occurrence of an Event of Default which is not timely cured or waived:

(b) The Secured Party may foreclose this Security Agreement in the manner now or hereafter provided or permitted by law, including treatment of the Collateral as real property subject to judicial foreclosure pursuant to Chapter 667, Hawaii Revised Statutes, as amended, and shall have the immediate right to receivership on ex parte order and without bond pending foreclosure, and may sell, assign, transfer or otherwise dispose of the Collateral at public or private sale, in whole or in part, and the Secured Party may, in its own name or as the irrevocably appointed attorney-in-fact of the Debtor, effectually assign and transfer the Collateral, or any part thereof, absolutely and execute and deliver all necessary assignments, deeds, conveyances, bills of sale and other instruments with power to substitute one or more persons or corporations with like power; and, if the Secured Party so instructs the Debtor, the Debtor shall assemble, without expense to the Secured Party, all of the Collateral at a convenient place on the Island of Hawaii, at the Secured Party's option, and the Debtor shall ratify and confirm any such sale or transfer by delivering all proper instruments to such persons or corporations as may be designated in any such request. Any such foreclosure sale, assignment or transfer shall, to the extent permitted by law, be a perpetual bar, both at law and in equity, against the Debtor and all persons and entities lawfully claiming by or through or under the Debtor . Any such sale may be adjourned from time to time. The Secured Party shall give the Debtor notice of any public or private sale as may be required by the UCC and in any event no less than ten (10) days. Upon any sale, the Secured Party may bid for and purchase the Collateral, or any part thereof, and upon compliance with the terms of sale, may hold, retain and possess and dispose of the Collateral, in its absolute right without further accountability, and any purchaser, including the Secured Party, at any such sale may, if permitted by law, after allowing for the proportion of the total purchase price required to be paid in cash for the costs and expenses of the sale, commissioner's compensation and other charges, in paying purchase money, tum in the Note, including interest and charges thereon, in lieu of cash, up to the amount which shall, upon distribution of the net proceeds of such sale, be payable thereon.

A. DEBTOR'S WARRANTIES. The Debtor warrants and represents to the Secured Party as follows:

3. The Debtor's exact and correct legal name is as set forth in the first paragraph of this Security Agreement. The Debtor is registered and in good standing in the State of Hawaii.

B. DEBTOR'S COVENANTS. The Debtor hereby covenants and agrees with the Secured Party as follows:

2. Preservation of Contracts. Other than in the Debtor's ordinary course of business, without the prior written consent of the Secured Party, the Debtor will not: (a) modify, change, alter, extend, terminate, cancel, tender or accept surrender of any of the Contracts; (b) reduce, discount, compromise, settle, waive, release or set-off the amount of any sums payable thereunder, vary the terms of payment or otherwise change, alter or modify the same, or consent to the subordination of interest of any part thereto, or waive, excuse, condone or in any manner release or discharge any party thereunder of or from their respective obligations, covenants, conditions and agreements required to be performed; (c) execute any agreement which would prevent the Secured Party from acting as the Debtor, as provided herein; nor (d) alienate, assign, pledge, transfer or encumber any of the rights or interests of the Debtor therein or thereto, including the sums due or to become due thereunder, other than pursuant to Permitted Liens.

4. Indemnification. The Debtor will indemnify and hold and save the Secured Party harmless from and against any and all liability, loss, damage or expense of whatever kind or nature, including attorneys' fees, which the Secured Party may at any time sustain or incur hereunder, including, but not limited to, any claims or demands whatsoever which may be asserted against the Secured Party as a result of any failure on the part of the Debtor to perform, observe or discharge its obligations under any of the Contracts or involving any of the Collateral, other than any of the foregoing arising from Secured Party's gross negligence or willful misconduct. Prior to the actual entry and taking possession of any property by the Secured Party, this Security Agreement shall not operate to place responsibility upon the Secured Party for the control, care, management or repair of any property constituting security hereunder.

6. Duplicate Originals. At the request of the Secured Party, the Debtor will furnish to the Secured Party a duplicate original of each Contract now existing or hereafter executed by the Debtor.

7. Litigation. The Debtor will appear in and defend any action or proceeding at law or in equity affecting in any manner all or part of the Collateral; and in such event the Debtor will pay all costs, charges and expenses, including cost of evidence of title and attorneys' fees incurred, and will fully indemnify the Secured Party from and against any loss, damage or expense, including attorneys' fees, sustained or incurred by the Secured Party as a result of any failure on the part of the Debtor to comply with its obligations under this paragraph.

8. Liens. The Debtor will maintain the valid security interest of the Secured Party in the Collateral and the sums due thereunder, free and clear of all liens, claims and encumbrances that may be, or are threatened to be, made prior to or on a parity with the security interest of the Secured Party herein, except for Permitted Liens, liens for taxes or assessments not yet payable or payable without penalty so long as payable, and liens subject to Permitted Protests. The Debtor will not claim any credit on interest payable on the Note or on any other payment secured hereby for any portion of the taxes assessed against the Collateral, and the provisions of any law entitling the Debtor to such credit are hereby expressly waived by the Debtor to the extent they may be lawfully waived. The Debtor will not release any liens on its assets without at least thirty (30) days' prior written notice to the Secured Party.

11. Personal Propert y . The Debtor agrees: (a) to keep all Personal Property intact and in good condition, order and repair; (b) at the Debtor's own expense to replace any portion thereof which may be broken or become obsolete or worn out or unfit for use; (c) to comply with all laws, rules and regulations made by governmental authority and applicable thereto; (d) not to commit or suffer any strip or waste of the Personal Property; and (e) not to alienate, assign, pledge, transfer or encumber any of the rights or interests of the Debtor therein and thereto, except for Permitted Liens.

13. Change in Status . The Debtor will not change its location or place of organization or its name without at least thirty (30) days' prior written notice to the Secured Party. The Debtor shall keep the Secured Party timely advised with respect to any such changes, and the Secured Party shall have no affirmative obligation to know about any such changes.

C. MUTUAL COVENANTS. The Debtor and the Secured Party mutually covenant and agree each with the other as follows:

1. Secured Party Not Obligated To Perform . Neither the acceptance of this Security Agreement by the Secured Party, nor the exercise of any rights hereunder by the Secured Party, shall be construed in any way as an assumption by the Secured Party of any obligations, responsibilities or duties of the Debtor arising from the Collateral assigned hereunder or otherwise bind the Secured Party to the performance of any of the terms and provisions contained in any of the Contracts or of any obligations respecting the Personal Property, it being expressly understood that the Secured Party shall not be obligated to perform, observe or discharge any obligation, responsibility, duty or liability of the Debtor under any of the Collateral, including, but not limited to, appearing in or defending any action, expending any money or incurring any expenses in connection therewith.

D. MISCELLANEOUS

1. Terms Commercially Reasonable. The terms of this Security Agreement shall be deemed commercially reasonable within the meaning of the Uniform Commercial Code.

4. Change, Amendment, Etc . No change, amendment, modification, cancellation or discharge or any provision of this Security Agreement shall be valid unless consented to in writing by the Secured Party.

5. Assignment of Secured Party's Interest . The Secured Party shall have the right to assign its interest in this Security Agreement to any subsequent holder of the Note.

To:

NUTREX HAWAII, INC.

73-4460 Queen Kaahumanu Highway, Suite 102

Kailua-Kana, Hawaii 6740

Attention: JOLE DEAL

with a copy to: Gregory Nasky

Goodsill Anderson Quinn & Stifel LLP

999 Bishop Street, Suite 1600

Honolulu, Hawaii 96813

To:

FIRST FOUNDATION BANK

18101 Von Karman Avenue, Suite 750

Irvine, California 92612

Such addresses may be changed from time to time by the addressee by serving notice as provided above. Service of such notice or demand shall be deemed complete upon the earlier of the date of actual deli very or the third day after the date of mailing if mailed in Hawaii.

---THE NEXT PAGE IS THE SIGNATURE PAGE---

IN WITNESS WHEREOF, the Debtor and the Secured Party have executed these presents on the day and year first above written.

NUTREX HAWAII, INC., a Hawaii corporation

By /s/ Gerald Cysewski

GERALD CYSEWSKI

Its Executive Vice President

By /s/ Jolé Deal

JOLE DEAL

Its Chief Financial Officer

Debtor

FIRST FOUNDATION BANK

By /s/ Christopher M. Naghibi

CHRISTOPHER M. NAGHIBI

Its Chief Credit Officer

Secured Party

Exhibit 4.7

Form 4279-3	UNITED STATES DEPARTMENT OF AGRICULTURE	FORM APPROVED
(Rev. 07-05)	RURAL DEVELOPMENT	OMB NO . 0570-0017

CONDITIONAL COMMITMENT

(Business and Industry and Section 9006 Program)

TO: Lender	Case No.
PACIFIC RIM BANK	61-005-600267157
Lender's Address	State
TWO WATERFRONT PLAZA 500 ALA MOANA BLVD ., #2A	HAWAII
HONOLULU HI 96813-4920
Borrower	Principal Amount of Loan
CYANOTECH CORPORATION & NUTREX HAWAII, INC.	$2,500,000.00

From an examination of information supplied by the Lender and other relevant information, it appears that the transaction can properly be completed.

Therefore, the United States of America acting through the United States Department of Agriculture (USDA) hereby agrees that, in accordance with applicable provisions of the regulations, it will execute Form 4279-5, "Loan Note Guarantee," subject to the conditions and requirements specified in the regulations and herein.

The Loan Note Guarantee fee payable by the lender to USDA will be the amount as specified in the regulations on the date of this Conditional Commitment for Guarantee. The interest rate for the loan is WSJ PRIME + 2.0; 6.0% FLOOR % 1/. If a variable rate is used, it must be tied to a base rate agreed to by the Lender and USDA which cannot change more often than quarterly and must be published periodically in a financial publication specifically agreed to by the Lender and Borrower.

A Loan Note Guarantee will not be issued until the Lender certifies that there has been no adverse change in the Borrower's financial condition, nor any other adverse change in the borrower's condition, for any reason, during the period of time from USDA's issuance of this Conditional Commitment for Guarantee to issuance of the Loan Note Guarantee regardless of the cause or causes of the change and whether the cause or causes of the change were within the Lender's or Borrower's control. The Lender's certification must address all adverse changes and be supported by financial statements of the Borrower and its guarantors executed not more than 60 days before the time of certification . As used in this paragraph only, the term "Borrower" includes any parent, affiliate, or subsidiary of the Borrower.

In the event of the Government's failure to issue a guarantee in a situation where it is found to be in breach, the other party's remedy is limited to a suit for the guaranteed portion of principal and interest which ultimately remains unpaid.

This agreement becomes null and void unless the conditions are accepted by the Lender and Borrower within 60 days from the date of issuance by USDA.

Except as set out below, the purposes for which the loan funds will be used and the amounts to be used for such purposes are set out in the Application for Loan Guarantee . Once this instrument is executed and returned to USDA no major change of conditions or approved loan purpose as listed on the forms will be considered. Additional Conditions and Requirements including Source and Use of Funds: 2/

If the conditions set forth in this commitment are not met within 120 days from the date of this commitment, USDA reserves the right to discontinue the processing of the application and terminate its commitment. If USDA decides to terminate this commitment USDA will provide the Lender a written notice at least 14 days prior to termination. J1.

			UNITED STATES OF AMERICA

		By	/s/ Denise M. Oda

			DENISE M. ODA
Date:	04-14-2015		Business Programs Director
			( Title )

According to the Paperwork Reduction Act of 1995, no persons are required to respond to a collection of information unless it displays a valid OMB control number . The valid OMB control number for this information collection is 0575●0170. the time required to complete this information is estimated to average 15 minutes per response, including t he lime for reviewing instructions, searching e xisting data sources, ga1hering and maintaining the data needed, and completing and reviewing the collection of information.

Position]

Form 4279-3 (Rev 07-05)

ACCEPTANCE OF CONDITIONS

To: USDA4/

RURAL DEVELOPMENT Federal Bldg., Rm. 311

154 Waianuenue Avenue

Hilo, HI 96720

The conditions of this Conditional Commitment for Guarantee including attachments are acceptable and the undersigned intends to proceed with the loan transaction and request issuance of a Loan Note Guarantee within days.

	PACIFIC RIM BANK

		( Name of Lender )

Date: April 16, 2015	By: /s/ Signature not legible

CYANOTECH CORPORATION

Date: April 14, 2015
By: /s/ Gerald Cysewski     /s/ Jole Deal

Its EVP                                   Its CFO

NUTREX HAWAII, INC.

Date: April 14, 2015 By: /s/ Gerald Cysewski     /s/ Jole Deal

Its EVP                                   Its CFO

1/	Insert fixed interest rate or, if authorized by regulations, variable interest rate followed by a "V" and the appropriate loan subsidy rate, if applicable.

2/	Insert any additional conditions or requirements in this space or on an attachment referred to in this space; otherwise, insert "NONE".

3/	USDA will determine and insert the date by which conditions should be met.

4/	Return completed and signed copy of this form to USDA issuing office.

Attachment to Form RD 4279-3, "Conditional Commitment" CYANOTECH CORPORATION & NUTREX HAWAII, INC. Case Number: 61-005-600267157

$2,500,000 Business & Industry (B&I) Guaranteed Loan

Approval Date: 04/06/15

LOAN PURPOSE:

The purpose of the loan is to provide working capital for a commercial property located at 73-860 Makako Bay Drive, Kailua-Kona, Hawaii 96740. Funds will be used for working capital, and fees & costs associated with this loan. Upon final disbursement of loan funds, a copy of the lender's detailed loan settlement must be provided to Rural Development as evidence that all funds were disbursed in amounts and for purposes outlined above.

PERCENTAGE OF GUARANTEE:

2.	An 80% guarantee will be issued after any development work is completed and the terms of this Conditional Commitment have been met. INTEREST RATE AND TERM:

The term of the loan is to be seven (7) years. The interest rate is to be established by the formula: IR = Wall Street Journal Prime Rate+ 2.00 BASIS POINTS with a floor rate of6.0%. The interest rate is to not vary more often than quarterly. The loan is to be fully amortized with monthly installments. When the rate changes, installments are to be adjusted to assure there are no balloon payments. Reasonable and customary prepayment penalties will not be prohibited. Default interest rates, late payment fees, and interest on interest are not covered by the guarantee.

RENEWAL FEE:

This loan guarantee is subject to an annual renewal fee of one-half of one percent of the guaranteed portion of the outstanding principal as of December 31st of each year. The calculation is one-half of one percent of the outstanding principal multiplied by the guarantee percentage. Payments are due to Rural Development by January 31st of each year. For loans where the Loan Note Guarantee is issued between October 1 and December 31, the first annual renewal fee will be due January 31st of the second year following the date the Loan Note Guarantee is issued. Payments not received by April 1st of the following year are considered delinquent and may result in cancellation of the guarantee to the lender. Holder's rights will continue in effect as specified in the Loan Note Guarantee and Assignment Guarantee Agreement.

COLLATERAL:

This loan is to be secured by a second mortgage or deed of trust (including assignment of rents) on the borrower's leasehold interest in the land and improvements located on a 90.067-acre commercial property at 73-860 Makako Bay Drive, Kailua-Kona, Hawaii 96740. The lender is to secure a transferable assignment of the lessor's ground lease. The term of the borrower's leasehold interest must exceed the term of the B&I loan.

Last Updated: July 11, 2014

Conditional Commitment Attachment

There are to be no construction or mechanics liens against the security.

The lender will not require compensating balances or other collateral as a means of eliminating the lender's exposure for the unguaranteed portion of the loan. The entire loan will be secured by the same security with equal lien priority for the guaranteed and unguaranteed portions of the loan. The unguaranteed portion of the loan will neither be paid first nor given any preference or priority over the guaranteed portion.

GUARANTOR(S):

6.	CYANOTECH CORPORATION & NUTREX HAW AII, INC. is to have full liability for the loan . INSURANCE:

Hazard insurance naming the lender as mortgagee or loss payee, as applicable, will be maintained in an amount at least equal to the outstanding loan balance or the replacement value (whichever is greater) of the collateral. Hazard insurance includes fire, windstorm, lightning, hail, explosion, riot, civil commotion, aircraft, vehicle, marine, smoke, builder's risk during construction, and property damage. Worker’s Compensation must be carried in accordance with State law.

Key person life insurance is not required. EQUITY:

A minimum of ten percent tangible balance sheet equity will be required at loan closing. Tangible balance sheet equity must be met in the form of either cash or tangible earning assets contributed to the business and reflected on the business' balance sheet. Tangible balance sheet equity will be determined using a balance sheet prepared in accordance with Generally Accepted Accounting Principles and will not include subordinated debt or appraisal surplus. Prior to issuance of the Loan Note Guarantee, the lender will provide Rural Development with a balance sheet as of loan closing reflecting the business' post-closing status and a certification that the borrower met the minimum tangible balance sheet equity requirement at loan closing.

LOAN AG RE EMENT:

9.	A loan agreement between the lender and borrower will be executed which conforms to RD Instruction 4279-B, § 4279.161(b)(ll).

The borrower must obtain audited financial statements annually, prepared in accordance with Generally Accepted Accounting Principles, and submit them to the lender within 90 days of the business' fiscal yearend. Financial statements will contain, at a minimum, a balance sheet and a profit and loss statement reflecting the financial condition of the borrower as of its yearend. The lender is responsible for obtaining all required financial statements from the borrower, analyzing them, and providing copies of statements with a detailed written analysis to Rural Development within 120 days.

b .

All personal and commercial guarantors of this loan must provide annual financial statements to the lender within 90 days of guarantor's fiscal or calendar yearend.

Conditional Commitment Attachment

The borrower will refrain from co-signing or otherwise becoming liable for obligations or liabilities of others.

Dividend payments will be limited to an amount that, when taken, will not adversely affect the repayment ability of the borrower. No dividend payments will be made unless (1) an after-tax profit was made in the preceding fiscal year, (2) the borrower is and will remain in compliance with covenants of the Loan Agreement and Conditional Commitment, (3) all borrower debts are paid to a current status, and (4) prior written concurrence of the lender is obtained. This is not intended to apply to dividend payments to cover personal tax liability resulting from profitability of the business.

Borrower will not invest in additional fixed asset purchases in an annual aggregate of more than $500,000 without concurrence of the lender. Borrower will not lease, sell, transfer, or otherwise encumber fixed assets without the concurrence of the lender. Disposition of fixed assets serving as collateral for this loan must also have the concurrence of Rural Development.

Compensation of officers and owners will be limited to an amount that, when taken, will not adversely affect the repayment ability of the borrower. This amount may not be increased year to year unless (1) an after-tax profit was made in the preceding fiscal year, (2) the borrower is and will remain in compliance with covenants of the Loan Agreement and Conditional Commitment, (3) all borrower debts are paid to a current status, and (4) prior written concurrence of the lender is obtained.

Borrower's debt-to-net worth, based upon yearend financial statements and as defined by Generally Accepted Accounting Principles, shall not exceed 1.25 to 1, and the Borrower's current ratio, similarly defined, shall not fall below 2.1 to 1.

Borrower shall not enter into any merger or consolidation or sell the business without prior written concurrence of the lender.

Outside investment and loans/advances to stockholders, owners, officers, or affiliates require the prior written consent of the lender. Loans from stockholders, owners, officers or affiliates must be subordinated to the guaranteed loan or converted to stock. No payments are to be made on these debts unless the B&I loan is current and in good standing.

ENVIRONMENTAL:

10.

The lender will take action to ensure that all construction associated with this credit facility and the continuing operations of the business are completed in accordance with applicable Federal, State, and local laws, regulations, and ordinances, as related to any adverse impact the project/operations may potentially have on the environment.

APPRAISAL:

11.

A current (less than 12 month old) appraisal acceptable to Rural Development and completed in accordance with USPAP and FIRREA indicating that the fair market value of the real property security is not less than $15,600,000, excluding any value attributed to business valuation. Lenders will be responsible for ensuring that appraisal values adequately reflect the actual value of the collateral. A qualified appraiser must determine the appraised market value in accordance with RD Instruction 4279- B, section 4279.144, prior to issuance of the Loan Note Guarantee. Collateral must have documented value sufficient to protect the interest of the lender and the Agency. The discounted collateral value must be at least equal to the loan amount.

Conditional Commitment Attachment

LOAN GUARANTEE CLOSING:

12.	PACIFIC RIM BANK and CYANOTECH CORPORATION & NUTREX HAWAII, INC. must each execute Form AD-3031, "Assurance Regarding Felony Conviction or Tax Delinquent Status for Corporate Applicants," at loan closing and provide the forms to the Agency prior to issuance of the Loan Note Guarantee.

13.	Coincident with, or immediately after loan closing, and prior to issuance of the guarantee, the lender will provide Rural Development with the following:

A guarantee fee of$60,000 (= $2,500,000 x 80% x 3%) made payable to the U.S. Treasury and Form RD 1980-19, "Guaranteed Loan Closing Report."

This guarantee will be governed by the previously executed RD Form 4279-4, "Lender's Agreement," dated March 27, 2012.

A copy of the executed Loan Agreement that contains any continuing loan conditions set forth by the Agency in this Conditional Commitment.

A copy of the executed Promissory Note(s).

A copy of the executed Settlement Statement.

Original, executed Forms RD 4279-14, "Unconditional Guarantee," as required;

Original, executed Forms AD-3031, "Assurance Regarding Felony Conviction or Tax Delinquent Status for Corporate Applicants," for both the lender and borrower.

Written lender certification in accordance with RD Instruction 4279-B, § 4279.181.

Borrower's loan closing balance sheet, prepared in accordance with Generally Accepted Accounting Principles, demonstrating required tangible balance sheet equity. The balance sheet must reflect the business' post loan closing status.

14.

The lender is required to hold in its own portfolio or retain a minimum of 5 percent of the total loan amount. The amount required to be retained must be of the unguaranteed portion of the loan and cannot be participated to another. The lender may sell the remaining amount of the unguaranteed portion of the loan only through participation.

15.

Agency personnel and any person(s) accompanying Agency personnel shall be authorized to enter upon the premises and into any building thereon, whether permanent or temporary, jointly or separately, with personnel of the lender to carry out the functions involving their interests. Scheduled and unscheduled inspections may be conducted by these personnel to determine the effectiveness of the loan program.

Conditional Commitment Attachment

16.

The lender will always retain responsibility for servicing the entire loan and for notifying the Agency of any violations of the terms of the Loan Agreement or Conditional Commitment. The lender will advise the Agency of the loan classification within 90 days of issuance of the guarantee and whenever the lender revises its classification of the loan.

17.

PACIFIC RIM BANK (lender) certifies by accepting this Conditional Commitment for a $2,500,000 guarantee the lender understands that no adverse change may occur during the period of time from Agency issuance of the Conditional Commitment to issuance of the Loan Note Guarantee relating to CYANOTECH CORPORATION & NUTREX HAWAII, INC. (borrower) regardless of the cause or causes of the change and whether the change or cause(s) of the change were within the lender's or borrower's control. Prior to each disbursement, lender shall be in receipt of satisfactory evidence that there has been no unremedied adverse change in the financial or any other condition of the Borrower since the date of the application or since any preceding disbursements which would warrant withholding or not making further disbursements.

18.	CYANOTECH CORPORATION & NUTREX HAWAII, INC., by accepting Form 4279-3, "Conditional Commitment," certifies that it is not delinquent on any Federal debt, including tax debt.

19.

By signing this Conditional Commitment, the lender and borrower certify that they understand and accept the conditions outlined herein. No provision stated herein shall be amended or waived without the prior written consent of the lender and Rural Development. Any loans or advances made to the Borrower by the Lender after issuance of the Loan Note Guarantee will not be covered by the guarantee, except authorized protective advances. Regulations contained in RD Instructions 4279-A and 4279-B, and Form RD 4279-4, "Lender's Agreement," will apply.

20.	Any request for an extension of the expiration date of this Conditional Commitment must be made in writing and received by Rural Development prior to the expiration date. This request must be accompanied by a full explanation as to why the extension is needed.

Exhibit 4.8

HAZARDOUS SUBSTANCES CERTIFICATE AND INDEMNITY AGREEMENT

THIS CERTIFICATE AND INDEMNITY is made in connection with and as partial consideration for the making of a loan in the principal amount of $2,500,000.00 (the "Loan") by FIRST FOUNDATION BANK, a California corporation ("Lender"), to CYANOTECH CORPORATION, a Nevada corporation, and NUTREX HAWAII, INC., a Hawaii corporation (individually and collectively, "Borrower"), and secured by property owned by CYANOTECH CORPORATION ("Mortgagor") (the Borrower and Mortgagor being hereafter individually and collectively referred to as the "Indemnitor").

NOW THEREFORE, in consideration of, and to induce Lender to make the Loan, the undersigned Indemnitor certifies, represents, warrants, covenants and agrees as follows:

1. Indemnitor has no knowledge after due investigation of (a) the presence of any "Hazardous Substances" (as defined below) on that certain real property situate at 73-860 Makako Bay Drive, Kailua-Kana, Island and County of Hawaii, State of Hawaii, identified by Tax Map Key No. (3) 7-3-043-063, legally described in Exhibit "A" attached hereto (the "Property"), or (b) any spills, releases, discharges or disposal of Hazardous Substances that have occurred or are presently occurring on or onto the Property or any "Other Property" (as defined below).

2. As of the date of this Agreement, Indemnitor has no knowledge after due investigation of any failure to comply with all applicable local, state and federal environmental laws, regulations, ordinances and administrative and judicial orders relating to the generation, recycling, reuse, sale, storage, handling transport and disposal of any Hazardous Substances by any person on the Property.

3. Indemnitor bas duly investigated the present and past uses of the Property and has made due inquiry of the appropriate governmental agencies and offices having jurisdiction over the Property as to whether the Property or any property in the immediate vicinity of the Property is or has been the site of storage of or contamination by any Hazardous Substances and Indemnitor has examined or been advised of the laws regulating the environment that are applicable to the Property. Upon Lender's request, Indemnitor will provide Lender with a written summary of its investigations and copies of all inquiries and responses.

4. Indemnitor has not and will not release or waive the liability of any previous owner, lessee, or operator of the Property or any party who may be potentially responsible for the presence or removal of Hazardous Substances on or from the Property, and that Indemnitor has made no promises of indemnification regarding Hazardous Substances to any party, other than existing and prior lessors, sublessors, and lender, including Lender.

5. Indemnitor agrees to immediately notify Lender if Indemnitor becomes aware of (a) any Hazardous Substances or other environmental problem or liability with respect to the Property or any Other Property, or (b) any lien, action or notice resulting from violation of any laws, regulations, ordinances or orders described in paragraphs 2 or 8 of this Agreement. At its own cost, Indemnitor will take all actions which are necessary or desirable to clean up any Hazardous Substances affecting the Property, including removal, containment or any other remedial action required by governmental authorities.

6. Indemnitor shall indemnify and hold Lender harmless from and against any and all claims, demands, damages, losses, liens, liabilities, penalties, fines, lawsuits and other proceedings and costs and expenses (including attorneys' fees and disbursements), which accrue to or are made against or incurred by Lender on or after transfer of the Property, pursuant to foreclosure proceedings or in lieu thereof, and arise directly or indirectly from or out of, or in any way connected with (a) the inaccuracy of the certifications contained herein, (b) any activities on the Property during Indemnitor's ownership, possession or control of the Property which directly or indirectly result in the Property or any Other Property becoming contaminated with Hazardous Substances and (c) the discovery and/or cleanup of Hazardous Substances which were deposited or existing on the Property or any Other Property prior to such a transfer. Indemnitor acknowledges that it will be solely responsible for all costs and expenses relating to the cleanup of Hazardous Substances from the Property or from any Other Property as between Indemnitor and Lender.

7. Indemnitor's obligations under this Agreement are unconditional and shall not be limited by any nonrecourse or other limitations of liability provided for in any document relating to the Loan ("Loan Documents"). The representations, warranties and covenants of Indemnitor set forth in this Agreement (including without limitation the indemnity provided for in paragraph 6 above) (a) are separate and distinct obligations from Indemnitor's obligations under the Loan and the other Loan Documents evidencing and securing the Loan, (b) are not secured by the Mortgage and other security documents securing the Loan and shall not be discharged or satisfied by foreclosure of the liens created by such Mortgage or other security documents, (c) shall not be discharged by the payoff of the Loan, and (d) shall continue in effect indefinitely after any transfer of the Property, including without limitation transfers pursuant to foreclosure proceedings (whether judicial or nonjudicial), or by any transfer in lieu of foreclosure.

8. As used in this Agreement, "Hazardous Substances" shall mean: any chemical, substance or material defined, classified or designated as hazardous, toxic or radioactive, or other similar term, by any federal, state or local environmental statute, regulation, or ordinance presently in effect or that may be promulgated in the future, as they may be amended from time to time, including but not limited to:

Federal Resource Conservation and Recovery Act of 1976, 42 U.S.C. Section 6901, et seg.

Federal Comprehensive Environmental Response, Compensation, and Liability Act of 1980, 42 U.S.C. Section 9601, et seg.

Federal Hazardous Materials Transportation Act, 49 U.S.C. Section 5101, et seg.

Federal Clean Air Act, 42 U.S.C. Section 7401, et

Federal Water Pollution Control Act, Federal Clean Water Act of 1977, 33 U.S.C. Section 1251, et seg.

Federal Insecticides and Environmental Pesticide Control Act, 7 U.S.C. Section 136, et seg.

Federal Toxic Substances Control Act, 15 U.S.C. Section 2601, et seg.

Federal Safety of Public Water Systems Act, 42 U.S.C. Section 300f, et seg.

Hawaii Hazardous Waste, Hawaii Revised Statutes Chapter 342J Hawaii Air Pollution Control, Hawaii Revised Statutes Chapter 342B Hawaii Ozone Layer Protection, Hawaii Revised Statutes Chapter 342C Hawaii Water Pollution, Hawaii Revised Statutes Chapter 342D Hawaii Nonpoint Source Pollution Management and Control, Hawaii Revised Statutes Chapter 342E

Hawaii Integrated Solid Waste Management, Hawaii Revised Statutes Chapter 342G

Hawaii Solid Waste Pollution, Hawaii Revised Statutes Chapter 342H Hawaii Underground Storage Tanks, Hawaii Revised Statutes Chapter 342L Hawaii Asbestos and Lead, Hawaii Revised Statutes Chapter 342P

The term "Hazardous Substances" shall also include all toxic fungi and mold including, but not limited to Stachybotrys atra, Stachybotrys chartarum, Aspergillus, Penicillium, Fusarium, Trichoderma and Memnoniella.

As used in this Agreement, "Other Property" means any property which become contaminated with Hazardous Substances as a result of construction, operations or other activities on, or the contamination of, the Property.

9. This Agreement shall be binding upon and inure to the benefit of Lender, Indemnitor and their respective heirs, representatives, successors and assigns. This Agreement shall be governed under the laws of the State of Hawaii. In any suit, action or appeal therefrom to enforce or interpret this Agreement the prevailing party shall be entitled to recover its costs incurred therein including attorneys' fees and disbursements.

10. If Indemnitor includes more than one person or entity, each shall be jointly and severally liable hereunder as Indemnitor, respectively.

11. Counterparts. The parties hereto agree that this instrument may be executed in counterparts, each of which shall be deemed an original, and said counterparts shall together constitute one and the same agreement, binding all of the parties hereto, notwithstanding all of the parties are not signatory to the original or the same counterparts.

---THE NEXT PAGE IS THE SIGNATURE PAGE---

IN WITNESS WHEREOF, Indemnitor has executed this Certificate and Indemnity Agreement dated JUL 3 0 2015

CYANOTECH CORPORATION, a Nevada corporation

	By /s/ Gerald Cysewski
	GERALD CYSEWSKI
	Its Executive Vice President


	By /s/ Jolé Deal
	JOLE DEAL
	Its Chief Financial Officer

NUTREX HAWAII, INC., a Hawaii corporation

	By /s/ Gerald Cysewski
	GERALD CYSEWSKI
	Its Executive Vice President

	By /s/ Jolé Deal
	JOLE DEAL

	Its Chief Financial Officer

"Indemnitor"

EXHIBIT"A"

THAT CERTAIN UNRECORDED SUBLEASE NO. K-4

SUBLESSOR:	NATURAL ENERGY LABORATORY OF HAWAII, A BODY CORPORATE AND A PUBLIC INSTRUMENTALITY OF THE STATE OF HAWAII ORGANIZED PURSUANT TO HAWAII REVISED STATUTES, CHAPTER 227D

SUBLESSEE:	CYANOTECH CORPORATION, A NEVADA CORPORATION

DATED:	DECEMBER 29, 1995

TERM:	THIRTY (30) YEARS, COMMENCING - ON JANUARY 1, 1996

THE FOREGOING UNRECORDED SUBLEASE NO. K-4 WAS AMENDED BY THE FOLLOWING:

UNRECORDED SUPPLEMENTAL AGREEMENT NO.1 TO AMEND SUBLEASE K-4 DATED NOVEMBER 21, 1996.

THE FOREGOING UNRECORDED SUBLEASE NO. K-4 AND UNRECORDED SUPPLEMENTAL AGREEMENT WERE SET FORTH BY THE FOLLOWING:

SHORT FORM SUBLEASE NO. K-4

EFFECTIVE AS OF:	DECEMBER 29, 1995
RECORDED:	DOCUMENT NO. 2000-056138

THE REAL PROPERTY IN THE FOREGOING SUBLEASE AS AMENDED, BEING DESCRIBED AS FOLLOWS:

PARCEL FIRST:

1.	213°	29'	15.0"	825.97	FEET ALONG LEASED PARCEL "A" TO A POINT;

2.	123°	29'	15.0"	249.34	FEET ALONG THE REMAINDER OF PARCEL "A" TO A POINT;

					THENCE, ALONG THE REMAINDER OF THE NATURAL ENERGY LABORATORY SITE, H.S.S. PLAT 315-A (C.S.F. NO. 19934) FOR THE FOLLOWING FOUR (4) COURSES;

3.	184°	50'	25.0"	974.90	FEET TO A POINT;

					THENCE, ALONG A CURVE TO THE RIGHT HAVING A RADIUS OF 440.00 FEET, THE CHORD AZIMUTH AND DISTANCE BEING:

4.	205°	30'	12.5"	310.53	FEET TO A POINT;

5.	226°	10'	00.0"	527.04	FEET TO A POINT;

6.	274°	50'	25.0"	749.21	FEET TO A POINT;

7.	4°	50'	25.0"	3,501.37	FEET ALONG THE WESTERLY SIDE OF KEAHOLE AIRPORT (C.S.F. NO. 19137) TO A POINT;

					THENCE, ALONG THE REMAINDER OF LOT 9, ALONG A CURVE TO THE RIGHT HAVING A RADIUS OF 435.00 FEET, THE CHORD AZIMUTH AND DISTANCE BEING:

8.	30°	13'	39.5"	373.00	FEET TO A POINT;

9.	55°	36'	54.0"	72.78	FEET ALONG THE REMAINDER OF LOT 9 TO A POINT;

10.	1 45°	36'	54.0"	1726.08	FEET ALONG THE EASTERLY SIDE OF THE MAIN ROADWAY TO THE NATURAL ENERGY LABORATORY TO A POINT;

11.	123°	29'	15.0"	86.79	FEET ALONG THE EASTERLY SIDE OF THE -"MAINROADWY - TO - THE - NATURAL ENERGY LABORATORY TO THE POINT OF BEGINNING AND CONTAINING AN AREA OF 90.067 ACRES, MORE OR LESS.

PARCEL SECOND:

EASEMENT "1-A" FOR ROADWAY PURPOSES. PARCEL THIRD:

SUBJECT, HOWEVER, to the following:

1.	Title to all mineral and metallic mines reserved to the State of Hawaii.

2.	Shoreline setback lines as they may be established by the State Land Use Commission or by the various Counties pursuant to the Hawaii Revised Statutes .

3.	Easement "2-A", for roadway purposes, as described in or disclosed by the Short Form Sublease No. K-4 recorded April 26, 2000 as Regular System Document No. 2000- 056138 of Official Records.

4.	Easement "3", for electrical purposes, as described in or disclosed by the Short Form Sublease No. K-4 recorded April 26, 2000 as Regular System Document No. 2000- 056138 of Official Records.

5.	Easement "5", for electrical purposes, as described in or disclosed by the Short Form Sublease No. K-4 recorded April 26, 2000 as Regular System Document No. 2000- 056138 of Official Records.

7.	The failure to comply with any of the terms, provisions, conditions and reservation of that certain Sublease No. K-4, more particularly described herein.

9.	The terms and provisions contained in the document entitled "Nondisturbance and Attornment Agreement" recorded October 27, 2008 as Regular System Document No. 2008-165170 of Official Records.

10.	A mortgage to secure an original principal indebtedness of $5,500,000.00, and any other amounts or obligations secured thereby.

Dated:

August 14, 2012

Mortgagor:	Cyanotech Corporation, a Nevada corporation
Mortgagee:	Pacific Rim Bank, a Hawaii corporation

Recorded September 07, 2012 as Regular System Document No. A-46330408 of Official Records.

Sublessor's Consent to Mortgage of Sublease K-4; Estoppel Certificate and Subordination Agreement Recorded September 24,2012 as Regular System Document No. A-46500120 of Official Records.

11.	The Assignment of Lessor's Interest in Leases and Rents, as additional security for the payment of the indebtedness in the amount of $5,500,000.00, which was recorded September 07,2012 as Regular System Document No. A-46330409 of Official Records.

12.	A financing statement

Debtor:	Cyanotech Corporation, a Nevada corporation
Secured Party:	Pacific Rim Bank

Recorded September 07, 2012 as Regular System Document No. A-46330410 of Official Records.

13.	A financing statement

Debtor:	Nutrex Hawaii, Inc., a Hawaii corporation
Secured Party:	Pacific Rim Bank

Recorded September 07,2012 as Regular System Document No. A-46330411 of Official Records.

14.	The terms and provisions contained in the Estoppel Certificate recorded September 07, 2012 as Regular System Document No. A-46330413 of Official Records.

END OF EXHJBIT "A"

Exhibit 4.9

LAND COURT SYSTEM	REGULAR SYSTEM
After Recordation, Return by Mail D Pick-up D Phone#:

Document Contains 11 Pages

Tax Map Key No. (3) 7-3-043-063

SUBLESSOR'S CONSENT TO MORTGAGE OF SUBLEASE K-4;

ESTOPPEL CERTIFICATE AND SUBORDINATION AGREEMENT

CONSENT.

The NATURAL ENERGY LABORATORY OF HAWAII AUTHORITY, STATE OF HAWAII (the "Sublessor"), the (i) lessee under that certain unrecorded General Lease No. S- 5619, made by and between the STATE OF HAWAII, BY ITS BOARD OF LAND AND NATURAL RESOURCES (the "Lessor") and Lessee-Sublessor dated July 13, 2001, as amended (the "Master Lease"), which consolidated General Lease No. S-4717 and General Lease No. S-5157, and (ii) sublessor under that certain Sublease K-4, entered into by and between the Sublessor and CYANOTECH CORPORATION, a Nevada corporation (the "Sublessee-Mortgagor"), dated December 29, 1995, as amended by Supplemental Agreement No.1 to Amend Sublease K-4, dated November21, 1996, a short form of which is dated April 21, 2000, and recorded in the Bureau of Conveyances of the State of Hawaii (the "Bureau"), as Document No. 2000-056138, and by Supplemental Agreement No.2 dated March 9, 2012, but effective as of February 1, 2012 (the "Sublease"), DOES HEREBY CONSENT to the Mortgage, Security Agreement and Financing Statement dated JULY 30, 2015 recorded in said Bureau as Document No. (the "Mortgage"), made by the Sublessee-Mortgagor, to FIRST FOUNDATION BANK, a California corporation (the "Mortgagee"), intended to be recorded in said Bureau concurrently herewith, covering the Sublease, upon the following terms and conditions:

Enforcement of Mortgage.

In the event of any default by the Sublessee-Mortgagor under the Mortgage, the Mortgagee shall have the right to enforce the Mortgage and acquire title to the subleasehold estate in any lawful way, and pending foreclosure of the Mortgage may take possession of and rent the premises demised by the Sublease, and upon foreclosure thereof or assignment of the Sublease to the Mortgagee in lieu of foreclosure, the Mortgagee may without further consent of the Lessee-Sublessor sell and assign the subleasehold estate by assignment in which the assignee shall expressly assume and agree to observe and perform all of the covenants of the sublessee under the Sublease, including but not limited to the specific purpose as set forth in Exhibit A of the Sublease and such assignee may make a purchase money mortgage of the Sublease to the Mortgagee, provided that upon execution of any such assignment or mortgage, a true copy thereof shall be delivered promptly to the Lessee-Sublessor and that no other or further assignment of the Sublease shall be made without complying with the terms of the Sublease. The Mortgagee or any tenant of the Mortgagee pending foreclosure shall be liable to perform the obligations imposed upon the sublessee by the Sublease only during the period such party has possession or ownership of the subleasehold estate . Nothing contained in the Mortgage shall release or be deemed to relieve the Sublessee-Mortgagor from the full and faithful observance and performance of the sublessee's covenants under the Sublease or from any liability for the nonobservance or nonperformance thereof, nor be deemed to constitute a waiver of any rights of the Lessee-Sublessor under the Sublease, and the terms, covenants and conditions of the Sublease shall control in case of any conflict with the provisions of the Mortgage, except as herein set forth.

Protection of Mortgagee.

Sublessee-Mortgagee Default.

The Lessee-Sublessor will not take any action to terminate the Sublease, or incur any expenses reimbursable by the sublessee, by reason of the bankruptcy or insolvency of the Sublessee-Mortgagor or because of the occurrence of any default thereunder, if the Mortgagee shall, after the receipt of written notice from the Lessee-Sublessor of intention to terminate the Sublease for any such cause and within the time period specified in paragraph 39 of the Sublease (the "Cure Period"), either remedy such default, if the default is a monetary default, or, if such is not the case, shall undertake in writing to perform all covenants and conditions of the sublessee under the Sublease until such time as the Sublease shall be assigned upon foreclosure pursuant to the Mortgage or assigned in lieu of foreclosure or until such time as the default of the Sublessee-Mortgagor shall be cured. If such default shall be the failure of the Sublessee-Mortgagor to promptly discharge or cause to be discharged any lien, charge or encumbrance which may be filed against the demised premises or improvements thereon junior in priority to the Mortgage, the Mortgagee may remedy such default by effecting the foreclosure of the Mortgage, and such default shall be deemed to be remedied within the Cure Period if such foreclosure proceedings are instituted within such period and thereafter prosecuted in a diligent and timely manner.

Management Company Operation of Leased Premises Option.

Provided that (i) Mortgagee cures the default as set forth in the written notice from the Lessee-Sublessor, within the Cure Period, and continues to make the required payments under the Sublease to the Lessee-Sublessor, and assumes Sublessee-Mortgagor's other obligations under the Sublease and (ii) Mortgagee has succeeded to the interest of Sublessee-Mortgagor under the Sublease as a result of foreclosure proceedings, the exercise of a power of sale granted by the Mortgage, the assignment of a lease in lieu of foreclosure, or through other means, then Mortgagee shall have the right, but not the obligation, to contract with a management company to enter into possession of the leased premises for the purpose of operating the Sublessee-Mortgagor's facilities and business. In the event that Mortgagee elects (i) to cure the default under the Sublease; and (ii) to contract with a management company, Mortgagee agrees to promptly give written notice of such election and the name and address of the management company to the Lessee-Sublessor, as the case may be. Mortgagee further agrees that the management company so selected shall have past and sufficient experience in the industry of operating Sublessee-Mortgagor's facilities and business. Notwithstanding the fact that Lender has cured any defaults, or makes and continues to make the required payments under the Sublease as a result of foreclosure proceedings through the exercise of a power of sale granted by the Mortgage, or the assignment of a lease in lieu of foreclosure, or through other means, or has contracted with a management company to operate the Sublessee-Mortgagor's facilities and business, Mortgagee's only obligation under the Sublease is to fulfill all obligations under the Sublease and make the required payments for the period of time that either Mortgagee or the management company is in possession of the leased premises and is operating such facilities. The Lessee-Sublessor expressly agrees, acknowledges and understands that by the fact that Mortgagee has succeeded to the interest of the Sublessee-Mortgagor as set forth above, Mortgagee has not and will not become legally obligated under the Sublease, except for the making of the required payments and for compliance with the obligations under the Sublease for the period of time that Mortgagee or the management company is in possession of the leased premises.

Sublessee-Mortgagee Bankruptcy.

In the event of the commencement of a bankruptcy proceeding concerning the Sublessee-Mortgagor, the Lessee-Sublessor agrees and acknowledges that the actual or deemed rejection of the Sublease (or any "New Sublease" entered into pursuant to the terms of this Agreement) under any provision of the Bankruptcy Code (Title 11, United States Code) or any successor law having similar effect, shall not effect a termination of the Sublease or affect or impair the Mortgagee's lien thereon or rights with respect thereto; provided, however, that this provision is not intended and shall not be deemed to confer any rights or benefits upon the Sublessee-Mortgagor or the Sublessee-Mortgagor's bankruptcy trustee.

If it appears necessary to the Mortgagee, in order to give legal or practical effect to the preceding sentence, the Lessee-Sublessor agrees that promptly upon the written request of the Mortgagee, the Lessee-Sublessor will enter into a new sublease ("New Sublease") of the demised premises to the Mortgagee or its designee (the "New Sublessee") on the following terms and conditions:

(a) The New Sublease shall be for the remainder of the term of the Sublease, effective as of the effective date of the rejection of the Sublease, at the rent and additional rent, and upon the terms, covenants and conditions (including all options to renew but excluding requirements which are not applicable or which have already been fulfilled) of the Sublease;

(b) The Mortgagee shall pay or cause to be paid to the Lessee-Sublessor at the time of the execution and delivery of such New Sublease, any and all sums which are at the time of execution and delivery thereof due under the Sublease and, in addition thereto, all reasonable expenses, including reasonable attorneys' fees, which the Lessee-Sublessor shall have incurred by reason of the actual or deemed rejection of the Sublease and the execution and delivery of the New Sublease, and the New Sublessee shall undertake, by executing the New Sublease, to perform all covenants and conditions of the New Sublease until such time as the New Sublease shall be assigned by the New Sublessee;

(c) Any New Sublease made pursuant to this Agreement shaH be prior to any mortgage or other lien on, or charge or encumbrance on the fee or leasehold interest in the demised premises which was subordinate to the Sublease, and the New Sublessee shall have the same right, title and interest in and to the demised premises and the buildings and improvements thereon as the Sublessee-Mortgagor had under the Sublease;

(d) The New Sublessee may assign such New Sublease and shall thereupon be released from all liability for the performance or observance of the covenants and conditions in such New Sublease contained on the sublessee's part to be performed and observed from and after the date of such assignment, provided that any assignment by the New Sublessee shall be subject to paragraphs 30 and 31 of the Sublease.

II.	Estoppel Certificates.

Lessee-Sublessor's Certificate.

The Lessee-Sublessor hereby certifies to the Mortgagee that as of the date hereof (1) the Master Lease and the Sublease are in full force and effect and unmodified by any instruments, except as may be hereinabove provided and Lessee-Sublessor agrees to provide Mortgagee with a copy of any agreement between the Lessor and the Lessee-Sublessor modifying, canceling or surrendering the Master Lease at least forty-five (45) days prior to the effective date of such agreement; and that no agreement between the Lessee-Sublessor and the Sublessee-Mortgagor modifying the Sublease shall be effective without forty-five (45) days prior written notice to the Mortgagee, provided that any modification to the Sublease which would materially affect the Mortgagee's interest under the Mortgage, including, but not limited to any canceling or surrendering of the Sublease, and which is objected to by the Mortgagee shall not be effective; (2) the Sublessee-Mortgagor is not in default in the payment of rent under the Sublease or in the performance or observance of any covenant or condition to be performed or observed by the Sublessee-Mortgagor thereunder; (3) no event has occurred which authorizes, or with the lapse of time will authorize, the Lessee-Sublessor to terminate the Sublease; and (4) the execution and delivery by the Sublessee-Mortgagor of the Mortgage will constitute neither a breach of the Sublessee-Mortgagor's obligations as sublessee under the Sublease, nor an event of default thereunder.

Sublessee-Mortgagor's Certificate.

The Sublessee-Mortgagor hereby certifies to the Mortgagee that as of the date hereof(!) the Sublease is in full force and effect and unmodified by any instruments, except as may be hereinabove provided; (2) the Sublessee-Mortgagor is not in default in the payment of rent under the Sublease or in the performance or observance of any covenant or condition to be performed or observed by the Sublessee-Mortgagor thereunder; (3) no event has occurred which authorizes, or with the lapse of time wiii authorize, the Lessee-Sublessor to terminate the Sublease; and (4) the execution and delivery by the Sublessee-Mortgagor of the Mortgage will constitute neither a breach of the Sublessee-Mortgagor's obligations as sublessee under the Sublease, nor an event of default thereunder.

III.	Subordination Aifeement.

Subordination of Personal Property Lien Rights. The Lessee-Sublessor hereby subordinates any lien rights it may have in the Personal Property (defined below) under the Sublease, and all rights of levy, possession or sale it may have in the Personal Property, for unpaid rent or other payments due and payable to the Lessee-Sublessor, to the security interest and lien of the Mortgagor in the Personal Property under the Mortgage and other security agreements and financings statements; provided, however, that notwithstanding anything to the contrary contained herein, in no event shall the subordination of Personal Property include the subordination of the Lessee-Sublessor's interest in any buildings, structures and improvements placed, installed or constructed on, within, under, over or across the Premises or the Lessee Sublessor's interest in the leased premises. As used herein, "Personal Property" means all goods, materials, supplies, chattels, furniture, inventory, equipment, machinery, accounts, and other personal property of the Sublessee-Mortgagor, whether now owned or hereafter acquired by the Sublessee-Mortgagor, and the proceeds and products thereof, and all replacements, substitutions, additions and accessions thereto; provided that any real property and improvements on the land are not included as part of this definition.

Mortgagee or its agents may, at no expense to the Sublessee-Mortgagor, in accordance with the terms of agreements between Mortgagee and Sublessee-Mortgagor, enter onto the leased premises at any time or times in which the leased premises are open to the public and take possession of, sever or remove the Personal Property or any part thereof, and said Personal Property upon severance and/or removal may be sold, transferred or otherwise disposed of by Mortgagee free and discharged of all liens, claims, demands, rights or interests of the Sublessee-Mortgagor. Mortgagee, or its representatives, may advertise and conduct public auctions or private sales of the Personal Property at the premises, and the Sublessee-Mortgagor shall not interfere with any such auction or sale.

Mortgagee agrees to make such repairs caused by any severance and/or removal of the Personal Property to the extent reasonably necessary to restore the leased premises to its condition immediately prior to such removal. Except as above stated with respect to repairs, Mortgagee shall not be liable for any diminution in value of the premises caused by the absence of personal property actually removed or by any necessity of replacing such removed personal property.

The Lessee-Sublessor agrees not to take any action to terminate the right of Sublessee-Mortgagor to occupy the leased premises or to have the Personal Property located on the leased premises removed without giving Mortgagee written notice of the same and an opportunity to cure any default for a period of time no less than the Cure Period. During such time Mortgagee shall be entitled to cure or cause to be cured any default upon which such termination is based upon the same terms as Sublessee-Mortgagor is entitled to effect such cure. The Lessee-Sublessor will permit Mortgagee to remain on the leased premises for a period of up to ninety (90) days following receipt by Mortgagee of written notice of such termination and direction that the Personal Property be removed, provided that within ten (l 0) days of its receipt of such notice Mortgagee notifies the Lessee-Sublessor of its wish to maintain occupancy of the leased premises, and the period of such occupancy. Mortgagee, upon giving such notice, shall be obligated to pay to the Lessee-Sublessor the rents, installments or other amounts due the Lessee-Sublessor with respect to the leased premises for the period of Mortgagee's occupancy. Mortgagee's right to occupy the leased premises pursuant to the preceding two sentences shall be extended, at Mortgagee's request and subject to payment by Mortgagee as aforesaid, for any period Mortgagee is prohibited from selling the Personal Property due to the imposition of the automatic stay under the Bankruptcy Code. In the event Mortgagee is not seeking to enforce its lien on the real property, but is only enforcing its security interest in the Personal Property, Mortgagee shall not be liable to the Lessee-Sublessor for any unpaid or unperformed obligations of Sublessee-Mortgagor to the Lessee-Sublessor for the period prior to the effective date of Mortgagee accepting occupancy pursuant to the foregoing provisions, nor shall Mortgagee be liable for any such obligations arising after its period of occupancy.

IV.	Miscellaneous.

As used herein, the terms "Lessee-Sublessor", "Sublessee-Mortgagor"and "Mortgagee" shall mean and include the Lessee-Sublessor, the Sublessee-Mortgagor and the Mortgagee named above and their respective heirs, executors, personal representatives, successors in trust and assigns. Where there is more than one Lessee-Sublessor, Sublessee-Mortgagor or Mortgagee, the use of the singular shall be construed to include the plural wherever the context shall so require. The use of any gender herein shall include all genders.

This instrument may be executed in counterparts, each of which shall be deemed an original, and said counterparts shall together constitute one and the same agreement, binding all of the parties hereto, notwithstanding all of the parties are not signatories to the original or the same counterparts. In making proof of this instrument, it shall not be necessary to produce or account for more than one such counterpart. For all purposes, duplicate unexecuted pages of the counterparts may be discarded and the remaining pages assembled as one document.

IT IS UNDERSTOOD that, except as specifically provided herein, should there be any conflict between the terms of the Sublease and the terms of this Consent, the former shall control.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

IN WITNESS WHEREOF, the Sublessor and the Sublessee-Mortgagor have executed these presents on this 14 ^th day of August , 2015.

SUBLESSOR:	NATURAL ENERGY LABORATORY OF HAWAII AUTHORITY

APPROVED AS TO FORM	By /s / Gregory Barbour

	Its Executive Director
/s/ Bryan C Ya

Deputy Attorney General
Dated: 8/11/15

	SUBLESSEE-MORTGAGOR:	CYANOTECH CORPORATION, a Nevada corporation

		By /s/ Gerald Cysewski
		GERALD CYSEWSKI
		Its Executive Vice President

		By /s/ Jolé Deal
		JOLE DEAL
		Its Chief Financial Officer

Exhibit 31.1

Certification Pursuant

To 18 U. S. C. Section 1350,

As Adopted Pursuant To

Section 302 of the Sarbanes-Oxley Act of 2002

I, Brent D. Bailey, President and Chief Executive Officer certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Cyanotech Corporation;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) or 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the registrant and we have:

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiary, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

Date: November 12, 2015	/s/ Brent D. Bailey
	Brent D. Bailey
	President and Chief Executive Officer and Director

Exhibit 31.2

Certification Pursuant

To 18 U. S. C. Section 1350,

As Adopted Pursuant To

Section 302 of the Sarbanes-Oxley Act of 2002

I, Jole Deal, Chief Financial Officer, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Cyanotech Corporation;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

Date: November 12, 2015	/s/ Jole Deal
	Jole Deal
	Vice President — Finance & Administration and CFO (Principal Financial and Accounting Officer)

Exhibit 32

CERTIFICATION OF CEO AND CFO
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, each of the undersigned certifies that this Quarterly Report on Form 10-Q for the period ended September 30, 2015, fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934 and that the information contained in this Report fairly presents, in all material respects, the financial condition and results of operations of Cyanotech Corporation.

Date: November 12, 2015	/s/ Brent D. Bailey
	Brent D. Bailey
	President and Chief Executive Officer and Director


Date: November 12, 2015	/s/ Jole Deal
	Jole Deal
	Vice President — Finance and Administration and Chief Financial Officer

Exhibit 99.1

News Release	Contact : Bruce Russell
	(310) 346-6131
	brussell@cyanotech.com

Cyanotech Reports Financial Results for the Second Quarter

and First Six Months of Fiscal Year 2016

KAILUA KONA, Hawaii (November 12, 2015) — Cyanotech Corporation (Nasdaq Capital Market: CYAN), a world leader in microalgae-based, high-value nutrition and health products, today announced financial results for the second quarter and first six months of fiscal year 2016, ended September 30, 2015.

Second Quarter 2016

For the second quarter of fiscal 2016 compared to the second quarter of fiscal 2015, net sales were $8,516,000 compared to $7,946,000, an increase of 7%. Gross profit was $3,100,000, with gross profit margin of 36.4%, compared to gross profit of $3,935,000 and gross profit margin of 49.5%. Operating loss was ($139,000) compared to operating income of $195,000. Net income was $14,000 or $0.00 per diluted share, compared to net income of $63,000 or $0.01 per diluted share.

Commenting on the second quarter 2016 results (changes shown vs. second quarter 2015), Brent Bailey, Cyanotech President and CEO, noted:

“Net sales in our Nutrex packaged consumer products grew +19% versus prior year in spite of a significant decrease in Astaxanthin production compared to the second quarter of last year. Second quarter net sales growth of our Nutrex business, by channel, was:

	~ Nutrex Mainland:	+18%
	~ Nutrex Hawaii:	-7%
	~ Nutrex International:	+108%

“The strong increase in Nutrex International is primarily due to initial shipments of BioAstin into China. The decline in Nutrex Hawaii is primarily due to a temporary product placement change in several retail outlets that has been corrected.”

“BioAstin brand retail market share of Astaxanthin in the US natural products channel was 59%. Our Nutrex brand market share of Spirulina was 50%.

“Progress on major strategic initiatives and investments is continuing :

●

Based on the strong results to date, Costco management has approved expansion of BioAstin into the remaining 43 Los Angeles region warehouses in the third quarter of fiscal 2016, making it available in approximately 23% of Costco’s domestic warehouses.

●

The first phase of our Astaxanthin capacity expansion, which includes additional ponds, is projected to be completed by the end of November 2015.

●

We recently received the China Food and Drug Administration (CFDA) seal, which allows our BioAstin brand Astaxanthin to be imported into China. We believe BioAstin is the first astaxanthin consumer brand to receive the China Food and Drug Administration CFDA seal.

73-4460 Queen Kaahumanu Highway, #102 ~ Kailua-Kona, Hawaii 96740

(808) 326-1353 fax (808) 329-3597 ~ www.cyanotech.com

“Although investments in these initiatives negatively impacted our profitability in the second quarter, they are expected to position us well for the future.”

“The decline in gross profit for the second quarter was primarily driven by the following factors:

●

A 41% decrease in Astaxanthin production compared to exceptionally strong production during the same period last year.

●

Changes in customer mix during the period resulted in higher overall sales allowances that are not expected to continue at this level.

●

A longer than expected start-up of our extraction plant led to outside processing costs in the second quarter.”.

First Six Months 2016
For the first six months ended September 30, 2015 compared to the first six months ended September 30, 2014, net sales were $16,110,000 compared to $15,570,000 an increase of 4%. Gross profit was $6,024,000, with gross profit margin of 37.4%, compared to gross profit of $6,994,000 and gross profit margin of 44.9%. Pretax loss was ($409,000) compared to a pretax loss of ($902,000), and net loss was ($91,000) or ($0.02) per diluted share, compared to a net loss of ($318,000) or ($0.06) per diluted share.

Trailing 12 Months

For the trailing 12 months ended September 30, 2015 compared to the trailing 12 months ended September 30, 2014, net sales were $34,349,000 compared to $29,990,000 an increase of 15%. Gross profit was $13,496,000, with gross profit margin of 39.3%, compared to gross profit of $12,615,000 and gross profit margin of 42.1%. Pretax income was $722,000 compared to a pretax loss of ($1,423,000), and net income was $203,000 or $0.04 per diluted share, compared to a net loss of ($739,000) or ($0.13) per diluted share.

About Cyanotech — Cyanotech Corporation, a world leader in microalgae technology, produces BioAstin® Natural Astaxanthin and Hawaiian Spirulina Pacifica®—all natural, functional nutrients that leverage our experience and reputation for quality, building nutritional brands which promote health and well-being. Cyanotech's Spirulina products offer complete nutrition, and augment energy and immune response. They are FDA-reviewed and accepted as Generally Recognized as Safe (GRAS) for use in food products. BioAstin's superior antioxidant activity and ability to support and maintain a natural anti-inflammatory response enhance skin, muscle and joint health. All Cyanotech products are produced from microalgae grown at our 90-acre facility in Kona, Hawaii using patented and proprietary technology. Cyanotech sells its products direct to consumers at retail locations in the United States and online at www.nutrex-hawaii.com and also distributes to nutritional supplement, nutraceutical and cosmeceutical manufacturers and marketers worldwide and is GMP-certified by the Natural Products Association ^TM . Visit www.cyanotech.com for more information.

“Safe Harbor” Statement under the U.S. Private Securities Litigation Reform Act of 1995 Besides statements of present fact and historical fact, this press release may contain forward-looking statements. Forward-looking statements relate to the future and are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Our actual results may differ materially from those contemplated by forward-looking statements. We caution against relying on forward-looking statements. Important factors that could change actual, future results include: changes in sales levels to our largest customers, weather patterns in Hawaii, production problems, risks associated with new products, foreign exchange fluctuations, and availability of financing, as well as national and global political, economic, business, competitive, market and regulatory conditions. Other factors are more fully detailed in the Company’s annual Form 10-K filings with the Securities and Exchange Commission.

73-4460 Queen Kaahumanu Highway, #102 ~ Kailua-Kona, Hawaii 96740

(808) 326-1353 fax (808) 329-3597 ~ www.cyanotech.com

( Financial Tables Follow : The following tables do not contain footnotes or other information contained in the Company’s Form 10-Q for the period ended September 30, 2015, which can be found on the Cyanotech website ( www.cyanotech.com ) under Investors>Investor Filings upon filing. As such the following Financial Tables are provided only as a guide and other factors are more fully detailed in the Company’s annual Form 10-K filings with the Securities and Exchange Commission.)

73-4460 Queen Kaahumanu Highway, #102 ~ Kailua-Kona, Hawaii 96740

(808) 326-1353 fax (808) 329-3597 ~ www.cyanotech.com

CYANOTECH CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except par value and number of shares)

(Unaudited)

	September 30, 2015			March 31, 2015
ASSETS
Current assets:
Cash and cash equivalents	$	2,062		$	2,226
Accounts receivable, net of allowance for doubtful accounts of $28 at September 30, 2015 and $6 at March 31, 2015		4,226			3,258
Inventories, net		6,169			5,678
Deferred tax assets		315			315
Prepaid expenses and other current assets		463			317
Total current assets		13,235			11,794

Equipment and leasehold improvements, net		17,534			14,754
Restricted cash		—			486
Deferred tax assets		3,373			3,035
Other assets		778			846
Total assets	$	34,920		$	30,915

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current maturities of long-term debt	$	560		$	234
Customer deposits		97			31
Accounts payable		3,994			2,926
Accrued expenses		1,160			1,124
Total current liabilities		5,811			4,315

Long-term debt, excluding current maturities		7,335			5,109
Deferred rent		7			8
Total liabilities		13,153			9,432

Commitments and contingencies

Stockholders’ equity:
Common stock of $0.02 par value, shares authorized 50,000,000; 5,580,099 shares issued and outstanding at September 30, 2015 and 5,564,799 shares at March 31, 2015		112			111
Additional paid-in capital		31,221			30,846
Accumulated deficit		(9,566	)		(9,474	)
Total stockholders’ equity		21,767			21,483

Total liabilities and stockholders’ equity	$	34,920		$	30,915

73-4460 Queen Kaahumanu Highway, #102 ~ Kailua-Kona, Hawaii 96740

(808) 326-1353 fax (808) 329-3597 ~ www.cyanotech.com

CYANOTECH CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in thousands, except per share amounts)

(Unaudited)

	Three Months Ended September 30,						Six Months Ended September 30,
	2015			2014			2015			2014

NET SALES	$	8,516		$	7,946		$	16,110		$	15,570
COST OF SALES		5,416			4,011			10,086			8,576
Gross profit		3,100			3,935			6,024			6,994

OPERATING EXPENSES:
General and administrative		1,486			2,170			2,696			4,917
Sales and marketing		1,616			1,462			3,348			2,696
Research and development		166			105			343			221
(Gain) Loss on disposal of equipment and leasehold improvements		(29	)		3			(29	)		13
Total operating expenses		3,239			3,740			6,358			7,847

Income (loss) from operations		(139	)		195			(334	)		(853	)

Interest expense, net		(51	)		(23	)		(75	)		(49	)

Income (loss) before income tax		(190	)		172			(409	)		(902	)

INCOME TAX EXPENSE (BENEFIT)		(204	)		109			(318	)		(584	)

NET INCOME (LOSS)	$	14		$	63		$	(91	)	$	(318	)

NET INCOME (LOSS) PER SHARE:
Basic	$	0.00		$	0.01		$	(0.02	)	$	(0.06	)
Diluted	$	0.00		$	0.01		$	(0.02	)	$	(0.06	)

SHARES USED IN CALCULATION OF NET INCOME (LOSS) PER SHARE:
Basic		5,568			5,493			5,566			5,491
Diluted		6,047			5,668			5,566			5,491

73-4460 Queen Kaahumanu Highway, #102 ~ Kailua-Kona, Hawaii 96740

(808) 326-1353 fax (808) 329-3597 ~ www.cyanotech.com

	CYANOTECH CORPORATION

Date: April 14, 2015	By: /s/ Gerald Cysewski /s/ Jole Deal

	Its EVP Its CFO

	NUTREX HAWAII, INC.

Date: April 14, 2015	By: /s/ Gerald Cysewski /s/ Jole Deal

	Its EVP Its CFO