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XL TechGroup, Inc. (XLT)

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Wednesday 27 February, 2008

XL TechGroup, Inc.

Operating update

XL TechGroup, Inc.
27 February 2008


Press Release                                                   27 February 2008



                               XL TechGroup, Inc.
                       ('XL TechGroup' or 'the Company')

                                Operating Update

XL TechGroup (AIM: XLT), the creator of companies that solve identified, global
unmet market needs, today provides an update on the progress of the Company's
portfolio of businesses.

John Scott, CEO of XL TechGroup, commented: 'During meetings with our
institutional investors in October 2007, a number of anticipated milestones were
flagged for each of the XL TechGroup companies over the subsequent few months.
These are outlined in the relevant presentation on our website.  At TyraTech,
PetroAlgae, DxTech and QuoNova, all of these milestones have either been
achieved or are continuing to make good progress towards completion.  We are
confident that the additional milestones anticipated during 2008, especially
those related to cash generation, should also be successfully achieved, and we
look forward to keeping shareholders updated over the coming months.'

PetroAlgae LLC ('PetroAlgae') - 94.4% owned by XL TechGroup*

* as at 31 December 2007

Work has been continuing at PetroAlgae's optimization site in Florida to
identify the most efficient operating parameters that will maximise oil yields
in a number of differing geographies and climate conditions.  A comprehensive
framework has been developed to both explain and predict biomass growth and
lipid production.  One particular focus has been on confirming CO2 requirements,
with research indicating that approximately 240 tons per annum of carbon dioxide
is needed for each acre of production.  This is a positive development as many
potential licensees already produce significant amounts of CO2 through their
existing operations and, as a result, they are very interested in the added
benefits of potential mitigation solutions.

Beyond generating oil test samples, the optimization facility is also producing
quantities of biomass for process testing and optimization, and is making good
progress in meeting the remaining plant engineering challenges.  All of this
work is now leading to the design and construction of an initial 5-10 acre
demonstration facility adjacent to the existing site in Florida, to be completed
in the summer of 2008.  Continuous feedback from potential customers and
partners, particularly those outside the USA, has concluded that a more compact
facility than previously anticipated will be sufficient to answer a number of
important scalability and other questions.  This clearly has significant
benefits for PetroAlgae in terms of both development time and capital
expenditure.  Later in 2008, it is currently anticipated that a larger site of
approximately 50 acres will be built with a co-development partner in a US
location adjacent to a CO2 source, such as a power plant.

PetroAlgae is in discussions with potential customers and partners whose
combined needs will exceed 2 billion gallons per annum by 2010.  These parties
include biodiesel refiners, petroleum companies, petrochemical manufacturers,
large plantation operators, energy providers, commodity traders, amino acid
producers, animal feed suppliers and government/military organizations.  The
first non-binding MOUs have been signed, and PetroAlgae continues to anticipate
that its first international licenses will be agreed in 2008, along with its
first US joint-venture.  The deal structures for international licenses are
expected to produce significant up-front fees, together with milestone payments
and a long-term royalty tail based on gross revenues.  XL TechGroup is also in
discussions with a number of parties that have expressed a serious interest in
making a strategic investment in PetroAlgae.

TyraTech Inc. ('TyraTech') - 47.9% owned by XL TechGroup*

* as at 31 December 2007

TyraTech was successfully listed on AIM in June 2007, raising gross proceeds of
£25 million.  Since its IPO, TyraTech has made very good progress including the
following key developments:

•    successfully completed its first stage of development with Kraft Foods
     and received the first milestone payment;
•    received the first milestone payment in its partnership with Syngenta;
•    announced the US launch of 'Natures Natural', a peat replacement and
     horticulture product;
•    announced the commercial launch and first sales of its Crawling Insect
     Spray product, and;
•    achieved development and financial milestones with Arysta LifeScience
     Corporation.


DxTech LLC ('DxTech') - 83.5% owned by XL TechGroup*

* as at 31 December 2007

DxTech is in active discussions with global companies with diagnostic businesses
that have revenues in the US$200 million to US$2 billion range.  Each has an
aggressive approach to Point-of-Care ('POC') testing, many have visited the
DxTech facilities in Merrimack, New Hampshire and Cambridge, UK to conduct due
diligence on the technology, and they have expressed a clear interest in
proceeding with discussions toward possible partnership agreements.  The deal
structures under discussion involve up-front money to DxTech in the form of
development fees or license fees, as well as performance based milestone
payments.  Deals would also include terms regarding supply, distribution and
profit sharing.

DxTech intends to target the US POC market with a phased launch of cartridges,
starting with a CLIA-waived thyroid series of assays, followed by blood glucose
and haemoglobin A1C in relation to diabetes diagnosis and management, then a
lipid panel for heart disease diagnosis and management, liver function, and
ultimately haemotology.  DxTech expects to receive FDA clearance in 2009 and
CLIA waiver in 2010, with the first revenues from physician offices in the US to
start before the end of 2009.

DxTech's technology also has the potential to transform diagnostic testing in
emerging-markets such as India, Russia and China.  Specific terms of a deal are
at an advanced stage of negotiation with a leading company from one of these
countries, and co-development revenues and licensing fees related to markets
outside the US are anticipated to begin in 2008.  XL TechGroup is also reviewing
a number of serious expressions of interest from parties interested in making a
strategic investment in DxTech.

QuoNova LLC ('QuoNova') - 88.7% owned by XL TechGroup*

* as at 31 December 2007

The last year at QuoNova has been characterized by a strategic focus on
consolidating and expanding the anti-virulence technology platform,
strengthening the patent position and advancing the selection of development
compounds for different applications.  This work is being accompanied by
progression of the initial patent portfolio, with the first two patents being
allowed by the US Patent Office.

Notable progress has also been made under R&D collaborations.  In the wound
healing area, QuoNova's Quorum Sensing Blocker ('QSB') technology has been found
to be effective in a predictive animal model.  It has also been shown to be
highly efficacious in-vitro in inhibiting biofilm generation by Gram-positive
species, including resistant strains such as MRSA (methicillin-resistant
Staphylococcus aureus) and by clinically relevant fungal pathogens such as
Candida sp.

QuoNova is preparing for the entry of selected candidates into the regulatory
development process.  Further collaborations with academic and industrial
partners are aimed at evaluating effects across a still broader panel of
microorganisms, at conducting further proof of concept studies in animal models
of respiratory and dermatological disease, and at developing specific
formulations for a number of separate consumer healthcare and industrial
products.  Successful collaborations will form the basis for future product
development and licensing agreements, and discussions continue to advance
towards the first anticipated deals during 2008.

AgCert International plc ('AgCert') - 18.8% owned by XL TechGroup*

* as at 31 December 2007

AgCert recently announced that it has so far been unable to reach agreement with
all its creditors and customers regarding the renegotiation of contracts, and
has proposed to file a petition for examinership in Ireland.  This entails a
process whereby AgCert is put under the protection of the High Court in Ireland
with a view to allowing a court appointed examiner to formulate and put forward
for approval a scheme of arrangement with its creditors and members.  The
objective in petitioning for examinership is to address AgCert's obligations
while maintaining an ongoing business.  This action by AgCert has no impact on
any XL TechGroup borrowing covenants.

To facilitate AgCert's negotiations with its creditors and customers, with the
single aim of looking to maximise value for all of AgCert's shareholders, XL
TechGroup has entered into a loan note agreement with Laurus Master Fund Ltd. 
('Laurus') under which XL TechGroup has agreed to pay US$17.8 million plus
interest to Laurus in May 2009.  In return, XL TechGroup has received US$9.9
million in cash from a third party which has now become AgCert's sole secured
creditor.  From XL TechGroup's perspective, the effect of this agreement has
been to:

•    remove a previous commitment to provide a loan of up to €5 million to 
     AgCert in the second quarter of 2008;
•    add US$9.9 million in cash to XL TechGroup's balance sheet, and;
•    leave XL TechGroup with a US$7.9 million right to participate alongside 
     AgCert's sole secured creditor under the original debt owed to them by
     AgCert

It is the Company's view that the new agreement with Laurus has left XL
TechGroup in an improved position in relation to AgCert than existed before when
XL TechGroup was simply a shareholder with a commitment to lend AgCert
additional funds that would not have been secured in a senior way.  The changed
position gives XL TechGroup cause to continue to be optimistic that a stake in
an AgCert business with value will be preserved, whether through the
examinership process or otherwise.

GenXL LLC ('GenXL') - 42.9% owned by XL TechGroup*

* as at 31 December 2007

In March 2007, GenXL announced its first company development agreement with
EnGen LLC.  The competitive cost and significant performance advantages of
EnGen's proprietary nano-scale polymer technology have now been validated, and
it is ready for commercial deployment in ultra-capacitors and lithium-ion
batteries.  Negotiations with a number of potential partners are underway,
including with the market leader that has validated the technology.

In November 2007, GenXL acquired 70% of INSERO which is developing implantable
drug delivery systems, with an initial focus on hypertension, the single leading
cause of premature death worldwide.  A major problem with existing hypertension
treatments is non-compliance and the INSERO technology platform addresses this
directly.  Feasibility studies with a US company should be completed within the
first quarter of 2008, and INSERO would then move to negotiate a licensing
agreement.

XL TechGroup Cash Position

As of 31 December 2007, XL TechGroup had cash on hand totalling approximately
US$11.4 million.  The recent loan note agreement with Laurus provides an
additional US$9.9 million.

XL TechGroup currently finances PetroAlgae, DxTech and QuoNova.  The first two
of these are now in the fifth (Scale) stage of XL TechGroup's systematic company
building methodology, when it is normal for outside strategic and other
financing to be introduced.  Such discussions have already started for both
PetroAlgae and DxTech, and XL TechGroup anticipates closing on relevant
agreements during 2008.  Additionally, all three companies are expected to be
generating revenue before the end of 2008.  As a result, it is anticipated that
one or more of these companies should no longer be dependant on XL TechGroup for
part or even all of their funding by the end of 2008.

Over the last six months, given increased uncertainties in capital and other
funding markets, XL TechGroup has been successful in reducing the Group's
monthly cash burn, without any significant impact on the planned development of
its existing portfolio of companies.  It should also be noted that XL TechGroup
currently does not expect to launch its next new company before the fourth
quarter of 2008.  The Board of XL TechGroup has recently approved a 2008 budget
that results in a cash positive position over the full year, without needing to
raise any additional funds in the market or sell any part of the Company's
holding in TyraTech in the market.  Including a continuing focus on Group
expenses, this budget is based on XL TechGroup achieving the following during
2008:

•    international licensing and co-development deals for PetroAlgae
•    regional licensing and co-development deals for DxTech
•    co-development and licensing deals for QuoNova
•    strategic and non-strategic third party investments in DxTech and 
     PetroAlgae
•    value realisation from the sale of technologies that do not quite make
     it through XL TechGroup's selection criteria and which are not appropriate 
     for GenXL

The Board of XL TechGroup believes that its existing cash resources, combined
with anticipated cash inflows from anticipated deals as well as the Company's
continuing ability to leverage its assets, will be sufficient to fund the
overall business through 2008.

Change of Auditor

XL TechGroup also announces the appointment of Grant Thornton LLP as Auditors to
the Company.  This appointment has been approved by the Company's Audit
Committee, and Grant Thornton LLP will conduct the audit of XL TechGroup's
accounts for the year to 31 December 2007.

                                    - Ends -


For further information:
XL TechGroup Inc.
John Scott / Harold Gubnitsky                                                          Tel: +1 321 409 7403
[email protected]
Chris Munden, Director of Investor Relations                                      Tel: +44 (0) 20 7398 7720
[email protected]                                                                        www.xltechgroup.com

Nomura Code Securities
Richard Potts, Corporate Finance                                                   Tel: +44 (0) 20 7776 1200
                                                                                          www.nomuracode.com

XL TechGroup media enquiries:
Abchurch Communications
Heather Salmond                                                                  Tel: +44 (0) 20 7398 7704
[email protected]
Gareth Mead                                                                      Tel: +44 (0) 20 7398 7710
[email protected]
                                                                         Switchboard: +44 (0) 20 7398 7700
                                                                                    www.abchurch-group.com



                      This information is provided by RNS
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