10
Financial Review from the CFO
(continued)
US$1.7 million (2007: US$3.8 million) with no provisions for bonuses in 2008 (2007: US$1.2 million), reductions in accrued XLTG expenses (US$0.4 million), and reductions in accrued consulting expenses (US$0.3 million). The deferred revenue has reduced by 25% to US$1.2 million (2006: US$1.6 million) due to the timing and size of milestone payments and when they are recognized as revenue. The deferred revenue outstanding at the end of 2008 is expected to be recorded as revenue during the first half of 2009 as costs are incurred on collaborative research and development activities. The warrant liability relating to warrants issued to the underwriters of the IPOPO has reduced significantly to a negligible amount (2007: US$1.0 million) due to the significant reduction in the Company´s stock price during the year.
There were no changes in the Company´s issued shares during
the year. During the first half year, the Group received treasury stock in settlement of a loan of US$0.5 million, which was made to fund an unanticipated tax liability of Dr. Armstrong resulting from the conversion of units in TyraTech LLCLLCLLC to common shares in TyraTech, Inc.
Liquidity and Cash Flow: Net loss before and after tax for the year was US$17.4 million (2007: US$16.5 million) including non-cash expenses such as amortization of employee stock awards of US$4.1 million (2007: US$4.0 million), depreciation and amortization of US$0.5 million (2007: US$0.9 million), write-off of inventory US$0.7 million (2007: US$0.2 million) and changes in the value of existing warrants of US$(1.0) million (2007: US$0.5 million). The increased operational activity towards the end of the year, including sales and product development, has increased accounts receivable, prepaid expenses and inventory by US$3.1 million (2007: US$1.5 million). There was a decrease in payables and accruals of US$2.1 million (2007: increase US$2.5 million) mostly from the payment of 2007 bonuses in 2008 and recognition of deferred revenues US$0.4 million (2007: US$0.4 million). All this together has resulted in a net cash outflow from operating activities in the year of US$17.9 million (2007: US$10.3 million).
Cash invested in property, plant and equipment (PPPP&E) decreased to US$0.4 million (2007: US$0.9 million). The majority of the work in fitting out new offices occurred in 2007 with only a small amount of cost rolling into 2008. Costs relating to the new IT infrastructure were split equally between the two years. All of these capital projects are substantially complete.
As noted above, during 2007 the Group issued 5,000,000 shares with the admission of the Group to trading on the AIM market of the London Stock Exchange, for net proceeds of US$43.7 million. Part of the proceeds from the issue was used to repay the notes payable to XLTechGroup, Inc.
Cash and cash equivalents were US$9.2 million (2007: US$27.5 million). We invest our cash resources in deposits with banks with the highest credit ratings, putting security before absolute levels of return.
Currency Effects: The Group has no significant overseas currency exposures and does not use financial derivatives to manage currency risk.
Keith Bigsby / Chief Financial Officer
April 1, 2009
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