Half-yearly report
KleenAir Systems International plc
(the 'Company')
Interim Accounts for the period ended 31 March 2007
HIGHLIGHTS
· London low emission zone announced in May, setting emissions standards for specified vehicles
· The Company has launched its patented exhaust filters to help vehicles meet these low emission zone standards
· Filters well received at the Birmingham Commercial Vehicle Show in April
· First sales made, and order book building satisfactorily
· HM Revenue and Customs has confirmed reinstatement of Company's EIS status
CHAIRMAN'S STATEMENT
As foreshadowed in the annual report for the period ended 30 September 2006, Mayor Ken Livingstone gave final approval
to the London Low Emission Zone on 9 May 2007, bringing to an end some three years of uncertainty. KleenAir had been
gearing itself for this development and is now well positioned to launch its specialised retrofit products designed to
bring older vehicles to current emission standards.
The new legislation requires heavy goods vehicles over 12 tonnes to upgrade to Euro III emission standards by February
2008. Coaches and heavy goods vehicles over 3.5 tonnes must upgrade by July 2008. The legislation extends to commercial
vans in 2010; and by 2012 all heavy goods vehicles and coaches must meet Euro IV standards. The number of retrofits
will be substantial over this period of time, and will probably be followed by further upgrades later. As a result of
the funds we have raised since 2005, we have started the process of generating working capital to meet this challenge.
Our order book has started building satisfactorily since the mayor's approval of the LEZ. We are now undertaking an
advertising and sales programme to make the industry more aware of the cost effective solutions we are offering in order
to meet the new requirement.
The technical approval process for product certification by Transport for London has not yet been finalised and
introduces a further delay of at least two months. As such, we expect to start making deliveries in late August with the
bulk of this year's sales occurring, as predicted in our Annual Report, in the last quarter of the current calendar
year.
Our Free-Flow Filter, made with metal rather than ceramic, was well received at the Commercial Vehicle Trade Show at the
National Exhibition Centre in Birmingham in April. This is a lower cost filter as well as more durable, due to its
metallic construction, and much easier to maintain. It is particularly suited to those vehicles requiring to upgrade
from Euro II to Euro III, in which market we intend to become a leader.
Our new applications engineering facility in Ross-on-Wye will be a key element in preparing product for the market. We
have started the process of recruiting more application engineers to assist in the process.
Despite having previously received approval by HM Revenue and Customs of new issues of shares being eligible for EIS
relief, this status was withdrawn, due to a technicality, in the last quarter of 2006. Because this was such an
important item for many of our shareholders, we engaged in active dialogue with HMRC over a period of several months. In
March 2007 the decision was reversed and the EIS status reinstated.
We believe that we are now well prepared to exploit the new and significant market now opening up to our products.
Lionel Simons
18 June 2007
For further information please contact:
Peter Newell 07786 333 046
peter.newell@kleenairsystems.co.uk
Nick Harriss 020 7512 0191
ARM Corporate Finance Ltd
Interim profit and loss account
6 months to 9 months to 6 months to
31 March 30 September 30 June
2007 2006 2006
£ £ £
Group turnover 25,700 - -
COGS 1,449
Gross Profit 24,251 0 0
Sales and Marketing (55,997) (99,376) (29,498)
R & D Expense (106,817) (103,263) (54,666)
Other operating charges (250,784) (506,807) (229,625)
Operating Loss (389,348) (698,428) (313,789)
Interest receivable 4,858 11,018 5,636
Loss on ordinary activities
before taxation (384,489) (698,428) (308,153)
Tax on profit/loss on
ordinary activities - - -
Loss on ordinary activities
after taxation (384,489) (698,428) (308,153)
Earnings per share
basic (0.02) (0.04) (0.01)
diluted (0.02) (0.04) (0.01)
All of the activities of the company are classed as continuing.
The company has no recognised gains or losses other than the results for the period as set out above
The basic earnings per Ordinary Share is calculated on the profit on ordinary activities after taxation on the weighted
average number of Ordinary Shares in issue, during the period, of 18,957,426 (30 September 2006 16,925,082 and 30 June
2006 15,925,881)
As at 31 As at 30 As at
March September 30 June
Group balance sheet 2007 2006 2006
£ £ £
Fixed assets
Intangible Fixed assets 83,354 89,167 214,676
Tangible Fixed assets 22,720 17,201 425
Total Fixed assets 106,074 106,368 215,101
Current assets
Debtors 54,777 90,072 75,384
Cash at bank and in hand 235,764 483,808 758,246
Total Current assets 290,541 573,880 833,630
Creditors: amounts falling
due within one year 93,440 160,036 127,576
Net current assets/liabilities 197,101 413,844 706,054
Total assets less current
liabilities 303,175 520,212 921,155
Share Capital 198,080 189,235 189,235
Share Premium 1,843,899 1,705,699 1,705,699
P & L (1,795,886) (1,387,173) (986,888)
Other Reserves 57,082 12,450 13,109
Capital and reserves 303,175 520,212 921,155
6 months to 9 months to 6 months to
31 March 30 Sept to 30 June
Grouo cash flow 2007 2006 2006
£ £ £
Net cash inflow from operating
activities (391,592) (504,105) (431,623)
Returns on investments and
servicing of finance 4,858 11,019 5,636
Capital expenditure and/financial
investment - (including repayment
of loan to subsidiary) (8,355) (17,377) (425)
Net Financing 1,137,803
Issue of equity capital 8,845 55,698
Share premium on issue of equity
share capital 141,200 1,419,302
Issue costs (3,001) (531,673)
Increase/Decrease in cash (248,045) 436,962 711,391
PRINICIPAL ACCOUNTING POLICIES
Basis of accounting
The financial statements have been prepared under the historical cost convention.
The principal accounting policies of the company have remained unchanged from those set out in the company's 2006 annual
report and financial statements.
All employee services received in exchange for the grant of any share-based remuneration are measured at their fair
values. These are indirectly determined by reference to the fair value of the share options awarded. Their value is
appraised at the grant date and excludes the impact of any non - market vesting conditions (for example, profitability
and sales growth targets).
All share-based remuneration is ultimately recognised as an expense in the profit and loss with a corresponding credit
to other reserve, net of deferred tax where applicable. If vesting periods or other vesting conditions apply, the
expense is allocated over the vesting period, based on the best available estimate of the number of share options
expected to vest. Non-market vesting conditions are included in assumptions about the number of options that are
expected to become exercisable. Estimates are subsequently revised, if there is any indication that the number of share
options expected to vest differs from previous estimates. No adjustment is made to expenses recognised in prior periods
if fewer share options ultimately are exercised than originally estimated.
Upon exercise of share options, the proceeds received net of any directly attributable transaction costs up to the
nominal value of the shares issued are allocated to share capital with any excess being recorded as additional paid in
capital.
NOTES 6 months to 9 months to 6 months to
31 March 30 September 30 June
2007 2006 2006
£ £ £
1. Other operating income and
charges
Sales and Marketing expenses 55,997 29,498
Research and Development
expenses 106,817 54,666
Administrative expenses 206,152 707,447 229,625
2. Operating Loss
Operating loss is stated
after charging/(crediting)
Depreciation 3,650 176
Amortisation 4,999 19,801 13,201
Auditors remuneration 4,752 12,500 2,500
Write off of goodwill 118,909
Operating lease rentals 7,769 7,949
Leasehold Plant and Furniture
3. Fixed Assets property equipment and Fittings Total
£ £ £ £
Cost
At 30 September 2006 9,850 5,820 1,707 17,377
Additions 8,841 8,841
At 31 March 2007 9,850 14,661 1,707 26,218
Depreciation
At 30 September 2006 126 50 176
Charge for the period 1,438 1,614 270 3,322
At 31 March 2007 1,438 1,740 320 3,498
Net book value
At 31 March 2007 8,412 12,921 1,387 22.720
At 30 September 2006 9,850 5,694 1,657 17,201
4. Intangible Assets Intellectual
Property Total
£ £
Cost
At 30 September 2006 100,000 100,000
Additions
At 31 March 2007 100,000 100,000
Depreciation
At 30 September 2006 10,833 10,833
Charge for the period 5,813 5,813
At 31 March 2007 16,646 16,646
Net book value
At 31 March 2007 83,354 83,354
At 30 September 2006 89,167 89,167
5. Investments £
Cost
At 30 June 2006 99,990
Write off in the period to 30 September 2006 (99,990)
Net Book Value
At 31 March 2007 and 30 September 2006 0
At 30 June 2006 99,990
At 31 March 2007 Kleenair Systems International Plc held 100% of the issued ordinary share capital of the company listed
below:
KleenAir Systems Ltd
Country of Incorporation England & Wales
Proportion of share capital held 100% (Direct)
Nature of Business Trading
KleenAir Systems International Inc was wound up on 17 October 2006, whereupon the holding in KleenAir Systems Ltd became
direct.
31 March 2007 30 Sept 2006 30 June 2006
6. Debtors £ £ £
Trade Debtors 29,375 20,011 20,011
VAT Recoverable 19,511 10,339
Stock 4,296
Other debtors 6,199 11,925 20,177
Prepayments and accrued income 14,907 38,585 24,857
Total debtors 54,777 90,032 75,384
31 March 2007 30 Sept 2006 30 June 2006
7.Creditors £ £ £
Trade Creditors 48,979 62,920 16,689
VAT Payable 779
Amounts due to related undertakings 0 19,011 52,345
Wages, Other taxation and social security 15,793 8,957
Other creditors 0 10,271 24,000
Accruals and deferred income 27,889 67,834 25,584
Total creditors 93,440 160,036 127,575
7 Publication of non statutory accounts.
The financial information set out in this interim financial report does not constitute statutory accounts as defined in
s 240 of the Companies Act 1985. The figures for the period ended September 2006 have been extracted from the statutory
financial statements. The auditors' report on those financial statements was unqualified and did not contain a statement
under section 237(2) of the Companies Act 1985.
Dated: 19 June 2007