Final Results

Final Results

Watermark Global

Watermark Global Plc
Preliminary Results for the year ended 31 December 2008
And Notice of AGM

Watermark Global Plc (AIM: WET) (“Watermark” or “ the Company”), a water treatment and management company listed on the London AIM with a focus on Acid Mine Drainage in South Africa, announces its preliminary results for the year ended 31 December 2008.

Highlights

• Successful completion of pilot trials to select technology for commercial plant. The Alkali, Barium, Calcium process from the Council for Scientific and Industrial Research has been chosen.
• Successful completion of Pre-Feasibility Study, and commencement of Definitive Feasibility Study (“DFS”)
• The appointment of Bertie Steytler as Head of Operations and Adam Gunn as non-executive Director.
• The conclusion of negotiations with mining houses to form Western Basin Environmental Corporation, and commencement of negotiations for similar agreements at the Eastern and Central Basins.
• Signing of a R10m loan from Development Bank of South Africa, and placing of shares in the UK and Australia which raised approximately £2m to fund the DFS.
• Watermark has established itself as a key player in addressing Acid Mine Drainage and other water management opportunities in the Witwatersrand area, South Africa.

Results Summary

The loss from ordinary activities for the year ended 31 December 2008 was £ 2.907m, including a loss on disposal of £0.277m relating to MicroFuze Americas Inc. (which has been announced previously), resulting in a loss of 1.2p per share. The net cash position of the group at 31 December 2008 was approximately £0.65m.

The financial information set out below does not constitute the Company’s statutory accounts for the year ended 31 December 2008, but is derived from those accounts. Statutory accounts for 2008 will be delivered to the Registrar of Companies following the Company’s Annual General Meeting. The auditors have reported on those accounts and their report was not qualified.

Annual General Meeting

The Annual General Meeting of the Company will be held on 24 July 2009 at 10.00 am at 42, Queen Anne’s Gate, London SW1H 9AP. Notice of the meeting will be sent to shareholders along with the report and accounts today. A copy of the report and accounts will be made available on the Company’s website www.watermarkglobalplc.com

Enquiries	Â
Watermark Global plc
Peter Marks, Chairman		Tel: + 44(0) 20 7233 1462
Dirk Kotze, Chief Financial Officer		Tel: + 44(0) 20 7233 1462
[e-mail]
Nominated Adviser: Cenkos Securities
Ian Soanes/Elizabeth Bowman		Tel: [phone]
Investor Relations
Charles Zorab		Tel: + 44(0) 20 7233 1462
[e-mail]

CHAIRMAN’S STATEMENT

Introduction

The 2008 year saw substantial progress in the continued development of the Company’s core Acid Mine Drainage (AMD) water treatment project in South Africa. Importantly, as the project has continued to advance and mature, the need to find a sustainable solution to the growing AMD problem has become increasingly urgent. There is also an increasing imbalance between rising demand and declining supply of potable, as well as industrial water, in the region which firmly underpins Watermark’s business plan and proposed rollout strategy.

In February 2008, construction of the first pilot water treatment plant was completed, with the second one completed in March 2008. The purpose of these plants was to prove the concept of treating AMD in such plants and to verify the mass balances of by-products which would form part of the commercialisation phase of the project.

In working towards the implementation of a sustainable solution to the problem of AMD, Watermark is responding to the South African Government’s directive to the mining houses to recover and treat contaminated water arising from the flooding of underground voids left by over a hundred years of mining along the Witwatersrand. In treating the water to an acceptable quality, Watermark’s wholly owned subsidiary, Western Utilities Corporation (WUC) is expected to make a significant contribution to alleviating the chronic water shortage in the Gauteng region of South Africa, while at the same time delivering an attractive commercial return to its shareholders.

By the middle of the 2008 year, the pilot plants were providing valuable insights with respect to both quality and mass balance availability.

The Witwatersrand region can be divided, in hydro-geological terms, into the Eastern, Western, Central and Far Western Basins. An initial Management Agreement with the participants of the Western Basin, being Harmony, DRD Gold and Mintails, was concluded. The Western Basin is the first and smallest contributor of affected mine water to the Company’s proposed initial 75 million litres (75ML) per day plant. Heads of Agreement are being negotiated with the other two key contributors in the Central and Eastern Basins. Negotiations are also progressing with mining houses in the Far Western Basin. The Company will have a total available resource of approximately 200 ML per day provided all the other agreements are concluded.

In October 2008, the Company announced that it had selected a technology process known as “Alkali, Barium, and Calcium”, from the Council for Scientific and Industrial Research (CSIR) The choice was made on the basis of cost and recoverability of the by-product materials to create a zero-effluent operation.

Towards the end of 2008 the Company completed a Pre-Feasibility Study (PFS) which provided encouraging figures on capital and operating cost within a 30% level of accuracy together with work covering engineering, primary legislation, market evaluation and sensitivity analysis. Since the completion of the PFS, the Company has commissioned and started work on a Definitive Feasibility Study (DFS). The bulk of this work is being undertaken by Golder Associates Africa, a highly regarded firm of engineering and environmental consultants. The detailed work which they are engaged in is expected to provide an evenmore accurate assessment of the parameters of the project in the araeas of legal, environmental, financial, risk assessment and engineering.

The total cost of this study (which was announced in February 2009) is approximately Rand 35million (£ 2.59m) this includes some provision for cost overruns. Importantly, Rand 10million of this has been funded by the Development Bank of South Africa on a non-recourse basis. The additional funds have been raised via a placing to UK and Australian institutions in May 2009 which raised £2.0m (Rand 27m). The DFS is expected to be completed by August of this year.

Directorate and Staff

Mr. Adam Gunn agreed to join the Board of the Company as a non-executive director. Adam is a highly regarded environmental lawyer, with sound commercial skills. His knowledge of environmental legislation has already proved an invaluable asset to the Company.

During the year WUC appointed Mr. Bertie Steytler as Head of Operations. Bertie plays a key role in overseeing the Company’s existing operations (and management contracts), as well as assisting with all the preparatory work currently underway in respect of the planned plant rollout.

It is also important to acknowledge the significant achievements of the small yet highly dedicated team led by Jaco Schoeman as CEO and Dirk Kotze as CFO, both Executive Directors. Their ongoing commitment to the project, as well as their ability and determination in overcoming the various hurdles with the rest of the team, should be acknowledged as a key element in the success achieved to date.

Other Matters

At the beginning of 2008, we changed the name of the Company to Watermark Global PLC to reflect the focus of the Company. During the first quarter in 2009 the company disposed off its remain interest in MicroFuze (Pty) Ltd, effectively disposing of any further interest in the Microfuze technology business.

Outlook

The work currently being undertaken by the Company has already attracted a great deal of interest from various parties, including other mining houses as well as key government departments and authorities, for example, The Department of Water and Environmental Affairs (DWEA). Many of these parties now realise that the problem of AMD pollution from the mines is now critical and that the ‘Watermark solution’ is one of the very few workable options available to both the Government and the mines in South Africa as a viable solution which will address the problem of AMD.

Several government departments agree that it is now time for action in addressing this issue head on and they see Watermark as the company best positioned to bring about and help implement a sustainable, long-term solution to this major problem. The environmental impact assessment (EIA) for the project is progressing well. The EIA will be submitted to government authorities in September for approval. Approval for other authorisations such as the water use licence will also be sought from government late in 2009.

Approval of these environmental authorizations and licences will confirm government’s official support for the project.

Despite the additional pressures that have been caused by the global financial crisis over recent months and the impact it has had on share prices, including that of Watermark, the Company has continued to make significant progress and, with the additional funding secured, will be able to move forward with the completion of the DFS, regulatory approval and the commercial rollout plan.

I would like to take this opportunity to thank all our shareholders for their continued interest in and support of the Company during these difficult times, and also to all other key stakeholders who have been associated with the development and achievements of the Company.

We look forward to bringing you further updates on the Company’s progress over the coming months.

Peter Marks
Chairman

Consolidated Income Statement
For the year ended 31 December 2008

	Â	Note	Â	2008	Â	2007
							Â
				£		£
Continuing operations
Revenue		2		158,158		7,268
Cost of sales				(136,491)		-
Gross profit				21,667		7,268
Investment Income		6		87,635		92,952
Expenses
Administrative expenses				(1,278,032)		(1,046,955)
Loss on disposal of subsidiary		7		(277,238)
Impairment of goodwill		14		-		(1,566,632)
Share based compensation costs		20		(1,551,509)		(715,583)
Loss from operations		8		(2,997,477)		(3,228,950)
Finance costs		11		-		(6)
Loss for the year				(2,997,477)		(3,228,956)
Taxation		12		99,626		23,629
				Â		Â
Loss for the year from continuing operations				(2,897,851)		(3,205,327)
							Â
Loss for the year from discontinued operations		9		(9,867)		(178,935)
							Â
Loss for the year				(2,907,718)		(3,384,262)
Minority interests				-		26,840
							Â
Loss for the year attributable to equity holders		21		(2,907,718)		(3,357,422)
							Â
Loss per share				Pence		Pence
							Â
Basic		13		(1.2)		(2.0)
							Â
Fully diluted		13		(1.2)		(2.0)

Consolidated Balance Sheet
As at 31 December 2008

	Â	Notes	Â	2008	Â	2007
							Â
				£		£
Assets
Non Current assets Intangible assets		14		-		-
Property, plant & equipment		15		677,107		401,991
Deferred tax		12		99,626		23,629
				776,733		425,620
Current assets
Trade and other receivables		17		555,272		85,589
Cash and cash equivalents				651,318		2,105,987
				1,206,590		2,191,576
							Â
Total assets				1,983,323		2,617,196
							Â
Equity and liabilities
Equity attributable to equity holders of the parent
Share capital		19		379,304		336,554
Share premium account		21		8,053,737		6,670,787
Share option reserve		21		1,418,450		1,082,045
Exchange difference reserve		21		50,370		57,321
Profit and Loss Account		21		(8,491,140)		(5,583,422)
Total equity pre minority interest				1,410,721		2,563,285
							Â
Minority interest				-		(147,796)
Total equity pre minority interest				1,410,721		2,415,489
Current liabilities
Trade and other payables		18		572,602		201,707
Total equity and liabilities				1,983,323		2,617,196

Approved by the Board on 29 June 2009
Signed on behalf of the Board of DirectorsSigned on behalf of the Board of Directors
D Kotzé
Finance Director

Consolidated Statement of Changes in Equity
For the year ended 31 December 2008

	Â	Share Capital	Â	Share Premium	Â	Share Option Reserve	Â	Retained Earnings	Â	Foreign Exchange Reserve	Â	Total	Â	Minority Interest	Â	Total
Balance 1/1/2007		223,682		4,026,259		728,862		(2,226,000)		-		2,752,803		(120,956)		2,631,847
Changes in Equity 2007
Exchange Gains		-		-		-		-		57,321		57,321		-		57,321
Loss from Current Operations		-		-		-		(3,357,422)		-		(3,357,422)		(26,840)		(3,384,262)
Share Based Payments		-		-		353,183		-		-		353,183		-		353,183
Issue of Share Capital		112,872		2,644,528		-		-		-		2,757,400		-		2,757,400
Balance 31/12/2007		336,554		6,670,787		1,082,045		(5,583,422)		57,321		2,563,285		(147,796)		2,415,489
Changes in Equity 2008
Exchange Gains		-		-		-		-		(6,951)		(6,951)		-		(6,951)
Loss from Current Operations		-		-		-		(2,907,718)		-		(2,907,718)		-		(2,907,718)
Share Based Payments		42,750		1,382,950		336,405						1,762,105				1,762,105
Disposal of Subsidiary		Â		Â		Â		Â		Â		-		147,796		147,796
Balance 31/12/2008		379,304		8,053,737		1,418,450		(8,491,140)		50,370		1,410,721		-		1,410,721

Notes to the financial statements
For the year ended 31 December 2008

1. Incorporation and principal activities

Country of incorporation

Watermark Global Plc was incorporated in the United Kingdom as a public limited company on 19 August 2005. Its registered office is 42, Queen Anne’s Gate, London SW1H 9AP. The company is domiciled in South Africa.

Principal activities

The principal activity of the Group during the period was that of commercialising process technologies, namely the process technology for the treatment of acid mine drainage. The principal activity of the Company was that of a holding Company.

2. Accounting policies

The principal accounting policies adopted in the presentation of these financial statements are set out below. These policies have been applied consistently throughout the period presented in these financial statements unless otherwise stated.

Basis of preparation and consolidation

The company and consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and have been prepared on the historic cost basis. They comprise the accounts of Watermark Global Plc and all its subsidiaries made up to 31 December 2008.

Going concern

The financial statements have been prepared on a going concern basis. The group is in the process of finalising its Bankable Feasibility Study for its Acid Mine Drainage project in South Africa and construction of the water treatment plant is estimated to commence in December 2009, with commissioning to start in December 2010. Full production is planned for March 2011, with the concomitant cash flow. The Company’s forecast expenditure for the period to 30 June 2010 indicates that cash resources are sufficient for the Company and Group to meet its liabilities as they fall due. Should the Group be unable to continue trading, adjustments would have to be made to reduce the value of assets to their reasonable amounts, to provide for further liabilities which might arise, such as closure costs, and to classify fixed assets as current assets.

Functional and presentational currency

Items included in the Group’s financial statements are measured using the currency of the primary economic environment in which the entity operates (“the functional currency”). The financial statements are presented in British Pounds (GBP), which is the Group’s functional and presentational currency.

Foreign currency translation

(1) Foreign currency translation

Foreign currency transactions are translated into the measurement currency using the exchange rates prevailing at the date of the transactions. Gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement.

(2) Foreign operations

On consolidation, the assets and liabilities of the consolidated entity’s overseas operations are translated at exchange rates prevailing at the reporting date. Income and expense items are translated at the average exchange rates for the period unless exchange rates fluctuate significantly. Exchange differences arising, if any, are recognised in the foreign currency translation reserve, and recognised in the profit or loss on disposal of foreign operations.

Revenue recognition

Revenue represents amounts receivable for water, plant, management, service and Company administrative service done on behalf of Western Basin Environmental Corporation (WBEC), net of VAT, trade discounts and other sales tax.

Tangible fixed assets and depreciation

Fixed assets are stated at cost less depreciation and impairment. Depreciation is calculated to write down the cost of all tangible fixed assets by equal annual instalments over their expected useful life, as follows:

Â	Plant and Machinery	Â	Over 3 – 10 years
	Motor Vehicles		Over 3 years
	Fixtures, Fittings and Equipment		Over 4 years
	Assets under construction		Not depreciated

Acquisitions and goodwill

An acquisition of subsidiaries is accounted for using the purchase method. The cost of the business combination is measured as the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquired, plus any costs directly attributable to the business combination. The acquirer’s identifiable assets, liabilities and contingent liabilities are recognised at their fair values at the acquisition date, except for non-current assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5 ‘Non-Current Assets Held for Sale and Discontinued Operations’, which are recognised and measured at fair value less costs to sell.

Goodwill, being the excess of the cost of the business combination over the identifiable assets, liabilities and contingent liabilities acquired, is capitalised and classified as an asset on the balance sheet. Goodwill arising on acquisitions before the date of transition to IFRS has been retained at the previous UK GAAP amounts subject to being tested for impairment.

Impairment of goodwill and other non-financial assets

Impairment tests on goodwill and assets under construction are undertaken annually at the financial year end. Other non-financial assets are subject to impairment tests whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. Where the carrying value of an asset exceeds its recoverable amount (i.e. the higher of value in use less fair value of costs to sell), the asset is written down accordingly.

Where it is not possible to estimate the recoverable amount of an individual asset, the impairment test is carried out on the asset’s cash generating units (i.e. the lowest group of assets to which the asset belongs for which there are separately identifiable cash flows). Goodwill is allocated on initial recognition to each of the Group’s cash generating units that are expected to benefit from the synergies of the combination giving rise to the goodwill.

Any impairment is charged to the income statement immediately. Any impairment loss recognised for goodwill is not reversed.

Finance costs

Interest expense and other borrowing costs are charged to the income statement as incurred.

Deferred taxation

The tax payable is based on taxable profit for the period. Taxable profit differs from net profit as reported in the income statement because it excludes items of income and expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible.

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable differences and deferred tax assets are

recognised to the extent that taxable profits will be available against which deductible temporary differences can be utilised. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when the deferred taxes relate to the same fiscal authority. Deferred tax is calculated at the prevailing corporate tax rate both at company level (28%) and subsidiary level (29%).

Investment Income

Investment income is recognised on an accruals basis.

Investments

Investments in subsidiary companies are stated at cost less provision for any impairment in value, which is recognised as an expense in the period in which the impairment is identified.

Share-based compensation benefits

IFRS 2 ‘Share-based Payment’ requires the recognition of equity-settled share-based payments at fair value at the date of grant and the recognition of liabilities for cash-settled share based payments at the current fair value at each balance sheet date.

The Group provides benefits to employees and service providers (including senior executives) of the Group in the form of share based payments, whereby employees render services in exchange for shares or rights over shares (equity-settled transactions).

The cost of these equity-settled transactions with employees is measured by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined by using a Black-Scholes model. In valuing equity-settled transactions, no account is taken of any performance conditions, other than market conditions linked to the price of the share of Watermark Global Plc if applicable.

The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance and/or other service conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (the vesting period).

The cumulative expense recognised for equity-settled transactions at each reporting date until vesting date reflects (i) the extent to which the vesting period has expired and (ii) the Group’s best estimate of the number of equity instruments that will ultimately vest. No adjustment is made for the likelihood of market performance conditions being met as the effect of these conditions is included in the determination of fair value at grant date. The profit and loss account charge or credit for a period represents the movements in cumulative expense recognised as at the beginning and end of that period.

No expense is recognised for awards that do not ultimately vest, except for awards where vesting is only conditional upon a market condition.

If an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award and designated as a replacement award on the date that it is granted, the cancelled and new award are treated as if they were a modification of the original award, as described in the previous paragraph.

The dilutive effect, if any, of outstanding options is reflected as additional share dilution in the computation of earnings per share.

Where shares have been granted to employees, these have only been granted to Directors of the Holding company.

Use and revision of accounting estimates

The preparation of the financial report requires the making of estimations and assumptions that affect the recognised amounts of assets, liabilities, revenues and expenses and the disclosure of contingent liabilities, including impairment, share-based payments and work under construction. These estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgement about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the revision affects both current and future periods.

Financial Instruments

Financial assets and financial liabilities are recognised in the Group’s balance sheet when the Group becomes a party to the contractual provisions of the instrument.

Trade receivables

Trade receivables which are non-interest bearing, are measured on initial recognition at fair value and subsequently at amortised cost. Appropriate allowables for estimated recoverable amounts are recognised in the income statement when there is objective evidence that the asset is impaired, measured as the difference between the asset’s carrying value and the fair value of the estimated recoverable amount, if any.

Cash and cash equivalents

Cash and cash equivalents comprise cash at bank and in hand.

Trade payables

Trade payables are initially measured at fair value and subsequently at amortised cost. Trade payables are non-interest bearing.

3. Financial Risk Management

Financial risk factors

The Group is exposed to liquidity risk, market risk (interest rate risk and currency risk), credit risk and capital risk management arising from the financial instruments it holds. The risk management policies employed by the Group to manage these risks are discussed below:

Liquidity Risk

The Group manages liquidity risk by maintaining adequate reserves and banking facilities, by monitoring cash flows and managing the maturity profiles of financial assets and liabilities within the bounds of contractual obligations.

Credit Risk

The Company manages credit risk through strict payment terms. Maximum payment terms granted is 30 days from service delivery. Outstanding accounts are monitored on a monthly basis.

Market Risk

Interest rate risk is the risk that the value of the financial instruments will fluctuate due to changes in the market interest rates. The Group’s income and operating cash flows are substantially independent of changes in market interest rates. The Group is exposed to interest rate risk in relation to its bank deposits.

The Group has no borrowings at the balance sheet date and does not anticipate any borrowings in the forthcoming year.

The Group has monies on deposit which earn interest at rates from 4% to 10% depending on location. Interest rates in South Africa are more volatile than in the United Kingdom and hence a larger sensitive range has been used. The sensitivity of interest rate increases and decreases is set out below:

		Â	Â	2008	Â	2007
				Interest received reduction		Interest received reduction
						Â
Interest rate decrease
1%				(4,765)		(11,388)
2%				(9,531)		(22,776)
3%				(14,296)		(34,164)
						Â
				Interest received increase		Interest received increase
Interest rate increase
1%				4,765		11,388
2%				9,531		22,776
3%				14,296		34,164

Currency Risk

Currency risk is the risk that the value of financial instruments will fluctuate due to changes in foreign exchange rates. Currency risk arises when future commercial transactions and recognised assets and liabilities are denominated in a foreign currency that is not the Group’s measurement currency. The Group is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the US Dollar and South African Rand. The Group’s management monitors the exchange rate fluctuations on a continuous basis and acts accordingly.

Loans between companies which are members of the Watermark Global PLC Group are made in the functional currency of the lending company. In all other respects, the policy for all Group companies is that they only trade in their principal functional currency, except in exceptional circumstances from time to time.

As at 31 December 2008 the Group held no monetary assets or liabilities in currencies other than the functional currency of the operating units involved. These operating units refer to South Africa and the UK and assets are held in both Sterling and Rand. Interest rate exposure has been included as part of the sensitivity calculations.

Credit Risk

The company manages credit risk through strict payment terms. Maximum payment terms granted is 30 days from service delivery. Outstanding accounts are monitored on a monthly basis.

Capital Risk Management

The Group manages its capital to ensure that it will be able to continue as a going concern while maximising the return to shareholders through the optimisation of the debt and equity balance.

The capital structure of the Group consists of cash and cash equivalents and equity attributable to equity holders of the parent, comprising issued capital, reserves and accumulated losses as disclosed in notes 19 and 21. The Group does not use derivative financial instruments and has no long term debt facilities.

4. Fair Value Estimation

The fair values of the Group’s financial assets and financial liabilities approximate to their carrying amounts at the balance sheet date due to their being no non-current assets or liabilities.

5. Segmental information

For management purposes the Group is organised into two operating divisions; Corporate and Water technology. These divisions are the basis on which the Group reports its primary segment information. This information also represents the geographical segments being the United Kingdom and South Africa.

	Â	Corporate	Â	Water	Â	Total
				technology
						Â
		United Kingdom		South Africa
		£		£		£
Revenue
External		-		158,158		158,158
		Â		Â	Â	Â
Total revenue from continuing operations		-		158,158	Â	158,158
						Â
Result
Segment result from continuing operations		(2,658,206)		(426,907)		(3,085,113)
Finance income						87,636
Loss before tax						(2,997,477)
Income tax credit					Â	99,626
						Â
Loss for the period					Â	(2,897,851)

Other segment items included in the income statement:

Depreciation	Â		Â	1,491	Â	9,914	Â	11,405
Share based Employee Payments				1,551,509		-		1 551,509
Loss on Disposal of Subsidiary				277,238		-		277,238
									Â
Balance sheet						Consolidation Adjustments
									Â
Segment assets		1,799,244		1,843,583		(1,659,504)		1,983,323
Segment liabilities		(134,697)		(2,099,947)		1,662,042		(572,602)
Net assets/(liabilities)		1,664,547		(256,364)		2,538		1,410,721

Additions to property plant and equipment can be found in Note 15.

In 2007 for management purposes the Group was organised into three operating divisions; Corporate Water technology and Microwave technology. These divisions are the basis on which the Group reports its primary segment information. This information also represents the geographical segments being the United Kingdom, South Africa and the United States of America.

Period ended 31 December 2007

	Â	Corporate	Â	Water	Â	Microwave	Â	Total
				Technology		Technology
									Â
		United Kingdom		South Africa		United States of America
		£		£		£		£
Revenue
External		-		-		1,489		1,489
		Â		Â		Â		Â
Total revenue from continuing operations		-		-		1,489		1,489
									Â
Result
Segment result from continuing operations		(2,923,871)		(80,946)		(496,026)		(3,500,843)
Finance income								92,952
									Â
Loss before tax								(3,407,891)
									Â
Income tax credit								23,629
								Â
Loss for the period								(3,384,262)

Other segment items included in the income statement:

	Â		Â		Â		Â		Â
Depreciation		209		833		18,874		-		19,916
Impairment of Goodwill		-		-		1,566,632		-		1,566,632
Share Based Employee Payments		715,583		-		-		-		715,583

	Â		Â		Â		Â		Â
Balance sheet								Consolidation Adjustments
											Â
Segment assets		3,324,133		1,036,350		854,466		(2,597,753)		2,617,196
Segment liabilities		(115,080)		(1,070,388)		(1,613,992)		2,597,753		(201,707)
Minority Interest		Â		Â		Â		147,796		147,796
Net assets/(liabilities)		3,209,053		(34,038)		(759,526)		147,796		2,563,285

Additions to property plant and equipment can be found in Note 15.

6. Investment income

Investment income comprises interest on bank and cash balances received:

	Â	2008	Â	2007
		£		£
					Â
UK		28,970		67,787
South Africa		58,173		24,817
Australia		492		348
		87,635		92,952

7. Loss on Disposal of Subsidiary

On 14 January 2008, the Group effectively disposed of its 85% investment in MicroFuze Americas Inc., following its deal with ATC, for no consideration. As per IAS 28, the group effectively lost significant influence over the operation of the company as:

• It has no Board representation
• It does not participate in the policy making of the company
• There are no more material transactions between the parties
• No managerial personnel are shared between the parties, and
• No essential technical information is provided

The net assets of MicroFuze Americas Inc. at the date of disposal were as follows:

	Â	£ ‘000
		Â
Net Assets disposed of		128
Minority Share		149
		277
Loss on disposal of Investment		(277)
Total Consideration received		-

The deal with ATC makes provision for payment for the shares through the commercialisation of the technology, subsequent to the deal being concluded, ATC has not been able to commercialise the technology and the Company decide to write-down the investment in MicroFuze Americas Inc.

8. Operating loss

	Â	2008	Â	2007
					Â
		£		£
Operating loss is stated after charging:
Depreciation		11,405		19,916
Auditors’ remuneration – audit		24,500		23,000
Directors’ remuneration		161,238		353,655
Subsidiary auditor’s fees		10,000		10,000
Impairment of goodwill		-		1,566,632
Exchange (gain)/loss		(97,114)		17,382
Share based payments for services		210,596		-
Share based employee benefits		799,009		715,583
Corporate finance fees		752,500		-

9. Loss from Discontinued Operations

In accordance with IFRS 5, the Group classified its 85% investment in MicoFuze Americas Inc. as assets held for sale since the investment was disposed off on the 14^th January 2008, and treated as a loss from continued operations. The following losses were included in the Group Consolidated Incomes Statement. Total loss on disposal has been recognised in the income statement (Note 7).

	Â	2008	Â	2007
		£		£
Operating Revenue
		-		1,489
Profit/(Loss) on disposal of Assets		50		(7,268)
		50		(5,779)
Administrative Expenses		(9,917)		(173,156)
Loss from operations		(9,867)		(178,935)
Minority Interest		-		26,840
Loss attributable to Equity Holders		(9,867)		(152,095)

10. Employees

	Â	2008	Â	2007
		£		£
The average monthly number of persons (including directors) employed by the Group during the period was:
					Â
					Â
Group		5		5
Company		3		3
					Â
Employment costs
Wages and salaries		64,766		382,686
					Â
Key management Remuneration
Aggregate emoluments (including benefits in kind)		193,103		68,965
Directors’ remuneration
Aggregate emoluments (including benefits in kind)		161,238		353,655
					Â
Emoluments of the Highest Paid Director		111,071		155,616

Details of share based payments for directors are disclosed in note 20.

11. Finance costs

	Â	Â	2008	Â	2007
			£		£
						Â
Bank overdraft interest payable			-		6

12. Taxation

	Â	2008	Â	2007
		£		£
				Â
UK Corporation tax		-		-
Factors affecting the tax charge for the period
Loss on ordinary activities before taxation		(3,007,344)		(3,407,891)
Loss on ordinary activities before taxation multiplied by standard rate of UK corporation tax of 30%		(902,203)		(1,022,366)
Effects of :
Depreciation		3,421		5,975
Impairment of goodwill		-		469,990
Loss on disposal of subsidiary		83,171		-
Share based employee compensation costs		465,453		214,674
Deferred tax (Western Utilities Corporation)		99,626		23,629
Losses carried forward		250,532		308,098
UK Corporation tax		-		-

A deferred tax asset of £802,577 (2007: £1,105,756) has not been recognised due to the uncertainty over the timing of future recoverability. A deferred tax asset of £99,626 (2007: £23,629) has been recognised relating to losses incurred in Western Utilities Corporation (Pty) Limited which are expected to be utilised in the foreseeable future.

13. Loss per share

Loss for the year attributable to shareholders is £2,907,718 (2007: £3,357,422). This is divided by the weighted average number of shares outstanding calculated to be 235,163,631 (2007: 184,008,321) to give basic loss per share of 1.2p (2007: 2.0p loss).

The calculation of diluted loss per share would be based on the weighted average number of shares outstanding adjusted by the dilutive share options. The weighted average number of shares outstanding is 258,082,877 (2007: 200,469,483). On the assumption that the share options, which would give rise to the dilution, may not be exercised due to current losses, the diluted loss per share has been stated at the same figure as the basic loss per share.

14. Intangible assets

	Â	Goodwill
		£
Cost
At 1 January 2007 and at 31 December 2007		1,556,632
Disposals		(1,556,632)
At 31 December 2008		-
Provision for impairment
At 1 January 2007		-
Impairment		1,556,632
At 31 December 2007		1,556,632
Disposals		(1,556,632)
At 31 December 2008		-
Net Book Value   At 31 December 2008		-
At 31 December 2007		-
At 31 December 2006		1,556,632

Goodwill relates to the purchase of subsidiary undertakings. The carrying value of goodwill has been compared to its recoverable amount based on the value in use of the cash generating units to which the goodwill has been allocated. Each subsidiary has been assessed as a separate cash generating unit.

Following the annual impairment review undertaken at 31st December 2007, the Directors concluded that goodwill arising on the acquisition of MicroFuze Americas Inc. had been impaired. Goodwill in respect of this cash generating unit was written down to £nil in the consolidated balance sheet.

The carrying value of the company’s investment in MicroFuze Americas Inc. was also impaired and was written down to £Nil as at 31 December 2007.

As at 31 December 2008 goodwill has been eliminated due to the effective disposal of MicroFuze Americas Inc. (Note 7).

15. Property, plant and equipment - Group

	Â	Plant & Machinery	Â	Fixtures, Fittings & Equipment	Â	Assets under construction	Â	Total
		£		£		£		£
Cost
At 1 January 2007		81,024		10,570		-		91,594
Additions		90,759		23,314		231,747		345,820
Disposals		(7,039)		(1,720)		-		(8,759)
Foreign exchange movement		2,777		(1,428)		-		1,349
At 31 December 2007		167,521		30,736		231,747		430,004
Additions		-		12,705		549,112		561,817
Disposals		(167,521)		(5,298)		(129,630)		(302,449)
Foreign exchange movement		-		818		-		818
At 31 December 2008		-		38,961		651,229		690,190
									Â
Accumulated depreciation
At 1 January 2007		8,656		1,150		-		9,806
Charge for the year		18,874		1,042		-		19,916
Disposals		(1,536)		-		-		(1,536)
Foreign exchange movement		-		(173)		-		(173)
At 31 December 2007		25,994		2,019		-		28,013
Charge for the year		-		11,381		-		11,381
Disposals		(25,994)		(476)		-		(26,470)
Foreign exchange movement		-		159		-		159
At 31 December 2008		-		13,083		-		13,083
									Â
Net Book Value
									Â
At 31 December 2008		-		25,878		651,229		677,107
At 31 December 2007		141,527		28,717		231,747		401,991
At 31 December 2006		72,368		9,420		-		81,788

Assets under construction relate to costs incurred by Western Utilities Corporation (Pty) Limited (WUC) which was established to develop and commercialise a process technology which will facilitate the treatment of acid water, which is an industrial by-product of the mining process, and to sell the treated water to industrial customers. WUC constructed a pilot plant close to the water decant point in the West Rand region in South Africa. The total construction costs (including the SAVMIN pilot plant campaign) amounted to £651,229. During November 2008 a portion of the pilot plant, to the value of £129,630 was sold to the Tshwane University of Technology to use in continued research to improve on the selected technology; the Company will continue to benefit from the research as co-owner of the technology.

Property, plant and equipment - Company

Company :	Â	Fixtures, Fittings & Equipment	Â	Total
		£		£
Cost
At 1 January 2007, at 31 December 2007 and at 31 December 2008		1,401		1,401
Accumulated Depreciation
At 1 January 2007		281		281
Charge for the year		209		209
At 31 December 2007		490		490
Charge for the year		280		280
At 31 December 2008		770		770
Net book value
At 31 December 2008		631		631
At 31 December 2007		911		911
At 31 December 2006		1,120		1,120

16. Fixed asset investments

	Â	£
Cost
At 1 January 2007		1,600,000
Additions		7
At 31 December 2007 and at 31 December 2008		1,600,007
Provision for impairment
At 1 January 2007		-
Impairment		1,600,000
At 31 December 2007 and at 31 December 2008		1,600,000
Net book value
At 31 December 2008		7
At 31 December 2007		7
At 31 December 2006		1,600,000

Investments in subsidiaries comprise the following, all of which are fully consolidated:

Name and nature of business	Â	Country of Registration	Â	Class of shares	Â	% held
							Â
Water Utilities Limited (dormant holding company)		BVI		Ordinary		100
							Â
Western Utilities Corporation (Pty) Limited (acid mine drainage process development) -held indirectly		South Africa		Ordinary		100
							Â
*MicroFuze International Pty Limited (holding company)		Australia		Ordinary		100

*Microfuze International Pty Limited was subsequently disposed of on 20 March 2009 (Note 24).

The investment was written down in 2007. Balances due from the company have been written off as at 31 December 2008 (Note 17).

17. Trade and other receivables

Group:	Â	2008	Â	2007
		£		£
				Â
Other debtors and prepayments		555,272		85,589
		555,272		85,589
Company :
Amounts owed by group undertakings		1,659,504		986,727
Other debtors and prepayments		20,093		33,156
		1,679,597		1,019,883

As at 31 December 2008 the amounts owed by the Group of companies represents a balance due from Western Utilities Corporation (Pty) Limited of £1,659,504. Interest is payable at LIBOR. The balance due from Western Utilities Corporation (Pty) Limited will be only be repaid when the resources of the company permit. The balance due from MicroFuze International Pty Limited has been written off due to the sale of this subsidiary post year end (Note 24).

18. Trade and other payables

Group	Â	2008	Â	2007
		£		£
Trade payables		528,629		121,115
Other payables		9,741		-
Accruals and deferred income		28,999		63,953
Taxation and social security		5,233		16,639
		572,602		201,707
Company
				Â
Trade payables		69,071		38,755
Accruals and deferred income		27,000		59,686
Taxation and social security		-		16,639
		96,071		115,080

19. Share capital

	Â	2008	Â	2007
		£		£
Authorised
1,000,000,000 ordinary shares of 0.15p each		1,500,000		1,500,000
Allotted, issued and fully paid
252,869,333 (2007: 224,369,110) ordinary shares of 0.15p each.		379,304		336,554

The Company has allotted shares for non cash consideration during the year as follows in lieu of remuneration:

	Â	Number of Shares	Â	Nominal Value
				£
June 2008 non cash in lieu of services		5,000,000		7,500
June 2008 non cash in lieu of services		2,000,000		3,000
June 2008 non cash in lieu of services		4,000,000		6,000
September 2008 non cash in lieu of fees and services		17,500,000		26,250
		28,500,000		42,750

20. Share based payment arrangements

Details of the share options outstanding as at 31 December 2008

Name	Â	Date granted	Â	Number	Â	Exercise price	Â	Expiry date	Â	Fair value at grant date
						Pence				Pence
Duncan Clegg		2006/02/13		1,500,000		10		2011/02/13		6.23
Peter Marks		2006/02/13		1,500,000		10		2011/02/13		6.23
Doug Parrish		2006/02/13		4,000,000		10		2011/02/13		6.23
Timothy Wall		2006/02/13		2,000,000		10		2011/02/13		6.23
Nabarro Wells		2006/02/13		2,700,000		10		2011/02/13		6.23
Sandy Barblett		2007/06/06		3,000,000		10		2012/06/06		2.39
Art Greenberg		2007/06/06		1,000,000		10		2012/06/06		2.39
Harley Grant		2007/06/06		2,000,000		10		2012/06/06		2.39
Jeff Henry		2007/06/06		2,000,000		10		2012/06/06		2.39
Mike Dureau		2007/06/06		110,000		10		2012/06/06		2.39
Steven Ribich		2007/12/10		1,947,000		10		2012/12/10		3.87
Rockbury		2008/04/23		3,330,000		7.5		2013/04/22		6.32
Dirk Kotzé		2008/02/01		2,000,000		10		2013/02/28		6.29
At 31 December 2008				27 087 000

No options expired and none were forfeited or exercised during the year. In addition to the 3,330,000 options granted 6,670,000 of additional share options granted to Rockbury are conditional on certain performance criteria. Consequently these options have not been accounted for.

The fair value of the options vested in the period was £336,405 (2007: £353,183). The assessed fair value at grant date is determined using the Black Scholes Model that takes into account the exercise price, the term of the option, the share price at grant date, the expected price volatility of the underlying share, the expected dividend yield and the risk-free interest rate for the term of the option.

The options granted to D Kotze were revalued to 3p subsequent to the year end, after which they were cancelled on 19^th March 2009 and replaced with 2,000,000 fully paid-up shares in lieu of services rendered.

The following table lists the inputs to the model used for the year ended 31 December 2008:

	Â	23/04/2008	Â	01/02/2008
				Â
Dividend yield (%)		-		-
Expected volatility (%)		116		126
Risk-free interest rate (%)		5		5.2
Share Price at grant date (pence)		7.62		7.50
No. of options		3,330,000		2,000,000

The expected volatility reflects the assumption that the historical volatility is indicative of future trends, which may not necessarily be the actual outcome. The exercise period is 5 years from the date of grant being 23 April 2008 and 1 February 2008 respectively (2007: 6 June 2007 and 12 December 2007 respectively).

Shares issued in lieu of remuneration

During the year shares were issued to the directors of the company, to the value of £673,200, namely Doug Parrish £244,800 in lieu of directors fees, Jaco Schoeman £306,000 in lieu of meeting performance criteria, D Kotzè £122,400 in lieu of sign on fee. In addition, J Schoeman will be entitled to an additional 5,000,000 shares as per his employment contract.

The following table summarises the total share based payments effected for the year 31 December 2008:

Shares and Options issued	Â	Shares	Â	Options	Â	Value £
							Â
Directors		673,200		125,809		799,009
In lieu of commission on capital raised		752,500		-		752,500
Total						1,551,509
Service providers		-		210,596		210,596
Total charge to income statement		1,425,700		336,405		1,762,105

21. Reserves

	Â	Group Exchange difference reserve	Â	Company and Group Share option reserve	Â	Company and Group share premium account	Â	Group Profit and loss account	Â	Company Profit and loss account
		£		£		£		£		£
At 1 January 2007		-		728,862		4,026,259		(2,226,000)		(1,264,541)
Loss for the year		-		-		-		(3,357,422)		(4,531,276)
Exchange difference		57,321		-		-		-		-
Share based payments		-		353,183		-		-		-
Premium on shares issued		-		-		3,124,528		-		-
Cost of share issue		-		-		(480,000)		-		-
At 31 December 2007		57,321		1,082,045		6,670,787		(5,583,422)		(5,795,817)
Loss for the year		-		-		-		(2,907,718)		(2,392,005)
Exchange difference		(6,951)		-		-		-		-
New shares issued		-		-		1,382,950		-		-
Share based payments		-		336,405		-		-		-
At 31 December 2008		50,370		1,418,450		8,053,737		(8,491,140)		(8,187,822)

The company has taken advantage of the exemption conferred by section 230 of Companies Act 1985 from presenting its own income statement. Loss after taxation of £2,392,005 (2007: £4,531,276) has been included in the financial statements of the holding company.

22. Related party transactions

Other than transactions with Group companies and directors as disclosed in the Notes, there were no transactions with other related parties.

23. Ultimate controlling party

There was no ultimate controlling party during the year.

24. Subsequent events

On 20 March 2009, the Board decided to sell its intermediate holding company, MicroFuze International Pty Limited for $1. The sale of the subsidiary results in a loss of approximately £219,152 which represents the total outstanding loans to MicroFuze International Pty Limited. Consequently the balance due from the company has been fully written down as at 31 December 2008 (Note 17).

In May 2009 the Company completed a placing of shares to UK and Australian institutions raising £2.0m (424,000,000 ordinary shares at 0.5 pence). The issue of the shares was approved at an Extraordinary General Meeting of shareholders held on 15^th of June 2009.

25. Standards issued but not in force

At the date of approval of these financial statements the following accounting standards were issued by the International Accounting Standards Board but were not yet effective:

Standard / Interpretation	Â	Effective for annual periods beginning on or after
(i) Adopted by the European Union
Improvements to IFRSs – 2008		1 January 2009
Amendments to IFRS 1 and International Accounting Standard (IAS) 27 “Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate”		1 July 2009
Amendment to IFRS 2 “Share Based Payment: Vesting Conditions and Cancellations”		1 January 2009
IFRS 8 “Operating Segments”		1 January 2009
IAS 1 (Revised) “Presentation of Financial Statements”		1 January 2009
IAS 23 (Revised) “Borrowing Costs”		1 January 2009
Amendments to IAS 32 and IAS 1 “Puttable Financial Instruments and Obligations arising on Liquidation”		1 January 2009
International Financial Reporting Interpretation Committee (IFRIC) 13 “Customer Loyalty Programmes”		1 July 2008

Standard / Interpretation   (ii) Not adopted by the European Union	Â	Effective for annual periods beginning on or after
IFRS 1 (Revised) “First Time Adoption of International Financial Reporting Standards”		1 January 2009
IFRS 3 (Revised) “Business Combinations”		1 July 2009
IAS 27 (Revised) “Consolidated and Separate Financial Statements”		1 July 2009
Amendment to IAS 39 “Eligible Hedged Items”		1 July 2009
Amendment to IAS 39 “Reclassification of Financial Assets: Effective date and Transition”		1 July 2008
IFRIC 15 “Agreements for the Construction of Real Estate”		1 January 2009
IFRIC 16 “Hedges of a Net Investment in a Foreign Operation”		1 October 2008
IFRIC 17 “Distributions of Non cash Assets to Owners”		1 July 2009
IFRIC 18 “Transfers of Assets from Customers”		1 July 2009

The Board of Directors expects that the adoption of these accounting standards in future periods will not have a material effect on the financial statements of the Group except from the application of IAS 1 (Revised) “Presentation of Financial Statements” which will have a material effect on the presentation of the financial statements.

26. Statutory information

The financial information set out above does not constitute the Company’s statutory accounts for the year ended 31 December 2008, but is derived from those accounts. Statutory accounts for 2008 will be delivered to the Registrar of Companies following the Company’s Annual General Meeting. The auditors have reported on those accounts and their report was not qualified.