Amphion Innovations plc
Full Year Trading Update

28 February 2011 – Amphion Innovations plc (LSE: AMP) (“Amphion” or the “Company”), provides the following trading update for the 12 month period to 31 December 2010.

As previously indicated in the Interim Results, given the length of time since the last outside financing event, which has historically been the basis for calculating company values, the Board has decided to adopt a different approach to valuation of certain individual holdings. The Company continues to follow the International Private Equity and Venture Capital Valuation Guidelines. Under those guidelines, the price of the recent investment is likely to be the appropriate methodology for all private investments, but for only a limited period after the date of the relevant investment. In those instances where the Company concluded that length of time together with conditions in the market and at the investee company required an adjustment to the price of the recent investment, it discounted the investment. The resulting valuations, in most cases, are based on management’s estimates of value, but they do also reflect the poor environment for private financing which has had a negative impact on many early stage emerging companies in our sectors. The valuation continues to include the wholly-owned subsidiary, DataTern, which generated the majority of Amphion’s revenues through IP licensing, at depreciated historical cost.

As a result, the Company expects to show a decrease in Net Asset Value (“NAV”) in sterling to £0.15 being $0.23 as at 31 December 2010 (£0.26 and $0.42 as at 31 December 2009). In absolute terms, 15p per share ($0.23) equates to a total NAV of £20 million ($31 million).

Early in the year, Amphion raised an additional $1,450,265 through the placing of additional tranches of the Convertible Promissory Note first issued in late 2008 and during the year raised a total of $952,500 in unsecured loans.

As previously reported in June and September 2010, Amphion’s intellectual property licensing programme was restructured to improve returns, which meant we fell behind plan in the first six months of the year. However, the revenue generated from this programme improved markedly in the second half of the year. In addition, the contribution margin from the programme also rose in the second six months of the year as a result of the restructuring and is now significantly higher than before.

Amphion’s wholly-owned subsidiary, DataTern, Inc., signed additional non-exclusive intellectual property license agreements with 9 leading international companies over the year, bringing the total number of licensees of the ORM technology to 27. Since the year end,

DataTern has concluded an additional 3 licenses, generating revenue so far in 2011 of $850,000 and bringing the total number of licensees to 30. The total number of claims outstanding is now 14.

Despite the renewed success of this programme, only about $1 million of value is shown on the Company’s balance sheet (and Net Assets) for our intellectual property assets.

Amphion’s total revenue fell by 53% to $4,090,071 million in 2010, reflecting the shortfall in the licensing programme revenue, most of which occurred in the first six months of the year. As a result, gross profit was $3,077,490 (2009: $5,791,018). Despite a significant reduction in administrative expenses (which include some of the direct expenses of the IP programme) from $6,683,955 in 2009 to $4,963,199 in 2010, the loss from operations increased from $892,937 to $1,885,709.

In September we warned that we remained very cautious about the current environment and the potential impact on our ability to finance our Partner Companies. The environment over the past five months has remained very difficult, although we are just beginning to see the first signs of life in the IPO market. This is the key to a more active and supportive market for financing of private technology and medical technology companies.

We are pleased to report that we have recently reached agreement in principle to conclude a significant round of financing of our Partner Company, Motif BioSciences. The total amount of capital being committed to Motif is up to $15 million, part of it in equity financing and part of it in partnership financing of the company’s programmes. We have adjusted the valuation of the holding in Motif down to reflect the essential elements of this financing, which remains subject to detailed due diligence, definitive agreements and the fulfillment of various closing conditions. Amphion’s percentage ownership in Motif is expected to increase as a result of the conversion of loan capital to equity. More information will be made available in due course.

Amphion expects to announce its preliminary results for the 12 months to 31 December 2010, in May 2011.

Richard Morgan, Amphion’s Chief Executive Officer, said:

“2010 was an extremely challenging year for Amphion and our Partner Companies. Our model depends on being able to gain access to capital to fund and grow our Partner Companies and this has been in extremely short supply in the last twelve months. We continue to cut costs throughout Amphion and wherever possible in each of our Partner Companies, while doing what we can to preserve essential intellectual property and other critical assets. While the restructuring of our IP licensing programme proved to be extremely disruptive, with adverse consequences for the flow of settlements and revenue, we believe that the programme is now a lot stronger and the underlying economics have improved sharply as a result. We started to see a resumption of activity in this programme in the third and fourth quarters of last year and this has continued into the first part of 2011. We remain confident in the strength of the key ORM patents and believe we should continue to see progress in the programme in the months ahead.

Our main challenge remains to get sufficient capital to support our Partner Companies. We believe we are seeing the first signs of an improvement in the overall environment but we do not expect that recovery will be rapid or broad. One key goal remains to achieve an IPO or other realization of one or more of our Partner Companies and we continue to believe that some of our companies should be able to approach the IPO market as and when it revives.”

As of 1 March 2011, Amphion’s registered office will be Fort Anne, Douglas, Isle of Man, IM1 5PD.

For further information please contact:

Amphion Innovations
Charlie Morgan:
+1 (212) 210-6224

Cardew Group
Tim Robertson/ Jamie Milton
+44 020 7930 0777

Seymour Pierce Limited, Nominated Adviser
Freddy Crossley:
+44 020 7107 8347

About Amphion Innovations plc
Amphion (LSE: AMP) builds shareholder value in high growth companies in the medical and technology sectors, by using a focused, hands-on company building approach, based on decades of experience in both the US and UK. Amphion has significant shareholding in 8 Partner Companies developing proven technologies targeting substantial commercial marketplaces, each in excess of $1 billion. Each Partner Company is chosen with the goal of achieving an exit valuation in excess of $100 million. The Amphion model has been refined to optimise the commercialisation of patents and other intellectual property within the Partner Companies. The Partner Companies collectively own or control over 200 separately identified pieces of intellectual property, a number which grows rapidly each year.

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