PURE Bioscience Reports Fiscal 2019 Year-End Financial Results

 

Update on Business Segments and PURE’s SDC-Based Antimicrobial Food Safety Solutions

 

SAN DIEGO, CA (Oct 29, 2019) – 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.
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.

 

Continued

 

   
 

 

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.

 

Contact:

Mark Elliott, VP Finance

PURE Bioscience, Inc.

Ph: 619-596-8600 ext: 116

 

   
 

 

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 

 

Continued

 

   
 

 

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 

 

Continued

 

   
 

 

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  

 

Continued

 

   
 

 

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   $ 

 

   
 

 


The following information was filed by Pure Bioscience, Inc. (PURE) on Tuesday, October 29, 2019 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-K Annual Report statement of earnings and operation as management may choose to highlight particular information in the press release.

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