10 Mar 2015 07:02
10 March 2015 |
HaloSource, Inc.
("HaloSource" or the "Company")
Preliminary Results Announcement
HaloSource Inc. (HAL.LN, HALO.LN), the global clean water technology company traded on London's AIM, today announces its preliminary results for the financial year ended 31 December 2014.
Financial Highlights
· Consolidated revenues increased by 30% to $21.0 million (2013: $16.1 million), including:
o Drinking Water revenue increased 97%, to $6.3 million (2013: $3.2 million)
o Environmental Water revenue increased 131%, to $3.0 million (2013: $1.3 million)
o Recreational Water revenue increased 1%, to $11.5 million (2013: $11.4 million)
· Gross margin increased to 43% (2013: 41%).
· Operating expenses decreased 8% to $17.2 million (2013: $18.6 million).
· Net loss improved to $8.6 million, a decrease of 31% (2013: net loss of $12.5 million). In the fourth quarter, traditionally the Company's strongest quarter, positive net income was achieved.
· Net cash used in operating activities decreased by 32% to $8.4 million (2013: $12.4 million).
· Successful placing for net proceeds of $10.3 million in November 2014.
· Total net cash at year end, including restricted cash and short-term investments, of $13.8 million.
Operational Highlights
Continued solid progress in 2014 across all areas of our business as we continue to grow several of our key customer relationships:
· Drinking Water: Our strategic focus on leading innovation in the chemistry of water purification, with our technologies taken to market via strategic partnerships with the world's leading multi-national companies ("MNC") resulted in strong growth.
· Environmental Water: We experienced significant growth in this burgeoning segment during 2014, more than doubling the previous year's sales, as we tightened our focus on North America and pivoted our strategy in line with our corporate focus on innovation in the chemistry of water purification.
· Recreational Water: Improved performance from sales of Mighty PodsTM was largely offset by reduced sales due to unseasonably cold and wet weather across much of the US in the first half of the year.
Martin Coles, HaloSource's CEO, commenting on the results, said:
"2014 marked another year of solid progress for our company as our strategy of taking our class leading innovation in the chemistry of water purification to market through many of the world's most respected sector players continues to build significant momentum. We expect this strategy to drive strong, sustained long term growth through increasing adoption of devices and systems deploying our technologies in our current markets as well as rapid growth in geographic reach as our partners expand their offerings into new markets. Our focus on strategic partnerships allows us to target our efforts on our competencies in innovating and developing the science of water purification.
Our confidence was recently reinforced by the strengthening of our balance sheet with a £7 million fundraising ($10.3 million, net of expenses) in the fourth quarter of 2014. With the support of both new and previously existing shareholders, we are confident in our ability to continue to grow revenues, expand margins and control expenses in order to reach cash flow break even and profitability while also making a critical difference in the world by bringing clean water to those we serve."
Enquiries:
HaloSource | |
Martin Coles, Chief Executive Officer | +1 425 974 1991 |
James Thompson, Chief Financial Officer | +1 425 974 1993 |
Liberum Capital (NOMAD and Broker) | |
Richard Bootle/Jill Li/Steve Pearce | +44 203 100 2222 |
Allenby Capital (Joint Broker) | |
Chris Crawford/Kat Perez | +44 203 328 5656 |
Newgate (Financial PR) | +44 207 680 6550 |
James Benjamin/Georgia Lewis/Andre Hamlyn | halosource@newgatecomms.com |
About HaloSource
HaloSource, Inc. creates innovative solutions for water purification that serve people, preserve the planet and protect our most valuable resource. The Company works with scientists and industry experts across the globe in search of new ways to improve water quality and has been awarded more than 70 patents for its ground breaking chemistries, which provide effective and environmentally responsible solutions to the growing issue of water stress.
Founded in Seattle, Washington, HaloSource has grown to become an influential leader in three market segments: drinking water, recreational water, and environmental water treatment and remediation. HaloSource is headquartered in the US with operations in China and in India. Learn more about the Company's research and development and future cutting edge technologies by visiting www.halosource.com.
HaloKlear, HaloPure, SeaKlear and HaloShield are either trademarks or registered trademarks of HaloSource, Inc. All other trademarks, brand names or product names belong to their respective holders.
JOINT STATEMENT BY THE CEO AND CHAIRMAN
In 2014 we continued to make progress in growing our business by narrowing our focus and continuing to strengthen our partnerships with key customers in all areas in which we do business, leading to increased revenues and improved gross margins, while also continuing to reduce our administrative spending.
In Drinking Water, deployment of our unique bromine based HaloPure® purification technology meets and exceeds U.S. Environmental Protection Agency and China Ministry of Health standards for germ kill and approval for long-term use. We are continuing to develop advanced applications which remove other highly toxic water borne contaminants from solution such as lead, arsenic and fluoride. We have had continued success with several major MNCs:
o Perfect, one of China's largest direct sales organisations, continued a national roll out of their pressure fed water purification device.
o Jarden, a leading US MNC, launched HaloPure powered pitchers in 2014 into Peru, Chile and Colombia, with additional large Central and South American markets planned for launch in 2015.
o In December 2014 we extended our stand-still agreement with the world's largest gravity-fed water purifier company, and a leading global MNC, for a third year while continuing to ship cartridges in support of their national launch in China.
By 2018, the Point of Entry/Point of Use ("PoE"/"PoU") water filtration and purification market is expected to reach $16 billion in global sales, up from $9 billion in 2011 (according to a 2012 report by Verify Markets). HaloPure is the enabling technology in category leading devices in China and India, through strategic partners that include Perfect and Eureka Forbes Limited, respectively. Partnering with Jarden as they enter the fast growing Latin American market reinforces our strategy of increasing the penetration of our drinking water purification technology around the globe through strong commercial partners.
Other PoU drinking water products on the market typically provide consumers with alternatives that filter water to improve taste and remove only basic contaminants. The HaloPure®powered devices not only deliver better tasting water but, most importantly, they quickly eliminate waterborne viruses and bacteria by 99.9% while preventing bacterial recontamination, thereby keeping treated water fresher for longer.
In Environmental Water, our greener biopolymer solutions provide a far lower environmental footprint when compared with other chemical solutions now used in applications such as sediment control, simple mining, and oil and gas. In addition, our solutions can be highly tailored and/or used in combination with other established technologies (reverse osmosis, for example) to create significant improvements in output, cost of operation, cost of ownership and waste reduction. We continue to build strategic partnerships with companies who have the relationships, reputations and connections which help take our class leading biopolymer solutions into new applications and markets.
In the Recreational Water business our focus remains on contaminant removal and ease of use and dosing, led by our Mighty PodsTM products that provide crystal clear and clean water while reducing the need for excessive levels of harsh chemicals. While the market as a whole was down for the year we managed to grow revenues by 1%, taking market share as our Mighty Pods™ product roll out continued to gain distribution with new applications for hot tubs and above-ground swimming pools launched during 2014. We plan to drive future growth in this segment by extending our strategy of partnering with leading players in the US, Canada and internationally as an OEM supplier, taking our innovation to market through recognised brands and channels as we have in the other two segments of our business. Our recently announced multi-year supply agreement with Fluidra, one of EMEA's largest Pool and Spa players, is a prime example of this strategy.
We continue to be very encouraged by our progress in 2014 and we believe we are still barely scratching the surface of the opportunities that exist for commercial applications of our water purification technology in the global market place.
Financial Review
Group revenue for 2014 increased 30% year-on-year to $21.0 million, driven by significant growth in the Company's Drinking Water revenue to $6.3 million (up 97% from $3.2 million in 2013) and Environmental Water revenue to $3.0 million (up 131% from $1.3 million in 2013). The Company continued to experience acceleration of orders from our strategic partners in China, Latin America and India in Drinking Water, while also building new partnerships and expanding existing partnerships in our Environmental Water segment. Revenue from the Company's Recreational Water segment of $11.5 million was 1% higher compared with $11.4 million in 2013, despite poor weather in the North American recreational water market for the second year in a row.
Gross margins, at 43%, improved from 2013, as the Company continues to benefit from improved product margins in our Recreational Water and Environmental Water businesses, as well as efficiencies of scale in our Drinking Water business. Operating expenses totaled $17.2 million, down 8% from $18.6 million in 2013. The net loss for the year was $8.6 million, a reduction of 31% from 2013, and includes the impact of non-cash costs related to share based compensation of $0.3 million and $0.6 million in 2014 and 2013, respectively. Positive net income was achieved for the first time in the Company's history during Q4 2014, traditionally the Company's strongest quarter.
In 2014, we reduced our net consumption of cash by nearly 40% compared to 2013 and management believes that improved margins and continued cost reduction efforts should further reduce cash consumption in 2015. At 31 December 2014, the Company had a total of $14.8 million in cash, comprised of cash and cash equivalents ($3.3 million), restricted cash ($1.5 million) and short-term investments ($10.0 million). The Company believes it has sufficient capital to fund its plans for future growth and execute against its strategy.
Technology and Product Development
Our focus remains on the business of innovation in the chemistry of water purification. We continue to work on advancements in our point of use drinking water technology in order to reduce the complexity and cost of manufacturing while maintaining the same high level of efficacy for our partners' products. We also continue to develop exciting adsorption technologies in our environmental remediation platform with potential applications for both new and existing partners, as well as cross-application with our clarification and purification platforms.
Employee Headcount
Employee headcount at the beginning of the year was 126 and as of 31 December 2014 stood at 116. The decrease from the prior year is due primarily to reductions in our US based corporate headquarters. For 2015, we expect headcount to remain stable in the US and to expand modestly in India and China as production requires.
Outlook
We have continued to execute on our business plan in 2014, furthering our efforts to become the "innovation partner" to our customers. We regularly engage with leading multi-national companies who seek our expertise in water chemistry. These relationships will deliver, as we have started to see in 2014, highly scalable revenue via indirect channels to market in 2015 and beyond.
The fundamentals of our three market segments remain highly favorable and supported by our valuable, substantial and protected technologies, whose development and commercialization we continue to accelerate. The increasing monetisation of our valuable IP leads us to remain confident of delivering excellent returns for our shareholders.
HaloSource, Inc. and Subsidiaries Consolidated Statements of Operations and Comprehensive Loss |
2014 |
2013 |
Years ended December 31, | US$000 (Unaudited) | US$000 (Audited) |
Revenue - net | $ 20,958 | $ 16,063 |
Cost of goods sold | 12,021 | 9,531 |
Gross profit | 8,937 | 6,532 |
Operating expenses | ||
Research and development | 2,311 | 2,656 |
Selling, general, and administrative | 14,857 | 15,904 |
Total operating expenses | 17,168 | 18,560 |
Operating loss | (8,231) | (12,028) |
Other expense, net | (349) | (392) |
Loss before income taxes | (8,580) | (12,420) |
Income taxes | (50) | (43) |
Net loss | (8,630) | (12,463) |
Other comprehensive income (loss) | ||
Unrealized loss on available-for-sale investments | (13) | (35) |
Foreign currency translation adjustments | 165 | 104 |
Comprehensive loss | $ (8,478) | $ (12,394) |
Net loss per share - basic and diluted | $ (0.05) | $ (0.08) |
Shares used to compute basic and diluted loss per share (in 000s) | 164,053 | 156,411 |
HaloSource, Inc. and Subsidiaries | 2014 | 2013 |
Consolidated Balance Sheets | US$000 | US$000 |
As of December 31, | (Unaudited) | (Audited) |
Assets | ||
Current assets | ||
Cash and cash equivalents | $ 3,295 | $ 1,762 |
Restricted cash | 1,552 | 1,941 |
Short-term investments | 9,985 | 9,314 |
Accounts receivable, less allowance for doubtful | ||
accounts of $294 and $20, respectively | 8,388 | 6,085 |
Inventories - net | 3,187 | 3,626 |
Prepaid expenses and other current assets | 1,528 | 1,539 |
Total current assets | 27,935 | 24,267 |
Property and equipment - net | 3,160 | 4,018 |
Goodwill | 2,180 | 2,180 |
Other intangible assets - net | 724 | 846 |
Deposits | 210 | 276 |
Total assets | $ 34,209 | $ 31,587 |
Liabilities and stockholders' equity | ||
Current liabilities | ||
Accounts payable | $ 2,986 | $ 2,549 |
Accrued expenses and other current liabilities | 1,573 | 1,257 |
Salaries and benefits payable | 508 | 603 |
Current portion of debt and capital lease obligations | 1,050 | 1,082 |
Total current liabilities | 6,117 | 5,491 |
Long-term portion of debt and capital lease obligations | 25 | 45 |
Deferred rent | 1,073 | 1,167 |
Deferred tax liabilities | 138 | 104 |
Total liabilities | 7,353 | 6,807 |
Commitments and contingencies | ||
Stockholders' equity | ||
Common stock, no par value; 400,000,000 and | ||
200,000,000 shares authorized; 220,230,404 and | ||
156,484,041 issued and outstanding, respectively | 141,219 | 130,665 |
Accumulated other comprehensive income | 225 | 73 |
Accumulated deficit | (114,588) | (105,958) |
Total stockholders' equity | 26,856 | 24,780 |
Total liabilities and stockholders' equity | $ 34,209 | $ 31,587 |
HaloSource, Inc. and Subsidiaries | ||
Consolidated Statements of Cash Flows | 2014 | 2013 |
Years ended December 31, | US$000 (Unaudited) | US$000 (Audited) |
Operating activities | ||
Net loss | $ (8,630) | $ (12,463) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation and amortization | 1,013 | 1,085 |
Allowance for inventory, sales returns and bad debts | (369) | (8) |
Share-based compensation | 347 | 567 |
Loss on disposal of property, equipment and other assets | 25 | 9 |
Realized losses on short-term investments | - | 13 |
Deferred income taxes | 34 | 30 |
Changes in operating assets and liabilities: | ||
Accounts receivable | (2,077) | (2,561) |
Inventories | 514 | (21) |
Prepaid expenses and other assets | 59 | (514) |
Accounts payable | 517 | 702 |
Accrued expenses and other liabilities | 243 | 751 |
Salaries and benefits payable | (2) | 109 |
Deferred rent | (107) | (66) |
Net cash used in operating activities | (8,433) | (12,367) |
Cash flows from investing activities | ||
Purchase of property and equipment | (175) | (1,365) |
Purchase of short-term investments | (9,934) | (8,122) |
Sales of short-term investments | 9,250 | 8,090 |
Proceeds from sale of property and equipment | 105 | - |
Decrease (increase) in restricted cash | 389 | (73) |
Net cash used in investing activities | (365) | (1,470) |
Cash flows from financing activities | ||
Proceeds from public offering, net of offering costs of $686 | 10,206 | - |
Borrowings under long-term debt | 32 | 89 |
Repayments of debt and capital lease obligations | (19) | (50) |
Proceeds from exercise of stock options and warrants | 1 | 1 |
Net cash provided by financing activities | 10,220 | 40 |
Effect of exchange rate changes on cash | 111 | (76) |
Net increase (decrease) in cash and cash equivalents | 1,533 | (13,873) |
Cash and cash equivalents, beginning of year | 1,762 | 15,635 |
Cash and cash equivalents, end of year | $ 3,295 | $ 1,762 |
Note 1 - Basis of Preparation
The financial information set out in this document does not constitute the Group's financial statements for years to 31 December 2014 and 2013. The results for 31 December 2014 are unaudited. Financial statements for the year ended 31 December 2014 will be finalized based on the information presented in this announcement. The independent auditor's report will be based on those financial statements once they are complete.
Financial statements for the year ended 31 December 2013 have been reported on by the Independent Auditor. The Independent Auditor's report on the financial statements for 2013 was unqualified and did not draw attention to any matters by way of emphasis.
The financial information set out in these preliminary results has been prepared using accounting principles generally accepted in the United States of America ("U.S. GAAP"). The accounting policies adopted in these preliminary results have been consistently applied to all the years presented and are consistent with the policies used in the preparation of the statutory accounts for the period ended 31 December 2014. The principal accounting policies adopted are unchanged from those used in the preparation of the statutory accounts for the period ended 31 December 2013.
Note 2 - Litigation
As of 31 December 2014 and through to 5 March 2015, the date this press release was approved by the Board of Directors for distribution, we were not involved in any material pending litigation, claims or assessments.
Cautionary Statement:
This press release contains certain forward-looking statements. All statements contained in this press release that do not relate to matters of historical facts should be considered forward-looking statements. Forward-looking statements include statements with respect to the operations, performance and financial condition of the Company, including, but not limited to, cash consumption and sufficiency of capital, the available opportunities, markets for and benefits of its products and services, the Company's innovation and deployment of new products, the improvements to and expanded deployment of existing products, the potential benefits of business relationships with third parties, and the Company's plans and strategies for and expected future growth. By their nature, these statements involve uncertainty since future events and circumstances can cause results and developments to differ materially from those anticipated. The forward-looking statements reflect knowledge and information available at the date of preparation of this press release and the Company undertakes no obligation to update these forward-looking statements. Nothing in this press release should be construed as a profit forecast. These statements about future events are subject to risks and uncertainties that could cause HaloSource's actual results to differ materially from those that might be inferred from the forward-looking statements. HaloSource can make no assurance that any forward-looking statements will prove correct.
General Information:
The Company is incorporated and domiciled in the State of Washington, USA. The address of its registered office is 1725 220th Street SE, Suite 103, Bothell, WA 98021, USA.
The Company has its primary listing on the Alternative Investment Market ("AIM"), a sub-market of the London Stock Exchange.
The 2014 unaudited preliminary results announcement was prepared under U.S. GAAP and was approved for issue on 5 March 2015.
The Company anticipates its 2014 audited consolidated financial statements and 2015 Annual Report will be available to shareholders the week of 23 March 2015.
HaloPure, SeaKlear and Mighty Pods are either trademarks or registered trademarks of HaloSource, Inc. All other trademarks or brand names belong to their respective holders.