Latest Results

Unaudited Preliminary Results for the year ended 31 December 2009

TyraTech Inc. (AIM: TYR), a leading independent novel pesticide company for human, animal and environmental health, today announces its unaudited preliminary results for the year ended 31 December 2009.

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Operational Highlights

Financial Highlights

Post Period Highlights

Commenting on these results, Alan Reade, the Executive Chairman of TyraTech,  said:

"2009 has been a year of development and we now have a solid platform for future growth and revenue generation. We are confident of our ability to take this technology to market with products that our partners can commercialise. Furthermore, we are committed to leveraging these products into other markets and creating significant shareholder value over the coming years.''

 

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Chairman’s Statement and Operational Review

 The progress of our technology platform continues to reinforce our confidence in our ability to quickly and effectively develop new, potent and safe products for our core markets:

These markets will be accessed by focusing on key partnerships, such as those with Terminix, Kraft Foods and Arysta.

During 2009, we were able, for the first time, to demonstrate the value of our technology in a commercial setting.  This was with the successful launch of Terminix SafeShield™ through our partnership with Terminix International, the worlds largest professional pest control company, for the consumer markets and Terminix Natural Pest Control Contact Insecticide and Terminix Natural Drain Fly Killer being sold and distributed into institutional, commercial, and government markets.  We are pleased with the success of the commercialization of these products and believe it will serve to reinforce and broaden our partnership in the coming year and thereafter.

Kraft continues to be a highly valuable and committed partner. The partnership has made important and very positive technical strides, which not only reinforces our confidence in the human uses of our platform, but also confirms our belief that there is future value and opportunity for this technology in other markets, such as animal functional food.

In the agricultural market our partnership with Arysta has produced the first crop protection product, SHOOTER, which will be launched during 2010. This is expected to lead to a range of products suitable for a variety of crops, which should create further commercialization opportunities outside of North America.

TyraChem is progressing with product testing of our active ingredients incorporated into plastics in final testing.

In the second half of 2009 we signed an agreement with Clarke Mosquito Control, to develop products to control mosquitoes. The partnership has already resulted in an innovative product that would be suitable for use in environmentally sensitive areas and shows excellent activity against adult mosquitoes.

We are in the advanced stages of developing a new and potent product for the equine market. This product will protect horses and riders from flying biting insects. During the first quarter of 2010 we expect to conclude a commercial arrangement with a specialist equine supplier in North America.

As we move to a more commercial environment we will continue to focus on our core markets and partnerships. Our knowledge base now gives us the opportunity to articulate with much more precision the commercial opportunities and how we should prioritise them.

In this period of expansion there will be a focus on both cash and cost management. During the second half of the year there were substantial reductions in costs and this will remain a focus into the coming years. At the end of December 2009 we had a cash balance of $1.3 million. This is lower than we would like and though we believe that this could be sufficient to fund the business through 2010 and beyond, the margin for slippage would be limited and the potential of the business may not be fully realized. We are therefore considering   a number of other options available to us in order to strengthen our balance sheet or working capital position. As announced in our Interim statement in September 2009, Molecular Securities’ claim for $2.7 million is still being contested in court and we expect that this will be resolved in 2010, although the precise timeframe remains uncertain. We continue to believe that the claim has no merit and we are confident that TyraTech will prevail.  It does however remain a significant contingency in the context of the Group’s current cash balance.

Board Changes

In January of this year we announced that I had assumed the role of Executive Chairman taking charge of the day to day affairs of TyraTech, as a result of Dr. Douglas Armstrong stepping down as Chief Executive Officer.

Summary and Outlook

We are confident of TyraTech’s technology and of our ability to  develop further products that our partners can commercialise. We are also committed to leveraging these products into other markets and to create significant shareholder value over the coming years.

Although difficult, 2009 has been a year of significant progress and we now have a solid platform for future growth and revenue generation. Our strong and experienced team is focused on medium term profitability. To that end I would like to thank all our employees for their efforts throughout the year as we look forward to an exciting 2010.

Alan Reade
Executive Chairman
February 24, 2010

 

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Financial Review

Revenues
The Group continued to grow its product revenues as we mature as a business. Overall revenues remained largely flat for the year at US$5.9 million (2008: US$5.9 million). However, product revenues grew to US$2.9 million (2008: US$1.0 million) the majority of which came from Terminix and also included Sustainable Solutions product revenues US$0.3 million (2008: US$(0.1) million). Collaborative revenue reduced to US$2.1 million (2008: US$4.9 million) with the impact of the revised Kraft contract. These changes meant that amounts shown as revenue for meeting previous milestones  are treated as a cost reduction for all subsequent milestones; during 2009 the amount treated as a cost recovery for work on the third milestone was US$1.0 million. The license revenues of US$0.8 million (2008: US$ nil) came primarily from contracts such as that with Arysta.

Cost of Sales and Gross Profit

Cost of sales for the year was US$5.1 million (2008: US$4.4 million). This included project costs for collaborative revenue projects of US$1.9 million (2008: US$2.7 million), cost of insecticide products of  US$1.2 million, (2008: US$1.0 million), and cost of sales of WasteSolver of US$0.3 million (2008 of US$0.1 million). We have included an inventory write-off of US$1.6 million (2008: US$0.9 million) largely in Sustainable Solutions which we will seek to recover in 2010.

Operating Expenses

Overall, operating expenses for the year have reduced by a third to US$13.7 million (2008: US$20.4 million). The expenses for the year include non-cash stock compensation to employees and non-employees of US$3.3million (2008: US$4.1 million), depreciation and amortization of US$0.5 million (2008: US$0.5million) and provision for doubtful debts of US$ nil (2008: US$0.7 million). The net cash spent on operating expenses is continuing to decline and the costs for the second half of 2009 include US$0.6 million in one off severance costs. The table below analyses the net cash operating expense by department for each six month period over the last two years.

    Six months ended
    31 December 2009 30 June 2009 31 December 2008 30 June 2008
General and Administrative $ 2.3m 1.4m 3.5m 3.1m
Business development   0.9m 1.8m 2.1m 2.4m
Research and product development   1.2m 2.3m 1.9m 2.8m
Total $ 4.4m 5.5m 7.5m 8.3m

Other Income and Costs

Finance income decreased to US$0.15 thousand (2008: US$422 thousand) earned from reduced funds on deposit and declining interest rates in the year which reduced to a weighted average of 0.04% (2008: 3.31%). The interest expense was paid on a capitalized equip­ment lease and remains materially unchanged at US$ 3 thousand (2008: US$5 thousand).

Changes in the fair value of warrants was insignificant in the year (2008: US$(1.0) million) and relates to warrants issued to the underwriters of the IPO which were impacted by the significant reduc­tion in the stock price during 2008.

Balance Sheet

Non-current assets reduced by US$0.4 million (2008: US$0.1 million). We acquired a minimal amount of non-current assets of US$34 thousand (2008: US$405 thousand)  which was largely made up of information technology infrastructure (2008: US$0.1 million); in 2008 we also spent US$0.3 million for completion of the fit-out of new offices and laboratories to accommodate the expansion of our staff.  These acquisitions were offset by a depreciation charge of US$0.5 million (2008: US$0.5 million).

Current assets show a significant reduction to US$3.3 million (2008: US$12.2 million). Cash and cash equivalents reduced to US$1.3 million (2008: US$9.2 million) from funding the operating loss for the year and increases in working capital. Trade and other receivables increased to US$0.9 million (2008: US$0.6 million) and inventories reduced to US$0.9 million (2008: US$1.7 million) largely from a write off of Sustainable Solutions inventory which we are seeking to recover in 2010. Prepayments and short-term deposits reduced to US$0.3 million (2008: US$0.8 million) due largely to prepayments in Sustainable Solutions for inventory in 2008 which was acquired in 2009.

Total liabilities increased to US$3.2 million (2008: US$2.9 million). The accounts payable and accrued liabilities have increased to US$2.6 million (2008: US$1.7 million) largely from a provision for severance costs at the end of 2009 of US$0.5 million. The deferred revenue has reduced by over 50% to US$0.6 million (2008: US$1.2 million) largely due to changes in the Kraft contract, the timing and size of milestone payments and when they are recognized as revenue. The deferred revenue outstanding at the end of 2009 is expected to be recorded as revenue during 2010. The warrant liability relating to warrants issued to the underwriters of the IPO has continued to have a negligible value. A long term liability has been recorded for our obligations to fund half of TyraChem’s costs which have been funded by our partner, these will be paid out of future distributions. In addition there is an amount of US$0.1 million for the amount of severance liabilities recorded at the end of the year which will be paid in 2011.

There were no changes in the Company’s issued shares during the year.

Liquidity and Cash Flow

Net loss before and after tax for the year was US$13.0 million (2008: US$17.4 million) including non-cash expenses such as amortization of employee stock awards of US$3.3 million (2008: US$4.1 million), depreciation and amortization of US$0.5 million (2008: US$0.5 million), write-off of inventory US$1.6 million (2008: US$0.7 million), doubtful debt provisions of  US$ nil (2008: US$0.9 million) and changes in the value of existing warrants of US$(0.0) million (2008: US$(1.0) million). In addition the accounting for our joint venture, TyraChem, has an adjustment of US$18 thousand (2008: nil). The net increase in accounts receivable, prepaid expenses and inventory of US$0.6 million (2008: US$3.1 million) is due largely to Sustainable Solutions. There was an increase in payables and accruals of US$1.0 million (2008: reduction US$2.1 million) mostly from severance provisions booked at the end of the year. All this together has resulted in a net cash outflow from oper­ating activities in the year of US$7.9 million (2008: US$17.9 million).

Cash invested in property, plant and equipment (PP&E) was negligible in the year (2008: US$0.4million).

During 2008, the Group received treasury stock in settlement of a loan of US$0.5 million, which was made to fund an unanticipated tax liability of Dr. Armstrong resulting from the conver­sion of units in TyraTech LLC to common shares in TyraTech, Inc

Cash and cash equivalents were US$1.3 million at the end of 2009 (2008: US$9.2 million). We invest our cash resources in deposits with banks with the highest credit ratings, putting security before absolute levels of return.

In November 2008, Molecular Securities, Inc. (Molecular) filed a complaint against the Company asserting claims for breach of contract and quantum merit. Molecular alleges that it is owed US$ 2.8 million for services that it allegedly provided to TyraTech plus interest, attorneys' fees and costs. TyraTech strongly refutes this claim and is vigorously defending itself in the lawsuit. After taking advice on the merits and demerits of the lawsuit the Company does not intend to provide any liability for the lawsuit. Motions in connection with the lawsuit are expected to be heard by the New York Court during the course of this financial year. The precise timing of any final determination of the lawsuit remains uncertain. Whilst the Directors believe that the Company will successfully defend itself in the lawsuit there can be no assurance that this will be the case. If Molecular were to prevail in some or all of its claim against TyraTech there could be a material adverse effect upon the Group's working capital which could in turn significantly delay the development of the Group's business and the Company achieving profitability.

Currency Effects

The Group has no significant overseas cur­rency exposures and does not use financial derivatives to manage currency risk

Keith Bigsby
Chief Financial Officer
February 24, 2010

 

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Unaudited Consolidated Balance Sheets
December 31, 2009 and 2008

  2009 2008
Assets    
Current assets    
  Cash and cash equivalents $1,265,373  $9,175,712
  Accounts receivable 885,749    559,788
  Inventory 933,470    1,696,252
  Prepaid expenses 265,342       796,453
    Total current assets  3,349,934  12,228,205
Property and equipment, net of accumulated depreciation    834,636    1,254,571
    Total assets $4,184,570 $13,482,776
     
Liabilities and Shareholders’ Equity    
Current liabilities    
  Accounts payable
Accrued liabilities		  $1,317,429
1,236,081		  $741,659
   935,797
  Deferred revenue 562,500 1,198,992
  Current installments of obligation under a capital lease      16,601      20,339
  Liability for warrants 6           618
Total current liabilities 3,132,617 2,897,405
Other Long term liabilities 114,381 16,601
Total liabilities 3,246,998 2,914,006
Shareholders’ equity    
  Common stock, $0.001 par, authorised and issued and outstanding 22 million      22,000      22,000
  Additional paid-in capital 63,166,674 59,874,782
  Retained deficit (62,246,907) (49,323,817)
  Treasury stock of 70,622 (2007: 129,120) common stock , $0.001 par.         (4,195)         (4,195)
    Total shareholders’ equity 937,572 10,568,770
    Total liabilities and shareholders’ equity $4,184,570 $13,482,776

See accompanying notes to consolidated financial statements

 

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Unaudited Consolidated Statements of Operations
December 31, 2009 and 2008


    2009 2008
Revenues:      
  Product sales     $2,901,622 $1,048,583
  License and royalty revenue     846,875 -
  Collaborative revenue     2,110,317 4,890,288
      Net revenue       5,858,814 5,938,871
Costs and expenses related to product sales and collaboration revenue 5,084,378 4,409,089
Gross profit   774,436 1,529,782
Costs and expenses:      
  General and administrative     7,427,044 9,433,492
  Business and development     2,916,522 5,682,795
  Research and technical development     3,395,175 5,253,338
      Total cost and expenses       13,738,741 20,369,625
      Loss from operations       (12,964,305) (18,839,843)
Other (income) expense:      
  Interest income     (15,271) (442,299)
  Interest/other expense     3,138 4,579
  Change in fair value of warrant liabilities     (612) (997,312)
      Total other (income) expense       (12,745) (1,435,032)
      Loss before income taxes       (12,951,560) (17,404,811)
Income taxes   - -
      Net loss before controlling interest       (12,951,560) (17,404,811)
Less : Net loss on non-controlling interest   28,468 -
      Net loss attributable to TyraTech Inc.       $(12,923,092) $(17,404,811)
Net loss per common share      
  Basic and diluted     $(0.60) $(0.84)
Weighted average number of common shares      
  Basic and diluted     21,492,178 20,702,527

See accompanying notes to consolidated financial statements.

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Unaudited Consolidated Statements of Shareholders' Equity
Years ended December 31, 2009 and 2008

    Common stock Additional paid-in capital Retained earnings Treasury Stock Total stockholders’ equity
Balances as of December 31, 2007 $22,000 $55,818,617 $(31,919,006) $(665) $23,920,946
  Exchange of  note for treasury
stock                                             		 

-		  

-		  

-		  

(497,297)		  

(497,297)
  Proceeds from sale of treasury stock - (34,666) - 493,767 459,101
  Stock based compensation - 4,090,831 - - 4,090,831
  Net loss - - (17,404,811) - (17,404,811)
Balances as of December 31, 2008 22,000 59,874,782 (49,323,817) (4,195) 10,568,770
  Non-controlling interest - (10,638) 28,470 - 17,832
  Stock based compensation - 3,302,530 - - 3,302,530
  Net loss - - (12,951,560) - (12,951,560)
Balances as of December 31, 2009 $22,000 $63,166,674 $(62,246,907) $(4,195) $937,572

See accompanying notes to consolidated financial statements.

 

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Unaudited Consolidated Statements of Cash Flows
December 31, 2009 and 2008

  2009 2008
Cash flows from operating activities: $(12,951,560) $(17,404,811)
  Net loss    
  Adjustments to reconcile net loss to net cash used in operating activities    
    Depreciation and amortisation      453,595      479,618
    Write-off of inventory      1,575,000      712,293
    Provision for a doubtful receivable - 878,697
    Change in fair value of warrants    (612)    (997,312)
    Amortisation of stock awards   3,302,530   4,090,831
    Effect of non-controlling interest 17,832 -
  Changes in operating assets and liabilities    
    Accounts receivable     (325,961)     (952,895)
    Inventory   (662,220)   (1,643,438)
    Prepaid expenses      381,111      (513,425)
    Accounts payable and accrued liabilities   990,437   (2,127,515)
    Deferred revenues      (636,492)      (406,674)
  Net cash used in operating activities (7,856,340) (17,884,631)
Cash flows used for investing activities:    
  Purchase of property and equipment
Loan to Director		     (33,660)
- 		(404,626)
(497,297)
  Net cash used in investing activities     (33,660) (901,923)
Cash flows from financing activities:    
  Payments made under a capital lease     (20,339)     (18,460)
  Net proceeds from sale of common stock     -     459,101
  Net cash (used in) provided by financing activities      (20,339) 440,641
Net (decrease) increase in cash (7,910,339) (18,345,913)
Cash, beginning of year  9,175,712  27,521,625
Cash, end of year  $1,265,373 $9,175,712
Supplemental disclosures    
  Cash paid for interest        $ 3,138 $4,579
  Cash paid for income taxes                 $ - $ -
  Non-cash investing and financing activities
The Company received 59,502 shares of treasury stock in settlement of a loan with a Director		  

$-		  

$497,297

 

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Notes


The notes to the results are available in the PDF download.

 

Page last up-dated: 24 February 2010

 

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