PURE Bioscience, Inc. (OTCQB: PURE), creator of the patented non-toxic silver dihydrogen citrate (SDC) antimicrobial, today reported financial results for the fiscal year ended July 31, 2019.
Summary of Results – Year End Operations
-
Revenues for the fiscal year ended July 31, 2019 increased 8% to $1,909,000, compared with revenues of $1,774,000 in the prior fiscal year. The increase of $135,000 was attributable to increased food safety customer adoption.
- Core food safety revenues for fiscal 2019 increased 16% as compared with food safety revenues in fiscal 2018.
- Net loss for fiscal 2019 was $6.6 million, as compared with $7.4 million for fiscal 2018. Net loss, excluding inducement expense, derivative expense, and share-based compensation for fiscal 2019 was $3.1 million, as compared with $4.7 million for fiscal 2018.
- Net loss per share was ($0.09) as compared with ($0.11) for fiscal 2018.
- Gross margin was 62% for fiscal 2019 as compared with 57% for the same period in fiscal 2018. The increase was primarily attributable to the sale of higher margin formulations and packaging configurations of our products during fiscal 2019 as compared with the prior fiscal year.
Corporate Update – Fiscal Q4 to Present
-
Cost Reduction Measures:
-
Striving towards our goal to achieve cash flow breakeven in fiscal Q3 2020, in July 2019 we continued to pursue immediate revenue generating opportunities while also implementing significant restructuring and cost reduction measures, including:
- Board and management salaries and fees have been meaningfully reduced;
- Material reductions were made in outside advisor and service costs; and
- Sales and marketing expenses not directly related to new customer acquisitions and revenue growth were eliminated.
-
Striving towards our goal to achieve cash flow breakeven in fiscal Q3 2020, in July 2019 we continued to pursue immediate revenue generating opportunities while also implementing significant restructuring and cost reduction measures, including:
-
Board and Management:
- Effective August 7, 2019, Hank R. Lambert retired as CEO and a member of our Board.
- Effective the same date, Tom Y. Lee, Chairman of the Board and PURE’s largest shareholder, became Acting CEO.
- In September 2019, PURE’s corporate headquarters moved to Rancho Cucamonga, CA, to co-locate with Swabplus, Inc., a privately held manufacturer of single-dose applicator and formulation OEM products. Lee also is CEO and Chairman of the Board of Swabplus. The disinterested members of the Board approved the relocation, which materially reduced our lease expenses.
-
Financings:
- On October 2, 2019, we raised $830,000 in gross proceeds in a private placement with accredited existing shareholders, including two of our Board members. Proceeds of the financing are being used for general working capital purposes.
Business Update
-
PURE Control®
- SmartWash Boost: PURE Bioscience and Smart Wash continue to collaborate on the verification of the industry-revolutionizing results on pre-cut lettuce. The results to date using PURE Control as a pretreatment exhibit increased efficacy and potentially increased cross-contamination control during processing.
- A large multinational produce processor has evaluated, accepted and is rolling out PURE Control into its plants in the U.S. that process berries (strawberries and blueberries) and tomatoes. Three plants are operational and PURE has worked with the company’s engineering and management teams to provide a turn-key solution for all U.S. locations.
- PURE Bioscience continues to work with additional produce processors to evaluate the use of PURE Control for their products.
-
PURE® Hard Surface
- Food Transportation Sanitization – two of the largest food transportation companies are deploying our solution. We are in approximately 40% of the distribution centers for one customer. The other company mandated our solution and expects full deployment system-wide by the end of calendar year 2019. We continue on-site evaluations and discussions with four major transport companies representing both distributors and processors.
-
PURE Bioscience has successfully worked this year with industry leaders to provide:
- Effective environmental food safety solutions;
- Treatment of produce field bins; and
- Enhanced equipment applications, including built-in PURE applicators.
-
Ongoing testing in poultry breeder barns and hatcheries continues through the end of calendar year 2019. PURE Bioscience has been working with a large independent agricultural research farm on enhanced environmental control across all species (poultry, beef and pork) and results from this initiative are also expected by the end of calendar year 2019.
- We are pleased with results thus far on this initiative.
- PURE Bioscience is working closely with dairy industry leaders to provide new PURE Hard Surface applications directed at cheese production and spray-drying operations. To date, evaluations continue in three locations.
Tom Y. Lee, Acting CEO, said: “We acknowledge that it is taking much longer than anyone expected to gain meaningful traction with our best-in-class products. The series of meaningful steps taken to significantly reduce our overhead will shorten the time required to reach our goal of cash flow breakeven in fiscal Q3 2020 and reduce, if not eliminate, the need for additional financing.”
About PURE Bioscience, Inc.
PURE Bioscience, Inc. is focused on developing and commercializing our proprietary antimicrobial products primarily in the food safety arena -- providing solutions to the health and environmental challenges of pathogen and hygienic control. Our technology platform is based on patented, stabilized ionic silver, and our initial products contain silver dihydrogen citrate, or SDC. SDC is a broad-spectrum, non-toxic antimicrobial agent, which offers 24-hour residual protection and formulates well with other compounds. As a platform technology, SDC is distinguished from existing products in the marketplace because of its superior efficacy, reduced toxicity and mitigation of bacterial resistance. PURE is headquartered in Rancho Cucamonga, California (San Bernardino metropolitan area). Additional information on PURE is available at www.purebio.com.
Forward-looking Statements
Any statements contained in this press release that do not describe historical facts may constitute forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. Statements in this press release concerning the company’s expectations, plans, business outlook or future performance, and any other statements concerning assumptions made or expectations as to any future events, conditions, performance or other matters, are “forward-looking statements.” Forward-looking statements inherently involve risks and uncertainties that could cause our actual results to differ materially from any forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, the Company’s failure to implement or otherwise achieve the benefits of its proposed business initiatives and plans; acceptance of the Company's current and future products and services in the marketplace, including the Company’s ability to convert successful evaluations and tests for PURE Control and PURE Hard Surface into customer orders and customers continuing to place product orders as expected and to expand their use of the Company’s products; the Company’s ability to generate sufficient revenues and reduce its operating expenses in order to reach profitability; the Company’s ability to raise the funding required to support its continued operations and the implementation of its business plan; the ability of the Company to develop effective new products and receive required regulatory approvals for such products, including the required data and regulatory approvals required to use its SDC-based technology as a direct food contact processing aid in raw meat processing and to expand its use in OLR poultry processing; competitive factors, including customer acceptance of the Company’s SDC-based products that are typically more expensive than existing treatment chemicals; dependence upon third-party vendors, including to manufacture its products; and other risks detailed in the Company's periodic report filings with the Securities and Exchange Commission (the SEC), including its Form 10-K for the fiscal year ended July 31, 2019 and Form 10-Q for the third fiscal quarter ended April 30, 2019. You should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. By making these forward-looking statements, the Company undertakes no obligation to update these statements for revisions or changes after the date of this release.
PURE Bioscience, Inc. Consolidated Balance Sheets |
||||||||
July 31, 2019 |
July 31, 2018 |
|||||||
Assets |
||||||||
Current assets |
||||||||
Cash and cash equivalents |
$ |
398,000 |
$ |
851,000 |
||||
Accounts receivable |
373,000 |
275,000 |
||||||
Inventories, net |
177,000 |
197,000 |
||||||
Restricted cash |
75,000 |
75,000 |
||||||
Prepaid expenses |
18,000 |
58,000 |
||||||
Total current assets |
1,041,000 |
1,456,000 |
||||||
Property, plant and equipment, net |
362,000 |
461,000 |
||||||
Patents, net |
529,000 |
658,000 |
||||||
Total assets |
$ |
1,932,000 |
$ |
2,575,000 |
||||
Liabilities and stockholders’ equity |
||||||||
Current liabilities |
||||||||
Accounts payable |
$ |
553,000 |
$ |
608,000 |
||||
Promissory note payable |
— |
503,000 |
||||||
Accrued liabilities |
185,000 |
170,000 |
||||||
Total current liabilities |
738,000 |
1,281,000 |
||||||
Deferred rent |
4,000 |
13,000 |
||||||
Total liabilities |
742,000 |
1,294,000 |
||||||
Commitments and contingencies (See Note 4) |
||||||||
Stockholders’ equity |
||||||||
Preferred stock, $0.01 par value: 5,000,000 shares authorized, no shares issued and outstanding |
— |
— |
||||||
Common stock, $0.01 par value: 100,000,000 shares authorized, 76,732,334 shares issued and outstanding at July 31, 2019, and 68,248,158 shares issued and outstanding at July 31, 2018 |
768,000 |
683,000 |
||||||
Additional paid-in capital |
123,900,000 |
117,522,000 |
||||||
Accumulated deficit |
(123,478,000 |
) |
(116,924,000 |
) |
||||
Total stockholders’ equity |
1,190,000 |
1,281,000 |
||||||
Total liabilities and stockholders’ equity |
$ |
1,932,000 |
$ |
2,575,000 |
||||
PURE Bioscience, Inc. Consolidated Statements of Operations |
||||||||
Year ended |
||||||||
July 31, |
||||||||
2019 |
2018 |
|||||||
Net product sales |
$ |
1,909,000 |
$ |
1,774,000 |
||||
Operating costs and expenses |
||||||||
Cost of goods sold |
728,000 |
763,000 |
||||||
Selling, general and administrative |
3,967,000 |
5,235,000 |
||||||
Research and development |
354,000 |
459,000 |
||||||
Share-based compensation |
2,449,000 |
2,359,000 |
||||||
Total operating costs and expenses |
7,498,000 |
8,816,000 |
||||||
Loss from operations |
(5,589,000 |
) |
(7,042,000 |
) |
||||
Other income (expense) |
||||||||
Change in derivative liability |
— |
459,000 |
||||||
Inducement to exercise warrants |
(960,000 |
) |
(876,000 |
) |
||||
Interest expense, net |
(6,000 |
) |
(8,000 |
) |
||||
Other income, net |
1,000 |
25,000 |
||||||
Total other expense |
(965,000 |
) |
(400,000 |
) |
||||
Net loss |
$ |
(6,554,000 |
) |
$ |
(7,442,000 |
) |
||
Basic and diluted net loss per share |
$ |
(0.09 |
) |
$ |
(0.11 |
) |
||
Shares used in computing basic and diluted net loss per share |
72,880,484 |
67,279,124 |
||||||
PURE Bioscience, Inc. Consolidated Statements of Stockholders’ Equity |
|||||||||||||||||
Common Stock |
Additional Paid-In |
Accumulated |
Total Stockholders’ |
||||||||||||||
Shares |
Amount |
Capital |
Deficit |
Equity |
|||||||||||||
Balance July 31, 2017 |
63,093,153 |
$ |
631,000 |
$ |
110,141,000 |
$ |
(109,482,000 |
) |
$ |
1,290,000 |
|||||||
Share-based compensation expense - stock options |
— |
— |
1,525,000 |
— |
1,525,000 |
||||||||||||
Share-based compensation expense - restricted stock units |
— |
— |
834,000 |
— |
834,000 |
||||||||||||
Warrant liability removed due to warrant exercise |
— |
— |
1,394,000 |
— |
1,394,000 |
||||||||||||
Issuance of common stock upon exercise of warrants |
4,914,505 |
49,000 |
2,583,000 |
— |
2,632,000 |
||||||||||||
Stock issued for services |
240,500 |
3,000 |
169,000 |
172,000 |
|||||||||||||
Inducement to exercise warrants |
— |
— |
876,000 |
— |
876,000 |
||||||||||||
Net loss |
— |
— |
— |
(7,442,000 |
) |
(7,442,000 |
) |
||||||||||
Balance July 31, 2018 |
68,248,158 |
$ |
683,000 |
$ |
117,522,000 |
$ |
(116,924,000 |
) |
$ |
1,281,000 |
|||||||
Issuance of common stock in private placements, net |
5,802,927 |
58,000 |
2,156,000 |
2,214,000 |
|||||||||||||
Share-based compensation expense - stock options |
— |
— |
1,387,000 |
— |
1,387,000 |
||||||||||||
Share-based compensation expense - restricted stock units |
— |
— |
1,062,000 |
— |
1,062,000 |
||||||||||||
Issuance of common stock upon the vesting of restricted stock units |
281,250 |
3,000 |
(3,000 |
) |
— |
— |
|||||||||||
Issuance of common stock upon exercise of warrants |
2,399,999 |
24,000 |
816,000 |
— |
840,000 |
||||||||||||
Inducement to exercise warrants |
— |
— |
960,000 |
— |
960,000 |
||||||||||||
Net loss |
— |
— |
— |
(6,554,000 |
) |
(6,554,000 |
) |
||||||||||
Balance July 31, 2019 |
76,732,334 |
$ |
768,000 |
$ |
123,900,000 |
$ |
(123,478,000 |
) |
$ |
1,190,000 |
|||||||
PURE Bioscience, Inc. Consolidated Statements of Cash Flows |
||||||||
Year Ended |
||||||||
July 31, |
||||||||
2019 |
2018 |
|||||||
Operating activities |
||||||||
Net loss |
$ |
(6,554,000 |
) |
$ |
(7,442,000 |
) |
||
Adjustments to reconcile net loss to net cash used in operating activities: |
||||||||
Share-based compensation |
2,449,000 |
2,359,000 |
||||||
Amortization of stock issued for services |
38,000 |
122,000 |
||||||
Stock issued for services |
— |
121,000 |
||||||
Depreciation and amortization |
241,000 |
285,000 |
||||||
Inventory write-off |
— |
58,000 |
||||||
Gain on inventory recovery |
— |
(19,000 |
) |
|||||
Interest expense on promissory note |
1,000 |
3,000 |
||||||
Change in fair value of derivative liability |
— |
(459,000 |
) |
|||||
Inducement to exercise warrants |
960,000 |
876,000 |
||||||
Changes in operating assets and liabilities: |
||||||||
Accounts receivable |
(98,000 |
) |
22,000 |
|||||
Inventories |
20,000 |
37,000 |
||||||
Prepaid expenses |
2,000 |
45,000 |
||||||
Accounts payable and accrued liabilities |
(40,000 |
) |
103,000 |
|||||
Deferred rent |
(9,000 |
) |
2,000 |
|||||
Net cash used in operating activities |
(2,990,000 |
) |
(3,887,000 |
) |
||||
Investing activities |
||||||||
Investment in patents |
(6,000 |
) |
(15,000 |
) |
||||
Purchases of property, plant and equipment |
(7,000 |
) |
(19,000 |
) |
||||
Net cash used in investing activities |
(13,000 |
) |
(34,000 |
) |
||||
Financing activities |
||||||||
Net proceeds from the sale of common stock |
1,710,000 |
— |
||||||
Net proceeds from the exercise of warrants |
840,000 |
2,632,000 |
||||||
Net proceeds from promissory note financing |
— |
500,000 |
||||||
Net cash provided by financing activities |
2,550,000 |
3,132,000 |
||||||
Net decrease in cash, cash equivalents, and restricted cash |
(453,000 |
) |
(789,000 |
) |
||||
Cash, cash equivalents, and restricted cash at beginning of year |
926,000 |
1,715,000 |
||||||
Cash, cash equivalents, and restricted cash at end of year |
$ |
473,000 |
$ |
926,000 |
||||
Reconciliation of cash, cash equivalents, and restricted cash to the consolidated balance sheets |
||||||||
Cash and cash equivalents |
$ |
398,000 |
$ |
851,000 |
||||
Restricted cash |
$ |
75,000 |
$ |
75,000 |
||||
Total cash, cash equivalents and restricted cash |
$ |
473,000 |
$ |
926,000 |
||||
Supplemental disclosure of cash flow information |
||||||||
Cash paid for taxes |
$ |
5,000 |
$ |
3,000 |
||||
Non-cash financing activities |
||||||||
Warrant liabilities removed due to settlements |
$ |
— |
$ |
1,394,000 |
||||
Common stock issued for prepaid services |
$ |
— |
$ |
51,000 |
||||
Conversion of promissory note and accrued interest from a related party to common stock |
$ |
504,000 |
$ |
— |
||||
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