T YR AT ECH, INC. / ANNUAL R EPORT 20 0 9
Notes to Consolidated Financial Statements
(CONTINUED)
(8) RELATED PARTY TRANSACTIONS
Research and Development Services from
Vanderbilt University
During the year ended December 31, 2009, the Company paid US$360,000 (2008: US$496,000) to Vanderbilt University (Vanderbilt), a significant shareholder, for the dedicated use of a laboratory and staff which houses the Company's proprietary development platform. Such amounts are included in research and development costs in the consolidated statements of operations. As of December 31, 2009 and 2008, no amounts were payable to Vanderbilt under this arrangement.
(9) WARRANTS
(a) XL TechGroup Inc. Warrants
The 594,306 XLTG warrants are for a term of 5 years, expire on May 1, 2011 and have an exercise price of £3.40. At the date of grant, the warrants were recorded at fair value as a warrant liability and as a discount in obtaining financing. Upon the qualified public offering of the shares on June 1, 2007, the warrants qualified for equity classification within the consolidated balance sheets and as such the warrant liability was reclassified to equity at fair value on June 1, 2007. The warrants are not subsequently re-measured to fair value after this date as they qualify for equity classification. The fair value of the warrant as of June 1, 2007 upon the qualified public offering was US$4.5 million. The XLTG warrants were transferred to PetroTech Holdings Corporation, a Laurus/Valens group company, as part of the transfer of XLTG's 45.69% shareholding in the Company on August 28, 2008.
(b) Collaborative Warrants
In connection with research and development collaborations, the Company granted warrants to purchase a variable number of common shares of Company's common shares equal to US$2.0 million divided by the per share price to the public in the initial public offering in June 2007. The warrants qualify for equity classification within the consolidated balance sheets and as such the warrant liability was reclassified to equity at fair value in June 2007 and December 2007. The warrants are not subsequently re-measured to fair value after this date as they qualify for equity classification. The warrants have a term of three years from the time of the qualified equity offering and they expired on June 1, 2010. The US$2.0 million of warrants are for 202,941 common shares
of the Company at an exercise price of US$9.80 to US$9.89 per share.
(c) IPO Underwriter Warrants
In connection with the IPO in June 2007, the Company granted warrants to underwriters of the IPO to purchase 198,002 common shares of the Company at £5 per common share. The warrants are for a term of 5 years. At the date of grant, the warrants were recorded at fair value to a warrant liability with the expense offset against the IPO proceeds
in equity. The warrant is re-measured at fair value at each reporting date with subsequent changes in fair value recorded in the accompanying consolidated statement of operations. The fair value of the warrants as of December 31, 2009 and December 31, 2008 were US$6 and US$618, respectively.
The fair value of these warrants was determined by using the Black-Scholes option-pricing model with the following assumptions: no dividends, risk-free rate of 4.4% (2008: 4.4%), the remaining contractual life of the warrants, and
a volatility of 79% (2008: 68%).
(10) STOCK BASED COMPENSATION
(a) Unit Grants
From inception until recapitalized from a limited liability company to a corporation on May 23, 2007, the Company has granted a total of 2.0 million net member units to various employees through unit grant agreements. The unit grants generally vest over four years of continual service and have an initial cost per unit of $0.01. The fair value of these grants was determined by the Company at the grant date and was equal to the fair market value of the units at the date of grant. The fair value is amortized to compensation expense on a straight-line basis over the vesting period. The unrecognized future compensation cost is US$0.9 million (2008: US$5.5 million) and will be recognized over a weighted average period of 1.25 years.
Employees
As of December 31, 2009 the total unrecognized compensation cost for these unit grants was US$0.9 million (2008: US$5.5 million), which is being amortized over the remaining weighted average vesting period of 1.25 years (2008: 1.8 years). The compensation recognized in operating expenses for unit grants for the year ended December 31, 2009 was US$2.1 million (2008: US$2.6 million). Since inception to
