Half Yearly Report

RNS Number : 5533T

Proteome Sciences PLC

30 September 2010

PRESS RELEASE

30^th September, 2010

Proteome Sciences plc

("Proteome Sciences" or the "Company")

RESULTS FOR THE SIX MONTHS ENDED 30^th JUNE 2010

HIGHLIGHTS

Proteome Sciences plc (AIM: PRM), a leading developer of biomarkers in diagnostics and drug development, is pleased to announce its interim results for the six months ended 30 June 2010. The main events to date are summarised below:

· Commercial

o Strategic alliance with global CRO, Parexel

o License with Sigma Aldrich for ProteoPrep products in Europe, Japan and Australia

o Launch of cysTMT^® reagents in May

o Medicare reimbursement for lung cancer test in USA

o Two novel AD biomarker assays launched and available through PS Biomarker Services

o Protein biomarker collaboration with Thermo Fisher for innovative products and assays

o Patents with Bio-Rad for two stroke biomarkers in blood - 93% sensitivity and 100% specificity

o Further TMT product launches in pipeline for 2011

o Dr. Ian Pike, Chief Operating Officer of Proteome Sciences, has been appointed to the Board

· Financial

o Pre-tax loss for period £2.26m (2009: £2.49)

o Cash used in operations £1.91m (2009 : £1.57m)

o Net proceeds from Placing and Open Offer £6.5m

o Second half costs expected broadly unchanged

o Warranty claim with Sanofi-Aventis settled with Є11m payment to Proteome Sciences

· Outlook

o Strategically positioned to convert biomarkers/biomarker services into revenue

o Great majority of revenue concentrated in second half

o Reasonable to target breakeven this year with buoyant commercial environment

o Rapid growth in biomarker outsourcing

o Considerable activity/negotiations for biomarkers and at PS Biomarker Services

o Serial licences/contract opportunities for the Company's expanding pipeline

o Scope for new and significant revenues from Thermo Fisher biomarker collaboration

o Strongly confident about prospects moving into 2011 and beyond

Commenting on these results, Christopher Pearce, Chief Executive of Proteome Sciences, said:

"After completing the fund raising in June, our balance sheet has been transformed and allowed us to make the necessary investment in new mass spectrometry equipment to fulfil the substantial and rapidly growing outsourcing needs for biomarker services. This has been significantly enhanced by the recent post-balance sheet Є11m settlement from Sanofi-Aventis for the outstanding warranty claim.

With key licenses and contracts for our biomarkers and reagents in place, we will convert the commercial expectations of our biomarker research, IP and services into revenue. We are involved in considerable activity and negotiations for our biomarkers/biomarker services and remain strongly confident about our prospects moving into 2011 and beyond."

- ENDS -

Attached: Full text of Chairman's statement, consolidated profit and loss account, consolidated balance sheet, consolidated cash flow statement and notes to the financial information.

For further information please contact:

Proteome Sciences plc

www.proteomics.com Tel: +44 (0)1932 865065

Christopher Pearce, Chief Executive Officer christopher.pearce@proteomics.com

James Malthouse, Finance Director james.malthouse@proteomics.com

Dr. Ian Pike, Chief Operating Officer ian.pike@proteomics.com

Nominated Adviser

Singer Capital Markets Limited

Shaun Dobson/Claes Spång

Tel: +44 (0)20 3205 7500

Public Relations

IKON Associates Redleaf Communications Limited

Adrian Shaw Anna Dunkin/Lucy Salaman

Tel: +44 (0)1483 271291 Tel: +44 (0)20 7566 6700

Mobile: +44 (0)7979 900733 Email: proteome@redleafpr.com

Email: adrian@ikonassociates.com

Notes to Editors:

About Proteome Sciences

Proteome Sciences is a global leader in applied proteomics and uses high sensitivity proprietary technologies for protein biomarker discovery, validation and assay development. The Company's own research has discovered a large number of novel protein biomarkers in key human diseases and is focused mainly in neurological/neurodegenerative conditions and in cancer. It has discovered and patented blood biomarkers, including Alzheimer's disease, stroke, brain damage and lung cancer for diagnostic and treatment applications. These biomarkers are available for outlicensing. The first blood test for lung cancer using Proteome Sciences' biomarkers was launched in the USA in 2009 and received Medicare reimbursement in 2010. Its PS Biomarker Services provides ISO 9001: 2008 accredited facilities in Frankfurt, Germany, using proprietary isobaric and isotopic Tandem Mass Tags^® (TMT^®) to discover protein biomarkers, and reference materials combined with isotope dilution mass spectrometry. Highly multiplexed assays can be developed rapidly and are suitable for screening hundreds of candidate biomarkers in validation studies. Assays for validated biomarkers can be transferred for immunoassay development. Proteome Sciences, based in Cobham, UK, has facilities in London and Frankfurt and delivers outsourced proteomics services and proprietary biomarkers to pharmaceutical, biotechnology and diagnostics companies. Visit http://www.proteomics.com.

Chairman's Statement:

Considerable progress has been made on two main fronts during the first half of 2010; the commercial development and exploitation of our research programmes and intellectual property and secondly; the financial transformation of the balance sheet.

The commercial momentum established in 2009 continued into 2010 with the strategic alliance in biomarkers with Parexel in February, the license with Sigma Aldrich for Proteoprep on sample preparation products in April, the launch of the new cysTMT reagents by Thermo Fisher Scientific and announcement of reimbursement approval under Medicare in the USA for the Oncimmune lung cancer test in June and the launch of two novel Proteome Sciences' biomarker assays for Alzheimer's disease at the 2010 ICAD International Conference held in Honolulu in July.

These activities have been underpinned by the successful placing and open offer and loan conversion in June that raised £6.5m net of expenses, and which has transformed the balance sheet. The proceeds of the placing will be used partly to fund the Company through to breakeven, to invest in equipment at PS Biomarker Services and to develop MS assays for our proprietary biomarkers with the main focus on Alzheimer's disease, cancer and brain damage.

The recent Є11m settlement of the warranty claim with Sanofi-Aventis Deutschland GmbH has provided further financial resources to the Company and will enable management to focus its full attention on the commercial exploitation of the biomarker IP and biomarker services activities. Following the conclusion of the warranty claim, the Board is delighted to announce the appointment of Dr. Ian Pike as Chief Operating Officer of Proteome Sciences plc.

As noted last year, the pattern, composition and timing of revenue and royalties from new licenses and contracts signed will continue to be uneven and at this phase of the Company's commercial development shareholders should look to full year revenue growth and trends, rather than the half year contributions for a more balanced view of the Company's performance.

As was the case in 2009, the Board is expecting the great majority of revenue to be concentrated in the second half of the year. Whilst it may appear challenging, the Company is experiencing a buoyant commercial environment that supports the previous statement that it is still reasonable to be targeting breakeven this year.

Biomarkers

In Life Sciences, a more focused discovery process using proteins as biomarkers for disease has been in development for some time. This has resulted in a more targeted approach in biomarker discovery and validation using proteomics. Against this background, the global market for biomarkers has grown faster than expected and is now projected to reach US$26.5bn by 2015, growing at a compound rate of 20.2% during the period 2007-2015. Our biomarker programmes and IP will benefit from this growth.

Lung Cancer

Following the license to Oncimmune Inc and the launch of their Early CDT-Lung test in blood in 2009, it was very encouraging that in June Oncimmune obtained eligibility reimbursement in June in the USA under the Medicare system for the lung cancer test that incorporates our annexin autoantibody technology. This reflects the acceptance by healthcare providers of the important role that the test plays in patient management and the test is also expected to be covered shortly by private health insurers. Proteome Sciences receives a royalty on all tests sold. Reimbursement should make a substantial difference to the sales and market size for the lung cancer test which is priced at $475 in the USA. The test has been launched in Canada and it is anticipated that Oncimmune is also preparing to launch the lung cancer test in the UK and Continental Europe in early 2011 and this has already been subject to front page media coverage in the UK.

The test is the first to accurately identify the signals sent out by an individual's immune system as a cancer germinates. Research published by Oncimmune suggests that these signals can be detected up to five years before a tumour can be seen using X-ray or MRI scan, allowing medical intervention at the very early stage of tumour development. As a consequence, it is hailed as offering a 'paradigm shift' in cancer diagnostics. Initial revenues started modestly, but we anticipate significant growth following Medicare coverage and with the imminent launch in the UK and Europe.

The license with Oncimmune is non-exclusive and allows Proteome Sciences to enter into multiple licences with other diagnostics companies and for them to access our full portfolio of patented proprietary biomarkers in lung cancer.

Stroke

As previously commented, a further large study to develop a rapid blood test for stroke has been initiated with a commercial partner, and this is anticipated to lead to the introduction of a commercial blood test for stroke. Constituents of the panel of blood biomarkers recognise rapid changes in protein expression and are detectable within 15 minutes of the occurrence of a stroke. Other protein biomarkers are linked to the disease process and appear to predict the long-term outcome of stroke.

In August 2010, an international patent filing for the diagnosis of stroke using just two biomarkers filed jointly by Bio-Rad Pasteur and Proteome Sciences was published. The biomarker combination demonstrated 93% sensitivity and 100% specificity in the detection of all types of stroke. The performance was even better for ischemic stroke, where the sensitivity increased to 95% and the specificity remained at 100%.

We are strongly encouraged by the performance of the stroke markers covered by our intellectual property and look forward to concluding licenses that will crystallise their commercial value and utility in the near future.

Alzheimer's Disease

Alzheimer's disease has commanded ever-increasing media coverage in 2010. This follows a highly productive period for Proteome Sciences last year with the license agreement signed with Millipore in AD for use on the Luminex^® platform and the subsequent discovery and significance of the clusterin gene in Alzheimer's. Proteome Sciences had discovered and patented the use of clusterin in blood prior to these publications as part of the initial group of blood proteins in the original research and that changed expression in Alzheimer's. A mass spectrometric (MS) based clusterin assay was subsequently developed by the Company.

In July 2010, the Daily Telegraph's front page article featured 'Alzheimer's blood test was in sight and that the disease could be detected up to 10 years before symptoms appeared'. This article was stimulated by a publication in the Archives of General Psychiatry in which Proteome Sciences was involved with King's College London that revealed that high levels of clusterin protein in blood appear to be relevant to both the pathology and symptoms in patients with Alzheimer's and were highly significant.

The recent World Alzheimer Report 2010, published by Alzheimer's Disease International, has highlighted that the global cost of dementia of $601bn will exceed 1% of global GDP this year. It has also predicted that the number of people with dementia will double by 2030 and more than triple by 2050. This is a considerable increase to estimates over the last five years and Proteome Sciences is particularly well placed to capitalise from the discoveries and intellectual property that it has established from its research.

At the 2010 ICAD Conference in Hawaii, Proteome Sciences launched two novel proteomic biomarker assays for Alzheimer's. The first is a mass spectrometer assay for nine blood proteins for early diagnosis, prediction of disease progression and response to treatment using a tiny amount of blood. The second is a test to measure the changes in levels of phosphorylation in tau that will be used to evaluate the potential of new Alzheimer's treatments. The launch of the tau assay is particularly timely as pharmaceutical and academic research groups are re-focussing their efforts for discovering new medicines away from beta-amyloid and into tau.

The two assays, together with the mass spectrometry test for clusterin can be outsourced through PS Biomarker Services.

Reagents

TMT^® products have continued to experience strong demand in 2010 and these will be complemented by the recent launch of CysTMT^® by Thermo Fisher at the Biomarker World Congress in the USA and an anti-TMT^® antibody used to enrich labelled peptides that improve sensitivity and breadth of coverage for many low abundance proteins. Further TMT^® products with additional reactive selectivity are in the pipeline for 2011, including a sixplex set that can be used in both HCD and ETD fragmentation modes on the Thermo LTQ Orbitrap mass spectrometer. By using the same core chemistry across the TMT^® range, one of the key reasons that TMT^® leads the field in isobaric mass tagging is because quantitative mass spectrometry studies for biomarker discovery and targeted quantification can be performed without having to change the mass spectrometer set up. This provides a considerable scientific and commercial advantage.

At HUPO 2010, it was announced that Thermo Fisher Scientific and Proteome Sciences formed a protein biomarker collaboration to deliver innovative products for protein biomarker research and applications. This combines the skills of Thermo Fisher's BRIMS Center with Proteome Sciences to further develop quantitative proteomic workflows based on best-in-class reagents, hardware and software for biomarker discovery and validation.

The new collaboration means that Proteome Sciences will now be applying TMT^® in biomarkers and biomarker technology with Thermo Fisher. This opens up the scope for new and significant revenue opportunities to both Proteome Sciences and Thermo Fisher and extends and enhances the existing arrangements and license.

In April, a non-exclusive license was signed with Sigma-Aldrich Corporation to sell products under Proteome Sciences trademark ProteoPrep^® in Europe, Japan and Australia. Currently there are eleven ProteoPrep^® products. The license provides royalties on all ProteoPrep^® sales in the jurisdictions listed.

PS Biomarker Services

Following our first research contract in Q4 2009 with Takeda, a strategic alliance was announced with Parexel International Corporation, the leading global biopharmaceutical services CRO, to enhance biomarker capabilities for early phase clinical development. This provides full access to PS Biomarker Services protein and peptide biomarker capabilities for Parexel's customer programmes for assessment of new compounds in development in pre-clinical and clinical trials.

Our services division has been considerably enhanced with the installation over the summer of the latest LTQ Orbitrap Velos and TSQ Vantage Thermo Fisher mass spectrometers at our Frankfurt facility. We now offer the most integrated biomarker discovery, qualification and assay validation workflows in the industry, including SRMs and MS assays.

The Division is seeing its highest level of activity since its establishment in 2009 with multiple expressions of interest currently being followed with a range of small, medium and large pharmaceutical clients. The Division is expected to contribute significantly to H2 2010 revenues.

Financial results

The unaudited financial results for the six months to 30^th June, 2010 show a loss before tax for the period of £2.264m compared with the loss of £2.485m in the corresponding period of 2009.

This reduction in the loss before taxation reflects the increase in turnover in the period of 139% and also the company's continuing control over costs which resulted in a fall in administrative expenses from £2.401m to £2.242m.

In addition, the Balance Sheet has been considerably strengthened as a result of the placing, open offer and conversion at the same price of part of the Chief Executive's loan into ordinary shares, all of which took place in the period under review and this has been further strengthened by the successful Є11m settlement from the Sanofi-Aventis Deutschland GmbH settlement discussed below which was received on 29^th September 2010 and is not reflected in the figures which form part of the interim results. The placing and open offer raised £6.5m net of expenses.

We have referred in the past to the uneven nature of the Company's income at this stage in its development and this continues to be the case.

The Company is still aiming to achieve break-even in the current year, but such a result depends on the conclusion of significant licensing and other commercial contracts in the remaining quarter of the year. Every effort continues to be made to achieve this target.

Warranty Claim against Sanofi

A settlement has been reached between the parties under which a payment of Є11m was received by Proteome Sciences by the close of business on 29 September 2010. Further details of the settlement have not been disclosed due to the confidentiality clause forming part of the settlement.

Current prospects

With a transformed balance sheet and key licenses/contracts for our biomarkers and reagents in place, we are strategically placed to convert the commercial expectations of our biomarker research and services and the intellectual property appertaining thereto into revenue. A key factor behind this is the installation of state of the art mass spectrometry equipment over the summer at PS Biomarker Services in Frankfurt necessary to fulfil the substantial and rapidly growing outsourcing needs for biomarker services as pharma and biotechnology companies focus on streamlining costs/time lines to obtain improved efficiency and performance in drug development programmes.

The variable lead times to negotiate and implement contracts may continue to provide an uneven pattern of revenue until 2011 when it is expected to move to a more normal and predictable basis. Whilst challenging the buoyant commercial environment that we are experiencing continues to support our previous statement that it is still reasonable to be targeting breakeven this year, but this clearly depends on concluding significant licensing/commercial contracts in the final quarter of this year.

Against this background, and with a considerable volume of activity and negotiations in place for our biomarkers/biomarker services and the prospect of serial licenses/contracts from an expanding pipeline, we remain strongly confident about our prospects moving into 2011 and beyond.

R.S. Harris

Chairman 30^th September, 2010

Unaudited consolidated income statement

For the six months ended 30th June, 2010

Note

Six months

ended

30th June

2010

Six months

ended

30th June

2009

Year ended

31st December 2009

Continuing operations
Revenue	216,366	90,321	1,305,694
Cost of sales	(74,285)	(15,755)	(329,000)
	__________	_________	_________
Gross profit	142,081	74,566	976,694
Administrative expenses	(2,241,702)	(2,400,831)	(4,842,600)
	__________	_________	_________

Operating loss	(2,099,621)	(2,326,265)	(3,865,906)
Investment revenues	1,059	540	786
Finance costs	(165,641)	(159,351)	(331,736)
	__________	_________	_________

Loss before taxation	(2,264,203)	(2,485,076)	(4,196,856)
Tax	102,000	90,000	187,026
	__________	_________	_________

Loss for the period from continuing operations	(2,162,203)	(2,395,076)	(4,009,830)
	__________	_________	_________

Attributed to shareholders of the company	(2,162,203)	(2,395,076)	(4,009,830)
	__________	_________	_________

Loss per share
Basic and diluted 2	(1.60p)	(1.80p)	(3.02p)

Unaudited consolidated statement of comprehensive income

For the six months ended 30th June, 2010

Six months

ended

30th June

2010

Six months

ended

30th June

2009

Year ended

31st December 2009

Exchange differences on translation of foreign operations	(85,547)	(82,240)	(41,470)
	_________	_________	_________

Net (expense)/income recognised directly in equity	(85,547)	(82,240)	(41,470)
Loss for the period	(2,162,203)	(2,395,076)	(4,009,830)
	_________	_________	_________

Total comprehensive expense for the period	(2,247,750)	(2,477,316)	(4,051,300)
	_________	________	_________

Unaudited consolidated statement of changes in equity

For the six months ended 30th June, 2010

	Share capital	Share Premium account	Other reserve	Equity reserve	Translation reserve	P&L account	Total
	£	£	£	£	£	£	£

At 1 January 2010	1,328,036	29,660,338	10,755,000	2,207,586	120,061	(53,308,915)	(9,237,894)

Total comprehensive expense for the period	_________	_________	_________	_________	(85,547)	(2,162,203)	(2,247,750)
	1,328,036	29,660,338	10,755,000	2,207,586	34,514	(55,471,118)	(11,485,644)

Issue of share capital	593,688	11,280,079	-	-	-	-	11,873,767

Share issue expenses	-	(317,698)	-	-	-	-	(317,698)

Share-based payment charge	-	-	-	180,000	-	-	180,000
	_________	__________	__________	_________	_________	__________	_________

Balance at 30 June 2010 (unaudited)	1,921,724	40,622,719	10,755,000	2,387,586	34,514	(55,471,118)	250,425
	_________	__________	__________	_________	_________	__________	_________

Unaudited consolidated statement of changes in equity

For the year ended 31st December, 2009

	Share Capital	Share Premium a/c	Other reserve	Equity reserve	Translation Reserve	Retained loss	Total
	£	£	£	£	£	£	£

At 1 January 2009	1,328,036	29,660,338	10,755,000	1,769,922	161,531	(49,299,085)	(5,624,258)

Loss for the year	-	-	-	-	-	(4,009,830)	(4,009,830)

Exchange differences on translation of foreign operations	-	-	-	-	(41,470)	-	(41,470)
	_________	__________	__________	_________	_________	__________	_________

Total comprehensive expense for the period	1,328,036	29,660,338	10,755,000	1,769,922	120,061	(53,308,915)	(9,675,558)

Share-based payment charge	-	-	-	437,664	-	-	437,664
	_________	__________	__________	_________	_________	__________	_________

Balance at 31 December 2009	1,328,036	29,660,338	10,755,000	2,207,586	120,061	(53,308,915)	(9,237,894)
	_________	__________	__________	_________	_________	__________	_________

For the six months ended 30th June, 2009

	Share capital		Share premium account	Other reserve	Equity reserve	Translation reserve	P&L account	Total
	£		£	£	£	£	£	£

At 1 January 2009	1,328,036		29,660,338	10,755,000	1,769,922	161,531	(49,299,085)	(5,624,258)

Loss for the period		-	-	-	-	-	(2,395,076)	(2,395,076)

Exchange differences on translation of foreign operations		-	-	-	-	(82,240)	-	(82,240)
		_________	__________	__________	_________	_________	__________	_________

Total comprehensive expense for the period		1,328,036	29,660,338	10,755,000	1,769,922	79,291	(51,694,161)	(8,101,574)

Share-based payment charge	-		-	-	216,000	-	-	216,000
	_________		__________	__________	_________	_________	__________	_________

Balance at 30 June 2009	1,328,036		29,660,338	10,755,000	1,985,922	79,291	(51,694,161)	(7,885,574)
	_________		__________	__________	_________	_________	__________	_________

Unaudited consolidated balance sheet

As at 30th June, 2010

	Six months ended 30th June 2010 £		Six months ended 30th June 2009 £		Year ended 31st December 2009 £

Non-current assets
Goodwill		4,218,241		4,218,241		4,218,241
Property, plant and equipment		154,138		277,287		222,165
Other investments		763,502		763,502		763,502
		5,135,881		5,259,030		5,203,908
Current assets
Inventories		219,835		172,291		169,946
Trade and other receivables		845,082		490,045		694,752
Cash and cash equivalents		5,457,414		-		131,158
		6,522,331		662,336		995,856
Total assets		11,658,212		5,921,366		6,199,764
Current liabilities
Trade and other payables		(821,910)		(841,074)		(1,058,340)
Current tax liabilities		(25,030)		(33,502)		(27,990)
Short-term borrowings		(7,753,493)		(10,677,377)		(11,787,021)
Short-term provisions		(2,678,452)		(2,125,117)		(2,433,886)
		(11,278,885)		(13,677,070)		(15,307,237)
Net current liabilities		(4,756,554)		(13,014,734)		(14,311,381)
Non-current liabilities
Long-term provisions		(128,902)		(129,870)		(130,421)
Total liabilities		(11,407,787)		(13,806,940)		(15,437,658)
Net assets/(liabilities)		250,425		(7,885,574)		(9,237,894)
Equity
Share capital		1,921,724		1,328,036		1,328,036
Share premium account		40,622,719		29,660,338		29,660,338
Equity reserve		2,387,586		1,985,922		2,207,586
Other reserve		10,755,000		10,755,000		10,755,000
Translation reserve		34,514		79,291		120,061
Retained loss		(55,471,118)		(51,694,161)		(53,308,915)
Total equity/(deficit)		250,425		(7,885,574)		(9,237,894)

Unaudited consolidated cash flow statement

For six months 30th June, 2010

Note

Six months

ended

30th June

2010

Six months

ended

30th June

2009

Year ended

31st December 2009

Cash flows from operating activities 3
Cash used in operations	(1,906,724)	(1,570,418)	(2,831,271)
Interest paid	(165,641)	(159,351)	(331,736)
Tax (paid)/refunded	(76)	(8,503)	191,072
	_________	_________	_________

Net cash outflow from operating activities	(2,072,441)	(1,738,272)	(2,971,935)
	_________	_________	_________

Cash flows from investing activities
Purchases of property, plant and equipment	(7,777)	(6,630)	(10,579)
Interest received	1,059	540	786
	_________	_________	_________

Net cash outflow from investing activities	(6,718)	(6,090)	(9,793)
	_________	_________	_________

Financing activities
Proceeds on issue of shares	6,527,687	-	-
New loans raised	885,664	1,584,562	2,699,359
	_________	_________	_________

Net cash from financing activities	7,413,351	1,584,562	2,699,359
	_________	_________	_________

Net increase/(decrease) in cash and cash equivalents	5,334,192	(159,800)	(282,369)
Cash and cash equivalents at beginning of period	131,158	273,810	273,810
Effect of foreign exchange rate changes	(7,936)	(119,163)	139,717
	_________	_________	_________

Cash and cash equivalents at end of period	5,457,414	(5,153)	131,158
	_________	_________	_________

Notes to the unaudited interim results

For six months 30^th June, 2010

1. The information for the period ended 30 June, 2010 does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006. It has been prepared in accordance with the accounting policies set out in, and is consistent with, the audited financial statements for the year to 31^stDecember, 2009. These statutory accounts, upon which the auditors issued an unqualified opinion, and which did not contain any statement under Section 498(2) of (3) of the Companies Act 2006, have been delivered to the Registrar of Companies.

The interim financial report has been prepared with accounting policies consistent with International Financial Reporting Standards. The financial statements have been prepared under the historical cost basis.

The Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future and they therefore continue to adopt the going concern basis in preparing these accounts.

2. Loss per share from continuing operations

The calculation of the basic and diluted loss per share is based on the following data:

	Unaudited first half 2010		Unaudited first half 2009		Year ended 31^st December 2009
Loss		£		£		£
Loss for the purpose of basic loss per share being net loss attributable to equity holders of the parent		(2,162,203)		(2,395,076)		(4,009,830)

Number of shares						No.
Weighted average number of ordinary shares for the purpose of basic loss per share		134,783,061		132,803,571		132,803,571
Weighted average number of ordinary shares For the purpose of diluted loss per share		134,783,061		132,803,571		132,803,571
IAS 33 requires presentation of diluted EPS when a company could be called upon to issue shares that would decrease net profit or increase net loss per share. For a loss making company with outstanding share options, net loss would only be increased by the exercise of out-of-the-money options. Since it seems inappropriate to assume that the option holders would act irrationally, no adjustment has been made to diluted EPS for out-of-the-money share options.

Notes to the unaudited interim results (continued)

For six months 30th June, 2010

3 Note to the consolidated cash flow statement
	Unaudited first half 2010 £	Unaudited first half 2009 £	Year ended 31st December 2009 £

Operating loss	(2,099,621)	(2,326,265)		(3,865,906)
Adjustments for:
Depreciation of property, plant and equipment	59,366	82,655		155,738
Share-based payment expense	180,000	216,000		437,664
	_________	_________		_________

Operating cash flows before movements in working capital	(1,860,255)	(2,027,610)		(3,272,504)
(Increase)/decrease in inventories	(49,889)	15,788		18,134
(Increase)/decrease in receivables	(53,881)	190,883		(354,999)
(Decrease)/increase in payables	(185,746)	250,521		313,789
Increase in provisions	243,047	-		464,309
	_________	_________		_________

Cash used in operations	(1,906,724)	(1,570,418)		(2,831,271)
	_____ ___	_________		_____ ___