Pure Technologies Ltd. announces results for first quarter ended March 31,
2010
CALGARY, May 18 /CNW/ - Pure Technologies Ltd., TSX-V: PUR, today announced financial results for the first quarter ended March 31, 2010.
The Company generated revenues of $5.7 million and EBITDA of ($1.3 million) for the quarter compared to $8.2 million and $2.0 million respectively for the corresponding period in 2009. These numbers are lower than the first quarter of 2009, primarily a result of contract timing and revenue recognition factors. Equipment shipments and other business scheduled for the second and third quarters should ensure a strong recovery, with second quarter revenues expected to exceed $11 million in satisfaction of existing contracts.
Current confirmed backlog is in excess of $32 million. We have also received verbal notification of projects worth more than $4 million, which are subject to the normal contract review process and final documentation. Annualized revenue from licenses, monitoring and technical support revenue under contract is currently in excess of $4.5 million. In general, business activity is strong and we reiterate the guidance provided in the Business Update published on January 11 of this year, wherein we anticipated continuing strong growth in revenue and earnings for the year.
The US and MENA continue to generate the majority of our revenues; however we continue to accelerate our international business development activities. In addition to establishing our Abu Dhabi office late last year, we are in the process of establishing a presence in Asia through the formation of a joint venture company with Balama Prima Engineering Co. Ltd., a privately-held Hong Kong-based company. The Joint Venture will manage Pure's business activities in China, Hong Kong, Macau and Taiwan. Also, we are actively pursuing opportunities for inspection and monitoring projects in Mexico and South America. These initiatives are expected to commence contributing meaningful revenues by later this year.
During the quarter, we announced an agreement to form a joint venture with our largest customer, the Great Man-Made River Authority. This joint venture will result in both sides committing to a long-term relationship, thereby enabling resource planning for the installation, operation and maintenance of our SoundPrint(R) AFO monitoring technology as it is increasingly deployed to assist in the integrity management of the Authority's water conveyance system.
We successfully completed an equity issue during the quarter for net proceeds of $28 million. With over $56 million in working capital, of which $37 million is in cash, we are in a strong position to take advantage of development opportunities.
Financial Highlights
Compared to the corresponding period in 2009, overall revenue decreased by 30%, led by a 68% decrease in equipment sales. We continue to be susceptible to wide fluctuations in quarterly revenues primarily as a consequence of timing of project deliveries. For example, in the first quarter of last year five AFO systems were delivered while only one system was delivered in the current quarter. Nevertheless, equipment shipments and other business scheduled for the second and third quarters of this year are expected to bring revenues in line with our internal projections.
Revenue from inspection services increased by 42% over the first quarter of 2009, primarily as a consequence of growth in our SmartBall inspection business. There was also a contribution from our robotics business following the acquisition of Pipe Eye in the second quarter of 2009. Consulting services for the first quarter of 2010 increased partially due to the contribution of Jason Consulting, which we acquired in the third quarter of 2009, and increased revenue from the continuing Washington Suburban Sanitary Commission project. Monitoring and technical support revenue increased over 2009 by 62%. The largest contributing factor was revenue derived from SmartBall licenses that were issued in 2010 and annual renewal fees for licenses issued in prior years.
Effective January 1, 2010, the company adopted EIC-175 Multiple Deliverable Revenue Arrangements. The new revenue guidance was applied only to revenue arrangements entered into on, or after January 1, 2010. In general, the impact of EIC-175 will be to accelerate recognition of revenue in the event that an order has been partially delivered at the end of the reporting period. For the first quarter of 2010, reported revenue was $315,000 higher than it would have been under the previous accounting standards. Usage fees generated from SmartBall licenses are recognized as revenue on a quarterly basis.
Gross margins for the quarter were 60% compared to 70% in 2009, which was higher than normal due to a few specific projects. We also incurred additional expenses in the quarter as a result of implementing enhanced maintenance protocols for monitoring sites which should result in increased long-term operational efficiencies. It is expected that margins will return to historical levels over the balance of the year.
Marketing and promotion expenses for the quarter have increased by 14% over 2009. Increased presence in the international market is the major contributing factor in this. In particular, the establishment of the UAE branch office in late 2009 and preliminary work on the Joint Venture in Hong Kong resulted in expenses not incurred in 2009.
Engineering and operations expenses have increased by 32% over 2009. Additional resources were added throughout 2009 in order to meet growth demands for both 2009 and 2010. In comparison to the fourth quarter of 2009, the increase is 11%. As well, the Company is focusing on additional training of operational staff which is reflected in the increase.
General and administrative expenses for the quarter have increased 15%. The expenses are consistent with the prior year overall and the majority of the increase over last year is due to increases in rent as additional space was required both in Canada and the US to accommodate growing operations.
Research and development expenses increased by 134% in the quarter. Part of the increase is due to the deduction of grant payments from the Arizona State University in 2009 for a SmartBall project which has been ongoing since 2008. These deductions account for 30% of the increase. The remaining increase is due to ongoing efforts in our R & D department to bring new technologies to the Company including further advances in our robotics capability as a result of the acquisition of Pipe Eye in 2009.
Depreciation and amortization for 2010 increased by 40% compared to the first quarter of 2009. The rise in depreciation and amortization expense reflects the increased asset levels, particularly in the robotics area, as well as the amortization of intangible assets realized on the acquisition of Jason Consultants.
2010 Q1 Financial Highlights
(unaudited)
Consolidated Statement of Three months ended:
Operations March 31, March 31,
2010 2009
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Equipment sales $ 1,720,000 $ 5,441,000
Inspection services 914,000 642,000
Consulting services 1,686,000 1,215,000
Monitoring & technical support 1,406,000 866,000
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Total revenue 5,726,000 8,164,000
Cost of sales 2,320,000 2,443,000
Marketing 1,223,000 1,068,000
Engineering and production 1,177,000 893,000
General and administrative 1,792,000 1,562,000
Research and development 544,000 233,000
Depreciation and amortization 444,000 316,000
Foreign exchange (gain) loss 129,000 (141,000)
Interest income (16,000) (39,000)
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Income (loss) from continuing operations
before tax (1,887,000) 1,829,000
Income taxes 8,000 3,000
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Net income (loss) (1,895,000) 1,826,000
Income (loss) per share - basic $ (0.05) $ 0.06
- diluted $ (0.05) $ 0.05
Weighted avg. shares
- basic 33,316,799 32,961,396
- diluted 36,318,799 33,633,541
(unaudited)
Consolidated Balance Sheet As at As at
March 31, December 31,
2010 2009
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Assets
Current assets
Cash $ 37,316,000 $ 15,565,000
Accounts receivable 18,964,000 17,297,000
Inventory 2,051,000 1,475,000
Prepaid expenses 856,000 819,000
Net investment in lease 73,000 75,000
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59,260,000 35,231,000
Property and equipment 2,929,000 2,859,000
Goodwill 1,987,000 1,988,000
Intangible Assets 1,819,000 1,977,000
Net investment in lease 18,000 38,000
Other assets - -
----------------------------
$ 66,013,000 $ 42,093,000
Liabilities and Equity
Current liabilities
Accounts payable $ 2,521,000 $ 4,812,000
Deposits on sales contracts 105,000 125,000
Future income taxes 219,000 239,000
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2,845,000 5,176,000
Shareholders' equity
Share capital 72,632,000 45,576,000
Contributed surplus 1,841,000 1,591,000
Warrants 993,000 -
Accumulated other comprehensive loss (344,000) (191,000)
Deficit (11,954,000) (10,059,000)
----------------------------
$ 66,013,000 $ 42,093,000
About Pure Technologies Ltd.
Pure Technologies Ltd. is an international technology and services company which has developed patented technologies for inspection, monitoring and management of critical infrastructure around the world. Pure operates from its headquarters in Calgary, Canada and through subsidiaries in Maryland, New Jersey, Ohio, and the UK. Pure's proprietary product portfolio includes SoundPrint(R), a continuous acoustic structural monitoring system for buildings, bridges and structures; SoundPrint(R) AFO, a fiber-optic distributed acoustic sensing system for monitoring and surveillance of pipelines; and SmartBall(R), a revolutionary new leak detection technology for water, wastewater and hydrocarbon pipelines.
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).
To find out more about Pure Technologies Ltd. (TSX-V: PUR), visit our website at www.puretechnologiesltd.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"
%SEDAR: 00006060E
For further information: James E. Paulson, Chairman or Karen Keebler, Chief Financial Officer at (403) 266-6794, or e-mail to: [email protected]
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