Half Yearly Report

VPhase plc

("VPhase" or the "Company" or the "Group")

Consolidated Interim Financial Statements

for the six months ended 30 June 2013

VPhase plc (AIM:VPHA), today reports its Interim Results for the six months ended 30 June 2013 and progress since then on converting the Group to an investment shell.

The Group has today also issued a separate announcement relating to a conditional fundraising of £150,000 and associated corporate actions.

It is expected that trading in the existing ordinary shares of the Company (trading of which had been suspended), will be restored today at 7.30am.

For further information:

Six month review

Following the excellent growth seen in 2012 it was a disappointing start to 2013. Having raised £519,000 of new funds and with the recently signed BG contract, expectations were for continued growth. However, the introduction of the Green Deal and the Energy Company Obligation had a deleterious impact on the demand for all energy efficiency products including voltage optimisation. To compound matters the welfare reform that introduced a tax on spare bedrooms in council and housing association homes, referred to as Registered Social Landlords ("RSL") led to a reduction in budgets available for refurbishment and energy efficiency measures. As RSLs were a key focus for the Group this had a deleterious impact on sales and whilst momentum had been initially maintained it dropped dramatically in the second quarter.

In the second quarter of 2013 it became apparent that with the downturn in performance and the level of funds available that additional funding would be required to ensure that the Group could continue to trade. An approach was made to our existing institutional investors; however given the deterioration in trading performance and uncertainty surrounding the wider market for energy efficiency products the existing institutional investors were unwilling to commit funds and new institutions were also deterred by that stance.

The Board explored other sources of funding including equity backed loans, debt facilities and convertible loan notes but it became apparent that funds were either not available in sufficient quantum or as timely as required and on 20 June 2013 we requested the suspension of our shares from trading on the AIM Market of the London Stock Exchange. During this period we sought the advice from BDO LLP in relation to the options available to us. Given the Groups financial position the Directors filed notices of intention to appoint Administrators for the Group on 12 July 2013.

Between 12 July 2013 and 22 August 2013, the business and its assets were marketed and a solvent solution was identified where the trading subsidiary would be sold as a going concern and the holding company VPhase plc converted into an investment shell. During this period the Directors took legal advice on the extension to the Intention to Appoint Administrators each time it lapsed and maintained the protection for the Group by extending the notice. On 22 August 2013, the third notice lapsed and it was not deemed appropriate to extend the Notice as the solvent solution for the subsidiary was progressing well. Unfortunately the terms of the restructuring of VPhase plc could not be agreed and as a result of the time delays the purchaser of the trading subsidiary withdrew their offer on 3 September 2013. On 4 September 2013, the Directors made an application for the appointment of Joint Administrators and Dermot Justin Power and Patrick Alexander Lannagan were appointed.

On 6 September 2013, 9 out of 17 employees were made redundant and the remainder by the 30 September with the majority having exited the business by 24 September 2013. During this period the Administrators sold the intellectual property and tooling for £200,000 and commenced the disposal of the inventory with expectations that they would receive at least £50,000. As at time of writing around £58,000 has been received and £77,000 of debtors representing 68% of the book debts at time of administration. These numbers have been used to restate the Group's assets to their net realisable value given that the going concern principle cannot be applied to the previous trade.

On 20 September 2013, Vanda Murray OBE, and Duncan Sedgwick both resigned from the Board and I would like to express on behalf of the Board our gratitude to the support they have shown during their tenure.

On 12 November 2013, at a meeting of creditors the Joint Administrators' proposals were approved, including that the Joint Administrators propose a Company Voluntary Arrangement ("CVA"). At subsequent meetings of creditors and members, also held on 12 November 2013, the CVA was approved. Under the terms of the CVA Dermot Power and Patrick Lannagan will be appointed Supervisors. The CVA commenced on 12 November 2013. The terms of the CVA were discussed in the documents issued to Creditors and Members. Broadly the Supervisors will receive any dividend from Vphase Smart Energy Limited, along with a contribution from a third party, and will distribute these funds to Creditors. Upon the funds being distributed the CVA will be completed.

The CVA enables VPhase plc to propose to members that it is being reconstructed into a debt free investment shell. The Group has today issued a separate announcement relating to a conditional fundraising of £150,000 and associated corporate actions. Further details can be found in the circular to shareholders dated 22 January 2014 and related announcement.

Rick Smith

Director

22 January 2014

Unaudited consolidated income statement

The Group has no items to be recognised in the "Consolidated statement of comprehensive income" and consequently this statement has not been shown.

The notes are an integral part of these unaudited Consolidated Interim Financial Statements.

Unaudited consolidated statement of financial position

The notes are an integral part of these unaudited Consolidated Interim Financial Statements.

Unaudited consolidated statement of changes in equity

Unaudited consolidated statement of changes in equity (continued)

Unaudited consolidated statement of cash flows

Cash flows from operating activities

These notes are an integral part of these unaudited Consolidated Interim Financial Statements.

Notes to the Consolidated Interim Financial Statements

1 Nature of operations and general information

VPhase plc ("the Company") and its subsidiaries (together "the Group") suspended activities on 4 September 2013 when it appointed Dermot Power and Patrick Alexander Lannagan of BDO LLP, 3 Hardman Street, Manchester, M3 3AT as its administrators. Previously the Group had been developing products that provide energy efficiency solutions to certain identified problems in the energy market. As a result of failing to get funding to continue to progress its products the Board has terminated the service contracts off all the Group's executive directors and employees and via a Company Voluntary Arrangement has compromised all external liabilities with the exception of modest ongoing professional and regulatory costs necessary to retain the Company's listing on AIM.

Following the Company entering the Company Voluntary Arrangement, the full control of the company reverted to the Board on 27 December 2013 and the existing shares will be re-admitted to trading on AIM at 7.30 am on 22 January 2014.

VPhase plc is incorporated in England and Wales. The address of the registered office is 39 Long Acre, London, WC2E 9LG. The Company does not trade at present. VPhase plc's shares are listed on the AIM Market of the London Stock Exchange.

VPhase plc's Consolidated Interim Financial Statements are presented in pounds sterling (£), which is also the functional currency of the parent company.

2 Basis of preparation

These Consolidated Interim Financial Statements are for the six months ended 30 June 2013. They have not been prepared in accordance with IAS 34 Interim Financial Reporting. They do not include all of the information required for full annual financial statements, and should be read in conjunction with the consolidated financial statements of the Group for the year ended 31 December 2012.

The financial information set out in these Financial Statements does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006. The consolidated statement of financial position as at 31 December 2012 and the consolidated income statement, consolidated statement of cash flows, consolidated statement of changes in equity and associated notes for the year then ended have been extracted from the Group's Financial Statements as at 31 December 2012. Those Financial Statements have received an unqualified report with an emphasis of matter in respect of going concern from the auditors and have been delivered to the Registrar of Companies. The 2012 statutory accounts contained no statement under section 498(2) or section 498(3) of the Companies Act 2006.

The Consolidated Interim Financial Statements for the period ended 30 June 2013 have not been audited or reviewed in accordance with International Standard on Review Engagement 2410 issued by the Auditing Practices Board.

The Consolidated Interim Financial Statements have been approved by the Board of Directors on 20 January 2014.

These financial statements have been prepared under the historical cost convention.

The Company has not prepared these statements on a going concern basis and has realised a write-down of assets to their estimated net realisable value with a charge to the income statement of £1,789,000.

3 Post balance sheet events

On 4 September 2013 the business entered Administration and on 24 September 2013 various assets were disposed of. The results for the six month period ending 30 June 2013 were restated as the going concern principal could no longer be applied and the value of assets were written down to their realisable value based upon the realisation of amounts, or estimation of amounts to be realised, on disposal as set out below:

In addition a provision for employee claims was created and charged to the income statement £257,000 (2012: £nil) and an additional provision for cancellation of leases was created and charged to the income statement £50,000 (2012: £nil) resulting in an increase in provisions of £307,000.

4 Segment analysis

The business of the Group comprises one segment, energy efficiency, and as such no segmental information is provided. The Group operates entirely within the United Kingdom.

5 Loss per ordinary share

The calculation of the basic loss per ordinary share is based on the earnings attributable to ordinary shareholders divided by the weighted average number of shares in issue during the period.

Reconciliations of the loss and weighted average number of shares used in the calculations are set out below:

The share options and warrants in issue are anti-dilutive in respect of the basic loss per share calculation and have therefore been excluded in the above calculations.