TIDMHAL TIDMHALO
RNS Number : 0560C
HaloSource Inc
12 March 2014
FOR IMMEDIATE RELEASE 12(th) March 2014
HALOSOURCE, INC.
("HaloSource" or the "Company")
Preliminary results announcement
Seattle, U.S.A. - HaloSource, Inc. (HAL.LN, HALO.LN), the clean
water technology company traded on London's AIM, today announces
its preliminary results for the year ended 31 December 2013.
2013 Highlights
Continued progress in 2013 with several key achievements and
milestones announced, all of which provides a solid foundation for
future growth in line with the strategic plan:
o Drinking Water: As a key component of our strategic plan we
further tightened our focus as innovation partner to global
corporations such as Perfect, Tupperware, and Eureka Forbes. In
December 2013 we extended the stand-still agreement with the
world's largest gravity-fed water purifier company for another
year, continuing to ship cartridges in support of their test market
and, ultimately, national launch. We also completed a supply
agreement for pitchers and pitcher cartridges with H2O
International, a key conduit to one of the world's largest consumer
product companies.
o Recreational Water: Growth in the segment rebounded in 2013 as
we expanded distribution, drove better sales force execution, and
brought an exciting new line of consumer and service friendly water
care products to market led by our SeaKlear(R) line of Mighty
Pods(TM) products. Sales of Mighty Pods products exceeded
expectations by a significant margin in our first year of launch
and with increasing uptake we are very excited for the future of
this convenient form factor as we expand the line to include
above-ground pool and hot tub applications in addition to our
current in-ground pool line up. We opened up new distribution
channels and geographies with the largest pool and spa retailer in
the US and the world's largest retailer.
o Environmental Water: The business struggled during 2013;
however, with most of the issues now behind us and a clear focus on
forming strategic partnerships as the route to market, just as in
other aspects of our business, we have been able to increase our
sales with targeted major industry players. We will continue to
focus on deployment of our class leading biopolymer chemistry and
our innovation pipeline for this segment through these partners
with a bias toward regulated and environmentally sensitive
applications.
Joint Statement by the Chairman and CEO
"2013 was another year of great progress for our company as we
continued to gain traction with the strategy put in place just
under 2 years ago. This focuses our efforts against end user led
innovation in water purification chemistry taken to market as
components in the treatment solutions offered by strategic partners
with significant market reach/reputation and ownership.
This focus in each segment of our business enables our engineers
and scientists to create and continuously improve the application
of our unique, class leading solutions to the challenges faced by
end users and consumers in each aspect of the businesses we
serve.
We are establishing ourselves as the innovation partner for a
number of important strategic players who are already well
established as market and channel leaders in their segments. While
many of our solutions are impactful in themselves, they can often
be used in conjunction with other chemistry or technologies to
significantly improve "system" performance in terms of output,
efficacy in contaminant kill and/or removal, as well as improving
the safety and environmental footprint of the original technology
deployed.
In Drinking Water, deployment of our unique bromine based
HaloPure(R) purification technology not only meets and exceeds U.S.
Environmental Protection Agency and China Ministry of Health
standards, for germ kill but we are now developing advanced
applications which remove other highly toxic water borne
contaminants from solution such as lead, arsenic and fluoride.
In Environmental Water, our greener biopolymer solutions provide
a far lower or even zero environmental impact footprint when
compared with other chemical solutions now in use in applications
such as construction, storm water management, simple mining, and
oil and gas. In addition, our solutions can be highly tailored
according to each issue being faced and/or used in combination with
other established technologies (reverse osmosis, for example) to
create significant improvements in output, cost of operation, total
cost of ownership and wastage.
Similarly, in the Recreational Water business our focus is on
contaminant removal and ease of use/dosing led by our Mighty Pods
products which provide crystal clear and clean water while reducing
the need for excessive levels of harsh chemicals. Consumer, Retail
and Service industry reaction to our Mighty Podsproducts format
tells us we are onto a real winner in this segment as simplicity,
safety and effectiveness at a reasonable premium overcomes the
complexity, mess and safety concerns of the backyard chemistry
set.
We are very encouraged by our progress in 2013 and are only now
scratching the surface of the huge opportunities that exist for
commercial applications of our water purification technology in the
global market place. We will continue to focus our approach through
the creation of strategic partnerships as the route to market.
We are very excited at the prospects for growth in all segments
of our business in 2014 and beyond as we reach for cash flow
breakeven and aggressive future growth funded from business
operations. We will continue to focus on being a company worthy of
our people, our partners, our customers and consumers while making
a critical difference in the world by bringing clean water to those
we serve."
Financial Review
Group revenue for 2013 increased 21% year-on-year to $16.1
million, driven by significant growth in the Company's Recreational
Water revenue to $11.4 million (up 30% from $8.7 million in 2012)
and Drinking Water revenue to $3.2 million (up 50% from $2.1
million in 2012). The Company signed several new supply agreements
specific to its Recreational Water and Drinking Water businesses
which opened up new distribution channels and created continued
expansion and awareness of the Company's products in these two
segments.
Revenue from the Company's Environmental Water segment of $1.3
million was 37% lower compared with $2.2 million in 2012, which
management believes was driven primarily by difficulties in
overcoming regulatory hurdles in international markets as well as
adverse weather conditions in the western United States. With these
issues now behind us and the right partnerships being put in place
we anticipate a strong return to growth in 2014 and beyond.
The Company's antimicrobial coatings revenue was $0.2 million,
no change from the previous year.
Gross margins, at 41%, improved from 2012, as the Company
started to benefit from scale efficiencies across both our Drinking
Water and Recreational Water businesses, as well as improved
margins due to sales mix and lower raw material costs in our
Recreational Water business. Operating expenses totaled $18.6
million, up from $16.6 million in 2012. The net loss for the year
was $12.4 million, essentially unchanged from 2012, which includes
the impact of non-cash costs related to share based compensation of
$0.6 million and $0.7 million in 2013 and 2012. During the second
half of 2013, the Company embarked on an even more aggressive cost
management effort with the goal of lowering spending by 15% in
2014. Management believes improved margins and our cost reduction
efforts should reduce cash consumption going forward.
At 31 December 2013, the Company had a total of $13.0 million in
cash, comprised of cash and cash equivalents ($1.8 million),
restricted cash ($1.9 million) and short-term investments ($9.3
million). The Company believes it has sufficient capital to fund
its plans for future growth and execute against its strategy.
Enquiries
HaloSource http://ir.halosource.com
Martin Coles, Chief Executive Officer +1 425 974 1991
James Thompson, Chief Financial Officer +1 425 974 1993
Buchanan
Charles Ryland/Clare Akhurst +44 207 466 5000
Liberum Capital (NOMAD)
Simon Atkinson/Richard Bootle +44 203 100 2222
HaloSource, Inc. and Subsidiaries
Consolidated Statements of Comprehensive
Loss
Years ended December 31, 2013 2012
US$000 US$000
(Unaudited) (Audited)
---------------------------------------------------- ---------------------- --------------------
Revenue - net $ 16,063 $ 13,271
Cost of goods sold 9,531 8,900
---------------------------------------------------- ---------------------- --------------------
Gross profit 6,532 4,371
Operating expenses
Research and development 2,656 2,541
Selling, general, and administrative 15,904 14,087
Total operating expenses 18,560 16,628
---------------------------------------------------- ---------------------- --------------------
Operating loss (12,028) (12,257)
---------------------------------------------------- ---------------------- --------------------
Other income (expense)
Other income (expense), net (27) 2
Interest income 128 61
Interest expense (178) (130)
Foreign exchange loss (315) (39)
---------------------------------------------------- ---------------------- --------------------
Total other expense (392) (106)
---------------------------------------------------- ---------------------- --------------------
Loss before income taxes (12,420) (12,363)
Income taxes (43) (38)
---------------------------------------------------- ---------------------- --------------------
Net loss (12,463) (12,401)
Other comprehensive income (Loss)
Unrealized loss on available-for-sale
investments (35) (2)
Foreign currency translation adjustments 104 15
---------------------------------------------------- ---------------------- --------------------
Comprehensive loss $ (12,394) $ (12,388)
---------------------------------------------------- ---------------------- --------------------
Net loss per share - basic and diluted $ (0.08) $ (0.14)
---------------------------------------------------- ---------------------- --------------------
Shares used to compute basic and diluted
loss per share (in 000s) 156,411 91,853
---------------------------------------------------- ---------------------- --------------------
HaloSource, Inc. and Subsidiaries
Consolidated Balance Sheets
As of December 31, 2013 2012
US$000 US$000
(Unaudited) (Audited)
-------------------------------------------------- ---------------------- --------------------
Assets
Current assets
Cash and cash equivalents $ 1,762 $ 15,635
Restricted cash 1,941 1,871
Short-term investments 9,314 9,329
Accounts receivable, net of allowance
for doubtful
accounts of $20 and $13, respectively 6,085 3,582
Inventories - net 3,626 3,702
Prepaid expenses and other current
assets 1,539 1,090
-------------------------------------------------- ---------------------- --------------------
Total current assets 24,267 35,209
Property and equipment - net 4,018 3,697
Goodwill 2,180 2,180
Other intangible assets - net 846 968
Deposits 276 264
-------------------------------------------------- ---------------------- --------------------
Total assets $ 31,587 $ 42,318
-------------------------------------------------- ---------------------- --------------------
Liabilities and stockholders' equity
Current liabilities
Accounts payable $ 2,549 $ 2,085
Accrued expenses and other current
liabilities 1,312 572
Salaries and benefits payable 603 493
Current portion of debt and capital
lease obligations 1,082 1,252
-------------------------------------------------- ---------------------- --------------------
Total current liabilities 5,546 4,402
Long-term portion of debt and capital
lease obligations 45 64
Deferred rent 1,167 1,172
Deferred tax liability 49 74
-------------------------------------------------- ---------------------- --------------------
Total liabilities 6,807 5,712
-------------------------------------------------- ---------------------- --------------------
Commitments and contingencies
Stockholders' equity
Common stock, no par value; 200,000,000
shares
authorized; 156,484,041 and 156,193,131
issued and
outstanding, respectively 130,665 130,097
Accumulated other comprehensive
income 73 4
Accumulated deficit (105,958) (93,495)
-------------------------------------------------- ---------------------- --------------------
Total stockholders' equity 24,780 36,606
-------------------------------------------------- ---------------------- --------------------
Total liabilities and stockholders'
equity $ 31,587 $ 42,318
-------------------------------------------------- ---------------------- --------------------
HaloSource, Inc. and Subsidiaries
Consolidated Statements of Cash
Flows
Years ended December 31, 2013 2012
US$000 US$000
(Unaudited) (Audited)
----------------------------------------------------- ---------------------- ---------------------
Operating activities
Net loss $ (12,463) $ (12,401)
Adjustments to reconcile net loss
to net cash used in operating activities:
Depreciation and amortization 1,085 1,094
Allowance for inventory, sales
returns and bad debts (8) (55)
Share-based compensation 568 665
Loss on disposal of property, equipment
and other assets 9 1
Realized losses on short-term investments 13 18
Deferred income taxes (25) 37
Changes in operating assets and
liabilities:
Accounts receivable (2,561) (1,020)
Inventories (21) 491
Prepaid expenses and other assets (514) (3)
Accounts payable 702 296
Accrued expenses and other liabilities 805 (96)
Salaries and benefits payable 109 (372)
Deferred rent (66) 177
----------------------------------------------------- ---------------------- ---------------------
Net cash used in operating activities (12,367) (11,168)
----------------------------------------------------- ---------------------- ---------------------
Cash flows from investing activities
Purchase of property and equipment (1,365) (991)
Purchase of short-term investments (8,122) (7,552)
Sales of short-term investments 8,090 8,500
Increase in restricted cash (73) (25)
----------------------------------------------------- ---------------------- ---------------------
Net cash used in investing activities (1,470) (68)
----------------------------------------------------- ---------------------- ---------------------
Cash flows from financing activities
Proceeds from common stock offering - 25,666
Issuance costs associated with
common stock offerings - (1,274)
Borrowings under long-term debt 89 1,240
Repayments of debt and capital
lease obligations (50) (111)
Proceeds from exercise of stock
options and warrants 1 100
----------------------------------------------------- ---------------------- ---------------------
Net cash provided by financing
activities 40 25,621
----------------------------------------------------- ---------------------- ---------------------
Effect of exchange rate changes
on cash (76) (15)
----------------------------------------------------- ---------------------- ---------------------
Net (decrease) increase in cash
and cash equivalents (13,873) 14,370
Cash and cash equivalents, beginning
of year 15,635 1,265
----------------------------------------------------- ---------------------- ---------------------
Cash and cash equivalents, end
of year $ 1,762 $ 15,635
----------------------------------------------------- ---------------------- ---------------------
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 2012 and 2013. The results for 31 December 2013 are
unaudited. Financial statements for the year ended 31 December 2013
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 2012 have
been reported on by the Independent Auditor. The Independent
Auditor's report on the financial statements for 2012 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 2013. The principal accounting policies adopted
are unchanged from those used in the preparation of the statutory
accounts for the period ended 31 December 2012. New standards,
amendments and interpretations to existing standards, which have
been adopted by the Group, have not been listed since they have no
material impact on the financial statements.
Note 2 - Litigation
In 2011, HaloSource was named as a defendant in a lawsuit,
captioned Molycorp Minerals, LLC ("Molycorp") v. HaloSource, Inc.,
in the United States District Court for the District of Colorado.
The complaint alleged that the Company breached certain provisions
contained in non-disclosure agreements entered into in both 2009
and 2010, made fraudulent representations in the 2010
non-disclosure agreement, and misappropriated confidential
information of the plaintiff. The plaintiff sought injunctions
enjoining the Company from the alleged breaches of contract and
control over certain patent applications, damages in an unspecified
amount, and a declaration of ownership by the plaintiff in certain
patent applications filed by the Company. During the year ended 31
December 2013 the Company and MolyCorp reached a mutually
beneficial agreement to settle the claims.
Other than the matter noted above, as of 31 December 2013 and
through to 7 March 2014, the date this press release was approved
by the Board of Directors for distribution, we were not involved in
any other material pending litigation, claims or assessments.
Note 3 - Reclassifications
Certain amounts in the prior period financial statements have
been reclassified for comparative purposes to conform to current
period presentation with no effect on the previously reported
results of operations.
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
220(th) 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 2013 unaudited preliminary results announcement was prepared
under U.S. GAAP and was approved for issue on 7 March 2014.
The Company anticipates its 2013 audited consolidated financial
statements and 2014 Annual Report will be available to shareholders
the week of 24 March 2014.
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.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR EAKDFFDPLEFF
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