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Knowledge Support (KSS)

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Monday 09 September, 2002

Knowledge Support

Interim Results

Knowledge Support Systems Group Plc
09 September 2002

Knowledge Support Systems Group PLC ('KSS')


Interim Results for the 6 Months Ended 30 June 2002




KSS is a leading supplier of price management and optimisation solutions and
services primarily for the petroleum, mass and convenience retail industries.
Organisations use KSS's solutions to enhance the efficiency and consistency of
their pricing processes and to optimise retail prices with regard to revenue and
profit targets, price image and competitive positioning. KSS's software products
are available as on-site solutions to allow close integration into clients'
systems, data and business processes. A range of services is available from
operations in Florham Park, New Jersey, USA and Manchester, UK.


FINANCIAL HIGHLIGHTS
                                                    30 June 2002                30 June 2001

                                                         £m                          £m

Turnover                                                0.6                          0.5
Operating Expenses                                      3.6                          6.1
Exceptional Operating Income                            1.0                           -
Operating Loss                                          2.0                          5.4
Net Interest Income                                     0.5                          0.8
Loss After Tax                                          1.3                          4.6

Basic Loss per Share                                   1.82p                        6.20p

Net Funds                                              £22.6m                      £28.0m








OPERATIONAL HIGHLIGHTS


  • The strategic review has progressed well. The Board will continue to
    review progress closely and consider all options


  • Net loss after tax reduced to £1.3m compared to £4.6m for the first half
    of 2001


  • Net funds at 30 June 2002 were £22.6m, with average net cash burn rate in
    first half of £0.37m per month


  • Exceptional income of £1.0m million booked in first half from an insurance
    claim relating to the death of the founder, Professor Madan Singh.


Petroleum


  • Petroleum business achieved internal revenue targets for the first half
    and management currently expect that the full year target will be met


  • New version of PriceNet (version3) successfully installed on two locations
    under previously announced licence deals


  • PriceNet v3, with its significantly improved functionality, has been very
    well received by the market and sales pipeline is growing steadily


  • Petroleum business gaining momentum with target of achieving a profitable
    run rate by Q4 of 2003


  • Continued focus on North American and European markets


Retail


  • Disappointing revenue performance in first half, following delays in
    launching PriceStrat version 3


  • Market interest in revenue management solutions now well established and
    increasing competition highlights market development


  • Continued primary focus on US retail market but increasing business
    development activities in European market


  • Management believes that KSS's PriceStrat solution is strategically well
    placed against competitive offering


  • Actively pursuing opportunities that would provide first reference
    customers with good expectation of key contract wins before the end of this
    calendar year


  • Expansion of retail product offering to include specialist services and
    tools to engage customers on specific pricing issues and opportunities with
    view to shortening sales cycle and generating revenues faster.


Contact :


KSS


Iain Cockburn, CEO                    Tel: 0161 609 4016



CHAIRMAN'S STATEMENT

Six Months Ended 30 June 2002




The revenue for the six month period ended 30 June 2002 was £601,000, compared
with £513,000 for the same period last year. The net loss was £1,347,000
compared with a net loss of £4,613,000 in the corresponding period last year.
The reduction in net loss is attributable to a £2,508,000 reduction in operating
expenses and exceptional income of £1,000,000 arising from an insurance claim
following the death of Professor Madan Singh on 28 March 2002.

BOARD CHANGES


As we have earlier reported, David Mushin was dismissed from the post of Chief
Executive Officer and from the Group on 24 June 2002.


At that date, Iain Cockburn, Finance Director, was appointed as Interim Chief
Executive Officer and the Board announced that it would immediately commence a
strategic review of the Group, with particular emphasis on the Retail business.


Following the death of Professor Madan Singh in March 2002, I was appointed as
Non-Executive Chairman, having been serving as Deputy Chairman.

SUMMARY


The strategic review has progressed well and an update on the findings of the
first stage is included in the Chief Executive's Review.


The Board is pleased with the leadership and commercial focus that Iain Cockburn
has brought to the strategic review, the operations and the organisation. It is
clear that the business is under control and that he has the high level of
support from the entire team that is needed to effect the necessary changes that
are taking place in the business. Having already led the Petroleum business to
the stage that it is well placed to generate growth, I am pleased that he will
now also be focussing on the Retail business as well.


The Company continues to benefit from a strong Balance Sheet with net funds at
the end of period of £22,638,000. The Board is committed to protecting these
funds to ensure all strategic options are kept open for the Group. The Board
acknowledges the poor trading result of the Group and the consequent loss of
value suffered by shareholders. I believe however, that the strategic review has
already identified various opportunities for KSS to aggressively pursue under
Iain's leadership that should help to start restoring shareholder value. I can
assure shareholders that the Board will maintain close attention on continued
progress and pursue whatever strategic options that are in the best interest of
the business and shareholders.


Trevor Goul-Wheeker

Non Executive Chairman

6 September 2002


CHIEF EXECUTIVE'S REVIEW


In this section I am providing an update on trading in each of our key
businesses, Petroleum and Retail, and on the preliminary findings of the Board's
strategic review.


Given the poor state of the Telecommunications markets, I continue to see our
partnership with Alcatel as the only viable route to market in that sector.
There are no sales and marketing activities being undertaken at this time.


I would like to thank the Chairman and the rest of the Board for supporting and
working closely with me and the rest of the management team. Their experience
has been invaluable in the last three months.

PETROLEUM

The Petroleum business attained its internal revenue target for the first half.
The key achievement of the period was laying down a solid foundation for the
second half and the future.


In the first half of 2002, we have successfully implemented the new PriceNet
product (v3) in two locations, in the US with Sunoco and in Europe with a major
multi-national, both under previously announced licence deals. In addition the
product has also been implemented on trial evaluations with two major new
customers. In all cases it has been very favourably received by both existing
and potential customers.


The business is also in advanced negotiations regarding two small orders, which
we expect to complete within the next four to eight weeks. A number of larger
evaluations continue to progress well, with the results of these still expected
later in the year. Although long sales cycles and the developing sales pipeline
create significant forecasting risk, at this stage, the team and myself are
reasonably confident of achieving our Petroleum revenue target for the year.

RETAIL

As announced on 26 June 2002, the Retail division performed very poorly in terms
of revenues and new client generation in the first half. Particular emphasis
needed to be paid to completing development efforts and re-organising sales and
marketing activities.


The team's improved understanding of the issues and importance of integration
pointed us towards delaying the launch of PriceStrat v3.0 to ensure we had the
features and components necessary to facilitate such integration. The
development effort is now shaping up very well and we are pursuing selected
opportunities to showcase integration and customisation features with major
retail clients.


The primary focus in Retail continues to be the US market with growing interest
in Europe where we are also now in varying stages of discussion with retailers.
We are committed to building partnerships with other key vendors in the sector.
Our relationship with SAP continues to develop favourably. Our short term target
for the SAP partnership is to identify a client with SAP and use that to
complete and certify the product interfaces.


The sales and marketing activities in Retail are now well focused and the sales
pipeline is starting to develop. We are in late stage discussions on a number of
potentially key large contracts. We are relatively confident to close at least
one of these contracts and commence work by the end of this calendar year.
Clearly, with the delay in the release of PriceStrat v3 and consequent delay in
closing business, we still expect, as previously announced, that Retail will
fall short of its revenue target for the year.



BALANCE SHEET AND CASH POSITION


In addition to the improved strategic direction of the Group, we have continued
to maintain control of all aspects of the day to day operations. Cost controls
are still being applied rigorously and headcount has reduced since the end of
the 2001 by 9% to 73.


The funds from the insurance claim of £1,000,000 that was booked in the first
half as exceptional operating income are due to be received in the second half.
No compensation for loss of office or severance costs were incurred in respect
of the dismissal of David Mushin.


The average monthly cash burn in the first six months of the year was £364,000
per month.


In light of the obligations to existing and prospective clients, we must
maintain a strong and credible organisation to support our customers and win new
business, especially given the new more solutions focused marketing strategy.


The Group continues to benefit from a strong balance sheet. Net funds at the end
of June were £22,638,000. In the Board's view it is essential to protect these
funds to ensure the Group retains the confidence of its customers, partners and
shareholders and therefore the ability to pursue all options in the best
interests of the business and shareholders.

STRATEGIC REVIEW


The first stage of our strategic review is complete and our initial conclusions
are outlined below. We continue to review all strategic options available to the
Group.


In addition to keeping a tight rein on the day-to-day operational aspects of the
business, I am personally leading the strategic review process. In doing so I
have drawn on both the knowledge and experience available within the Group, our
US Advisory Board and additional outside assistance where required to contribute
to and validate the key findings, assumptions and recommendations.




Petroleum


We have conducted a thorough review of the Petroleum business and developed a
three-year business plan and strategy. This exercise confirmed our belief that
the strategy adopted is sound, that the commercial assumptions that have been
made are reasonable and that real potential exists for long term sustainable
growth.


The fundamentals of the product are in good shape and the success with recent
deployments has given us great confidence concerning performance, robustness and
process efficiency.


The live implementations together with the evaluations that are underway in the
US should start to provide us with the US reference base that is essential in
building confidence and credibility in the US market. In line with the broader
group strategic review, we are now aggressively pursuing alliances and
partnerships that would help accelerate acceptance of KSS in the US market.


Retail


The strategic review to date has confirmed what we have repeatedly stated in
past announcements - the level of interest in revenue management solutions from
retailers, particularly in the US, is continuing to increase, with most tier one
and tier two players actively evaluating options and allocating budgets for
activities in this area. The increasing level of competition provides additional
confirmation that a significant market opportunity has evolved.


We are convinced that clients are increasingly concerned with the issues of
scalability and management of data, pricing rules and constraints that
necessitate a very high level of integration between the revenue management
solution and the clients' systems and data. In our view this is best achieved by
providing an on-site solution with the necessary consultancy and assistance
required to achieve that integration.


These capabilities position us well against competitive offerings. The pricing
service model used by our key competitors supports a very efficient and
straightforward initial implementation from the customer's standpoint. We
believe however that the lack of integration will inevitably result in a
solution that is less cost effective, less process efficient and less flexible
for customers in the longer term when compared to our model of an on-site
delivered product.


KSS's key problem to date has been that the Group sought to generate revenue
only from the sale of a single and complete pricing software system. In the past
we have over-estimated both the readiness of retailers to adopt such complex
applications as well as our ability to complete the definition and development
of that product. As a result, and despite significant interest from our target
market, KSS has not been successful to date in closing a first major retail
contract.


While leading retailers continue to demand full pricing solutions, we have
identified alternative ways to generate revenue by leveraging existing core
skills, experience and software components to provide a broader range of
services and decision support offerings that are more focussed on clients'
immediate issues and objectives.


The first opportunity is to deliver services that enable retailers to improve
their pricing processes and prepare for the adoption of price modelling and
optimisation. The skills and knowledge that the Group has in this regard are
exceptional and unique as no other vendor has accumulated experience around the
'productisation' of pricing models. We are actively pursuing initiatives to
deliver these services to customers who are considering on-site solutions.


The second opportunity centres around a number of specialist services and tools
that can be packaged and delivered to customers to address specific pricing
problems or provide decision support for aspects of pricing or promotions. These
services can be sold, supported by a very compelling ROI (Return on Investment),
either as a standalone service or as part of a longer term project to provide
the foundations for a price modelling and optimisation solution.


We have already discussed and validated these initiatives with a number of
customers and prospective partners and in the last two months submitted
proposals incorporating many of these to customers. The feedback to date has
been very positive and encouraging. We look forward to officially launching them
at a number of upcoming retail events in the autumn.


The extension and maturing of our offering to include a portfolio of specialist
services should position the Group to leverage fully its existing strengths and
generate revenues more quickly than was otherwise possible.


Alliances


As part of the Group strategic review, we are exploring various alliances that
would increase our presence and acceptability in the important US market and
consequently accelerate our penetration of that market. Although good progress
is being made with selected partnerships, in general progress is slowed by our
lack of reference customers.



SUMMARY


We believe that the good progress that has been made in the Petroleum sector
puts that business on a sound footing to achieve a profitable run rate in this
sector by Q4 of next year.


We remain disappointed by our past trading performance in Retail but believe
that the newly introduced customer centric solutions and ROI-based sales
approach will yield positive results in regard to closing new business in the
Retail market.


Whist day-to-day trading remains very difficult and we are realistic about the
timeframes required to grow the sales pipelines and close customer contracts, we
believe positive momentum is building in both businesses.


We remain positive about KSS's opportunity to perform and succeed in its chosen
markets. We will continue to monitor progress and momentum and in the case of
underperformance, we will aggressively explore all options to re-structure the
Group or seek alternative methods of maximising shareholder value.


I would like to take this opportunity to thank the staff for their support and
commitment during this challenging period.




Iain Cockburn

Chief Executive Officer

6 September 2002







Consolidated profit and loss account
                                                                   (Unaudited)          (Unaudited)            (Audited)
                                                              Six months ended     Six months ended           Year ended
                                                                  30 June 2002         30 June 2001     31 December 2001
                                                  Note
                                                                             £                    £                    £

Turnover                                             2                 600,805              512,658            1,020,520
Cost of sales                                                         (55,105)                    -            (163,521)
                                                                  ____________         ____________         ____________
Gross profit                                                           545,700              512,658              856,999
Administrative expenses
Exceptional costs                                                            -                    -          (1,552,693)
Other costs                                                        (3,601,008)          (6,108,997)         (10,897,357)
Other operating income                                                  91,280              168,526              330,783
Other operating income - exceptional                 3               1,000,000                    -                    -
                                                                  ____________         ____________         ____________
Total operating (loss)/profit                                      (1,964,028)          (5,427,813)         (11,262,268)
Interest receivable and similar income                                 473,979              844,998            1,493,712
Interest payable                                                             -                    -                    -
                                                                  ____________         ____________         ____________
(Loss)/profit on ordinary activities before                        (1,490,049)          (4,582,815)          (9,768,556)
taxation
Tax on (loss)/profit on ordinary activities          7                 142,902             (30,031)              772,189
                                                                  ____________         ____________         ____________
(Lossss)/profit on ordinary activities after                       (1,347,147)          (4,612,846)          (8,996,367)
taxation
Dividends paid and proposed                                                  -                    -                    -
                                                                  ____________         ____________         ____________

Retained loss for the
                                                                   (1,347,147)          (4,612,846)          (8,996,367)
period/year
                                                                  ____________         ____________         ____________
Earnings per ordinary share
          - Basic                                    4                 (1.82)p               (6.2)p             (12.17)p

           - Diluted                                 4                 (1.82)p               (6.2)p             (12.17)p
                                                                  ____________         ____________         ____________




The Group's turnover and operating loss arise from continuing operations.






Consolidated balance sheet
                                                                (Unaudited)          (Unaudited)            (Audited)
                                                           Six months ended     Six months ended           Year ended
                                                               30 June 2002         30 June 2001     31 December 2001
                                                                          £                    £                    £
Fixed assets
Intangible assets                                                         4                    4                    4
Tangible assets                                                     748,924            2,026,099            1,020,865
Investments: own shares                                              13,937                    -                    -
                                                               ____________         ____________         ____________
                                                                    762,865            2,026,103            1,020,869
                                                               ____________         ____________         ____________

Current assets
Debtors                                                           2,519,705            1,529,490            1,889,474
Investments                                                      21,935,835           27,428,255           23,706,582
Cash at bank and in hand                                            716,162              615,705            1,161,262
                                                               ____________         ____________         ____________
                                                                 25,171,702           29,573,450           26,757,318

Creditors: amounts falling due within one                         (908,832)          (1,186,339)          (1,260,697)
year
                                                               ____________         ____________         ____________
Net current assets                                               24,262,870           28,387,111           25,496,621
                                                               ____________         ____________         ____________

Total assets less current liabilities                            25,025,735           30,413,214           26,517,490

Creditors: amounts falling due after more
than one year                                                      (29,631)            (102,294)             (48,835)

Provisions for liabilities and charges                            (418,619)                    -            (547,363)
                                                               ____________         ____________         ____________
Net assets                                                       24,577,485           30,310,920           25,921,292
                                                               ____________         ____________         ____________

Capital and reserves
Called up share capital                                             148,014              147,922              148,014
Share premium account                                            37,370,135           37,363,279           37,370,135
Profit and loss account                                        (12,940,664)          (7,200,281)         (11,596,857)
                                                               ____________         ____________        ____________
Equity shareholders' funds                                       24,577,485           30,310,920           25,921,292
                                                               ____________         ____________         ____________





Consolidated statement of total recognised gains and losses
                                                                (Unaudited)          (Unaudited)            (Audited)
                                                           Six months ended     Six months ended           Year ended
                                                               30 June 2002         30 June 2001     31 December 2001
                                                                          £                    £                    £

Loss attributable to members of the company                     (1,347,147)          (4,612,846)          (8,996,367)
                                                                

Exchange translation differences                                      3,340             (21,346)             (34,401)
                                                               ____________         ____________         ____________
Total recognised gains and losses for the
period/year                                                     (1,343,807)          (4,634,192)          (9,030,768)
                                                               ____________         ____________         ____________

Reconciliation of movements in shareholders' funds
                                                                (Unaudited)          (Unaudited)            (Audited)
                                                           Six months ended     Six months ended           Year ended
                                                               30 June 2002         30 June 2001     31 December 2001
                                                                          £                    £                    £

Loss for the period/year                                        (1,347,147)          (4,612,846)          (8,996,367)
                                                               ____________         ____________         ____________

Retained loss for the period/year                               (1,347,147)          (4,612,846)          (8,996,367)
Net proceeds from issue of ordinary shares                                -               13,490               20,438
Exchange translation difference                                       3,340             (21,346)             (34,401)
                                                               ____________         ____________         ____________
Net (reduction in)/addition to shareholders'
funds                                                           (1,343,807)          (4,620,702)          (9,010,330)
Opening shareholders' funds                                      25,921,292           34,931,622           34,931,622
                                                               ____________         ____________         ____________
Closing shareholders' funds                                      24,577,485           30,310,920           25,921,292
                                                               ____________         ____________         ____________





Consolidated cash flow statement
                                                                (Unaudited)          (Unaudited)            (Audited)
                                                           Six months ended     Six months ended           Year ended
                                                               30 June 2002         30 June 2001     31 December 2001
                                                  Note                    £                    £                    £

Net cash outflow from operating activities           5          (2,532,850)          (4,632,223)          (8,631,206)
                                                               ____________         ____________         ____________

Returns on investment and servicing of
finance
Interest received and similar income                                115,290              743,188            1,690,235
Interest paid                                                             -                    -                    -
                                                               ____________         ____________         ____________
Total returns on investments and servicing
of finance                                                          115,290              743,188            1,690,235
                                                               ____________         ____________         ____________

Taxation
Research and Development tax credit received                        338,128                    -                    -
Overseas taxation paid                                             (82,774)                    -             (10,357)
                                                               ____________         ____________         ____________
                                                                    255,354                    -             (10,357)
                                                               ____________         ____________         ____________

Capital expenditure
Purchase of tangible fixed assets                                   (2,696)            (637,614)            (778,121)
Proceeds from sale of tangible fixed                                  1,770                    -               21,439
assets
Purchase of fixed asset investments                                (23,743)                    -                    -
                                                               ____________         ____________         ____________
Net cash outflow from capital expenditure                          (24,669)            (637,614)            (756,682)
                                                               ____________         ____________         ____________

Cash outflow before use of                                      (2,186,875)          (4,526,649)          (7,708,010)
liquid resources and financing
                                                               ____________         ____________         ____________
Management of liquid resources
(Increase)/decrease in short term deposits                        (229,253)            2,185,860            1,907,433
Purchase of shares held in money market                                   -          (3,000,000)          (3,000,000)
Sale of shares held in money market                               2,000,000            5,500,100            9,500,200
                                                               ____________         ____________         ____________
Net cash outflow from management of liquid
resources                                                         1,770,747            4,685,960            8,407,633
                                                               ____________         ____________         ____________
Financing
Proceeds from issue of ordinary shares                                    -               13,490               20,438
                                                               ____________         ____________         ____________
Net cash inflow from financing                                            -               13,490               20,438
                                                               ____________         ____________         ____________

(Decrease)/increase in funds                         6            (416,128)              172,801              720,061
                                                               ____________         ____________         ____________



Notes

1     Basis of preparation


The interim financial statements have been prepared on the basis of the
accounting policies set out in the Group's last Annual Report and Accounts.


The financial information for the year ended 31 December 2001 has been extracted
from the statutory accounts, which have been filed with the Registrar of
Companies. The auditors' report on these accounts was unqualified.


The interim report for the six months ended 30 June 2002 was approved by the
Board on 6 September 2002.

2     Analysis of turnover

All turnover and results are derived from the Group's principal activity being
the development and licensing of intelligent software products that optimise
tactical pricing decisions for businesses selling to mass consumer markets. An
analysis of turnover is set out below:


Turnover by customer location

                                                               (Unaudited)          (Unaudited)            (Audited)
                                                          Six months ended     Six months ended           Year ended
                                                              30 June 2002         30 June 2001     31 December 2001
                                                                         £                    £                    £
UK                                                                  91,680              109,700               84,152
Europe excluding UK                                                208,962              147,807              454,856
USA                                                                136,917                    -                7,776
Other                                                              163,246              255,151              473,736
                                                              ____________         ____________         ____________
                                                                   600,805              512,658            1,020,520
                                                              ____________         ____________         ____________


Turnover by activity

                                                                (Unaudited)           (Unaudited)            (Audited)
                                                           Six months ended      Six months ended           Year ended
                                                               30 June 2002          30 June 2001      31 December 2001
                                                                          £                     £                     £
Licences                                                            149,459               246,592               618,866
Maintenance income                                                   88,109               123,557               158,412
Professional services                                               363,237               142,509               243,242
                                                               ____________          ____________          ____________
                                                                    600,805               512,658             1,020,520
                                                               ____________          ____________          ____________




3     Exceptional operating income


Other operating income of £1m reported as exceptional relates to insurance
proceeds under a Keyman insurance policy on the death of Madan Singh. The
proceeds are due to be received following the period end.


4     Earnings per share

                                                                (Unaudited)          (Unaudited)            (Audited)
                                                           Six months ended     Six months ended           Year ended
                                                               30 June 2002         30 June 2001     31 December 2001

Earnings per ordinary share:
Basic                                                               (1.82)p               (6.2)p             (12.17)p
Diluted                                                             (1.82)p               (6.2)p             (12.17)p
                                                               ____________         ____________         ____________


Earnings per ordinary share is based on the Group's loss for the financial
period of £1,347,147 (30 June 2001: loss £4,612,846; 31 December 2001: loss
£8,996,367).


The weighted average number of shares used in the calculation is basic
73,932,521 (30 June 2001: 73,899,427; 31 December 2001:73,942,679) and diluted
73,932,521 (30 June 2001: 73,899,427; 31 December 2001: 73,942,679).


5     Reconciliation of operating loss to net cash outflow from operating
activities
                                                                (Unaudited)          (Unaudited)            (Audited)
                                                           Six months ended     Six months ended           Year ended
                                                               30 June 2002         30 June 2001     31 December 2001
                                                                          £                    £                    £
Total operating (loss)/profit                                   (1,964,028)          (5,427,813)         (11,262,268)
Depreciation and amortisation                                       265,263              421,512              848,973
Charges
(Loss)/profit on sale of tangible fixed
assets                                                                2,032                    -              655,019
(Increase)/decrease in debtors                                    (677,999)              572,491              796,231
Increase/(decrease) in creditors                                  (158,118)            (198,413)              330,839
                                                               ____________         ____________         ____________
Net cash (outflow)/inflow from                                  (2,532,850)          (4,632,223)          (8,631,206)
operating activities
                                                               ____________         ____________         ____________







6     Reconciliation of net cash flow to movement in net funds
                                                                (Unaudited)          (Unaudited)            (Audited)
                                                           Six months ended     Six months ended           Year ended
                                                               30 June 2002         30 June 2001     31 December 2001
                                                                          £                    £                    £
Increase/(decrease) in cash and cash
equivalents in the period/year                                    (416,128)              172,801              720,061   
                   
Cash inflow from decrease/ (increase) in debt                             -                    -                    -
                                                                          
Cash outflow from increase in liquid                            (1,770,747)          (4,685,960)          (8,407,633)   
      
                                                                
Resources
                                                               ____________         ____________         ____________
Movement in net funds resulting from cash
flows                                                           (2,186,875)          (4,513,159)          (7,687,572)
                                                               ____________         ____________         ____________
Movement in net funds/(debt) in the
period/year                                                     (2,186,875)          (4,513,159)          (7,687,572)
Net funds at the start of the
period/year                                                      24,824,988           32,512,560           32,512,560
                                                               ____________         ____________         ____________
Net funds at the end of the
period/year                                                      22,638,113           27,999,401           24,824,988
                                                               ____________         ____________         ____________


7     Taxation
                                                                (Unaudited)          (Unaudited)            (Audited)
                                                           Six months ended     Six months ended           Year ended
                                                               30 June 2002         30 June 2001     31 December 2001
                                                                          £                    £                    £
Current year
R&D tax credit receivable                                           165,251                    -              490,618
Foreign taxation                                                   (23,681)             (30,031)             (43,062)

Prior year
R&D tax credit receivable                                             3,138                    -              334,990
Foreign taxation                                                    (1,806)                    -             (10,357)
                                                               ____________         ____________         ____________
                                                                    142,902             (30,031)              772,189
                                                               ____________         ____________         ____________








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