PROCYTE REPORTS SECOND QUARTER 2004 FINANCIAL RESULTS
REVENUES INCREASE 40%
Redmond, Wash.—August 5, 2004—
ProCyte Corporation (OTCBB: PRCY.OB),
a company that develops and markets skin
care and procedure related products for the dermatology, cosmetic
surgery and spa markets based on its patented GHK Copper Peptide Complex® technologies,
today announced financial results for the second quarter and first half
ended June 30, 2004.
Revenues in the second quarter 2004
increased by $1,053,000 or 40% to $3,685,000 compared to $2,632,000 in
the second quarter 2003. The increase is a result of higher product
sales in the physician market, new product sales into the spa market and
an increase in shipments of Copper Peptide compound to Neutrogena.
Sales to physicians have been steadily increasing since the third
quarter of 2003, reflecting positive
reaction to recent product introductions. The increase in shipments to
Neutrogena in the second quarter of 2004 related to a planned new
product launch by Neutrogena. Royalties for the 2004 quarter decreased
by $89,000 from the comparable 2003 quarter, primarily due to the launch
of products into additional countries by Neutrogena in the second
quarter of 2003, which did not occur in the 2004 period.
Operating expenses
in the second quarter 2004 increased by $830,000 to $2,611,000 from
$1,781,000 in the second quarter 2003. This was due to increased
headcount and commissions related to the increased sales activity. Also
included in the 2004 expenses are $289,000 related to spa operations,
$120,000 lease and facility costs not paid by Emerald Pharmaceuticals,
L.P. after it ceased operations in February of this year, and a $294,000
impairment of leasehold improvements located in the space formerly
subleased by Emerald. Partially offsetting these items was a $166,000
judgment recovery recorded in the 2004 second quarter.
On July 16, 2004 we
completed a strict foreclosure process of accepting substantially all of
Emerald’s assets in satisfaction of Emerald’s obligations under a $2.0
million promissory note. We are in active discussions to sell the
assets related to our former manufacturing operation, which we accepted
under the strict foreclosure process. We took the $294,000 impairment
charge in the 2004 second quarter based upon information currently known
to us, including our assessment of the probability of completing such
sale on the terms currently being negotiated. The sale is contingent
upon, among other things, entering into a binding definitive agreement
and the successful negotiation of new leases with the landlord on terms
acceptable to both ProCyte and the prospective buyer. We expect to
incur additional operating expenses of approximately $10,000 per month
until such sale, if any, can be completed.
Net loss for the
second quarter of 2004 was $29,000 or $0.00 per diluted share as
compared to a net income of $269,000 or $0.02 per diluted share in
2003. The $294,000 impairment charge related to the Emerald leasehold
improvements plus the $120,000 loss of rental and other income due to
Emerald’s default mostly offset the 26% increase in gross profit and
resulted in the loss being reported for the quarter.
Revenues for the
first six months of 2004 were $6.9 million compared to $6.0 million in
2003, an increase of 16%. Product sales increased by 22% to $5.2
million in the first six months of 2004, from $4.0 million for the
comparable six month period of 2003. Royalties decreased by 25%
primarily due to the launch of products into additional countries by
Neutrogena in the second quarter of 2003, which did not occur in the
2004 period.
Operating expenses
for the six month periods were $4.9 million in 2004 versus $4.1 million
in 2003. The 2004 amount includes $479,000 related to spa operations
and $504,000 for the Emerald sublease and related asset impairment. The
2003 amount includes $688,000 in Infomercial expenses.
Net income was
$21,000 for the first six months of 2004, or $0.00 per diluted share,
compared to net income of $136,000 or $0.01 per diluted share for the
same period of 2003. The expenses and impairment charge related to
Emerald during the six months ended June 30, 2004 resulted in the
reduction of net income in the first half of 2004 as compared to the
comparable 2003 period.
Our cash position
improved as of June 30, 2004 to $5.7 million compared to $4.4 million at
March 31, 2004 and $3.8 million at December 31, 2003. The increase in
cash came from a reduction in inventory and accounts receivable
balances, an increase in trade accounts payable, the receipt of payment
of an employee note and the receipt of a deposit from Neutrogena under a
supply agreement.
“Our revenues are
growing across all product segments, and we expect to see increased
product revenue from our international distributors and licensees in the
second half of 2004,” said Jack Clifford, President & CEO. “Also, we
expect new product introductions and the addition of new distributors to
drive revenue growth for the remainder of 2004 and into 2005. Once the
Emerald expenses and charges are behind us, we anticipate improving
earnings into 2005.”
ProCyte will hold
a conference call at 4:00 p.m. EDT on Thursday, August 5, 2004 to
discuss its financial results and continuing business plans. Interested
parties are invited to listen to the call live by dialing 800-261-2045, Passcode 64909#. For those parties unable to join the call, a replay
will be available until midnight Sunday, August 8, 2004 by calling
800-294-1193 and asking for the ProCyte playback.
ProCyte
Corporation develops and markets products based on its patented,
clinically proven Copper Peptide technology for skin health, hair care
and wound care. The Company sells directly to dermatologists, plastic
and cosmetic surgeons, spas and salons and through licenses with
strategic partners into the consumer market, including its long-term
worldwide license agreement with Neutrogena®, a Johnson &
Johnson company (NYSE: JNJ). ProCyte brands include Neova®,
VitalCopper™,
Simple Solutions®
and AquaSanté®
Skin Care products; Complex Cu3®
Post-Procedure Skin Care; GraftCyte®
Hair Transplant Care; and Tricomin®
Advanced Care for Thinning Hair. The Company also has the exclusive
distribution rights for Cutanix Corporation’s Quadrinone®
technology in the U.S., Canada and Puerto Rico. Additional information
is available by visiting the Company’s website at www.procyte.com.
###
This release may contain forward-looking statements relating to the
research, development, commercialization, production, marketing and
distribution of the Company's products and future operating results,
which are subject to certain risks and uncertainties that could cause
actual results to differ materially from those projected.
The
words “believe,” “expect,” “intend,” “anticipate,” variations of such
words, and similar expressions identify
forward-looking statements, but their absence does not mean that the
statement is not forward-looking. These statements are not guarantees of
future performance and are subject to certain risks, uncertainties and
assumptions that are difficult to predict. Factors that could affect the
Company’s actual results include its ability to develop, commercialize
and produce new products; the market acceptance of existing and
potential future products; the availability, cost and timely delivery of
materials and services from and performance of third-party suppliers,
manufacturers, distributors, licensees and other collaborative partners;
the satisfaction of regulatory requirements, and the receipt, timing,
terms and conditions of required regulatory approvals. Reference is
made to the Company’s Annual Report on Form 10-K for the year ended
December 31, 2003 and its latest quarterly report on Form 10Q filed with
the Securities and Exchange Commission for a more detailed description of
such factors. Readers are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date of
this release. The Company undertakes no obligation to publicly update
any forward-looking statement to reflect new information, events or
circumstances after the date of this release or to reflect the
occurrence of unanticipated events.
Summary Financial Information
(in 000's except per share amounts)
| Statements of
Operations Data: |
Three months ended
June 30, |
Six months ended
June 30, |
|
2004 |
2003 |
2004 |
2003 |
| REVENUES |
|
|
|
|
|
Product sales
|
$ 3,454 |
$ 2,313 |
$ 6,315 |
$ 5,195 |
|
Licenses, royalties and other
|
230 |
319 |
589
|
783
|
|
Total revenue
|
3,684
|
2,632
|
6,904
|
5,978
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of product sales
|
1,157 |
619 |
2,018 |
1,802 |
|
Gross Profit
|
2,527
|
2,013
|
4,886
|
4,176
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| OPERATING EXPENSES |
|
|
|
|
| Marketing & selling
|
1,260
|
814
|
2,458
|
2,213
|
|
General, research &
administrative
|
1,057
|
967
|
2,148
|
1,934
|
|
Loss on asset impairment |
294
|
-
|
294
|
-
|
|
Total operating expenses
|
2,611
|
1,781
|
4,900
|
4,147
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| INCOME (LOSS) FROM OPERATIONS |
(84) |
232 |
(14) |
29 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Interest & other income |
43 |
37 |
50
|
125
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net income (loss) before tax |
(41) |
269 |
36
|
154
|
|
Income tax provision (benefit) |
(12) |
- |
15
|
18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net Income (Loss) |
$ (29) |
$ 269 |
$ 21 |
$ 136 |
|
|
|
|
|
|
|
|
|
|
| Net Income (loss) per
share |
|
|
|
|
| Basic |
$ 0.00 |
$ 0.02 |
$ 0.00 |
$ 0.01 |
| Diluted |
$ 0.00 |
$
0.02 |
$ 0.00 |
$ 0.01 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Shares used in per share computation |
|
|
|
|
|
Basic
|
15,798 |
15,765 |
15,795 |
15,755 |
|
Diluted
|
15,798 |
16,040 |
16,030 |
15,979 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Balance
Sheet Data: |
June
30,
2004 |
December
31,
2003 |
| Cash and cash equivalents |
$ 5,729 |
$ 3,796 |
| Accounts
receivable, net of allowance |
1,202
|
1,336 |
| Inventory |
2,625 |
2,942
|
| Property
and equipment, net |
171
|
541
|
| Intangibles,
net |
3,205
|
3,212
|
| Other
assets |
8,091 |
8,176
|
|
Total Assets |
$ 21,023 |
$ 20,003 |
|
|
|
| Total
liabilities |
$
1,756 |
$ 785 |
| Stockholders'
equity |
19,267
|
19,218
|
|
Total Liabilities and Stockholders' Equity |
$ 21,023 |
$ 20,003 |
|
