TIDMTYR TIDMTYRU
RNS Number : 5248E
TyraTech, Inc.
09 May 2017
Strictly Embargoed until 07.00: 9(th) May 2017
TyraTech, Inc.
("TyraTech" or the "Company")
Results for the Year Ended 31 December 2016
TyraTech Inc. (AIM: TYR, and TYRU), a life sciences company
focused on nature-derived insect and parasite control products,
today announces its results for the year ended 31 December
2016.
Operational highlights
-- Vamousse(R) sales in US grew by 10% to $5.9 million over 2015
and gained 3% points of market share
-- Vamousse sales in UK grew by 27% to GBP1.3 million in local
currency (2015: GBP1 million) and gained market share over
competition
-- Vamousse distribution network increased in the US - driven by
the addition of Rite Aid, the third largest pharmacy chain in the
US with more than 4,500 stores
-- Addition of 450 Morrisons stores, the fourth largest chain of supermarkets in the UK
-- Vamousse Head Lice Treatment was voted in the UK Pharmacy
Product of the Year 2017 - Best Advertising Campaign by Independent
Pharmacy Magazine
-- Launch of two new PureScience(TM) animal health products for
the poultry and swine market in the US
Financial Highlights
-- Gross revenue increased to $8.4 million (FY2015: $7.4 million)
-- Gross product revenue increased by 13% to $8.0 million (2015: $7.1 million)
-- Gross profit increased to $4.8 million with gross margins on
net revenue of 67% (2015: $4.6 million and 69%)
-- Vamousse generated a positive direct contribution of $2.2 million on $6.6 million net sales
-- Operating costs and expenses $7.1 million (2015: $7.1 million)
-- Net loss, before and after taxes, $2.3 million (2015: $2.3 million)
-- Cash and cash equivalents at 31 December 2016 $1.8 million (2015: $4.0 million)
-- Net cash used in operations decreased to $1.8 million (2015: $2.8 million)
Post period highlights
-- Addition of the new product Vamousse Lice Repellent at CVS and Meijer in the US
-- Distribution of Guardian(R) in the US in a limited test
market (around 600 stores) with Kroger, the largest grocery store
chain and supermarket by retail sales
-- Full launch of the equine fly repellent Outsmart(TM) with our partner SmartPak
Strategic Review
The Company has made significant progress in successfully
commercializing its technology in both the human health space
(Vamousse) and more recently, in the animal health space
(PureScience and Outsmart). With Vamousse, the Company has created
a brand with a strong distribution network, a sizable market share
and a positive direct contribution margin. With PureScience and
Outsmart, the Company has begun to enter the animal health market,
answering unmet needs, receiving positive customer feedback and
completing efficacious field trials.
However, the Board is of the view that the Company lacks the
necessary resources from operating cash flow alone to fund the next
phase of its growth in both areas. The increasingly positive cash
contribution of the Vamousse product range cannot currently support
the financial needs of Vamousse's growth as well as the development
of the highly attractive animal health pipeline of new
products.
Therefore, as announced on 9 February 2017, the Board
implemented a strategic review to determine the most effective way
to unlock the future growth potential of the Company's assets and
maximize shareholder value.
The Board has now completed the first stage of this review and
has concluded that it should divide the Company's intellectual
property and products into two separate entities, focused on human
health and animal health respectively. Initially, both entities
will remain 100% owned by Tyratech.
The human health business as a stand-alone entity could be
profitable with growth potential in existing markets, geographical
extension, and further innovative products. Investment in this
business would be focused on supporting its own marketing and
commercial initiatives and could be managed within limited cash
resources depending on how aggressive a growth target is set.
The animal health business ultimately has larger growth
opportunities, but will require further investment to support
activities in research and development. This investment includes
the necessary time to fully develop and transform the pipeline into
marketable products. The Company believes that the resource
requirements to build a successful animal health business would be
significant and therefore require some type of private partnership
and/or investment.
The Company is moving swiftly to complete the next stage of the
strategic review process. It has engaged consultants to assist in
the process with the aim of completing the reorganization by the
end of the financial year. It is already in the final stages of an
external validation of the value of Vamousse and in the early
stages of an external validation of the valuation of the animal
health business.
To optimize our existing resources, the Company will stay
focused in the short term on growing Vamousse in the US and in the
UK without major expansion in existing and new geographies. We will
also continue to roll-out the existing animal health products in
the US.
Commenting on results José Barella, Chairman TyraTech said:
"2016 was a challenging year for the Company. The progress made
by Vamousse in difficult market conditions and the launch of the
first products in the Animal Health space were significant but not
enough to generate the cash resources to fully develop the
potential of the Vamousse product range while investing in the
R&D of a promising Animal Health pipeline. This situation masks
the fact that, on a stand- alone basis, Vamousse, provides a
positive business contribution.
"To address this situation, the Board has undertaken a
comprehensive review of the company structure, resource, and
potential pipeline to unlock the full value of the Company for the
shareholders. Phase one of this is already complete and we look
forward to updating shareholders further in due course."
Bruno Jactel, CEO TyraTech added:
"Despite difficult market conditions in the US, the overall
gross revenues grew 13% year over year mainly driven by Vamousse.
The brand made substantial progress in 2016, increasing its market
share and retail distribution in the UK and in the US. We added a
major distributor, Rite Aid, in the US and placed new products in
CVS and gained commitment to expand the offering at Walgreens in
2017. From our innovation pipeline, we launched a new head lice
repellent in 2017, which will extend our footprint into the
prevention market where we believe significant growth opportunities
exist. Despite our focus in resource allocation and management time
on Vamousse, we advanced, albeit modestly, the pipeline of our
animal health products. We launched products in the equine and
poultry segments with major distributors and the biggest producers
of poultry and eggs in the US. It also became apparent in 2016 that
the Company does not have sufficient resources from operating cash
flow alone to fund the next phase of its growth and unlock the full
value of its assets. Our focus will be to continue to drive the
growth of the Vamousse brand and the existing Animal Health
products within the cash resources available and to implement the
initial actions of the strategic review as we seek to unlock the
full value of the Company for shareholders.
-ends-
For further information:
TyraTech Inc. Tel: +1 919 415
Bruno Jactel, Chief Executive 4340
Officer Tel: +1 919 415
Erica H. Boisvert, Chief Financial 4287
Officer
www.tyratech.com
SPARK Advisory Partners Limited Tel: +44 20 3368
(Nominated Adviser) 3551
Matt Davis / Mark Brady
Allenby Capital Limited (Broker) Tel: +44 20 3328
Chris Crawford 5656
Belvedere Communications (PR) Tel: +44 20 3567
John West / Kim van Beeck 0510
Chairman's Statement
Overview
2016 was a challenging year for the Company. After a very
positive start, it became apparent early in the second half of the
year that the previous pattern of strong organic growth in the
market for head lice treatments had reversed and that, probably for
cyclical or climatic reasons, there was a decline in the overall
market.
By the end of the year, the market appeared to have returned to
a level position. Against this, the Vamousse product range
performed well in these difficult market conditions, with the brand
increasing its market share by 3% in the US. We also introduced our
first PureScience products in the Animal Health market, initially
aimed at niche markets in the poultry industry, and successfully
re-introduced an improved Equine fly repellant. Further details of
the operational results are given in the Chief Executive's Business
Review and the Chief Financial Officer's Review below.
Update on Strategic Review
The Company has made significant progress in successfully
commercializing its technology in both the human health space
(Vamousse) and more recently, in the animal health space
(PureScience and Outsmart). With Vamousse, the Company has created
a brand with a strong distribution network, a sizable market share
and a positive direct contribution margin. With PureScience and
Outsmart, the Company has begun to enter the animal health market,
answering unmet needs, receiving positive customer feedback and
completing efficacious field trials.
However, the Board is of the view that the Company lacks the
necessary resources from operating cash flow alone to fund the next
phase of its growth in both areas. The increasingly positive cash
contribution of the Vamousse product range cannot currently support
the financial needs of Vamousse's growth as well as the development
of the highly attractive animal health pipeline of new
products.
Therefore, as announced on 9 February 2017, the Board
implemented a strategic review to determine the most effective way
to unlock the future growth potential of the Company's assets and
maximize shareholder value.
The Board has now completed the first stage of this review and
has concluded that it should divide the Company's intellectual
property and products into two separate entities, focused on human
health and animal health respectively. Initially, both entities
will remain 100% owned by Tyratech.
The human health business as a stand-alone entity could be
profitable with growth potential in existing markets, geographical
extension, and further innovative products. Investment in this
business would be focused on supporting its own marketing and
commercial initiatives and could be managed within limited cash
resources depending on how aggressive a growth target is set.
The animal health business ultimately has larger growth
opportunities, but will require further investment to support
activities in research and development. This investment includes
the necessary time to fully develop and transform the pipeline into
marketable products. The Company believes that the resource
requirements to build a successful animal health business would be
significant and therefore require some type of private partnership
and/or investment.
The Company is moving swiftly to complete the next stage of the
strategic review process. It has engaged consultants to assist in
the process with the aim of completing the reorganization by the
end of the financial year. It is already in the final stages of an
external validation of the value of Vamousse and in the early
stages of an external validation of the valuation of the animal
health business.
To optimize our existing resources, the Company will stay
focused in the short term on growing Vamousse in the US and in the
UK without major expansion in existing and new geographies. We will
also continue to roll-out the existing animal health products in
the US.
Finally, I would like to express my thanks to the TyraTech staff
who have worked tirelessly under considerable pressure over the
last twelve months, and thank Alan Reade, who retired from the
Board in 2016 for his great contribution over many years.
Jose Barella
Non-Executive Chairman
9 May 2017
Chief Executive's Business Review
Operational update
In 2016, TyraTech made significant operational progress. Overall
gross product sales grew by 13% reaching revenue of $8 million
(FY15: $7.1 million), mainly driven by the head lice products under
the brand Vamousse. New animal health products were launched in the
market, on a limited scale.
Vamousse
In the US, Vamousse performed well under difficult market
conditions. Sales grew by 10% over 2015 and gained three percentage
points of market share among branded products to reach close to 8%
at the end of the year, demonstrating that Vamousse can outpace its
competitors.
The growth was driven primarily by adding Rite Aid the third
major pharmacy chain in the US with close to 4,600 outlets. It was
also linked to additional SKUs placed at CVS (Vamousse Lice Defense
shampoo and Vamousse Lice Elimination powder) and targeted
marketing efforts.
Unfortunately, as reported in the Interim Results the head lice
category slowed significantly in the middle of the year, and
despite signs of recovery at the back end of the year it finished
essentially flat for 2016. In addition, some major competitors
invested heavily in their marketing efforts in 2016. Although
Vamousse continued to gain market share, because of this slowdown
coupled with the onboarding of a new retailer and the one-time cost
of adding new SKUs on the shelves of other retailers, revenues
generated were not sufficient to maintain cash resources as
expected. We consequently reduced operating and marketing
expenditure in the second half of the year.
Nevertheless, the Company is launching a new Vamousse product,
Vamousse Lice Repellent, in CVS and Meijer in 2017. As a repellent,
this product will protect children and families when exposed to a
potential risk of lice infestation. Combined with the Vamousse Lice
Defense shampoo, this product will reinforce the unique positioning
of Vamousse in the prevention market, which offers strong growth
potential.
In the UK, Vamousse sales grew by 27% in local currency terms,
an impressive outcome. The brand gained significant market share
and extended its distribution network adding around 450 Morrison's
stores. Morrisons is the UK's fourth largest chain of supermarkets.
In addition, further stores were added at both Sainsbury's and
Tesco.
Importantly, approval for the listing of Vamousse Treatment on
Part IX of the Drug Tariff, allowed the brand to now be prescribed.
In addition, Vamousse Treatment obtained its listing on the Minor
Ailment Scheme in Scotland, allowing free distribution for those
qualifying under the scheme to be reimbursed by the NHS.
In recognition of the exceptional work done on the marketing of
the product, despite a reduction of the total investment compared
to 2015, Vamousse Head Lice Treatment was awarded the UK Pharmacy
Product of the Year 2017 - Best Advertising Campaign by Independent
Pharmacy Magazine.
Overall Vamousse provided a positive direct contribution margin
of $2.2 million over net sales of $6.6 million, a 34% contribution
margin on net revenues. The direct contribution margin is defined
as Vamousse net sales less associated cost of sales and sales and
marketing expenses for the brand.
Guardian
As in the previous year, fewer resources were allocated to the
launch and growth of Guardian, TyraTech's personal mosquito and
tick repellent. Guardian was promoted online in the US and earned
media coverage in Woman's World magazine, with a circulation of
around 1.3 million. In the UK, the product was sampled at outdoor
shows in the summer, with user surveys validating strong consumer
appreciation for the brand across a variety of important
attributes.
A significant achievement post-period end was the 2017 listing
of Guardian with the largest grocery chain in the US, Kroger, for a
limited test in over 600 stores, which we hope will be a precursor
to achieving further retail expansion.
PureScience
TyraTech launched two new products in the animal health segment
in the US under the brand PureScience, targeting first the poultry
industry, where significant unmet needs have been identified for
insect and parasite control
The first product launched in 2016 was a powder that controls
mites on chickens, for either breeder/broiler or layer producers.
By year-end, the product captured an estimated 50% of the small
market of breeders and headway has been made in the much bigger
layer business, to be developed further in 2017.
The Company is currently working with the biggest producers of
eggs in the US (Cal-Maine Foods Inc.; Rose Acre Farms Inc.) as well
as with the biggest producers of breeder and broiler chickens
(Tyson Foods Inc.; Perdue Food). The feedback given by these
producers has so far been very encouraging. It is expected that new
products will be launched in 2017 for both the poultry and swine
producing markets.
The first foray into the animal health market in 2016 was
limited due to a resource focus on Vamousse. Nevertheless, the test
market of avian mite control demonstrated the existence of a
customer demand for efficacious and safe products. TyraTech's
technology can address this need. In addition, good relationships
have been established with some of the biggest producers of animal
protein.
OutSmart
As previously announced, TyraTech re-developed its formulation
to repel flies, mosquitoes and ticks on horses. After extensive
laboratory work and clinical testing, a new patent has been filed
and the product was pre-launched, at the end of 2016 with our
partner SmartPak, the biggest distributor of equine products and
equipment in the US. The product has been fully launched in 2017 in
time for the fly season.
Background
TyraTech is a life sciences company focused on nature-derived
insect and parasite control products. The Company's technology,
based on more than 10 years of research and more than 33 granted
and 33 pending patents, relies upon plant-based formulations that
offer a unique combination of effectiveness, safety and
convenience. It has the potential, already demonstrated in several
markets and usages, to effectively compete with traditional
pesticides which are plagued with resistance and safety issues.
As a "green" platform, Tyratech's technology offers an
innovative answer to a growing trend of customers looking for clean
food, devoid of artificial chemicals, and safe for children, home
and the environment. TyraTech's technology has applications in
multiple markets across agriculture, home and garden, human and
animal health - everywhere there are insects and parasites.
In 2012, TyraTech licensed its products and technology targeted
at agriculture to the American Vanguard Corporation (NYSE: AVD).
TyraTech created Envance(R), a joint venture with American Vanguard
Corporation to develop and explore the best way to commercialize
products for home and garden usage. TyraTech holds 13.3% of
Envance.
For human health, TyraTech, has successfully commercialized its
own brand of head lice products, Vamousse, in the retail and OTC
pharmacy markets in the US and in Europe. It has also
commercialized Guardian, an innovative personal repellent product,
on a very limited scale in the US.
Finally, TyraTech is developing new products for the animal
health market: some of which have already been launched into the US
in limited market segments (such as: equine fly repellent; avian
mite control), but most of which are in the research and
development phase.
TyraTech has evolved successfully from a technology platform
into a company dedicated to the development and commercialization
of products, targeting the control of insects and parasites. This
strategic move has demonstrated that:
- The technology, built on a "green" backbone offers a credible
alternative to existing traditional chemical pesticides. With a
priority on efficacy, products designed from nature-derived
alternatives can answer a growing demand for insect and parasite
control that is clean and safe for people, animals, the environment
and the food chain;
- The technology is validated through multiple product
applications showing a unique value proposition attractive to end
consumers;
- As evidenced by the Vamousse brand, the technology is
competitive against the biggest established brands in the
category;
- TyraTech can develop and manage a solid infrastructure able to
address the needs of the biggest retailers in the world and in
multiple geographies;
- TyraTech can create brands with significant growth potential.
The Company's activities are at different stages of
maturity:
-- Human health (Vamousse and Guardian) is at a monetization and
commercialization phase and Vamousse provides a positive direct
contribution margin of $2.2 million
-- Animal health (PureScience) is largely at an early phase of
innovation and product development.
As shown in the operational update, TyraTech made substantial
progress in 2016 in increasing the market penetration and market
share of its head lice product and advancing the pipeline of its
animal health products. However, it also became clear that the
Company lacks the necessary resources from operating cash flow
alone to fund the next phase of its growth in both areas. With
limited available resources, Tyratech has not been able to
effectively pursue growth in both the OTC human care market and the
development of products for the animal health market, because each
requires investment, either in marketing or in R&D.
Accordingly, and as set out in more detail above in the
Chairman's statement, the Board has undertaken a comprehensive
strategic review of the business to determine the best strategy to
grow and/or capture value from both businesses and to enhance
shareholder value.
Market Potential and Business Model
Human health and personal care
The worldwide market for the control of insects and parasites is
estimated to be worth in the region of $800 million in 2016 driven
mainly by need for the control of head lice and on-skin mosquito
and tick repellents.
The global lice market, estimated at $370 million at the
manufacturer level in 2016, is growing annually between 5% and 8%
in value. Unmet needs exist in this market because globally people
in all geographies, and socio-economic groups are susceptible to
lice infestation, and the incidences are frequent. Consumer needs
have not been well met in the market due to growing resistance to
the pesticides commonly used to treat lice infestation and the
frustrating cosmetics of alternative technologies like
dimethicone.
With its unique technology, Vamousse can fulfill these unmet
needs. Vamousse represents the next generation of lice control
products, uniquely combining high levels of efficacy, safety and
convenience. Compared to earlier products in the category, Vamousse
Lice Treatment uses a different mode of action to kill both lice
and eggs in the same application. Vamousse Lice Treatment is
pesticide-free and works by dehydrating and desiccating adult lice
and their eggs.
Additionally, the market for personal insect repellents is
estimated to be worth in the region of $430 million at the
manufacturer level in 2016 and is dominated by the pesticide
molecule DEET, which is now more than 60 years old.
Some issues are arising from the intensive usage of this
molecule. It is now well documented that DEET dissolves some
plastics, synthetic fabrics and painted surfaces. In Europe,
personal repellent products with high concentrations of DEET have
restrictions of use for children. Additionally, instances of DEET
resistance have been reported in flies. Customers frequently
express their dissatisfaction with products using synthetic
pesticides and are looking for alternatives. TyraTech's Guardian
offers a plant-based solution that is safe and effective. Multiple
laboratory and field studies, published in peer-reviewed scientific
journals, have demonstrated that Guardian offers the same and
sometimes more effective protection than DEET but with a better
safety profile.
Growth prospects for TyraTech in the human health market for the
control of insects and parasites will be mainly linked to the
performance of Vamousse and Guardian in the categories of head lice
and insect repellent.
The Company has not yet identified other segments in human
health that would offer a significant opportunity for TyraTech's
technology. This is however, not the case with the animal health
market, which represents a larger market opportunity, given its
size and greater unmet needs.
Animal health
The market for animal health, estimated at $24 billion in 2015
at manufacturer level, is traditionally split between the market
for companion animals (dogs, cats, and horses) representing more
than 40% of the total and the market for production animals
(ruminant, poultry, and swine) totaling almost 60% of the
market.
The market for companion animals is driven by the strengthening
of the human-animal bond. Pets are more and more considered members
of the family. Market growth is fueled by increased pet
medicalization; a strong elasticity to product innovation; and a
relatively low elasticity to price increases.
Tyratech's technology would be applicable in the control of
fleas and ticks and internal parasites, representing close to a $4
billion market worldwide. Even though it is a very competitive and
crowded market, there is a growing demand for products that are
effective and, importantly, not derived from traditional
pesticides. Families are reluctant to use pesticides on their pets,
the same way they are more and more eager to ban the usage of
pesticides on their children. The products for flea and tick
control are sold either by vets or as OTC products in major retail
and pet shop chains. This is typically a business-to-consumer
market model, not completely different from the head lice business
model.
The market for production animals is driven by the necessity to
provide affordable proteins to a growing population and a rising
middle class in certain nations. Because the availability of arable
land is limited and diminishing per capita, it will be very
difficult to increase the number of animals. The principal way to
achieve the goal of feeding the planet will be through increasing
animal productivity. Even though there are numerous factors that
influence animal productivity (feed efficiency, husbandry,
genetics), it is widely recognized that insects and parasites are a
major impediment to animal health and productivity. These insects
and parasites can directly cause nuisance and spoliation of
nutrients while indirectly constituting vectors for disease
transmission and aggravation of virus or bacterial infections.
The usage of traditional chemical pesticides is more and more
contested for the following reasons:
-- The products are less efficacious because insects and
parasites have in some cases developed a very high level of
resistance. There are now several need states in which there are no
pesticides able to control parasites any longer.
-- The cost of launching new pesticides or parasiticides in the
animal health market is increasing rapidly, mainly due to the long
and complex studies required to ensure the safety of the molecules
for the food chain and the environment. This is dramatically
slowing the pace of innovation.
-- The regulatory agencies around the world are increasingly
restricting the usage of chemical pesticides on animals destined to
enter the food chain.
Finally, there is a growing demand from customers for "clean"
food devoid of chemicals, hormones, antibiotics and pesticides.
This is probably the strongest and most significant force that will
drive the production systems of animal protein in the next decade.
The major producers of poultry and eggs are already responding to
the 'voice of the consumer' by voluntarily banning the usage of
hormones and antibiotics and moving to a cage-free system of egg
production.
Products for production animals are sold through distributors
with the recommendation of vets and professionals. This is a
business-to-business model that requires convincing customers one
by one and managing key accounts in markets that are more and more
concentrated in the hands of few major multinational
operations.
TyraTech's technology offers multiple benefits to the animal
health market:
- Superior efficacy:
o The formulations are highly effective, even against insects
and parasites that are resistant to traditional pesticides
o The products are active against all stages (eggs to adults)
requiring only one application where two or more traditional
pesticide applications must be used
o The treatment is economical, offering extended control and
less frequent application due to the holistic control of all stages
of insect development
- Safety:
o The formulations are plant-based, therefore they offer a
superior level of safety
o The products are easy to use so there is no requirement for
licensed applicators to be hired
o Application can be made when animals are present due to the
safe ingredient profile
o The products do not leave residues in the environment and can
be used where traditional pesticides are forbidden
The animal health market, by its size, growth potential and
unmet needs, represents a major opportunity for TyraTech. The
Company tested its unique value proposition through the launch of
PureScience products in the poultry sector in the US. Some of the
biggest players in the market, responded very positively to
TyraTech's innovative solutions.
Outlook and Summary
For 2017, our operational focus will be to execute upon the
increased distribution of Vamousse in both the US and the UK and
growth of brand awareness with expansion of the portfolio. We will
continue to roll-out the existing animal health products in the
US.
To optimize our existing resources, the operations will stay
focused in the short term on growing Vamousse in the US and in the
UK without major expansion in existing and new geographies. It is
expected that a great deal of time will be spent by management to
prepare and execute the new strategy.
Bruno Jactel
Chief Executive Officer
9 May 2017
Financial Overview
Revenue
Overall, gross revenue for 2016 was $8.4 million versus $7.4
million in 2015. Of this, gross product revenue was $8.0 million
compared to $7.1 million in 2015, an increase of 13%. This increase
in gross product revenue is primarily a result of the expansion of
the Vamousse distribution network in both the US and UK, in both
number of stores and additional product listing. Gross product
revenue by geography was 78% US and 22% UK/EU for both 2016 and
2015.
In 2016, $7.7 million, or 96% of gross product revenue was
generated by the Vamousse product line (2015: $ 6.9 million, or
97%), and animal health product revenue at $0.3 million grew 45%
year over year (2015: $0.2 million).
Net revenue (excluding sales discounts, returns and allowances)
grew by $0.5 million, year-over-year to $7.2 million from $6.7
million, an increase of 8%. 2016 net revenue was depressed by $0.3
million as a result of increased expense incurred for new products
sold in new distribution channels. The growth in net product
revenue was 8% ($6.9 million versus $6.4 million).
Net revenue for the Vamousse product line was $6.6 million after
sales discounts, returns and allowances despite the increase of
$0.3 million year on year of slotting fees in new retail outlets
(2015: $6.2 million).
Cost of Revenue, Gross Profit, and Gross Margin
Overall, cost of revenue for 2016 was $2.4 million versus $2.1
million in 2015. Product cost of revenue was $2.3 million and $2.0
million for 2016 and 2015, respectively; while collaborative cost
of revenue remained unchanged at $0.1 million respectively.
Gross profit for 2016 was $4.8 million (gross margin 67% on net
revenue) versus $4.6 million (69% on net revenue) in 2015. Gross
margin decreased slightly in 2016 due to the heavy investment to
place new product and a slight increase in product mix.
As our business model continues to move to a product-based
model, product gross profit and product gross margin will continue
to be primary measures.
In 2016, product gross profit was $4.6 million or 67% on net
revenue versus $4.4 million or 70% on net revenue in 2015.
In 2016, the cost of revenue for the Vamousse product line was
$2 million producing a product gross margin on net revenue of 69%
on the brand (2015: $1.8 million or 70%).
Operating Performance
Operating costs and expenses for 2016 were $7.1 versus $7.1
million in 2015.
Net of non-cash and other one-time expenses, operating costs and
expenses were approximately $6.9 million and $7.0 million in 2016
and 2015, respectively, a decrease of $0.1 million.
The loss from operations for 2016 was $2.3 million versus $2.4
million in 2015, and the net loss, before and after taxes, for 2016
was $ 2.3 million versus $2.3 million in 2015. In 2015, the main
driver of the $0.1 million difference between loss from operations
and net loss, before and after taxes, was the income received from
AMVAC for the partial sale of TyraTech's ownership percentage in
Envance.
Direct business development expenses related to Vamousse were
$2.3 million in 2016 (2015: $2.3 million). Overall, Vamousse
provided a positive direct contribution margin of 34% on net
revenue, or $2.2 million (2015: 33% or $2.1 million respectively).
Direct contribution is defined as Vamousse net sales less
associated cost of sales and sales and marketing expenses for the
brand. In 2016 both direct contribution margin and gross margin
were reduced by $0.3 million as against 2015 margins as a result of
additional "slotting fees" incurred to expand the retail
distribution of the Vamousse product range. These fees should
provide ongoing benefits in future years from the resulting
enhanced distribution.
Balance Sheet
At 31 December 2016 and 2015, cash and cash equivalents were
$1.8 million and $4.0 million, respectively.
Working capital was $2.3 million at 31 December 2016 versus
working capital of $4.8 million at 31 December 2015. The $2.5
million decrease is attributable primarily to the use of working
capital in commercial operations without additional fundraise
during 2016. Additionally, accounts receivable decreased slightly
which was partially offset by a small increase in inventory and an
increase in deferred revenue from service and licensing fees to be
released in 2017.
At 31 December 2016 shareholders' equity was approximately $2.7
million versus $5.0 million at 31 December 2015. The $2.3 million
decrease was primarily due to approximately $4.5 million received
in net proceeds from the stock issuance in November 2015 offset by
the current year $2.3 million net loss, before and after taxes.
Cash Flow and Liquidity
Net cash used in operations was $1.8 million in 2016 compared to
$2.8 million for 2015, a decrease of $1 million. This decrease was
primarily the result of an increase in product sales and related
cash collections combined with a deferral of revenue from service
and licensing fees representing $0.3 million which will be released
in 2017.
Net cash used in investing during 2016 was approximately $0.2
million, resulting primarily from the capitalization of intangible
assets. For 2015, net cash provided by investing represents $0.1
million received for the partial ownership sale of Envance to AMVAC
along with minimal amounts of cash received from the sale of
laboratory equipment, netted against the $0.1 million expense for
intangible acquisition costs.
Net cash provided by financing activities was $0.0 million for
2016 (2015: $4.5 million).
As of 31 December 2016, the Company had approximately $1.8
million in cash and cash equivalents. The Company had no
indebtedness as of 31 December 2016 but currently has no committed
external sources of funds.
Based upon the Company's existing cash and cash equivalents,
implementation of the board's strategic review conclusion,
anticipated revenues from product sales and other collaborative
arrangements, and the ability to control operating costs, the
Company's forecast indicates it will have sufficient cash to meet
its working capital needs through the next twelve months.
Currency Effects
In 2016, the Company recorded foreign currency translation
consolidation adjustment of $0.1 million. Going forward, as the
Company pursues current and future growth opportunities in
geographic regions outside the US, the Company may evaluate the
need to use financial derivatives to mitigate foreign currency
risk.
Erica H. Boisvert
Chief Financial Officer
9 May 2017
TyraTech, Inc.
Consolidated Statements of Operations and Comprehensive
Loss
in thousands
-------------------------------------------------------------------
Year Ended December 31, 2016 2015
------------------------------------------- ---------- ----------
Gross Revenue:
Product $ 8,026 $ 7,108
Collaborative 333 335
------------------------------------------- ---------- ----------
Total gross revenue 8,359 7,443
Less: sales, discounts, returns,
and allowances 1,142 708
------------------------------------------- ---------- ----------
Total net revenue 7,217 6,735
Cost of revenue:
Product 2,266 1,959
Collaborative 129 137
------------------------------------------- ---------- ----------
Total cost of revenue 2,395 2,096
------------------------------------------- ---------- ----------
Gross profit 4,822 4,639
Costs and expenses:
General and administrative 3,079 3,285
Business development 2,848 2,726
Research and development 1,204 1,042
----------
Total costs and expenses 7,131 7,053
------------------------------------------- ---------- ----------
Loss from operations (2,309) (2,414)
------------------------------------------- ---------- ----------
Other income (expense):
Other income 30 1
Gain on partial sale of Envance
ownership - 129
Change in fair value of warrant
liabilities - 23
---------- ----------
Total other income 30 153
------------------------------------------- ---------- ----------
Loss before income taxes (2,279) (2,261)
Income tax expense - -
------------------------------------------- ---------- ----------
Net loss $ (2,279) $ (2,261)
------------------------------------------- ---------- ----------
Other comprehensive loss:
Foreign currency translation
adjustments (121) (7)
------------------------------------------- ---------- ----------
Comprehensive Loss $ (2,400) $ (2,268)
------------------------------------------- ---------- ----------
Net loss per common share
Basic and diluted $ ($0.01) $ (0.01)
------------------------------------------- ---------- ----------
Weighted average number of common shares
(000's)
Basic and diluted 366,582 273,946
------------------------------------------- ---------- ----------
TyraTech, Inc.
Consolidated Balance Sheets
in thousands, except for share data
--------------------------------------------------------------------
December 31, 2016 2015
------------------------------------------------ -------- --------
ASSETS
Current assets
Cash and cash equivalents $ 1,755 $ 3,955
Accounts receivable 985 1,117
Inventory 988 829
Prepaid expenses 162 218
------------------------------------------------ -------- --------
Total current assets 3,890 6,119
Property and equipment, net of
accumulated depreciation 23 32
Intangible assets, net of accumulated
amortisation 300 129
Long term deposits 69 69
Total assets $ 4,282 $ 6,349
------------------------------------------------ -------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 742 $ 591
Accrued liabilities 501 704
Deferred revenue 298 70
------------------------------------------------ -------- --------
Total current liabilities 1,541 1,365
Other long-term liabilities 20 20
--------
Total liabilities 1,561 1,385
------------------------------------------------ -------- --------
Commitments and Contingencies
Shareholders' equity
Common stock, at $0.001 par authorized
480 million; 367.7 million shares
issued, 366.6 million shares outstanding
(30 June 2015: Common stock, at
$0.001 par authorized 380 million;
262.3 million shares issued, 261.2
million shares outstanding)
shares issued, 366.6 million shares
outstanding as of
31 December 2016 and 2015 367 367
Additional paid in capital 92,053 91,896
Accumulated deficit (89,460) (87,181)
Accumulated other comprehensive
income (126) (5)
Treasury stock of 1.1 million shares
as of 31 December 2016 and 2015 (108) (108)
Total shareholders' equity 2,726 4,969
------------------------------------------------ -------- --------
Non-controlling interest (5) (5)
-------- --------
Total shareholders' equity 2,721 4,964
Total liabilities and shareholders'
equity $ 4,282 $ 6,349
------------------------------------------------ -------- --------
TyraTech, Inc.
Consolidated Statements of Shareholders' Equity
in thousands
------------------------------------------------------------------------------------------------------
Accumulated
Additional Other
Common Paid-in Accumulated Treasury Non-controlling Comprehensive Total
Stock Capital Deficit Stock Interest Income Equity
(Loss)
Balance as
of 31 December
2014 $ 261 $ 87,341 $ (84,920) $ (108) $ (5) $ 2 $ 2,571
----------------- ------ ---------- ----------- -------- --------------- ------------- --------
Proceeds from
issuance of
common
stock, net
of expenses 106 4,279 - - - - 4,385
Equity warrants
issued (also
reduces
proceeds above) - 144 - - - - 144
Stock based
compensation
- SARS - 132 - - - - 132
Foreign currency
translation - - - - - (7) (7)
Consolidated
net loss - - (2,261) - - - (2,261)
Balance as
of 31 December
2015 $ 367 $ 91,896 $ (87,181) $ (108) $ (5) $ (5) $ 4,964
----------------- ------ ---------- ----------- -------- --------------- ------------- --------
Stock based
compensation
- SARS - 157 - - - - 157
Foreign currency
translation - - - - - (121) (121)
Consolidated
net loss - - (2,279) - - - (2,279)
Balance as
of 31 December
2016 $ 367 $ 92,053 $ (89,460) $ (108) $ (5) $ (126) $ 2,721
----------------- ------ ---------- ----------- -------- --------------- ------------- --------
TyraTech, Inc.
Consolidated Statements of Cash Flows
in thousands
-----------------------------------------------------------------
Year Ended December 31, 2016 2015
----------------------------------------- ---------- ----------
Cash flows from operating activities:
Net loss $ (2,279) $ (2,261)
Adjustments to reconcile net loss
to net cash used in
operating activities:
Depreciation 17 42
Amortisation of intangible assets 56 -
Stock based compensation 157 132
Change in fair value of warrants - (23)
Gain on partial sale of unconsolidated
sub - (125)
Net gain from sale of equipment - (4)
Changes in operating assets and
liabilities:
Accounts receivable 132 (208)
Inventory (159) 96
Prepaid expenses and long-term
deposits 56 (27)
Accounts payable and accrued liabilities (52) (340)
Deferred revenue and other long-term
liabilities 228 (71)
----------------------------------------- ---------- ----------
Net cash used in operating activities (1,844) (2,789)
----------------------------------------- ---------- ----------
Cash flows from investing activities:
Intangible asset acquisition costs (227) (129)
Purchase of property and equipment (8) (2)
Proceeds from sales of equipment - 16
Proceeds from partial sale of
unconsolidated subsidiary - 125
Net cash (used in) provided by
investing activities (235) 10
----------------------------------------- ---------- ----------
Cash flows from financing activities:
Net proceeds from sale of common
stock - 4,385
Equity warrants issued - 144
----------------------------------------- ---------- ----------
Net cash provided by financing
activities - 4,529
----------------------------------------- ---------- ----------
Net increase in cash (2,079) 1,750
Cash and cash equivalents, beginning
of year 3,955 2,212
Effect of exchange rate changes
on cash and cash equivalents (121) (7)
----------------------------------------- ---------- ----------
Cash and cash equivalents, end
of year $ 1,755 $ 3,955
----------------------------------------- ---------- ----------
Notes to Consolidated Financial Statements
(1) Basis of Preparation
The financial information set out in this document does not
constitute the Group's financial statements for the year ended 31
December 2016 or 31 December 2015. The annual report and financial
statements for the year ended 31 December 2016 were approved by the
Board of Directors on 9 May 2017 along with this preliminary
announcement. The financial statements for the year ended 31
December 2016 have been reported on by the Independent Auditor. The
Independent Auditor's report on the financial statements for 2016
was unqualified and did not draw attention to any matters by way of
emphasis.
The financial information set out in this preliminary
announcement has been using accounting principles generally
accepted in the United States of America ("U.S. GAAP"). The
accounting policies adopted in these preliminary results have been
consistently applied to all the years presented and are consistent
with the policies used in the preparation of the financial
statements for the year ended 31 December 2015. The principal
accounting policies adopted are unchanged from those used in the
preparation of the financial statements for the period ended 31
December 2016. New standards, amendments and interpretations to
existing standards, which have been adopted by the Group, have not
been listed since they have no material impact on the financial
statements.
(2) Liquidity and Capital Resources
At 31 December 2016, the Company had $1.8 million (2015: $4.0
million) in cash and cash equivalents and no indebtedness. The
Company currently has no committed external source of funds.
The Directors have prepared cash flow forecasts covering a
period of at least 12 months from the date of approval of the
annual report and financial statements, which foresees that the
Group will be able to operate within its existing working capital
facilities based upon the following forecast assumptions: existing
cash and cash equivalents, implementation of the board's strategic
review conclusion, anticipated revenues from product sales and
other collaborative arrangements, and the ability to control
operating costs.
Overall, the Directors are of the view that the Group has
adequate financing to be able to meet its financial obligations for
a period of at least 12 months from the date of approval of the
annual report and financial statements.
(3) Distribution of Annual Report and Financial Statements
Following distribution to stockholders of copies of its full
Annual Report and Financial Statements that comply with US GAAP,
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) Cautionary Statement
Tyratech ('the group') has made forward-looking statements in
this preliminary announcement. The Group considers any statements
that are not historical facts as "forward-looking statements". They
relate to events and trends that are subject to risk and
uncertainty that may cause actual results and the financial
performance of the Group to differ materially from those contained
in any forward-looking statement. These statements are made in good
faith based on information available to them and such statements
should be treated with caution due to the inherent uncertainties,
including both economic and business risk factors, underlying any
such forward-looking information.
(5) Date of Annual General Meeting
The Annual General Meeting (AGM) of the stockholders of
TyraTech, Inc. will be held at the offices of the Company 5151
McCrimmon Parkway, Suite 275, Morrisville NC, USA 27560, on 28 June
2017 at 12:00PM (EDT).
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR FMGGKLRMGNZM
(END) Dow Jones Newswires
May 09, 2017 02:00 ET (06:00 GMT)
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