Final Results

Amphion Innovations plc

Preliminary Results for the year to 31 December 2009

Amphion Innovations plc (LSE: AMP) ("Amphion" or "the Company"), which builds shareholder value in high growth companies in the medical and technology sectors, today announces its preliminary results for year ended 31 December 2009.

Highlights

Trading and financial performance

·; Revenue increased by 22% to US $8.6 million in 2009 (2008: US $7.1 million)

·; Gross profit increased by almost 70% to US $5.8 million (2008: US $3.4 million)

·; NAV per Share broadly flat at US $0.42 (2008: US $0.44)

·; Operating loss narrowed to US $892,937 (2008: US $3.4 million loss)

·; Loss for the year increased to US $2.9 million primarily due to reduction of fair value of investments of US $1.8 million (2008: US $1.2 million primarily as a result of fair value increase on investments of US $2.0 million)

·; Net cash generated from operating activities US $1.7 million (2008: US $2.4 million negative)

·; Additional US $4.2 million raised through issue of Convertible Promissory Note

Intellectual property (IP)

·; First full year of income from IP licensing

·; Revenue generated from IP licensing rose 40% to US $7.6 million in 2009

·; Increased scope of future licensing income with successful re-examination of '502 patent

·; Large number of potential licensees identified

·; IP assets are carried at amortised cost and their full value is not reflected in the NAV

·; Examining options to further capitalise on IP income

Partner Companies

·; Post year end, Kromek completed the oversubscribed Series D financing of £12.3 million

·; Axcess reports record revenues of US $4.9 million

·; Myconostica raised £1.75 million in a Series D financing

·; Positive preclinical study results of WellGen's proprietary black tea extract advances lead medical food into the final phase of clinical development

Richard C.E. Morgan, Amphion's Chief Executive Officer said:

'Alongside the continued progress made by our Partner Companies, a key achievement in 2009 has been the successful development of a significant secondary revenue stream through our IP licensing and development subsidiary, DataTern. This has been achieved by the signing of 14 new licenses with leading international companies and we are pursuing further licenses from a number of other large corporations. Income from IP has enabled the business to offset a more challenging environment for capital raisings and equally importantly has served to highlight the importance and value of IP throughout our business.

'Our Partner Companies all made good progress during the year. Kromek, in particular, had a very successful period culminating in a significantly oversubscribed fund raising in January 2010. Looking ahead, we will seek to maximise the potential of the IP licensing programme, alongside raising new capital which together will enable us to add value to our Partner Companies and support their continued development."

Enquiries

Amphion Innovations +1 212 210 6224

Charlie Morgan

Cardew Group +44 020 7930 0777

Tim Robertson/ Jamie Milton/ Daniela Cormano

Charles Stanley Securities, Nominated Advisor +44 020 7149 6000

Mark Taylor

Chairman and CEO's Statement

Results

Amphion continued to make progress in 2009. The continued success of our intellectual property (IP) licensing programme has been a critical factor in getting the Company to narrow its operating loss for the year and to enable us to raise additional capital through the issue of the Convertible Promissory Note (CPN). It is very gratifying that in the last two years Amphion has essentially established a strong second leg to our business with the IP licensing programme, which is driving a significant change in our operating and financial profile.

Revenue generated from IP licensing rose 40% to US $7.6 million in 2009. As a result of the success of the licensing programme, Amphion's total revenue increased by 22% to US $8.6 million in 2009 (2008: US $7.1 million) and gross profit increased by almost 70% to US $5.8 million (2008: US $3.4 million). Since our IPO in 2005 our revenue has increased by 76% per annum compound. As a result the total loss from operations narrowed from US $3.4 million in 2008 to US $892,937 in 2009.

Our reported Net Asset Value (NAV) per Share was US $0.42 as at 31 December 2009 compared to US $0.44 in 2008 and has remained in the US $0.40 to US $0.45 per Share range for about the last two years. Since Amphion's IPO in 2005 the NAV per Share has grown by 16.1% per annum compound from US $0.22 to US $0.42. Certain of our individual holdings of equity may be revalued in a new round of financing and those changes may be downward compared with most recent valuations. However, in this eventuality the overall impact on our NAV per Share is likely to be moderated by our holdings of convertible debt and by other assets in the Partner Companies that we do not believe would be impacted in this way. It should also be noted that Amphion's holding of intellectual property assets, which are valued at amortised cost, are producing sizable levels of gross income which we believe will continue in the future and could lead to an increase in value. While their progress has been slowed by the market environment, none of the Partner Companies is standing still and we expect to see significant growth in the years ahead.

Intellectual Property Licensing Programme

Amphion's IP licensing programme made good progress over the course of 2009. Amphion's wholly-owned subsidiary, DataTern, Inc., signed additional non-exclusive intellectual property license agreements with 14 leading international companies over the year, bringing the total number of licensees of the ORM technology to 18.

As we reported in our Interim Statement in August we were delighted to learn that the US Patent and Trademark Office (the USPTO) had given notice of the positive outcome of the reexamination of the second of our two key patents, what we call the '502 patent. Up to that time, our licensing activity was focused mainly on the second of these two patents, the '402 patent. It is a major accomplishment getting the '502 patent successfully through the reexamination process, not only with all 18 original claims intact but with 26 new ones added. We are only just now starting to approach potential licensees about a license to '502, although all companies that have already settled with us have obtained a fully paid-up license to both these two patents. Our confidence in the fundamental strength of this technology and IP is even stronger now than it was one year ago.

Over the past seven years that we have been developing our capabilities in this area, we have established a solid second leg to our business, which we expect to continue to grow and have a positive impact on our primary business. Until June of 2008, we were investing in these capabilities and most of the costs associated with establishing this business have been expensed as incurred. Even today, despite the continued success of this programme, only about US $1.3 million of value is shown in our balance sheet (and Net Assets) for our intellectual property assets due to the fact that they are accounted for at amortised cost. Like much of the IP underlying our Partner Companies, we believe the ORM patents are fundamental and important and that many companies managing complex data in an IT setting should require a license to the technology to continue to "practice the art". We believe that there remain a very large number of additional potential licensees and that we should be able to generate a significant amount of revenue from this asset over the next few years. In due course, once Amphion has recovered its sunk costs, we will start sharing this revenue stream with FireStar (where the ORM technology and patents were originally developed), so FireStar should then benefit directly as well. Our longer term goal is to develop our IP licensing activities further, beyond the ORM technology programme, to support additional licensing programmes in the future.

Key Role of IP Management in the Amphion Model

Our basic business model remains unchanged: we remain committed to starting and building high potential companies based on innovative and proprietary but basically proven technology. Each one of our companies is carefully selected to address established markets in excess of US $1 billion and to have target exit values in excess of US $100 million. Our ability to select good IP and to develop the IP portfolios in each of our Partner Companies is a critical success factor and is getting steadily stronger as we deepen our knowledge and experience in this area. This underpins Amphion's investment in each Partner Company at the outset and as it develops.

Kromek is a case in point where we remain excited by the business potential. There is an urgent need for products that apply innovative technology to security, industrial and medical applications where solutions are sorely needed and current technology does an inadequate job. But Kromek is also a particularly good case study of our general approach to the growth of IP portfolios. In 2005, when we were initially evaluating a commitment to Kromek, it had one (important) process patent. Today it has over fifty patents covering many different aspects of multispectral x-ray detection and imaging and the number continues to grow rapidly.

We are excited by the company's progress and prospects, but Kromek is not unique. We are taking the same systematic approach to developing the IP portfolio of each one of our companies. In each case our primary goal remains the same: to develop a sound business that is very valuable as an IPO or to an acquirer. However, in the final analysis, if the company is not able to succeed as a business, a really distinguished IP portfolio can provide a valuable insurance policy for the investors. In those circumstances Amphion's ability to monetise such an IP portfolio is an important strategic asset for the company, as evidenced by the growing revenue stream from the IP licensing programme.

Amphion in the Middle East

We believe the Middle East is now beginning to see the first signs of recovery from the recent financial crisis and economic conditions, particularly in those countries that enjoy an abundance of oil and gas reserves, including Kuwait, Qatar, Abu Dhabi, and Saudi Arabia. A number of projects are currently under development and in November, Amphion signed a partnership agreement with Kuwait University, the State's first and oldest University. This agreement is aimed at establishing and operating a Technology Transfer Unit (TTU) at the University, which will be the first in-house TTU in Kuwait. Our presence in the region and our projects are being carefully selected to benefit Amphion as a whole and our Partner Companies in particular.

Prospects for 2010 and Beyond

We expect our IP licensing programme to be a key source of financial support for the Company and complement the completion of the CPN issue, which stood at £4.9 million (US $7.5 million) at the year end. Since then an additional £850,000 has been issued bringing the total to £5.7 million. The goal is to issue up to £7 million (US $11 million) of CPN. If we manage to meet our revenue generation objectives, Amphion should be able to cover most, if not all, of its direct operating costs, including the cost of servicing the coupon on the CPN. In parallel with completing the issue of CPN, we are actively exploring alternative ways of raising capital and providing additional resources for our Partner Companies. We hope to be able to report on these initiatives as the year progresses.

For our business model to work we need continuous access to capital. Capital for early stage emerging technology companies remained very scarce throughout 2009. For the broader economic recovery to make a positive impact on Amphion, we need to see a return of a viable IPO market. We continue to believe that a number of our companies should be ready to approach the IPO market as and when it revives but we believe that conditions will improve slowly, if at all, during 2010.

While we remain cautious, we believe in the strength of our model and the quality of our Partner Companies. We are focused on driving revenues from our IP programme which together with the completion of the CPN issue will mean we can continue to add value to our Partner Companies and, through our significant shareholdings in each one, build a large amount of value for our Amphion shareholders.

Below we provide a summary of progress made with each of our Partner Companies during 2009.

Axcess International, Inc. became profitable in the first half of 2009, achieving record year end revenues in 2009 of US $4.9 million, as it implemented its comprehensive security system based on the successful delivery of a port personnel security contract valued at US $3.2 million in Trinidad and Tobago. The company successfully signed and announced a product and marketing partnership with Assay Abloy's HID access control division to embed proximity access control codes into Axcess' Dot Wireless Credential product which will be introduced into the market in Q1 2010.

FireStar Software, Inc. extended its successful partnership with OMG to include OMG MDMI Labs, to further accelerate the adoption of the MDMI Standard. FireStar also developed a partnership with Southeast Michigan Health Information Exchange in order to assist them in building their Information Exchange and is working with the European and US patent offices to clarify and enhance existing EdgeNode™ patent applications.

Kromek launched its second product in June 2009, the 311+ Scanner, at the TranSec World Expo in Amsterdam, intended to scan for liquids in quart sized bags as well as a variety of bottles in airport security. Kromek was also awarded a US $4 million contract from the US Defense Threat Reduction Agency for the development of Detectors from Vapour Growth Cadmium Zinc Telluride material and completed the UK Government contract for developing new generation baggage scanning systems. In addition, over the course of the year, Kromek's first product, the Bottle Scanner, underwent successful trials at Newcastle Airport. Post year end, Kromek completed the oversubscribed J round of its Series D financing of £12.3 million.

m2m Imaging Corp. grew its business by 18%, in 2009, expanding its B2B supply relationships with Siemens Molecular Imaging, Varian, Mediso Medical Imaging, and Scanco of Switzerland to provide key components and accessories for their imagers, while also expanding its direct sales to end-user customers.

Motif BioSciences, Inc.'s partnership with Imperial College London and Professor Philippe Froguel began to yield results. Currently, these discoveries include specific genetic associations with type 2 diabetes, obesity, hypertension, and dyslipidemia.  Motif also applied to the Qatar National Research Fund for funding of an ambitious study of the genetics of response to metformin and expanded its discussions to partner with and initiate research projects with a variety of companies and international academic medical centres in the areas of target gene discovery, biomarker discovery, biomarker development, prospective pharmacogenomics, and drug re-profiling.

Myconostica, Ltd.achieved the CE marking for and completed updating of its Aspergillus assay and commenced sale in Europe of the 2nd generation MycAssayTM Aspergillus product. During August 2009, Myconostica successfully raised £1.75 million in a Series D financing. In January 2010, the company received a license from Health Canada for the sale of MycAssayTM Aspergillus and MycAssayTM Pneumocystis, and appointed as exclusive distributers Inverness Medical Canada for Canada, along with Bactus AB for Sweden and Finland. During January 2010 Myconostica also launched a new version of MycAssayTM Pneumocystis, with improved clinical performance and increased analytical sensitivity.

PrivateMarkets, Inc. built upon its Q4 2008 launch in the Texas electricity market throughout 2009 with growth in trading volumes of its platform exceeding expectations leading to a 25% increase in the customer base by the close of the year. The company has initiated discussions with the Chicago Mercantile Exchange regarding the addition of clearing services that will position the product for expansion into other regional markets in 2010.

WellGen, Inc.introduced its first commercial products range in 2009 under the brand name TeAmé - a line of natural food supplements that address important health needs of baby boomers: joint health, stress management, immune defense, and exercise nutrition. WellGen signed a Memorandum of Understanding with RFI Ingredients to collaborate on a range of opportunities to create and market therapeutic nutrition products. Finally, during 2009, a preclinical study of WellGen's proprietary black tea extract concentrate demonstrated that it significantly improves glucose control including the measure of HbA1c, thereby advancing the company's lead medical food into the final phase of clinical development for diabetes.