Fi n a n c i a l H i g h l i g h t s
B a r r y R i l e y ,
Ac t i n g C h i e f F i n a n c i a l O f f i c e r
TYRATECH • ANNUAL REPORT 2014 • PAGE 6
Revenue
Overall, gross revenue for 2014 was $4.9 million versus $1.4 million
in 2013. This increase in gross revenue can be primarily attributed
to the introduction of product revenue ($2.8 million versus $0.0
million), which commenced in February 2014 in the USA ($2.1
million) and in July 2014 in the UK ($0.7 million). Going forward, as
our business model continues to evolve, we anticipate product
revenue will become a greater percentage of our overall gross
revenue.
Net revenue grew approximately 245 percent, or $3.3 million,
year-over-year to $4.7 million from $1.4 million. This growth can be
primarily attributed to product net revenue growth ($2.6 million
versus $0.0 million). The remaining growth in net revenue came
from collaborative revenue, which benefited from a one-time
recognition of the approximate $1.2 million remaining Terminix
exclusive product license fee, which was offset by year-overyear
reductions in other collaborative revenue sources. Again,
going forward we anticipate product net revenue will become a
greater percentage of our overall net revenue.
Cost of Revenue, Gross Profit, and Gross Margin
Overall, cost of revenue for 2014 was $1.2 million versus $0.7
million in 2013. Product cost of revenue was $0.9 million and $0.0
million for 2014 and 2013, respectively; while collaborative cost of
revenue was $0.3 million in 2014 versus $0.7 million in 2013.
Gross profit for 2014 was $3.5 million (gross margin equals 74.9
percent) versus $0.6 million (46.3 percent) in 2013. Gross profit
and gross margin both benefited from the one-time recognition
of the remaining Terminix exclusive product license fee.
As our business model moves to a product-based model, product
gross profit and product gross margin will become primary
measures. For 2014, product gross profit was $1.7 million (64.1
percent). Within the personal care market, we anticipate product
gross margin can remain in the low-to-mid 60 percentage range.
However, downward gross margin pressure may be experienced
due to such factors as, i) the initial year investments required for
our customer acquisition initiatives, ii) our response to competitive
market dynamics, and iii) our ability to effectively manage our
supply chain, manufacturing, and distribution costs, as well as
other factors.
Operating Performance
Operating costs and expenses for 2014 were $8.5 versus $5.0
million in 2013.
Net of non-cash and other one-time expenses, operating costs
and expenses were approximately $8.2 million and $4.7 million
in 2014 and 2013, respectively, an increase of $3.5 million. The
increase was driven by an approximate $3.0 million increase
in business development costs and expenses, primarily due to
advertising and sales support costs associated with the USA and
the UK product launches, as well as an approximate $0.7 million
increase in general and administrative costs and expenses,
primarily due to establishing a UK branch and incurring personnelrelated
costs. These increases were partially offset by a $0.2 million
reduction in research and development costs and expenses.
Furthermore, as we continue to evaluate growth opportunities
such as market penetration, geographic expansion, and new
product launch options, both business development and
general and administrative costs and expenses are expected to
increase in absolute terms. However, over time, we anticipate
both these costs items will decrease as a percentage of total
product revenue.
The loss from operations for 2014 was $5.0 million versus $4.3
million in 2013, and the net loss, before and after taxes, for 2014
was $5.1 million versus $4.9 million in 2013. In 2014, the drivers
of the $0.1 million difference between loss from operations and
net loss, before and after taxes, were the income impact of $0.2
million due to the change in the valuation of warrants offset by
recognizing a $0.3 million loss on our investment in the Envance
joint venture.
Balance Sheet
At 31 December 2014 and 2013, cash and cash equivalents were
$2.2 million and $0.9 million, respectively.
Working capital was $2.5 million at 31 December 2014 versus
negative working capital of $0.2 million at 31 December 2013.
The $2.7 million change is attributable to increases in cash and
cash equivalents, accounts receivable, and inventory, partially
offset by increases in accounts payable and accrued liabilities.
