OsmetechAnnualReport 2004 xx
Osmetech plc
AnnualReport andAccounts 2005 xx OsmetechAnnualReport 2004
Osmetech today
Osmetech is a fast developing, international diagnostics business with
operations inAtlanta,BostonandPasadena in theUS, serving the high
growth, near patient testing market targeting small to medium sized
hospitals.
TheOPTI range ofblood gas and electrolyte products provides a high
quality, reliable revenuebase. Its established operational infrastructure
and strong international distributor network gives theGroupanexcellent
platform to support the further growth of its business.
Theacquisitions ofMolecular Sensing plc inOctober 2004andClinical
MicroSensors,Inc. inJuly 2005 have provideda strongcombination of
products suitable for the rapidly growing genetic diagnostics market.
TheOptiGENEand eSensor products areboth scheduled for launch in
early 2006.
Contents
1 Highlights
2 Chairman’s statement
3 ChiefExecutiveOfficer’s review
9 Board of directors
10 Report of the directors
15 Independent auditors’ report
16 Consolidated profit and loss account
16 Consolidated statement of total recognised gains and losses
17 Consolidatedbalance sheet
18 Company balance sheet
19 Consolidatedcash flow statement
19 Reconciliation of net cash flow to movement in net funds
20 Notes to theconsolidatedcash flow statement
23 Notes forming part of the financial statements
37 Notice ofannual general meeting
39 Form of proxy
IBCDirectors andadvisers OsmetechAnnualReport 2005 1
Highlights
•Sales of £5.83m (2004 – £6.18m) – increase of 4% onaconstantcurrency basis
•Sales of $10.61m (2004 – $10.45m) for OPTIbusiness – underlying increase of over 10%
(excluding one offSARS relatedbenefit of over $1m in prior year)
•Operating losses of £2.15m (2004 – £1.42m)before exceptional operatingcosts of £0.83m
(2004 – £nil) – in line with projections
•Loss for the year after tax of £2.72m (2004 – £1.17m)
•Acquisition ofMolecular Sensing plc for £2.73mbeforeacquisitioncosts givingan entry
point into the fast growingDNAbased diagnostics sector
•Strong product pipelineand excellent growth prospects in the small to medium sized
hospital market
•VetStat successfully launchedby our vetinerary distribution partner,IDEXXLaboratories,
Inc. – initial orders exceed expectations
Current period
•Successful fund raising of £11.0mbeforecosts
•Acquisition ofClinicalMicroSensors,Inc. fromMotorola,Inc. strengthening theGroup’s
DNA diagnostics strategy
•Appointment of senior DNA diagnostics specialists to management team
•Launch of two new OPTI instruments 2 OsmetechAnnualReport 2005
Chairman’s statement
Osmetech has continued to make significant progress with its strategy to developa diagnostics
business in the fast growing near patient testing market serving small to medium sized hospitals.
The two recent acquisitions ofOFEX-listedMolecular Sensing plcandClinicalMicroSensors,Inc
(“CMS”) fromMotorola,Inc. havecreateda strongand unrivalled product combination. OPTI
GENE will target simple test applications suchas sexually transmitted diseases, where thereis
oftena demand for fast results. TheCMS eSensor™ product is suitable for morecomplex tests,
suchas CysticFibrosis, where theanalysis of multiple gene targets is required. As theHuman
GenomeProject continues to provide the genetic information necessary for new tests, these
products createa strategically strong position for Osmetech in the fast growing market segment of
genetic diagnostics.
TheOPTIbusiness has again performed well in the year. It provides us withan excellent platform
from which wecan develop new product opportunities within theGroup. This proven operational
infrastructure willbe very valuable in the process ofbringing theOPTIGENEand eSensor™
products through to market. Weanticipatebeingable to successfully leverage our skills in
instrument manufacturingas wellas benefiting from our strong international distribution network
that currently sell toa similar customer base of small to medium sized hospitals.
Iam delighted to welcomeBruceHuebner andGeoffMcKinley to the management team,both of
whom haveconsiderable experience in the field of genetic diagnostics. Bruce joins theGroupas
President ofCMS. He was previously ChiefOperatingOfficer ofGen-ProbeandPresident and
ChiefOperatingOfficer ofNanogen, two major internationalcompanies in the genetics and
infectious diseases markets. Bruce has a strongSales andMarketingbackgroundand oversaw
Gen-Probe througha period of growthandcommercial success in the diagnostics industry. Geoff
McKinley is responsible for our OPTIGENEbusiness. He was previously Sr. Director Business
Development bioMérieux NA with responsibility for new technologies for this globalMolecular
biology business, successfully in-licensing technology fromGen-ProbeandAffymetrix 
InJuly 2005,Osmetech raised £10.2 million net of expenses by way ofa placing of new shares in
order to provide workingcapital for theGroup througha very exciting stage in our development.
We recognise the support andcommitment of many of our long term shareholders and had
originally proposed to provideall existing shareholders with the opportunity to participate in the
fundraising throughan offer of shares ona pre-emptivebasis. However, particularly in view of the
new EuropeanProspectus Directive that became effective inJulyand the increased timeandcost
that would havebeen involved in preparing suchan offer, we reluctantly concluded that to
proceed on this basis would not be in thebest interests of theCompany. 
At the forthcomingAnnualGeneralMeeting tobe held on 30 September 2005,a resolution willbe
proposed toconsolidate every 10 ordinary shares of 0.01p each into 1 ordinary share of 0.10p each.
Weexpect to launchboth theOPTIGENEand eSensor™ products in thecoming months and with
Osmetech underpinnedby the strength of theOPTIbusiness,Ibelieve that weare very well
placed tobuilda successfuland fast growing international diagnostics business.
GordonHall
Chairman
1September 2005 OsmetechAnnualReport 2005 3
Chief Executive Officer’s review
Introduction
Wearenow building upon the highly reliable revenue platform that OPTI has provided. The
completion of twoacquisitions,Molecular Sensing plc (“MS”)andClinicalMicroSensors,Inc
(“CMS”), in the fastest growth sector of the global diagnostics market, genetic diagnostics, should
providea powerful product combination. This shouldallow us toperformboth simple tests
throughOPTIGENEand morecomplex tests with theCMS eSensor™ instrument, yielding
exciting international opportunities for the further growth of theGroup. 
As with theacquisition ofOPTI fromRoche in 2003, theseacquisitions werecompleted on
favourable terms for Osmetech shareholders and we expect tobeable to extract considerable
value from these investments in duecourse.
OPTI
The recent investment in new OPTI products is starting to pay off, with the updatedCCA with
touchscreen havingbeen successfully launched. The reusableOPTIR instrument targeting higher
usagecustomers and theOPTILion electrolyte only analyser exhibitedat the recent American
Association ofClinicalChemists Conference (AACC) meeting in theUS were very well receivedby
bothcustomers and international distributors. Both of these products are scheduled for worldwide
launch later this calendar year.
TheOPTI product line of near point ofcarearterialblood gas analysis instruments and
consumables continues to show good underlying sales growthas the market continues to migrate
from traditionalcentral hospital laboratory settings. Sales revenues for the year increased
marginally inconstant currency terms and there was underlying growth in excess of 10%after
accounting for the one-offbenefit ofSARS-related sales toChinaand initial distributor pipeline
filling during the prior year.
The VetStat product,anOPTICCAanalyser adapted for the veterinary market, has now been
launchedby our distribution partner,IDEXXLaboratories,Inc. (“IDEXX”), producing most
encouraging early results, with orders exceeding expectations. IDEXX is a worldwide leader in the
development andcommercialisation ofanimal health diagnostic products and weareconfident of
future growth resulting from their extensive sales and marketingcampaigns.
Good progress has alsobeen made with the development contract withIDEXX tocreatea new
platform for measuringcriticalcare parameters based onOsmetech’s proprietary optical
fluorescence technology. Weexpect product sales tocommence on schedule in the short to
medium term.
Weopeneda sales office inGermany inApril with exclusive distribution rights toOPTI products in
this important market where we havean existingcustomer base regularly orderingconsumables.
We shouldbeable to successfully leverage this operation further as we introduce new OPTI
products andcomplementary third party products. We willalso havean established operation
through which to launch theGroup’s genetic diagnostics products allowing us to service the
customer base directly.
OPTI is well placed to grow steadily and,as the installedbaseexpands, producea high quality
and reliable income stream for theGroup.
Genetic diagnostics market
Genetic diagnostics is the fastest growing segment of the global diagnostics market and, in theUS
is forecast to grow at approximately 20% per year during the next 5 years. The growth of this 4 OsmetechAnnualReport 2005
Chief Executive Officer’s review continued
sector and the prospect of high profit margins is becoming of increasing interest across the wider
diagnostics industry. Roche have recently madea strategic investment inAffymetrix which has a
bio-chip for DNA detection.
The genetic diagnostics market has not been dominatedby the major companies. Most testing is
currently performedby large hospitals and reference laboratories operating expensive instruments
and running specialised tests, which rely on high volume testing in order to managecosts.
The growth in these highly accurate diagnostic tests is expected tobe drivenby technological
advances providing simpler and morecost effectiveassays to enable small to medium sized
hospitals to perform testing themselves inaddition to the expansion of theHumanGenome
Project resulting in new tests to reduce healthcare systemcosts and to improve patient care. This
fits well withOsmetech’s existing distributor networkandcustomer base.
The following three sub-segments account for over 75% of theUS genetic diagnostics market. The
genetics and pharmacogenomics market in theUSalone is expected to increase from $120m to
$950m over the period 2003-2010. Over the same period theUS infectious diseases market is
expected to grow from $675m to $1.8bn.
1)HumanGenetics
Human genetics focuses on enabling the physician to test individuals for diseases for which they
havea genetic predisposition, for example:cystic fibrosis, thrombosis,Alzheimer’s or certain
cancers. This is achieved through the detection of “mistakes” inan individual’s DNA which may
cause mutations associated witha particular disease.
2)Pharmacogenomics
Pharmacogenomics is the process of developing drug therapies tailored toan individual patient’s
needs through genetic testing. This enables physicians to ensure that treatments areboth safeand
effective, reducing drug wastageand reducing the possibility of patients experiencingadverse
drug reactions. This is anarea in which weanticipate rapid growthand perhaps for the first time in
the healthcare diagnostics industry we will see pharmaceutical margins,but without theassociated
development costs and timescales.
TheFDA has recently approveda new product fromRoche/Affymetrix for theCYP450 family of
enzymes which will provide relevant genetic information for drug metabolism,and has now been
launchedat more than $500 per test. CMSalso has a product currently under development for
CYP450 which is planned tobe launched later in 2006.
The portable OPTI CCA analyser
Over 800 new OPTICCA instruments sold in 2004/5
increasing theactive installedbase of units of over
4,000 from which repeat consumable sales
continue tobe generated. OsmetechAnnualReport 2005 5
Chief Executive Officer’s review continued
3)Infectious Diseases
Healthcare physicians rely on tests whichareable to identify theDNA of thebacteria responsible
for sexually transmitted diseases (e.g.,HIV,Chlamydia, gonorrhoea)and other infectious diseases
suchas MRSA. This is the largest sector of the genetic diagnostics market today and is
concentrated incentral laboratories whichbatchand test high volumes of samples. Osmetech’s
aim through its OPTIGENE instrument is to improve the turnaround time of testing in this area
sufficiently to justify a shift in testingaway from thecentral laboratory to near point ofcare. An
easy to perform test whichcan providea result within 45 minutes, whilst the patient is stillat the
hospital or clinic presents a significant opportunity tocontrol the spread of diseaseboth in the
hospitaland in the general population. Theseattributes arealso expected tobe useful for the
effective diagnosis for emergingcontagious diseases suchas BirdFlu. 
Osmetech’s genetic diagnostics strategy
Strategically, the progression into genetic diagnostics was a logical move for Osmetech, with strong
growthanticipated from the small to medium sized hospital market - our corecustomer base. We
hadbeen evaluatinga number of potential tests and technologies tocombine with our ownFDA
approvedbacterial vaginosis test withina devicecapable of diagnosingand differentiatingbetween
the most prevalent andclinically important vaginal infections.During this process we reviewedand
assessed thecollaborative work that LGCLimited (“LGC”)andMS hadbeen performing includinga
successful study ofclinical samples at theRoyalFreeHospitalinLondon to evaluate theLGC
HyBeaconChlamydia detectionassay run on the prototypeOPTIGENE instrument. We now intend
to developand market theOPTIGENE deviceas a priority toaddress the most critical
requirements of the vaginal infectionand sexually transmitted diseases market.
Webelieve that theOPTTIGENEand eSensor™ products have theattributes necessary to meet
the requirements of the hospital market. For new genetic tests that emerge from the expansion of
theHumanGenomeProject that only require theanalysis ofa limitedamount of genetic
information, the rapidOPTIGENE product is well suited. The eSensor™ device is designed for
morecomplex tests. 
Both of these products facilitateaccurate testing inacost effective, easy to use format andare
well protectedby strongIP positions. Unlike much of thecompetition,both products combine
bothan instrument platformand proprietary assay-specificconsumables.
Acquisition of Molecular Sensing plc
Theall share offer for Molecular Sensing plc was completed on 12 October 2004. The offer of 47
Osmetech shares for every 2 MS shares resulted ina total of 83,992,581 new Osmetech shares
being issued. Withanaverage mid-market price of 3.245 pence per share this valuedMSat
approximately £2.7m. At the date ofacquisition, the fair valueof the net assets ofMS was £1.8m,
includingcash of £1.9m.
OPTI’s self contained optical sensor cassette for
blood gas, electrolyte and metabolite analysis
Over 1.3 millionconsumable tests sold in 2004/5
representing 63% of totalOPTI sales anda highly
reliable source of revenue. 6 OsmetechAnnualReport 2005
Chief Executive Officer’s review
continued
OPTI GENE
OPTIGENE is a rapidand easy to use device for DNAandRNAanalysis for relatively simple tests
that require limited genetic information suchas thrombophiliaand infectious diseases including
sexually transmitted diseases.
We have signedan exclusiveagreement withLGC to license its HyBeacons DNA probe
technology for genetic testingapplications inall world markets, excludingIndia. Assays utilising
this technology arebeing developedat our facility inBoston,US. 
The development programme for thecompletion of theOPTIGENE instrument has been fully
integrated intoOsmetech’s operations. We plan to exhibit the product at theMedica (Europe)and
AMP (US) trade shows inNovember this year, with product sales likely tocommence in the first half
of 2006.
OPTIGENEalso has significant potential in other markets suchas veterinary, forensics and
research. We would seek to exploit these opportunities through strategic partnerships as we have
achieved through the existingIDEXX relationship.
We havealso signeda license withRocheDiagnostics for our proprietary plastic tube technology.
The worldwide non-exclusive license will enableRoche to manufactureand sell plasticconsumable
vials for use on its large installedbase ofLightCycler instruments as a morecost-effective
alternative to existing glass vials, whilst maintaining performance levels. The same technology has
been incorporated intoconsumables tobe supplied for use withOsmetech’s OPTIGENE
instrument.
Acquisition of Clinical Micro Sensors, Inc.
CMS was acquiredcashand debt free on 26 July 2005 for aconsideration satisfiedby an issue of
warrants that entitleMotorola to subscribe for 78,114,287 ordinary shares at 1.75 pence per share.
Under the terms of theacquisition,Motorola havealso subscribed for 212,470,862 ordinary shares
inOsmetech equating toan investment of £3.7m.
CMS
CMS was founded in 1994as a spin off fromTheCaliforniaInstitute of Technology (“Caltech”)and
was acquiredby Motorola inJune 2000 for aconsideration of $280m. Thebusiness is based in
Pasadena,California,USand employs approximately 60 people.
Motorola has disposed of its non-core medicalbusinesses includingCMS. Osmetech identified
this business as having excellent core technology with strong intellectual property protectedby
international patents, which hadbenefited from significant investment by Motorola during its
period of ownership.
Thecore technology ofCMS is electro-chemical detection for DNAanalysis. CMS has been
developinga low cost instrument andconsumable for moderately complex genetic testing where
the detection of multiple gene targets is required. TheCMS eSensor™ instrument is a platform
that allows a number of tests tobe performed through the use ofacommonconsumable
configured for a specific test. Webelieve that both the instrument andconsumable have
significant cost advantages over competitor products.
CMS has developeda test for cystic fibrosis carrier screening where the presence of 25 genes is
analysed froma single sample. Clinical trials havebeenconductedat two hospitals and one
reference laboratory in theUS to support a 510k submission to theFDA. Oneclinical laboratory, OsmetechAnnualReport 2005 7
Chief Executive Officer’s review
continued
OregonHealthandScienceUniversity, recently presenteda research poster, ‘BiochipBasedCystic
Fibrosis Carrier Screening’ that discusses theclinical methodsand results using theCMS
eSensor™ DNA detection system. The paper notes that theCMS system producedaccurateand
timely results, was easy to use with straightforward sample preparation. It concluded that this
biochip system wouldbe useful for moderate volume testing. The paper is available on our
website: www.osmetech.com. 
We plan to exhibit theCMS eSensor™ cystic fibrosis product at theMedica (Europe)andAMP (US)
trade shows inNovember this year, with product sales anticipated tocommence in the first half of
2006.
CMS’s second product launch is likely tobe for CYP450,anarea that we expect to grow rapidly
intoa significant market. This product is anticipated for launch towards the end of 2006.
Fund raising
At the same timeas theacquisition ofCMS inJuly 2005,a placing of 628.6m ordinary shares raised
£11.0m gross (£10.2m net of expenses)at a price of 1.75 pence per share. Following the
completion of the placing thereare 1,318,049,730 ordinary shares in issue. The placing was largely
with new investors, includingMotorola who subscribed for £3.7m. This will provide funds for the
enlargedGroup’s workingcapital requirements, particularly that which relates to the new CMS
business. 
Webelieve that net proceeds of the funding willbe sufficient for thecompletion of development
and the launch ofboth theOPTIGENEandCMScystic fibrosis products. However, it is likely that
Osmetech will require further funding in the future,but we expect tobeable toachieve this froma
position of strengthas webuild value within theGroup.
Financial review
Sales revenues totalled $10,863,000 (£5,833,000) which representeda 4% increase over the
previous year onaconstant currency basis: $10,453,000 (£6,180,000). The 6% reduction in sales
reported in sterling reflects the relative weakness of theUS dollar during the period. 
OPTI sales accounted for 98% of total revenues andas has already explained this business
experienced underlying growth in excess of 10%. In product terms, the highly reliable repeat
reagent sales accounted for 63% of total revenues.
As expected, gross profit margins reduced to 41.5% from theabnormally high levels achieved in
the previous year following the successful utilisation of slow moving inventory acquiredas part of
the purchase of theOPTIbusiness. A high proportion ofOPTI’s cost of sales represents fixed
manufacturingcosts, the recovery of which will improve throughadditional production volumes
fromIDEXXand new product introductions. With minimal sales and marketingcosts through the
use of distributors for internationaland veterinary market sales, we expect tobeable to improve
the profitability of thebusiness as revenues continue to grow.
Operating losses before exceptional items of £827,000 (2004 – £nil) increased to £2,152,000 (2004 –
£1,418,000) largely as a result of the reduction in gross margins explainedabove. Other (non-
exceptional) overheads of £4,574,000 (2004 – £4,864,000) representeda reduction of 6%compared
to the prior year. Although much of this reduction was explainedby currency movements, this year
includes overheads relating to theMS/OPTIGENEbusiness since its acquisition on 12 October
2004, together withcosts associated with the due diligence process for theCMSacquisition. 8 OsmetechAnnualReport 2005
Chief Executive Officer’s review
continued
We have recognised exceptionalcosts this year of £827,000,although only £67,000 represents
‘cash items’ and relates to the integration of theMSacquisition. Non-cash items comprise the
write down of thecarrying value ofcertain tangibleand intangibleassets, including £681,658
relating to electronic gas odour sensor technology following theGroup’s change in strategy to
focus its development resources primarily on genetic diagnostics.
Cash outflows before financingamounted to £1,227,000 (2004 – £2,104,000)although this included
£1,691,000 net cashacquired from theacquisition ofMS. Adjusting for this, the gross outflow of
£2,918,000 was broadly similar to the reported loss for the year. The £760,000 non-cash elements of
the exceptionalcosts were offset by a largely temporary increase of £553,000 in trade debtors due
to the strong sales performance towards the end of the trading period.
In order tobring our reporting periodand naturalbusiness cycle in line with that of our
commercial partners, we intend tochange our accounting period toaDecember year end. We will
therefore report for an 8 month period ending 31December 2005.
Outlook
Lookingahead for OPTI, we expect continued strong growth through theIDEXX trading
relationshipandan increasedcontribution from the launch later this year of theOPTILIONand
OPTIR instruments.
We havea high quality operational infrastructurecapable of supporting thecontinued growth of
thebusiness and have the skills, experienceand knowledge of the market to exploit the significant
opportunities that lieahead, particularly in the field of genetic diagnostics. Within the genetic
diagnostics sector, the small to medium sized hospitalbusiness is expected to grow most rapidly:
this is Osmetech’s existingcore internationalcustomer base.
Webelieve that the recent acquisitions ofMSandCMS will provideOsmetech witha strong
commercial presence in the fastest growing sector of the globaldiagnostics market. TheOPTIGENE
and theCMS eSensor™ products areboth near to market,complementary andcompriseboth
instrument andconsumable. As an installedbase of instruments is established we havean excellent
opportunity to expand sales revenues by increasing the testingcapability through offering new tests
andbenefiting from the relatively high margins that this sector is anticipated to yield.
Osmetech is well placed tocontinue to make significant progress with its strategy to developa
medical devices and diagnostics business in the fast growing near patient testing market
principally serving small to medium sized hospitals. Our product portfoliocontinues to strengthen,
combining the reliable, high quality revenues fromOPTI with exciting growth opportunities in the
field of genetic testing. We havea provencommercial infrastructure with existing distributionand
customer base together withcommercial partnerships with three leading worldcompanies:Roche,
Sysmex andIDEXX. We look forward to the future withconfidenceand the prospects ofbuilding
significant value for shareholders.
James White
ChiefExecutiveOfficer 
1September 2005 OsmetechAnnualReport 2005 9
Board of directors
for the year ended 30 April 2005
Gordon James Hall
Non-ExecutiveChairman
GordonHall,aged 62, was ManagingDirector ofShieldDiagnosticGroup plc (now Axis-Shield plc) untilOctober 1997 and prior to
this held senior positions at Abbott Laboratories. He was appointed to theBoardas executiveChairman on 24September 1998,
becoming non-executiveChairman on 1February 2001.
James Nicholas Gerald White
ChiefExecutiveOfficer
James White,aged 34, was previously a senior consultant inArthur DLittleLimited’s corporate finance practice, where he
specialised inadvising venturecapitalists on investments in smalland medium sizedcompanies. He was Operations Manager of
Osmetech fromSeptember 1998 untilappointed to theBoardas ChiefOperatingOfficer on 1October 1999. He was appointed
ChiefExecutiveOfficer on 22 December 2000.
David Anthony Sandilands
ChiefFinancialOfficer
DavidSandilands,aged 44, was GroupFinancialDirector at Bluebird Toys plc, until its take-over by MattelInc. of theUSA. Mr
Sandilands qualifiedas aCharteredAccountant withPrice Waterhouseand was appointed to theBoardas ChiefFinancialOfficer
on 1July 1999.
Gordon Bruce Kuenster
Non-Executive
GordonKuenster,aged 71, has foundedand developed major medical diagnosticcompanies. He was appointedGroupVice
President anda director ofSquibbCorporation, following its acquisition ofAdvance Technology Laboratories Inc. He is Chairman
ofUMD Technology Inc,an integratedcircuit testingcompany. He was appointed to theBoard on 3 February 1998as Director of
Development and was appointedChief Technology Officer on 1October 1999,becominga non-executive director on
3 September 2002.
Alfred Marek
Executive
AlfredMarek,aged 60, is President ofOsmetech’s CriticalCareDivisionbased inAtlanta, having joined theCompany at the time
of theOPTIacquisition inApril 2003. He was previously with AVLand was instrumental in developing their entireblood gas
business prior to its sale toRoche in 2000. Mr Marek was appointed to theBoard on 21April 2004. 10 OsmetechAnnualReport 2005
Report of the directors
for the year ended 30 April 2005
The directors submit their report together with theaudited financial statements for the year ended 30 April 2005.
Results and dividends
The results of theGroup for the year are set out on page 16.
The directors do not recommend the payment ofa dividend (2004 – £nil)
Principal activities, trading review and future developments
The principalactivity of theGroup is the design, development,manufactureand sale of healthcare diagnostics and medical
devices incorporating sensing technology.
The principalactivities of the subsidiaries,Molecular Sensing plc,Molecular Sensors LimitedandOsmetechIncare the sameas
Osmetech plc. Osmetech Technology Inc, is a holdingCompany. OsmetechGmbH is a sales operationand has exclusive rights to
distributeOsmetech products inGermany. The principalactivity of the sixth subsidiary,OsmetechAESOP TrusteeLimited, is toact
as a trustee toan employee share ownership trust.
A review of the tradingand future developments are dealt with fully in theaccompanyingChairman’s statement.
Charitable and political contributions
TheGroup did not makeany charitable or politicalcontributions during the year (2004 – £nil).
Directors
The directors of theCompany at 30 April 2005and their interests, which wereall heldbeneficially, in the ordinary sharecapital of
theCompany at thebalance sheet date were:
Ordinary shares of 1p each Ordinary shares of 1p each
30 April 2005 30 April 2004
Shares Options Shares Options
GJHall 763,946 1,000,000 763,946 1,000,000
JNGWhite 1,509,500 25,120,000 1,509,500 25,120,000
DASandilands 330,263 12,500,000 330,263 12,500,000
AMarek 261,900 10,000,000 261,900 10,000,000
GBKuenster 330,5403,350,000 330,5403,350,000
On 26 July 2005 the following directors acquired the following ordinary shares of 0.01p pursuant to the placing of new ordinary
shares by Evolutions Securities Limitedat 1.75p per share:
Ordinary Shares of Ordinary Shares of
0.01p each 0.01p each heldafter
acquired thePlacing
GJHall 285,714 1,049,660
JNGWhite571,428 2,080,928
DASandilands285,714 615,977
Note:Theabove table does not include the deferred shares, whichare effectively useless.
Inaccordance with theArticles ofAssociation,Mr DASandilands will retireby rotationand,being eligible, offers himself for
re-election. Mr Sandilands does not havea serviceagreement with theCompany. Mr Sandilands’ appointment is terminableby at
least 12 month’s notice. Mr GBKuenster, havingattained theage of 71 years, offers himself for re-election. Mr Kuenster does not
havea serviceagreement with theCompany and his appointment is terminableby at least 12 month’s notice. OsmetechAnnualReport 2005 11
Report of the directors
continued
Directors’ interests in contracts
No director was, or is, materially interested inany contract subsisting during, or at the end of the financial year which was
significant in relation to thebusiness of theGroup.
Substantial shareholdings
Inaddition to the directors’ shareholdings shownabove, the directors havebeen notified or areaware of the following interests in
3 per cent. or more of the issued ordinary sharecapital of theCompany as at 22 August 2005:
Shareholder Number ofShares Per cent
MotorolaInc 212,470,862 16.12
GartmoreInvestment Management plc 167,827,798 12.73
Schroder Investment Management Limited 161,242,856 12.23
PershingKeenNominees LimitedPSL981Account 59,662,866 4.53
BarclayshareNominees Limited 54,293,2314.12
TD WaterhouseNominees (Europe)LimitedSMKTNOMSAccount 53,807,266 4.08
Compliance
As anAIM listedcompany, theCombinedCode is not mandatory and theCompany has therefore not produceda separate
CorporateGovernance or Directors’ RemunerationReport.
Going Concern
Having reviewed theGroup’s budgets and financial projections andafter making dueandcareful enquiries, theDirectors havea
reasonable expectation that theGroup has adequate resources tocontinue in operational existence for the foreseeable future.
Theaccounts, therefore,are prepared ona goingconcernbasis.
Directors’ responsibilities
UnitedKingdomcompany law requires the directors to prepare financial statements for each financial year which givea trueand
fair view of the state ofaffairs of theCompany and theGroupas at the end of the financial year and of the profit or loss of the
Group for that period. In preparing those financial statements, the directors are required to:
• select suitableaccounting policies and thenapply themconsistently;
• make judgements and estimates that are reasonableand prudent and;
• state whether applicableaccounting standards havebeen followed;
The directors are responsible for keeping proper accounting records which disclose with reasonableaccuracy at any time the
financial position of theCompany andGroupand to enable them to ensure that the financial statements comply with the
Companies Act 1985. They arealso responsible for the system of internalcontrol, for safeguarding theassets of theCompany and
hence for taking reasonable steps for the preventionand detection of fraudand other irregularities.
The maintenanceand integrity of the web site is the responsibility of the directors; the workcarried out by theauditors does not
involveconsideration of these matters and,accordingly, theauditors accept no responsibility for any changes that have occurred
to the informationcontained in the financial statements since they were initially presented on the web site.
Legislation in theUnitedKingdom governing the preparationand dissemination of the financial statements and other information
included in theannual reports may differ from legislation in other jurisdictions. 12 OsmetechAnnualReport 2005
Report of the directors
continued
Supplier Payment Policy
TheCompany has due regard to the payment terms of suppliers and settles all undisputedaccounts inaccordance with the
payment terms agreed with the supplier for eachbusiness transaction. TheCompany had 10 days (2004 – 48 days) of purchases
outstandingat the end of the financial year.
Post balance sheet event
On 26 July 2005, theCompany acquired 100% of the sharecapitalofClinicalMicroSensors Inc.,a 100% subsidiary
ofMotorolaInc. Refer to note 26 for further information.
CREST
TheCompany’s ordinary shares are eligible for settlement throughCREST, the system for securities tobe heldand transferred in
electronic form rather than in paper. Shareholders are not obliged to useCRESTandcancontinue to holdand transfer shares in
paper without loss of rights.
Independent Auditors
A resolution to reappoint Deloitte& ToucheLLPas theCompany’s auditor willbe proposedat theAnnualGeneralMeeting.
Electronic Communications
TheCompany may deliver shareholder information includingAnnualandInterimReports,Forms ofProxy andNotices ofGeneral
Meetings inan electronic format to shareholders.
If you would like to receive shareholder information in electronic format, please register your request on theCompany’s Registrar’s
electronic databaseat www.capitaregistrars.com. You will initially need your unique “investor code”, which you will findat the top
of your sharecertificate. There is nocharge for this service.If you wish to subsequently change your mind, you may do soby
contacting theCompany’s Registrars by post or through their web site.
If you elect to receive shareholder information electronically,please note that it is the shareholder’s responsibility to notify the
Company ofany change to their name,address, e-mailaddress or other contact details. Shareholders shouldalso note that, with
electroniccommunication, theCompany’s obligations willbe satisfied when it transmits the notification ofavailability of
information or such other document as may be involved to the electronicaddress it has on file. TheCompany cannot be held
responsible for any failure in transmissionbeyond its controlany more than it can for postal failure. In the event of theCompany
becomingaware that an electronic notification is not successfully transmitted,a further twoattempts willbe made. In the event
that the transmission is still unsuccessfula hardcopy of the notification willbe mailed to the shareholder. In the event that specific
software is required toaccess information placed on theCompany’s website it willbeavailable via the website without charge.
Before electing for electroniccommunications shareholders should ensure that they have theappropriate equipment and
computer capabilities sufficient for the purpose. TheCompany takes all reasonable precautions to ensure no viruses are present in
any communication it sends out but cannot accept responsibility for loss or damagearising from the opening or use ofany e-mail
or attachments from theCompany and recommends that shareholders subject all messages to virus checking procedures prior to
use. Any electroniccommunication receivedby theCompany that is found tocontainany virus will not beaccepted.
Shareholders wishing to receive shareholder information in theconventional printed form willcontinue to do soand need take no
further action.
Should you haveany further questions on this pleasecontact theCompany’s Registrars,CapitaRegistrars on 0870 162 3131. OsmetechAnnualReport 2005 13
Report of the directors
continued
Annual General Meeting – Explanation of Special Business
Share Consolidation, Renewal of Authority to Allot Shares, Disapplication of Pre-emption rights and amendment to Articles
of Association (Resolutions 5, 6, 7 and 8)
Resolution 5
At theAnnualGeneralMeeting,a resolution willbe proposed toconsolidate every 10 ordinary shares of 0.01p each into
1 ordinary share of 0.10p each (the “Consolidation”). Following theConsolidation, eachShareholder will holdapproximately the
same proportion of the issued ordinary sharecapital of theCompany as it did prior to theConsolidation. Each ordinary share of
0.10p each (“New Ordinary Shares”) willcarry the same rights (including voting, dividend rights and rights ona return ofcapital)as
each existing ordinary share of 0.01p each (“ExistingShares”).
Shareholders will not receive fractions arising on theconsolidation of their ExistingShares. Accordingly,Shareholders witha total
holding ofExistingShares in excess of 10,but which is not exactly divisibleby 10, will have their entitlements rounded down to the
nearest whole number ofNew Ordinary Shares andShareholders with less than 10 ExistingShares will not be entitled toany New
Ordinary Shares. Fractional entitlements toNew Ordinary Shareswillbeaggregatedand sold in the market with the proceeds of
salebeing retainedby theCompany.
Subject toResolution 5being passedat theAnnualGeneralMeeting, theConsolidation willbe effectedby reference to
Shareholders and their holdings ofExistingShares on the register as at theclose ofbusiness on 30 September 2005;
•Dealings inExisting shares willcease on 30 September 2005and dealings inNew Ordinary Shares willcommence on
3 October 2005;
• Settlements effected on or after 30 September 2005 ofbargains madebefore that date willbe inNew Ordinary Shares;
• For Shareholders holding their ExistingShares incertificated form, new sharecertificates willbe despatched (at the risk of
theaddressee) in respect ofNew Ordinary Shares by no later than 10 October 2005;
• For Shareholders holding their ExistingShares in uncertificated form, the relevant CRESTaccounts willbecredited with the
New Ordinary Shares on 3 October 2005, in place of their ExistingShares.
TheDirectors believe that the increased share price will give theGroup greater credibility in its core markets wherea higher share
price may be perceived to signify a more substantialcompany.
Under the terms of theShareOptionSchemes, in the event ofa variation in the sharecapital of theCompany, theBoard may
adjust the exercise priceand/or the number of shares subject toan option. Outstanding options under theShareOptionSchemes
willbeadjusted inaccordance with their terms and participants willbe notified separately of theadjustments.
Resolution 6
TheDirectors may only allot shares or grant rights over shares ifauthorised to do soby shareholders. The generalauthority
grantedat theannual general meeting held on 23 September 2004is due to expireat theannual general meeting in 2005.
Accordingly,Resolution 6 willbe proposedas an ordinary resolution to grant a new authority toallot unissued sharecapital up to
anaggregate nominal value of £43,935 representingapproximately one third of the total issued ordinary sharecapitalas at
1September 2005. If given, this authority will expireat the earlier of (A) 31 0ctober 2006 and (B) theconclusion of the next annual
general meeting of theCompany tobe held in 2006. Other than in respect of theCompany’s obligations under its employee share
schemes theDirectors have no present intention of utilising theauthority set out in this resolution to issueany of theauthorised
but unissued sharecapital of theCompany. This authority, if granted, willbe inaddition toany other likeauthority to the extent
not utilisedat the timeand date it is granted. 14 OsmetechAnnualReport 2005
Report of the directors
continued
Resolution 7
TheDirectors also requireadditionalauthority from shareholders toallot shares or grant rights over shares where they propose to
do so for cashand otherwise than to existing shareholders pro rata to their holdings. The generalauthority grantedat theannual
general meeting held on 23 September 2004 is due to expireat theannual general meeting in 2005. Accordingly,Resolution 7 will
be proposedas a special resolution to grant suchauthority. Ifgiven, this authority will expireat the earlier of (A) 31 0ctober 2006
and (B) theconclusion of the next annual general meeting of theCompany tobe held in 2006. Apart from rights issues, open
offers and other pre-emptive issues, theauthority willbe limited to the issue of shares up toanaggregate nominal value of
£13,180 being 10 per cent. of the issued ordinary sharecapitalat 1September 2005. This authority does not accord withIPC
guidelines,but the directors regard theauthority as desirable to maximise the options open to theCompany in thecoming year.
Resolution 8
TheCompanies Act 1985 (“Act”) requires any director ofa publiccompany to retire from office uponattaining theage of 70,
unless theArticles ofAssociation of theCompany dissaply the relevant section of theAct. GordonKuenster (who is 71), would
thereforebe required to stand down from theBoard unless theCompany’s Articles permit him to stay in office. TheBoard wishes
GordonKuenster tocontinue in office,and since theArticles do not currently dissaply section 293 of theAct, it is proposed to put
a resolution to theAnnualGeneralMeeting tochange theCompany’s Articles ofAssociation so that Directors may stay in office
beyond theage of 70.
By order of theBoard
S A Craig
Secretary
1September 2005 Independent auditors’ report
OsmetechAnnualReport 2005 15
Independent auditors report to the members of Osmetech plc
Wehaveaudited the financial statements ofOsmetech plc for the year ended 30 April 2005, whichcomprise theconsolidated
profit and loss account, theconsolidated statement of total recognised gains and losses, thebalance sheets, theconsolidated
cash flow statement, the reconciliation of net cash flow to movement in net funds, notes to theconsolidatedcash flow statement
and the related notes 1 to 26. The financial statements havebeen prepared under theaccounting policies set out therein.
This report is made solely to theCompany’s members,as abody,inaccordance with section 235 of theCompanies Act 1985. Our
audit work has been undertaken so that we might state to theCompany’s members those matters weare required to state to them
inanauditors’ report and for no other purpose. To the fullest extent permittedby law, we do not accept or assume responsibility
toanyone other than theCompany and theCompany’s members as abody, for our audit work, for this report, or for the opinions
we have formed.
Respective responsibilities of directors and auditors
As described in the statement of directors’ responsibilities, theCompany’s directors are responsible for the preparation of the
financial statements inaccordance withapplicableUnitedKingdom law andaccounting standards. Our responsibility is toauditthe
financial statements inaccordance with relevant UnitedKingdom legaland regulatory requirements andauditing standards.
We report to you our opinionas to whether the financial statements givea trueand fair view andare properly prepared in
accordance with theCompanies Act 1985. Wealso report if, in our opinion, theDirectors’ Report is not consistent with the financial
statements, if theCompany has not kept proper accounting records, if we have not receivedall the informationand explanations
we require for our audit, or if information specifiedby law regarding directors’ remunerationand transactions with theCompany
and other members of theGroup is not disclosed.
We read theDirectors’ Report and the other informationcontained in theAnnualReport for theabove year as set out in the
contents sectionandconsider the implications for our report if webecomeaware ofany apparent misstatements or material
inconsistencies with the financial statements.
Basis of audit opinion
Weconducted our audit inaccordance withUnitedKingdomauditing standards issuedby theAuditingPractices Board. Anaudit
includes examination, ona test basis, of evidence relevant to theamounts and disclosures in the financial statements. It also
includes anassessment of the significant estimates and judgements madeby the directors in the preparation of the financial
statements,and of whether theaccounting policies areappropriate to thecircumstances of theCompany andGroup,consistently
appliedandadequately disclosed.
Weplannedand performed our audit soas to obtainall the informationand explanations which weconsidered necessary in order
to provide us with sufficient evidence to give reasonableassurance that the financial statements are free from material
misstatement, whether causedby fraud or other irregularity or error. In forming our opinion wealso evaluated the overall
presentation of information in the financial statements.
Opinion
In our opinion the financial statements givea trueand fair view of the state ofaffairs of theCompany and theGroupas at 30 April 2005
and of the loss of theGroup for the year then endedand havebeen properly prepared inaccordance with theCompanies Act 1985 .
Deloitte & Touche LLP
CharteredAccountants andRegisteredAuditors
Manchester
1September 2005 16 OsmetechAnnualReport 2005
Consolidated profit and loss account
for the year ended 30 April 2005
Year ended Year ended
30.04.05 30.04.04
Note £ £
Turnover 2 5,832,870 6,180,028
Cost of sales (3,410,903) (2,733,651)
Gross profit2,421,967 3,446,377
Exceptionaladministrative expenses 5 (827,184) –
Other administrative expenses (4,574,179) (4,864,443)
Total administrative expenses (5,401,363) (4,864,443)
Operating loss 4 (2,979,396) (1,418,066)
Net finance income 8 113,631 102,148
Loss on ordinary activities before taxation (2,865,765) (1,315,918)
Taxation 9 146,672 147,804
Loss for the year transferred from reserves 20 (2,719,093) (1,168,114)
BasicandDilutedLoss per share11 (0.42p) (0.21p)
Allactivities arose fromcontinuing operations.
Consolidated statement of total recognised gains and losses
for the year ended 30 April 2005
Year ended Year ended
30.04.05 30.04.04
£ £
Loss for the financial year (2,719,093) (1,168,114)
Currency translation difference on foreigncurrency net investments (198,750) (241,703)
Total recognised losses relating to the year (2,917,843) (1,409,817) OsmetechAnnualReport 2005 17
Consolidated balance sheet 
at 30 April 2005
At 30.04.05 At 30.04.04
Note ££ ££
Fixed assets
Intangibleassets 12 1,396,113 1,021,933
Tangibleassets 13 673,825 476,513
2,069,938 1,498,446
Current assets
Stocks 15 1,143,977 967,278
Debtors 16 2,193,160 1,464,345
Investments 17 1,000,000 2,700,000
Cashat bankand in hand 883,712 472,317
5,220,849 5,603,940
Creditors: amounts falling due within one year 18 (1,379,412) (940,483)
Net current assets 3,841,437 4,663,457
Net assets 5,911,375 6,161,903
Capital and reserves
Called up sharecapital19 6,894,783 6,044,304
Share premiumaccount 19 29,425,051 29,493,748
Merger reserve19 1,885,533 –
Profit and loss account20 (32,293,992) (29,376,149)
Equity shareholders’ funds 21 5,911,375 6,161,903
These financial statements wereapprovedby theBoard ofDirectors on 1September 2005
Signed onbehalf of theBoard ofDirectors
D A Sandilands Director 18 OsmetechAnnualReport 2005
Company balance sheet
at 30 April 2005
At 30.04.05 At 30.04.04
Note ££ ££
Fixed assets
Intangibleassets 12 15,706 680,419
Tangibleassets 13 9,862 3,093
Investments 14 6,229,150 3,006,672
6,254,718 3,690,184
Current assets
Debtors 16 623,865 471,547
Investments 17 1,000,000 2,700,000
Cashat bankand in hand 697,456 429,886
2,321,321 3,601,433
Creditors: amounts falling due within one year 18 (354,404) (324,995)
Net current assets 1,966,917 3,276,438
Net assets 8,221,635 6,966,622
Capital and reserves
Called up sharecapital19 6,894,783 6,044,304
Share premiumaccount 19 29,425,051 29,493,748
Merger reserve19 1,885,533 –
Profit and loss account20 (29,983,732) (28,571,430)
Equity shareholders’ funds 21 8,221,635 6,966,622
These financial statements wereapprovedby theBoard ofDirectors on 1September 2005
Signed onbehalf of theBoard ofDirectors
D A Sandilands Director OsmetechAnnualReport 2005 19
Consolidated cash flow statement
for the year ended 30 April 2005
Year ended Year ended
30.04.05 30.04.04
Note £ £
Net cash outflow from operating activities (a) (2,748,191) (1,772,616)
Returns on investments and servicing of finance (c) 107,410 101,049
Taxation (c) 158,080 227,529
Capital expenditure and financial investment (c) (435,841) (238,303)
Acquisitions and disposals (b) 1,691,296 (421,762)
Cash outflow before management of liquid resources and financing (1,227,246) (2,104,103)
Management of liquid resources (c) 1,700,000 20,000
Financing (c) (58,144) 2,047,577
Increase/(decrease) in cash414,610 (36,526)
Reconciliation of net cash flow to movement in net funds
Year ended Year ended
30.04.05 30.04.04
£ £
Increase/(decrease) incash in the year 414,610 (36,526)
Decrease in liquid resources (1,700,000) (20,000)
Exchange differences (3,215) (9,990)
Change in net funds 1,288,605 (66,516)
Net funds at beginning of year3,172,317 3,238,833
Net funds at end of year 1,883,712 3,172,317 20 OsmetechAnnualReport 2005
Notes to the consolidated cash flow statement
(a) Reconciliation of operating loss to operating cash flows
Year ended Year ended
30.04.05 30.04.04
£ £
Operating loss (2,979,396) (1,418,066)
Depreciationandamortisation 278,996 157,831
Loss on disposal of fixedassets 17,025 –
Impairment of tangible fixedassets 29,045 –
Impairment of intangible fixedassets 731,007 –
Increase in stocks (276,933) (62,297)
Increase in debtors (808,799) (274,442)
Increase/(decrease) increditors 260,864 (175,642)
Net cash outflow from operatingactivities (2,748,191) (1,772,616)
(b) Acquisitions and disposals
On 12 October 2004, theGroupacquired the entire issued sharecapital ofMolecular Sensing plcand its subsidiaries for a total
consideration of £2,725,459, satisfied entirely by the issue of ordinary shares andcosts of £204,523.
Theacquisition has beenaccounted for using theacquisition method ofaccounting. After adjustments to the valuation ofassets
and liabilities to reflect their fair value, the fair value of theassets acquired is £1,779,044. Goodwill of £1,150,938 has therefore
arisenand inaccordance with theGroup’s accounting policy hasbeencapitalised within thebalance sheet. 
Fair valueadjustments and net assets acquired:
Fair value
Book value adjustments Total
£££
Intangibleassets 274,272 (218,217)56,055
Tangibleassets 46,265(5,328) 40,937
Debtors 28,074– 28,074
Cashand deposits 1,895,819 –1,895,819
Creditors andaccruals (236,450)(5,391) (241,841)
Net assets acquired 2,007,980 (228,936)1,779,044
Goodwill 1,150,938
2,929,982
Satisfiedby:
Issue ofShares2,725,459
Acquisitioncosts 204,523
2,929,982
Theadjustments made in respect of intangibleassets comprise the write off of goodwillacquired of £154,000 and the write off of
patents of £64,217 which wereconsidered to have no value to thebusiness at the date ofacquisition. OsmetechAnnualReport 2005 21
Notes to the consolidated cash flow statement
continued
(b) Acquisitions and disposals continued
Net cash inflow in respect of theacquisitioncomprised:
£
Cashat bankand in handacquired 1,895,819
Acquisitioncosts (204,523)
Net cash inflow 1,691,296
Molecular Sensing plc earneda loss after taxation of £608,985 in the period from 1January 2004 to 12 October 2004. The
summarised profit and loss account for the period from 1January 2004 to 12 October 2004 shown on thebasis of theaccounting
policies ofMolecular Sensing plc prior to theacquisition, wasas follows:
£
Turnover and gross profit –
Other operating expenses (685,854)
Operating loss (685,854)
Finance income (net) 66,051
Loss on ordinary activities before taxation (619,803)
Tax on loss on ordinary activities 10,818
Loss for the financial period (608,985)
Post acquisition, the operations ofMolecular Sensing plc were integrated with the existingOPTIbusiness and therefore it has not
been possible to determine the impact on the profit and loss account post acquisition. Notes to the consolidated cash flow statement
continued
22 OsmetechAnnualReport 2005
(c) Analysis of cash flows 
Year ended Year ended
30.04.05 30.04.04
£ £
(i) Gross cash flows
Returns on investments and servicing of finance
Interest received 107,587 101,146
Interest paid (177) (97)
(107,410) 101,049
Taxation
ResearchandDevelopment tax credit 158,080 227,529
Capital expenditure and financial investment
Payments toacquire intangible fixedassets (16,535) (14,754)
Payments toacquire tangible fixedassets (419,306) (223,549)
(435,841) (238,303)
Management of liquid resources
Transfer from TermDeposits 1,700,000 20,000
Financing
Shares issued 23,620 2,147,577
Share issue expenses (81,764) (100,000))
(58,144) 2,047,577
(ii) Analysis of changes in net funds
At Cash Exchange At
30.04.04flows differences 30.04.05
£££ £
Cashat bankand in hand 472,317 414,610 (3,215) 883,712
Current asset investments 2,700,000 (1,700,000)– 1,000,000
Net Funds3,172,317 (1,285,390)(3,215) 1,883,712
(d) Major non-cash transactions
Theconsideration for theacquisition ofMolecular Sensing plccomprised entirely of the issue of shares. The fair value of shares
issued was £2,725,459. OsmetechAnnualReport 2005 23
Notes forming part of the financial statements
for the year ended 30 April 2005
1 Accounting policies
The financial statements havebeen prepared under the historicalcost conventionandare inaccordance withapplicableUnited
Kingdomaccounting standards. TheCompany has takenadvantage of the exemptionconferredby section 230 of theCompanies
Act 1985 from presenting its own profit and loss account. The followingaccounting policies, which have not changed in the year,
havebeenapplied.
Basis ofconsolidation
Theconsolidatedaccounts incorporate the financial statements ofOsmetech plcandall of its subsidiary undertakings made up to
30 April 2005. TheCompany uses theacquisition method ofaccounting toconsolidate the results of its subsidiary undertakings.
The results of subsidiary undertakings are included from the date ofacquisition.
Investments
Investments heldas fixedassets are statedat cost less provision for impairment.
Acquisitions and disposals
Onacquisition ofabusiness, includingan interest inanassociated undertaking, fair values areattributed to theGroup’s share of
net separableassets under theacquisition method inFRS6 'Acquisitions andMergers’. Where thecost of theacquisition exceeds
the fair values attributable to suchassets, the difference is treatedas purchased goodwillandcapitalised in thebalance sheet in
the year ofacquisition. The results andcash flow relating toabusiness are included in theconsolidated profit and loss account
and theconsolidatedcash flow statement from the date ofacquisition.
Turnover
Turnover represents sales of goods and services to third parties as wellas income received from licenceand development
agreements. Income from theseagreements is typically in the form of fees on signature, milestone payments on theachievement
of pre-determined events and royalties on the sale of the product once marketed. Turnover is stated exclusive of valueadded tax
and other sales related taxes.
Turnover is recognised when licence rights are granted to the extent that theGroup has performed its contractual obligations,
based on the fair value of the right toconsideration for eachcomponent of theagreement. Unearnedamounts arecarried forward
as deferred income.
Tangible fixedassets
Tangible fixedassets are statedat cost, net of depreciationandany provision for impairment.
Depreciation
Depreciation is provided to write off thecost, less estimated residual values, ofall tangible fixedassets over expected useful
lives. It is calculatedat the following rates:
Short leasehold improvements –over the life of lease
Plant, machinery and motor vehicles –10-35% per annum oncost
Office equipment – 25-50% per annum oncost
Taxation
Current tax, includingUKcorporation tax, researchand development tax credits and foreign tax, is providedat amounts expected
tobe paid or recovered using the tax rates enacted or substantively enactedby thebalance sheet date. 24 OsmetechAnnualReport 2005
Notes forming part of the financial statements
continued
1 Accounting policies continued
Deferred taxation
Deferred tax is provided in full on timing differences which result inan obligationat thebalance sheet date to pay more tax, or a
right to pay less tax at a future date,at rates expected toapply when they crystallisebased oncurrent tax rates and law. Timing
differences arise from the inclusion of items of incomeand expenditure in taxationcomputations in periods different from those in
which they are included in the financial statements. Deferred tax assets are recognised to the extent that it is regardedas more
likely than not that they willbe recovered. Deferred tax assets and liabilities are not discounted.
Financecosts
Financecosts associated with the issue of debt are deducted from the proceeds of the issueandcharged to profit over the
term of the debt so that theamount charged is at aconstant rate on thecarryingamount.
Financial instruments
In relation to the disclosures made in note 25:
• Short term debtors andcreditors are not treatedas financialassets or financial liabilities.
• TheGroup does not hold or issue derivative financial instruments for trading purposes.
• Forward exchangecontracts are used to fix the value of the relatedasset or liability in thecontract currency andat the
contract rateandany gains or losses on these instruments are offset. Where the instrument is used to hedgeacommitted or
probable future transaction, gains and losses are deferred until the transaction occurs.
Foreigncurrency
Profit and loss accounts of foreign subsidiary undertakings are translated into sterlingat theaverage rate. Assets and liabilities of
the foreign subsidiary undertakings are translated into sterlingat the rates of exchange ruling on thebalance sheet date.
Exchange differences whicharise from translation of the net investment in foreign subsidiary undertakings and the translation of
the profit and loss betweenclosing rateandaverage rateare taken to reserves.
All other differences are taken to the profit and loss account with the exception of differences on foreigncurrency borrowings,
which, to the extent that they are used to finance or providea hedgeagainst foreign equity investments,are taken directly to
reserves to the extent of the exchange differences arising on the net investment in those enterprises.
Intellectual property rights
Patent costs arecapitalisedand written off ona straight linebasis over the shorter of the life of the patent or its useful
economic life. TheGroup’s other intellectual property rights are statedat cost andamortised over their useful economic
lives in relation to revenues generated.
Goodwill
Purchased goodwill, representing the excess of the fair value of theconsideration over the fair value of theassets acquired, is
capitalisedandamortised ona straight linebasis over its useful economic life. This is presumed tobebetween 10 and 15 years
depending on thebusiness acquired, unless circumstances change significantly resulting inan impairment of thecarrying value .
Researchand development
All researchand development expenditure is charged to the profit and loss account in the year in which it is incurred. OsmetechAnnualReport 2005 25
Notes forming part of the financial statements
continued
1 Accounting policies continued
Stock
Stocks are valuedat the lower ofcost or net realisable value.Cost is calculatedas follows:
Raw materials – cost of purchase on first in, first out basis.
Finished goods – cost of raw materials and labour andattributable overheads based on the normal level ofactivity.
Net realisable value is based on estimated selling price less further costs tocompletionand disposal.
Pensioncosts
Contributions to definedcontribution pension schemes arecharged to the profit and loss account in the year in which they
become payable.
Operating leases
Rentals under operating leases arecharged ona straight linebasis over the lease term, even if the payments are not made on
suchabasis.
2 Turnover
The turnover is wholly attributable to theGroup’s principalactivity.
Turnover is analysedby destinationas follows:
2005 2004
£ £
UnitedKingdom 222,712 123,923
Rest ofEurope 917,753 1,142,784
USA 2,696,614 2,331,073
Far East 1,609,478 2,120,280
Rest of world 386,313 461,968
5,832,870 6,180,028
Turnover originates as follows:UnitedStates – £5,673,092 (2004 – £6,180,028); UnitedKingdom – £133,988 (2004 – £nil)and
Germany – £25,790 (2004 – £nil). All turnover is to externalcustomers.
3 Analysis of loss before taxation and net assets
The directors have not disclosed segmentalanalysis on the grounds that it is considered seriously prejudicial to theGroup’s
commercial interests. 26 OsmetechAnnualReport 2005
Notes forming part of the financial statements
continued
4 Operating loss
2005 2004
£ £
This is arrivedat after charging:
Amortisation of intangible fixedassets 93,163 30,807
Depreciation 185,833 127,024
Impairment of intangibleassets 731,007 –
Impairment of tangibleassets 29,045 –
Auditors’ remuneration –audit services:Osmetech plc 30,000 24,500
–audit services:Other Groupcompanies 18,611 17,791
– nonaudit services 17,160 11,000
Operating lease rentals – plant and machinery 11,512 –
– other 224,762 263,036
Researchand development 2,130,533 1,744,862
Loss on disposal of fixedassets 17,025 –
5 Exceptional administrative expenses
The exceptionalcosts incurred in 2005 relate to:
• Theclosure of theMolecular Sensing plc facility inMelksham,Wiltshire,UKamounting to £67,132 and related provisions for
the write off of tangibleand intangible fixedassets of £29,045and £49,349 respectively.
• Provisions for the impairment of intangible fixedassets of £681,658 related to electronic gas odour sensor technology
following theGroup’s change in strategy to focus its development resources primarily on genetic diagnostics.
The effect of this exceptionalcharge on preand post tax results in 2005 was £827,184 (2004 – £nil).
6 Employees
2005 2004
£ £
Staffcosts for all employees, including executive directors,consist of:
Wages and salaries 2,849,276 2,739,148
Social security costs 249,534 227,584
Other pensioncosts 152,314 107,637
3,251,124 3,074,369
Theaverage monthly number of employees of theGroup during the year, including executive directors, was as follows:
Number Number
2005 2004
Manufacturing 28 24
Researchand development 22 21
Sellingandadministration 24 19
74 64 OsmetechAnnualReport 2005 27
Notes forming part of the financial statements
continued
7 Directors
2005 2004
£ £
Emoluments 553,009 403,261
Definedcontribution pension scheme payments 65,396 40,230
618,405 443,491
Highest paid director:
Emoluments 209,026 198,311
Definedcontribution pension scheme payments 23,700 22,500
232,726 220,811
Thereare 3 (2004 – 3) directors whoare members of definedcontribution schemes.
Directors’ interests
The interests of the directors in ordinary shares ofOsmetech plc, which, saveas disclosed,areall heldbeneficially as reported in
theReport of the directors on page 10.
Options
TotalOptions
on ordinary share Exercise
30 April 2004 Date of price per Exercisable
Director and 30 April 2005grantshare From T o
GJHall 1,000,000 25.09.08 2p 21.10.01 21.01.08
JNGWhite120,000 25.09.98 2p 21.10.01 21.01.08
5,000,000 30.09.02 2p 30.09.05 30.09.12
15,815,900 24.02.03 2.39p 24.02.04 24.02.13
4,184,100 24.02.03 2.39p 24.02.04 24.02.13
DASandilands2,500,000 30.09.02 2p 30.09.05 30.09.12
5,815,900 24.02.03 2.39p 24.02.04 24.02.13
4,184,100 24.02.03 2.39p 24.02.04 24.02.13
GBKuenster 1,350,000 26.04.00 26
1
/ 4p 26.04.03 26.04.10
1,000,000 20.03.0111p 20.03.04 20.03.11
1,000,000 29.01.02 12
3
/ 4p 29.01.05 29.01.12
AMarek 10,000,000 1.04.03 2.33p1.04.041.04.13
The mid-market price of the shares at 30 April 2005 was 2.52p (2004 – 4.33p)and the range during the period was between 2.35p
and 4.45p; (2004 – 2.81pand 5.00p).
8 Net finance income
2005 2004
£ £
Interest onbankbalances and term deposits 113,808 102,245
Interest onbankborrowings (177) (97)
113,631 102,148 28 OsmetechAnnualReport 2005
Notes forming part of the financial statements
continued
9 Tax on loss on ordinary activities
The tax credit comprises:
2005 2004
£ £
Current tax:
UKcorporation tax receivable (136,395) (147,804)
Adjustment in respect of prior years researchand development tax credit (10,277) –
Total tax on loss on ordinary activities (146,672) (147,804)
The differencebetween the totalcurrent tax shownaboveand theamount calculatedby applying the standard rate ofUK
corporation tax to the loss before tax is as follows:
2005 2004
£ £
Loss on ordinary activities before tax (2,865,765) (1,315,918)
Tax credit at 30% (859,730) (394,775)
Effects of:
– losses whichareavailable to set against future profits 568,539 418,074
–   researchand development tax credit 34,095 (147,804)
– expenses not deductible for tax purposes 139,324 10,959
– depreciation in excess ofcapitalallowances (15,139) (22,826)
– movement in short term timing differences (3,484) (11,432)
Adjustment in respect of prior year (10,277) –
Total current tax credit (146,672) (147,804)
Factors that may affect the future tax charge
A deferred tax asset has not been recognised in respect of timing differences relating to tax losses carried forwardas there is
insufficient evidence that theasset willbe recovered. Theamount of theasset not recognisedat a standard rate of 30% is
£8.3 million (2004 – £6.4 million). Inaddition,a deferred taxasset in respect ofcapitalallowances of £289,000 (2004 – £317,000) has
not been recognised. Theseassets willbe recoverable if theGroup generates profits in the future from the same trade in which
the losses were incurred.
10 Loss attributable to the Company
The loss for the financial year dealt with in the financial statements of the parent company was £1,412,302 (2004 – £1,283,961). As
permittedby Section 230 of theCompanies Act 1985, no separateprofit and loss account is presented in respect of the parent company.
11 Loss per share
The loss per share of 0.42p (2004 – loss per share 0.21p) has beencalculated on the weightedaverage number of shares in issue
during the year namely 646,690,390; (2004 – 561,457,432)and losses of £2,719,093; (2004 – £1,168,114).
FRS 14 requires presentation of dilutedEPS whenacompany couldbecalled upon to issue shares that would decrease net profit
or increase net loss per share. For a loss makingcompany with outstanding share options, net loss per share would only be
increasedby the exercise of out-of-the-money options. Since it is inappropriate toassume that option holders wouldact
irrationally, noadjustment is made to dilutedEPS for out-of-the-money share options. OsmetechAnnualReport 2005 29
Notes forming part of the financial statements
continued
12 Intangible assets
Group Company
Patents and Intellectual Patents and Intellectual
Trademarks Property Goodwill Total Trademarks Property Total
£££ £ ££ £
Group
Cost
At beginning of year 195,686600,000 367,555 1,163,241 195,686600,000 795,686
Additions 16,535–– 16,535 16,535– 16,535
Acquisitions 56,055 –1,150,938 1,206,993 56,055 – 56,055
Currency translationadjustment –– (27,830) (27,830) –– –
At end of year268,276 600,000 1,490,663 2,358,939 268,276 600,000 868,276
Amortisation
At beginning of year 19,007 96,260 26,041 141,308 19,007 96,260 115,267
Charge for the year6,296 –86,867 93,163 6,296 – 6,296
Provision for impairment227,267 503,740 – 731,007 227,267 503,740 731,007
Currency translationadjustment –– (2,652) (2,652) –– –
At end of year252,570 600,000 110,256 962,826 252,570 600,000 852,570
Net book value
At 30 April 200515,706 –1,380,407 1,396,113 15,706 –15,706
At 30 April 2004179,679503,740341,514 1,021,933 176,679503,740680,419
13 Tangible assets
Short Plant, machinery
leasehold and motor Office
improvements vehicles equipment Total
£££ £
Group
Cost
At beginning of year 1,124456,348 221,158 678,630
Additions 101,784 216,377 101,145 419,306
Acquisitions – 2,333 38,604 40,937
Disposals –(17,025) (9,638) (26,663)
Currency translationadjustment (85) (34,553)(15,761) (50,399)
At end of year 102,823 623,480335,508 1,061,811
Depreciation
At beginning of year38137,504 64,575 202,117
Provided in the year2,553 105,71377,567 185,833
Disposals –– (9,638) (9,638)
Provision for impairment – 270 28,775 29,045
Currency translationadjustment (71) (13,196)(6,104) (19,371)
At end of year2,520 230,291 155,175 387,986
Net book value
At 30 April 2005100,303 393,189 180,333 673,825
At 30 April 20041,086318,844 156,583 476,513 30 OsmetechAnnualReport 2005
Notes forming part of the financial statements
continued
13 Tangible assets continued
Plant, machinery
and motor Office
vehicles equipment Total
££ £
Company
Cost
At beginning of year –12,940 12,940
Transfers from other groupcompanies2,333 40,198 42,531
Disposals –(9,638) (9,638)
At end of year2,333 43,500 45,833
Depreciation
At beginning of year –9,847 9,847
Provided in the year2,063 4,431 6,494
Transfers from other groupcompanies – 223 223
Provision for impairment270 28,775 29,045
Disposals –(9,638) (9,638)
At end of year2,333 33,638 35,971
Net book value
At 30 April 2005– 9,862 9,862
At 30 April 2004– 3,0933,093
14 Fixed asset investments
Investments Loan Total
££ £
Company
Cost
At beginning of year646 9,804,646 9,805,292
Additions2,947,483274,995 3,222,478
At end of year2,948,12910,079,641 13,027,770
Provision for impairment
At beginningand end of year645 6,797,975 6,798,620
Net book value
At 30 April 2005 2,947,484 3,281,666 6,229,150
At 30 April 20041 3,006,671 3,006,672 OsmetechAnnualReport 2005 31
Notes forming part of the financial statements
continued
14 Fixed asset investments (continued)
The following were subsidiary undertakings at the end of the year and haveallbeen included in theconsolidatedaccounts.
Proportion of
Country of voting rights and
incorporation ordinary share
Name or registration capital held Nature ofbusiness
Osmetech Technology IncUSA 100% HoldingCompany
OsmetechIncUSA 100%*Sameas ultimate parent company
Molecular Sensing plcUK 100% Sameas parent company
Molecular Sensors Limited UK 100% Sameas parent company
OsmetechGmbH Germany 100% Sales operation
OsmetechAESOP TrusteeLimited UK 100% Dormant
Thecountry of operation is the sameas its country of incorporation or registration.
During the year, the groupacquired the entire sharecapital ofMolecular Sensing for consideration of £2,929,982 and the entire
sharecapital ofa new subsidiary,OsmetechGmbH for £17,501.
*Shares heldby Osmetech Technology Inc.
15 Stocks – Group
2005 2004
£ £
Raw materials and work in progress 861,380 600,574
Finished goods 282,597 366,704
1,143,977 967,278
There is no material differencebetween the replacement cost of stocks and theamount at which they are stated in the financial
statements.
16 Debtors
2005 2004
Group Company Group Company
££ ££
Due within one year
Trade debtors 1,481,814 – 928,649 –
Other debtors 165,551 101,894 47,962 16,426
Called up sharecapital not paid 290,000 290,000 290,000 290,000
Taxation recoverable 136,395 136,395 147,804147,804
Prepayments andaccrued income 119,400 95,576 49,930 17,317
2,193,160 623,865 1,464,345 471,547 32 OsmetechAnnualReport 2005
Notes forming part of the financial statements
continued
17 Investments – term deposits
2005 2004
£ £
Group and Company
Cash deposits with terms in excess of 7 days 1,000,000 2,700,000
18 Creditors: amounts falling due within one year
2005 2004
Group Company Group Company
££ ££
Tradecreditors 603,192 115,314 217,984 30,210
Taxationand social security 31,320 20,940 51,820 51,820
Accruals and deferred income 744,900 218,150 670,679 242,965
1,379,412354,404 940,483324,995
19 Share capital and other reserves (Group and Company)
2005 2004
£ £
Authorised:
Ordinary sharecapital:
1,200,000,000 shares of 1p each (2004 – 810,000,000 shares of 1p each) 1,200,000 1,200,000
Allotted, called up and fully paid:
Ordinary sharecapital:
674,978,258 shares of 1p each (2004 – 589,930,397 shares of 1p each) 6,749,783 5,899,304
Allotted and called up:
Ordinary sharecapital:
14,500,000 shares of 1p (14,500,000 shares of 1p) 145,000 145,000
Called up sharecapital – total 6,894,783 6,044,304
Share
Share Premium Merger
capital Account Reserve
£££
Movement in the year
At 1May 2004 6,044,304 29,493,748 –
Shares issued in the period 850,47913,066 1,885,533
Share issuecosts –(81,763)–
At 30 April 2005 6,894,78329,425,051 1,885,533 OsmetechAnnualReport 2005 33
Notes forming part of the financial statements
continued
19 Share capital and other reserves (Group and Company) continued
The following ordinary shares of 1p each were issued during the year:
Date Number Consideration per share
27 October 2004 76,808,133 3,268,432 shares of 10p each inMolecular Sensing plc
28October 2004 311,867 13,271 shares of 10p each inMolecular Sensing plc
4November 2004 301,740 12,840 shares of 10p each inMolecular Sensing plc
11November 20041,275,955 54,296 shares of 10p each inMolecularSensing plc
18November 2004136,180 5,795 shares of 10p each inMolecular Sensing plc
25November 20041,075,758 45,777 shares of 10p each inMolecularSensing plc
2 December 2004 795,05233,832 shares of 10p each inMolecular Sensing plc
9December 2004 293,444 12,487 shares of 10p each inMolecular Sensing plc
17 December 2004 730,073 31,067 shares of 10p each inMolecular Sensing plc
16 December 2004 2,264,37996,357 shares of 10p each inMolecularSensing plc
24December 2004 250,000 1.75p
24December 2004805,2802.39p
Share options
TheCompany has granted options under theOsmetech plcEnterpriseManagement IncentivePlan (“EMIPlan”)and the
Osmetech plc 2003 USEquity CompensationPlan (“USPlan”)and has entered into individual optionagreements and unapproved
options as follows:
1. EMI Plan:
Number of ordinary shares
under optionas at Subscription
Date 30.04.05 30.04.04 Price Exercisablebetween
17 September 2002 1,187,500 1,437,500 1
3
/
4
p17 December 2002 and 17 September 2012
24February 2003 10,554,238 11,359,518 2.39p 17 December 2003 and 24February 2013
13 October 2004 35,250 –9.36p13 October 2004and 30July 2011
1November 2004 2,750,000 – 3.075p 1November 2005and 1November 2014
14,526,988 12,797,018 34 OsmetechAnnualReport 2005
Notes forming part of the financial statements
continued
19 Share capital and other reserves (Group and Company) continued
2. US Plan:
Number of ordinary shares
under optionas at Subscription
Date 30.04.05 30.04.04 Price Exercisablebetween
1April 2003 25,000,000 25,000,000 2.33p1April 2004and 1April 2013
3. Individual Option Agreements:
Number of ordinary shares
under optionas at Subscription
Date 30.04.05 30.04.04 Price Exercisablebetween
25September 1998 1,237,000 1,237,000 2p 21October 2001and 21October 2008
26 April 2000 1,350,000 3,150,000 26
1
/
4
p 26 April 2003 and 26 April 2010
20 March 2001 250,000 250,000 11p 1March 2004and 20 March 2011
20 March 2001 750,000 750,000 11p 20 March 2004and 20 March 2011
29January 2002 1,000,000 2,000,000 12
3
/
4
p 29January 2005and 29January 2012
30 September 2002 7,500,000 7,500,000 2p 30 September 2005and 30 September 2012
24February 2003 21,631,800 21,631,800 2.39p 24February 2004and 24February 2013
13 October 2004 2,802,281 – 3.4p 13 October 2004and 22 November 2008
36,521,081 37,218,800
4. Unapproved Options:
Number of ordinary shares
under optionas at Subscription
Date 30.04.05 30.04.04 Price Exercisablebetween
13 October 2004 35,250 –5.32p 27 May 2005and 27 May 2012
36,521,081 37,218,800
Warrants
TheCompany has warrants outstandingas follows:
Number of ordinary shares
under warrant as at Subscription
Date 30.04.05 30.04.04 Price Exercisablebetween
14January 2002 – 300,000 14.055p 15January 2002 and 14January 2005
29January 2002 – 730,000 13.32p 30 January 2002 and 29January 2005
– 1,030,000 OsmetechAnnualReport 2005 35
Notes forming part of the financial statements
continued
20 Profit and Loss Account (Group and Company)
Group Company
££
At 1May 2004(29,376,149) (28,571,430)
Loss for the period (2,719,093)(1,412,302)
Exchange loss onconsolidation (198,750)–
At 30 April 2005(32,293,992)(29,983,732)
21 Reconciliation of movements in shareholders’ funds
2005 2004
Group Company Group Company
££ ££
Loss for the financial year (2,719,093)(1,412,302) (1,168,114) (1,283,961)
Other recognised losses relating to the year (198,750)– (241,703)–
New sharecapital subscribed including premium 2,667,315 2,667,315 2,337,577 2,337,577
Net (reduction)/increase in shareholders’ funds (250,528) 1,255,013 927,760 1,053,616
Opening shareholders’ funds 6,161,903 6,966,622 5,234,143 5,913,006
Closing shareholders’ funds 5,911,3758,221,635 6,161,903 6,966,622
22 Commitments
At thebalance sheet date theGroup hadannualcommitments under non-cancellable operating leases as set out below:
Land and Landand
buildings Other buildings Other
2005 2005 2004 2004
££ ££
Operating leases which expire:
Between twoand five years 48,8788,478 ––
Over five years 216,052 – 168,055 5,067
264,930 8,478 168,055 5,067
23 Related party transactions
TheCompany has takenadvantage of the exemption not to disclose transactions with other Group undertakings as voting rights
arecontrolled within theGroupandconsolidated financial statements are publicly available.
No director was, or is, materially interested inany contract subsisting during, or at the end of the financial year which was
significant in relation to thebusiness of theGroup.
24 Pension costs
TheCompany makes contributions into money purchase pension schemes for thebenefit of its employees. Theassets of the
schemes are held separately from those of theCompany in independently administered funds. The pensioncost charge represents
contributions payableand paidby theCompany to the funds,andamounted to £152,314 for the year (2004 – £107,637). Notes forming part of the financial statements
continued
36 OsmetechAnnualReport 2005
25 Financial instruments
The numerical disclosures in this note deal with financialassets and financial liabilities as defined inFinancialReportingStandard
13 –Derivatives andOther FinancialInstruments:Disclosures (FRS13). Certain financialassets suchas investments in subsidiaries
are excluded from the scope of these disclosures.
As permittedby FRS13, short-term debtors andcreditors havebeen excluded from the disclosures other than thecurrency risk
disclosures.
There is no material differencebetween the fair values andbook values of theGroup’s financial instruments, either in thecurrent or
prior year.
TheGroup’s treasury activities are designed to provide suitable, flexible fundingarrangements to satisfy its requirements. The
Group uses financial instruments comprisingcashand term deposits. The main risks arising from theGroup financial instruments
are interest rateand liquidity risks. TheBoard reviews policies for managing each of these risks and they are summarisedbelow.
These policies have remained unchanged from previous years.
TheGroupaims toachieveabalancebetweencontinuity and flexibility of fundingby maintaininga range of maturities on its
liquid resources. TheGroupalso mixes the duration of its deposits to reduce the impact of interest rate fluctuations.
TheGroup has limited foreigncurrency risk since overseas subsidiaries derive revenues and incur expenses denominated
predominantly in thecurrencies of thecountries in which they operate. All monetary assets and liabilities of theGroupare
materially denominated in the operating or functionalcurrency of the operating unit involved.
There is no material differencebetween the fair values andbook values of theGroup’s financial instruments.
Interest bearing financialassets
Functionalcurrency of operations
2005 2006
Group Sterling US Dollar Euro Group Sterling USDollar Euro
£££ £££££
Cash 883,712718,084 127,961 37,667 472,317 429,886 42,431–
TermDeposits 1,000,000 1,000,000 –– 2,700,000 2,700,000 ––
1,883,712 1,718,084 127,961 37,667 3,172,3173,129,886 42,431–
The sterlingandUS dollar cashbalances attract interest at floating rates based on theBank ofEnglandBase rateandUSPrimeRate
respectively.
The term deposits are of 1 month’s duration,at a weightedaverage fixed rate of 4.60% (2004 – 1 month’s duration, 3.69%).
26 Post Balance Sheet events
On 26 July 2005, thecompany acquired 100% of the sharecapitalofClinicalMicroSystems Inc,a 100% subsidiary ofMotorolaInc.
Theconsideration for the transactioncomprised the issue of warrants over 78,114,287 Osmetech shares at 1.75p per share. The net
assets ofClinicalMicroSystems Incat acquisitionbeforeconsideration of fair valueadjustments were £1,232,000. OsmetechAnnualReport 2005 37
Notice of annual general meeting
Notice is hereby given that theAnnualGeneralMeeting ofOsmetech plc (the “Company”) willbe heldat the offices ofAshurst,
BroadwalkHouse, 5AppoldStreet,LondonEC2A 2HA on 30 September 2005at 10.30 am for the purpose ofconsideringand, if
thought fit, passing the following resolutions:
Ordinary Business
1. To receiveandconsider theaccounts for the year ended 30 April 2005, together with the reports of the directors andauditors
thereon.
2. To re-elect DASandilands as a director.
3. To re-elect GBKuenster as a director.
4. To re-appoint Deloitte& ToucheLLPas auditors of theCompany until theconclusion of the next annual general meetingand
toauthorise the directors of theCompany to determine their remuneration .
Special Business
Toconsider,and if thought fit, to pass, the following resolutions of which numbers 5and 6 willbe proposedas ordinary resolutions
and numbers 7 and 8 willbe proposedas special resolutions:
5. That all of the issuedand unissued ordinary shares of 0.01p each in the sharecapital of theCompany,be with effect from
close ofbusiness on the date of the passing of this resolutionconsolidated into ordinary shares of 0.10p each (“Ordinary
Shares”) on thebasis of one ordinary share of 0.10p each for every 10 ordinary shares of 0.01p each, eachOrdinary Share
having the same rights andbeing subject to the same restrictions as the ordinary shares of 0.01p eachas set out in the
Company’s Articles ofAssociationand that fractional entitlements to ordinary shares of 0.10p eachbeaggregatedand sold in
the market and the proceeds of salearising therefrombe retained for thebenefit of theCompany.
6. That, the directors beand they are hereby generally and unconditionally authorised for the purposes ofand pursuant to
section 80 of theCompanies Act 1985 (the “Act”) to exerciseall the powers of theCompany toallot relevant securities (within
the meaning of section 80(2) of theAct) up toanaggregate nominalamount of £43,935 provided that this authority shall,
unless renewed, varied or revoked, expireat the earlier of (A) 31October 2006 and (B) theconclusion of the next annual
general meeting of theCompany tobe held in 2006 and provided further that theCompany may before the expiry of such
period makeany offer,agreement or arrangement which would or might require relevant securities tobeallottedafter such
expiry and the directors of theCompany may allot relevant securities pursuant toany such offer,agreement or arrangement as
if theauthority hereby conferred had not expired. This authority shallbe inaddition toany likeauthority pursuant to the said
section 80 to the extent not utilisedat the timeand date on which this Resolution 6 is passed.
7. That, subject to the passing ofResolution 6 above, the directors of theCompany beand they are hereby empowered toallot
equity securities (within the meaning of section 94(2) of theAct) for cash pursuant to theauthority conferredby Resolution 6
aboveas if section 89(1) of theAct did not apply toany suchallotment, provided that this power shall, unless renewed, varied
or revoked, expireat the earlier of (A) 31 0ctober 2006 and (B) theconclusion of the next annual general meeting of the
Company tobe held in 2006 and provided further that this powershallbe limited to theallotment of equity securities:
(i) inconnection witha rights issue, open offer or other pre-emptive issue in favour of ordinary shareholders where the
equity securities respectively attributable to the interests ofall ordinary shareholders are proportionate (as nearly as
practical) to the respective numbers of ordinary shares heldbythembut subject to such exclusions or other arrangements
as the directors may deem necessary or desirable in relation tofractional entitlements or legal or practical problems
arising in, or pursuant to, the laws ofany territory or the requirements ofany regulatory body or stock exchange inany
territory; and 38 OsmetechAnnualReport 2005
Notice of annual general meeting
continued
(ii) otherwise than pursuant to paragraph (i)above) up toanaggregate nominalamount of £13,180 and provided further that
theCompany may,at any timebefore the expiry of such power makeany offer or enter intoany agreement which would
or might require equity securities tobeallottedafter the expiry of such power and the directors may allot equity
securities in pursuance ofany such offer or agreement as if such power conferred hereby had not expired. This power
shallbe inaddition toany existing like power not utilisedatthe timeand date on which this Resolution 7 is passed.
8. That theArticles ofAssociation of theCompany beamendedbytheaddition ofa new Article 110 Aas follows:
“There shall not beanage limit for Directors and sub-sections (2) to (6) of section 293 of theAct shall not apply to the
Company.”
By Order of theBoard Registered office
SACraig c/oAshurst
Secretary BroadwalkHouse
5AppoldStreet
LondonEC2A 2HA
1September 2005
NOTES:
(1) A member of theCompany may appoint one or more proxies toattendand, ona poll, to vote instead of the member. A proxy
ofa member need not alsobea member.
(2) The instrument appointinga proxy,and the power ofattorney or other authority (ifany) under which it is signed, or a notarially
certifiedcopy of that power or authority must be deposited with theCompany’s Registrars,CapitaRegistrars,Proxy
Department,TheRegistry, 34BeckenhamRoad,Beckenham,Kent,BR3 4TU, not less than 48 hours before the time for holding
the meeting. AForm ofProxy accompanies this document for useby members.
(3) Completion of theForm ofProxy will not precludea member fromattendingand voting in person.
(4) As permittedby Regulation 41 of theUncertificatedSecurities Regulations 2001, only those holders of ordinary shares whoare
registered on theCompany’s share register as at 10.30 am on 28September 2005 shallbe entitled toattend theAnnual
GeneralMeetingand to vote in respect of the number of shares registered in their names at that time. Changes to entries on
the share register after 10.30 am on 28September 2005 shallbedisregarded in determining the rights ofany person toattend
and/or voteat theAnnualGeneralMeeting.
(5) The register of directors’ interests in the sharecapital of theCompany is available for inspectionat theCompany’s registered
office during normalbusiness hours from the date of the noticeof this meeting until the date of theAnnualGeneralMeeting
and willbeavailable for inspectionat the place of theAnnualGeneralMeeting for at least 15 minutes prior toand during the
meeting . OsmetechAnnualReport 2005 39
OSMETECH plc: Proxy for use at annual general meeting
Please insert I/We
full name
(Please useblock letters)
andaddress of
of
being member(s) of theabove–namedcompany, hereby appoint theChairman of theAnnualGeneralMeeting
or (see note 1)
as my/our proxy to vote for me/us and on my/our behalfat theAnnualGeneralMeeting of theCompany tobe heldat the offices
ofAshurst,BroadwalkHouse, 5AppoldStreet,LondonEC2A 2HA on 30 September 2005at 10.30 amandat any adjournment
thereof.
I/we request such proxy to vote on the following resolutions as mentionedbelow (see note 2)
Signature(see note 3) Dated this day of 2005
Joint holders (ifany) (see note (5))
Name Name
Name Name
NOTES:
(1) If you wish toappoint some other personas your proxy please insert his/her nameandaddress, initialand strike out the words “theChairman of theMeeting”. A
proxy need not bea member of theCompany. Appointinga proxy will not preclude you from personally attendingand votingat the meeting (in substitution for your
proxy vote) if you subsequently decide to do so.
(2) Please indicate withan “X” in theappropriatebox how you wish your votes cast. Unless otherwise instructed the proxy will exercise his/her discretionas whether,and
if so how he/she will vote.
(3) This Form ofProxy must, in thecase ofan individual,be signedby theappointer or his/her attorney or, in thecase ofacorporation,be given under its common seal
or signed on its behalfby anattorney or a duly authorised officer or, if it is subject to theCompanies Act 1985 (as amended), inaccordance withSection 36A thereof.
(4) Tobe valid this Form ofProxy andany power ofattorney or other authority under which it is executed (or a duly notarisedcopy thereof) must be lodged with the
Registrars of theCompany,CapitaRegistrars,Proxy Department,TheRegistry, 34BeckenhamRoad,Beckenham,Kent,BR3 4TU, not less than 48 hours before the
timeappointed for the meeting, or adjourned meetingat which it is tobe used.
(5) In thecase of joint holders ofa share the vote of the senior who tenders a vote whether in person or by proxy shallbeaccepted to the exclusion of the votes of the
other joint holders and for this purpose seniority shallbe determinedby the order in which the names stand in the statutory register of members in respect of the
share.
(6) Any alteration in this Form ofProxy must be initialledby the person in whose hand it is signed or executed.
Ordinary Business FOR AGAINST
1. To receiveandconsider theaccounts for the year ended 30 April 2005, together with the
reports of the directors andauditors thereon.
2. To re-elect DASandilands as a director.
3. To re-elect GBKuenster as a director.
4. To re-appoint Deloitte& ToucheLLPas auditors of theCompany until theconclusion of the
next annual general meetingand toauthorise the directors of theCompany to determine
their remuneration.
Special Business
5. Toconsolidate theCompany’s ordinary shares into ordinary shares of 0.10p each
6. Toauthorise the directors toallot shares of theCompany up toa maximumamount
of £43,935.
7. Toempower the directors toallot shares for cash otherwise than ona pre-emptivebasis 
and otherwise up toa maximumamount of £13,180.
8. Toamend theArticles ofAssociation.
q BUSINESSREPLYSERVICE
LicenceNoMB122
Capita Registrars
Proxy Department
PO Box 25
Beckenham
Kent BR3 4BR
2 2
THIRDFOLD
FIRSTFOLD
SECONDFOLD Directors 
Gordon J Hall (Non-Executive Chairman)
James N G White (Chief Executive Officer)
David A Sandilands (Chief Financial Officer)
Gordon B Kuenster (Non-Executive)
Alfred Marek (Executive)
Secretary
Sally A Craig
Corporate Governance Standing Committees
Audit Committee
Gordon J Hall (Chairman)
Gordon B Kuenster
Remuneration Committee
Gordon J Hall (Chairman)
Gordon B Kuenster
Correspondence address
12 St James’s Square
London
SW1Y 4RB
Tel: 020 7849 6027
Fax: 020 7849 6300
Registered office
c/o Ashurst
Broadwalk House
5 Appold Street
London EC2A 2HA
Fax: 020 7849 6300
Website: http://www.osmetech.com
Registered number
2849544
Stockbroker and financial advisor 
Evolution Securities Limited
100 Wood Street
London
EC2V 7AN
Auditors
Deloitte & Touche LLP
POBox 500
201 Deansgate
Manchester
M60 2AT
Solicitors
Ashurst
Broadwalk House
5 Appold Street
London
EC2A 2HA
Registrars and transfer office
Capita Registrars
Northern House
Woodsome Park
Fenay Bridge
Huddersfield
HD8 0LA
Tel: 0870 162 3131
Principal banker
National Westminster Bank plc
41 Greengate Street
Stafford
ST1 2JD
Directors and advisers xx OsmetechAnnualReport 2004