Net income for the fourth quarter of 2007 was $3,390,000 compared with a loss of $843,000 in 2006. Earnings per share on both a basic and diluted basis was $0.11 compared to $(0.04) in 2006. Total revenue for the quarter was $8,452,000 compared with $2,873,000 in 2006. Fourth quarter results were significant as the first phase of a large international project was completed.

Pure has experienced an increase in commercial activity in all sectors of our business. Having secured our capital base through a $15 million financing in April of 2007, and following the sale of our non-core video analytics division, we are well positioned to grow our business in the environmental technology and infrastructure management sectors.

Our SoundPrint AFO optical-fibre distributed sensing technology was a major contributor to revenues for the year, as a result of the installation of a number of systems for pipeline agencies in the US and the shipping of the first stage of a large order for the Great Man-Made River Authority in Libya. In Canada, we completed the first phase of an inspection and monitoring program for the City of Montreal using our P-Wave and AFO technologies. The results generated by our efforts in Montreal initiated emergency repairs on a critical water transmission main, and may have thus prevented a catastrophic failure on a major thoroughfare.

Following commercialization of the SmartBall leak detection system for water pipelines in the second half of the year, we are beginning to generate meaningful revenues and we have embarked on a program of international demonstration projects, which we expect will increase the market for the technology. In the latter part of 2007, we formed a new oil and gas division to exploit opportunities for SmartBall and AFO in leak detection and pipeline integrity monitoring.

In the bridge sector, we installed a SoundPrint system on the Veterans Memorial Bridge in Port Arthur, Texas, the second project we have completed for Texas Department of Transportation, and we supplied another system for a post-tensioned bridge in the UK. We also moved to expand our business in the bridge sector by starting a new specialty bridge engineering division, Bridge Engineering Solutions, to exploit opportunities in inspection, assessment and monitoring resulting from increased scrutiny of these structures following the tragic bridge failure in Minneapolis, Minnesota.

Financial Overview

Revenue for the year increased 70% during the year. In September 2007, the Company finalized its largest contract ever with the Great Man-Made River Authority (GMRA) in Libya. This is a multi-year contract to provide SoundPrint AFO systems for long term pipeline monitoring and technical support. During the last quarter, the first shipment for this contract was completed and resulted in the recognition of $7.1 million in revenue.

As in 2006, the Company continues to diversify its product line through the introduction of new technologies. SoundPrint AFO was introduced in 2005 and has become the largest product line for the Company. In the latter part of 2007, SmartBall for water was introduced on a commercial basis. While many projects were done on a demonstration basis, this product resulted in revenues of approximately $275,000.

As a percentage of sales, gross margin for 2007 was 65% versus 57% in 2006 (59% in 2005 and 64% in 2004). Gross margins were targeted to increase in 2007 to over 60% and this was accomplished. The increase in monitoring and technical support revenue assisted in raising gross margin as this type of revenue has low costs associated with it. With the increased experience with installations of SoundPrint AFO, the gross margins for these projects have also increased by reducing unanticipated costs that were responsible for the margin decrease in 2006.

Marketing and promotion expenses have increased 53% in 2007 with an increase of 22% in the prior year. Late in 2006, the Company opened an office in Benghazi, Libya to support the contract with GMRA and further pursue opportunities in the Middle East and Africa. In the last quarter of 2007, a new division was created to market and further develop the oil and gas SmartBall. A general manager was hired and is currently pursuing opportunities for 2008. Resources in the US were also added to market SmartBall for the water and wastewater industries.

General and administration expenses decreased 6% over 2006 with a 46% increase from 2005 to 2006. Staffing was increased in 2006 as revenue was anticipated to grow at a substantial rate. Engineering staff require training time to ensure that project operations are effectively managed. Staffing levels remained consistent throughout 2007.

Research and development expenditures for the year were consistent with 2006, and an increase from 2005 to 2006 of 13% was experienced. These expenses can fluctuate from year to year depending upon whether projects underway meet our capitalization policy described in note 1 of the financial statements. In 2007, SmartBall and SoundPrint AFO development costs were capitalized. Staffing levels were increased to meet the demands of current product lines, the further development of SmartBall for oil and gas, and for new research projects for the oil and gas markets.

Depreciation and amortization in 2007 fell slightly from 2006 but rose in relation to 2005. Patent amortization accounted for the slight decrease as some assets are reaching full amortization and additions are proportionately less.

A large portion of the Company's activities are generated through its wholly-owned U.S. subsidiaries. Upon consolidation, the Company is subject to foreign exchange gains or losses due to the use of the temporal method to translate the accounts of the subsidiaries. These gains or losses are recognized in current year earnings or losses. In 2007, this accounted for the majority of the loss on foreign exchange, and in 2006 accounted for 40% of the loss.

In addition, a large portion of international contracts are or were denominated in U.S. dollars or Euros. Accordingly, the Company is susceptible to foreign exchange fluctuations. The Company does not currently engage in currency hedging activities.

Pure's working capital is strong and at December 31, 2007 was $25,903,000 including $16,452,000 in cash and cash equivalents. The Company currently has no debt.

The Company currently has a confirmed order backlog in excess of $12 million plus annualized recurring revenues under contract of over $2.5 million. In addition, Pure has received verbal confirmation of awards in excess of $1.4 subject to the completion of the normal contract review process and final documentation. -- www.cnxmarketlink.com