Pure Technologies Announces Second Quarter Results

Pure's year-to-date revenue and income of $11,420,000 and $2,114,000 respectively are significantly higher than for the corresponding period in 2007 which was $4,129,000 for total revenue and a net loss of $259,000 from continuing operations.

During the quarter, Pure finalized the acquisition of Price Brothers (UK) Ltd., a U.K.-based pipe engineering consultancy. For the quarter, $907,000 of revenue and $177,000 of income were recognized from PBUK. Integration of the companies is progressing well and together we are pursuing additional business opportunities in Libya. We also completed commissioning of a SoundPrint AFO fibre-optic monitoring in a wastewater pipeline in Muskegon, Michigan, the first such application in a wastewater line. This is an important development that will allow us to pursue new opportunities in the sector.

Also during the quarter, Pure generated approximately $400,000 in revenues from our SmartBall leak detection system in the water and wastewater sectors, completing projects in Florida, Hawaii and Denver. In the oil and gas sector, we undertook a successful field trial for a major North American mid-stream pipeline operator.

We continue to invest heavily in marketing and business development in the water and oil and gas pipeline sectors, with an increasing emphasis on international markets. In June, we hosted a major international workshop on pipeline assessment and management attended by delegates from nine countries representing water agencies, oil & gas pipeline operators and consultants. We have attended a number of international conferences and exhibitions, and we have successfully completed SmartBall demonstrations in the UK and, subsequent to quarter end, in Malaysia and Brazil.

Financial Overview

Product sales revenue increased by 175% in the second quarter of 2008 compared to 2007. During the quarter, the first wastewater AFO system was successfully developed, installed and commissioned at Muskegon, Michigan. Two major bridge projects were completed; a SoundPrint monitoring system installation on the Luling Bridge in Louisiana and a Cablescan project in Pennsylvania. These three major projects, along with inspection services and the revenue from PBUK, accounted for the significant increase in revenue.

Year to date product sales revenue has increased 190% from the prior year. The increased activity in the second quarter, along with the completion of phase 1 and 2 of the Great Man-Made River Authority (GMRA) project in Libya during the first quarter, resulted in the year to date increase.

Monitoring revenue increased over the second quarter of 2007 by 188%. During the quarter, the recurring technical support revenue from the GMRA project began to be recognized. The ongoing AFO projects along with the GMRA project resulted in the increase for the quarter and the 94% increase year to date 2008 from 2007.

Gross margins were 60% compared to 64% in quarter 2 of 2007. Year to date gross margins are 64% for 2008 and 69% for 2007. The Company targets a 60% gross margin and this gross margin can fluctuate with the product mix of its technologies.

Marketing and promotion expense for the quarter increased by 120% and 100% year to date over 2007. During this quarter, a workshop was held in Calgary bringing together customers from across the globe to hear presentations on current infrastructure issues. AFO and SmartBall demonstrations were conducted, and an oil and gas seminar was also held to introduce the Company's technologies to the hydrocarbon market. We continue to promote our products on the international market through participation in conferences worldwide in both the water and wastewater industries and the oil and gas sector. As a result of these initiatives, demonstrations of the SmartBall were completed in Los Angeles, Atlanta and the United Kingdom. Several others demonstrations are planned for quarter 3 and 4 including Malaysia, Mexico, South America and Libya.

General and administrative expenses increased 124% in the quarter from 2007. The majority of this increase is due to the acquisition of PBUK. Other than the direct cost of sales, all other expenses are categorized as general and administrative. The year to date increase of 71% represents the increase from PBUK as well as the additional staff hired in the first quarter.

Research and development expenses increased 188% in the quarter from 2007 and 259% for the year. Additional staff was added in the latter half of 2007. 2007 projects related mainly to the further development of SmartBall. These costs were capitalized over the course of 2007 based on the Company's accounting policy for development expenses. For 2008, the work within this department has been focused on new product research and is not capitalized.

Depreciation and amortization for 2008 increased by 38% compared to the first quarter of 2007 and 34% for the year. The rise in depreciation and amortization expense reflects capitalization of development costs for AFO systems and SmartBall, particularly the costs capitalized in 2007.

Operating expenses have increased 116% for the quarter and 85% for the year while revenues have risen by 177% both for the quarter and year to date. As indicated in our 2007 prospectus financing, the Company anticipated increasing expenses in both marketing and research and development through new staff and market initiatives centered largely on SmartBall. From the development work completed in 2007, these initiatives are now materializing and are expected to continue throughout 2008 with the end result of additional revenues. The acquisition of PBUK has added significant revenues along with additional G&A expenses.

The Company's cash balance at June 30, 2008 was $9,905,000 compared to $16,452,000 at December 31, 2007. This decrease is partially due to acquisition of PBUK and purchase of property and equipment and partially due to cash required to service the contracts completed in the first half of the year. With this decrease in cash came an increase in receivables of $7,700,000. Payments of $7,857,000 were received subsequent to quarter end with a significant portion of this reflecting payments related to GMRA.

Revenue generation continues to grow. Marketing efforts, on an international basis, are expected to develop into revenue producing projects within the latter half of the year. Focused efforts on SmartBall within North America have provided numerous projects including both water and wastewater applications. The oil and gas industry efforts are gaining traction and several pilot projects are scheduled over the next few months. Current confirmed backlog is in excess of $10,900,000. Pure has also received verbal confirmation of projects in excess of $1,400,000 which are subject to the normal contract review process and final documentation. Annualized monitoring and technical support revenue under contract is in excess of $2,900,000. -- www.cnxmarketlink.com