Half Yearly Report

PLETHORA SOLUTIONS HOLDINGS PLC

("Plethora" or the "Company")

INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2011

Business Overview

The Company continues to pursue its strategy of concentrating on its niche in urology and sexual health, reducing its R&D activities and delivering value from its development portfolio, most importantly PSD502, and focusing on building a profitable speciality sales and marketing business known as The Urology Company Limited.

In the first half of 2011 The Urology Company completed a number of important steps towards that goal including:

Against this backdrop the Company announced a small financing in April raising £855,000 in equity (before expenses), with the commitment of an additional debt line which has not been drawn. This provided a proportion of the funding required during the critical development phase of The Urology Company.

Shortly after the end of the half year the Company provided a trading update in which we set out that revenue development in the first half had been challenging and that we had not received income under the current PSD502 arrangement. As a result the Company signalled that it would need the support of shareholders.

On 28 September, the Company announced two important transactions. The first related to Plethora amending its 2009 licensing agreement with Shionogi under which Plethora has assumed control of the registration and commercialisation of PSD502 in Europe and a number of other countries in the Rest of the World. Secondly, the Company announced that it had completed the terms for a financing to provide £2 million in a combination of debt and equity.

Financial Review

Total income during the first half was £35k (H1 2010: £1,061k, FY 2010: £1,194k). This comprised sales by The Urology Company of £21k (H1 2010: £nil, FY 2010: £33k) and other income of £14k (H1 2010: £nil, FY 2010: £1,161k).

Sales made by The Urology Company were £21k (H1 2010: £nil, FY 2010 £33k), which were broadly similar to those recorded in the second half of 2010. The launch of new products has not been without its challenges and we have learned much during this period. Steps were taken to drive revenue growth including the appointment of a new VP Commercial in January 2011 and the establishment of a sales force with the ability to reach all major UK conurbations in May 2011. The expansion of the sales force through the North-51 agreement did not occur early enough in the year to contribute meaningfully to revenue in the first half. The sales representatives are, however, now fully trained and close to reaching their planned activity rates with customers and we are beginning to see the benefits of this expanded sales force.

On these sales the Company recorded gross profit of £9k (H1 2010: £nil, FY 2010: £9k) being a gross margin of 43% (H1 2010: nil%, FY 2010: 27%). This margin is approaching internal targets and the Company expects to see improvements as volumes increase particularly in higher value products.

Operating Costs were £1,621k (H1 2010: £878k, FY 2010: £2,094k) comprising:

Outlook

Since the half year end, trading in The Urology Company has increased particularly after the commencement of sales in the Multi-Gyn® and Multi-Mam® products which came on stream at the beginning of September. The directors are encouraged to note that the anticipated levels of revenue from these product ranges are in line with the Company's expectations and this validates the strategy of acquiring rights to products with existing revenue in the UK market. However, given the early stage of the business, there remains a degree of variability in being able accurately to predict the year end outcome particularly with the products in their UK launch phases.

Overall the Company has continued to look at ways of reducing operating costs and expects to see further cost savings achieved in the second half.

Preparation has commenced for the regulatory activities in relation to PSD502 and these costs will be expensed as R&D costs. Consequently, part of the proceeds of the financing will be directed towards PSD502. This will largely be undertaken through the use of external professionals and the Company will not expand is R&D infrastructure.

As at 30 June 2011, the Company had cash resources available to it amounting to approximately £355,000. This level of cash resources, in conjunction with the continuing non-receipt of licensing income from Shionogi, has resulted in it being necessary to pursue the financing announced on 28 September 2011 to provide adequate working capital for the Company. As a result of this transaction the Company is now well placed to deliver on the growth in The Urology Company and the development of PSD502.

 Consolidated Statement of Comprehensive Income

 Consolidated Balance Sheet

Consolidated Interim Cash Flow Statement

Condensed Consolidated Statement of Changes in Equity

Six months ended 30 June 2011

Year ended 31 December 2010

Condensed Consolidated Statement of Changes in Equity

Six months ended 30 June 2010

Notes to the Financial Information

1. Basis of Preparation

The interim financial information is unaudited and has not been subject to review by the Company's auditors in accordance with ISRE 2410. This consolidated financial information for the six months ended 30 June 2011 has been prepared in accordance with International Financial Reporting Standards ("IFRS") and International Financial Reporting Interpretations Committee ("IFRIC") interpretations that had been published by 30 June 2011 and endorsed by the European Union ("EU"). The accounting policies adopted are consistent with those of the financial statements for the year ended 31 December 2010.

The financial information set out in the interim report does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 December 2010, prepared under IFRS, have been filed with the Registrar of Companies. The auditor's report on those financial statements was unqualified and did not contain a statement under Section 498(2) or Section 498(3) of the Companies Act 2006. The interim report was approved by the Board on 29 September 2011.

A copy of the interim results for the six months ended 30 June 2011 will be available on the Company's website at www.plethorasolutions.co.uk.

2. Going Concern

In considering the appropriate basis of the interim financial information the directors are required to consider whether the Company can continue in operational existence for the foreseeable future.

At 30 June 2011 the Company had £355k of cash and cash equivalents.

The directors have prepared detailed cash flow forecasts for the period to 31 December 2012, which show that the Company has adequate working capital for the forecast period. These cash flow projections assume that a number of as yet uncertain events occur including that The Urology Company achieves sales and earns margin broadly in line with budget and that the Company's lenders do not withdraw any of its existing financing facilities. On 28 September 2011 the Company announced a proposed financing to raise approximately £2m. It is a critical assumption that this is completed on schedule. The directors believe this is highly probable as the Company has received statements of intention to vote in favour of this fundraising from 45.3% of shareholders.

Consequently, the directors have concluded that it is appropriate to prepare the Company's financial statements on the going concern basis, which assumes that the Company will continue in operational existence for the foreseeable future. Nevertheless, there is material uncertainty in relation to the events set out above, which may cast significant doubt on the Company's ability to continue as a going concern. In the event that some combination of the above events fails to occur as expected, the Company may be unable to realise its assets and discharge its liabilities in the normal course of business. 

3. Profit/loss per Share

4. Trade and other payables

5. Borrowings

(i) Convertible loan notes due 2012

The principal terms of the convertible loan notes due 2012 include: maturity 31 December 2012; coupon 13% per annum, accrued until maturity; convertible into new ordinary shares at 12.5p per share; secured by first charge over the Company's assets; repayable by the Company at any point post issuance; convertible by the Company after 31 December 2010 provided the Company's share price is 25% greater than the conversion price for the preceding 60 days prior to conversion.

The Group has £2,455,000 of convertible loan notes due 2012, which were issued in several tranches. On 26 September 2008 £750,000 was issued to Merlin Biosciences Fund III LP and Merlin Biosciences Fund III (2007) LP (the "Merlin Notes"). In addition, on 16 February 2009 the Company issued £1,000,000 to certain institutional investors (the "Institutional Notes"). Both the Merlin Notes and the Institutional Notes were originally issued on different terms from the convertible loan notes due 2012. On 7 December 2009 the Company issued £450,000 convertible loan notes due 2012 and entered into a deed of amendment with each of the holders of the Merlin Notes and the Institutional Notes to bring them into common terms with the convertible loan notes due 2012. Finally on 10 May 2010 the Company issued a further £255,000 of convertible loan notes due 2012.

In connection with the Merlin Notes and the Institutional Notes, the Company issued warrants to subscribe for new ordinary shares to the holders over 520,833 shares at 36p per share and 1,333,332 shares at 33p per share respectively.

Under IFRS a proportion of the convertible loan notes due 2012 is regarded as equity and is recorded in the convertible loan note reserve. In addition, amounts were recorded as notional interest and as a loss on the restructuring of the Merlin Notes and the Institutional Notes.

5. Borrowings (continued)

The following non-IFRS disclosure shows the effect of the accounting treatment.

As at 30 June 2011 a total of £637,000 of interest had been accrued in respect of the loan notes. This amount will be paid either in cash or by conversion to equity at 12.5p per share at maturity (namely 31 December 2012).

As set out in Note 7 the Company intends to convert £1,655,000 plus accrued interest into ordinary shares.

(ii) CfE Loan due 2015

On 29 June 2010 the Company entered into a £1 million, five year secured term loan ("CfE Loan") with Capital For Enterprise Fund A L.P. ("CfE Fund"). The CfE Loan will be repayable by 29 June 2015. However, the Company may, at its option, repay part, or all, of the loan ahead of the maturity date. During the prior year the Company received a waiver from the CfE fund which remedied technical breaches of a financial covenant. Interest accrues on the loan at 10% per annum. The loan agreement provides for the Company to pay a premium on repayment of the loan. This premium is fixed at either 20% of any amounts repaid in the first 3 years or 25% in years 4 or 5 or at maturity. The CfE Fund has also been granted a warrant to acquire new ordinary shares in the Company at nominal value. The number of shares issuable under the warrant is the lower of 3% of the Company's fully diluted share capital, or such number of shares as equals £500,000 at the then prevailing market price. The warrant is only exercisable at an Exit Event, as defined in the loan agreement.

The following non-IFRS disclosure shows the effect of the accounting treatment.

6. Share Capital

On 26 April 2011 the Company completed a placing of 11,400,000 new ordinary shares at 7.5p per share to raise £855,000 before £41,000 of expenses.

7. Post balance sheet events

PSD 502 Agreement

On 28 September 2011 the Company announced that it had reached agreement with Shionogi Ireland Limited under which the Company will regain regulatory and operational control of PSD502 in Europe and other territories.

Financing & Reduction of Debt

In addition, the Company announced that it has conditionally raised approximately £2.05 million before expenses, in part to finance the activities associated with completing the European regulatory approval for PSD502 and for general working capital.

The Financing comprises a placing of £1.2 million through the issue of 48,085,000 new ordinary shares at a placing price of 2.5p per share and a new loan of £850,000, to be entered into by the Company as a condition of the Placing.

In conjunction with the Placing, the Company intends to reduce its borrowings by converting £1,655,000 (plus accrued interest of £518,668) of its £2,455,000 outstanding convertible loan notes through the issue of 86,946,731 new ordinary shares to certain convertible loan noteholders.