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Chris Lahiji
Chris Lahiji
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This has been one of my long time favorites and currently happens to be in the fund I co-manage.

Procyte is all about making your skin feel healthy and beautiful. Founded in 1986, the company develops, makes, and markets skin and hair care products, most of which are based on its copper peptide technology.

ProCyte's skin care products are used following such dermatological, plastic, and cosmetic surgery procedures as chemical peels and microderm abrasion.

The company also makes sun protection and self-tanning products. ProCyte's hair care products include shampoos, conditioners, and follicle therapy solutions. It also licenses its copper peptide technology to Johnson & Johnson subsidiary Neutrogena, for use in its patented skin care line.

What interests me about the company besides its product line, is its disciplined management team. When I open the books, the financials looks very strong.

For one thing, ProCyte is currently profitable. The other is that it has $5.4 in cash, and a little over $20 million in assets altogether. Their liabilities are less than a tenth of that (1.5 million).

I've calculated that the net tangible assets are currently near $18 million dollars, which is above its market cap of $16 million.

It really excites me to find a medical skin care company that has assets worth more than what Wall Street is valuing them at, and this should bode well for our members.

In my opinion, the stock should be worth more than a buck. 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 the comparable period of 2003 which was partially offset by a 18% decrease in revenue from Neutrogena.

Even though profits dropped 13% to $359,000, it was mostly due to tax provisions and not weakness or slowing demand for their product line.

The hurricanes in Florida also didn't help. PRCY does a lot of business in that state, and I'm pretty confident that during the evacuations, people could care less about healthy skin and more about their safety.

That was a one time thing, and I'm looking at the big picture.

I believe that ProCyte has great financials that will serve as a solid foundation as they develop new products and continue to remain profitable.

The stock is currently trading below its asset base, and shall continue to generate cash flow and profitability for the shareholders. With around $19 million in stockholders equity, owners of ProCyte should be feeling snug right now.

Give it special consideration moving forward. One of these days, the company will get recognized by the public and move substantially higher in my opinion. Patience will be the key with ProCyte.

-Chris Lahiji

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