10th Jun 2011 07:00
TyraTech, Inc. (the "Company" or "TyraTech")
10 June 2011
Preliminary Results
TyraTech Inc. (AIM: TYR), a natural life sciences company that harnesses the power of nature to improve human and animal health using a proprietary, novel technology that is both effective against insects and parasites and safe for people and pets, today announces its unaudited preliminary results for the year ended 31 December 2010.
Operational Highlights
·; Successful extension to our partnership with Terminix, the largest professional pest control company in North America, through a new product development and supply agreement
·; Strengthened management team through the addition of key leaders with significant experience in our key markets
Financial Highlights
·; Revenue from continuing operations decreased for the year to US$4.6 million (2009: US$6.3 million).
·; Deferred revenue at year end increased by $3.5 million from 2009 and will be recognized in future periods
·; Expenses from continuing operations for the year were reduced by 43% to US$7.4 million (2009: US$13.0 million)
·; Net loss before and after tax for the period attributable to TyraTech reduced significantly to US$6.1 million, (2009: US$13.9 million)
·; Successfully raised US$4.8 million in working capital through additional share issues
·; Cash and cash equivalents were US$3.3 million (2009: US$1.3 million)
Post Period Highlights
·; On 1 June 2011, we announced that the New York Supreme Court, Appellate Division of New York County issued a ruling on 26 May 2011 entering judgment in favour of TyraTech and against Molecular Securities, Inc. ("Molecular") and dismissing Molecular's complaint in its entirety. This ruling may be appealed by Molecular
·; Subsequent to 31 December 2010, milestone payments were received from Terminix for the successful development of three new products
For further information please contact:
Tyratech, Inc.
Alan Reade, Executive Chairman Tel: +1 321 409 7731
Peter Jerome, Chief Financial Officer Tel: +1 919 695 5792
Brewin Dolphin Limited, Nominated Advisor
Matthew Davis / Iain Marlow Tel: +44 113 241 0138
Chairman's Statement and Operational Review
As we entered 2010, TyraTech faced a difficult business climate. As I outlined in my Half Year report, we identified three main priorities for the business:
1. Increase our focus on cost control
2. Support our partnerships, with initial emphasis on those with Terminix and Kraft
3. Strengthen our balance sheet, particularly the cash position
I am happy to report to you that significant progress was made during 2010 in each of these areas.
First, on the cost front, we reduced our cash operating expenses to US$6.3 million in 2010 from US$10.4 million in 2009, representing a 39% reduction in cash expenditures. This was achieved through a focused effort by all of the employees of TyraTech and I wish to thank them for the sacrifices that were made during this challenging period.
Significant progress was made with Terminix in the period. As announced previously, we successfully extended our partnership with Terminix, the largest professional pest control company in North America, through a new product development and supply agreement. This extension brought with it a significant upfront payment to TyraTech, which was received in October 2010. Under this new Agreement, Terminix and TyraTech are now working together to develop and market new and effective pest control products incorporating TyraTech's Nature's Technology™. The extended strategic relationship enables a development plan to identify further co-branded natural products and market channels for commercialisation. For each of up to six new products developed, TyraTech receives development milestone payments from Terminix. The successful development of three new products was announced in February 2011. The new products, part of a growing pipeline of innovative products, will expand the existing product lines and enable Terminix to continue marketing and branding the TyraTech insecticide product lines in the US, Canada and Mexico.
The Kraft project (functional food) has made excellent progress during the year from both a technical and a market definition standpoint. The board hopes to report further progress on this exciting project in the current financial year.
With regard to our product sales, we experienced a 30% increase in order demand for our primary product supplied to Terminix, Terminix SafeShield™. We believe that our future growth in product sales will be driven by Terminix SafeShield™ and the new professional and institutional products delivered to Terminix in Q4 of 2010 and the first part of 2011. Further, our 2010 results do not include US$3.5 million in additional Deferred Revenue which was received in 2010 and will be recorded as revenue in future periods. We also had one shipment which was anticipated to occur in December 2010 shift into January 2011, reducing our 2010 product sales by approximately US$500,000.
During 2010, we successfully raised US$4.8 million in working capital through additional share issues. This, along with our operating expense reductions, allowed us to finish 2010 with US$3.3 million in cash, a US$2.0 million increase from December 2009. While we are still challenged to balance growing our business against a limited level of working capital, we are optimistic that these share issues will provide sufficient capital to the business to fund our working capital needs in 2012.
Board Changes:
As reported earlier, Dr. Geoffrey Vernon and Dr. Ken Noonan resigned as a non-executive Directors. In August 2010 we also reported that Keith Bigsby had resigned as Chief Financial Officer and Director.
In July 2010, Jim Hills joined the Board as a non-executive Director, bringing invaluable experience in consumer marketing and brand management.
Management Changes:
Throughout 2010 and into the early part of 2011, I have worked to develop a strong management team with significant experience in our key markets.
Kevin T. Schultz, D.V.M., Ph.D. joined TyraTech in November 2010 and holds the position of Chief Scientific Officer (CSO). In addition to his responsibilities as CSO, Dr. Schultz is also leading the Functional Foods and Animal Health Research and Development at TyraTech. Dr. Schultz began his corporate work as Executive Director, World-Wide Animal Science Research & Development at Merck. He was one of the founding executives to combine the Animal Health Division of Merck with Rhone Merieux (forming Merial) and was subsequently appointed Head of Pharmaceutical Research and Development. Following that, Dr. Schultz assumed the role of CSO and Global Head of all Research and Development for Merial.
In February 2011, Peter Jerome joined TyraTech as our Chief Financial Officer. Mr. Jerome is a Certified Public Accountant. For the past 10 years Mr. Jerome has been with Albany Molecular Research, Inc. (AMRI). AMRI is a publicly traded international research and development and manufacturing company focusing on providing a full complement of pharmaceutical services from drug discovery to the commercial manufacturing of active pharmaceutical ingredients. Initially at AMRI, Mr. Jerome held the position of Director of Finance and Corporate Controller, and for the past 3 years he has been Director, Investor Relations / Financial Planning and Analysis. Mr. Jerome also spent 10 years with the audit firm PricewaterhouseCoopers LLP where he was a Senior Audit Manager.
Also in February 2011, Keith Kennedy, Ph.D. joined TyraTech as Vice President Product Development. Dr. Kennedy has more than 22 years of experience in the development of global consumer products. As Director of S.C. Johnson and Son's (SCJ) Insect Control Product Development Division, he led global development teams that successfully introduced over 75 new chemical specialty products worldwide, products that are now being sold in over 100 countries. Dr. Kennedy's key product responsibilities at SCJ included: Raid® and Bagyon® insecticides; Off!® and Autan® insect repellents. Before moving into product development, Dr. Kennedy directed the efforts of SCJ's Entomology Research Center. For the last five years, Dr. Kennedy has worked as a private consultant for new insect control and repellent technology.
Other Business:
As I write this report to you, we are in the process of relocating TyraTech's operations to the Research Triangle Park (RTP) area of North Carolina. We are making this move in order for the business to be located in a hub with other Life Science businesses. We believe this will provide TyraTech with greater access to a talented employment base and other scientific expertise through the vast network of public and private research facilities in the RTP area.
I am also pleased to report the continued development of TyraChem, our innovative Joint Venture with Chemplast International (Chemplast). As part of McNeel International Corporation, Chemplast is a multinational plastics and master batch manufacturer. In 2011, the companies continue working together to develop innovative technology platforms that leverage TyraTech's Nature's Technology™ insecticide platform into novel delivery systems.
Summary and Outlook
We continue to be confident of TyraTech's technology and of our ability to develop and commercialise further products that our partners can commercialise, as evidenced by the new products we have delivered to Terminix. We are also committed to leveraging these products into other markets and to create significant shareholder value over the coming years.
While there is much work left to be done, we are proud of the accomplishments we achieved in 2010 and look forward to similar accomplishments in 2011 and beyond.
Alan Reade
Executive Chairman
June 10, 2011
Financial Review
Revenues
TyraTech continues to develop its product revenues as we mature as a business. Overall revenues from continuing operations decreased for the year to US$4.6 million (2009: US$6.3 million). Not included in Revenue is an increase in Deferred Revenue of approximately US$3.5 million. This increase in Deferred Revenue will be recognized in future periods. Product revenues from continuing operations decreased to US$2.1 million (2009: US$2.6 million). Increased product sales related to the Terminix SafeShield™ product, which is sold to the household market, were offset by a decrease in sales of commercial and institutional products. Collaborative revenue reduced to US$2.5 million (2009: US$3.7 million) with the impact of the revised Kraft contract. These changes resulted in expenses incurred from September 2009 forward being reflected as revenue and equally offset as cost of goods sold.
Cost of Sales and Gross Margin
Cost of sales for the year from continuing operations was US$3.3 million (2009: US$4.5 million). This included project costs for collaborative revenue projects of US$2.2 million (2009: US$2.6 million), cost of product sold of US$1.1 million, (2009: US$1.9 million). Gross margin from product sales was 46% in 2010 (2009: 27%). The increase in gross margin was driven by product mix, with higher margins on our household product driving the overall increase in product margin.
Operating Expenses
Overall, operating expenses from continuing operations for the year were reduced by 43% to US$7.4 million (2009: US$13.0 million). The expenses for the year include non-cash stock compensation to employees and non-employees of US$0.9 million (2009: US$3.3 million), depreciation and amortization of US$0.2 million (2009: US$0.5million) and provision for doubtful debts of US$0.0 million (2009: US$0.1 million). The decrease in overall operating expenses was driven by a decrease in stock compensation expense of US$2.4 million, a decrease in employee compensation costs of US$2.0 million (due to headcount reductions conducted during 2010), and a decrease in discretionary spending (Legal, Travel, Facilities and Materials and Supplies) of US$1.2 million.
The table below analyses the net cash operating expense by financial line item for the twelve months ended December 21, 2010 and 2009.
(in millions) | 31 December 2010 | 31 December 2009 | |
General and Administrative | $2.9 | $ 3.8 | |
Business development | 0.6 | 2.8 | |
Research and product development | 2.8 | 3.8 | |
Total | $6.3 | $10.4 |
Liquidity and Cash Flow
Cash flow used in operations for 2010 was US$(2.7 million) compared to US$(7.7 million) for 2009, a US$5.0 million improvement. This improvement was driven by several significant factors. As previously mentioned, cash operating expenses for the year decreased by US$4.1 million, the receipt of the upfront payment from Terminix upon the execution of our expanded product development agreement contributed an additional US$2.5 million in improvement, with these items offset by an increase in working capital (excluding deferred revenue) of US$1.4 million and other items of US$0.2 million.
Cash flow from financing activities in 2010 was US$4.8 million, compared to nil in 2009. The Company raised US$4.8 million in additional share capital, net of offering expenses, in 2010 through the issuance of an additional 30.0 million shares of its common stock.
Cash and cash equivalents were US$3.3 million at the end of 2010 (2009: US$1.3 million). We invest our cash resources in deposits with banks with the highest credit ratings, putting security before absolute levels of return.
In October 2008, Molecular Securities, Inc. (Molecular) filed a complaint against the Company asserting claims for breach of contract. Molecular alleges that it is owed US$ 2.7 million for services that it allegedly provided to TyraTech plus interest, attorneys' fees and costs. The Company 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. On May 26, 2011, the New York Supreme Court, Appellate Division of New York County issued a ruling entering judgment in favour of the Company and against Molecular and dismissing Molecular's complaint in its entirety. Molecular may choose to appeal the ruling with the Court of Appeals (New York's highest court) in which case the Company will continue to defend itself and continues to believe that the recording of any liability is inappropriate as Molecular's claims are meritless. If Molecular were to prevail in the litigation 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 cur-rency exposures and does not use financial derivatives to manage currency risk.
Peter JeromeChief Financial Officer and Group SecretaryJune 10, 2011
TYRATECH, INC. | ||||||||||||||
Unaudited Consolidated Balance Sheets | ||||||||||||||
December 31, 2010 and 2009 | ||||||||||||||
2010 | 2009 | |||||||||||||
Assets | ||||||||||||||
Current assets | ||||||||||||||
Cash and cash equivalents | $3,343,581 | $1,264,661 | ||||||||||||
Accounts receivable, net | 791,423 | 528,060 | ||||||||||||
Inventory | 341,414 | 224,004 | ||||||||||||
Prepaid expenses Current assets from discontinued operations | 104,528 597 | 214,317 464,700 | ||||||||||||
Total current assets | 4,581,543 | 2,695,742 | ||||||||||||
Property and equipment, net of accumulated depreciation | 626,397 | 834,636 | ||||||||||||
Total assets | $5,207,940 | $3,530,378 | ||||||||||||
Liabilities and Shareholders' (Deficit) Equity | ||||||||||||||
Current liabilities | ||||||||||||||
Accounts payable Accrued liabilities Current liabilities from discontinued operations | $428,971 884,099 2,028 | $970,150 1,392,158 552,765 | ||||||||||||
Deferred revenue | 1,951,643 | 476,500 | ||||||||||||
Other current liabilities | 6 | 16,607 | ||||||||||||
Total current liabilities | 3,266,747 | 3,408,180 | ||||||||||||
Other long-term liabilities | 2,102,483 | 104,712 | ||||||||||||
Total liabilities | 5,369,230 | 3,512,892 | ||||||||||||
Shareholders' (deficit) equity | ||||||||||||||
Common stock, $0.001 par, authorised 100 million; |
| |||||||||||||
51.8 million shares issued (2009: 22.0 million shares issued) | 51,837 | 22,000 | ||||||||||||
Additional paid-in capital | 69,059,576 | 63,177,312 | ||||||||||||
Accumulated deficit | (69,267,152) | (63,176,664) | ||||||||||||
Treasury stock of 13,741 (2009: 326,241) | (177) | (4,195) | ||||||||||||
Total TyraTech, Inc. shareholders' (deficit) equity |
| (155,916) | 18,453 | |||||||||||
Non-controlling interest Total (deficit) equity | (5,374) (161,290) | (967) 17,486 | ||||||||||||
Total liabilities and (deficit) equity | $5,207,940 | $3,530,378 | ||||||||||||
TYRATECH, INC. | ||||||||||||||
Unaudited Consolidated Statements of Operations | ||||||||||||||
Years ended December 31, 2010 and 2009 | ||||||||||||||
2010 | 2009 | |||||||||||||
Revenues: | ||||||||||||||
Product sales | $2,055,612 | $2,590,618 | ||||||||||||
Collaborative revenue | 2,536,401 | 3,740,222 | ||||||||||||
Total revenues | 4,592,013 | 6,330,840 | ||||||||||||
Costs and expenses related to product sales and collaboration revenue: Product costs Collaborative costs and expenses |
1,112,658 2,156,502 |
1,895,052 2,560,368 | ||||||||||||
Total costs and expenses | 3,269,160 | 4,455,420 | ||||||||||||
Gross profit | 1,322,853 | 1,875,420 | ||||||||||||
Costs and expenses: | ||||||||||||||
General and administrative | 3,657,560 | 6,535,727 | ||||||||||||
Business development | 705,004 | 2,042,435 | ||||||||||||
Research and technical development | 3,050,278 | 4,393,367 | ||||||||||||
Total cost and expenses | 7,412,842 | 12,971,529 | ||||||||||||
Loss from operations | (6,089,989) | (11,096,109) | ||||||||||||
Other (expense) income: | ||||||||||||||
Interest income | 683 | 15,271 | ||||||||||||
Interest/other expense | (17,307) | (2,526) | ||||||||||||
Total other (expense) income | (16,624) | 12,745 | ||||||||||||
Loss from continuing operations before income taxes |
(6,106,613) |
(11,083,364) | ||||||||||||
Income tax expense | - | - | ||||||||||||
Net loss from continuing operations |
$(6,106,613) |
$(11,083,364) | ||||||||||||
Discontinued operations (note 15): Income (loss) from discontinued operations before income taxes Income tax expense Income (loss) from discontinued operations |
10,070 - 10,070 |
(2,797,950) - (2,797,950) | ||||||||||||
Consolidated net loss | $(6,096,543) | $(13,881,314) | ||||||||||||
Net loss attributable to non-controlling interest | 6,055 | 28,467 | ||||||||||||
Net loss attributable to TyraTech, Inc. including discontinued operations |
$(6,090,488) |
$(13,852,847) | ||||||||||||
Net loss per common share from continuing operations | ||||||||||||||
Basic and diluted | $(0.16) | $(0.53) | ||||||||||||
Net loss per common share from discontinued operations | ||||||||||||||
Basic and diluted | $0.00 | $(0.13) | ||||||||||||
Net loss per common share attributable to TyraTech, Inc. | ||||||||||||||
Basic and diluted | $(0.16) | $(0.66) | ||||||||||||
Weighted average number of common shares | ||||||||||||||
Basic and diluted | 37,116,234 | 21,068,343 | ||||||||||||
TYRATECH, INC. | |||||||||||||
Unaudited Consolidated Statements of Shareholders' (Deficit) Equity | |||||||||||||
Years ended December 31, 2010 and 2009 | |||||||||||||
Common stock | Additional paid-in capital | Accumulated deficit | Non-controlling interest | Treasury stock | Total (deficit) equity | ||||||||
Balance as of December 31, 2008 | $22,000 | $59,874,782 | $(49,323,817) | $ - | $(4,195) | $10,568,770 | |||||||
Contribution from non-controlling interest | - | - | - | 27,500 | - | 27,500 | |||||||
Stock based compensation | - | 3,302,530 | - | - | - | 3,302,530 | |||||||
Consolidated net loss | - | - | (13,852,847) | (28,467) | - | (13,881,314) | |||||||
Balance as of December 31, 2009 | $22,000 | $63,177,312 | $(63,176,664) | $ (967) | $(4,195) | $ 17,486 | |||||||
Proceeds from issuance of common stock, net of expenses | 29,837 | 4,793,027 | - | - | - | 4,822,864 | |||||||
Issuance of treasury shares |
| - | 145,982 | - | - | 4,018 | 150,000 | ||||||
Contribution from non-controlling interest | - | - | - | 1,648 | - | 1,648 | |||||||
Stock based compensation | - | 943,255 | - | - | - | 943,255 | |||||||
Consolidated net loss | - | - | (6,090,488) | (6,055) | - | (6,096,543) | |||||||
Balance as of December 31, 2010 | $51,837 | $69,059,576 | $(69,267,152) | $ (5,374) | $(177) | $ (161,290) | |||||||
TYRATECH, INC. |
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Unaudited Consolidated Statements of Cash Flows |
| |||||||||||||
Years ended December 31, 2010 and 2009 |
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2010 | 2009 |
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Cash flows from operating activities: |
| |||||||||||||
Net loss | $(6,096,543) | $(13,881,314) |
| |||||||||||
Adjustments to reconcile net loss to net cash used in operating activities: Discontinued operations (10,070) |
2,797,950 |
| ||||||||||||
Depreciation and amortisation | 238,676 | 453,595 |
| |||||||||||
Inventory valuation adjustment | - | 496,087 |
| |||||||||||
Change in fair value of warrants | - | (612) |
| |||||||||||
Amortization of stock awards | 943,255 | 3,302,530 |
| |||||||||||
Non-cash performance bonus | 150,000 | - |
| |||||||||||
Loss on disposal of property and equipment | 7,356 | - |
| |||||||||||
Changes in operating assets and liabilities: |
| |||||||||||||
Accounts receivable | (263,363) | (27,412) |
| |||||||||||
Inventory | (117,410) | 29,629 |
| |||||||||||
Prepaid expenses | 109,789 | 169,468 |
| |||||||||||
Accounts payable and accrued liabilities | (1,049,238) | 998,409 |
| |||||||||||
Deferred revenue Net cash used in discontinued operations | 3,472,914 (76,564) | (722,492) (1,292,560) |
| |||||||||||
Net cash used in operating activities | (2,691,198) | (7,676,722) |
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Cash flows from investing activities: |
| |||||||||||||
Purchase of property and equipment | (64,193) | (33,660) |
| |||||||||||
Sale of property and equipment | 26,400 | - |
| |||||||||||
Net cash used in investing activities | (37,793) | (33,660) |
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Cash flows from financing activities: |
| |||||||||||||
Payments made under a capital lease | (16,601) | (20,339) |
| |||||||||||
Contribution from non-controlling interest | 1,648 | 27,500 |
| |||||||||||
Net proceeds from sale of common stock | 4,822,864 | - |
| |||||||||||
Net cash provided by financing activities | 4,807,911 | 7,161 |
| |||||||||||
Net increase (decrease) in cash | 2,078,920 | (7,703,221) |
| |||||||||||
Cash and cash equivalents, beginning of year | 1,264,661 | 8,967,882 |
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Cash and cash equivalents, end of year | $3,343,581 | $1,264,661 |
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Supplemental disclosures |
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Cash paid for interest | $ 706 | $3,138 |
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Cash paid for income taxes | $ - | $ - |
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Non-cash investing and financing activities | ||||||||||||||
Settlement of Sustainable Solutions, LLC operations | $342,328 | $ - |
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Notes
1. Basis of preparation
TyraTech, Inc., a Delaware corporation, is engaged in the development, manufacture, marketing and sale of proprietary natural insecticide and parasiticide products, through the utilization of a proprietary development platform that enables rapid characterization of potent blends of plant oil derived pesticides. TyraTech is focused on developing safer natural products with plant essential oils to be used in a wide variety of pesticidal and parasitic applications. These new synergistic formulations target specific receptors unique to invertebrates.
The unaudited consolidated financial statements of the Company for the year ended 31 December 2010 and 2009 comprise the Company and its subsidiaries (together referred to as the 'Group').
The information contained within this Preliminary Announcement has been extracted from the financial statements which have been prepared in accordance with accounting principles generally accepted in the United States of America (US GAAP).
The financial information in this announcement does not constitute statutory accounts for the year ended 31 December 2010 and 2009 but is derived from these accounts.
The preliminary announcement for the year ended 31 December 2010 was approved by the Board for release on 10 June 2011.
2. Discontinued Operations
During 2010, the Company discontinued the Sustainable Solutions segment which is reported as discontinued operations in the consolidated statements of operations for the twelve months ended 31 December 2010 and 2009. The assets and liabilities of discontinued operations have been reclassified and are segregated in the consolidated balance sheets for the years ended 31 December 2010 and 2009.
The Company ceased operations of the Sustainable Solutions, LLC. Subsidiary effective 31 March 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.
3. Distribution of Annual Report and Financial Statements
The group expects to distribute copies of the full Annual Report and Financial Statements that comply with US GAAP by 30 June 2011 following which copies will be available either from the registered office of the company; The Corporation Trust Company, 1209 Orange Street, Wilmington, Delaware 19801, USA; or from the company's website; www.tyratech.com
4. Date of Annual General Meeting
The Annual General Meeting (AGM) of the stockholders of TyraTech, Inc., (the Company) will be held on 27 July 2011 at 12.00 noon UK time at the office of Brewin Dolphin, 12 Smithfield Street, London, EC1A 9B.
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