Final Results

17 June 2011

Environmental Recycling Technologies plc

Preliminary Results for the year ended 31 December 2010

Environmental Recycling Technologies plc ("ERT" or the "Company") (AIM: ENRT), which has developed and is exploiting the patented rights to the Powder Impression Moulding ("PIM") process capable of converting mixed waste plastics into commercially viable products, announces its preliminary results for the year ended 31 December 2010

Highlights

·; A year which has seen important and successful progress in pursuit of our strategy to maximise the commercialisation of the patented rights to the Powder Impression Moulding ("PIM") process.

·; 2010 saw the first full scale commercialisation of the PIM process by 2K Manufacturing ("2K"), our current principal licensee. 2K commenced commercial production at its Luton facility of "EcoSheet", its award winning sustainable alternative to plywood. 2K is installing a second PIM production line at Luton and has signed sub licences to allow the international roll out of the PIM process in Spain, France, Belgium, Holland, Sweden and Switzerland.

·; Extension of current working relationship with ARUP, the leading global consulting engineers, to identify commercial opportunities for the development of products using the PIM process from recycled plastic in the construction and engineering sectors.

·; Continuation of ERT's patent protection programme with grant of European patents covering a further 21 territories in the EU and Western Europe and patents successfully granted in Australia, Canada and New Zealand, and patents have also been granted in Singapore and China.

·; Revenue together with other income for the year ended 31st December 2010 was £1.02 million (2009: £1.21 million). Reflecting continued investment in the development of the business, the group returned a loss on operations of £2.80 million (2009: £3.55 million).

Ken Brooks, Chairman, commented:

"The early months of the current year have seen continuing good progress. The commercial progress made by 2K in 2010 has led to new enquiries from potential partners both from within the UK and internationally during 2011. ERT is now in a position to extend its business model both in terms of increasing the patent portfolio and the number of commercial partners to exploit the benefits of the PIM process technology. We look forward to the coming year with optimism and believe that over the next 12 months, new exciting opportunities will arise."

For further information:

Environmental Recycling Technologies Plc

Ken Brooks, Chairman 0845 071 1394

Roger Baynham, Managing Director

Evolution Securities (Nominated Adviser)

Bobbie Hilliam/Patrick Castle 0207 071 4300

Weber Shandwick Financial

Nick Oborne/John Moriarty 020 7067 0700

The Company confirms that the Company's Annual Report and Accounts for the year ended 31 December 2010 will be sent to shareholders and will be available on the Company's website by 30 June 2011: www.ertplc.com.Chairman's and Managing Director's Statement

Environmental Recycling Technologies plc is pleased to announce its results for the year ended 31 December 2010, a year which has seen important and successful progress in pursuit of our strategy to maximise the commercialisation of the patented rights to the Powder Impression Moulding ("PIM") process.

Results

Revenues together with other income for the year ended 31st December 2010 was £1.02million (2009: £1.21million). The loss on operations was £2.80 million (2009: £3.55million). No dividend payment is proposed and the loss per share was 0.83 pence (2009: a loss of 1.44 pence).

Summary of Current Licensee Operations

United Kingdom - 2K Manufacturing

For 2K Manufacturing ("2K"), our current principal licensee, 2010 saw the first full scale commercialisation of the PIM process. Following the successful final commissioning of its production line, 2K commenced commercial production at its Luton facility of "EcoSheet", its award winning sustainable alternative to plywood.

This is a major milestone for ERT, as it offers clear evidence of the success of the PIM process and should therefore help accelerate industry demand amongst new licensees and further encourage prospective licensees with whom we are already in discussions. 2K has also signed further sub-licence agreements to allow the roll out of the PIM process in Spain, France, Belgium, Holland, Sweden and Switzerland. 2K has additional ambitious plans to sub-licence further its manufacturing system and "EcoSheet" product globally.

2K is installing a second PIM production line at its Luton facility. In addition, during 2010 2K installed material sorting and preparation equipment enabling it to now take in unseparated used waste plastic to use in the PIM process, further reducing the cost of materials and increasing its profit margins.

United Kingdom - Contour Showers Limited

Our other master licensee, Contour Showers Limited, continues commercial production of the "Ecodec" through a third party manufacturer. Contour Showers illustrates the PIM process's ability to manufacture high value, low volume products demonstrating the breadth of PIM's commercial potential.

United Kingdom - One Delta Limited

Progress by other current licensees on applications using our PIM Process is continuing. One Delta Limited is developing flood prevention systems, fencing for public access barriers and anti-ballistic fencing products using the PIM process. One Delta hopes to achieve its commercial milestones in the coming months.

United Kingdom - Arup

In 2010, ERT extended its current working relationship with ARUP, the leading global consulting engineers. ERT and ARUP are working together to identify commercial opportunities for the development of products using the PIM process from recycled plastic in the construction and engineering sectors.

International Commercial Opportunities

ERT's prime focus is to achieve commercial success in the UK and Europe but nonetheless ERT continues to receive international enquiries. With the assistance of a number of partners, we continue to examine each of these international opportunities.

Extension of the ERT Patent portfolio during 2010

ERT has continued its patent protection programme throughout the world during 2010. We have sought protection for the PIM process in the major markets in the world where the Board believes there is the greatest commercial potential. In 2010, ERT succeeded in obtaining its European patent which covers a further 21 territories in the EU and Western Europe. Patents have also been successfully granted in Australia, Canada and New Zealand and patents have also been granted in Singapore and China. Additional international patent grants and enforcement of any potential patent breaches remain an important focus for ERT.

Board Change

As a result of being appointed as Parliamentary Under-Secretary of State (Foreign & Commonwealth Office), Henry Bellingham resigned as a Non-Executive Director of ERT on 21 May 2010. The directors of ERT would like to congratulate Henry on his appointment and are grateful to him for his contribution to the Company over the years.

The PIM Process and the Environmental Policy Initiatives in the UK

Roger Baynham, ERT's Managing Director became Chairman of the PBF Recycling Group at the end of 2010. This is an influential industry group and, through this body, Roger has been able to extend further commercial awareness of ERT and the PIM process. Most importantly, he is able to show PIM process commercial applications which utilise co-mingled plastic waste.

The plastics recycling sector is witnessing unprecedented growth in the UK and of particular significance is the recent opening of the first mixed plastics recycling plant in the UK at Teesside with the assistance of funding from the Waste & Resources Action Programme (WRAP) a not-for-profit company funded by Government to help businesses reap the benefits of reducing waste and develop sustainable products.

The Environmental Services Association has estimated that capital expenditure of between £10-20 billion will be required over the next 10 years to fund new materials recycling and energy recovery infrastructure. As the UK's infrastructure evolves to cope with new demands, the performance of existing technologies will have to be improved and further technologies that are new to the waste sector and resources sector will need to be developed on a commercial scale. The PIM process is currently one of the emerging technologies that should benefit from such policy focus.

Further as a result of the environmental policy agenda and initiatives emanating from both government and industry, waste is now perceived as a critical resource which can help towards the stated goals of a low carbon economy. Plastic recyclers cannot currently obtain sufficient raw materials for processing into recyclate to meet the needs of domestic manufacturers. In addition, how the materials are collected and sorted before they are sent to reprocessing is now the single most important factor driving the quality of recycled and recovered materials. It also affects the viability of many reprocessing technologies. In this respect a key differentiator of the PIM process is an ability to use a range of recycled plastics without the need for pre-sorting them.

Outlook

The early months of the current year have seen continuing good progress. The commercial progress made by 2K in 2010 has led to new enquiries from potential partners both from within the UK and internationally during 2011. ERT is now in a position to extend its business model both in terms of increasing the patent portfolio and the number of commercial partners to exploit the benefits of the PIM process technology. We look forward to the coming year with optimism and believe that over the next 12 months, new exciting opportunities will arise.

Ken Brooks Roger Baynham

Chairman Managing Director

Financial Review for the year ended 31 December 2010

Results

Revenue together with other income for the year ended 31 December 2010 was £1.02 million (2009: £1.21 million). The loss on operations was £2.80 million (2009: £3.55 million). Total comprehensive losses attributable to equity shareholders were £3.32 million (2009: £4.65 million).

Dividends and loss per share

No dividend payment is proposed. The loss per share was 0.83 pence (2009: 1.44 pence).

Trading and Outlook

The progress towards profitability continues to be challenging and the group has reported another operating loss for the year. Whilst there are a number of uncertainties as outlined in note 1, the outlook is now more promising as 2K Manufacturing gears up its production of its "EcoSheet".

Administrative expenses excluding exceptional items for the period were £2.41 million (2009: £2.17 million). The loss on operations before exceptional items was £1.39 million (2009 £0.96 million)

Exceptional costs were £1.41 million (2009: £2.59 million) were incurred during the year in relation to the final settlement of the financial guarantee in respect of the financial guarantee in respect of the Alpha Line sale and leaseback agreement which was settled in full in April 2011 and impairment of the available-for-sale financial assets (see note 4).

Financing

The company meets its day to day cost base by managing its cash resources and securing appropriate levels of finance to settle their liabilities as they fall due. Additional cash funds of £0.38 million were raised during the year through the issue of new shares.

Trade payables have fallen by £0.64 million to £0.63 million (2009: £1.27million). £0.99 million were settled by way of a debt for equity swap.

Furthermore, the settlement costs associated with a former employee in Kyrgyzstan amounting to £1.02 million at 31 December 2009 have partially been repaid during the year in cash (£0.21 million) and via a debt for equity swap of £0.45 million.

Total borrowings amounted to £2.48 million. During the year YA Global Investments Limited ("Yorkville") converted a further £1.22 million into equity reducing the loan balance outstanding to £0.81 million as at 31 December 2010. The loan facility was renewed during the year with £0.55 million of accrued interest capitalised as part of the new loan agreement with an attached interest rate of 14% per annum. In February 2011, the loan balance and associated interest owed to Yorkville was repaid in full.

In addition, a further debt for equity swap in relation to other loans and accrued interest amounting to £2.27 million took place during the year. As at 31 December 2010 other loan balances outstanding amounted to £1.67 million (2009: £1.58 million).

As far as other loans are concerned, the directors have received written assurance from the lenders of £1.02 million (2009: £1.1 million) that there is no intention to request immediate repayment of the liabilities and that subject to agreement, the lender would accept repayment by way of a debt for equity swap.

The Standby Equity Distribution Agreement ("SEDA") with Yorkville to the value of £5million was not renewed as the directors no longer considered it necessary to have the SEDA facility in place.

On 31 January 2011, the company entered into a subscription agreement with a new investor to raise £0.54 million by issuing 13.5 million new shares at a price of 4 pence. As part of that subscription, the company agreed to issue warrants over 6 million new shares which were subsequently exercised.

In addition, the new investor indicated in writing that they would be willing to subscribe for a further 13.5 million new shares at a price of 4 pence at any time up to 20 April 2011. This offer was accepted on 25 March 2011 which raised further funds of £0.54 million.

Going concern

Based upon forecasts prepared, after making enquiries and the comments made above, the Directors have a reasonable expectation that the company and the group have adequate resources to meet commitments as they fall due and continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the annual report and accounts (see note 1).

David Shepley-Cuthbert

Finance Director

Group Statement of Comprehensive Income

Year ended 31 December 2010

Group Statement of Financial Position

At 31 December 2010

Group Statement of Changes in Equity

Year ended 31 December 2010

Year ended 31 December 2009

Group Statement of Cash Flow

Notes to the financial statements

1. Accounting policies

Basis of preparation

The principal accounting policies adopted in the preparation of the financial statements are set out below. The policies have been consistently applied to all the years presented, unless otherwise stated.

These financial statements have been prepared using recognition and measurement policies that are consistent with International Financial Reporting Standards, International Accounting Standards and Interpretations (collectively IFRS) issued by the International Accounting Standards Board (IASB) as adopted by the European Union ("adopted IFRS's").

The financial information set out above does not constitute the company's statutory accounts for the years ended 31 December 2010 or 2009, but is derived from those accounts.

Statutory accounts for 2009 have been delivered to the Registrar of Companies and those for 2010 will be delivered prior to 30 June 2011. The auditors have reported on those accounts; their reports were unqualified, did not include references to any matters to which the auditors drew attention by way of emphasis without qualifying their reports and did not contain statements under Section 498 of the Companies Act 2006.

The group has adopted early IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments (effective for accounting periods beginning on or after 1 April 2010), see accounting policy below. The interpretation addresses transactions in which an entity issues equity instruments to a creditor in return for the extinguishment of all or part of a financial liability. The impact of the early adoption of IFRIC 19 has been to recognise a gain of £0.63 million within the overall loss for the year. The comparatives have not been restated because the impact of applying IFRIC 19 to the prior year was not material

Going concern

The group's business activities, together with the factors likely to affect its future development, performance and position are set out in the Reviews. The financial position of the group, its borrowings and borrowing facilities are described in the Financial Review.

As described in the Financial Review on page 4 the progress towards profitability is challenging and the group has reported another operating loss for the year. Whilst there are a number of uncertainties, the directors' consider that the outlook is now more promising. The directors have continued to manage cash resources and secure appropriate levels of finance. At the date of approving these accounts the company has repaid the debt owed to Yorkville including accrued interest. Debts owed to other lenders amount to £1.8 million and are due for repayment before 31 December 2011.

The directors are in discussions with other lenders to settle the outstanding loans by the issue of shares in the company rather than settling in cash. During the year other lenders converted £2.27 million into shares.

In addition, written assurance has been received from one lender covering £1.02 million that there is no intention to request immediate repayment and that subject to agreement the lender would accept repayment by the issue of shares in the company. Similarly the expectations arising from the terms of the remaining loan arrangement are that the lenders would accept settlement in shares if the company was unable to repay the loans.

During the year the company exited the Standby Equity Distribution Agreement (SEDA) with Yorkville as the directors no longer considered the facility necessary.

The directors have prepared forecasts that indicate that the company and group have adequate resources to meet commitments as they fall due. Furthermore, the directors have obtained written confirmation from YA Global Limited ("Yorkville") confirming their willingness to make available to the company, if required, a SEDA facility amounting to the value of £2 million on acceptable terms to cover the company's normal overheads in the foreseeable future.

The directors acknowledge that due to the reliance on 2k Manufacturing, and the reliance on the above lenders for financial support, there is a degree of uncertainty that this support will continue although, at the date of approval of these financial statements, they have no reason to believe that they will not do so. Therefore after making enquiries and considering the uncertainties described above the directors consider that the group and the company will have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the annual report and accounts.

Basis of consolidation

The financial statements consolidate the accounts of Environmental Recycling Technologies plc and its non-trading subsidiary undertakings. Intercompany transactions and balances between companies are eliminated in full.

2. Revenue and segment information

The revenue and loss before tax are attributable to the principal activities of the Group being the licensing of the intellectual property of the plastic Powder Impression Moulding system to generate licence fees and ongoing royalties.

In the opinion of the Directors, the only business segment is the exploitation of the group's intellectual property. Whilst customers may be operating in different economic environments the group operates from the United Kingdom and all business is subject to English law.

All assets are held in the UK.

Reporting of external revenue by location of customer is as follows:

Revenue arises from:

Revenue of £1,016,000 (2009: £800,000) related to customer A, £Nil (2009: £300,000) to customer B and £Nil (2009: £1,470) to customer C of the group's total revenue respectively.

3. Loss on operations before interest and finance

Loss on operations is stated after charging/ (crediting):

Grant income is of a revenue nature.

Amounts paid to the company's auditors in respect of services to the company, other than audit of the Company's financial statements, have not been disclosed as the information is required instead to be disclosed on a consolidated basis.

4. Exceptional items

The legal and settlement costs are associated with the claim from a former employee in Kyrgyzstan. The product development work relates to fulfilling contractual obligations for pre-production work for Contour. Finance guarantee obligations relates to a financial guarantee dated August 2006, which guaranteed the Alpha Line finance agreement with 3DM Group Limited, which company (with 3DM Europe Limited) was subsequently sold to Enviro Polytek Limited (formerly Environmental Polymer Technologies Limited) on 30 November 2006 (see note 12).

5. Finance income

6. Finance costs

7. Earnings per share

At 31 December 2010, there were 39,979,185 (2009: 12,896,785) of potentially issuable shares which are anti-dilutive; such shares may become dilutive in future periods.

Since the year end, the Company has issued additional shares (see note 15) which would have impacted on the earnings per share calculation if they had occurred before 31 December 2010.

8. Available-for-sale financial assets

During 2008, 500,000 shares in Longborough Capital Corp Inc. (LBOC), a company with shares traded on pink sheets in New York, were received in settlement of licence fees amounting to US$625,000 due from LBOC. In addition GTI Inc. a subsidiary of LBOC paid licence fees due amounting to US$650,000 by issuing 1,083,333 shares. These GTI Inc. shares were exchanged for 520,000 shares in LBOC on 30 March 2009.

Listed shares are carried at fair value based on quoted market prices (level 1).

Company

The Company's investment in the capital of unlisted subsidiary undertakings is less than £1,000 in total and it represents:

The total cost of these investments is £602 against which there is an impairment provision of £600.

9. Trade and other receivables

All receivable balances are in sterling. As at 31 December 2010 trade receivables of £300,000 were past due, reviewed by the directors and provided in full for non-payment.

The ageing analysis of these receivables past due but not impaired is as follows:

The Group's main income is from licence and royalty fees. Accrued income and receivables are regularly reviewed by the Board of Directors to assess the recoverability of amounts due.

10. Trade and other payables - current

Book value is a fair approximation for fair value and debts are due for repayment under normal trading terms.

All trade and other payables fall due for payment within one year except for £200,000 in relation to the former employee settlement cost, due for payment in 2012.

Other payables cover claims for legal and settlement costs associated with a former employee in Kyrgyzstan. This financial liability was previously included within provisions and was transferred to other payables following final settlement. Amounts paid during the year to the former employee and legal advisors were offset against the provision.

11. Borrowings

The carrying value (which is a reasonable approximation to fair value) of borrowings analysed by lender is as follows:

The amounts due to YA Global Investments Limited ("Yorkville") are stated net of unamortised finance costs. The convertible loan was unsecured and denominated in Sterling.

Pursuant to an agreement dated 27 March 2008 Yorkville borrowings are secured by a debenture over the assets of the undertaking. The loan was due for repayment on 31 December 2011 and simple interest is being charged at 14% per annum. Since the financial year end, the outstanding loan and accrued interest has been settled and the debenture is in the process of being released.

Other cash loans advanced during the year totalled £280,000 and £1,217,000 was advanced to repay Yorkville. A further £814,399 costs were incurred for stock lending and arrangement fees. Other loans totalling £2,266,624 were converted during the year into Ordinary Shares by way of a debt for equity swap. These loans carry interest at rates varying from 7.5% to 15% and conversion rights into Ordinary Shares.

The company has no other borrowing facilities.

12. Provisions

Provisions cover claims for legal and settlement costs associated with a former employee in Kyrgyzstan. Amounts paid during the year to the former employee and legal advisors were offset against the provision.

Finance guarantee obligations relate to a financial guarantee dated August 2006, which guaranteed the Alpha Line finance agreement with 3DM Group Ltd, which company (with 3DM Europe) was subsequently sold to Enviro Polytek (formerly Environmental Polymer Technologies Limited) on 30 November 2006. On 15 January 2010, Enviro Polytek Limited went into administration. The finance guarantee obligation provision has been increased to reflect the full and final settlement terms that have been negotiated in April 2011.

13. Related party transactions

Invoices totalling £50,011 (2009: £59,710) were received from the A H Brooks Partnership for services rendered and recoverable expenses. The partners are K W Brooks and Mrs N Brooks, wife of K W Brooks. The amount outstanding at the year-end was £23,102 (2009: £54,592), which was due to the A H Brooks Partnership.

K W Brooks was owed £1,188 by the company at the year-end (2009: £24,735).

Aston Hall Limited invoiced £46,973 (2009: £46,362) to the Group in respect of director's fees for D C Shepley-Cuthbert who is also a director and controlling party of Aston Hall Limited. The amount outstanding at the year-end was £25,698 (2009: £26,018).

Oakridge Business Services Limited, of which Mrs A Baynham wife of R Baynham is a director, invoiced £26,663 (2009: £15,000) in the year for director's fees. The amount outstanding at the year-end was £163 (2009: £11,250).

Philip Tyler Polymers Limited, a company that K W Brooks and R Baynham are directors of, invoiced £33,333 (2009: £29,536) to the Group in respect of support services. The amount outstanding at the year-end was £14,688 (2009: £29,719).

14. Share based payments

Environmental Recycling Technologies plc operates an unapproved option scheme for Executive Directors, senior management and certain employees.

The exercise price of options outstanding at the end of the year ranged between 2.5p and 72p (2009: 6p and 72p) and their weighted average contractual life was 1.6 years (2009: 3.8 years)

The weighted average share price (at the date of exercise) of options exercised during the year was 5p (2009: nil p)

The weighted average fair value of each option granted during the year was 1p (2009: nil p)

The following information is relevant in the determination of the fair value options granted during the year under the unapproved options scheme operated by Environmental Recycling Technologies plc:

2010

Equity-settled

Option pricing model used Black Scholes

Weighted average share price at grant date (pence) 1.4

Exercise price (pence) 2.5

Weighted average contractual life (days) 1,096

Equity-settled

Expected volatility 90.6%

Expected dividend growth rate -

Risk-free interest rate 2.0%

The volatility assumption, measured at the standard deviation of expected share price returns is based on a statistical analysis of daily share prices over the last 3 years.

The share based remuneration expense comprises:

Environmental Recycling Technologies plc issues warrants to third parties for the provision of services rendered and the provision of finance.

The exercise price of warrants outstanding at the end of the year ranged between 2.5p and 88p (2009: 2.5p and 88p) and their weighted average contractual life was 1.8 years (2009: 0.9 years)

The weighted average share price (at the date of exercise) of warrants exercised during the year was 5.3 p (2009: nil p)

The weighted average fair value of each warrant granted during the year was 1.3 p (2009: nil p)

The following information is relevant in the determination of the fair value warrants granted during the year under the unapproved options scheme operated by Environmental Recycling Technologies plc:

2010

Equity-settled

Option pricing model used Black Scholes

Weighted average share price at grant date (pence) 1.4

Exercise price (pence) 2.5

Weighted average contractual life (days) 1,096

Equity-settled

Expected volatility 90.6%

Expected dividend growth rate -

Risk-free interest rate 2.0%

The volatility assumption, measured at the standard deviation of expected share price returns is based on a statistical analysis of daily share prices over the last 3 years.

15. Events after the reporting date

Subscription for shares

On 31 January 2011, the Company entered into a subscription agreement with a new investor to raise £540,000 by issuing 13,500,000 Ordinary Shares of 2.5 pence each at a price of 4 pence. As part of that subscription, the Company agreed to issue warrants over 6,000,000 new Ordinary Shares exercisable at any time until 28 April 2011. In addition, the new investor indicated in writing that they would be willing to subscribe for a further 13,500,000 Ordinary Shares at a price of 4 pence at any time up to 20 April 2011. This offer was accepted on 25 March 2011 which raised a further £540,000.

Repayment of Convertible Loan Agreement

Following the subscription in January 2011, the Board resolved to repay in full its Convertible Loan Agreement with YA Global Investments ("Yorkville") entered into on 28 December 2006.

In accordance with the Convertible Loan Agreement, and following receipt of conversion notices (the "Conversion Notices"), the Company issued two tranches of Ordinary Shares to Yorkville (the "Conversion"). The first tranche was for 8,459,492 Ordinary Shares which were issued at a price of 3.76 pence, which represented a discount of 32.8 percent to the closing middle market price of the Company on 28 January 2011. The second tranche was for 214,136 Ordinary Shares which were issued at a price of 4.38 pence, which represented a discount of 21.7 percent to the closing middle market price of the Company on 28 January 2011. The Conversion satisfied £259,400 of loans owed to Yorkville.

The remaining outstanding amounts under the Convertible Loan Agreement of £540,000 were repaid using the cash proceeds from the Subscription.

Following the Conversion and Repayment, the Convertible Loan Agreement was terminated and a debenture secured against the assets of the Company is in the process of being removed.

Litigation settlement

On 2 February 2010, the company announced that it reached a settlement on a series of disputes and litigation with Mr Sean Daley ("Mr Daley"), the former director of Camco Corporation Limited and CEO of the group's Central Asian operations. As part of that settlement agreement the Board agreed to make certain payments to Mr Daley in both cash and shares over a period of three years.

In accordance with this Settlement Agreement, the company issued Mr Daley with 992,063 Ordinary Shares at 5.04 pence, representing a discount of 10 percent to the closing middle market price of the Company on 28 January 2011.