Small Cap Updates & New Recommendations for May 17, 2014

This week we have updates on LiqTech International (LIQT) and Verisante Technology (VRS).

LiqTech International (LIQT – $2.05), the Danish clean technology company that manufactures state-of-the-art filtration products announced first quarter results for the period ending March 31, 2014.

Net sales for the quarter ending March 31, 2014 were $3,197,502 compared to $3,399,148 for the comparable period in 2013, representing a decrease of $201,646 or 5.9 percent. Net loss for the three-month period ending March 31, 2014 was $755,435 compared to a loss of $669,811 for the three-month period ended March 31, 2013.

LiqTech’s sales decline is mainly due to a reduction in Diesel Particulate Filter (DPF) sales in the US. These sales were down $368,000, or 19%, in the first quarter as compared to the prior year. DPF filters remove up to 99% of the particulate emitted by the diesel engine. The LiqTech DPF has found its way into engines both old and new and has been a major component in addressing “clean air zones” around the world, including cities in Europe the USA and Korea. Due to the financial crisis less filters are retrofitted to trucks and LiqTech’s results has been impacted by this the past several quarters.

The good news is that in a board meeting at the end of April, the California Air Resources Board (CARB) reaffirmed its commitment to air quality benefits originally envisioned by the CARB diesel truck and bus regulation roll-out. Finn Helmer, LiqTech’s Chief Executive Officer commented: “This is a very positive signal and we expect this to result in increasing orders for DPF filters this year”.

The Company has been able to make up some of the decline in Diesel Particulate Filter sales by increasing its sales of silicon carbide liquid membrane filters. They were 28% of in the first quarter of 2014 compared to last year’s first quarter. In fact, these were the highest quarterly sales of liquid membranes since the beginning of 2012.

Mr. Helmer added: “In the first quarter, we were pleased to see good sequential improvement in gross margin (nearly 18% in Q1 and adjusted for depreciation, the gross margin was nearly 32%) despite lower sales. The higher gross margin was due mainly to greater production efficiency. Also, in the first quarter we started to implement a new production process for liquid membranes that has resulted in improved yields and more uniform quality. This has also resulted in higher yields and 30%-40% lower cost. We are now able to double current production levels of liquid membranes with the same equipment.”

“We have seen growing interest in our liquid membrane filters in many market segments where we have delivered and installed test systems. In addition to the oil market, we have seen good interest in market areas such as: algae concentration, industrial waste water, pre-reverse osmosis filtration and scrubber water. In these market areas, we have customer tests underway that we expect to culminate in orders later this year. These are all market areas in which LiqTech liquid membrane filters have significant competitive advantages.”

Conclusion

LiqTech is a very interesting technology company as liquid membrane filter sales continue to gain traction in several key market segments.

Recently, LiqTech received a purchase order for approximately $300,000 for a prototype algae separation system based upon a new development in LiqTech silicon carbide liquid membrane technology. Saudi Arabia’s Ministry of Water and Electricity has officially announced that ceramic flat sheet membranes is the technology of choice for Ground Water applications. And many more tests with LiqTech’s membrane filters are currently being conducted around the world.

Also, current actions by CARB (California Air Resources Board) are expected to result in increasing orders for DPF filters this year. And future opportunities for the DPF continue as increasing legislation calls for significant reductions in diesel exhaust emissions especially in rapidly industrialized areas like China and South America.

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Verisante Technology (VRS – $0.15) reached another major milestone as it completed the development of the commercial prototype of the Core.

The prototype of the Core, which is based on the same platform technology as Verisante’s award winning Aura device for the detection of skin cancer, will be used to prepare for the Company’s application for Regulatory Approval in Canada, Europe, USA and China for the detection of lung cancer.

A clinical study on lung cancer using the Core technology has been completed and the investigators of the study are currently preparing a paper for publication. Previously published results show that the device can measure the difference between low grade and high grade dysplasia, as well as carcinoma in situ.

Core, for lung cancer detection, employs an endoscopic probe that can be used in bronchoscopy procedures to help analyze lesions for malignancy. A bronchoscopy is normally performed by a doctor under local anaesthetic to look for abnormal tissue and to take tissue samples, (or biopsies) if necessary. The Core™ probe enters through the biopsy channel of the bronchoscope and measures the Raman spectra of the abnormal tissue, providing immediate feedback of the results of the spectral measurement to the doctor. The probe is an endoscopic accessory that will fit with all major brands of endoscopes. It will also be equipped with a consumable sheath to be discarded after each procedure.

In the United States, more than 500,000 bronchoscopies are performed annually to diagnose lung disease, and the American Cancer Society estimates the number of new cases of lung cancer diagnosed will be more than 224,000 in 2014.

In addition to the USA, Verisante anticipates one of the other major markets for Core for lung cancer will be China, where bronchoscopies are already widely performed. According to the World Health Organization’s World Cancer Report 2014, 1.59 million people died from lung cancer globally in 2012, and China, with approximately 20 percent of the world’s population, accounted for more than one third of those deaths.

Lung cancer is the leading cause of cancer related deaths worldwide in both men and women, and has recently surpassed heart disease as the leading cause of smoking-related mortality. More people die from lung cancer than breast cancer, colorectal cancer and prostate cancer combined. Profile Page

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