Half-yearly report

KleenAir Systems International plc
                                           (the 'Company')
                            Interim Accounts for the period ended 31 March 2007


HIGHLIGHTS

·   London low emission zone announced in May, setting emissions standards for specified vehicles

·   The Company has launched its patented exhaust filters to help vehicles meet these low emission zone standards

·   Filters well received at the Birmingham Commercial Vehicle Show in April

·   First sales made, and order book building satisfactorily

·   HM Revenue and Customs has confirmed reinstatement of Company's EIS status


CHAIRMAN'S STATEMENT

As foreshadowed in the annual report for the period ended 30 September 2006, Mayor Ken Livingstone gave final approval
to the London Low Emission Zone on 9 May  2007, bringing to an end some three years of uncertainty. KleenAir had been
gearing itself for this development and is now well positioned to launch its specialised retrofit products designed to
bring older vehicles to current emission standards.

The new legislation requires heavy goods vehicles over 12 tonnes to upgrade to Euro III emission standards by February
2008. Coaches and heavy goods vehicles over 3.5 tonnes must upgrade by July 2008. The legislation extends to commercial
vans in 2010; and by  2012 all heavy goods vehicles and coaches must meet Euro IV standards.  The number of retrofits
will be substantial over this period of time, and will probably be followed by further upgrades later. As a result of
the funds we have raised since 2005, we have started the process of generating working capital to meet this challenge.

Our order book has started building satisfactorily since the mayor's approval of the LEZ. We are now undertaking an
advertising and sales programme to make the industry more aware of the cost effective solutions we are offering in order
to meet the new requirement.

The technical approval process for product certification by Transport for London has not yet been finalised and
introduces a further delay of at least two months. As such, we expect to start making deliveries in late August with the
bulk of this year's sales occurring, as predicted in our Annual Report, in the last quarter of the current calendar
year.

Our Free-Flow Filter, made with metal rather than ceramic, was well received at the Commercial Vehicle Trade Show at the
National Exhibition Centre in Birmingham in April. This is a lower cost filter as well as more durable, due to its
metallic construction, and much easier to maintain. It is particularly suited to those vehicles requiring to upgrade
from Euro II to Euro III, in which market we intend to become a leader.

Our new applications engineering facility in Ross-on-Wye will be a key element in preparing product for the market. We
have started the process of recruiting more application engineers to assist in the process.

Despite having previously received approval by HM Revenue and Customs of new issues of shares being eligible for EIS
relief, this status was withdrawn, due to a technicality, in the last quarter of 2006. Because this was such an
important item for many of our shareholders, we engaged in active dialogue with HMRC over a period of several months. In
March 2007 the decision was reversed and the EIS status reinstated.

We believe that we are now well prepared to exploit the new and significant market now opening up to our products.


Lionel Simons

18 June 2007


For further information please contact:

Peter Newell                                              07786 333 046
[e-mail]

Nick Harriss                                              020 7512 0191
ARM Corporate Finance Ltd





Interim profit and loss account

                                  6 months to       9 months to      6 months to
                                  31 March          30 September         30 June
                                    2007               2006                 2006
                                     £                   £                 £

Group turnover                    25,700                 -                 -
COGS                               1,449
Gross Profit                      24,251                 0                 0

Sales and Marketing              (55,997)             (99,376)           (29,498)

R & D Expense                   (106,817)            (103,263)           (54,666)

Other operating charges         (250,784)            (506,807)          (229,625)


Operating Loss                  (389,348)            (698,428)          (313,789)

Interest receivable                4,858               11,018              5,636


Loss on ordinary activities
before taxation                 (384,489)            (698,428)          (308,153)

Tax on profit/loss on
ordinary activities                 -                    -                  -


Loss on ordinary activities
after taxation                  (384,489)            (698,428)          (308,153)


Earnings per share

basic                              (0.02)               (0.04)             (0.01)
diluted                            (0.02)               (0.04)             (0.01)




All of the activities of the company are classed as continuing.

The company has no recognised gains or losses other than the results for the period as set out above

The basic earnings per Ordinary Share is calculated on the profit on ordinary activities after taxation on the weighted
average number of Ordinary Shares in issue, during the period, of 18,957,426 (30 September 2006 16,925,082 and 30 June
2006 15,925,881)



                                  As at 31         As at 30        As at
                                   March          September       30 June
Group balance sheet                2007             2006           2006
                                    £                £               £
Fixed assets
Intangible Fixed assets           83,354          89,167         214,676
Tangible Fixed assets             22,720          17,201             425

Total Fixed assets               106,074         106,368         215,101


Current assets
Debtors                           54,777          90,072          75,384
Cash at bank and in hand         235,764         483,808         758,246

Total Current assets             290,541         573,880         833,630


Creditors: amounts falling
due within one year               93,440         160,036         127,576


Net current assets/liabilities   197,101         413,844         706,054

Total assets less current
liabilities                      303,175         520,212         921,155


Share Capital                    198,080         189,235         189,235
Share Premium                  1,843,899       1,705,699       1,705,699
P & L                         (1,795,886)     (1,387,173)       (986,888)
Other Reserves                    57,082          12,450          13,109

Capital and reserves             303,175         520,212         921,155






                                  6 months to       9 months to      6 months to
                                     31 March         30 Sept        to 30 June
Grouo cash flow                        2007            2006             2006
                                        £                £                £

Net cash inflow from operating
activities                         (391,592)         (504,105)        (431,623)

Returns on investments and
servicing of finance                  4,858            11,019            5,636

Capital expenditure and/financial
investment - (including repayment
of loan to subsidiary)               (8,355)          (17,377)            (425)


Net Financing                                                        1,137,803

Issue of equity capital               8,845            55,698

Share premium on issue of equity
share capital                       141,200         1,419,302

Issue costs                          (3,001)         (531,673)


Increase/Decrease in cash          (248,045)          436,962          711,391



PRINICIPAL ACCOUNTING POLICIES

Basis of accounting

The financial statements have been prepared under the historical cost convention.

The principal accounting policies of the company have remained unchanged from those set out in the company's 2006 annual
report and financial statements.

All employee services received in exchange for the grant of any share-based remuneration are measured at their fair
values. These are indirectly determined by reference to the fair value of the share options awarded. Their value is
appraised at the grant date and excludes the impact of any non - market vesting conditions (for example, profitability
and sales growth targets).

All share-based remuneration is ultimately recognised as an expense in the profit and loss with a corresponding credit
to other reserve, net of deferred tax where applicable. If vesting periods or other vesting conditions apply, the
expense is allocated over the vesting period, based on the best available estimate of the number of share options
expected to vest. Non-market vesting conditions are included in assumptions about the number of options that are
expected to become exercisable. Estimates are subsequently revised, if there is any indication that the number of share
options expected to vest differs from previous estimates. No adjustment is made to expenses recognised in prior periods
if fewer share options ultimately are exercised than originally estimated.

Upon exercise of share options, the proceeds received net of any directly attributable transaction costs up to the
nominal value of the shares issued are allocated to share capital with any excess being recorded as additional paid in
capital.




NOTES                             6 months to       9 months to      6 months to
                                     31 March      30 September       30 June
                                     2007               2006             2006
                                      £                  £                £

1. Other operating income and
charges

Sales and Marketing expenses        55,997                                29,498

Research and Development
expenses                           106,817                                54,666

Administrative expenses            206,152             707,447           229,625


2. Operating Loss

Operating loss is stated
after charging/(crediting)

Depreciation                         3,650                 176
Amortisation                         4,999              19,801            13,201
Auditors remuneration                4,752              12,500             2,500
Write off of goodwill                                  118,909
Operating lease rentals              7,769               7,949


                             Leasehold     Plant and      Furniture
3. Fixed Assets               property     equipment      and Fittings      Total
                                 £             £              £               £

Cost
At 30 September 2006          9,850          5,820          1,707           17,377
Additions                                    8,841                           8,841

At 31 March 2007              9,850         14,661          1,707           26,218


Depreciation
At 30 September 2006                           126             50              176
Charge for the period         1,438          1,614            270            3,322

At 31 March 2007              1,438          1,740            320            3,498


Net book value
At 31 March 2007              8,412          12,921         1,387           22.720


At 30 September 2006          9,850           5,694         1,657           17,201


4. Intangible Assets                                     Intellectual
                                                           Property          Total
                                                              £                £
Cost
At 30 September 2006                                         100,000         100,000
Additions

At 31 March 2007                                             100,000         100,000


Depreciation
At 30 September 2006                                          10,833          10,833
Charge for the period                                          5,813           5,813

At 31 March 2007                                              16,646          16,646


Net book value
At 31 March 2007                                              83,354          83,354

At 30 September 2006                                          89,167          89,167



5. Investments                                                                   £

Cost
At 30 June 2006                                                               99,990

Write off in the period to 30 September 2006                                 (99,990)

Net Book Value
At 31 March 2007 and 30 September 2006                                             0

At 30 June 2006                                                               99,990




At 31 March 2007 Kleenair Systems International Plc held 100% of the issued ordinary share capital of the company listed
below:

                                                                       KleenAir Systems Ltd

Country of Incorporation                                                    England & Wales

Proportion of share capital held                                              100% (Direct)

Nature of Business                                                                  Trading

KleenAir Systems International Inc was wound up on 17 October 2006, whereupon the holding in KleenAir Systems Ltd became
direct.

                                              31 March 2007     30 Sept 2006    30 June 2006
6. Debtors                                          £                   £                  £

Trade Debtors                                     29,375           20,011           20,011
VAT Recoverable                                                    19,511           10,339
Stock                                              4,296
Other debtors                                      6,199           11,925           20,177
Prepayments and accrued income                    14,907           38,585           24,857

Total debtors                                     54,777           90,032           75,384


                                              31 March 2007     30 Sept 2006    30 June 2006
7.Creditors                                         £                    £                  £

Trade Creditors                                   48,979           62,920           16,689
VAT Payable                                          779
Amounts due to related undertakings                    0           19,011           52,345
Wages, Other taxation and social security         15,793                             8,957
Other creditors                                        0           10,271           24,000
Accruals and deferred income                      27,889           67,834           25,584

Total creditors                                   93,440          160,036          127,575



7 Publication of non statutory accounts.
The financial information set out in this interim financial report does not constitute statutory accounts as defined in
s 240 of the Companies Act 1985. The figures for the period ended September 2006 have been extracted from the statutory
financial statements. The auditors' report on those financial statements was unqualified and did not contain a statement
under section 237(2) of the Companies Act 1985.


Dated: 19 June 2007