UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

 

Washington, D.C. 20549

 

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

 

November 2, 2004

Date of Report (Date of

earliest event reported)

 

ProCyte Corporation

(Exact Name of Registrant as Specified in Charter)

 

Washington

 

0-18044 

 

91-1307460 

(State or Other Jurisdiction of
Incorporation)

 

(Commission File No.)

 

(IRS Employer
Identification No.)

 

 

 

 

 

8511 154th Avenue, NE, Redmond, WA

 

98052

(Address of principal executive offices)

 

(Zip Code)

 

(425) 869-1239

(Registrant’s telephone number, including area code)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨ Written communication pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 


 

Section 2 – Financial Information

 

Item 2.02.              Results of Operations and Financial Condition.

 

On November 2, ProCyte Corporation issued a press release announcing its earnings for the third quarter and nine months ended September 30, 2004.  A copy of the press release is attached hereto as Exhibit 99.1 and incorporated herein by reference.

 

Section 9 – Financial Statements and Exhibits

 

Item 9.01.              Financial Statements and Exhibits.

 

(c)              Exhibits.

 

Exhibit No

 

Description

99.1

 

Press release dated November 2, 2004, “ProCyte Reports Third Quarter 2004 Financial Results – Third Quarter Product Sales Increase 40%”

 

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

ProCyte Corporation

 

 

Dated: November 2, 2004

By:

/s/ Robert W. Benson

 

 

 

Robert W. Benson
Chief Financial Officer

 

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EXHIBIT INDEX

 

Exhibit No

 

Description

99.1

 

Press release dated November 2, 2004, “ProCyte Reports Third Quarter 2004 Financial Results – Third Quarter Product Sales Increase 40%”

 

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                Exhibit 99.1

 

News

 

 

For Release
November 2, 2004
6:30 a.m. Eastern Time

 

Contact:

Robert Benson
ProCyte Corporation
(425) 869-1239,X399

irinfo@procyte.com

 

PROCYTE REPORTS THIRD QUARTER 2004 FINANCIAL RESULTS

 

THIRD QUARTER PRODUCT SALES INCREASE 40%

 

Redmond, Wash.—November 2, 2004— ProCyte Corporation (OTCBB: PRCY.OB), today announced financial results for the third quarter and nine months ended September 30, 2004.

 

Revenues in the third quarter 2004 increased by $514,000 or 19% to $3,236,000 compared to $2,722,000 in the third quarter 2003. Product sales to international distributors, physician customers and product sales into the spa market all combined to increase third quarter 2004 product sales by $765,000 or 40% over the 2003 third quarter.  ProCyte expanded its international distribution network for its skin care and hair care products with the addition of five companies over the past several months which contributed to a 247% or $339,000 increase in international revenue for the third quarter of 2004 as compared to the 2003 third quarter.  Third quarter sales to physicians increased $187,000 or 12% as compared to the 2003 third quarter, reflecting positive reaction to 2004 product introductions.  Sales growth from physicians was slowed somewhat by the series of hurricanes that swept Florida during the 2004 third quarter, however this impact appears to have been temporary as October order levels have returned to expected rates.  Revenue from Neutrogena was $248,000 or 31% lower in the 2004 third quarter as compared to the 2003 third quarter due to the timing of Neutrogena’s production and promotional activities.

 

Operating expenses in the third quarter 2004 increased by $350,000 or 19% from the third quarter 2003 primarily due to the addition of spa operations and the operating expenses from ProCyte’s former manufacturing facility.  The sale of our manufacturing facility assets for $900,000 in cash was completed on October 22, 2004, eliminating lease and facility operating costs of approximately $120,000 per quarter beginning in November 2004.

 

Net income before income taxes was $323,000 for the third quarter of 2004, an increase of 24% as compared to $261,000 for the 2003 period.  In compliance with Generally Accepted Accounting Principles, ProCyte’s 2004 third quarter reflects a non-cash provision for income tax expense while in the comparable 2003 period no income tax expense provision was recorded.  Therefore, the third quarter 2004 net income, after a $122,000 provision for income tax expense, was $201,000 or $0.01 per diluted share as compared to net income of $261,000 or $0.02 per diluted share in the 2003 third quarter.

 

Revenues for the first nine months of 2004 increased by $1,440,000 or 17% compared to 2003.  Product sales increased by 33% to $7,834,000 in the first nine months of 2004, from $5,898,000 for

 

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the comparable period of 2003 which was partially offset by a 18% decrease in revenue from Neutrogena.

 

Operating expenses for the first nine months of 2004 increased $1,102,000 or 18% over the 2003 period. The 2004 amount includes $722,000 related to spa operations and $664,000 for the manufacturing facility expenses and related asset impairment. The 2003 period included $767,000 in Infomercial expenses.

 

Net income before income taxes was $359,000 for the first nine months of 2004, a decrease of 13% as compared to $414,000 for the comparable 2003 period.  Net income for the first nine months of 2004, after a $137,000 provision for income tax expense was $222,000, or $0.01 per diluted share, compared to net income of $397,000 or $0.02 per diluted share for the same period of 2003, which included no comparable provision for income tax expense. The decrease in net income is due to the effect of including the provision for income tax expenses in the 2004 period and the expenses and impairment charge related to the manufacturing facility incurred during the nine month period ended September 30, 2004.

 

Our cash position remains positive with a balance of $5,321,000 at September 30, 2004 as compared to $3,796,000 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.

 

“We are very encouraged by our product sales results given the business disruption some of our customers suffered as a result of the many hurricanes that hit Florida, one of our larger markets”, said Jack Clifford, President and Chief Executive Officer, “Our financial results for the past quarter and year-to-date have shown strong growth in both U.S. and international product sales.  We are also very pleased that we were able to not only sell the manufacturing assets, but to sell them to a buyer that could take on the facility, relieving ProCyte from the significant ongoing lease and operating expenses for a facility we could not effectively utilize.”

 

ProCyte will hold a conference call at 4:30 p.m. Eastern Time on Tuesday, November 2, 2004 to discuss the Company’s third quarter 2004 results.  To participate in the conference call, dial 800-260-1153 (confirmation code 87768#) approximately 5 minutes prior to the scheduled start time.  If you are unable to participate, a replay of the call will be available from 7:30 p.m. Eastern Time on Tuesday, November 2 until midnight on Saturday, November 6, by dialing 800-294-1193 and telling the operator that you want to listen to 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. 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 physician market 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.

 

###

 

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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 10-Q 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.

 

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Summary Financial Information

(in 000’s except per share amounts)

 

 

 

Three months ended September 30,

 

Nine months ended September 30,

 

Statements of Operations Data:

 

2004

 

2003

 

2004

 

2003

 

 

 

 

 

 

 

 

 

 

 

REVENUES

 

 

 

 

 

 

 

 

 

Product sales

 

$

2,883

 

$

2,286

 

$

9,198

 

$

7,481

 

Licenses, royalties and other

 

353

 

437

 

942

 

1,220

 

Total revenues

 

3,236

 

2,723

 

10,140

 

8,701

 

 

 

 

 

 

 

 

 

 

 

Cost of product sales

 

756

 

675

 

2,774

 

2,477

 

Gross Profit

 

2,480

 

2,048

 

7,366

 

6,224

 

 

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES

 

 

 

 

 

 

 

 

 

Marketing & selling

 

1,091

 

1,024

 

3,549

 

3,237

 

General, research & administrative

 

1,055

 

797

 

3,203

 

2,731

 

Loss on asset impairment

 

25

 

—

 

319

 

—

 

Total operating expenses

 

2,171

 

1,821

 

7,071

 

5,968

 

 

 

 

 

 

 

 

 

 

 

INCOME FROM OPERATIONS

 

309

 

227

 

295

 

256

 

 

 

 

 

 

 

 

 

 

 

Interest & other income

 

14

 

34

 

64

 

159

 

 

 

 

 

 

 

 

 

 

 

Net income before tax

 

323

 

261

 

359

 

415

 

Income tax provision

 

122

 

—

 

137

 

18

 

 

 

 

 

 

 

 

 

 

 

Net Income

 

$

201

 

$

261

 

$

222

 

$

397

 

 

 

 

 

 

 

 

 

 

 

Net income per share

 

 

 

 

 

 

 

 

 

Basic

 

$

0.01

 

$

0.02

 

$

0.01

 

$

0.03

 

Diluted

 

$

0.01

 

$

0.02

 

$

0.01

 

$

0.02

 

 

 

 

 

 

 

 

 

 

 

Shares used in per share computation

 

 

 

 

 

 

 

 

 

Basic

 

15,807

 

15,774

 

15,799

 

15,761

 

Diluted

 

15,954

 

15,974

 

16,000

 

15,973

 

 

Balance Sheet Data:

 

September 30,
2004

 

December 31,
2003

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

5,321

 

$

3,796

 

 

 

 

 

Accounts receivable, net of allowance

 

1,317

 

1,336

 

 

 

 

 

Inventory

 

2,977

 

2,942

 

 

 

 

 

Property and equipment, net

 

107

 

541

 

 

 

 

 

Intangibles, net

 

3,198

 

3,212

 

 

 

 

 

Other assets

 

8,052

 

8,176

 

 

 

 

 

Total Assets

 

$

20,972

 

$

20,003

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total liabilities

 

$

1,491

 

$

785

 

 

 

 

 

Stockholders’ equity

 

19,481

 

19,218

 

 

 

 

 

Total Liabilities and Stockholders’
Equity

 

$

20,972

 

$

20,003

 

 

 

 

 

 

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