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RNS Number:8679I
PuriCore Plc
13 September 2006
PuriCore plc
Interim Results for the Six Months Ended 30 June 2006
MALVERN, PENNSYLVANIA, and STAFFORD, UK, 13 September 2006 -- PuriCore plc
("PuriCore" or the "Company") (London Stock Exchange: PURI), the developer of a
novel, safe technology that mimics the human body's natural anti-microbial,
hypochlorous acid, today announces its inaugural interim results for the six
months ended 30 June 2006. The Company successfully listed its shares on the
London Stock Exchange in June 2006.
Financial Highlights
* Flotation on London Stock Exchange successfully completed in June
2006, raising $54.5 million ($47.0 million net)
* Revenues of $8.4 million, losses of $7.7 million (losses of $6.8
million net of non-cash compensation expense realised in accordance
with IAS 2)
Operational Highlights
* Continued strong growth in the Food Safety business, with 679
installations in H1 (versus 22 in H1 2005)
* UK Endoscopy business impacted by NHS budgetary constraints
Post IPO Highlights
* New $3.3 million contract with major US supermarket chain signed (see
separate press release issued today)
* Three new independent non-executive director appointments announced
(see separate press release issued today)
* US FDA 510(k) approvals for the Vashe(TM)system in wound care
applications and Aquatine(TM)EC for root canal treatments in dental
applications
Commenting on the results, Greg Bosch, Chief Executive of PuriCore, said:
"Following the Company's successful flotation in June, we are well-positioned to
execute our business plan and achieve our goal of building a global leadership
position in the field of infection control based on our proprietary technology
which generates hypochlorous acid. We had a strong first half of 2006 in Food
Safety and are delighted to announce the signing of another major contract in
this segment of the business today. With progress in both our core businesses,
as well as our initiatives to take Sterilox Systems into other industry sectors,
we look forward to delivering strong future growth for shareholders."
FOR FURTHER INFORMATION:
PuriCore plc Today: +44 (0) 20 7831 3113
Greg Bosch, Chief Executive Officer Thereafter: +1 (484) 321-2701
Keith A. Goldan, Chief Financial Officer
Financial Dynamics Tel: +44 (0) 20 7831 3113
David Yates
Sarah MacLeod
John Gilbert
ABOUT PURICORE PLC
PuriCore is a life sciences company focused on the development and
commercialisation of its proprietary technology that mimics the production by
the human body of its natural anti-microbial, hypochlorous acid. Hypochlorous
acid is highly effective at killing pathogens such as bacteria, viruses and
fungi and yet is safe and environmentally friendly. PuriCore's solutions have
applications in a wide range of markets where it is important to control
microbial contamination. These markets include medical device disinfection,
food safety, dental equipment decontamination, environmental remediation,
hospitality, water safety, wound management and other applications intended to
limit the spread of infectious disease, including major global disease threats
such as Tuberculosis, MRSA, Influenza, E.coli, Norovirus, HIV, polio, Hepatitis
A, H.pylori and Legionella.
PuriCore markets a portfolio of branded systems which produce hypochlorous acid
solutions on-site at a customer's location from water, electricity and common
salt. These solutions are generated at a range of concentrations and at a
nearly neutral pH range similar to the human body. They are effective as soaks,
sprays, mists and in other forms.
PuriCore is headquartered in Malvern, Pennsylvania and has offices in Stafford,
UK.
To receive additional information on the Company, please visit our web site at
www.puricore.com, which does not form part of this press release.
Chairman and Chief Executive's Statement
We are pleased to present our first interim report as a public company,
following an exciting first half of the year which culminated in PuriCore's
successful flotation on the London Stock Exchange on 27 June 2006. To our
pre-IPO investors, we want to thank you once again for your support and belief
in our vision and technology over the past years. To our new investors, we
welcome you to PuriCore and thank you for your support as we begin the next
stage of development for our Company.
Our goal is to build a global leadership position in the field of infection
control based on our innovative hypochlorous acid-producing technology. We are
achieving this as a direct result of meeting customer expectations and
addressing their need for new alternatives to existing technologies and
processes. Our flotation has strengthened our balance sheet, enabling us to
execute on our business plan in building the franchises, team, and processes to
establish PuriCore as a leader in our industry.
PuriCore's proprietary technology is marketed under the branded portfolio of
Sterilox Systems which produce hypochlorous acid (HOCl) solutions from only
water, salt and electricity. These solutions are safe and non-toxic yet highly
effective at killing a wide range of infectious pathogens. We were very proud
that our Sterilox technology was recognised by Frost & Sullivan, a leading
healthcare market research firm, as their Technology Innovation recipient in
late 2005. More important is the recognition by our customers across a wide
range of industries of the value that our science provides to them.
Our focus has been primarily in the disinfection of heat sensitive medical
devices, specifically endoscopes, and in food safety through the removal of
pathogens to extend shelf life of fresh produce and floral products in
supermarkets. We have also initiated efforts in the dentistry market as well as
new initiatives in wound care, hospitality, and environmental remediation. We
are the beneficiaries of a singular core platform technology that allows us to
expand into many industries and geographies. This portfolio of businesses
provides us with both opportunities for growth as well as leverage against
cyclical realities of markets.
Our successes would not be possible without the dedication and skills of our
nearly 100 PuriCore team members. We are building a team with top calibre
talent across all our functional areas in both of our core geographic markets,
the UK and US. We are establishing a culture which is based on a Core Purpose
of "generating life science solutions for a safer, healthier world" and Core
Values which will guide our activities well into the future. You can find these
on our website at www.puricore.com.
Operating Review
PuriCore has had an exciting and challenging start to the first half of 2006.
Exceptionally strong growth in the US Food Safety business was tempered by
challenges in the UK Endoscopy segment which was impacted by NHS budgetary
constraints in the first half. We also continue to seek new distribution
partners for our dental business. Activities in all existing businesses, as
well as research and development into new business segments, continue to
validate the Company's core technology.
US Food Safety
We are very pleased with the continued growth of our Food Safety business in the
US and are delighted to announce today the signing of the second largest sales
agreement in the Company's history. This agreement calls for the installation of
just over 200 Sterilox Systems in the third and fourth quarters of 2006 in one
of the largest retail supermarket chains in the US. These Systems will be
rented over three years and generate cumulative revenue and cash flow totalling
approximately $3.3 million. The installation of these Systems is expected to be
completed by the end of the year. This contract is another important
demonstration of the value that PuriCore's technology brings to its customers
and is indicative of the potential growth opportunity for the Company in this
segment. The Company also continues to receive positive feedback from the
ongoing System trials in several major US supermarkets.
During the first half of 2006 the Company installed 679 Sterilox Systems, 658 of
which were installed under rental agreements. This compares to 22 installations
in the first half of 2005, all of which were capital sales. The installation of
our 1,000th Sterilox Food Safety System in June of this year represented a
significant milestone for us and demonstrates the value that we continue to
deliver to our customers. As of 30 June 2006, the Company had an installed base
of 1,058 Systems in this segment, 935 of which were installed under rental
agreements. As of 31 July 2006, the installed base of Sterilox Systems in our
Food Safety business had risen to 1,141.
The Company continues to pursue a model of rental agreement sales in order to
expand its portfolio of recurring revenue streams. Although increased rental
agreements in preference to capital sales directly impacts revenues and net
income in the short term due to the timing of cash received and fixed
expenditures required for System installation, maintenance and support, these
rental agreements provide a strong base of recurring revenue while building
predictability and sustainability of cash flow. Additionally, rental agreements
are often preferred from a customer perspective as the financial benefits of
improved shelf life, product safety, and convenience effectively self-fund the
rental expense. The Company continues to use debt finance both to fund the
upfront capital investments required by the rental model and to reduce its
weighted average cost of capital.
The Sterilox System produces a food safe sanitiser from only water and common
salt which, when converted through patented technology, provides retailers a
solution to potential cross contamination of harmful bacteria or spoilage
organisms in the produce, seafood and floral departments. The equipment is fully
automated and uses very little floor space, which is ideal for supermarket
backrooms. The sanitiser is non-toxic, food safe, FDA allowed and EPA
registered.
UK and International Endoscopy
PuriCore's principal customer in the UK is the NHS hospital network. The UK
Government's directive earlier this year that it will not continue to offset the
over-budget expenditures of the NHS resulted in a delay in orders for our
Systems. The impact of this lower unit volume has also resulted in a lower
operating margin in this business compared to the first half of 2005 given the
fixed costs in place to support installations and maintenance.
However, we are confident about the opportunities for our UK Endoscopy business
based on a robust pipeline of prospective NHS Trust customers.
As a result of our flotation we are now in the position to offer our NHS and
private hospital customers a number of new financing options. We are in the
process of introducing these alternatives, including rental models which provide
our customers with more purchasing flexibility. Historically, our UK business
model was to place Sterilox Systems with customers on multi-year operating
leases and to place Automatic Endoscope Reprocessors (AER's) on capital sales.
The majority of these operating leases were vendor financed enabling the Company
to receive cash and therefore recognise the revenue upon sale. We expect these
additional financing options to have a positive impact on System installations
towards the end of 2006 and thereafter. As expected, there will be a short-term
impact on revenues and margins as we transition the UK business portfolio to
more of a rental model which recognises revenue over a rental period and builds
predictability and sustainability of cash flow.
Internationally, the Company continues to develop the market in the European
Union and abroad. In particular, Sterilox Endoscopy Systems and AER's have been
installed (sold on a distributor basis) in Ireland and India during the first
half of the year.
Global Dental
Our Global Dental business entered a transitional phase during the first half of
2006. While the efficacy of Sterilox Solutions for use in dental unit water
line decontamination is proven, our challenge has been to gain traction for this
indication in the dental office as the overall market adoption of such
technologies has been limited. Our strategy therefore is to increase the focus
on clinically oriented applications such as root canal procedures and oral
rinses.
To that end, since the IPO, the Company received US FDA 510(k) approval allowing
it to market Aquatine(TM)EC (Endodontic Cleanser) as a medical device indicated
for use in irrigating, cleansing, and debriding root canals. It is produced
from our current Sterilox System and is an efficacious, safe and non-toxic
alternative to sodium hypochlorite and other competitive cleanser offerings.
With this new indication enabling the product to be marketed for clinical uses,
the Company is now in the process of seeking new distribution partners for the
Global Dental business.
New Business Opportunities
In addition to the research and development activities to match our technology
to unmet needs in the retail grocery, endoscopy and dental industries, PuriCore
is pursuing new market opportunities in the wound care, hospitality and
environmental remediation markets. We are also constantly working on adapting
existing products to new geographical markets worldwide.
Our Wound Care System, VasheTM, received US FDA 510(k) regulatory approval, as
announced on 7 July 2006 and we are currently investigating potential markets
and partners for this technology. Our goal in US Endoscopy continues to be a
commercial launch in late 2007.
In the Environmental Remediation area, we recently concluded independent
laboratory studies to EPA test standards showing that the Sterilox hypochlorous
acid solution is effective as a hard surface virucidal disinfectant against an
Avian Flu surrogate (Hong Kong Influenza strain type A) after two minutes
contact time. Additional peer reviewed studies demonstrating the biocidal
activity of PuriCore hypochlorous acid solutions against key environmental
microbial pathogens such as Norovirus, Acinetobacter and MRSA are anticipated in
the coming months.
Board of Directors
We are pleased to announce today the addition of three new independent
Non-Executive Directors to our Board effective today, 13 September 2006. We
welcome to PuriCore Timothy Anderson and Dr. Alan Suggett, former senior
executives from Baxter and Smith & Nephew respectively, and Dr. Jim Walsh, Chief
Operating Officer of Trinity Biotech (see separate press release today for full
biographies and backgrounds). These new members bring valuable expertise and
contacts in the life science and medical technology industries.
Outlook
The strengthening of our balance sheet through the Company's successful
flotation earlier this year leaves us well positioned to execute our business
plan. We have a number of major opportunities ahead not only in our principal
businesses today, namely the Food Safety and Endoscopy businesses, but equally
the many other markets we can address with our proprietary platform technology.
We are focused on the continued expansion of our rental business which adds to
our base of recurring revenue and allows us to plan targeted investment in the
future. With new applications in our Dental business as well as the potential
to expand into the Wound Care, Environmental Remediation, and Hospitality
markets, PuriCore is well positioned to deliver exciting long term growth and
attractive investment returns to our shareholders.
Christopher P.J. Wightman Greg Bosch
Chairman Chief Executive Officer
Financial Review
PuriCore plc has prepared its unaudited interim financial statements in
accordance with International Financial Reporting Standards (IFRS) as at 30 June
2006. The comparative numbers for the six months ended 30 June 2005 have been
restated under IFRS.
Revenues
Revenues for the Company for the six months ended 30 June 2006 were $8.4
million, an increase of $0.3 million, or 4%, over the first half of 2005. 2006
results were negatively impacted by $323,000 vs. 2005 due to fluctuation of
foreign currency exchange (F/X) rates. Excluding the impact of currency,
revenues increased 8% over the first half of 2005.
Revenues in the Food Safety business for the interim period were $2.4 million
compared to $0.2 million for the same period in 2005, an increase of $2.2
million, or 968%. There is no F/X impact on this business line, as 100% of the
revenue is denominated in our reporting currency, the US dollar. As discussed
in the Chairman and CEO's statement, the Company continues its strategy of
growing the base of Sterilox Systems installed on rental agreements to provide a
strong base of recurring revenue while also building predictability and
sustainability of cash flow. Of the $2.4 million in H1 2006 revenue in the Food
Safety business, $1.7 million was related to Systems placed under three year
rental agreements. The 658 Systems placed in the first half of 2006 under rental
agreements represent approximately $10.9 million in revenue over their three
year contract lives.
UK and International Endoscopy revenues for the interim period were $5.6 million
compared to $7.1 million for the same period in 2005, a decrease of $1.5
million, or 21%. Excluding the negative impact from F/X noted above,
comparative revenues decreased $1.2 million, a 17% decrease.
Dental revenue for the period was $0.3 million vs. $0.7 million for the same
period 2005, a decrease of $0.4 million, or 56%. There is no material F/X
impact on this business line as substantially all of the revenue is denominated
in our reporting currency, the US dollar.
Gross Margins
Overall gross profit for the Company for the six months ended 30 June 2006 was
$2.4 million, or 28.4% of revenue. This compares to $3.7 million, or 45.8% of
revenue, for the same period 2005.
The decrease in margin percentage compared to 2005 is the result of:
* lower gross margins in the Food Safety business, which were anticipated and
planned as part of the Company's rental model. These margins are reflective
of a US-based service organisation that achieved and supported 679 System
installations during the first half of 2006 (658 of which were under three
year rental agreements). As the recurring revenue from these rental
installations grows, the fixed service component will be leveraged and margins
are therefore expected to increase. We anticipate this growth in margins to
begin in the second half of the year and continue throughout 2007;
* revenue in the UK and International Endoscopy business, which decreased from
the comparative period in 2005. The Company has certain internal fixed costs
that are charged to cost of sales, primarily related to our field service
organisation (responsible for System installations). Lower revenues, combined
with planned fixed costs, have contributed to lower gross margins. As unit
volumes sales increase, we expect gross margins to increase as well; and
* repairs and maintenance expenses for Systems installed under rental contracts,
which are expensed when incurred. While we are satisfied with the performance
and reliability of Systems to date, expenses were somewhat higher in the
period directly after installation.
Operating Expenses
Operating Expenses (consisting of Selling, General and Administrative expenses
and Research and Development expenses) for the six months ending 30 June 2006
were $9.9 million compared to $7.9 million for the same period in 2005. This
represents an increase of $2.0 million, or 25%. This includes $0.9 million and
$0.6 million for non-cash stock compensation charges in 2006 and 2005,
respectively, in accordance with IAS 2. Also within the 2006 non-cash stock
compensation charge is a $0.6 million charge for the repricing of certain
options. Excluding this non-cash charge, Operating Expenses increased $1.7
million, or 23%, over the same period in 2005.
The increase in operating expenses is a direct result of our investment in our
existing business lines as well as targeted investment in growth opportunities
consisting of both new markets for our technology as well as geographic
expansion for existing products.
Net Loss
Net loss for the first six months of 2006 was $7.7 million compared to $4.6
million for the same period 2005. The loss was driven by the revenue and gross
margin factors discussed above as well as the targeted investment in Operating
Expenses to drive the growth of the business.
Other Financial Highlights
The Company was successful in raising $54.5 million in its flotation on the
London Stock Exchange in June 2006. We will continue our strategy of targeted
investment in new business opportunities and geographic markets. Cash and IPO
related receivables, net of IPO costs to be paid, totalled $48.7 million as at
30 June 2006.
In April 2006, the Company financed the continued installation of its Sterilox
Food Safety Systems under rental contracts through a new $7.5 million line of
credit with a US commercial bank. The Company will continue to use selectively
secured lending to further the strategy of growing our base of rented Sterilox
Systems installed on operating lease agreements. This strategic leverage
enables us to manufacture and install our Systems while minimising the up-front
negative cash impact that results due to the nature of rental contracts (revenue
and cash recognised over time vs. at time of sale).
Keith A. Goldan
Chief Financial Officer
CONSOLIDATED INCOME STATEMENT
For the six month periods ended 30 June 2006, 30 June 2005 and the year ended 31
December 2005
Note 30 June 30 June 31 December
2006 2005 2005
$ $ $
CONTINUING OPERATIONS
REVENUE 1 8,362,939 8,059,638 12,835,954
Cost of sales (5,987,022) (4,368,528) (8,961,594)
______ ______ ______
GROSS PROFIT 1 2,375,917 3,691,110 3,874,360
Selling, general and administrative expenses (8,709,298) (7,546,818) (14,035,941)
Research and development (1,225,270) (397,941) (1,646,277)
______ ______ ______
EARNINGS BEFORE INTEREST AND TAX (7,558,651) (4,253,649) (11,807,858)
Finance costs (242,880) (432,988) (1,227,546)
Finance income 63,835 54,284 119,489
______ ______ ______
LOSS BEFORE TAX (7,737,696) (4,632,353) (12,915,915)
Income tax expense - - -
______ ______ ______
LOSS FOR THE PERIOD (7,737,696) (4,632,353) (12,915,915)
______ ______ ______
ATTRIBUTABLE TO:
EQUITY HOLDERS OF THE PARENT (7,737,696) (4,632,353) (12,915,915)
______ ______ ______
EARNINGS PER SHARE $/share $/share $/share
Continuing operations
Basic (0.07) (0.05) (0.14)
______ ______ ______
Diluted (0.07) (0.05) (0.14)
______ ______ ______
CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE
For the six months period ended 30 June 2006, 30 June 2005 and the year ended 31
December 2005
30 June 30 June 31 December
2006 2005 2005
$ $ $
Exchange differences on translation of foreign operations (223,085) (252,336) (130,152)
______ ______ ______
NET LOSS RECOGNISED IN EQUITY (223,085) (252,336) (130,152)
Loss for the period (7,737,696) (4,632,353) (12,915,915)
______ ______ ______
TOTAL RECOGNISED INCOME AND EXPENSE (7,960,781) (4,884,689) (13,046,067)
______ ______ ______
TOTAL RECOGNISED INCOME AND EXPENSE IS ATTRIBUTABLE TO:
Equity holders of the parent (7,960,781) (4,884,689) (13,046,067)
______ ______ ______
CONSOLIDATED BALANCE SHEET
As at 30 June 2006, 30 June 2005 and 31 December 2005
30 June 30 June 31 December
2006 2005 2005
$ $ $
ASSETS
NON CURRENT ASSETS
Intangible assets 4,654,086 4,499,803 4,534,245
Property, plant and equipment (excluding equipment leased to 1,598,394
1,625,569 1,671,209
customers)
Equipment leased to customers 5,647,116 140,617 1,978,203
Other loans receivable 254,671 - 783,073
Other receivables 1,810,098 15,776 202,270
______ ______ ______
TOTAL NON CURRENT ASSETS 13,964,365 6,281,765 9,169,000
______ ______ ______
CURRENT ASSETS
Inventories 2,965,310 2,890,639 3,731,050
Trade and other receivables 3,153,578 4,508,380 2,882,226
IPO funds receivable 6,863,979 - -
Other loans receivable 794,690 - 1,775,226
Cash and cash equivalents 46,977,061 5,236,447 952,842
______ ______ ______
TOTAL CURRENT ASSETS 60,754,618 12,635,466 9,341,344
______ ______ ______
TOTAL ASSETS 74,718,983 18,917,231 18,510,344
______ ______ ______
LIABILITIES
CURRENT LIABILITIES
Trade and other payables (6,401,070) (5,707,070) (6,675,808)
IPO expenses payable (5,162,462) - -
Financial liabilities (6,103,953) (255,724) (2,362,641)
______ ______ ______
TOTAL CURRENT LIABILITIES (17,667,485) (5,962,794) (9,038,449)
______ ______ ______
NON CURRENT LIABILITIES
Financial liabilities (4,622,311) (16,022) (2,881,046)
Provisions (20,884) (20,446) (25,752)
______ ______ ______
TOTAL NON CURRENT LIABILITIES (4,643,195) (36,468) (2,906,798)
______ ______ ______
TOTAL LIABILITIES (22,310,680) (5,999,262) (11,945,247)
______ ______ ______
NET ASSETS 52,408,303 12,917,969 6,565,097
______ ______ ______
EQUITY
Share capital 1,518,390 97,950 99,494
Share premium 144,267,162 91,840,429 93,283,890
Other reserves 3,764,484 2,445,334 2,808,835
Retained earnings (97,388,989) (81,367,731) (89,651,293)
Cumulative translation adjustment 247,256 (98,013) 24,171
______ ______ ______
ISSUED CAPITAL AND RESERVES ATTRIBUTABLE TO EQUITY HOLDERS
52,408,303 12,917,969 6,565,097
______ ______ ______
TOTAL EQUITY 52,408,303 12,917,969 6,565,097
______ ______ ______
CONSOLIDATED CASH FLOW STATEMENT
As of the six month period ended 30 June 2006, 30 June 2005 and the year ended
31 December 2005
30 June 30 June 31 December
2006 2005 2005
$ $ $
CASH FLOWS FROM OPERATING ACTIVITIES
Loss for the period (7,737,696) (4,632,353) (12,915,915)
Adjustments for:
Finance costs 242,880 432,988 1,227,546
Finance income (63,835) (54,284) (119,489)
Depreciation and amortisation 1,398,139 350,026 1,328,421
Amortisation of warrant and debt discount and issuance costs - - 52,634
Share based payment expense 940,024 629,313 1,333,380
Gain on disposal of property, plant and equipment 45,999 109,488 942,753
______ ______ ______
OPERATING LOSS BEFORE MOVEMENT IN WORKING CAPITAL
(5,174,489) (3,164,822) (8,150,670)
Decrease/(increase) in inventories 765,740 469,042 (102,411)
Increase in trade and other receivables (8,881,594) (2,244,721) (983,625)
(Increase)/decrease in trade and other payables 4,924,855 (3,387,685) (4,963,720)
Decrease in provisions (4,868) (131,226) (142,618)
______ ______ ______
CASH GENERATED BY OPERATIONS (8,370,356) (8,459,412) (14,343,044)
______ ______ ______
NET CASH FLOW FROM OPERATING ACTIVITIES (8,370,356) (8,459,412) (14,343,044)
______ ______ ______
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment (4,640,391) (283,795) (2,932,040)
Proceeds from sale of property, plant and equipment - - 335,987
Purchase of intangible assets - - (1,651)
Cash paid for internally generated intangibles (343,719) (587,612) (905,506)
______ ______ ______
NET CASH FLOW FROM INVESTING ACTIVITIES (4,984,110) (871,407) (3,503,210)
______ ______ ______
CASH FLOWS FROM FINANCING ACTIVITIES
Issue of shares, options and warrants 52,402,168 27,569,218 29,019,407
Proceeds from new loans 9,147,555 2,300,000 5,896,050
Repayments of borrowings (884,424) (15,536,553) (15,847,161)
Repayments of obligations under finance leases (19,985) (4,241) (30,356)
Interest received - - 119,489
______ ______ ______
NET CASH FLOW FROM FINANCING ACTIVITIES 60,645,314 14,328,424 19,157,429
______ ______ ______
NET INCREASE IN CASH AND CASH EQUIVALENTS 47,290,848 4,997,605 1,311,175
Cash and cash equivalents at beginning of period 952,842 - -
Effect of foreign exchange rate changes on cash held (217,268) 238,842 (358,333)
______ ______ ______
CASH AND CASH EQUIVALENTS AT END OF PERIOD 48,026,422 5,236,447 952,842
______ ______ ______
BASIS OF PREPARATION
The consolidated interim financial statements of the company for the six months
ended 30 June 2005 comprise the company and its subsidiaries (together referred
to as the 'Group').
The consolidated interim financial statements were authorised for issuance on 13
September 2006.
The comparative figures for the year ended 31 December 2005 are not the
company's statutory accounts for that financial year. Those accounts, which
were prepared under International Financial Reporting Standards as adopted by
the EU ("Adopted IFRSs"), have been reported on by the Reporting Accountant
(KPMG LLP). The report of the Reporting Accountants was (i) unqualified, (ii)
did not include a reference to any matters to which the Reporting Accountants
drew attention by way of emphasis without qualifying their report and (iii) did
not contain a statement under section 237(2) or (3) of the Companies Act 1985.
These interim financial statements are presented as a continuation of the
financial statements of PuriCore, Inc. (formerly Sterilox Technologies, Inc.)
which adopted IFRS for the first time in the non-statutory financial statements
presented in the Prospectus published 27 June 2006. The financial statements
published in the Prospectus include a reconciliation of equity at 1 January
2004, the date of transition of PuriCore, Inc.
The reconciliations of equity and profit included in Note 5 to these interim
financial statements explaining the transition from US GAAP to Adopted IFRSs are
presented to assist the users of these interim financial statements in their
understanding of the impact of the application of Adopted IFRSs.
The accounting policies have been applied consistently throughout the Group for
purposes of these consolidated interim financial statements.
ADOPTED IFRS NOT YET APPLIED
The following adopted IFRSs were available but have not been applied by the
Puricor Group in these financial statements:
* IAS 1 (Amendment): 'Presentation of financial statements' - effective for
annual periods beginning on or after 1 January 2007.
* IAS 21 (Amendment): 'The effects of changes in foreign exchange rates' -
effective for annual periods beginning on or after 1 January 2006.
* IFRIC 4: 'Determining whether an arrangement contains a lease' - effective
for annual periods beginning on or after 1 January 2006.
* IFRIC 5: 'Rights to interests arising from decommissioning, restoration
and environmental rehabilitation funds incorporating an amendment to IAS 39
Financial Instruments: recognition and Measurement' - effective for annual
periods beginning on or after 1 January 2006.
* IFRIC 6: 'Liabilities arising from participating in a specific market -
waste electrical and electronic equipment' - effective for annual periods
beginning on or after 1 December 2005.
* IFRIC 8: 'Scope of IFRS 2' - effective for annual periods beginning on or
after 1 May 2006.
* IFRIC 9: 'Reassessment of embedded derivatives' - effective for annual
periods beginning on or after 1 June 2006.
The Group does not anticipate that the adoption of these standards and
interpretations will have a material effect on its financial statements on
initial adoption.
NOTES TO THE FINANCIAL STATEMENTS
For the six month period ended 30 June 2006
1 SEGMENTAL ANALYSIS
The PuriCore Group is managed by type of business. Segmental information is
provided having regard to the nature of the goods and services provided and the
markets served.
Primary reporting format - Business Segments
For the period ended 30 June Endoscopy Food Dental Corporate & Total as
2006 Safety unallocated reported for
the PuriCore
Group
$ $ $ $ $
REVENUE 5,641,029 2,411,799 310,131 - 8,362,939
______ ______ ______ ______ ______
GROSS PROFIT/(LOSS) 2,342,602 (52,797) 121,115 (35,003) 2,375,917
______ ______ ______ ______ ______
For the period ended 30 June Endoscopy Food Dental Corporate Total as
2005 Safety & unallocated reported for
the PuriCore
Group
$ $ $ $ $
REVENUE 7,129,422 225,816 704,400 - 8,059,638
______ ______ ______ ______ ______
GROSS PROFIT/(LOSS) 3,483,195 13,948 295,251 (101,285) 3,691,110
______ ______ ______ ______ ______
For the year ended 31 December Endoscopy Food Dental
Corporate Total as
2005 reported for
Safety & unallocated the PuriCore
Group
$ $ $ $ $
REVENUE 10,994,419 832,032 1,009,503 - 12,835,954
______ ______ ______ ______ ______
GROSS PROFIT/(LOSS) 4,205,135 (749,733) 378,500 40,458 3,874,360
______ ______ ______ ______ ______
2 EMPLOYEE BENEFITS
SHARE BASED PAYMENTS
During the periods ended 30 June 2005 and 2006 and the year ended 31 December
2005 Sterilox Technologies, Inc. operated an Employee Share Option Scheme. The
share options granted under the scheme are not subject to performance conditions
and have an exercise period of up to 7 years. There are no vesting conditions
attached to the options other than completion of service, with options becoming
vested at various points in time following the completion of one year's
employment with Sterilox Technologies, Inc..
30 June 2006 30 June 2005
Weighted average Number of options Weighted average Number of options
exercise price exercise price
$ $ $ $
Outstanding at beginning of year
1.63 17,031,617 2.32 7,531,617
Granted during the year 1.01 6,993,600 0.78 7,030,000
Exercised during the year 0.52 370,000 - -
Forfeited during the year 2.85 (4,989,267) 1.66 28,333
______ ______ ______ ______
Outstanding at end of year 1.12 19,405,950 1.82 14,589,950
______ ______ ______ ______
Exercisable at end of year 1.23 10,393,958 1.64 7,465,199
______ ______ ______ ______
(continued from table above)
31 December 2005
Weighted average Number of options
exercise price
$ $
Outstanding at beginning of year
2.32 7,531,617
Granted during the year 0.80 9,720,000
Exercised during the year - -
Forfeited during the year (1.66) (220,000)
______ ______
Outstanding at end of year 1.63 17,031,617
______ ______
Exercisable at end of year 1.70 8,062,391
______ ______
The weighted average share price for the period was $0.92 (June 2005: $0.825,
December 2005: $0.825). The weighted average share price has been based on
valuations undertaken in the year and is not based on market observable
information.
On 22 February 2006, the company repriced 4,233,600 stock options to $1.00 held
by employees and non-employee directors from original exercise prices of $2.425
and $3.25 per share. As a condition of the reduction of the exercise price,
option holders agreed that the vesting of the options would not accelerate in
the event of a public offering of the company. As a result of the repricing,
under IFRS 2, the company has recognised incremental compensation expense
related to the increase in fair value due to the modification of $638,665 in the
six months to 30 June 2006.
3 ACQUISITION
On 27 June 2006, PuriCore plc acquired the entire share capital of PuriCore,
Inc. (formerly Sterilox Technologies, Inc.) from its shareholders in
consideration for the issue by PuriCore plc of ordinary shares credited as fully
paid (pursuant to a Merger Agreement dated 16 May 2006).
On 28 June 2006, PuriCore plc announced its placing on the London Stock
Exchange. The placing provided the Group with net proceeds of approximately
$49.6m (after the deduction of commissions, fees and other expenses payable).
4 EXPLANATION OF TRANSITION TO IFRS
As stated in the accounting policies, these financial statements are presented
as a continuation of the financial statements of PuriCore, Inc. which adopted
IFRS for the first time in the non-statutory financial statements presented in
the Prospectus published 27 June 2006. The financial statements published in
the prospectus include a reconciliation of equity at 1 January 2004, the date of
transition of PuriCore, Inc.
In preparing the interim financial statements, the company has adjusted amounts
reported previously in financial statements prepared in accordance with its old
basis of accounting (US GAAP). An explanation of how the transition from US
GAAP to Adopted IFRSs has affected the PuriCore Group's financial position,
financial performance and cash flows is set out in the following tables and the
notes that accompany the tables.
RECONCILIATION OF EQUITY
1 January 2005
Note Previously Effect of Adopted IFRS's
reported transition to
under IFRS
US GAAP
ASSETS and presented in
IFRS format
NON CURRENT ASSETS $ $ $
Intangible assets c 3,542,678 596,357 4,139,035
Property, plant and equipment (excluding
equipment leased to customers)
1,698,345 - 1,698,345
Equipment leased to customers 259,991 - 259,991
Other receivables 521,008 - 521,008
______ ______ ______
TOTAL NON CURRENT ASSETS 6,022,022 596,357 6,618,379
______ ______ ______
CURRENT ASSETS
Inventories 3,359,681 - 3,359,681
Trade and other receivables 1,758,427 - 1,758,427
Other loans receivable 2,300,000 - 2,300,000
Cash and cash equivalents - - -
______ ______ ______
TOTAL CURRENT ASSETS 7,418,108 - 7,418,108
______ ______ ______
TOTAL ASSETS 13,440,130 596,357 14,036,487
______ ______ ______
LIABILITIES
CURRENT LIABILITIES
Trade and other payables (8,440,945) - (8,440,945)
Financial liabilities (2,750,838) - (2,750,838)
______ ______ ______
TOTAL CURRENT LIABILITIES (11,191,783) - (11,191,783)
______ ______ ______
NON CURRENT LIABILITIES
Financial liabilities d (13,552,845) 491,143 (13,061,702)
Provisions (151,672) - (151,672)
______ ______ ______
TOTAL NON CURRENT LIABILITIES (13,704,517) 491,143 (13,213,374)
______ ______ ______
TOTAL LIABILITIES (24,896,300) 491,143 (24,405,157)
______ ______ ______
NET (LIABILITIES)/ASSETS (11,456,170) 1,087,500 (10,368,670)
______ ______ ______
EQUITY
Share capital 46,424 - 46,424
Share premium d,e 65,271,244 (948,507) 64,322,737
Other reserves d,e - 1,843,224 1,843,224
Deferred compensation e (154,624) 154,624 -
Retained earnings (76,917,518) 182,140 (76,735,378)
Cumulative translation adjustment f 298,304 (143,981) 154,323
______ ______ ______
ISSUED CAPITAL AND RESERVES ATTRIBUTABLE TO
EQUITY HOLDERS
(11,456,170) 1,087,500 (10,368,670)
______ ______ ______
TOTAL EQUITY (11,456,170) 1,087,500 (10,368,670)
______ ______ ______
(continued from table above)
30 June 2005
Note Previously Effect of Adopted IFRS's
reported transition to
under IFRS
US GAAP and
ASSETS presented in IFRS
format
NON CURRENT ASSETS $ $ $
Intangible assets c 3,387,542 1,112,261 4,499,803
Property, plant and equipment (excluding
equipment leased to customers)
1,625,569 - 1,625,569
Equipment leased to customers 140,617 - 140,617
Other receivables 15,776 - 15,776
______ ______ ______
TOTAL NON CURRENT ASSETS 5,169,504 1,112,261 6,281,765
______ ______ ______
CURRENT ASSETS
Inventories 2,890,639 - 2,890,639
Trade and other receivables 4,508,380 - 4,508,380
Other loans receivable - - -
Cash and cash equivalents 5,236,447 - 5,236,447
______ ______ ______
TOTAL CURRENT ASSETS 12,635,466 - 12,635,466
______ ______ ______
TOTAL ASSETS 17,804,970 1,112,261 18,917,231
______ ______ ______
LIABILITIES
CURRENT LIABILITIES
Trade and other payables (5,707,070) - (5,707,070)
Financial liabilities (255,724) - (255,724)
______ ______ ______
TOTAL CURRENT LIABILITIES (5,962,794) - (5,962,794)
______ ______ ______
NON CURRENT LIABILITIES
Financial liabilities d (16,022) - (16,022)
Provisions (20,446) - (20,446)
______ ______ ______
TOTAL NON CURRENT LIABILITIES (36,468) - (36,468)
______ ______ ______
TOTAL LIABILITIES (5,999,262) - (5,999,262)
______ ______ ______
NET (LIABILITIES)/ASSETS 11,805,708 1,112,261 12,917,969
______ ______ ______
EQUITY
Share capital 97,950 - 97,950
Share premium d,e 92,788,936 (948,507) 91,840,429
Other reserves d,e - 2,445,334 2,445,334
Deferred compensation e (88,928) 88,928 -
Retained earnings (81,051,712) (316,019) (81,367,731)
Cumulative translation adjustment f 59,462 (157,475) (98,013)
______ ______ ______
ISSUED CAPITAL AND RESERVES ATTRIBUTABLE TO
EQUITY HOLDERS
11,805,708 1,112,261 12,917,969
______ ______ ______
TOTAL EQUITY 11,805,708 1,112,261 12,917,969
______ ______ ______
RECONCILIATION OF EQUITY (continued)
31 December 2005
Note Previously Effect of Adopted IFRS's
reported transition
under to
US GAAP IFRS
and presented in
IFRS format
$ $ $
ASSETS
NON CURRENT ASSETS
Intangible assets c 3,152,443 1,381,802 4,534,245
Property, plant and equipment (excluding equipment 1,671,209 - 1,671,209
leased to customers)
Equipment leased to customers 1,978,203 - 1,978,203
Other loans receivable 783,073 - 783,073
Other receivables 202,270 - 202,270
______ ______ ______
TOTAL NON CURRENT ASSETS 7,787,198 1,381,802 9,169,000
______ ______ ______
CURRENT ASSETS
Inventories 3,731,050 - 3,731,050
Trade and other receivables 2,882,226 - 2,882,226
Other loans receivable 1,775,226 - 1,775,226
Cash and cash equivalents 952,842 - 952,842
______ ______ ______
TOTAL CURRENT ASSETS 9,341,344 - 9,341,344
______ ______ ______
TOTAL ASSETS 17,128,542 1,381,802 18,510,344
______ ______ ______
LIABILITIES
CURRENT LIABILITIES
Trade and other payables (6,675,808) - (6,675,808)
Financial liabilities (2,362,641) - (2,362,641)
______ ______ ______
TOTAL CURRENT LIABILITIES (9,038,449) - (9,038,449)
______ ______ ______
NON CURRENT LIABILITIES
Financial liabilities d (2,881,046) - (2,881,046)
Provisions (25,752) - (25,752)
______ ______ ______
TOTAL NON CURRENT LIABILITIES (2,906,798) - (2,906,798)
______ ______ ______
TOTAL LIABILITIES (11,945,247) - (11,945,247)
______ ______ ______
NET ASSETS 5,183,295 1,381,802 6,565,097
______ ______ ______
EQUITY
Share capital 99,494 - 99,494
Share premium d,e 94,232,397 (948,507) 93,283,890
Other reserves d,e - 2,808,835 2,808,835
Deferred compensation e (31,250) 31,250 -
Retained earnings (89,310,681) (340,612) (89,651,293)
Cumulative translation adjustment f 193,335 (169,164) 24,171
______ ______ ______
ISSUED CAPITAL AND RESERVES ATTRIBUTABLE TO EQUITY 5,183,295 1,381,802 6,565,097
HOLDERS
______ ______ ______
TOTAL EQUITY 5,183,295 1,381,802 6,565,097
______ ______ ______
RECONCILIATION OF PROFIT
30 June 2005
Note Previously Effect of Adopted IFRS's
reported transition
under to IFRS
US GAAP
and
presented in IFRS
format
$ $ $
CONTINUING OPERATIONS
REVENUE 8,059,638 - 8,059,638
Cost of sales (4,368,528) - (4,368,528)
______ ______ ______
GROSS PROFIT 3,691,110 - 3,691,110
Selling, general and administrative expenses b,c,e (6,446,269)
(1,100,549) (7,546,818)
Research and development
c (1,000,331) 602,390 (397,941)
Profit on disposal of property, plant and equipment - - -
______ ______ ______
EARNINGS BEFORE INTEREST AND TAX (3,755,490) (498,159) (4,253,649)
Finance costs (432,988) - (432,988)
Finance income 54,284 - 54,284
______ ______ ______
LOSS BEFORE TAX (4,134,194) (498,159) (4,632,353)
Income tax expense b - - -
______ ______ ______
LOSS FOR THE YEAR (4,134,194) (498,159) (4,632,353)
______ ______ ______
EARNINGS PER SHARE
Continuing operations $/share $/share
Basic (0.04) (0.05)
______ ______
Diluted (0.04) (0.05)
______ ______
(continued from table above)
31 December 2005
Note Previously Effect of Adopted IFRS's
reported transition
under to IFRS
US GAAP
and presented in
IFRS format
$ $ $
CONTINUING OPERATIONS
REVENUE 12,835,954 - 12,835,954
Cost of sales (8,961,594) - (8,961,594)
______ ______ ______
GROSS PROFIT 3,874,360 - 3,874,360
Selling, general and administrative expenses b,c,e (12,494,517)
(1,541,424) (14,035,941)
Research and development c (2,584,986) 938,709 (1,646,277)
Profit on disposal of property, plant and equipment - - -
______ ______ ______
EARNINGS BEFORE INTEREST AND TAX
(11,205,143) (602,715) (11,807,858)
Finance costs (1,227,546) - (1,227,546)
Finance income 119,489 - 119,489
______ ______ ______
LOSS BEFORE TAX (12,313,200) (602,715) (12,915,915)
Income tax expense b (79,963) 79,963 -
______ ______ ______
LOSS FOR THE YEAR (12,393,163) (522,752) (12,915,915)
______ ______ ______
EARNINGS PER SHARE
Continuing operations $/share $/share
Basic (0.13) (0.14)
______ ______
Diluted (0.13) (0.14)
______ ______
RECONCILIATION OF CASH FLOW
With the exception of reclassification, there are no material differences
between the cash flow statement presented under IFRSs and the cash flow
statement presented under US GAAP.
EXPLANATION OF IFRS ADJUSTMENTS
A summary of the significant differences between US GAAP and IFRS and the impact
to the PuriCore Group is as follows:
a) Presentation of financial results and information. The format of the IFRS
financial statements has been prepared in accordance with IAS 1 "Presentation of
financial statements", which differs from its US equivalent. In particular
there is greater flexibility on the presentation of information in the primary
statements. Certain headings are mandatory but IFRS allows companies to adopt
other headings in accordance with the nature of their business.
A reclassification has been made to classify warranty accruals from current
liabilities under US GAAP to provisions in accordance with IAS 37. At 1 January
2005 $151,672 has been reclassified, 30 June 2005 $20,446 and at 31 December
2005 $25,752.
b) Income tax and goodwill impairment charge. On acquisition of Sterilox
Medical (Europe) Limited on 30 November 2000, pre-acquisition losses of
$1,910,761 were acquired. No deferred tax asset was recognised at the time of
acquisition, as the directors considered realisation uncertain. Subsequent
benefit has been utilised and under US GAAP this benefit is treated as a write
down against goodwill and credit against tax charged in the income statement. A
tax charge of $443,371 in 2004 and $79,963 in 2005 have been recorded in the
income statement under US GAAP. Under IFRS an impairment charge against
goodwill is recorded in the income statement in place of this tax charge. This
has resulted in a reclassification in the income statement under IFRS from tax
expense to impairment charge with $nil impact on loss for the year in 2005.
c) Intangible assets - Research and development costs. Under IFRS, IAS 38
states that when the technical and economic feasibility of a project can be
demonstrated and further prescribed conditions are satisfied, the costs of the
development of the project must be capitalised. Any costs relating to research
must be expensed as they are incurred.
Under US GAAP, FAS 2 requires general research and development costs that are
not covered by separate standards to be expensed as they are incurred.
Cumulative capitalised expenditure is $596,357 at 1 January 2005, $1,112,261 at
30 June 2005 and £1,381,802 at 31 December 2005. Amortisation of $125,081 has
been charged in the year ended 31 December 2005 and $72,992 in the six months to
30 June 2005.
d) Compound financial instruments. Under IAS 32 and IFRS 7, financial
instruments are treated as equity only to the extent that they include no
contractual obligations to deliver cash or other financial assets or to exchange
financial assets or financial liabilities with another party under conditions
that are potentially unfavourable. To the extent that this definition is not
met, the proceeds of issue are classified as a financial liability. Financial
liabilities that include an option to convert to equity instruments are compound
financial instruments under US GAAP and IFRS. Under IFRS the instrument is
required to be "split" accounted - ie the equity component should be valued and
shown as a component of equity. This treatment is not permitted under US GAAP.
The equity component of convertible debt instruments have been included in other
reserves.
At 1 January 2004 the equity component reclassified was $536,022. In 2004,
$44,879 was released. The remaining $491,143 was released in 2005.
e) Accounting for stock based compensation. Under IFRS, the PuriCore Group
applies the fair value method of accounting for its stock based compensation
plans. For accounting purposes under US GAAP, the PuriCore Group applies an
intrinsic value method under APB 25 "Accounting for stock issued to employees"
as permitted by SFAS 123 "Accounting for stock based compensation". As
permitted under the transition rules for IFRS, the PuriCore Group has applied
the accounting methodology to awards granted after 7 November 2002.
In line with the requirements of SFAS 123 and as amended by SFAS 148 "Accounting
for stock based compensation - transaction and disclosure" the PuriCore Group
provides pro forma disclosure of the impact of applying these standards which
are based on a fair value method. The PuriCore Group has used a Black Scholes
model to calculate the fair value of awards granted. Under IFRS, the fair value
of the options granted are expensed over the vesting period.
The valuation models used to value all share options have been reviewed and
certain assumptions which are relevant under US GAAP have been amended to ensure
compliance with IFRS. This has resulted in a charge to the income statement
under IFRS of $168,138 in 1 January 2005 opening reserves, $1,027,557 during the
period ended 30 June 2005, $301,359 during the period ended 30 June 2006 and
$1,333,380 during the year ended 31 December 2005 and an equal credit to other
reserves. Under IFRS the cost of stock options granted but not exercised at the
balance sheet date should be disclosed within a separate reserve within equity.
Under US GAAP this cost is included within the share premium account. At 31
December 2005, a debit of $123,374 has been transferred from deferred
compensation to other reserves.
f) Cumulative translation differences. At 1 January 2004 the cumulative
translation differences have been assumed to be zero. The balance on the
reserve at that date ($159,433) has been transferred to retained earnings.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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