Pure Technologies Ltd. Announces Results For Second Quarter
30 August 2006
Pure Technologies Ltd., TSX-V: PUR, announces total revenues of $2,351,000 for the second quarter of 2006, compared with total revenues of $908,000 for the second quarter of 2005. Year to date revenue was $3,992,000 compared with $3,192,000 in the prior year. The second quarter showed a strong increase in activity over the first quarter and also over the corresponding quarter of 2005. Pure experienced a general increase in business activity, aided by the completion and recognition of projects commenced in the first quarter and the delivery of a SoundPrint(R) AFO system to a customer on the U.S. East Coast. Quarterly revenues continue to be susceptible to the timing of large projects because we recognize revenues on a project completion basis.
Net loss for the quarter was $1,046,000 compared with a loss of $1,248,000 in the quarter a year earlier.
As previously announced, revenues from Pure's new technologies including SoundPrint(R) AFO, SoundPrint(R) SmartBall and PureActiv(R) will not start to contribute meaningful revenues until the second half of the year. The SoundPrint(R) AFO product has attracted much attention from water agencies in North America and overseas. It is currently being used by five agencies as a key component of their prestressed pipeline integrity management strategy, and we expect this number to increase significantly over the next few years. We are also pursuing opportunities in the oil and gas sector, where the product is applicable for leak detection and pipeline surveillance.
Following beta testing in the U.S. and Europe, development work is continuing on the SoundPrint(R) SmartBall product for leak detection in water and wastewater pipes. We now anticipate commercial deployment in the last quarter. Concurrently, work is progressing on a version for oil and gas pipelines, which will be ready for testing on a petroleum products pipeline in Houston in October. Interest in the technology continues to be intense.
In addition, a number of large SoundPrint(R) bridge projects and pipeline inspection projects are scheduled for completion later this year. The company has a confirmed order backlog in excess of $4.1 million and has received verbal confirmation of awards in excess of $2.2 million. The company, therefore, anticipates a growing level of project activity as the year progresses. These numbers exclude recurring revenues.
Our PureTech Systems subsidiary continues to generate market credibility and brand awareness for its PureActiv(R) automated surveillance and video analytics technology. This has resulted in a substantial and increasing opportunity pipeline, which should ensure the long-term growth and profitability of the unit. We are currently pursuing strategic alternatives to realize some of the enterprise value in the company in a way which will have a positive impact on Pure.
Financial Overview
Total revenue for the three months ended June 30, 2006 was $2,351,000, compared with $908,000 in the same period a year earlier. Revenue has increased as major anticipated projects were completed in the quarter. Project activity continues to increase.
Monitoring revenue was lower than previous periods due to foreign currency exchange rates and a decrease in technical support to a large overseas client. Monitoring revenue is expected to increase as the year continues with the commissioning of large SoundPrint AFO projects which have a significant monitoring and technical support component.
With the increase in revenue for the quarter, the net loss for the quarter was $1,046,000 compared to a net loss of $1,247,637 in the corresponding period a year earlier.
Cost of sales for the period was $1,146,000 resulting in a gross margin of 51.3%. This compares with a gross margin of 54.7% for the same period a year ago and 55.9% for the first quarter of 2006. This is mainly due to lower margins generated on AFO system installation, which has high subcontract content, and because of the learning curve associated with the installation and commissioning of this new technology. This decline will be offset to some extent in the future by increased efficiency as our installation methods evolve and our technicians become more experienced. These projects will also generate meaningful higher-margin recurring revenues on an annualized basis.
Marketing and promotion expense for the quarter was $701,000 compared with $544,000 for the second quarter of 2005. Pure has expanded it's marketing and promotion resources to capitalize on it's growing suite of commercialized technologies. Resources were added in the first quarter and subsequently which will increase this expense.
General and administration expenses for the quarter were $995,000 which represented an increase from the prior year's expense of $872,000. During the latter half of 2005 Pure significantly added resources for its PureTech subsidiary in Phoenix and increased operational capabilities to meet expected 2006 requirements.
Research and development expenses increased to $236,000 in the quarter versus $192,000 in the previous year. Pure has added staffing resources in the research and development department to accelerate the development of recently commercialized and soon to be commercialized technologies. Research and development will continue to be an ongoing focus for 2006.
Depreciation and amortization for the second quarter of 2006 was $263,000 and $157,000 for 2005. Pure is continuing to capitalize software development costs for PureActiv(R), its innovative surveillance technology. Pure has incurred new capital expenditures for SoundPrint AFO systems deployed in 2006.
The Company has $5,561,000 of working capital at June 30, 2006 compared with $8,710,000 at December 31, 2005. Management believes the Company has sufficient working capital to meet its current obligations and projected requirements for growth. The Company currently has no debt.
Subsequent to June 30, the company completed a private placement with gross proceeds of $4,006,000. Proceeds from the placement will allow Pure Technologies to continue to accelerate market development for Pure's SoundPrint(R), P-Wave(R), SoundPrint(R) AFO and Smartball(TM) technologies as well as to meet current requirements for recently announced projects.
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2006 Q2 Financial Highlights
Consolidated Three months ended: Six months ended:
Statement June 30, June 30, June 30, June 30,
of Operations 2006 2005 2006 2005
-------------------------------------------------------------------------
Sales revenue
$ 2,042,000 $ 550,000 $ 3,364,000 $ 2,413,000
Monitoring &
technical
support 309,000 358,000 628,000 779,000
------------- ------------- ------------- -------------
Total revenue 2,351,000 908,000 3,992,000 3,192,000
Cost of sales 1,146,000 411,000 1,870,000 1,102,000
Marketing 701,000 544,000 1,297,000 921,000
General and
administrative 995,000 872,000 2,246,000 1,680,000
Research and
development 236,000 192,000 444,000 352,000
Depreciation and
amortization 263,000 157,000 492,000 315,000
Foreign exchange
loss (gain) 82,000 21,000 76,000 32,000
Interest income (25,000) (41,000) (61,000) (57,000)
------------- ------------- ------------- -------------
Net loss (1,047,000) (1,248,000) (2,372,000) (1,153,000)
Loss per share -
basic and
diluted $ (0.05) $ (0.06) $ (0.12) $ (0.06)
Weighted avg.
shares - basic
and diluted 20,318,161 20,111,870 20,301,681 20,015,585
Consolidated Balance Sheet As at As at
Jun. 30, 2006 Dec. 31, 2005
-------------------------------------------------------------------------
Assets
Current assets
Cash and cash equivalents $ 2,552,000 $ 5,552,000
Accounts receivable 3,159,000 3,237,000
Net investment in lease 90,000 -
Inventory 655,000 601,000
Prepaid expenses 352,000 288,000
-------------- --------------
6,808,000 9,678,000
Property and equipment 3,498,000 2,709,000
Patents and trademarks 517,000 499,000
Net investment in lease 347,000 -
Other assets 120,000 113,000
-------------- --------------
$ 11,290,000 $ 12,999,000
Liabilities and Equity
Current liabilities
Accounts payable $ 914,000 $ 840,000
Deferred revenue 333,000 128,000
-------------- --------------
1,247,000 968,000
Shareholders' equity
Share capital 23,826,000 23,558,000
Contributed surplus 483,000 286,000
Warrants - 81,000
Deficit (14,266,000) (11,894,000)
-------------- --------------
$ 11,290,000 $ 12,999,000
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About Pure Technologies Ltd.
Pure Technologies is an international technology company which has developed patented and proprietary technologies for management and surveillance of critical infrastructure around the world. Applications for these technologies include water and wastewater pipelines, bridges, oil and gas pipelines, transportation infrastructure, nuclear power plants, high-rise buildings, parking and other critical structures. Pure provides its technologies from its headquarters in Calgary, Canada and subsidiaries in Columbia, Maryland and Phoenix, Arizona.
Forward-Looking Statements
This release contains forward-looking statements. Forward-looking statements, without limitation, may contain the words "believes", "expects", "anticipates", "estimates", "intends", "plans", or similar expressions. Forward-looking statements are not guarantees of future performance. They involve risks, uncertainties and assumptions and the Company's actual results could differ materially from those anticipated. Forward-looking statements are based on the opinions and estimates of Management at the date the statements are made, and are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking statements. In the context of any forward-looking information please refer to risk factors detailed in, as well as other information contained in, the Company's filings with Securities Regulators (www.sedar.com).
(R) Registered Trademarks, property of Pure Technologies Ltd.
"The TSX Venture Exchange has not reviewed and does not accept
responsibility for the adequacy or accuracy of this release"
For further information: about Pure Technologies Ltd. (TSX-V: PUR), visit our website at www.puretechnologiesltd.com. Or contact James E. Paulson, Chairman or Karen Keebler, Chief Financial Officer at (403) 266-6794 or e-mail to info@puretechnologiesltd.com.
Source: newswire
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