Interim Results

RNS Number : 4767T

TyraTech, Inc.

29 September 2010

 

 

 

For Immediate Release

29 September 2010

 

 

 

Interim Results for the six months ended 30 June 2010

 

TyraTech Inc. AIM: (TYR), a leading independent eco-technology company developing novel pesticides for human, animal and environmental health, today announces its interim results for the six month period ended 30 June 2010.

 

Financial Highlights:

 

·; A successful US$2.8 million (net) placing through the issue of 24,443,888 shares of common stock;

·; Net revenues from continuing operations of US$2.7 million (2009: US$3.0 million), slightly down due to a partial order which was shipped after the half year;

·; Overall operating expenses from continued operations reduced 45% to US$3.8 million (2009: US$6.9 million);

·; Net loss before and after taxes including discontinued operations was US$3.1 million for the first half of 2010, (2009: US$6.2 million net loss) and

·; Cash and cash equivalents of US$1.5 million, US$ 3.3 million at 30 June 2009, and US$1.3 million at 31 December 2009.

 

Operational Highlights:

 

·; Continued expansion of TyraTech's Strategic Business Relationship Agreement with pest control market leader, Terminix, to expand coverage of development and commercialization of co-branded products for the US commercial and institutional market segments;

·; First order of TyraTech Insecticide Dust was received from Terminix;

·; More than 300,000 units of SafeShield shipped to Terminix by the end of August, 2010 and Terminix is expanding the marketing and sales programs for this product;

·; Sustainable Solutions business discontinued during this period.

 

On Outlook, Alan Reade, Chairman said:

"Our target in the latter half of 2010 and into 2011 is to be cash positive and to continue to improve our balance sheet in such a way as to take full advantage of the growth opportunities our new products will provide. Our strategic focus will remain firmly in the area of functional foods and household and commercial pest control."

 

 

  

For further information:

TyraTech Inc.
Alan Reade, Chief Executive Officer	+1 (321) 409 7403
www.tyratech.com
Nomura Code Securities
Richard Potts
www.nomuracode.com	+44 (0)20 7776 1200
Buchanan Communications
Lisa Baderoon/Jessica Fontaine	+44 (0) 20 7466 5000
www.buchanan.uk.com

 

Executive Chairman's Statement

 

 

We entered 2010 under very difficult circumstances and our priority has been to ensure that we create a stable and sustainable business going forward. We identified three main priorities:

 

1. increase the focus on cost control and ensure that every dollar of spend contributed to the immediate objectives and priorities of the business;

2. ensure a company wide focus on continued support of our partnerships with a particular emphasis on those with Kraft (functional food) and Terminix (domestic and commerical pest control);

3. strengthen our balance sheet, particularly the cash position.

I want to first say how proud I am of the TyraTech team as they have demonstrated a clear understanding of the challenges we faced at the beginning of the year and have worked tirelessly to ensure that all our challenges were met. This is evident from the massive reduction in operating cash expense from $5.5 million in the first half of 2009, down to $3.1 million in the half year to 30 June 2010.

 

Our two key projects with Kraft and Terminix have progressed very well. Both are well on track and moving on the timelines we set. The distribution of SafeShield by Terminix continues to be successful and the indications and forecasts we are receiving for 2011 are most encouraging. New product development continues to be an area of success and we are very excited about the new product opportunities being created.

 

As I mentioned in my comments on the 2009 results we now have a very solid platform on which to build. However the challenge of expanding a new business in a cash efficient/positive way remains difficult and requires our constant attention. We were able to improve our balance sheet in May with a fully subscribed share issue resulting in the addition of $2.8 million available working capital. This, of itself, would not be sufficient to secure the requirements of the Company without further growth and new agreements, but we remain confident that, with current cash levels and expected future product sales in additition to funding from prospective agreements, the Company can meet its working capital needs for the remainder of this year and through 2011.

 

The claim by Molecular Securities for $2.8 million, as detailed in Note 9, is still being contested in court, but we now expect that the court hearing is unlikely to be before the second half of 2011, although the precise timeframe remains uncertain. We continue to believe that the claim has no merit, but it remains a significant contingency in the context of the Company's cash resources.

 

Board Changes:

As reported earlier this year, Dr Geoffrey Vernon and Dr Ken Noonan resigned as a non-executive Directors . In August we also reported that Keith Bigsby had resigned as Chief Financial Officer and director. I would like to take this opportunity of thanking all three of them for their contribution.

 

In July Jim Hills joined the Board as a non-executive Director, bringing invaluable experience in consumer marketing and brand management.

 

Summary & Outlook:

Our target in the latter half of 2010 and into 2011 is to be cash positive and to continue to improve our balance sheet in such a way as to take full advantage of the growth opportunities our new products will provide. Our strategic focus will remain firmly in the area of functional foods and household and commercial pest control.

 

 

 

Alan Reade

Executive Chairman.

29 September 2010

 

 

 

 

 

Financial Review

 

Revenue

Revenue for the six month period from continuing operations was US$2.7 million (2009: US$3.0 million). Invoices raised in the period ended June 30, 2010 were slightly ahead of the corresponding period at US$2.4 million (2009 US$2.0 million), the difference in revenue being due to a lower release from deferred revenue. Collaborative revenue totaled US$1.3 million (2009: US$1.3 million). The lower product sales in the first half year of US$ 1.4 million (2009: US$ 1.7 million) is due to the final part of an order being shipped after the half-year end.

 

Cost of sales and gross profit

The cost of material and manufacturing costs for product sales was US$0.9 million (2009: US$0.9 million) and costs for collaborative undertakings were US$1.2 million (2009: US$0.9 million). Collaborative costs from the Kraft Project are offset by US$1.3 million of collaborative revenue resulting in 13% gross profit margin (2009: 30% gross margin). The overall gross profit for the six month period ended June 30, 2010 was US$0.7 million (2009: US$1.2 million). As above, the reduction was due to the final part of an order being shipped after the half-year end, together with a lower margin on collaborative revenue.

 

Operating expenses

Overall operating expenses from continuing operations reduced by 45% for the six month period to US$3.8 million (2009: US$6.9 million) as the Company continued its cost containment efforts. The overall expense for the six months included non-cash compensation relating to founder share grants and options of US$0.6 million (2009: US$1.7 million) and depreciation of US$0.1 million (2009: US$0.3 million). The reduction in stock compensation during the first half of 2010 resulted primarily from staff reductions, which included senior and executive personnel with large stock or option grants. The overall gross cash spent on operating expenses was reduced to US$3.1 million (2009 US$5.5 million) for the six month period. This was driven by a decrease in salary expenses (US$1.2 million), the average headcount of full time equivalents for the first six months of 2010 decreased to 18 (2009: 36), decreases in legal and other subcontractor expenses (US$0.8 million), and decreases in travel and entertainment expenses (US$0.2 million).

 

Detailed in the chart below are the changes in cash operating expenses for the most recent three six month periods from 1 January 2009 through 30 June 2010. The Company's focus in containing cash operating expenses is demonstrated in these results, particularly during the most recent half year ended 30 June 2010.

Cash Operating Expenses (including discontinued operations)
		Six months ended 30 June 2010	Six months ended 31 December 2009	Six months ended 30 June 2009
General and administrative	$	1.3m	$ 2.4m	$ 1.4m
Business development		0.3m	1.0m	1.8m
Research and technical development		1.5m	1.5m	2.3m
	$	3.1m	$ 4.9m	$ 5.5m

 

Balance Sheet

Non-current assets decreased by US$0.3 million to US$0.7 million (2009 US$1.0 million) due to depreciation and the sale of surplus fixed assets. Cash and cash equivalents were US$1.5 million at June 30, 2010 (2009: US$3.3 million). A proportion of the $2.8 million net proceeds of the share issue was used in reducing accounts payables from December 31, 2009 levels. Trade and other receivables decreased to US$0.1 million (2009: US$0.7 million) and inventory reduced to US$0.2 million (2009: US$0.9 million) as a result of the Company's December 31, 2009 inventory write down, and much tighter management of inventories generally. Assets related to discontinued operations were US$33,323 (2009: US$1.8 million) As a result, current assets decreased by US$5.0 million to US$1.9 million (2009: US$6.9 million).

 

Total liabilities increased to US$2.2 million (2009: US$1.9 million). The accounts payable and accrued liabilities increased slightly to US$1.9 million (2009: US$1.5 million) while deferred revenue remained constant at US$0.2 million (2009: US$0.2 million). Liabilities related to discontinued operations were US$0.2 million (2009: US$0.1 million)

 

 

Liquidity and Cash Flow

The net loss before and after tax for the period was US$3.1 million (2009: US$6.2 million) including non-cash expenses such as amortization of employee stock awards of US$0.6 million (2009 US$1.7 million), depreciation and amortization of US$0.1 million (2009: US$0.3 million) and deferred revenue recognized in the period of US$0.3 million (2009: US$1.0 million). Accounts receivable and prepaid expenses decreased by US$0.6 million (2009: US$0.2 million increase). Inventory decreased by US $0.1 million (2009: US$0.4 million increase) as a result of improved management of inventory levels, while payables and accruals decreased by US$0.6 million (2009: US $0.0 million) due to reducing accumulation of payables and accruals from December 31, 2009 from the cash received from the common stock sale.

 

Cash invested in property, plant and equipment increased to US$21 thousand (2009: US$16 thousand). This was largely for the minor upgrades of our information technology infrastructure and laboratory facilities. The Company also disposed of surplus lab equipment for US$25 thousand.

 

During the period 24,443,888 shares of common stock were issued, which received proceeds of US$2.8 million net of cash expenses. An additional 749,112 shares of common stock were issued in settlement of other expenses of US$99,781.

 

The Company invests its cash resources in deposits with banks with the highest credit ratings, putting security before absolute levels of return.

 

D. Williams

Financial Controller and Company Secretary

29 September 2010

 

 

 

Consolidated Statements of Operations

in $'000 (except share information)

		(Unaudited) Six months ended 30 June 2010	(Unaudited) Six months ended 30 June 2009	Year ended 31 December 2009
Revenues:
Product sales		$1,398	$1,743	$2,591
Collaborative revenue		1,318	1,304	3,740
Gross revenue		2,716	3,047	6,331
Cost and expenses related to product sales and collaborative revenue:
Product costs		856	946	1,895
Collaborative costs and expenses		1,151	907	2,561
Total costs and expenses		2,007	1,853	4,456
Gross Profit		709	1,194	1,875
Costs and expenses:
General and administrative		1,750	2,960	6,536
Business and development		371	1,378	2,042
Research and technical development		1,661	2,539	4,393
Total costs and expenses		3,782	6,877	12,971
Loss from operations		(3,073)	(5,683)	(11,096)
Other income (expense):
Interest income		-	15	15
Interest/other expense		(9)	(2)	(3)
Change in fair value of warrant liabilities		-	(1)	1
Currency loss		-	(1)	-
Loss from continuing operations before income taxes		(3,082)	(5,672)	(11,083)
Income tax expense		-	-	-
Loss from continuing operations		(3,082)	(5,672)	(11,083)
Discontinued operations (note 4):
Loss from discontinued operations before income taxes		(47)	(559)	(2,798)
Income tax expense		-	-	-
Loss from discontinued operations		(47)	(559)	(2,798)
Net loss attributable to non-controlling interest		5	17	28
Net loss attributable to TyraTech, Inc. including discontinued operations		(3,124)	(6,214)	(13,853)
Net loss per common share from continuing operations
Basic and diluted		(0.11)	(0.27)	(0.53)
Net loss per common share from discontinued operations:
Basic and diluted		-	(.03)	(0.13)
Net loss per common share attributable  to TyraTech, Inc.
Basic and diluted		(0.11)	(0.30)	(0.66)
Weighted average number of common shares:
Basic and diluted		27,091,966	20,893,633	21,068,343
The accompanying notes are an integral part of these consolidated financial statements

 

 

Consolidated Balance Sheets

in $'000 (except share information)

		(Unaudited) six months ended 30 June 2010	(Unaudited) six months ended 30 June 2009	year ended 31 December 2009
Assets
Current Assets:
Cash and cash equivalents		$1,475	$3,316	$1,265
Accounts receivable, net		83	730	528
Inventory		177	857	224
Prepaid expenses		143	268	215
Current assets from discontinued operations		33	1,761	464
Total current assets		1,911	6,932	2,696
Property and equipment, net of accumulated depreciation		700	1,017	834
Total assets		$2,611	$7,949	$3,530
Liabilities andShareholders' Equity
Current liabilities:
Accounts payable		$786	$526	$971
Accrued liabilities		1,104	987	1,392
Current liabilities of discontinued operations		166	137	552
Deferred revenue		154	175	476
Current installments of obligation under capital leases		9	20	17
Liability for warrants		-	1	-
Total current liabilities		2,219	1,846	3,408
Other long-term liabilities		105	19	105
Total liabilities		2,324	1,865	3,513
Equity
Common stock, at $0.001 par authorized and issued 47 million for 6/30/10 and 22 million for 6/30/09 and 12/31/09		47	22	22
Additional paid in capital		66,550	61,598	63,177
Retained deficit		(66,300)	(55,538)	(63,177)
Treasury stock of 326,241 common stock 6/30/10, 6/30/09 and 12/31/09		(4)	(4)	(4)
TyraTech Inc. shareholders' equity		293	6,078	18
Non-controlling interest		(6)	6	(1)
Total shareholders' equity		287	6,084	17
Total liabilities & shareholders' equity		$2,611	$7,949	$3,530
The accompanying notes are an integral part of these consolidated financial statements

Consolidated Statements of Cash Flow

in '000

		(Unaudited)  six months ended 30 June 2010	(Unaudited) six months ended 30 June 2009	year ended 31 December 2009
Cash flows from operating activities:
Net loss		$(3,129)	$(6,231)	$(13,881)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		121	253	453
Inventory valuation adjustment		-	-	1,922
Provision for doubtful receivable		-	-	91
Change in fair value of warrants		-	1	(1)
Amortization of stock awards		572	1,723	3,303
Loss on disposal of assets		8	-	-
Changes in operating assets and liabilities:
Accounts receivable		490	(348)	(106)
Inventory		149	(380)	(867)
Prepaid expenses		72	164	582
Accounts payable and accrued liabiities		(575)	8	1,342
Deferred revenue		(322)	(1,024)	(722)
Net cash used in operating activities		(2,614)	(5,834)	(7,884)
Cash flows from investing activities:
Purchases of property and equipment		(21)	(16)	(34)
Sale of property and equipment		25	-	-
Net cash provided by (used in) investing activities		4	(16)	(34)
Cash flows from financing activities:
Payments made under capital leases		(6)	(10)	(20)
Net proceeds from sale of common stock		2,826	-	-
Contribution from non-controlling interest		-	-	27
Net cash provided by (used in) financing activities		2,820	(10)	7
Net increase(decrease) in cash and cash equivalents		210	(5,860)	(7,911)
Cash and cash equivalents beginning of the period		1,265	9,176	9,176
Cash and cash equivalents end of the period		$1,475	$3,316	$1,265
Supplemental disclosures:
Cash paid for interest		$ -	$ 2	$ 3
Cash paid for income taxes		$ -	$ -	$ -
Non-cash operating activities
The Company exchanged inventory for settlement of accounts payable and accrued liabilities of a Sustainable Solutions, LLC Supplier:
Accounts payable and accrued liabilities		$(283)	$ -	$ -
Inventory		$283	$ -	$ -
These accompanying notes are an integral part of these consolidated financial statements

 

 

 

Notes to the Interim Consolidated Financial Statements

 

1. Basis of Preparation

 

The financial statements of TyraTech, Inc. and its subsidiaries (TyraTech Sustainable Solutions, LLC; TyraChem, LLC; TyraTech India, Pvt. Ltd., TyraTech International Ltd.; TyraTech International td.; TyraTech International LP; TyraTech International BV; and TyraTech International Coop) referred to as the "Company" have been prepared in accordance with accounting principles generally accepted in the United States of America (US GAAP) and the attached financial statements have been prepared on a consolidated basis.

 

The results for the year ended 31 December 2009 have been extracted from the statutory consolidated financial statements of TyraTech, Inc. for the year ended 31 December 2009 which were prepared in accordance with US GAAP.

 

The unaudited interim consolidated financial statements for the six months ended 30 June 2010 and 2009 were prepared on the basis of the accounting policies set out in the most recently published consolidated financial statements of the Company for the year ended 31 December 2009. As permitted this interim report has been prepared in accordance with AIM rules.

 

In May 2009, the FASB issued additional guidance on subsequent events, now codified as ASC 855-10, Subsequent Events (ASC 855-10). ASC 855-10 is intended to establish general standards of accounting for and disclosures of events that occur after the balance sheet date, but before financial statements are issued or are available to be issued. It requires the disclosure of the date through which an entity has evaluated events and the basis for the date-that is, whether the date represents the date the financial statements were issued or were available to be issued. This disclosure should alert all users of the financial statements that an entity has not evaluated subsequent events after that date in the financial statements issued for fiscal years and interim periods after June 15, 2009. The Company evaluated all subsequent events through September 29, 2010, the date the date the accompanying financial statements were available to be issued. The adoption of ASC 855-10 had no impact on the Company's financial statements.

 

2. Liquidity and Capital Resources

 

At 30 June 2010 the Company had US$1,475,232, before discontinued operations adjustment, (2009 US $3,315,860) in cash and cash and cash equivalents and no indebtness.

 

The Company issued 24,443,888 of new common shares of par value US$0.001 each for a gross cash consideration amount of US$3.2 million and US$2.8 million net of cash expenses. An additional 749,112 of new common shares par value of US$0.001 each were issued in settlement of other expenses of US$99,781. These shares are subject to a lock up agreement of six months which expires on 20 November 2010.

 

The Company has had significant negative cash flows from operating activities since inception. The Company is continuing to reduce the magnitude of these negative operating cash flows through cost reduction programs and product sales expansion. The Company believes that with the existing cash on hand, cash expected from existing supply contracts, funding from prospective agreements currently being negotiated, and a continued focus on cost control, that the Company will have sufficient cash to meet its working capital needs through the remainder of 2010 through 30 June 2011.

 

3. Segments

 

The Company previously considered itself to have two separate strategic business units that offer different products. They were managed separately because each business required different knowledge, skills and marketing strategies. These two business segments were pesticides and insecticides and sustainable solutions. In the first half of 2010 the Company decided to discontinue the business conducted in the sustainable solutions segment. The effect of that decision is discussed in the Discontinue Operations footnote.

 

 

4. Discontinued Operations

 

During 2010, the Company discontinued its sustainable solutions segment which is reported as discontinued operations in the consolidated statements of operations for the six months ended June 30, 2010 and June 30, 2009 and the twelve months ended December 31, 2009. The assets and liabilities of discontinued operations have been reclassified and are segregated in the consolidated balance sheets for the six months ended June 30, 2010 and June 30, 2009 and the twelve months ended December 31, 2009.

 

The Company ceased operations of the Sustainable Solutions, LLC. subsidiary effective March 31, 2010 and began liquidating the product inventory and settling the remaining liabilities with suppliers. This subsidiary was discontinued because its operations did not align with the Company's strategic plans.

 

The consolidated statements of operations for the six months ended June 30, 2010, twelve months ended December 31, 2009, and six months ended June 30, 2009 exclude revenues of $82,101, $311,004, and $276,199 and losses of $46,551, $2,797,950, and $558,462, respectively, from continuing operations. The following tables summarizes the major categories of assets and liabilities being discontinued:

 

		6/30/2010	6/30/2009	12/31/2009
Accounts receivable		1,500	177,833	46,797
Prepaid expenses		0	364,356	413
Inventory		31,823	1,218,648	416,778
Total current assets		$33,323	$1,760,837	$463,988
Accounts payable		$165,064	$128,934	$269,373
Accrued expenses		595	8,427	283,392
Total current liabilities		$165,659	$137,361	$552,765

 

 

 

5. Revenue (net of discontinued operations)

	(Unaudited) six months ended 30 June 2010	(Unaudited) six months ended 30 June 2009	(Audited) year ended 31 December 2009
	$'000	$'000	$'000
Opening deferred revenue	476	1,199	1,199
Closing deferred revenue	154	175	476
Movement in deferred revenue	322	1,024	723
Invoices raised	2,394	2,023	5,608
Total revenue	$2,716	$3,047	$6,331

 

 

6. Loss per Common Stock

 

The calculation of the basic and diluted earnings per ordinary share is based on the Company's loss, excluding the effect of losses attributable to non-controlling interests, and including losses from discontinued operations, of $3,128,949 for the six months ended 30 June 2010 (six months ended 30 June 2009: loss of $6,230,367; year ended 31 December 2009: loss of $13,880,838), and on 27,091,966, (30 June 2009: 20,893,633; 31 December 2009: 21,068,343) common shares, the weighted average number in issue and ranking for dividend during the period. There is no impact considered on the conversion of stock options or warrants as the effect would be antidilutive.

 

 

7. Accounts Receivable and Other Assets (net of discontinued operations)

	(Unaudited) six months ended 30 June 2010 $'000	(Unaudited) six months ended 30 June 2009 $'000	(Audited) year ended 31 December 2009 $'000
Accounts receivable and other	83	730	528
Prepaid expenses	143	268	215
	$226	$998	$743

 

8. Movement in Shareholders' Equity during the six months ended 31 December 2009 and 30 June 2010

 

	Common Stock	Additional Paid-in Capital	Accum-ulated deficit	Treasury Stock	Non-con- trolling Interest	Total
	$'000	$'000	$'000	$'000	$'000	$'000
Shareholders' Equity as of June 30, 2009	$22	$61,598	$(55,538)	$(4)	$6	$6,084
Contribution from non-controlling interest					27	27
Stock based compensation		1,579				1,579
Net loss			(7,639)		(34)	(7,673)
Shareholders' Equity as of December 31, 2009	$22	63,177	(63,177)	(4)	(1)	17
Proceeds from issuance of common stock, net of expenses	25	2,801				2,826
Stock based compensation Noncontrolling interest		572				572
Net loss			(3,123)		(5)	(3,128)
Stockholders' equity, as of June 30, 2010	$47	$66,550	$(66,300)	$(4)	$(6)	$287

 

9. Contingencies

 

In November, 2008, Molecular Securities, Inc. ("Molecular") filed a Complaint against the Company asserting claims for breach of contract and quantum meruit. Molecular alleges that it is owed US$2,760,470 for services it allegedly provided to TyraTech plus interest, attorneys' fees and costs. The appellate court recently granted the Company's motion for a stay of trial, on September 21, 2010. The stay will delay the trial until the appellate court determines the Company's appeal, likely the later part of 2011. TyraTech strongly refutes this claim and continues vigorously defending itself in the lawsuit. As a result, the Company has not recorded any liability related to this contingency.

 

This information is provided by RNS

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