(BGTI.L) Bgenuinetec Inc Buy/Sell

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BGENUINETEC INC.

Taketoshi Kashiwabara Japan +81-3-5652-0321

(Chairman)

Toshiya Kurita Japan +81-3-5652-0321

(Chief Financial Controller)

Charles Stanley Securities

Nominated Adviser +44 (0) 20 7149 6000

Russell Cook / Freddy Crossley

Cubitt Consulting

Brian Coleman-Smith / James Verstringhe/ Nicola Krafft +44 (0) 20 7367 5100

Background Note on Secure Design

On 14 July 2006, Secure Design was the first Japanese company to be admitted to trading on AIM. It offers fingerprint authentication products to companies and individuals that wish to establish high levels of security using biometrics. Biometrics uses a physical attribute of the body, such as a fingerprint to identify and verify the individual with the aim of making individual authentication efficient and secure.

The Company offers a range of fingerprint authentication products and systems, from an integrated system to a mobile device. The Company designs and outsources the production of these products and can tailor them to individual client specific needs and applications.

Biometric applications provide convenient and reliable security which reduces the cost associated with the failure of conventional authentication methods. The principal factor which distinguishes biometrics from conventional password based authentication is the enhanced security level it provides while maintaining the privacy of individual users.

The worldwide demand for biometrics is estimated to increase from just over $3 billion in 2007 to over $5.6 billion by 2010.*

("BGENUINETEC INC." or "the Company")

(A leading biometrics company based in Tokyo, Japan specialising in fingerprint authentication)

Interim Results for six months ended 30 June 2009

Chairman's Statement

Following the appointment of Dr Hiroaki Kunieda as Chief Executive in February this year, we have revised our business plan to reflect the financial situation within the Company. Demand for the security needed to identify an individual is increasing, especially in the fields of information security, financial transactions, security systems and medical treatment. There is also increasing interest in the use of fingerprint authentication on mobile phones and note PCs.

However, reasonable priced and secure solutions have not been available until now. Our objective is to see that personal authentication is installed on all small portable devices that are used in every day life. Therefore, we are always exploring high quality, low cost solutions for volume applications. Our technical team is headed by our Chief Technical Officer, Dr Dongju Li, who was appointed a director on 10 February this year.

We plan to form a wholly owned subsidiary, based in China, with a view to developing this market in cooperation with local Chinese companies. Through these partners, we aim to provide low cost, high quality security systems, based on fingerprint authentication, to information providers, banks, mobile phone operators and door lock manufacturers. We are also looking at other opportunities to use our leading edge technology in other sectors of this important market.

Results

Turnover in the period was JPY 37.05 million (£232,247), which was 149.53% higher compared to the results achieved in first half of 2008 when the Company reported sales of JPY14.85 (£ 93,075). The loss before tax decreased by 36.2% to JPY 205.4 million (£1,287,370) compared to JPY 322.04 million (£2,016,523). The loss per share improved by 58.4% to JPY 3.22 (0.02p) compared to JPY 7.75 (0.049p) in first half of 2008.
Operating review

In the first six months of the year, we have focused on building a new business model and investing in the R&D for the new algorithms required for the applications that we are developing for mobile phones, banks and door locks. Although we were not able to achieve our revenue targets for the period, our R&D results have brought us powerful algorithms for future products. We are actively looking to increase the sales of our products based on the new business model while at the same time developing a range of innovative products for international markets.

Operating expenses

Operating expenses in the period were JPY 129 million (£ 808,157), which were lower by JPY 111 million compared to those for the first half of 2008 mainly due to the write off of bad debt by JPY 111.6 million (£525,339) posted in 2008.

Cash Balance

The cash balance at the end of the period was JPY 24 million (£153,238), reflecting a fund raising of JPY 102 million in the period. The Company is currently seeking to raise further funds during the second half of the year for working capital and the continued development of the Company. The details of which will be announced in due course.

Dividend

At this stage in the Company's development, the directors do not intend to declare a dividend.

Accounts Receivables

The accounts receivables balance at the end of the period was JPY 38.3 million (£503,540).

Employees

I would like to take this opportunity to thank all our employees for their contributions. Their hard work, dedication and commitment which is much appreciated. We depend upon them to take care of our customers, and they do so in a positive manner. The company now has 11 employees, including directors.
Commercial Initiatives

We will be able to use various kinds of sensor in addition to the Mitsumi optical swipe sensor, which is used for NTT DoCoMo mobile phones. As a distributor of Fingerprint Cards (FPC) sensors in Japan, we have developed a new fingerprint module, with FPC area sensors, which has initially been well received in the Chinese market.

Subject to further funding, we are planning to strengthen our R&D team to work on our core component business, especially the module business, so that we can develop new innovative components such as sensors, low cost processors and high quality embedded algorithm and compact modules. In the current difficult economic situation in Japan, we are moving ahead with the new business model by using our technical skills and working closely with our partners.

Within our business model, we are focusing on the core components for fingerprint authentication, which are based on our creative designs for LSIs and embedded systems. We have started to strengthen all areas of the business so that we can balance the development of our core components and integrated modules including algorithms, chips and sensors which we can then provide to specialist distributors in overseas markets.

We are planning to establish subsidiaries in China to act as sales centres for our products which can then be distributed to related vendors throughout China. The strength of our business is our technology and we believe that by working alongside our Chinese sales partners we should be able to generate volume sales in the Chinese market.

Module Business

Many information security applications require fingerprint modules with different kinds of area sensors. As a growing sector worldwide, we aim to focus on this growing market, particularly in China. The sensors of our partner company, Fingerprint cards AB (FPC), located in Sweden, are highly rated for their durableness against ESD (Electrostatic discharge) and physical damage. We are working closely with FPC and we believe that our innovative technology will enable us to market the new modules outside Japan. Sales promotion for this new module has started and we have had initial positive feedback from some potential customers.

Door Locks are a traditional application for the module business and we have been working with the Japanese Lock Association and a major Chinese door lock company to develop the best solution for high quality door locks at a competitive price...

The Mobile business is potentially our largest business opportunity. Our leading edge technology in this area is the embedded fingerprint algorithm, which is suitable for small portable devices. The technology is largely proven by its acceptance by Sharp Corporation last year and by working with other sensor suppliers we plan to make our phone technology available across international markets.

The modules and the end products are particularly suitable for the Chinese market, while the mobile or note PC solution is particularly suitable for the US market. Based on alliances with world partners, we have confidence in expanding our business in this sector.

Since notebook PCs are increasingly used for e-Commerce, there is a growing need to make the notebook platform more secure.

Our technology can provide the secure hardware based solution to the notebook PC customers together with low cost software and fingerprint sensors. In addition, we can provide various types of swipe or area sensors from semiconductor to optical ones. The solution can be customized to meet the demands of the vendors. The core technology used in notebook PCs can be compatible with the solution to smart phones, which will benefit both our customers and their end users.

Fingerprint Authentication Chip

Our fingerprint authentication chips are used in our modules which we have been providing to OA makers (Fax Machines, Telecopiers etc.), such as Canon Inc., for the last 3 years. This project was due to be expanded in the current year, but orders have been effected by the global economic downturn. Nevertheless, there has been a recovery in the orders for chips for OA equipment in the 4th quarter.

Our next aim is to produce a chip to meet the increasing demand for small low cost modules to fit the reducing physical size of the printed circuit board.

Outlook

In order that the Company's trading performance will improve in the short to medium term, we are implementing a business model using our existing engineering and technology platform, focusing particularly on both core components and low cost modules.

To achieve the commercial objectives stated above, the Company needs to secure further funding and establish a robust balance sheet in the short term. Assuming that we obtain sufficient funding, the directors expect that the Company will be able to build upon its commercial relationships and that BgenuineTec has a sustainable and profitable future.

Taketoshi Kashiwabara

Chairman

29 September 2009

Note:

Exchange rate per Pound (£) for the above conversions is JPY159.54, which has been derived from the TTM rate on June/End, 2009 Consolidated Income Statement for the period from 01 January to 30 June

JPY'000 JPY'000 * *
(Note 5) (Note 5)
Revenue 37,053 14,849 232,247 93,075
Cost of sales (47,655) (88,007) (298,702) (551,634)
Gross loss (10,602) (73,158) (66,455) (458,559)
Other operating income 3,794 347 23,784 2,173
Sales and marketing expenses (9,651) (124,124) (60,494) (778,014)
General and administrative (100,163) (78,166) (627,824) (489,947)

expenses
Research and development (19,119) (38,119) (119,839) (238,928)

expenses
Loss from operations (135,741) (313,220) (850,828) (1,963,275)
Finance income 255 81 1,598 513
Finance costs (215) (1,300) (1,344) (8,146)
Net finance income (costs) 40 (1,219) 254 (7,633)
Impairment loss on equity (64,869) - (406,600) -

accounted investee
Share of loss of equity (4,817) (7,596) (30,196) (47,615)

accounted investee
Loss before tax (205,387) (322,035) (1,287,370) (2,018,523)
Income tax expenses - - - -
Loss for the period (205,387) (322,035) (1,287,370) (2,018,523)

Attributable to:
Equity holders of the Company (205,387) (322,035) (1,287,370) (2,018,523)
Minority interests - - - -
Basic loss per share*(Note 3) (3.22) (7.75) (0.020) (0.049)
Diluted loss per share (Note - - - -

Consolidated statement of comprehensive income for the period from 01 January to 30 June

JPY'000 JPY'000 * *
(Note 5) (Note 5)
Loss for the period (205,387) (322,035) (1,287,370) (2,018,523)

Other comprehensive income Financial assets available for sale:

the period
Total comprehensive loss for (197,376) (322,035) (1,237,157) (2,018,523)

the period

Attributable to:
Equity holders of the Company (197,376) (322,035) (1,237,157) (2,018,523)
Minority interests - - - -

Consolidated statement of financial position
As at 30 June As at 31 December As at 30 June As at 31 December

JPY'000 JPY'000 * *
(Note 5) (Note 5)

Assets Non-current assets
Property, plant and equipment 3,671 4,214 23,009 26,410
Investment securities 44,907 6,446 281,481 40,403
Investment in equity accounted 1,350 68,036 8,460 426,452

investee
Goodwill 7,200 7,200 45,130 45,130
Intangible assets 1,092 4,858 6,846 30,450
Other non-current assets 4,575 4,636 28,674 29,059
62,795 95,390 393,600 597,904

Current assets
Inventories 18,367 51,727 115,125 324,226
Trade and other receivables 75,332 43,442 472,186 272,298
Cash and cash equivalents 24,447 45,237 153,238 283,546
118,146 140,406 740,549 880,070
Total assets 180,942 235,796 1,134,149 1,477,974

Liabilities Non-current assets
Deferred tax liabilities 5,450 - 34,164 -
5,450 - 34,164 -

Current liabilities
Loans and borrowings 18,000 - 112,824 -
Trade and other payables 96,494 81,246 604,827 509,251
114,494 81,246 717,651 509,251
Net current assets 3,652 59,160 22,898 370,819
Total liabilities 119,944 81,246 751,815 509,251
Net assets 60,997 154,550 382,334 968,723

Equity
Share capital 918,614 867,614 5,757,892 5,438,223
Share premium 675,854 625,164 4,236,264 3,918,538
Fair value reserve 8,011 - 50,213 -
Share option reserve 28,101 25,967 176,139 162,766
Deficit (1,569,582) (1,364,195) (9,838,173) (8,550,804)
Total equity 60,997 154,550 382,334 968,723

Consolidated Statement of Changes in Equity for the period from 01 January to 30 June

JPY'000 *
(Note 5)
Attributable to equity holders of the Company
Share capital Share premium Fair value reserve Share option reserve Deficit Total equity Total equity
Balance at 1 January 2008 713,614 472,255 (425) 12,337 (826,272) 371,509 2,328,625
Net loss for the period - - - - (322,035) (322,035) (2,018,523)
Total comprehensive loss - - - - (322,035) (322,035) (2,018,523)
Share issued 68,000 68,000 - - - 136,000 852,451
Share issuance costs - (483) - - - (483) (3,027)
Share option costs charged to - - - (450) - (450) (2,818)

income for the period
Balance as at 30 June 2008 781,614 539,772 (425) 11,887 (1,148,307) 184,541 1,156,708
Balance at 1 January 2009 867,614 625,164 - 25,967 (1,364,195) 154,550 968,723
Net loss for the period - - - - (205,387) (205,387) (1,287,370)
Fair value adjustments of - - 8,011 - - 8,011 50,213

available-for sales investments, net of tax
Total comprehensive loss - - 8,011 - (205,387) (192,374) (1,237,157)
Share issued 51,000 51,000 - - - 102,000 639,338
Share issuance costs - (310) - - - (310) (1,942)
Share option costs charged to - - - 2,134 - 2,134 13,372

income for the period
Balance as at 30 June 2009 918,614 675,854 8,011 28,101 (1,569,582) 60,997 382,334

Consolidated statement of cash flows for the period from 01 January to 30 June

JPY'000 JPY'000 * *
(Note 5) (Note 5)

Operating Activities
Cash used in operations (89,855) (86,212) (563,212) (540,380)
Interest received, net 254 19 1,589 119
Net cash used in operating (89,601) (86,193) (561,623) (540,261)

activities Investing activities
Purchase of intangible assets - (3,447) - (21,604)
Acquisition of associate (3,000) (15,000) (18,804) (94,020)

company
Acquisition of other (25,000) - (156,701) -

investments
Proceeds from sales of - 1,645 - 10,309

investment securities
Increase of short-term lending (22,888) (1,500) (143,459) (9,402)
Net cash used in investing (50,888) (18,302) (318,964) (114,717)

activities Financing activities
Proceeds from loans and 18,000 - 112,824 -

borrowings
Proceeds on issue of new 101,690 135,517 637,396 849,424

shares, net of issuance cost
Net cash from financing 119,690 135,517 750,220 849,424

activities
Net increase (decrease) in cash (20,799) 31,022 (130,367) 194,446

and cash equivalents
Effect of exchange rate 9 67 59 421

fluctuations on cash held
Cash and cash equivalents at 45,237 9,515 283,546 59,637

beginning of year
Cash and cash equivalents at 24,447 40,604 153,238 254,504

end of period

Notes to the interim consolidated financial statements

1. General Information

This interim report was approved by the Directors on 24 September 2009. The results for the both of current and comparative half year have not been audited, but were the subject of an independent review carried out by independent auditors, Chiyoda International CPA Office. Their review confirmed that the figures were prepared using accounting policies and practices consistent with those adopted in the 2008 annual report. The audited results for the year ended 31 December 2008 are an abridged version of the company's financial statements which the predecessor auditor, Kainan Audit Corporation gave an unqualified report.

2. Going concern

These consolidated financial statements have been prepared by management on the bases of generally accepted accounting principles applicable to a "going concern", which assumes the Company will continue in operation for the foreseeable future and will be able to realise its assets and discharge its liabilities in the normal course of operations.

The Company posted a continuing net loss of JPY 205,387 thousand (£1,287,370) in the first half ended 30 June 2009, JPY 537,923 thousand in December 2008, and JPY 648,959 thousand in December 2007. Net loss for this period was mainly due to poor sales results of JPY 37,053 thousand (£232,247) and losses on impairment loss on equity accounted investee of JPY 64,869 million (£406,600).

These consolidated financial statements do not reflect adjustments that would be necessary if the going concern assumption was not appropriate because management believes that in the years ended 31 December 2009 the Company will still declare loss of JPY 317 million and in 2010 will head for surplus of JPY 14 million and the Company can successfully raise sufficient funds later this year to execute the business plan. If the going concern assumption were not appropriate for the consolidated financial statements, then an adjustment would be necessary to the carrying values of the assets and liabilities, the reported revenues and expenses and the balance sheet classification used.

3. Loss per share

Basic loss per share is calculated on loss for the period of JPY205,387 thousand (£1,287,370) divided by 63,744,261 weighted average ordinary shares in the period ended 30 June 2009 and loss for the period of JPY322,035 thousand (£2,018,523) divided by 41,556,393 weighted average ordinary shares in the period ended 30 June 2008.

There were no factors resulting in a delution of loss per share.

4. Dividend paid

No dividends were paid and approved for the period.

5. British pound sterling equivalent

The British pound sterling equivalents of the figures shown in these interim consolidated financial statements are supplementary information and have been translated at JPY159.54 to STG*1. Such translation should not be construed as representation that the Japanese yen amounts represent, or have been or could be converted into British pound at that or any other rate.

6. Impairment loss on investment in equity accounted investee

The Company recognised impairment loss on investment in Beyond LSI, Inc for JPY 64,869 thousand yen (*406,600) to its recoverable amount because of its poor results and net asset value declines significantly.
7. Related Party Transactions

Transactions between the Company and its related parties for the period from 01 January to 30 June 2009 are described as follows:
(Unit: JPY'000) Mr. Kashiwabara Mr. Kunieda Mr. Li Mr.Evans Mr. Kiyomoto Mr. Cho Mr. Takahashi Fuji Digital Techno-imagia I-O Network ASD, Inc. Byond
(Director) (Director) (Director) (Director) (ex-Director) (ex-Director) (ex-Director) Imaging LSI, Inc.
Sales of goods in the period - - - - - - - - 1,117 - - 840
Interest income in the period - - - - - - - - - - - 126
Purchase of goods in the - - - - - - - 4,170 - - - -

period
Interest expense in the period 1 - - - - - - - - - - -
Short-term lending made in the - - - - - - - - - - - 2,888

period
Short-term borrowing in the 18,000 - - - - - - - - - - -

period
Capital increase in the period 35,000 - - - - - - - - - - -
Amounts owed by related - - - - - - - - 1,117 - - 21,260

parties at end of the period
Amounts owed to related 26,000 - - - 14,787 8,800 6,375 - - - - -

parties at end of the period

(Unit: *) Mr. Kashiwabara Mr. Kunieda Mr. Li Mr.Evans Mr. Kiyomoto Mr. Cho Mr. Takahashi Fuji Digital Techno-imagia I-O Network ASD, Inc. Byond
(Note 5) (Director) (Director) (Director) (Director) (ex-Director) (ex-Director) (ex-Director) Imaging LSI, Inc.
Sales of goods in the period - - - - - - - - 7,000 - - 5,265
Interest income in the period - - - - - - - - - - - 794
Purchase of goods in the - - - - - - - 26,138 - - - -

period
Interest expense in the period 5 - - - - - - - - - - -
Short-term lending made in the - - - - - - - - - - - 18,099

period
Short-term borrowing in the 112,824 - - - - - - - - - - -

period
Capital increase in the period 219,381 - - - - - - - - - - -
Amounts owed by related - - - - - - - - 7,000 - - 133,261

parties at end of the period
Amounts owed to related 162,969 - - - 92,698 55,159 39,961 - - - - -

parties at end of the period

Copies of the statement are being sent to shareholders. Further copies are available on request from:

Toshiya Kurita

Chief Financial Controller

BGENUINETEC INC.

Headquarters and R&D Centre

ICST Building 3F

1-9-2 Nihonbashihoridomecho, Chuo-ku

Tokyo 103-0012 Japan

Tel: +81.3.5652.0321

Email:t_kurita@securedesign.jp

Brian Coleman-Smith

Cubitt Consulting Limited 30 Coleman Street London EC2R 5AL. Tel: + 44 (0)20 7367 5100

Email:brian.coleman-smith@cubitt.consulting.com

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

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