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PURE: Revenue Growth Expected to Accelerate with the Approval of PURE Control

11/14/2017
By Grant Zeng, CFA

OTC:PURE

Update on Full Fiscal Year 2017 Financials    

Recently PURE (OTC:PURE) reported financial results for the fiscal year ended July 31, 2017. 

Total revenue for the fiscal year ended 2017 increased 42% to $1.83 million, compared with prior year-end revenues of $1.29 million. 

Core food safety revenue for the year ended July 31, 2017 increased 79% as compared with food safety revenues in the fiscal year ended 2016. 

Gross margin decreased in fiscal 2017 to 61% as compared with 66% in fiscal 2016 as a result of product mix. 

R&D costs for fiscal 2017 were $0.78 million, compared with $0.93 million for the same period of last year.  

SG&A costs for fiscal 2017 were $5.23 million, compared with $5.08 million for the fiscal 2016. 

Total operating costs and expenses for the fiscal years ended 2017 and 2016, were $7.8 million and $8.3 million, respectively. 

Net loss for fiscal 2017 was $6.3 million ($0.10 per share), compared with $14.4 million ($0.25 per share) for fiscal year end 2016.

Balance Sheet Remains Strong


As of July 31, 2017, PURE had a cash balance of $1.64 million with no long-term debt.   

In October 2017, PURE completed a tender offer to amend and exercise three classes of outstanding warrants issued to investors who participated in its 2014, 2015 and 2017 private placement financings. PURE raised approximately $2.8 million in gross cash proceeds from the exercise of 4,756,163 outstanding warrants as part of the tender offer.

PURE offered its existing warrant holders the opportunity to exercise their warrants in cash at reduced exercise prices. Approximately 64% of the Company’s outstanding warrants were exercised in the tender offer.

Current cash combined with cash flow generated from operations will support the Company's operations and business plan through end of fiscal 2018 according to our financial model. 

Update on PURE Control Launch 

In parallel to its PURE Hard Surface® business, PURE is launching its second business segment PURE Control-which utilizes the company’s lead compound SDC as direct food contact processing aid. 

Currently, PURE is targeting three key fields for PURE Control. 

Produce (FDA)

PURE introduced PURE Control at IPPE (International Production & Processing Expo) in late Jan 2016.  IPPE is the world's largest annual poultry, meat and feed industry event attended by more than 30,000 industry leaders and their suppliers seeking to learn about the latest technological developments in the industry.

PURE targeted PURE Control as a food safety solution for a broad range of processed vegetables and fruits that are most frequently associated with pathogen contamination. In its regulatory filing, PURE demonstrated materially significant reductions in Salmonella, Listeria and E. coli in processed fresh produce, as compared with current processing chemicals.

Produce is the leading source of foodborne illness in the US. Given the immediate market need and the proven superior efficacy of SDC, we believe PURE Control can quickly achieve meaningful market penetration among fruit and vegetable processors.

In March 2017, the Company received its first order for PURE Control® antimicrobial from Taylor Farms, a leading produce processor, entering a new +$300 million US produce processing aids market to prevent foodborne illness.

Poultry (FDA/USDA)

In June 2015, PURE resubmitted a Food Contact Notification (FCN) to the US FDA for Silver Dihydrogen Citrate (SDC) as an online reprocessing antimicrobial for raw poultry processing aid. 

In April 2017, PURE received two required key regulatory notifications (USDA permission letter and an FDA FCN acknowledgement letter) on its path to obtain final regulatory approval of and commercialize PURE Control as a superior raw poultry processing aid into the +$350 million US market.

In May 2017, PURE’s FDA FCN for use of PURE Control at concentrations up to 160 PPM as a raw poultry processing aid became effective. PURE received a “Letter of No Objection” from the USDA FSIS for use of PURE Control at concentrations up to 160 PPM in pre-OLR and post-chill poultry processing. PURE now has regulatory approval to commercialize PURE Control for these non-OLR poultry processing applications. 

On August 2017, PURE Control antimicrobial was listed as a Safe and Suitable Ingredient in the USDA-FSIS Directive 7120.1 for Poultry Products, allowing immediate commercialization for pre-OLR and post chill applications, including parts processing.

On May 29th, PURE began its in-plant poultry processing trial to gain USDA approval for use of PURE Control during online reprocessing (OLR). If the plant trial is successful and no additional trials are required by the USDA, PURE anticipates that the USDA-FSIS would issue a “Letter of No Objection” within six weeks of the trial’s completion. The Company would then have the regulatory approval necessary to begin commercialization of PURE Control for OLR applications.

In September 2017, a poultry processor initiated testing of PURE Control for poultry parts and achieved in plant results on parts that are superior to chemistries in use today, eliminating Salmonella with up to a 2.7 Log* reduction in bacteria.

During calendar Q4, PURE expects that the poultry processor conducting the tests will continue with several more rounds of optimization and validation in-plant testing. Anticipating successful completion of its in-plant work, PURE looks forward to this processor becoming the first customer to order and use PURE Control for parts processing. Additional processors are preparing to initiate their own optimization and validation in-plant testing in calendar Q4.

Once approved and commercialized, poultry processors will be able to use PURE Control in place of the highly toxic interventions currently being used. It is anticipated that the plant trial processors will be among the first customers for PURE Control for poultry processing.

PURE Enters New Food Transportation Sanitization Market  


In October 2017, PURE signed an agreement with, and received an initial order from, iGPS Logistics.  PURE® Hard Surface disinfectant will be used by iGPS as a new sanitization solution.

PURE Hard Surface will be mist-spray applied to the surfaces of plastic pallets inside a trailer to quickly eliminate microorganisms, preventing cross contamination. Test results demonstrated rapid efficacy (consistently over 96% reduction in bacteria counts), coupled with a highly favorable safety profile.

The newly developed PURE pallet sanitization solution helps food transportation operations to comply with the Food Safety Modernization Act (FSMA) requirement that transport equipment be sanitized to prevent food contamination. The use of plastic pallets continues to expand in the food industry and they are increasingly required by leading processors and retailers. Pallet sanitization is becoming a critical component of any food safety plan to prevent cross contamination. This initial sale supports start-up operations in five of 15 iGPS pallet pooling centers. PURE expects follow-on orders, as well as rollout to the balance of the iGPS system, in the coming months.

The agreement with iGPS marks the entry into a new $50M+ US food transportation sanitization market, which further diversifies PURE’s revenue stream. 

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