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XL TechGroup, Inc. (XLT)

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Tuesday 20 September, 2005

XL TechGroup, Inc.

Interim Results

XL TechGroup, Inc.
20 September 2005


Press Release                                                  20 September 2005


                              XL TechGroup, Inc.

                      ('XL TechGroup' or the 'Company')

             Interim Results for the six months ended 30 June 2005



XL TechGroup, Inc. (AIM: XLT), the systematic architect and builder of an
ongoing stream of high value new companies, today announces its interim results
for the six months ended 30 June 2005.



Highlights

  • Strong balance sheet; with cash of US$23.8 million as at 30 June 2005;
    total cash and marketable securities as at 19 September 2005 of
    approximately US$141 million, compared to US$28.8 million as at 31 December
    2004
  • Total cash and marketable securities as at 19 September 2005 of
    approximately US$141 million, compared to US$28.8 million as of 31 December
    2004
  • XL TechGroup has further expanded its intellectual property portfolio with
    the completion of several new technology option deals
  • TyraTech continues to develop new formulations to target different types
    of insect and is progressing discussions with a variety of commercial
    partners
  • AgCert International Plc ('Agcert') (LSE: AGC), the first company created
    by XL TechGroup, completed its listing on the main market of the London
    Stock Exchange in June.  XL TechGroup currently holds a 27.2% stake in
    AgCert, which at £1.60 per share, is valued at approximately US$120 million
    as at 19 September 2005



Post period end

•         XL TechGroup's third company, DxTech, which was formed in July 2005,
is developing a unique microfluidic platform that replaces essentially all blood
tests currently performed at reference laboratories with a disposable which can
be used at the point of care.

•         The Company's existing relationship with The Procter & Gamble Company
(NYSE: PG) has been extended by the implementation of a new strategy that
combines P&G's vast portfolio of Intellectual Property with XL TechGroup's
expertise in systematically developing new technology businesses and scaling
them to liquidity.

•         XL TechGroup welcomed Florida Governor, Jeb Bush, to its offices in
August as part of his initiative to leverage the vast IP portfolios that are
held by Florida universities and research institutions.

•         A strategic relationship has been established with one of the world's
leading power companies, The AES Corporation (NYSE: AES), to generate new
business opportunities focused on the renewable energy sector, with funding
provided by AES.  This relationship will also leverage the AES global network to
generate new business opportunities for XL TechGroup companies.



Commenting on the results, John Scott, Chief Executive Officer of XL TechGroup,
said:



'We have made a very good start to the year, and are continuing to build on this
progress.  AgCert's IPO in June was XL TechGroup's first liquidity event and a
clear validation of our business model.  TyraTech, our second company, is in
negotiations with a number of targeted customers while our third company,
DxTech, has made excellent progress since its formation in July.



We are also very pleased about the strategic relationships we have established
with Procter & Gamble and AES, which we believe will significantly expand the
commercial possibilities for our existing businesses as well as introduce even
more opportunities to the pipeline.  We expect to announce further agreements of
this kind during the next few months.



Finally, we have also made a number of exciting additions to our technology
pipeline, which we are evaluating in the context of significant unmet market
needs.  The strength of our pipeline clearly demonstrates our ability to
continue to create one to two new high-value, high-growth companies each year.'



For further information:

XL TechGroup Inc.
John Scott / Harold Gubnitsky                               Tel: +1 321 409 7403
[email protected]                                          www.xltechgroup.com



XL TechGroup media enquiries:
Abchurch Communications
Heather Salmond / Samantha Robbins                     Tel: +44 (0) 20 7398 7700
[email protected]                       www.abchurch-group.com


Chairman and CEO's Statement



Within a year of its flotation on AIM, XL TechGroup has made significant
progress in developing the companies it has created, and evaluating and
strengthening its pipeline of new business opportunities.  The Company's
activities continue to demonstrate the validity of its unique model for value
creation.



AgCert

We were delighted by the successful flotation of XL TechGroup's first company,
AgCert, on the London Stock Exchange in June 2005.  This was a strong validation
of the XL TechGroup methodology and represented the first in an ongoing stream
of future liquidity events.  Notwithstanding AgCert's recent trading update, we
remain highly confident about its prospects, as supported by the 19 September
2005 release about a letter of approval from the Brazilian Government.  We
remain committed shareholders in AgCert and our 27.2% stake is currently valued
at approximately US$120 million.



TyraTech & DxTech

The second and third companies created by XL TechGroup, TyraTech and DxTech, are
both making excellent progress as outlined below.



•         TyraTech, which was created by XL TechGroup in July 2004, is
developing a new class of highly effective, non-toxic pesticides, based on
approved, safe, natural oils.  Its development is progressing rapidly,
particularly in human healthcare applications (e.g. malarial mosquitoes, typhoid
bearing lice and intestinal parasites).  TyraTech is continuing discussions with
companies in North America, Asia and Europe as well as numerous national public
health programs about the licensing and distribution rights for its patented
formulations in relation to natural insecticide and personal care products.
TyraTech is 66.7% owned by XL TechGroup



•         DxTech, created in July 2005, is developing a unique micro-fluidic
platform to initiate a transition from centralised to distributed diagnostics.
The technology addresses the need in the medical diagnostics market for
real-time results at point-of-care for a comprehensive array of blood tests
typically required by clinicians.  We are in discussions with a number of
potential development partners, including major pharmaceutical companies which
recognise the technology platform's potential to fulfil their need for a major
overhaul of the clinical trial process.  DxTech is currently 100% owned by XL
TechGroup, although some minority equity may be granted to technology partners
in the future.



Corporate & Technology Partners

Relationships with our corporate and technology partners are essential to the
success of XL TechGroup's approach and we are continually seeking to develop and
expand both new and existing collaborations.



In July we announced the formalisation of our already strong relationship with P
&G, which will give us the exciting opportunity of evaluating some of P&G's
early-stage IP in relation to identified unmet market needs.  We look forward to
providing an update on the progress of the first identified platform technology
in due course.



We have today also announced a new strategic relationship with AES, a leading
global power company with 2004 revenues of US$9.5 billion.  Together, we have
developed a two-pronged approach to generate new business opportunities.  The
first initiative is a distribution channel joint-venture that will leverage the
strong relationships that AES has established in the 27 countries in which it
operates, in particular in Asia, Eastern Europe and Latin America.  Resulting
business leads will be used by XL TechGroup and its portfolio companies such as
TyraTech and DxTech to accelerate revenue generation, increase value at
liquidity, and shorten time to a liquidity event.



The second initiative with AES is a company co-development agreement to identify
unmet market needs, particularly in the renewable energy field, with AES funding
the development of these eco-tech company opportunities and XL TechGroup
retaining a majority stake in each company created.  A number of eco-tech
opportunities in the XL TechGroup pipeline are already being evaluated for their
ability to generate renewable energy on a large-scale and cost-effective basis.



We remain in discussions with a number of other potential technology and
corporate partners which we expect to result in agreements to be announced
before the end of the year.



Pipeline of Possible Opportunities

Our pipeline includes technologies that have been matched with unmet needs to
create potential opportunities, from which the next new companies might be
selected.  The nature of our rigorous selection process means that only a few of
these opportunities will be chosen for development and scaling as new companies.
 The pipeline is continuously evolving as new opportunities are added, and as
some existing opportunities are eliminated.  The following list represents a
snapshot of the current possibilities.



•         an bio-inert, injectable, adjustable phase (liquid, plastic, solid)
reconstructive polymer with wide uses from replacing vitreous fluid to creating
artificial cartilage

•         a set of technologies capable of the low-cost, mass-production of
renewable energy sources, such as pure hydrogen and ethanol

•         an offshoot of a novel cancer vaccine technology which is adapted as a
peripheral blood diagnostic to screen for early cancer detection

•         a novel technology for non-invasively imaging, for the first time, of
unstable vulnerable plaque in the coronary arteries

•         a new approach to causing existing cancer therapeutics to 'stick'
highly preferentially to certain tumour types, thereby enhancing the specificity
of the relevant drugs

•         a proprietary platform therapeutic technology designed to attack a
variety of metabolic diseases

•         a molecular structure that co-valently bonds active groups to skin,
hair, mucosa and other organic structures, creating multiple applications in
cosmetics, drug delivery, wound healing and insect repellents

•         a hyper spectral imagery technology used to automatically detect skin
cancers, even those not yet visible to the unaided eye



We completed negotiations for exclusive options on five new technologies in the
first half of the year, which are all at the select stage of our creation
methodology, and a further option was agreed in July.  These include agreements
with Cornell University, Vanderbilt University and Procter & Gamble.



Outlook

Our newest companies -Tyratech and DxTech - are both progressing well and we
anticipate further news from each of them over the next few months.  In
addition, AgCert's technology and business model remain sound and we are fully
supportive shareholders.  Similarly, we are confident that our agreements with
Procter & Gamble and AES will add considerable value to XL TechGroup's
constantly evolving pipeline of opportunities.  We look to the future with a
great deal of optimism as we continue to create a healthy flow of high-value,
rapid growth companies.



Geoffrey Vernon                   John Scott

Chairman                          Chief Executive Officer



Financial Review



By design, XL TechGroup has developed a unique proven method to rapidly bring
companies from inception to liquidity, matching unexploited IP from a group of
corporate and technology partners to identified unmet market needs.
Significantly, we create companies rather than directly produce and sell
products.  Consequently, it is likely that the only turnover that will be
reported by XL TechGroup will be the result of consolidation of our early stage
companies and their resulting turnover, which may not be material, consistent or
a meaningful measurement of success for XL TechGroup.



Summary

XL TechGroup has made very good progress during the period, principally as a
result of the successful IPO of AgCert which has significantly boosted our
marketable securities.  While we have to account for AgCert under the equity
method, which means we can only record this holding on the balance sheet at
US$20.1 million, the current market value of our AgCert shares is much higher at
approximately US$120 million.  The total of our cash balances and marketable
securities, as at 19 September 2005, is approximately US$141 million.



Results of Operations

For the six months ended 30 June 2005, XL TechGroup reported a loss of US$7.1
million.  This loss includes US$0.16 million of net charges from accounting
adjustments required as a result of the AgCert IPO.



Operating Expenses

For the six months ended 30 June 2005, XL TechGroup's direct operating expenses
were US$8.2 million - US$2.7 million for general and administration, US$4.5
million for business development and US$1.0 million for in-process research and
development.



Funding Affiliates

During the six months ended 30 June 2005, XL TechGroup received a net repayment
of US$1.4 million of advances previously made to AgCert; and advanced US$2.0
million to TyraTech.  Funding the operations of our pipeline opportunities and
new companies is a planned aspect of our business and is expected to increase in
the future as their number and size grows.  These fundings will take the form of
either equity contributions or debt, with the latter expected to be repaid upon
certain events, including in relation to exits.



Liquidity and Cash

At 30 June 2005, XL TechGroup had cash balances (including short and long term
investments) of US$23.8 million.  The net outflow of cash from operating
activities is principally due to the Company's operating loss generated from its
continuing company development activities.  XL TechGroup is confident that its
available cash and marketable securities will satisfy both operating expenses
and the funding needs of new companies for the foreseeable future.



David Szostak

Chief Financial Officer



XL TECHGROUP, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

June 30, 2005 (unaudited) and 2004


US Dollars                                                                                   June 30
                                 Assets                                             2005                 2004
Current assets:
   Cash                                                                       23,792,621               338,139
   Receivables                                                                    67,519                 3,488
   Note receivable                                                               917,000                     -
   Prepaid expenses                                                               57,542                27,573
   Due from affiliates                                                            66,552                     -
                                                                             ___________            __________
                        Total current assets                                  24,901,234               369,200
Investment in AgCert International, Plc.                                      20,081,993                     -

     (fair market value of $142,100,270 as of June 30, 2005)
Property and equipment, net of accumulated depreciation                          141,082                44,868
Deferred loan costs, net                                                               -               236,362
Deferred offering costs                                                                -             2,049,111
Other assets                                                                     103,129                87,420
                                                                             ___________           ___________
                        Total assets                                          45,227,438             2,786,961
                                                                             ___________           ___________
          Liabilities and Stockholders' Equity (Deficit)
Current liabilities:
   Current instalments of notes payable                                                -               600,000
   Accounts payable                                                              131,215               307,115
   Accrued liabilities                                                         1,351,983             2,040,762
   Warrant liability                                                                   -               216,000
   Liability for warrants to purchase AgCert International, Plc.               3,014,908               202,380
   shares
   Due to affiliates                                                                   -               202,010
                                                                             ___________           ___________
                        Total current liabilities                              4,498,106             3,568,267
Investment in ANX, LLC.                                                       21,493,749             3,337,095
Notes payable, excluding current instalments                                           -             2,800,000
                                                                             ___________           ___________
                        Total liabilities                                     25,991,855             9,705,362
                                                                             ___________           ___________
Minority interest                                                                291,611                     -
                                                                             ___________           ___________
Stockholders' equity (deficit)
   Common stock, par value $0.001.  Authorised 100,000,000                        49,311                32,936

       Shares. Issued and outstanding 49,311,482 shares in 2005

       and 32,936,115 in 2004
   Additional paid in capital                                                 45,010,106             7,081,047
   Accumulated deficit                                                      (24,682,644)          (12,395,658)
   Unearned compensation                                                     (1,432,801)           (1,636,726)
                                                                             ___________           ___________
                        Stockholders' equity (deficit)                        18,943,972           (6,918,401)
                                                                             ___________           ___________
                        Total liabilities and stockholders' equity            45,227,438             2,786,961
                                                                             ___________           ___________


XL TECHGROUP, INC. AND SUBSIDIARIES

Consolidated Statements of Operations

Six months ended June 30, 2005 (unaudited) and 2004


US Dollars                                                                           Six months ended June 30
                                                                                      2005                 2004
Operating expenses:
   General and administrative                                                    2,743,709            1,783,222
   Business development                                                          4,458,076              869,203
   In-process research and development                                           1,000,000                    -
                                                                               ___________          ___________
                 Total operating expenses                                        8,201,785            2,652,425
                                                                               ___________          ___________
Other income (expense):
   Interest income                                                                 434,121                    -
   Interest expense                                                                    542            (133,053)
   Gain on initial public offering of AgCert International, Plc.                25,549,121                    -
   Equity in losses of affiliates                                             (22,898,644)            (764,972)
   Change in fair value of warrants to purchase                                (2,812,528)                    -

         AgCert International, Plc. shares
   Other income                                                                    128,722               61,107
                                                                               ___________          ___________
                 Total other income (expense)                                      401,334            (836,918)
                                                                               ___________          ___________
                 Loss before income taxes and minority interest                (7,800,451)          (3,489,343)
Income taxes                                                                             -                    -
                                                                               ___________          ___________
                 Loss before minority interest                                 (7,800,451)          (3,489,343)
Minority interest                                                                  708,389                    -
                                                                               ___________          ___________
                 Net loss                                                      (7,092,062)          (3,489,343)
                                                                               ___________          ___________
Loss per share                                                                      (0.14)               (0.12)
                                                                               ___________          ___________
Weighted average number of common shares                                        49,311,482           29,973,793
                                                                               ___________          ___________




XL Techgroup, Inc. and subsidiarIES

Consolidated Statements of Cash Flows

Six months ended June 30, 2005 (unaudited) and 2004


US Dollars                                                                          Six months ended June 30
                                                                                    2005                  2004
Cash flows from operating activities:
    Net loss                                                                  (7,092,062)          (3,489,343)
    Adjustments to reconcile net loss to net cash used for
    operating      activities:
          Depreciation and amortisation                                            15,915               43,827
          Equity in losses of affiliates                                       22,898,644              764,972
          Gain on initial public offering of AgCert International,           (25,549,121)                    -
          Plc.
          In-process research and development                                   1,000,000                    -
          Amortisation of unearned compensation                                   257,094              115,274
          Change in fair value of warrants to purchase AgCert                   2,812,528                    -
            International, Plc. shares
          Minority interest                                                     (708,389)                    -
       Changes in operating assets and liabilities:
          Accounts receivable                                                      56,640                2,981
          Prepaid expenses and other assets                                      (45,164)               42,335
          Accounts payable and accrued liabilities                                643,984              194,806
          Due to affiliates                                                      (52,368)              124,905
                                                                              ___________          ___________
                   Net cash used for operating activities                     (5,762,299)          (2,200,243)
                                                                              ___________          ___________
Cash flows from investing activities:
    Notes receivable                                                            (617,000)                    -
    Purchases of property and equipment                                           (5,720)                    -
    Repayment of advances by (investment in and advances to) affiliates         1,403,435            (990,000)
                                                                              ___________          ___________
                   Net cash provided by (used for) investing                      780,715            (990,000)
activities
                                                                              ___________          ___________
Cash flows from financing activities:
    Payment of loan costs                                                               -             (22,967)
    Net borrowings on notes payable                                                     -              600,000
    Proceeds from issuance of convertible notes payable                                 -            1,500,000
    Sale of member units                                                                -              250,000
                                                                              ___________          ___________
                   Net cash provided by financing activities                            -            2,327,033
                                                                              ___________          ___________
                   Net decrease in cash                                       (4,981,584)            (863,210)
Cash, beginning of period                                                      28,774,205            1,201,349
                                                                              ___________          ___________
Cash, end of period                                                            23,792,621              338,139
                                                                              ___________          ___________


Notes to the Accounts:



1)       Basis of Presentation



The consolidated financial statements of XL TechGroup, Inc. (the Company) have
been prepared in accordance with accounting principles generally accepted in the
United States of America (US GAAP).  The consolidated financial statements for
the six months ended 30 June 2005 and 30 June 2004 include the accounts of XL
TechGroup, Inc. and TyraTech, LLC (TyraTech), a Delaware limited liability
company. All inter-company balances and transactions have been eliminated.



During 2005, a 33.33% minority shareholder of TyraTech contributed intellectual
property (IP) to TyraTech valued at $1 million.  The IP was charged to operating
expenses as in-process research and development.



On 12 October 2004, the Company was recapitalized from a limited liability
company to a corporation in preparation for an initial public offering (IPO) on
the London Stock Exchange's Alternative Investment Market.



The financial information for the six months ended 30 June 2005 and 30 June 2004
is unaudited.  In the opinion of the Company directors, the financial
information for these periods present fairly the financial position, results of
operations and cash flows for the periods in conformity with generally accepted
accounting principles under US GAAP.



2)       Investment in AgCert International, Plc.



On 8 December 2004, the owners of ANX, LLC (ANX) (formerly known as AgCert
International, LLC) created Agcert International, Plc (AgCert Plc) for the
purpose of operating the carbon trading business.  Effective 1 January 2005,
AgCert Plc acquired ANX's carbon trading business (note 3).  On 4 April 2005,
the owners of AgCert Canada Co. (including the Company's 44.31% ownership)
transferred their investment in AgCert Canada Co. to a wholly owned subsidiary
of AgCert Plc.



Effective 6 June 2005, AgCert Plc completed an IPO under the symbol AGC on the
London Stock Exchange.  The Company owned 41.71% of AgCert Plc just prior to the
IPO, and 27.17% upon completion of the IPO.  As a result of the AgCert Plc IPO,
the Company recognized a gain of $25.5 million, which was included in other
income in the statement of operations.



As of 30 June 2005, the Company owns 41,712,000 shares (27.17% ownership) of
AgCert Plc and accounts for its investment in AgCert Plc under the equity
method.  The Company's portion of AgCert Plc's equity in losses totaled $3.6
million for the six months ended 30 June 2005.



As of 30 June 2005, the fair market value of the Company's investment in AgCert
Plc totaled $142.1 million.  Due to lock-up agreements in place, the Company is
restricted from selling its shares in AgCert Plc until twelve months following
the AgCert Plc IPO.



3)       Investment in ANX, LLC



Effective 1 January 2005, the assets and liabilities relating to the carbon
trading business of ANX were sold to AgCert Plc, a newly created entity under
the same common control as ANX (note 2).  As of 30 June 2005, continuing
operations of ANX focus on the development of other technologies.



As of 30 June 2005, the balance sheet of ANX consisted primarily of cash, shares
of AgCert Plc common stock (10.8% ownership), investment in a wholly owned
subsidiary and a put option liability.  When it becomes exercisable, the put
option allows certain ANX unit holders the option to put ANX units in exchange
for AgCert Plc shares.  ANX owns sufficient shares of AgCert Plc to cover the
maximum exposure related to the put option.  The put option is considered a
derivative instrument, which requires the put option liability to be recorded at
fair value at each balance sheet date, and resulting changes in fair value to be
included in income.  As of 30 June 2005, the put option liability was fair
valued at $54.8 million, all of which was included in ANX net losses for the six
months ended 30 June 2005.



As a result of the AgCert Plc IPO (note 3), ANX recognized a gain of $10.2
million in its statement of operations.  Just prior to the IPO, ANX accounted
for its investment in AgCert Plc under the equity method and recognized $1.2
million of equity in losses of AgCert Plc.  As of 30 June 2005, ANX owns 10.8%
of AgCert Plc and records its investment in AgCert Plc at fair value at each
balance sheet date.  Changes in fair value represent unrealized gains/losses and
are excluded from income until realized.



As of 30 June 2005, the Company owned 41.85% of ANX.  The Company accounts for
its investment in ANX under the equity method.  The Company's portion of ANX's
equity in losses totaled $19.3 million for the six months ended 30 June 2005.



4)       Liability for Warrants to Purchase AgCert International, Plc Shares



In connection with financing the Company arranged with private investors in
2003, the Company granted warrants to purchase an equivalent of 973,056 shares
of AgCert Plc, at $0.3083 per share.  As a result of the AgCert Plc IPO, the
warrant liability qualified as a derivative instrument, which requires the
warrant liability to be recorded at fair value at each balance sheet date.
Changes in the fair value of the warrant liability are included in other income
(expense) in the statement of operations. As of 30 June 2005, the warrant
liability was fair valued at $3.0 million, which resulted in a change in fair
value of $2.8 million for the six months ended 30 June 2005.



5)       Loss per Share



The loss per share was calculated based on a weighted average number of shares
outstanding during the six months ended 30 June 2005, namely 49,311,482 (2004:
29,973,793) and a loss of $7,092,062 (2004:  $3,489,343).  By comparison, the
number of shares outstanding at 30 June 2005 were 49,411,482 (2004: 32,936,115).


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            The company news service from the London Stock Exchange                                                                                        

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