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Cyanotech Corp – ‘DEF 14A’ for 8/25/16

On:  Friday, 7/15/16, at 7:28am ET   ·   Effective:  7/15/16   ·   For:  8/25/16   ·   Accession #:  1437749-16-35255   ·   File #:  0-14602

Previous ‘DEF 14A’:  ‘DEF 14A’ on 9/2/15 for 10/15/15   ·   Next:  ‘DEF 14A’ on 11/4/16 for 12/15/16   ·   Latest:  ‘DEF 14A’ on 7/14/23 for 8/24/23   ·   3 References:   By:  Cyanotech Corp. – ‘10-K’ on 6/27/23 for 3/31/23 By:  Cyanotech Corp. – ‘10-K’ on 6/22/22 for 3/31/22 By:  Cyanotech Corp. – ‘10-K’ on 6/22/21 for 3/31/21 

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  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 7/15/16  Cyanotech Corp                    DEF 14A     8/25/16    1:698K                                   RDG Filings/FA

Document/Exhibit                   Description                      Pages   Size 

 1: DEF 14A     Definitive Proxy Solicitation Material              HTML    498K 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No.     )

CYANOTECH CORPORATION
73-4460 Queen Kaahumanu Hwy., Suite 102
Kailua-Kona, HI 96740
(808) 326-1353

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be held Thursday, August 25, 2016 at 3:00 P.M. Hawaii Standard Time

To Our Stockholders:

You are cordially invited to attend the 2016 Annual Meeting of Stockholders (the “Annual Meeting”) of Cyanotech Corporation, a Nevada corporation (“Cyanotech” or the “Company”), to be held on Thursday, August 25, 2016 at 3:00 P.M., Hawaii Standard Time, at the Waikoloa Beach Marriott, 69-275 Waikoloa Beach Drive, Waikoloa, HI, USA 96738, or at any adjournment or postponement thereof, for the following purposes:

These matters are more fully described in the Proxy Statement accompanying this Notice.

In addition to the formal items of business, Cyanotech will report on operations for fiscal year 2016 and answer appropriate questions that you may have about Cyanotech and its activities.

The Board of Directors fixed the close of business on July 1, 2016 as the record date (the “Record Date”) for stockholders entitled to notice of, and to vote at, the Annual Meeting and any adjournment thereof. The stock transfer books will not be closed between the Record Date and Annual Meeting. Only stockholders of record at the Record Date are entitled to notice of and to vote at the Annual Meeting; however, all stockholders are cordially invited to attend the meeting.

Thank you for your ongoing support and continued interest in Cyanotech. We look forward to seeing you at the meeting.

Your vote is important. Whether or not you plan to attend this meeting, please vote your shares. This year you may submit your proxy: (i) by mail (after completing, signing and dating the enclosed card); (ii) by telephone; or (iii) by internet. If you do attend the meeting, you may vote at that time, which will revoke automatically any prior vote you may have submitted. Please note, however, that if your shares are held of record by a broker, bank or other nominee and you wish to vote at the meeting, you must obtain a proxy issued in your name from that record holder. Further instructions are included in the Proxy Statement under “Voting Rights and Solicitation.”

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS

FOR THE ANNUAL STOCKHOLDER MEETING TO BE HELD ON AUGUST 25, 2016

The Proxy Statement and 2016 Annual Report on Form 10-K are available on the internet at www.envisionreports.com/CYAN.

CYANOTECH CORPORATION

Proxy Statement for 2016 Annual Meeting of Stockholders

To be held August 25, 2016

TABLE OF CONTENTS

Stockholders Should Read the Entire Proxy Statement Carefully Prior to Completing and Submitting Their Proxies by

Internet, Mail or Telephone

PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS OF CYANOTECH CORPORATION
To Be Held August 25, 2016

This Proxy Statement is furnished in connection with the solicitation by the Board of Directors of CYANOTECH CORPORATION (the “Company” or “Cyanotech”) of proxies to be voted at the 2016 Annual Meeting of Stockholders (the “Annual Meeting”) which will be held on Thursday, August 25, 2016 at 3:00 P.M., Hawaii Standard Time, at Waikoloa Beach Marriott, 69-275 Waikoloa Beach Drive, Waikoloa, HI, USA 96738, or at any adjournment or postponement thereof, for the purposes set forth in the accompanying Notice of Annual Meeting of Stockholders. On July 15, 2016, the Company distributed to stockholders of record a Meeting Notice Regarding the Availability of Proxy Materials for this meeting containing instructions on how to access via the internet (www.envisionreports.com/CYAN) this Proxy Statement, the Notice of Annual Meeting, the form of proxy and our Annual Report on Form 10-K for the fiscal year ended March 31, 2016, and our undertaking to also mail a full set of such proxy materials, together with a postage paid envelope for returning non-electronic proxy cards, to any stockholders who request paper copies at no cost to them.

The Company’s principal executive offices are located at 73-4460 Queen Kaahumanu Highway, Suite 102, Kailua-Kona, HI 96740.

VOTING RIGHTS AND SOLICITATION

The enclosed proxy is being solicited on behalf of the Board of Directors of Cyanotech for use at the Annual Meeting, so that your shares will count toward determination of the presence of a quorum and your shares can be voted at the meeting.

Who May Vote: The close of business on July 1, 2016 is the record date for stockholders entitled to notice of and to vote at the Annual Meeting. Holders of the Company’s Common Stock outstanding on the record date are generally entitled to vote at the Annual Meeting, subject to any limitations under applicable law. Each stockholder has one vote for each share so held. At July 1, 2016, 5,648,264 shares of Common Stock, $0.02 par value per share, were issued and outstanding. You may vote by submitting your proxy card by internet, telephone, mail or in person at the meeting, or you may attend the meeting and vote your shares in person by ballot.

Methods of Voting: All stockholders of record may vote by mail by completing, signing, dating and returning their proxy cards in the postage-paid envelope. If you sign, date and return your proxy card without indicating how you want to vote, your proxy will be voted as recommended by the Board of Directors. Stockholders of record can instead vote by toll-free telephone or the internet website address listed on the proxy card; they may also vote by proxy card or by ballot if personally present at the meeting, but only the last vote before the polls close at the meeting will count. Stockholders who hold their shares through a broker, trustee or other nominee also can vote by telephone or internet as instructed by their bank, broker or other nominee; as “beneficial owners” they can also vote at the meeting if they present a separate “legal proxy” from the actual record holder and in that event only the final vote made in the name of the stockholder of record will count.

The presence in person or by proxy of the holders of record of a majority of the voting power of the outstanding shares entitled to vote constitutes a quorum. Directors are elected by a plurality of votes cast. For approval of all other matters to be voted on, when a quorum is present a matter is approved if the number of votes cast in favor of the action taken exceeds the number of votes cast in opposition to the action. Abstentions are counted only for purposes of determining whether a quorum is present.

Voting Shares Held by Brokers, Banks and Other Nominees: Votes will be counted by the inspectors of election appointed for the meeting, who will separately count “For” and “Withhold” and, with respect to any proposals other than the election of directors, “Against” votes, abstentions and broker non-votes. A “broker non-vote” occurs when a broker, trustee or other nominee holding shares for a beneficial owner does not vote on a particular proposal because the broker, trustee or other nominee does not have discretionary voting power with respect to that proposal and has not received instructions with respect to that proposal from the beneficial owner, despite voting on at least one other proposal for which it does have discretionary authority or for which it has received instructions.

Many of our stockholders may hold some or all of their shares through a broker, trustee or other nominee, rather than directly in their own name. As summarized below, there are distinctions between shares held of record and those owned beneficially.

●     Stockholders of Record — If your shares are registered directly in your name with our transfer agent, you are considered, with respect to those shares, the “stockholder of record.” As the stockholder of record, you have the right to grant your voting proxy directly to us or to a third party and to vote by completing a proxy card by internet, by telephone or by mail, or to vote in person by ballot or by proxy at the Annual Meeting of Stockholders.

●     Beneficial Owners — If any or all of your shares are held of record in a brokerage account, by a trustee or by another nominee, you are considered, with respect to those shares, the “beneficial owner.” As the beneficial owner of those shares, you have the right by internet, telephone or mail to direct your broker, trustee or nominee how to vote, and you also are invited to attend the Annual Meeting of Stockholders in person. Because a beneficial owner is not the stockholder of record, however, you may not vote these shares in person at the Annual Meeting of Stockholders unless you obtain a “legal proxy” from the broker, trustee or other nominee that holds your shares, giving you the right to vote the shares at the Annual Meeting of Stockholders.

For your vote to be counted, you must communicate your voting decisions by internet, telephone or mail to your broker, trustee or other nominee before the date of the stockholders meeting. Brokers, trustees and other nominees who do not receive instructions are entitled to vote those shares with respect to the ratification of the selection of our independent registered public accounting firm, but not with respect to election of directors and the vote related to the approval of the Cyanotech Corporation 2016 Equity Incentive Plan. If your shares are held by a broker, trustee, bank or other nominee, for your vote to be counted you will have to obtain a separate legal proxy form from the institution that holds your shares and follow the instructions included on that form regarding how to instruct your broker to vote your shares or how to obtain an authorization from your broker allowing you to vote your shares at the Annual Meeting in person or by proxy. Abstentions and broker non-votes will be included only in determining the presence of a quorum at the Annual Meeting, but will not be counted as votes cast on any proposals to be voted upon.

Voting your shares is important to ensure that you have a say in the governance of your Company. Please review these proxy materials and if you are a beneficial owner, follow the voting instruction form you receive from your broker, bank or other nominee to vote your shares. We hope that you will exercise your rights and fully participate as a stockholder in our Company’s future. If you have any questions about this rule or the proxy process in general, please contact the broker, bank or other financial institution where you hold your shares. The SEC also has a website (www.sec.gov/spotlight/proxymatters.shtml) with more information about your rights as a stockholder. Additionally, you may contact Jolé Deal, Corporate Secretary, by telephone at 808-326-1353 or by email to jdeal@cyanotech.com.

Voting Shares by Proxy: Shares represented by proxies in the accompanying form which are properly executed and returned to Cyanotech by internet, by mail or by telephone will be voted at the Annual Meeting in accordance with the stockholder’s instructions contained on the proxy or herein. To submit your proxy by mail, mark your votes on the enclosed form of proxy, then follow the directions on the form of proxy. To submit your proxy using the internet or by telephone, see the instructions on the proxy form and have the proxy form available when you access the internet website or place your telephone call. In the absence of contrary voting instructions properly submitted, all shares represented by properly submitted proxies which have not been revoked will be voted:

Management does not know of any other matters to be presented at this Annual Meeting other than those set forth in this Proxy Statement and in the Notice accompanying this Proxy Statement. If other matters should properly come before the meeting, the proxy holders will vote on such matters in accordance with their best judgment.

The entire cost of soliciting the proxies will be borne by Cyanotech. Proxies will be solicited principally through the use of the mails, but, if deemed desirable, may be solicited personally or by telephone, e-mail, facsimile or letters from officers and regular Cyanotech employees who will receive no additional compensation. Arrangements may be made with brokerage houses and other custodians, nominees and fiduciaries to send proxies and proxy material to the beneficial owners of the Company’s Common Stock, and such persons may be reimbursed for their expenses.

Revoking Your Proxy: Any person giving a proxy pursuant to this solicitation has the power to revoke it at any time before it is exercised at the stockholder meeting. It may be revoked by filing with the Secretary of the Company at the Company’s principal executive office, 73-4460 Queen Kaahumanu Highway, Suite 102, Kailua-Kona, HI 96740, a written notice of revocation or a duly executed proxy bearing a later date, or it may be revoked by attending the meeting, notifying the Secretary of the Meeting of the revocation of the prior proxy, and voting in person. Attendance at the meeting will not, by itself, revoke a proxy.

Appraisal: None of Nevada law, our Restated Articles of Incorporation or our Amended and Restated Bylaws (the “Bylaws”), provides for appraisal or other similar rights for dissenting stockholders in connection with any of the proposals to be voted upon at this Annual Meeting.

IMPORTANT NOTICE

Regarding Availability of Proxy Materials

For the Annual Meeting to Be Held on August 25, 2016

As permitted by the SEC, the Company is making available its Notice of Annual Meeting, Proxy Statement and Annual Report for fiscal year ended March 31, 2016 at www.envisionreports.com/CYAN. If you received the Company’s notice containing instructions on how to access these materials via the internet, you will not receive a printed copy of the proxy materials unless you request a copy by following the instructions contained in the notice which directs stockholders to that website, or to telephone toll-free 1-866-641-4276 or to email a request to investorvote@computershare.com.

●     Stockholders of Record. If your shares are registered in your own name, you may enroll to have future proxy materials delivered via e-mail or the internet by following the instructions at www.envisionreports.com/CYAN. You will need the control number on your proxy card to enroll.

●     Beneficial Stockholders. If your shares are not registered in your name, to enroll in the electronic delivery service, check the information provided to you by your bank or broker or contact your bank or broker for information on electronic delivery service.

Delivery of One Proxy Statement and Annual Report

To a Single Household to Reduce Duplicate Mailings

Each year in connection with the Annual Meeting of Stockholders, the Company is required to furnish to each stockholder of record a proxy statement and annual report and to arrange for a proxy statement, annual report and, if applicable, notice of internet availability of proxy materials to be furnished to each beneficial stockholder whose shares are held by or in the name of a broker, bank, trust or other nominee. Because many stockholders hold shares of the Cyanotech Common Stock in multiple accounts, this process may result in duplicate mailings of proxy materials to stockholders who share the same address. Stockholders can avoid receiving duplicate mailings and save the Company the cost of producing and mailing duplicate documents as follows:

●     Stockholders of Record. If your shares are registered in your own name and you are interested in consenting to the delivery of a single copy of proxy materials (other than proxy cards), you may also do so via the internet by going directly to www.envisionreports.com/CYAN and following the instructions therein.

●     Beneficial Stockholders. If your shares are not registered in your own name, your broker, bank, trust or other nominee that holds your shares may have asked you to consent to the delivery of a single copy of proxy materials (other than proxy cards) if there are other stockholders who share an address with you. If you currently receive more than one copy of proxy materials at your household and would like to receive only one copy in the future, you should contact your nominee.

Right to Request Separate Copies. If you consent to the delivery of a single copy of proxy materials but later decide that you would prefer to receive a separate copy of proxy materials for each account at your address, then please notify the Company or your nominee, as applicable, and the Company or your nominee will promptly deliver such additional proxy materials. If you wish to receive a separate copy of the proxy materials for each account at your address in the future, please call toll-free 1-866-641-4276 or send an email to investorvote@computershare.com.

*****

PROPOSAL ONE

Election of Directors

Board Nominees

A board of five directors is to be elected at the meeting. Unless otherwise instructed, the proxy holders will vote the proxies received by them FOR the election of the five Board nominees named below, all five of whom are presently directors of the Company. Each nominee has consented to be named a nominee in this Proxy Statement and to continue to serve as a director if elected. If any nominee becomes unable or declines to serve as a director or if additional persons are nominated at the meeting, the proxy holders intend to vote all proxies received by them in such a manner as will assure the election of as many nominees listed below as possible (or, if new nominees have been designated by the Board of Directors, in such a manner as to elect such nominees) and the specific nominees to be voted for will be determined by the proxy holders. The Company is not aware of any reason that any nominee will be unable or will decline to serve as a director. Each director elected at this Annual Meeting will serve until the next Annual Meeting or until such director’s successor has been elected and qualified. Voting for the election of directors is non-cumulative. It is the Company’s policy that all Board members attend each annual meeting of stockholders; last year all five Board members attended the Annual Meeting of Stockholders.

The following sets forth certain information on each of the nominees for election to serve as a director of the Company until the 2017 Annual Meeting of Stockholders including each director’s background, principal occupations and employment, as well as specific experience, qualifications, attributes and skills that led to the Board’s conclusion that each of the nominees for director should serve on the Board at the time of this Proxy Statement, in light of the Company’s current business and structure:

Gerald R. Cysewski, Ph. D.—67: Dr. Cysewski became Interim President and Chief Executive Officer as of April 1, 2016, prior to which he was Executive Vice President and Chief Scientific Officer. Dr. Cysewski co-founded the Company in 1983 and has served as a director of the Company since that time. From 1990 to May 16, 2008, Dr. Cysewski served as the Company’s President and Chief Executive Officer, as well as Chairman of the Board. Prior to 1990, Dr. Cysewski served in various other capacities for the Company including Vice Chairman and Scientific Director. From 1980 to 1982, Dr. Cysewski was Group Leader of Microalgae Research and Development at Battelle Northwest, a major contract research and development firm. From 1976 to 1980, Dr. Cysewski was an assistant professor in the Department of Chemical and Nuclear Engineering at the University of California, Santa Barbara, where he received a two-year grant from the National Science Foundation to develop a culture system for blue-green algae. Dr. Cysewski received his doctorate in Chemical Engineering from the University of California at Berkeley. Dr. Cysewski continues to be recognized as a leading authority on large scale production of micro-algae and is a frequently invited speaker at industry gatherings around the world, providing insight to the Board on changes in micro-algae science and regulatory matters that impact the Company. His extensive experience with the Company and his expertise in micro-algae production make him uniquely qualified to serve on our Board.

Michael A. Davis—63: Mr. Davis was appointed to the Board of Directors of the Company in March 2003. He was appointed to serve as Chairman of the Board of Directors on April 13, 2011. Mr. Davis is a private investor whose investments have focused in the natural foods and nutraceutical industries. He is currently the President of Skywords Family Foundation, where he has full responsibility for the design and implementation of its investment programs as well as the design and management of all its charitable activities (2001 to present). Mr. Davis has also served as Director of Canobie Films, Inc. for over 20 years, and was a Capital Markets Strategic Consultant to NYSE-listed insurance companies for over 6 years. Mr. Davis attended Harvard University. His business and investment experiences, as well as his long association with the Company provide the Board with critical perspective on the business issues the Company faces.

Walter B. Menzel—69: Mr. Menzel was elected to the Board of Directors of the Company in August 2013. Mr. Menzel is the President of the WM Group, a contract provider of management, marketing, and creative services for established and entrepreneurial enterprises and organizations. In addition, he is CEO of the Peter Michael Foundation, an underwriter of cancer research at leading medical centers. He is also Co-Founder of Prostate Management Diagnostics Inc., a private company in partnership with The Genome Institute at Washington University in St. Louis. Previously, he was Senior VP at McCann-Erickson, and served in positions of increasing client services responsibility at BBDO West, Needham Harper Worldwide, Leo Burnett Company, and J. Walter Thompson Company. Mr. Menzel is a graduate of the University of Wisconsin (BA) and Stanford University (MBA and MA) and is a National Association of Corporate Directors Board Leadership Fellow. His extensive experience and expertise in branding and marketing provides a unique perspective and contribution to the Board.

David M. Mulder—55: Mr. Mulder was elected to the Board and to its Audit Committee by the Board of Directors on May 17, 2016. Executive Vice President and Chief Financial Officer of Reiter Affiliated Companies, where he has served since December of 2012.  He also serves as the Chairman of the Board and President of FreSeguro, Inc., a Hawaiian captive insurance company. Mulder has over 25 years of international financial and general management experience in a broad variety of businesses, including agriculture, consumer products, wholesale products, distribution and medical products. His background includes serving as the CEO of Biolase, a public international medical device company, and as the CFO of Salton as the (then) public company doubled in size during the globalization of the George Foreman grill. He built his early career at Fruit of the Loom, where he last served as the head of the European, Middle East and Africa division. He started his professional career at Arthur Andersen where he did both consulting and audit, earning his CPA. He earned his Masters of Business Administration degree from the Fuqua School of Business at Duke University. His financial and accounting background, as well as his leadership experiences, are critical to the Company’s long range goals.

David L. Vied —55: Mr. Vied was elected to the Board on January 27, 2015.  Mr. Vied serves as the Global Sector Leader, Medical Devices & Diagnostics for Korn Ferry, a global leadership and talent advisory firm.  Previous experience includes serving in leadership roles for other global recruiting and talent advisory firms.  Mr. Vied received a B.A. degree in Communication Studies from California State University at Sacramento and a M.S. degree in Labor and Industrial Relations from the University of North Texas. His experience in management and corporate organization rounds out an important expertise represented on the Board.

Certain Legal Proceedings

On May 24, 2016, one of our shareholders, Meridian OHC Partners, LP, filed a complaint in the United States District Court, District of Nevada, entitled Meridian OHC Partners, LP vs. Cyanotech Corporation, Michael Davis and Rudolf Steiner Foundation (RSF), Inc. The complaint makes certain derivative claims on behalf of the Company, direct claims on behalf of Meridian, and alleges, among other things, (i) that there were deficiencies in the beneficial ownership reports of Mr. Davis, the Chairman of our Board of Directors, and RSF, one of our shareholders, including that Mr. Davis and RSF are an undisclosed group with respect to their shares of Company Common Stock, (ii) that Mr. Davis has failed to disclose control over his full voting power of the Company’s Common Stock in order to avoid triggering the State of Nevada’s “Acquisition of Controlling Interest” statutes, and (iii) that Mr. Davis has breached fiduciary duties to the Company. Meridian seeks declaratory and injunctive relief to reform this conduct, requests that the court award the Company the damages allegedly sustained as a result of the conduct, seeks relief directly against Mr. Davis and RSF and seeks other relief.

“Acquisition of Controlling Interest” provisions of Nevada corporate law apply to corporations organized in Nevada with at least 200 stockholders, including at least 100 stockholders of record who are Nevada residents, and which conduct business directly or through affiliated corporations in Nevada. The provisions provide that persons who acquire a “controlling interest” (as defined in the statute) in a Nevada company that is subject to the statute and those acting in association with the acquiring person may only be given full voting rights in certain of their shares if such rights are conferred by the disinterested stockholders of the company at an annual or special meeting. If Meridian’s allegations regarding Mr. Davis and RSF acting in association with respect to their shares of Company Common Stock are determined to be true, and if the Nevada “Acquisition of Controlling Interest” statutes are applicable to the Company and to the acquisition of such shares, then it is possible that certain of those shares may not currently have full voting rights.

The Board of Directors of the Company has formed a Special Committee comprised of independent directors to investigate, review and analyze the Meridian allegations and provide its recommendations to the Board.

Required Vote

The affirmative vote of the holders of a majority of the aggregate voting power of the Company’s Common Stock present in person or represented by proxy at a meeting at which a quorum is present, is required for the election of each nominated director.

The Board of Directors unanimously recommends that the stockholders vote FOR each of the above named director nominees.

BOARD MEETINGS AND COMMITTEES

Board Meetings

During fiscal year 2016 the Board met formally five times. Each of our Directors attended 75 percent or more of the meetings of the Board and of Board Committees on which he served.

Director Nomination Process

Director Qualifications. The Nominating and Corporate Governance Committee has established guidelines for considering nominations to the Company’s Board of Directors. These include: (a) personal characteristics, including such matters as integrity, education, diversity of background and experience, absence of potential conflicts of interest with the Company or its operations, and the availability and willingness to devote sufficient time to the duties of a director of the Company; (b) experience in corporate management, such as serving as an officer or former officer of a publicly held company; (c) experience in the Company’s industry and with relevant social policy concerns; (d) experience as a board member of another company; (e) academic expertise in an area of the Company’s operations; (f) practical and mature business judgment; and (g) diversity as to gender, age, ethnic background and experience. The criteria are not exhaustive and the Nominating and Corporate Governance Committee and the Board of Directors may consider other qualifications and attributes which the members believe are appropriate in evaluating the ability of an individual to serve as a member of the Board of Directors. The Nominating and Corporate Governance Committee’s goal is to assemble a Board of Directors that brings to the Company a variety of perspectives and skills derived from high quality business and professional experience. In doing so the Committee also considers candidates with appropriate non-business backgrounds.

Identification and Evaluation of Nominees for Directors. The Board of Directors believes that, based on the Nominating and Corporate Governance Committee’s knowledge of the Company’s corporate governance principles and the needs and qualifications of the Board at any given time, the Nominating and Corporate Governance Committee is best equipped to select nominees that will result in a well-qualified and well-rounded board of directors. The Nominating and Corporate Governance Committee also considers any candidate recommended by Company management or the Company’s stockholders in light of the criteria for selection of new directors. The Company’s Bylaws contain procedures for stockholder nominations which are discussed in greater detail under “STOCKHOLDER PROPOSALS AND NOMINATIONS” on page 25 of this proxy. In making its nominations, the Nominating and Corporate Governance Committee identifies nominees by first evaluating the current members of the Board willing to continue their service. Current members with qualifications and skills that are consistent with the committee’s criteria for Board service are re-nominated. As to new candidates, the committee will generally poll the Board members and members of management for recommendations and, if appropriate, engage a consultant to assist the Committee. The committee may also review the composition and qualification of the boards of directors of the Company’s competitors, and may seek input from industry experts or analysts. The committee reviews the qualifications, experience and background of the candidates. Final candidates are interviewed by the independent directors and executive management. In making its determinations, the committee evaluates each individual in the context of the Board as whole, with the objective of assembling a group that can best represent stockholder interests through the exercise of sound judgment. After review of all pertinent data, and due deliberation by the committee, this slate of nominees is recommended to the Board of Directors and the stockholders for election.

Each of the nominees for election at this annual meeting was unanimously recommended by the Nominating and Corporate Governance Committee for election.

Independent Directors

The Board has determined that each of the nominees for director, other than Dr. Cysewski, has no material relationship with the Company (either directly or as a partner, shareholder or officer of an organization that has a relationship with the Company) and is “independent” under Nasdaq Rule 5605(a)(2). In making its determination, the Board considered transactions and relationships between each director (and any member of his immediate family) and the Company and its subsidiaries and relationships between the directors or their affiliates and members of the Company’s senior management personnel and their affiliates.

Under Nasdaq Rule 5605(a)(2), an “Independent Director” is a person other than an Executive Officer of the company having a relationship which, in the opinion of the company’s board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. Since Dr. Cysewski is Interim President and Chief Executive Officer of the Company, he may not be considered an “Independent Director” under Nasdaq Rule 5605(a)(2).

The Independent Directors meet in executive session without the Chief Executive Officer or any other member of management in attendance at least twice annually in accordance with Nasdaq Corporate Governance Rules. Any Independent Director may request an executive session of Independent Directors to discuss any matter of concern.

Stockholder Communication with Directors

Stockholders may, at any time, communicate in writing with any particular director, or the non-management directors as a group, by sending such written communication to Cyanotech Corporation—Non-Management Directors (or to a specific named-director), 73-4460 Queen Kaahumanu Highway, #102, Kailua-Kona, Hawaii, 96740, or by e-mail to board@cyanotech.com. All written communications received will be directed to the relevant director or the non-management directors as a group.

Code of Ethics

We have adopted the Cyanotech Code of Ethics for our officers and employees. We have also adopted the Board of Directors Code of Conduct. Both Codes are publicly available on our website at www.cyanotech.com. The Codes contain general guidelines for conducting the business of the Company consistent with the highest standards of business ethics, and is intended to qualify as a “code of ethics” within the meaning of Section 406 of the Sarbanes-Oxley Act of 2002 and the rules promulgated thereunder and as a “code of conduct” within the meaning of the Nasdaq listing standards. If we make any substantive amendments to or grant any waiver from such Codes relating to our Chief Executive Officer, Chief Financial Officer or Controller, we will disclose the nature of such amendment in a report on Form 8-K and amend the website disclosure.

Corporate Governance

In addition to the Company’s Restated Articles of Incorporation, the Company’s Amended and Restated Bylaws and other key Company governance documents, including its Audit Committee Charter, Compensation and Stock Option Committee Charter, Nominating and Governance Committee Charter and the Code of Conduct and Ethics, are available on the Company’s website at www.cyanotech.com. The information contained on the website is not hereby incorporated by reference in, nor considered part of, this Proxy Statement, unless specifically incorporated. The Company will provide copies of any of these documents, free of charge, to any stockholder upon written request to the Chief Financial Officer, c/o Cyanotech Corporation, 73-4460 Queen Kaahumanu Highway, #102, Kailua-Kona, Hawaii, 96740.

The Company has chosen to separate the chief executive officer and board chairman positions as a matter of good corporate governance and to efficiently utilize the skills and time of the individuals who currently serve in these positions. Mr. Cysewski, the Company’s Interim President and Chief Executive Officer is primarily involved in the day to day responsibilities and obligations of the Company, while Mr. Davis, the Board’s Chairman, provides strategic direction for the Company and presides over meetings of the Board. These two key leaders communicate regularly with each other.

The Board is limited by its size, but plays a fundamental role in the Company’s risk oversight process, both directly and through the delegation to its committees of responsibilities related to the oversight of certain risks, and regularly discusses with management the Company’s major risk exposures, their potential impact on the Company’s business and the steps the Company can take to manage them.

While the Board is ultimately responsible for all risk oversight of the Company, the Audit Committee focuses on financial risks as they relate to the Company’s financial reporting process, financial statements and internal controls, among other responsibilities set forth in the Audit Committee’s Charter. The Nominating and Corporate Governance Committee focuses on the management of risks associated with the Board’s organization, membership, governance and structure. The Compensation and Stock Option Committee assists the Board in fulfilling its oversight responsibilities with respect to the management of risks arising from the Company’s compensation policies, bonus plans and incentive option plans.

The Company has an ongoing commitment to good governance and business practices. This includes regular monitoring and balancing of the Company’s processes and procedures in light of any new corporate governance best practices, and a continual review of changes in federal law and the rules and regulations promulgated by the SEC and the regulations of the Nasdaq Stock Market, LLC. which are applicable to the Company. These practices help to ensure that the Company will timely comply with new laws and rules and will implement other corporate governance practices which it believes to be in the best interest of the Company and its stockholders.

Board Committees

The Board of Directors of the Company has an Audit Committee, Nominating and Governance Committee and Compensation and Stock Option Committee.

The Audit Committee operates and acts under a written charter, which was revised and approved by the Cyanotech Board of Directors on November 8, 2011. A copy of the Charter and Powers of the Audit Committee can be found on the Company’s website at www.cyanotech.com. The Committee provides independent and objective oversight of (1) the Company’s financial reporting processes, (2) the Company’s audits of the financial statements, including appointment, compensation and oversight of the Company’s independent registered public accounting firm, (3) the Company’s internal controls, and (4) risk assessment and risk management policies set by management. The Committee also oversees and monitors the independence, performance and qualifications of the Company’s independent registered public accounting firm. The Audit Committee also reviews and approves related party transactions and reviews and resolves complaints from any employee regarding accounting, internal controls or auditing matters. All members of the Audit Committee are “independent” directors as defined in Nasdaq Rules 5605(a)(2) and 5605-3(2)(A), including Mr. Davis, who has been determined to be independent notwithstanding his substantial shareholdings in the Company (Rule 10A-3(e)(1)(ii)(B). On May 17, 2016, the Board of Directors elected David M. Mulder to the Board and determined that he met the requirements as an “audit committee financial expert” as defined in Item 407(d)(5) of Regulation S-K. Mr. Mulder was named to serve on the Audit Committee and was selected as its Chair, replacing Ralph K. Carlton. The Committee, comprised of independent directors Ralph K. Carlton (former Chair), Walter B. Menzel and Michael A. Davis, held thirteen formal meetings during fiscal year 2016.

The Nominating and Corporate Governance Committee operates and acts under a written charter, which was adopted and approved by the Cyanotech Board of Directors on January 7, 2010, a copy of which can be found on the company’s website at www.cyanotech.com. The Nominating and Corporate Governance Committee’s functions include (1) reviewing the background and qualifications of potential nominees for the Cyanotech Board of Directors presented by stockholders, directors and management, (2) recommending to the Board a slate of nominees to be submitted to the stockholders for election at the next Annual Meeting of Stockholders, (3) advising the Board with respect to matters of Board composition and procedures, and (4) overseeing the annual evaluation of the Board. Among the qualifications considered in the selection of candidates are knowledge, experience, skills, expertise, diversity, personal and professional integrity, character, business judgment, time availability, dedication, diversity and absence of conflicts of interest see caption “Director Nomination Process” above. The Nominating and Corporate Governance Committee has a policy of considering any candidate recommended by Company management or by the Company’s stockholders in light of the criteria for selection of new directors. All members of the Nominating and Corporate Governance Committee are “independent” directors under Nasdaq Rule 5605(a)(2). The Nominating and Corporate Governance Committee, comprised of independent directors Michael A. Davis (Chair) and Walter B. Menzel, and former independent director Ralph K. Carlton held seven formal meetings during fiscal year 2016. David L. Vied has replaced Mr. Carlton on the Nominating and Corporate Governance Committee as of May 17, 2016.

The Compensation and Stock Option Committee operates and acts under a written charter, which was adopted and approved by the Cyanotech Board of Directors on January 7, 2010 and which is also available on the Company’s website at www.cyanotech.com. The Compensation and Stock Option Committee reviews and makes recommendations to the Board concerning the Company’s executive compensation policy, bonus plans and incentive option plans, and approves the grants of stock options to officers, employees and consultants. Based on such review, the Committee recommended to the Board that such information be included in the Company’s proxy statement. At least once a year, the Compensation and Stock Option Committee meets in executive session with the other independent directors of the Board to evaluate the Chief Executive Officer’s (“CEO”) performance. All members of the Compensation and Stock Option Committee are “independent” directors as defined under Nasdaq Rule 5605(a)(2). The Compensation and Stock Option Committee held ten (10) formal meetings during fiscal year 2016. Until October 2015, the Compensation and Stock Option Committee consisted of Walter B. Menzel (Chair), Michael A. Davis and Ralph K. Carlton, each of whom was independent. In October 2015, Mr. Davis was replaced by independent director David L. Vied on this Committee.

DIRECTOR COMPENSATION

The following table sets forth the compensation earned by non-employee directors for fiscal year 2016:

At the 2014 Annual Meeting of Stockholders, the stockholders of the Company approved the 2014 Independent Director Stock Option and Restricted Stock Grant Plan (the “2014 Plan”). Under the 2014 Plan, 350,000 shares were reserved for issuance or option grant through the date of the 2024 Annual Stockholders’ Meeting.

Each independent director receives an annual fee of $32,000 for participation on the Board and the committees on which each independent director is appointed; the Board Chairman receives $40,000 annually. These fees are paid quarterly. Additionally, each independent director upon his or her first election to the Board, receives a 10-year option to purchase 6,000 shares of the Company’s Common Stock. Thereafter, each independent director receives an annual grant of restricted shares equivalent to $24,000; provided, however, the director serving as Chairman receives an annual grant of restricted shares equivalent to $30,000. Each independent director is also reimbursed for out-of-pocket costs incurred in connection with attendance at Board and committee meetings.

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PROPOSAL TWO

Approval of the Cyanotech Corporation 2016 Equity Incentive Plan

On June 27, 2016, the Board of Directors adopted, subject to stockholder approval, the Cyanotech Corporation 2016 Equity Incentive Plan (the “2016 Plan”) as the successor to the Company’s 2005 Stock Option Plan (the “2005 Plan”). The Board of Directors believes that it is in the best interest of the Company to continue to provide officers, employees and certain independent consultants with the opportunity to acquire Common Stock of the Company through incentive stock options which satisfy the requirements of Section 422 of the Internal Revenue Code (“ISOs”), non-qualified stock options that do not satisfy the requirements for ISO treatment (“NQSOs”, and together with ISOs, “Options”), as well as stock appreciation rights (“SARs”), restricted stock, restricted stock units and other stock-based awards (together, “Stock Awards”) and performance shares and performance units (together, “Performance Awards”), which are collectively referred to herein as “Awards”. The Board of Directors adopted the 2016 Plan in order to retain and attract qualified employees and independent consultants as well as to further align the interests of such employees and consultants with the interests of other Company stockholders through increased Company stock ownership. The 2016 Plan provides for the issuance of Awards for an aggregate of up to 1,300,000 shares of Stock to eligible parties as defined therein, up to 600,000 shares of which are available for issuance in connection with Performance Awards and Stock Awards.

The 2016 Plan will be effective upon its approval by the stockholders at the 2016 Annual Meeting of Stockholders and will terminate on August 25, 2026, but no Award granted prior to such date is adversely affected by such termination.

The 2005 Plan terminated on August 21, 2015 and the Company has made no Option grants under the 2005 Plan since that date. Each Option granted pursuant to the 2005 Plan remains in force in accordance with the provisions of the instruments evidencing such grant. Outstanding Options under the 2005 Plan which expire or terminate for any reason without having been exercised will not be available for future Option grants under the 2016 Plan. As of the date of this Proxy Statement, there were a total of 662,500 Options outstanding under the 2005 Plan, exercisable at prices ranging from $1.60 to $7.08 and expiring between 2016 and 2024. Termination of the 2005 Plan did not affect these outstanding Options.

The following is a summary of the principal features of the 2016 Plan. This summary, however, does not purport to be a complete description of all the provisions of the 2016 Plan. A copy of the 2016 Plan is attached to this Proxy Statement as Exhibit A, and the following discussion is qualified in its entirety by reference to Exhibit A.

Shares Reserved

1,300,000 shares of Stock will be reserved for issuance over the ten (10) year term of the 2016 Plan, with the number of shares that may be issued pursuant to Stock Awards and Performance Awards not to exceed 600,000 shares of Stock. The 2005 Plan initially provided that the maximum number of shares of Stock available for Option grants thereunder was 800,000, which was increased by 1,375,000 shares of Stock in 2011 to a total of 2,075,000 shares of Stock available for issuance thereunder. The 1,300,000 shares of Stock reserved for issuance under the 2016 Plan represents 2.6% of the shares of Stock authorized for issuance pursuant to the Company’s Restated Articles of Incorporation and approximately 23% of the shares of Stock outstanding as of June 23, 2016.

The shares issuable under the 2016 Plan will either be shares of the Company’s authorized but previously unissued Stock or shares of Stock reacquired by the Company, including shares purchased on the open market. If an Award issued under the 2016 Plan expires or terminates for any reason prior to exercise in full, the shares subject to the portion of the Award not so exercised will be returned to the pool of reserved shares and will be available for subsequent Award grants under the 2016 Plan so long as the plan is in force.

The number of shares of Stock available for issuance under the 2016 Plan shall not be increased by (a) any shares of Stock tendered, withheld, or surrendered in connection with the purchase of shares of Stock upon exercise of an Award, (b) any shares of Stock deducted or delivered from an Award payment in connection with the Company’s tax withholding obligations; (c) Stock repurchased on the open market with the proceeds of an Award exercise; or (d) any shares of Stock that were subject to a stock-settled SAR or Option that were not issued upon the exercise of such SAR or Option.

In the event of any change in the Company’s corporate structure or Stock, such as a recapitalization, stock split, stock dividend or other similar event, the Compensation and Stock Option Committee of the Company may make any appropriate adjustments in the number and kind of shares of Stock with respect to which Awards may be granted under the 2016 Plan, including the limits described above, and, with respect to outstanding Awards, in the number and kind of shares covered thereby and in the applicable exercise price subject to compliance with Section 409A of the Internal Revenue Code (the “Code”).

Plan Administration

            The 2016 Plan will be administered by the Compensation and Stock Option Committee, as designated by the Board of Directors, subject to the requirements of 1934 Act Rule 16b-3 and the NASDAQ Listing Rules. The Compensation and Stock Option Committee has authority to adopt rules as it may deem appropriate to carry out the purposes of the 2016 Plan, to interpret and construe the provisions of the 2016 Plan and any agreements and notices under the 2016 Plan, and to make determinations pursuant to any 2016 Plan provision. Each interpretation, determination or order or action made or taken by the Compensation and Stock Option Committee pursuant to the 2016 Plan is final and binding on all persons. The Compensation and Stock Option Committee is not liable for any action or determination made in good faith, and its members are entitled to indemnification and reimbursement in the manner provided in the Company’s Articles of Incorporation and Bylaws as such documents may be amended and restated from time to time.

The 2016 Plan expressly provides that no amendment or modification may be made to an outstanding Option or SAR that would be treated as a repricing under the NASDAQ Listing Rules or the rules of any other securities exchange or market system constituting the primary market for the Company’s Common Stock. The 2016 Plan provides for any Award to be subject to any Company approved clawback policy.

Eligibility

Any person (including an officer) employed by the Company or any Company subsidiary, or an independent consultant who provides valuable services to the Company or any Company subsidiary is eligible to participate in the 2016 Plan. However, ISOs may be granted only to employees or prospective employees in connection with written offers of employment. Generally, Awards will not be transferable other than by will or pursuant to the laws of descent or a qualified domestic relations order, and will be exercisable during the lifetime of a participant by such participant or such participant’s guardian or legal representative. No participant may be granted Awards for more than 500,000 shares of Stock (subject to adjustment as provided for changes in the Company’s capitalization) in any calendar year. As of July 7, 2016, approximately 123 employees were eligible to participate in the 2016 Plan.

Valuation

“Fair Market Value” is defined as the last reported sale price of the Common Stock of the Company on the Nasdaq Small-Cap Market, or if the Company’s Common Stock is regularly traded in some other market or on an exchange, the closing selling price per share of the Company’s Common Stock . Under the 2016 Plan, the exercise price of each Option will be no less than 100% of the Fair Market Value thereof on the date of the grant. On July 7, 2016, the closing price of the Company’s Common Stock on the Nasdaq Small-Cap Market was $5.16. Payment of the exercise price may be made in whole or in part with other shares of Stock owned by the participant credited at Fair Market Value.

Terms of Awards

Stock Options

Each Option granted under the 2016 Plan must be evidenced by a written agreement between the Company and the participant specifying the number of shares of Stock subject to the Option and the other terms and conditions of the Option, consistent with the requirements of the 2016 Plan. The exercise price of each Option will be established in the discretion of the Compensation and Stock Option Committee, provided, however, that the exercise price for an ISO may not be less than 100% of the Fair Market Value of the Company’s Common Stock on the date of the grant. Furthermore, any ISO granted to a person who at the time of the grant owns Stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or any subsidiary of the Company (a “Ten Percent Owner”) must have an exercise price equal to at least 110% of the Fair Market Value of the Company’s Common Stock on the date of the grant. The aggregate Fair Market Value of the shares of Stock for which ISOs granted to any employee may be exercisable for the first time by such employee during any calendar year (under all stock option plans of the Company and its subsidiaries) may not exceed $100,000. Options in excess of such limit shall be treated as NQSOs.

The exercise price of an Option may be paid in such form as permitted by the Compensation and Stock Option Committee, including, without limitation, cash, Stock, the immediate sale through a broker of the number of shares of Stock being acquired sufficient to pay the exercise price, or by a combination of these methods.

Options may become exercisable in full or in installments according to a vesting schedule that is no longer than ten years after the effective date of grant of an Option for any participant, except that no ISO granted to any Ten Percent Owner may be exercised more than five years after it was granted.

Vested Options that have not been exercised as of a participant’s separation from service with the Company or any of its subsidiaries may be exercised only during the applicable time period set forth in the written agreement pursuant to which such Options were issued, which shall be determined in the discretion of the Compensation and Stock Option Committee. No ISO can be exercised more than three months after the participant’s separation from service (other than for reasons of the participant’s disability or death), unless (a) the participant dies during such three-month period, and/or (b) the award agreement or the Compensation and Stock Option Committee permits later exercise (in which case the Option instead may be deemed to be a NQSO). No ISO may be exercised more than one year after the Participant’s termination of service on account of disability, unless (a) the participant dies during such one year period, and/or (b) the award agreement or the Compensation and Stock Option Committee permit later exercise (in which case the Option instead may be deemed to be a NQSO).

Stock Appreciation Rights

Subject to the terms of the 2016 Plan, the Compensation and Stock Option Committee may grant a SAR to any eligible participant. SARs may be granted in tandem with a related Option or independently of any Option. A SAR entitles the participant to receive payment of an amount equal to the product of (i) the excess, if any, of the Fair Market Value of a share of Stock on the date of exercise of the SAR over the exercise price thereof, and (ii) the number of shares of Stock subject to such SAR. Payment may be made in cash or partly in shares and partly in cash, as determined by the Compensation and Stock Option Committee. SARs to be settled in shares of Stock shall be counted in full against the number of shares available for award under the 2016 Plan, regardless of the number of Shares actually issued to the participant upon settlement of the SAR.

The exercise price for each SAR shall be established in the discretion of the Compensation and Stock Option Committee; provided that, (i) the exercise price per share subject to a SAR granted in tandem with any Option shall be the exercise price per share for the related Option and (ii) the exercise price per share subject to a SAR granted independent of any option shall be not less than the Fair Market Value of a share of the Company’s Common Stock on the date of grant of the SAR.

Restricted Stock Awards

Subject to the terms of the 2016 Plan, the Compensation and Stock Option Committee has the authority to determine the number of shares subject to a restricted stock award and the terms, conditions and restrictions applicable to the vesting of a restricted stock award. Generally, the participant has all of the rights of a Company stockholder with respect to the shares of Stock subject to a restricted stock award, including, but not limited to, the right to vote and the right to receive dividends; provided that, any restricted stock granted subject to the achievement of performance criteria shall be forfeited to the extent such criteria are not satisfied.

The Compensation and Stock Option Committee will determine the vesting for each restricted stock award. Shares issued pursuant to any restricted stock award may be made subject to vesting conditioned upon the satisfaction of service requirements, conditions, restrictions or performance criteria, including, without limitation, performance goals established by the Compensation and Stock Option Committee and set forth in the award agreement evidencing such restricted stock award.

The effect of a participant’s termination of service for any reason other than death, disability or cause on any restricted stock award shall be determined by the Compensation and Stock Option Committee, in its discretion, and set forth in the award agreement evidencing such Award.

Restricted Stock Units

The Compensation and Stock Option Committee may grant restricted stock units under the 2016 Plan, which represent a right to receive shares of Stock or equivalent cash value at a future date determined in accordance with the participant’s award agreement. No monetary payment is required for receipt of restricted stock units or the shares of Stock issued in settlement of the Award. Instead, the consideration for the Award is the participant’s services to the Company or its subsidiaries.

The Compensation and Stock Option Committee may grant restricted stock unit awards subject to the attainment of performance goals similar to those described below in connection with Performance Awards, or may make such awards subject to vesting conditions similar to those applicable to restricted stock awards. Participants have no voting rights or rights to receive cash dividends with respect to restricted stock unit awards until shares of Stock are issued in settlement of such awards. However, the Compensation and Stock Option Committee may grant holders of restricted stock units the right to receive dividend equivalents, which are rights to receive additional restricted stock units for a number of shares whose value is equal to any cash dividends paid by the Company. A holder of restricted stock units has no rights other than those of a general creditor of the Company. Restricted stock units represent an unfunded and unsecured obligation of the Company, subject to the terms and conditions of the applicable award agreement.

Performance Awards

The Compensation and Stock Option Committee may grant Performance Awards subject to such conditions and the attainment of such performance goals over such periods as the Compensation and Stock Option Committee determines. A performance share has an initial value equal to the Fair Market Value of the Company’s Common Stock as determined on the date the performance share is granted and each performance unit has an initial value of determined by the Compensation and Stock Option Committee in its discretion. Performance Awards will specify a predetermined number of performance shares or performance units that may be earned by the participant to the extent that one or more predetermined performance goals are attained within a predetermined performance period. To the extent earned, Performance Awards may be settled in cash, Stock or any combination thereof, as determined by the Compensation and Stock Option Committee.

Prior to the beginning of the applicable performance period or such later date as permitted under Section 162(m) of the Code, the Compensation and Stock Option Committee will establish one or more performance goals applicable to the Performance Award. Performance goals will be based on the attainment of specified target levels with respect to one or more measures of business or financial performance of the Company and each subsidiary consolidated for financial reporting purposes, or such division or business unit of Company as may be selected by the Compensation and Stock Option Committee. When a Performance Award is granted to a participant designated by the Compensation and Stock Option Committee as likely to be a “Covered Employee” within the meaning of Code Section 162(m), and the Compensation and Stock Option Committee believes the Performance Award should qualify as “performance-based compensation” for purposes of Code Section 162(m), the grant, exercise and/or settlement of such award shall be contingent upon achievement of one or more pre-established performance goals, measured either on an absolute basis or relative to the performance of a peer group or index.

The effect of the participant’s termination of employment or service on any Performance Award shall be determined by the Compensation and Stock Option Committee, in its discretion, and set forth in the award agreement evidencing such Performance Award. However, in no event shall a Performance Award be payable upon an employee’s termination from service with or without cause or for “good reason,” as defined in the applicable award agreement. No Performance Award may be sold or transferred other than by will or the laws of descent and distribution prior to the end of the applicable performance period.

Other Equity-Based Awards

The Compensation and Stock Option Committee may, in its discretion, grant to eligible employees other equity-based awards, as deemed by the Compensation and Stock Option Committee to be consistent with the purposes of the 2016 Plan.

Change in Control

Upon the occurrence of certain Change in Control events (as defined in the 2016 Plan), the Company may provide for any of the following in connection with outstanding Awards:

Amendment and Termination of 2016 Plan

        The Compensation and Stock Option Committee may amend the 2016 Plan. However, stockholder approval will be necessary for any amendment that would increase in the maximum aggregate number of shares of Stock that may be issued under the 2016 Plan (except in connection with a Change in Capitalization described above), change the class of persons eligible to receive ISOs, or that otherwise requires stockholder approval under any applicable law, regulation or rule. However, no such amendment or modification to the 2016 Plan may adversely affect any then outstanding Award unless expressly provided by the Compensation and Stock Option Committee. In any event, no termination or amendment of the 2016 Plan may adversely affect any then outstanding Award without the consent of the participant, unless such termination or amendment is required to enable an Option designated as an ISO to qualify as an ISO or is otherwise necessary to comply with any applicable law, regulation or rule.

        The Board of Directors may terminate the 2016 Plan at any time, and the 2016 Plan will in all events terminate on August 25, 2026. Each Award outstanding on such date will remain in force in accordance with the provisions of the instruments evidencing such Award.

Federal Income Tax Consequences

General

        The following is a brief description of certain federal income tax considerations with respect to the 2016 Plan and participation therein. There can be no assurance that such considerations will not be altered by future changes in the law or administrative interpretations. In addition, participants may be subject to certain state and local taxes which are not described herein and which may differ from taxes imposed under federal law.

        Because a participant’s tax circumstances may differ from those of other participants, and because there may be changes in applicable tax law, it is recommended that each participant consult with a qualified tax advisor concerning the tax consequences of participation in the 2016 Plan.

Incentive Stock Options

In general, no income for regular income tax purposes will be recognized by a participant upon exercise of an ISO under the 2016 Plan, provided that the ISO is exercised within three months after the termination of the participant’s service with the Company or its subsidiaries (or a longer period, described above in Terms of Stock Options, in the case of the participant’s death or disability). The difference between the exercise price and the Fair Market Value of the shares of Stock on the date the ISO is exercised is, however, an adjustment item for purposes of the participant’s alternative minimum tax. When the shares of the Company’s Common Stock received upon exercise of the ISO is sold, the participant will recognize long-term capital gain or loss equal to the difference between the amount realized and the exercise price of the ISO related to such stock if the participant has held the Company’s Common Stock for more than two years from the date of the ISO’s grant and for more than one year from the date of exercise.

If the above-mentioned holding period requirements are not satisfied, the subsequent sale of Stock received upon exercise of an ISO will be treated as a “disqualifying disposition.” In general, a participant will recognize taxable income at the time of a disqualifying disposition as follows: (i) ordinary income in an amount equal to the excess of (A) the lesser of the Fair Market Value of the shares of Stock on the date the ISO is exercised or the amount realized on such disqualifying disposition over (B) the exercise price of the ISO; and (ii) capital gains to the extent of any excess of the amount realized on such disqualifying disposition over the Fair Market Value of the shares of Stock on the date the ISO is exercised (or capital loss to the extent of any excess of the exercise price over the amount realized on disposition). Any capital gain or loss recognized by the participant will be long-term or short-term depending upon the holding period for the shares of the Company’s Common Stock sold. The Company may claim a deduction at the time of the disqualifying disposition equal to the amount of ordinary income the participant recognizes.

If an Incentive Stock Option is not exercised within the three months after the termination of the participants employment (or one year in the case of death or disability of the participant), it will be treated for federal income tax purposes as a NQSO, as described below.

In general, a participant who pays the exercise price of an ISO, in whole or in part, by delivering shares of Stock already owned by the participant will recognize no gain or loss for federal income tax purposes on the shares of Stock surrendered. However, if the shares of Stock delivered to exercise the ISO were acquired pursuant to the prior exercise of an ISO and the holding period requirements discussed above have not been met with respect to such shares, the delivery of such shares to exercise the ISO will be considered a taxable disposition of the shares. Under applicable Treasury Regulations, a portion of shares of Stock received upon exercise of an ISO equal in number to the shares surrendered will have a basis equal to the basis of the shares surrendered (increased, if applicable, by any income recognized as a result of the exchange), and the holding period of such shares will include the holding period of the shares surrendered (except for purposes of determining whether there has been a disqualifying disposition of the shares). The basis of the additional shares received upon such exercise will be zero, and the holding period of such shares for all purposes will begin on the day after the day that the Option is exercised.

Non-Qualified Stock Options

The grant of NQSOs under the 2016 Plan will not result in the recognition of taxable income to a participant or in a deduction to the Company. Upon exercise, a participant will recognize ordinary income in an amount equal to the excess of the Fair Market Value of each share of Stock purchased over the exercise price. The Company is required to withhold tax on the amount of income so recognized, and is entitled to a tax deduction equal to the amount of such income. Gain or loss upon a subsequent sale of any shares of Stock received upon the exercise of a NQSO is taxed as capital gain or loss to the participant (long-term or short-term, depending upon the holding period of the shares of the Company’s Common Stock sold).

A participant who pays the exercise price of a NQSO, in whole or in part, by delivering shares of Common Stock already owned by the participant will recognize no gain or loss for federal income tax purposes on the shares surrendered. With respect to shares of Stock acquired upon exercise which are equal in number to the shares of Stock surrendered, the basis and holding period of such shares will be equal to the basis and holding period of the shares surrendered. With respect to any additional shares of Stock acquired upon exercise, the basis of such shares will be equal to the Fair Market Value of such shares on the date of exercise, and the holding period for such additional shares will commence on the day after the day that the NQSO is exercised.

Restricted Stock Awards 

A participant acquiring restricted stock generally will recognize ordinary income equal to the Fair Market Value of the shares on the “determination date.” The “determination date” is the date on which the restricted stock becomes unrestricted, unless the restricted stock is subject to a substantial risk of forfeiture (as in the case where the unvested shares are subject to the Company’s right to repurchase them at the original exercise price upon the participant’s termination of service) and are not transferable, in which case the determination date is the earlier of (i) the date on which the shares become transferable, or (ii) the date on which the shares are no longer subject to a substantial risk of forfeiture.

If the participant is an employee, such ordinary income generally is subject to withholding of income and employment taxes. If the determination date is after the date on which the participant acquires the shares, the participant may elect, pursuant to Section 83(b) of the Code, to have the date of acquisition be the determination date by filing an election with the Internal Revenue Service no later than 30 days after the date the shares are acquired. Upon the sale of shares of Stock acquired pursuant to a restricted stock award, any gain or loss, based on the difference between the sale price and the Fair Market Value on the determination date, will be taxed as capital gain or loss. The Company generally will be entitled to a deduction equal to the amount of ordinary income recognized by the participant on the determination date, except to the extent such deduction is limited by applicable provisions of the Code.

Performance Awards and Restricted Stock Unit Awards

A participant generally will recognize no income upon the grant of a performance share, performance unit or restricted stock unit award. Upon the settlement of such Awards, participants normally will recognize ordinary income in the year of receipt in an amount equal to the cash received and the Fair Market Value of any unrestricted shares received. If the participant is an employee, such ordinary income generally is subject to withholding of income and employment taxes. If the participant received shares of restricted stock, the participant generally will be taxed in the same manner as described above (see discussion under “Restricted Stock”). Upon the sale of any shares received, any gain or loss, based on the difference between the sale price and the Fair Market Value on the “determination date” (as defined above under “Restricted Stock Awards”), will be taxed as capital gain or loss. The Company generally will be entitled to a deduction equal to the amount of ordinary income recognized by the participant on the determination date, except to the extent such deduction is limited by applicable provisions of the Code.

Section 162(m)

Section 162(m) of the Code generally denies a corporate tax deduction for annual compensation exceeding $1,000,000 paid to the chief executive officer, or to any of the four other most highly compensated officers of a publicly held company. However, certain types of compensation, including performance-based compensation, are generally excluded from this deductibility limit. To enable compensation in connection with Options, certain restricted stock grants, performance shares and performance units awarded under the 2016 Plan to qualify as “performance-based” within the meaning of Section 162(m) of the Code, the 2016 Plan limits the sizes of such awards as described above. While the Company believes that compensation in connection with such awards under the 2016 Plan will be deductible by the Company for federal income tax purposes, under certain circumstances, such as a Change in Control, compensation paid in settlement of Performance Awards may not qualify as “performance-based.” By approving the 2016 Plan, the stockholders will be approving, among other things, eligibility requirements for participation in the 2016 Plan, the range of financial performance measures upon which specific performance goals applicable to certain awards would be based, limits on the numbers of shares or level of compensation that could be made subject to certain awards, and the other material terms of the awards described above.

280G Parachute Payments

Except as otherwise provided in another agreement, contract or understanding that expressly addresses Section 280G or Section 409A of the Code, any Award held by a participant and any right to receive payment or other benefit under the 2016 Plan shall not become exercisable or vested (i) to the extent such benefit, when taken together with all other benefits the participant may be entitled to under any other compensation arrangements with the Company, would cause the benefit to the participant under the 2016 Plan to be considered a “parachute payment” within the meaning of Code Section 280G(b)(2) (“Parachute Payment”) and (ii) if as a result of receiving the Parachute Payment, the aggregate after-tax amounts received by the participant from the Company under the 2016 Plan and all other compensation arrangements would be less than the maximum after-tax amount that could be received by the participant without causing any such benefit to be considered a Parachute Payment. In the event that the receipt of any such benefit under the 2016 Plan, in conjunction with benefits under all other compensation arrangements, would cause the participant to be considered to have received a Parachute Payment under the 2016 Plan that would have the effect of decreasing the after-tax amount received by the participant as described in clause (ii), then such acceleration and payments and other payments will be reduced to the largest aggregate amount as will result in no portion thereof being subject to such an excise tax or being non-deductible.

Required Vote

The proposal will be approved if a quorum is present and the number of votes cast in favor exceeds the number of votes cast against the proposal.

The Board of Directors unanimously recommends a vote FOR approval of the 2016 Equity Incentive Plan.

*****

PROPOSAL THREE

Ratification of Selection of Independent Registered Public Accounting Firm

The firm of Grant Thornton LLP has served as the Company’s independent registered public accounting firm for the past five fiscal years. The Audit Committee has selected, and the Board of Directors has approved, the firm to continue in this capacity for the current fiscal year ending March 31, 2017. A representative of Grant Thornton LLP is expected to attend the annual meeting with the opportunity to make a statement and to respond to appropriate questions from stockholders present at the meeting. Although it is not required to do so, the Company wishes to provide stockholders with the opportunity to indicate their approval of the selection of the independent registered public accounting firm and accordingly is submitting a proposal to ratify the selection of Grant Thornton LLP. If the stockholders should fail to approve this proposal, the Board of Directors will consider the selection of another independent registered public accounting firm.

The Board of Directors unanimously recommends that stockholders vote FOR ratification of Grant Thornton LLP to serve as the Company’s independent registered public accounting firm for the year ending March 31, 2017.

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COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

Section 16(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) requires the Company’s directors and executive officers, and persons who own more than 10% of its common stock, to file reports of ownership and changes in ownership on Forms 3, 4 and 5 with the SEC. To the Company’s knowledge, based solely on a review of Forms 3 and 4, as amended, furnished to it during its most recent fiscal year, and Form 5, as amended, furnished to it with respect to such fiscal year, the Company believes that during fiscal 2016, its directors and executive officers and greater than 10% shareholders filed all such reports required to be filed under Section 16(a) on a timely basis.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT and RELATED

STOCKHOLDER MATTERS

The following tables set forth information regarding the beneficial ownership of the Company’s Common Stock as of July 1, 2016 by (i) each person who is known by the Company to own beneficially more than 5% of the outstanding shares of the Common Stock of the Company and Common Stock equivalents, (ii) each of the Company’s Named Executive Officers, (iii) each director and (iv) all directors and executive officers named in the Summary Compensation Table appearing herein as a group. The following tables set forth what such persons’ beneficial security ownership position would be assuming the exercise of all outstanding stock options and warrants, exercisable on July 1, 2016 or within 60 days of such date, but such shares are not treated as outstanding for purposes of computing the percentage ownership of any other person or group. As of July 1, 2016, 5,648,264 shares of the Company’s Common Stock was outstanding.

Security Ownership of Certain Beneficial Owners

Security Ownership of Management

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

No current member of the Company’s Compensation and Stock Option Committee is a current or former officer or employee of the Company or its subsidiaries and no executive officer of the Company was a member of the Compensation Committee of any corporation of which a member of the Company’s Compensation and Stock Option Committee is an executive officer.

EXECUTIVE OFFICERS OF THE REGISTRANT

The executive officers are elected by and serve at the pleasure of the Board. The executive officers and other key employees of Cyanotech as of July 1, 2016 include:

Gerald R. Cysewski, Ph. D., Interim President and Chief Executive Officer - 67: Dr. Cysewski became Interim President and Chief Executive Officer as of April 1, 2016, prior to which he was Executive Vice President and Chief Scientific Officer. Dr. Cysewski co-founded the Company in 1983 and has served as a director of the Company since that time. From 1990 to May 16, 2008, Dr. Cysewski served as the Company’s President and Chief Executive Officer, as well as Chairman of the Board. Prior to 1990 Dr. Cysewski served in various other capacities for the Company including Vice Chairman and Scientific Director. From 1980 to 1982, Dr. Cysewski was Group Leader of Microalgae Research and Development at Battelle Northwest, a major contract research and development firm. From 1976 to 1980, Dr. Cysewski was an assistant professor in the Department of Chemical and Nuclear Engineering at the University of California, Santa Barbara, where he received a two-year grant from the National Science Foundation to develop a culture system for blue-green algae. Dr. Cysewski received his doctorate in Chemical Engineering from the University of California at Berkeley.

Jolé Deal, Chief Financial Officer, Vice President-Finance and Administration, Secretary and Treasurer - 57: Ms. Deal is a former CPA with an MBA degree (Pepperdine University) and has over twenty years’ experience as a senior financial executive in consumer products manufacturing companies, before which she was employed in public accounting with Touche Ross / Deloitte & Touche for five years. Before joining the Company in 2011, she served as Chief Financial Officer of PureTek Corporation, a private manufacturer of nutritional supplements, generic pharmaceuticals and beauty care products, based in San Fernando, California, from 2009 until 2011. Previously she was Divisional Vice President and Controller of Pharmavite LLC, a manufacturer/marketer of Nature Made vitamins and dietary supplements, based in Northridge, California (a U.S. subsidiary of Otsuka Pharmaceutical Co., Ltd.), before which she held Pharmavite positions as Director, Sales and Marketing Finance and Director, Financial Planning.

Gerard Watts, Chief Operations Officer - 57: Mr. Watts joined Cyanotech in August 2014 as Chief Operations Officer and brings more than 30 years’ food and agribusiness experience Most recently he advised and guided domestic and international firms with regard to fundamental and strategic issues associated with the global produce business. Previously, he was COO / GM at North Shore Greenhouses, a grower and shipper of living herbs produced in hydroponic greenhouses. From 2008 to 2011, he was President of SunOpta Foods / SunOpta International Fruit Group, a $175 million vertically integrated manufacturer, distributor and redistributor of fresh fruit. From 2005 to 2008, he was VP, GM – Maui Land and Pineapple Company in Maui, Hawaii, where he directed all business operations for the Pineapple Division; and he capped more than 20 years with Calavo Growers Inc. of Santa Paula, California as VP, North American Operations / VP, GM Calavo de Mexico International.

James R. Lundeen, Vice President and Senior Strategist - 64: Mr. Lundeen joined Cyanotech in 2012 and is responsible for all consumer retail marketing and sales activity in the United States for the Nutrex Hawaii brand of nutritional supplements. Most recently, he was Vice President, Customer Marketing at Pharmavite. He has a 30-year track record of business building success at Shulton, General Mills, Colgate, Dial and Pharmavite.   Mr. Lundeen has a BA in Economics from Northwestern University and an MBA from Harvard Business School.

COMPENSATION AND STOCK OPTION COMMITTEE REPORT

The Compensation and Stock Option Committee reviewed and discussed with senior management the Compensation Discussion required by Item 402(m) through Item 402(r) of Regulation S-K that follows. Based on that review and discussion, the Committee recommended and the Board of Directors concurred that such Compensation Discussion be included this proxy statement.

Compensation and Stock Option Committee of the Board of Directors.

Compensation Discussion

Who is responsible for determining appropriate executive compensation?

The Compensation Committee has the responsibility for approving the total compensation program for the Company and its subsidiaries, including base salary, perquisites, incentive compensation and equity-based compensation. The Compensation Committee’s charter does not give the Compensation Committee the right to delegate any of its responsibilities to any other persons. This included determining compensation for the past fiscal year 2016, as well as for the current fiscal year 2017, for the Cyanotech Corporation Named Executive Officers (“NEO’s”) who are the individuals named in the Summary Compensation Table herein: (1) Brent D. Bailey, former President and Chief Executive Officer until March 31, 2016; (2) Gerald R. Cysewski, Ph.D., Interim President and Chief Executive Officer since March 31, 2016; and (3) Jolé E. Deal, Chief Financial Officer, Vice President-Finance and Administration, Secretary and Treasurer of the Company.

What are the objectives of the Company’s compensation programs?

The goals of the Company’s compensation program are to align compensation with business objectives and performance, and to enable the Company to attract, motivate and retain executives of outstanding ability, potential and drive commensurate with the size and development requirements of the Company. Key components include:

The Compensation Committee endeavors to balance Company needs and values with the employees’ needs and believes that it is important that the Committee maintain this relationship.

What are the compensation programs designed to reward?

The Company’s compensation programs are designed to recognize and reward executives for the Company’s annual and long-term performance and for individual performance that enhance shareholder value. To that end:

For other NEO’s, the Compensation Committee reviews and considers whether to approve a performance assessment and base salary recommendation from the Chief Executive Officer. The performance evaluations of these executives are based on the Company’s success in achieving short-term and long-term results and projections in relation to the Company goal of achieving sustainable profitability from sales of its products; in addition to performance toward specific departmental goals established annually and approved by the Compensation Committee.

What are the elements of executive compensation?

The elements of the Company’s executive compensation include:

How is base salary determined?

The base salaries of the executive officers are determined initially on the basis of one or more salary surveys conducted by third parties as well as research conducted by the Company’s Manager of Human Resources of local and national companies from public information such as filings with the SEC. Based on such surveys, the executive officers’ salaries are set within the ranges of the surveys targeted at the median; the exact level is determined after the Committee considers the experience and capability of the executive officer, the level of responsibility and the needs of the Company.

What were the base salary increases for fiscal year 2016?

There were no base salary increases for the executive officers in fiscal year 2016.

Are bonuses paid to executive officers?

The Committee believes that, as a general rule, annual compensation in excess of base salaries should be dependent on the Company’s performance, and should be awarded based on recommendations of the Chief Executive Officer to the Committee and in the discretion of the Board. Accordingly, each fiscal year, the Committee reviews and approves a cash incentive bonus plan designed to motivate executive officer and key personnel to achieve the financial and operational objectives of the Company.

The financial goals are established in part on the basis of an annual operating plan developed by management and approved by the Board of Directors. The annual operating plan is designed to maximize profitability, within the constraints of economic and competitive conditions, some of which are outside the control of the Company, and is developed on the basis of:  (i) the Company’s performance in the prior year; (ii) projections of sales revenue for the plan year based upon recent market conditions and trends and other factors which, based on historical experience, are expected to affect the level of sales that can be achieved; (iii) historical operating cost and cost savings that management believes can be achieved; and (iv) competitive conditions faced by the Company. Taking all of these factors into account, financial targets for key financial performance indicators such as Net Sales, Gross Margin and Net Income are established.

Additionally, specific performance measures are established in areas of strategic planning, leadership, and operations as appropriate to the executive’s area of management responsibility. Such goals support and complement the financial goals of the Company and allow executives to achieve meaningful results even when the Company’s overall profitability is challenged.

As a result of such performance-based criteria, executive compensation, and the proportion of each executive’s total cash compensation that is represented by incentive or bonus income, may increase in those years in which the Company achieves the anticipated level of growth and profitability. On the other hand, in years in which the Company experiences less than anticipated growth, bonuses and total executive compensation should be lower or not awarded and total executive compensation should consequently be lower.

No bonuses were awarded to the Company’s executive officers for fiscal year 2016 performance.

Role of the Compensation Consultant

The Compensation Committee retains Semler Brossy to provide advice on various compensation matters and recommends compensation program designs, including market trends, peer group composition and compensation for our employees, including our executive officers.  During fiscal 2016, the Company incurred approximately $137,000 in fees for Semler Brossy’s services in preparing the 2016 Plan and for no other services. Semler Brossy reports directly to the Compensation Committee, meets the independence requirements of applicable SEC rules and does not provide any other services to our Company beyond those requested or approved by the Compensation Committee.  Semler Brossy regularly attends meetings of the Compensation Committee, either in person or by telephone.  In 2016, Semler Brossy assisted the Compensation Committee with the following:

What is the Company’s equity incentive program?

The Company’s 2005 Stock Option Plan (the “2005 Plan”) has expired, and therefore no additional awards can be issued under this plan. If the Company’s stockholders approve the 2016 Plan, the Compensation Committee will be able to issue equity awards to select executives and key employees as an incentive for them to join or remain in the service of the Company.

How does the Company grant equity awards?

Since the expiration of the 2005 Plan, the Company has not made any equity awards to its employees and officers. If the Company’s stockholders approve the 2016 Plan, the Compensation Committee expects to make equity award grants on an annual basis. Such grants will be intended to align the interests of select executives and key employees with those of the long term goals of stockholders and provide each individual with a significant incentive to join or remain at the Company from the perspective of an owner with an equity stake in the business.

What perquisites and other personal benefits do executive officers have?

The former President and Chief Executive Officer, and the Chief Financial Officer, Vice President-Finance and Administration, Secretary and Treasurer receive monthly commuting expenses to and from Hawaii including airfare, transportation to and from the local airport, parking fees, etc., housing and transportation while working in Hawaii.

Do executive officers have change-in-control agreements?

Options granted under the 2005 Plan that remain outstanding accelerate when a Change in Control or a Corporate Transaction, as defined in the 2005 Plan, occurs, unless such outstanding options are assumed or replaced by the successor corporation with comparable, equalized options or a cash incentive program in accordance with the terms of the 2005 Plan.

A “change in control”, as defined in the 2005 Plan, generally means a change in control of Company effected as a result of (1) any person or related group of persons (other than the Company or a person that directly or indirectly controls, is controlled by, or is under common control with, the Company) directly or indirectly acquires beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act of stock possessing more than fifty percent (50%) of the total combined voting power of the Company’s outstanding stock pursuant to a tender or exchange offer made directly to the Company’s stockholders which the Board does not recommend such stockholders accept; or (2) a change in the composition of the Board over a period of thirty-six (36) consecutive months or less such that a majority of the Board members (rounded up to the next whole number) ceases, by reason of one or more proxy contests for the election of Board members, to be comprised of persons who either (A) have been Board members continuously since the beginning of such period or (B) have been elected or nominated for election as Board members during such period by at least a majority of the Board members described in clause (A) who were still in office at the time such election or nomination was approved by the Board.

If the Company’s stockholders approve the 2016 Plan, the Company will have the ability to take certain actions with respect to outstanding equity awards upon the occurrence of certain Change in Control events, as described further in PROPOSAL 2, Terms of Awards, Change in Control.

How was the Chief Executive Officer’s compensation determined last fiscal year?

The compensation payable to Mr. Bailey, the Company’s former President and Chief Executive Officer was determined by the Committee and was set forth in a Letter Agreement of Employment stating terms of employment dated November 5, 2010 with employment effective January 11, 2011. Base salary was set at a level which the Board felt would be competitive with the base salary levels in effect for chief executive officers at similarly-sized companies within the industry of $300,000 annually, plus eligibility for performance-based bonuses up to 50% of salary each fiscal year, plus an opportunity for a greater bonus if he achieves stretch goals measured by a compound annual earnings growth significantly exceeding fiscal year earnings goals, subject to the Board’s discretion. Additionally, stock options to purchase shares equivalent to approximately 13.5% of the Company’s outstanding common stock at January 11, 2011 were granted pursuant to the Letter Agreement of Employment. Mr. Bailey also received perquisites such as commuting expenses to Hawaii including airfare, transportation to and from the local airport, parking fees, etc.; housing, transportation and incidentals while working in Hawaii.

The material in the heading “Compensation Discussion” and the Report of the Audit Committee are not “soliciting material,” and are not deemed “filed” with the SEC or subject to the SEC’s proxy rules or to the liabilities of Section 18 of the Exchange Act, and are not to be incorporated by reference in any filing of the Company under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, as amended, whether made before or after the date hereof and irrespective of any general incorporation language in such filing. 

EXECUTIVE COMPENSATION AND OTHER INFORMATION

The following table sets forth the compensation paid or accrued by the Company to the Chief Executive Officer and the two highest compensated executive officers of the Company, other than the Chief Executive Officer, for services rendered in all capacities to the Company (hereinafter referred to as the “Named Executive Officers”) for the fiscal years ended March 31, 2016 and 2015.

SUMMARY COMPENSATION

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END

(1) All of Mr. Bailey’s outstanding options expired pursuant to the Separation Agreement he entered into with the Company on March 31, 2016.

(2) Options were granted August 29, 2011 and vest on August 29, 2016.

(3)  Options were granted July 19, 2012 and vest on July 19, 2016.

(4) Options were granted August 16, 2012 and vest on August 16, 2016.

EQUITY COMPENSATION PLAN INFORMATION

The following table provides information about our common stock that may be issued upon the exercise of options and rights under all of our existing equity compensation plans as of March 31, 2016, including the 2004 Independent Director Stock Option and Restricted Stock Grant Plan (the “2004 Directors Plan”). 2005 Stock Option Plan (the “2005 Plan”); and 2014 Independent Director Stock Option and Restricted Stock Grant Plan (the “2014 Plan”). The 2005 Plan and the 2004 Directors Plan have expired and, therefore, no additional awards will be issued under these plans. The 2014 Plan was approved by stockholders on August 28, 2014.

Report of the Audit Committee of the Board of Directors

The Audit Committee, which met thirteen (13) times in fiscal 2016, reviewed and discussed the Company’s audited financial statements with management. The Audit Committee discussed with Grant Thornton LLP, the Company’s independent registered public accounting firm (“Grant Thornton”), the matters required to be discussed by Statement of Auditing Standards No. 114, “Communication with Audit Committees,” which includes, among other items, matters related to the conduct of the audit of the Company’s financial statements. The Audit Committee also received written disclosures and the letter from Grant Thornton required by Independence Standards Board Standard No. 1, which relates to the independent registered public accounting firm’s independence from the Company and its related entities.

The Audit Committee is governed by the Audit Committee Charter adopted by the Board of Directors, a current copy of which is available on the Company’s website at www.cyanotech.com. Pursuant to such Charter, the Audit Committee has the following primary responsibilities:

The firm of Grant Thornton, an independent registered public accounting firm, served as the Company’s independent registered public accounting firm for the past four fiscal years. As stated in Proposal Three, the Audit Committee has selected and the Board has approved Grant Thornton to serve as the Company’s independent registered public accounting firm for the fiscal year ended March 31, 2016.

Audit services provided by Grant Thornton consisted of the examination of the Company’s annual financial statements and services related to filings with the SEC as well as their review of the Company’s quarterly financial statements. All fees paid to Grant Thornton were reviewed and considered for independence by the Audit Committee. In addition, the Audit Committee (i) discussed with Grant Thornton their qualification of the partners and managers assigned to the Company’s audit, (ii) reviewed with Grant Thornton the quality control system for the US accounting and audit practice to provide reasonable assurance that the audit was conducted with professional standards, and (iii) confirmed with Grant Thornton that there was appropriate continuity of personnel working on our audits and availability of national office consultation.

Based on the review and discussions referred to above, the Audit Committee recommended to the Company’s Board of Directors that the Company’s audited financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2016.

Submitted by the Audit Committee of the Company’s Board of Directors.

Independent Registered Public Accounting Firm’s Fees

Audit Fees

The aggregate fees billed by Grant Thornton, our independent registered public accounting firm, for professional services rendered for the audit of the Company’s annual financial statements and timely quarterly reviews for the fiscal year ended March 31, 2016 and 2015 were $334,300 and $546,600, respectively.

Audit-Related Fees

There were no audit-related fees billed by Grant Thornton for the fiscal years ended March 31, 2016 and 2015.

Tax Fees