(EHP.L) Epistem Holdings PLC Buy/Sell

Consolidated Statement of Changes in Equity

For the six months ended 31 December 2009
Share Share Reverse Total
Share Premium Options Acquisitions Retained Shareholder'
Capital Account Reserve Reserve Earnings Equity
£'000 £'000 £'000 £'000 £'000 £'000
At 1 July 2008 108 8,437 547 (2,484) (4,026) 2,582
Allotment of ordinary shares - 9 - - - 9

Recognition of equity settled
share-based payments - - 45 - - 45
Total Comprehensive Income for the financial period - - - - (520) (520)
At 31 December 2008 108 8,446 592 (2,484) (4,546) 2,116
Allotment of ordinary shares - 15 - - - 15
Exercise/lapse of options - 6 (12) - 6 -

Recognition of equity settled
share-based payments - - 26 - - 26
Total Comprehensive Income for the financial period - - - - 603 603
At 30 June 2009 108 8,467 606 (2,484) (3,937) 2,760

Allotment of ordinary shares 11 2,873 - - - 2,884
Share issue costs - (135) - - - (135)

Recognition of equity settled
share-based payments - - 14 - - 45
Total Comprehensive Income for the financial period - - - - 5 5
At 31 December 2009 119 11,205 620 (2,484) (3,932) 5,528

Consolidated Balance Sheet

As at 31 December 2009
31 Dec 2009 31 Dec 2008 30 June 2009
(unaudited) (unaudited) (audited)
£'000 £'000 £-000

Non-current assets

Intangible assets 137 53 139
Plant and equipment 587 403 465
Deferred taxation 594 - 594
1,318 456 1,198

Current assets

Trade and other receivables 1,107 725 820
Tax receivables 150 270 150
Cash and cash equivalents 5,598 1,240 3,748
6,855 2,235 4,718

Liabilities

Current liabilities

Deferred income 1,380 - 1,380
Trade and other payables 895 471 721
Obligations under finance leases 46 49 46
Bank overdrafts and loans 77 - 52
2,398 520 2,199

Net current assets 4,457 1,715 2,519
Total assets less current liabilities 5,775 2,171 3,717

Non-current liabilities

Deferred income (230) - (920)
Obligations under finance leases (17) (55) (37)
Net assets 5,528 2,116 2,760

Capital and reserves

Called-up equity share capital 119 108 108
Share premium account 11,205 8,446 8,467
Share options reserve 620 592 606
Reverse acquisition reserve (2,484) (2,484) (2,484)
Retained earnings (3,932) (4,546) (3,937)
Total shareholders' equity 5,528 2116 2,760

Consolidated Statement of Cash Flows

For the six months ended 31 December 2009
31 Dec 2009 31 Dec 2008 30 June 2009
(unaudited) (unaudited) (audited)
£'000 £'000 £'000

Cash flows from operating activities

Profit/(loss) on ordinary activities before taxation 5 (644) (701)
Depreciation, amortisation and impairment 80 59 131
Share-based payment expense 14 45 71

Operating profit/ (loss) before changes in working capital and provisions 99 (540) (499)
(Increase) in trade and other receivables (287) (288) (383)
(Decrease)/increase in deferred income (690) - 2,300
increase in trade and other payables 174 43 293
Cash generated from operations (704) (785) 1,711
Finance costs - (7) -
Finance income 7 36 41
Tax received - - 183
Net cash (outflow)/inflow from operating activities (697) (756) 1,935

Cash flows from investing activities

Acquisition of intangible assets, plant and equipment (200) (108) (328)
Net cash outflow from investing activities (200) (108) (328)

Cash flows from financing activities

Proceeds from issue of share capital 2,884 9 24
Expenses of share issue (135) - -
Repayment of borrowings (27) (23) (53)
Net cash inflow/(outflow) from financing activities 2,722 (14) (29)

Net increase/(decrease) in cash equivalents 1,825 (878) 1,578
Cash and cash equivalents at beginning of period 3,696 2,118 2,118
Cash and cash equivalents at end of period 5,521 1,240 3,696

Analysis of Net Funds

Cash at bank and in hand 5,598 1,240 3,748
Bank overdrafts (77) - (52)
Net Funds 5,521 1,240 3,696

Notes to the Interim Financial Statements

Six months ended 31 December 2009

1. General Information

The interim financial statements have been prepared using policies which are consistent with International Financial Reporting Standards ("IFRS") as adopted by the European Union and therefore comply with Article 4 of the EU IAS Regulation, International Financial Reporting Interpretations Committee("IFRIC") interpretations and with those parts of the Companies Act 1985 and 2006 applicable to companies reporting under IFRS.

These interim financial statements have not been audited and do not constitute statutory accounts within the meaning of section 435 of the Companies Act 2006. The comparative figures for the financial year ended 30 June 2009 are not the statutory accounts for the financial year but are abridged from those accounts which have been reported on by the Group's auditors and delivered to the Registrar of Companies. The report of the auditors was unqualified.

These interim financial statements were approved by the Board of Directors on 8 March 2010.

The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods represented in these consolidated financial statements.

2. Significant Accounting Policies

Basis of consolidation

The consolidated financial statements consolidate those of the Company and its subsidiaries (together referred to as the "Group"). They are presented in pounds sterling and all values are rounded to the nearest one thousand pounds (£k) except where otherwise indicated.

Subsidiaries are entities controlled by the Group. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. Transactions between Group companies are eliminated on consolidation.

On 16 March 2007, Epistem Holdings Plc merged with Epistem Limited, when the shareholders of Epistem Limited exchanged their shares for equivalent shares in Epistem Holdings Plc. As Epistem Holdings Plc was newly incorporated at the time of the transaction under the terms of IFRS 3 'Business Combinations', this transaction has been accounted for as a reverse acquisition, on the basis that the shareholders of Epistem Limited gained a controlling interest in the Group. The financial statements therefore represent a continuation of the financial statements of Epistem Limited.

Revenue recognition

a. Contract Revenue

In respect of pre-clinical contract income, the Company generally invoices and reports as revenue 50% of the value of a new contract on signature. This policy is designed to recognise that, in negotiating contracts for new studies, the Company performs specific pre-contract work to establish the parameters of the study work. When the final report is issued, the remainder of the contract is invoiced and recognised as revenue, at that date. In other cases where the contract does not provide for income recognition on signature, revenue is recognised as the work is undertaken and invoiced.

In respect of clinical contract income, revenue is recognised as the work is undertaken and invoiced.

b. Collaboration and licensing revenue

Contractually agreed upfront payments and similar non-refundable payments in respect of collaboration or licence agreements which are not directly related to ongoing research activity are recorded as deferred income and recognised as revenue over the anticipated duration of the agreement. Where the anticipated duration of the agreement is modified, the period over which revenue is recognised is also modified. Non-refundable milestone and other payments that are linked to the achievement of significant and substantive technological or regulatory hurdles in the research and development process are recognised as revenue on achievement of the specific milestone.

Segment reporting

A segment is a group of assets, liabilities and operations engaged in providing products or services that are subject to risks and returns that are different from those of other parts of the business. The Group's primary format for segment reporting is based on business segments.

Research and development

Research and development expenditure is written off in the year in which it is incurred.

Share-based payments

The Group issues equity settled and cash-settled share-based payments to certain employees (including directors). Equity settled share-based payments are measured at fair value at the date of grant. The fair value determined at the grant date of the equity settled share-based payments is expensed on a straight-line basis over the vesting period, together with a corresponding increase in equity, based upon the Group's estimate of the shares that will eventually vest.

Fair value is measured using the Black-Scholes pricing model. The expected life used in the model has been adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations.

Where the terms of an equity settled transaction are modified, as a minimum an expense is recognised as if the terms had not been modified. In addition, an expense is recognised for any increase in the value of the transaction as a result of the modification, as measured at the date of modification.

Where an equity settled transaction is cancelled, it is treated as if it had vested on the date of the cancellation, and any expense not yet recognised for the transaction is recognised immediately. However, if a new transaction is substituted for the cancelled transaction, and designated as a replacement transaction on the date that it is granted, the cancelled and new transactions are treated as if they were a modification of the original transaction, as described in the previous paragraph.

2. Segment information
Contract
Research Bio- Novel Unallocated
Services marker Therapies Expenses Total
£'000 £'000 £'000 £'000 £'000

Six months ending 31 December 2009

Revenue 1,166 307 1,290 - 2,763
Segment trading result 328 (134) 584 (685) 93
Less depreciation and amortisation (12) (18) (38) (10) (78)
Less equity settled share-based payments - (6) (3) (5) (14)
Operating profit/(loss) 316 (158) 543 (700) 1

Six months ending 31 December 2008

Revenue 1,123 330 - - 1,453
Segment trading result 267 15 (364) (458) (540)
Less depreciation and amortisation (18) (11) (23) (7) (59)
Less equity settled share-based payments (13) (8) (2) (22) (45)
Operating profit/(loss) 236 (4) (389) (487) (644)

Twelve months ending 30 June 2009

Revenue 2,295 670 1,003 - 3,968
Segment trading result 607 51 (103) (1,054) (499)
Less depreciation and amortisation (37) (24) (53) (17) (131)
Less equity settled share-based payments (7) (19) (2) (43) (71)
Operating profit/(loss) 563 8 (158) (1,114) (701)

This information is provided by RNS The company news service from the London Stock Exchange

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