UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 WASHINGTON,
D.C. 20549
 __________________
 
 FORM
20-F
 
 _________________________
 
  ̈
                REGISTRATION
      STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT
      OF 1934
 
 OR
 
 S
                ANNUAL
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934 FOR THE YEAR ENDED DECEMBER 31,
2009
 
 OR
 
  ̈
                TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934
 
 OR
 
  ̈
                SHELL
      COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
      ACT OF 1934
 
 Date of
event requiring this shell company report _____________________
 
 For the
year ended December 31, 2009
 
 Commission
File Number 0-20420
 
 CALCITECH
LTD.
 (Exact
name of Registrant as specified in its charter)
 
 A CORPORATION FORMED UNDER
THE LAWS OF BERMUDA
 (Jurisdiction
of Incorporation or Organization)
 
 10 route
de l’aeroport
 1215
Geneva
 Switzerland
 (Address
of principal executive offices)
 
 Securities
registered or to be registered pursuant to Section 12(b) of the
Act:  NONE
  Securities
registered or to be registered pursuant to Section 12(g) of the Act
 
 Common
Shares
 (Title of
Class)
 
 Securities
for which there is a reporting obligation pursuant to Section 15(d) of the
Act:  NONE
  
 
 The
number of outstanding Common Shares as of June 8, 2010 is
185,639,086
 
 Indicate
by check mark if the Company is a well-known seasoned issuer, as defined in Rule
405 of the Securities Act.   ̈Yes  SNo
 
 Indicate
by check mark if the Company is not required to file reports pursuant to Section
13 or 15(d) of the Securities Exchange Act of 1934. SYes   ̈No
 
 Indicate
by check mark whether the Company (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the Company was required to
file such reports), and (2) has been subject to such filing requirements for the
past 90 days.
 SYes   ̈No
 
 Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).  ̈Yes   ̈No
 
 Indicate
by check mark whether the Company is a large accelerated filer, an accelerated
filer or a non-accelerated filer.  ̈Large accelerated filer
 ̈Accelerated filer S
Non-accelerated filer
 
 Indicate
by check mark which basis of accounting the registrant has used to prepare the
financial statements included in this filing:
 U.S.
      GAAP  ̈
                International
      Financial Reporting Standards as issuedSOther
       ̈

                  by
      the International Accounting Standards
Board
 If
“Other” has been checked in response to the previous question, indicate by check
mark which financial statement item the registrant has elected to
follow.
 Item
17   ̈                                 Item
18   ̈
 
 Indicate
by check mark whether the Company is a shell company (as defined in Rule 12b-2
of the Exchange Act.
  ̈
Yes   S  No
 
 (APPLICABLE
ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE
YEARS)
 
 Indicate
by check mark whether the Company has filed all documents and reports required
to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934
subsequent to the distribution of securities under a plan confirmed by a
court.  NOT APPLICABLE
  
 
 TABLE OF
CONTENTS
  PagePART
      I
                
                1Item
      1.
                Identity
      of Directors, Senior Management and Advisors
                1Item
      2.
                Offer
      Statistics and Expected Timetable
                1Item
      3.
                Key
      Information
                13A.
                Selected
      Financial Data
                13B.
                Capitalization
      and Indebtedness
                23C.
                Reasons
      for the Offer and Use of Proceeds
                23D.
                Risk
      Factors
                2Item
      4(A).
                Unresolved
      Staff Comments
                4Item
      4.
                Information
      on the Company
                54A.
                History
      and Development of the Company
                54B.
                Business
      Overview
                54C.
                Property,
      Plant and Equipment
                16Item
      5.
                Operating
      and Financial Review and Prospects
                165A.
                Operating
      Results
                185B.
                Liquidity
      and Capital Resources
                195C.
                Research
      and Development, Patents and Licenses, etc.
                205D.
                Trend
      Information
                205E.
                Off
      Balance Sheet Arrangements
                205F.
                Tabular
      Disclosure of Contractual Obligations
                21Item
      6.
                Directors,
      Senior Management and Employees
                226A.
                Directors,
      Senior Management
                226B.
                Compensation
                236C.
                Board
      Practices
                236D.
                Employees
                246E.
                Share
      Ownership
                24Item
      7.
                Major
      Shareholders and Related Party Transactions
                257A.
                Major
      Shareholders
                257B.
                Related
      Party Transactions
                257C.
                Interest
      of Experts and Counsel.
                25Item
      8.
                Financial
      Statements
                268A.
                Consolidated
      Statements and Other Financial Information
                268B.
                Significant
      Changes
                26Item
      9.
                The
      Offer and Listing
                279A.
                Price
      History of Stock
                279B.
                Plan
      of Distribution
                279C.
                Markets
                289D.
                Selling
      Shareholders
                289E.
                Dilution
                289F.
                Expenses
      of the Issue
                28Item
      10.
                Additional
      Information
                2810A.
                Share
      Capital
                2810B.
                Memorandum
      and Articles of Association
                2810C.
                Material
      Contracts
                2910D.
                Exchange
      Controls
                29
  
  10E.
                Taxation
                3010F.
                Dividends
      and Paying Agents.
                3310G.
                Statement
      of Experts.
                3310H.
                Documents
      on Display.
                3410I.
                Subsidiary
      Information
                34Item
      11.
                Quantitative
      and Qualitative Disclosures About Market Risk
                34Item
      12.
                Description
      of Securities Other than Equity Securities
                34Item
      13.
                Defaults,
      Dividend Arrearages and Delinquencies
                34PART
      II
                
                34Item
      14.
                Material
      Modifications to the Rights of Security Holders and Use of
      Proceeds
                34Item
      15.
                Controls
      and Procedures.
                34Item
      16.
                
                3616A.
                Audit
      Committee Financial Report
                3616B.
                Code
      Of Ethics
                3616C.
                Principal
      Accountant Fees And Services
                3616D.
                Exemptions
      From The Listing Standards For Audit Committees
                3616E.
                Purchases
      Of Equity Securities By The Issuer And Affiliated
    Purchasers
                37PART
      III
                
                37Item
      17.
                Financial
      Statements
                37Item
      18.
                Financial
      Statements
                37Item
      19.
                Exhibits
                37
 
 
  PART
I
 
 The following discussion contains
forward-looking statements regarding events and financial trends, which may
affect CalciTech Ltd’s (“CalciTech,” the “Company,” “we,” “our” or “us”) future
operating results and financial position.  Such statements are subject
to risks and uncertainties that could cause our actual results and financial
position to differ materially from those anticipated in forward-looking
statements.  These factors include, but are not limited to, the fact
that we are in the development stage, will need additional financing to build
our proposed plants and will be subject to certain technological risks
associated with scaling up production to a commercial level, all of which
factors are set forth in more detail in the section entitled “Risk Factors” in
Item 3.D. and “Operating and Financial Review and Prospects” at Item
5.
 
 Item
      1.
              Identity
      of Directors, Senior Management and
Advisors
 
 Not Applicable.
 
 Item
      2.
              Offer
      Statistics and Expected Timetable
 
 Not Applicable.
 
 Item
      3.
              Key
      Information
 
 3A.
              Selected
      Financial Data
 
 The following tables set forth
selected consolidated financial data of the Company for the years ended December
31, 2009, 2008 and 2007, the 10 months ended December 2006, and the year ended
February 28, 2006. We derived all figures from our financial statements, which
were audited by our independent auditor and prepared in accordance with
International Financial Reporting Standards (IFRS).
 
 This information should be read in
conjunction with our audited financial statements for the years ended December
31, 2009, 2008 and 2007 included in this annual report. Historical information
for periods prior to the year ended December 31, 2007 are not included in this
annual report.
 
 All financial information is
presented in U.S. dollars, unless indicated otherwise.
  year
      to
                
                
                year to
                
                
                year
      to
                
                
                10
      months to
                
                
                Year
      toDec
      31, 2009
                
                
                Dec
      31, 2008
                
                
                Dec
      31, 2007
                
                
                Dec
      31, 2006
                
                
                Feb
      28, 2006Operations
      Data
                
                $
                
                
                $
                
                
                $
                
                
                $
                
                
                $Revenue
                
                
                0
                
                
                
                0
                
                
                
                58,291
                
                
                
                47,649
                
                
                
                59,805Income
      (loss) from operations
                
                
                (965,000
                )
                
                
                (1,234,000
                )
                
                
                (314,000
                )
                
                
                (394,000
                )
                
                
                (1,438,000
                )Net
      loss
                
                
                (1,081,000
                )
                
                
                (2,025,000
                )
                
                
                (678,000
                )
                
                
                (620,000
                )
                
                
                (1,858,000
                )Number
      of shares
                
                
                150,858,348
                
                
                
                99,998,665
                
                
                
                88,656,114
                
                
                
                88,899,675
                
                
                
                88,899,675Loss
      per Common Share
                
                
                (0.001
                )
                
                
                (0.002
                )
                
                
                (0.001
                )
                
                
                (0.07
                )
                
                
                (0.02
                )Balance
      Sheet DataCumulative
      DeferredDevelopment
      Expenditure
                
                
                0
                
                
                
                0
                
                
                
                0
                
                
                
                0
                
                
                
                0Total
      Assets
                
                
                8,206,000
                
                
                
                7,157,000
                
                
                
                5,450,000
                
                
                
                3,244,000
                
                
                
                2,507,000Long
      Term Obligations
                
                
                2,297,000
                
                
                
                5,545,000
                
                
                
                1,782,000
                
                
                
                1,993,,000
                
                
                
                847,000Capital
      stock
                
                
                1,898,000
                
                
                
                1,846,000
                
                
                
                1,824,000
                
                
                
                1,813,000
                
                
                
                1,813,000Total
      Stockholders’ Equity/ (Deficiency)
                
                
                5,145,000
                
                
                
                609,000
                
                
                
                2,267,000
                
                
                
                (77,000
                )
                
                
                (730,000
                )
 
 1
  
 3B.
              Capitalization
      and Indebtedness
 
 Not Applicable.
 
 3C.
              Reasons
      for the Offer and Use of Proceeds
 
 Not Applicable.
 
 3D.
              Risk
      Factors
 
 In
addition to the other information presented in this Annual Report, the following
should be considered carefully in evaluating us and our business. This Annual
Report contains forward-looking statements that involve risk and uncertainties.
Our actual results may differ materially from the results discussed in the
forward-looking statements. Factors that might cause such a difference include,
but are not limited to, those discussed below and elsewhere in this Annual
Report.
 
 Notwithstanding
the foregoing, our future success will be affected by many factors that are
frequently associated with the development of a new business, which include, but
are not limited to, the following:
  We Have Incurred
Net Losses Since Our Inception and Expect Losses to Continue.  Except for net
income of $732,000 for fiscal year ended February 28, 1996, we have not been
profitable since our inception. During the year ended December 31, 2009, we
earned $NIL from the sale of Synthetic Calcium Carbonate (“SCC”) samples. As our
marketing activities have been concentrated during 2009 in other industrial
sectors, no sample sales were possible with new products. For the year ended
December 31, 2009, we had a net loss of $1,081,000 and an accumulated deficit of
$47,474,000. The report of independent auditors on our December 31, 2009
financial statements includes an explanatory paragraph assuming the Company will
continue as a going concern.Lack of operating funds
may result in staff reductions and curtailing the construction currently
planned. See Risk Factor entitled "If We Are Unable to Raise Funds Our Growth
May Be Adversely Affected" below.
  If We Are Unable
to Raise Funds Our Growth May Be Adversely
Affected.  Historically, we have had to seek capital for
research and development of our SCC products due to lack of
revenues.  Based on the available amount of $22,000 in cash and together with its working capital
credit facility, and the continuing control of expenses, the Company has
sufficient working capital to meet its obligations up to the next 12 months
following the date of the approval of these financial statements. We have
failed to secure the endorsement of a House Bank in Germany of our application
to secure a grant from the European Regional Structural Fund towards a 50% of
the capital expenditure (CapEx) of our planned 100,000 tonnes per annum plant in
Leuna, Germany. This recently has been largely due to the difficulties in the
banking sector in Germany, particularly affected by sub-prime debt and more
recently the collapse of the credit markets. Although the Company has determined
to seek a strategic partner, there is no assurance in the current economic
climate that such a partner will participate in the total project CapEx which is
now estimated at Euro 45 million.
  We
believe that due to the environmental aspect of our technology, substantial
grants and loans will be available for future projects. However, in the event
that there is a cash shortage and we are unable to obtain a debt financing or
grants, additional equity financing will be required. The proposed plants in
Germany will also require additional funds, if our revenues or grants are unable
to cover the building expenses. Seeking additional financing would dilute the
ownership of existing shareholders.
  Our Inability to
Protect Our Patents and Other Proprietary Rights Could Adversely Impact Our
Competitive Position.  We believe that our patents and other
proprietary rights are important to our success and our competitive position.
Accordingly, we devote substantial resources to the establishment and protection
of our patents and proprietary rights. We currently hold patents for processes
and have patents pending for additional processes that we intend to use to
market our SCC technology. However, our actions to establish and protect our
patents and other proprietary rights may be inadequate to prevent others from
using our process outside of the jurisdiction of our patent or to prevent others
from claiming violations of their patents and proprietary rights by us. If our
processes are challenged as infringing upon patents of other parties, we will be
required to modify our processes, obtain a license or litigate the issue, all of
which may have an adverse effect on our business.
  2
 
 Failure to
Protect Our Trade Secrets May Assist Our Competitors. We protect our trade
secrets and proprietary know-how for our processes by various methods, including
the use of confidentiality agreements with employees and strategic partners.
However, such methods may not provide complete protection and there can be no
assurance that others will not obtain our know-how or independently develop the
same or similar technology. We prepare and file for patent protection on aspects
of our technology, which we think will be integrated into final processes early
in research phases, thereby limiting the potential risks.
 
 We Have Never
Produced SCC on a Commercial Scale.We operated a small
process pilot plant based in Norway, which was moved to Leuna in Germany in
2002.  The equipment was scaled up on a ratio of approximately 60:1
but still requires to be scaled up on a ratio of approximately 20:1 for the
commercial plant. Although specialist suppliers of filtration and drying
equipment have conducted trials for us and found the scale up ratio to be within
acceptable limits, there are no guarantees that the technology will operate as
planned or that costs for additional modifications will not occur. In addition,
if we are unable to produce SCC on a commercial scale we will be unable to
successfully commercialise our SCC technology as planned in our business
plan.
 
 Our Competitors
May Develop a Competing Technology. One of our competitive advantages
depends on our ability to use waste lime, which is a waste product available at
little or no cost. If competitors are able to develop a competing technology, we
may no longer have the free or low cost source of raw material.
  Our SCC Product
is at Initial Market Introduction and We Are Not Sure the Market Will Accept
it.We
intend to target our SCC products in the following markets: paper; food and
pharmaceutical, plastic, sealants and adhesives industries. The market
acceptance of SCC products produced by our process for use in pharmaceutical and
food additives will depend upon consumers and regulatory authorities accepting
them. Moreover, although our process can produce pure SCC from waste lime and
letters of intent from paper and other industrial producers for the supply from
the first commercial plant have been signed, there is no assurance that we will
be able to convince customers to convert these to contracts of purchase,
limiting the number of potential customers for our product to paper or chemical
producers. Failure to achieve market share in these industries could have
material adverse effects on our long-term business, financial condition and
results of operation.
 
 All of our
operations are located outside of the United States, substantially all of our
sales from samples are generated outside of the United States and  all
of our assets are located outside of the United States, subjecting us to risks
associated with international operations.Our operations are
in Europe and we have no operations in the United States.  100% of our
revenue from our samples was generated from outside of the United States. The
international nature of our business subjects us to the laws and regulations of
the jurisdictions in which we operate and sell our products. In addition, we are
subject to risks inherent in international business activities,
including:
 
 ·
              difficulties
      in collecting accounts receivable and longer collection
      periods,·
              changes
      in overseas economic conditions,·
              fluctuations
      in currency exchange rates,·
              potentially
      weaker intellectual property protections,·
              changing
      and conflicting local laws and other regulatory
    requirements,·
              political
      and economic instability,·
              war,
      acts of terrorism or other
hostilities,
  3
  ·
              potentially
      adverse tax consequences,·
              difficulties
      in staffing and managing foreign operations, or·
              tariffs
      or other trade regulations and
restrictions.
 
 Our results of
operations may be adversely impacted by currency fluctuations.Our
revenue is in currencies other than United States dollars, primarily in Euros.
Because our financial statements are reported in United States dollars,
fluctuations in Euros against the United States dollar may cause us to recognise
foreign currency transaction gains and losses, which may be material to our
operations and impact our reported financial condition and results of
operations.
 
 Penny stock rules
may make it more difficult to trade our Common Shares.The Securities and Exchange
Commission has adopted regulations which generally define a “penny stock” to be
any equity security that has a market price, as defined, less than U.S. $5.00
per share or an exercise price of less than U.S. $5.00 per share, subject to
certain exceptions.  Our securities may be covered by the penny stock
rules, which impose additional sales practice requirements on broker-dealers who
sell to persons other than established customers and accredited investors such
as, institutions with assets in excess of U.S. $5,000,000 or an individual with
net worth in excess of U.S. $1,000,000 or annual income exceeding U.S. $200,000
or U.S. $300,000 jointly with his or her spouse. For transactions covered by
this rule, the broker-dealers must make a special suitability determination for
the purchase and receive the purchaser’s written agreement of the transaction
prior to the sale. Consequently, the rule may affect the ability of
broker-dealers to sell our securities and also affect the ability of our
investors to sell their shares in the secondary market.
 
 Potential
litigation or environmental exposure may have a material adverse effect on our
financial condition or results of operation. Our operations are subject
to international, federal, state and local governmental, tax and other laws and
regulations, and potentially to claims for various legal, environmental and tax
matters. While we carry liability insurance, which we believe to be appropriate
to our business, an unanticipated liability, arising out of such a litigation
matter or a tax or environmental proceeding could have a material adverse effect
on our financial condition or results of operations.
  Our share has
been thinly traded and we cannot predict the extent to which a trading market
will develop. Our Common Shares
trades on the “OTCBB” and is thinly traded compared to larger, more widely known
companies.  Thinly traded common stock can be more volatile than
common stock trading in an active public market.  We cannot predict
the extent to which an active public market for our Common Shares will develop
or be sustained.
 
 We may be
classified as a passive foreign investment company, which could result in
adverse United States federal income tax consequences to U.S.
holders.  We believe that we were not a “passive foreign
investment company”, or PFIC, for U.S. federal income tax purposes for our
taxable year ending on December 31, 2009, and we do not expect to become one for
our current taxable year or in the future, although there can be no assurance in
this regard. A non-U.S. corporation will be considered a PFIC for any taxable
year if either (1) at least 75.0% of its gross income is passive income or (2)
at least 50.0% of the value of its assets (based on an average of the quarterly
values of the assets during a taxable year) is attributable to assets that
produce or are held for the production of passive income. The market value of
our assets may be determined in large part by the market price of our Common
Shares, which is likely to fluctuate. In addition, the composition of our income
and assets will be affected by how, and how quickly, we spend the cash we
receive. If we are treated as a PFIC for any taxable year during which U.S.
holders hold our shares, certain adverse United States federal income tax
consequences could apply to U.S. holders. See “Special United States Federal
Income Tax Considerations - Passive Foreign Investment Company.”
 
 Item
4(A).  Unresolved Staff Comments
 
 Not Applicable.
 
 4
 
 Item
      4.
              Information
      on the Company
 
 4A.
              History
      and Development of the Company
  CalciTech
Ltd., a Bermuda Company, has developed a new process for manufacturing high
quality Synthetic Calcium Carbonate (“SCC”).  Our process produces SCC
from waste lime and air polluting carbon dioxide.  SCC is a white
pigment.  It is also a calcium source for pharmaceuticals and food. As
of the date of this report, we do not have facilities to commence production of
SCC on a full commercial scale.
  Originally,
we were formed on November 9, 1978, under the laws of British Columbia, Canada
with the name Cornwall Petroleum & Resources Ltd.  We then changed
our name to Rexplore Resources International Limited and which was engaged in
petroleum and resource development.  In December of 1987, we were
restructured and the prior management replaced in connection with the
acquisition of a license to develop Trylene Gas. In July 1994, we changed our
domicile from British Columbia, Canada to Bermuda and changed our name from
Kemgas Sydney Ltd. to Kemgas Ltd. On July 25, 2000, we changed our name from
Kemgas Ltd. to our present name, CalciTech Ltd., to better reflect our change in
business to the production and sale of SCC.
  For the
purpose of commercialising our technology, we established CalciTech Synthetic
Minerals Ltd., a Bermuda company that is wholly owned by us.  On
February 1, 2003, we transferred all of our entire SCC intellectual property
rights and associated business activity to CalciTech Synthetic Minerals Ltd.
CalciTech Synthetic Minerals Ltd. has two wholly-owned companies, CalciTech
Group Services SA, a Swiss corporation, and CalciTech Synthetic Minerals Europe
Ltd., a UK corporation. CalciTech Synthetic Minerals Europe Ltd. has been
licensed with the technology and is responsible for all European operations for
the Company.
  Our
administration headquarters are located at World Trade Centre, 10 Route de
l’Aeroport, Geneva, Switzerland. We currently do not have full-scale commercial
plants. We are currently engaged in the commercialisation and project
development stage using sample material produced by a small-scale production
plant located in Leuna, Germany. This plant produced bulk samples to support the
sales activity to place the first 100,000 tonnes per annum plant production
under letters of intent. Construction and commissioning are expected to take 18
months from the conclusion of the project finance.
  The
Company, through CalciTech Synthetic Minerals Europe Ltd., is now planning a
matrix of plants in Europe and has made presentations to the European Investment
Bank (“EIB”) to confirm that such projects will qualify under its technological
innovation program for financial support. The Company’s financial advisors are
currently in negotiations with a number of UK banks, in the context of the EIB
borrowing for funding of all European plants.
  We are
also evaluating new product developments for new market applications and testing
various feedstocks. It is intended that the small-scale plant will continue to
produce our sample material to support other projects in other regions. We are
also engaged in planning and developing proposed full-scale commercial plants
located elsewhere in Europe. See “4B.  Business Overview – Business
Activities.” No assurance can be given that the planned plants will be
economically or technically feasible. We have generated no cash flows from our
operations, other than those generated through limited sample sales. See "Item
3D Risk Factors."
 
 4B.           Business
Overview
 
 Synthetic
Calcium Carbonate (“SCC”)
  Since
June 1999, we have actively pursued our plan to develop and commercialize SCC
from waste lime using our own proprietary process.  Acutely aware of
the industrial waste created from the production of acetylene gas, one of our
former businesses, we have moved forward to develop a method to extract a
commercial product from what is considered to be waste product: waste
lime.  Waste lime is generated from (i) the production of acetylene
gas, (ii) manufacture of dicyandiamide from calcium cyanamide, (iii) the
manufacture of paper sludge ash from recycled paper, and (iv) the manufacture of
other chemical and mineral processes.  In our pursuit to turn an
environmental problem into a commercially viable business, we have developed our
proprietary process to extract and produce quality SCC from waste lime. SCC is a
white filler pigment and is used for paper filling and coating, as well as in,
for example paint, polymers, food and pharmaceuticals.
  5
 
 Currently,
we are in discussions with industrial partner(s) to establish our first full
scale commercial plants and are engaged in sales activity within the paper,
polymers, paints, food, pharmaceutical and cosmetic industries to seek
commitment from potential customers to purchase SCC products from the first full
scale commercial plants. In addition, we will have to seek industrial partner(s)
or raise additional funds through loans from business partners, debt or equity
financing and/or through environmental grants from authorities to build our
initial plants. Assuming we have the capital to proceed, we intend to build 13
to 15 commercial plants over the next 10 years in Europe, some through joint
ventures with financial or industry partners.
 
 Below is
a discussion of our proprietary SCC process, conventional Precipitated Calcium
Carbonate (“PCC”) production, our products and a summary of our current
activities by site. We refer to the PCC produced by our technology as Synthetic
Calcium Carbonate, SCC.
 
 Our
SCC Process
  Our SCC
process can utilise most grades of lime, including low quality lime or
industrial waste lime such as carbide lime. In our process, the waste lime is
mixed with a solution of water and a proprietary promoter in a digester, which
selectively dissolves the calcium and leaves the impurities behind as insoluble
solids, which are readily removed by subsequent flocculation. The clear calcium
solution is then pumped into a reactor into which carbon dioxide from any
industrial emission source is passed to produce synthetic calcium carbonate by
precipitation. After the SCC product is filtered off, the promoter solution is
recycled back into the digester. The SCC can be supplied directly as slurry or
dried and bagged for market.
  By the
use of this process, we reduce waste lime and carbon dioxide emissions into the
environment. Carbide lime is a waste problem in many countries. Currently, this
waste lime is stored in large ponds with no or very limited disposal processes
available. Its high pH has potential pollution impacts to soil and ground water.
This is a common environmental problem in the former Eastern Block countries,
including the eastern section of Germany and Slovakia and remains a problem in
other industrial nations. Many of these governments have regulations for the
clean up of these ponds, which gives us the opportunity to have sources of free
or low cost waste lime. Many private companies are also willing to supply waste
lime at little or no cost because they have limited storage for the waste lime.
Additionally, each year over a million tonnes of waste lime is created as a
by-product of on-going acetylene plants in China alone. Although availability of
new waste carbide lime from acetylene production will reduce in the future, we
expect to utilise other available waste lime sources. In particular paper sludge
ash (“PSA”). The usage of recycled paper has reached 50 million tonnes in Europe
and continues to grow as the demand for sustainable products increases. However
it is not generally realised that paper contains up to 40% minerals, which
remain as a waste sludge after the recovery of the cellulose fibres. The
elimination of this sludge is a growing problem following the new EU Waste
Directive. Similar problems exist with recycled paper in North America and
China. By enabling the raw material to be renewed in a closed loop, the paper
industry can move closer towards the goal of zero waste, zero environmental
impact and carbon footprint-free production. This will significantly reinforce
their sustainability credentials.
  CalciTech's
new process overcomes the problem of impurities that has hitherto hindered the
re-use of the minerals. The new process uses CalciTech's original technology for
treating waste lime and applies it to solve a growing environmental problem.
Trials have been successfully completed with waste from a range of paper mills.
The SCC produced from this waste is of exceptionally high brightness and low
abrasivity. Extensive trials will be carried out with potential customers during
2010.
 
 6
 
 Conventional
PCC Process
 
 Other PCC
producers must use the conventional method for producing their PCC starting from
high-grade limestone, which has limited availability. High-grade limestone
deposits are found in quarries that must be mined, creating dust and noise
pollution and leaving scars on the land. The conventional process involves
calcining high quality white limestone to produce high purity quicklime. The
quicklime is slaked with water to create milk of lime. PCC is produced by
sparging carbon dioxide through a batch reactor containing the milk of lime,
then the PCC is filtered and sold dried at low solids or, more normally, as
slurry in paper filling.
 
 SCC
Versus PCC Production Process
 
 The SCC Process
 
 There are
a number of ways in which the SCC process differs from the conventional process.
The advantages resulting from the differences between the SCC process and the
PCC process are as follows:
 
 ·
                The
      SCC process does not require lime slaking and classification steps. This
      gives us significant advantages in both quality and cost
      effectiveness.
 
 ·
                The
      SCC process includes a digester circuit that facilitates the use of any
      waste lime, such as carbide lime, thereby removing the need to purchase
      lime as is required in the conventional
process.
 
 ·
                The
      SCC process includes a promoter recycle loop to enhance the process
      economics. Any impurities in the lime feed are rejected as insolubles in
      the digester resulting in a final SCC product of the highest purity. SCC
      is less dependent on the purity of the starting material and is always
      superior to that of the starting
material.
 
 ·
                In
      the SCC process, the total lime content is present in solution whereas in
      the conventional process the lime is present in suspension (milk-of-lime).
      The reaction times in the SCC process are therefore much shorter than in
      the conventional process as the SCC process eliminates the slow lime
      dissolution step. This advantage allows for the use of smaller equipment
      as well as providing a much higher degree of control over the process. The
      SCC solution process is therefore more flexible and easier controlled than
      the conventional suspension process enabling a narrower particle size
      distribution. Additionally, the higher level of control enables us to
      tailor make SCC products to serve a wide range of
  markets.
 
 Patents
 
 We first applied to patent our process
of transforming waste lime into high quality SCC in 1998 and subsequently a
patent was granted the United Kingdom. An international application was filed
under the European Patent Cooperation Treaty in December of 1999 to expand the
protection of our intellectual property on an international level. The patent
examination was completed in May 2001 and patents were granted on July 31, 2003
in 13 European countries. Since then, patents have also been granted in Eurasia
(Russia and the independent states formerly part of the Soviet Union), South
Africa, Hong Kong, Indonesia, China, Republic of Korea, Slovakia, Australia, New
Zealand and Poland. During 2008 further patents were granted in The United
States, Canada, Brazil, Czech Republic, Hungary and India.
  In
October 2009, CalciTech filed an application for a new patent at the UK Patent
Office. This new patent will protect the processes to be used by CalciTech to
produce SCC with exceptional features including, but not limited to, a unique
morphology (rice grain shape), a very narrow particle size distribution and
exceptional purity, which itself gives very high brightness. Typically,
CalciTech produce particles in the sub-micron range which satisfies the large
majority of potential applications, as demonstrated by extensive trials with
future customers. However, CalciTech can use the same process to produce other
particle sizes in the nano and micron range but as there is further development
work required, this has been delayed until market demand dictates. This wide
range of capability opens up new applications in growing markets.
  7
  In
December 2009, CalciTech filed a new patent at the United Kingdom Patent Office
for a technology that enables paper producers to recycle all the minerals
used in paper, in particular PSA.
 
 When granted, these patents will extend
the patent protection of CalciTech’s process and product in terms of lifetime
and coverage.
 
 Development
of the SCC Technology
  The
research and development of our SCC process began in 1994 with J.W. Bunger &
Associates, a technical research company based in Salt Lake City, USA. This led
to a research project associated with the Swiss Federal Institute of Technology
in Lausanne, Switzerland and University of Lyon in France. We began a pilot
project in Manchester, England, which ran between September 1998 and November
1999.  During the pilot project, we were successful in converting
waste-lime into high quality SCC. The Recherche et Valorisation des Mineraux
(“RVM”) of Paris, France confirmed the application as a superior quality paper
coating pigment, a market currently dominated by GCC and kaolin. The pilot plant
was moved to the site of an industrial partner at Odda in Norway, where the SCC
development program continued.
  In 2007,
worldwide PCC capacity was 13 million tonnes, of which two-thirds was utilised
by the paper industry. Within the paper industry, SCC is aimed at the coatings
sector, currently dominated by Kaolin and GCC. In Western Europe, consumption of
kaolin and GCC for coating was 2.6 million tonnes and 3.7 million tonnes
respectively in 2002, representing around U.S. $1.5 billion in
sales.
  On July
8, 2002, we announced that we had commissioned and fine-tuned our Synthetic
Calcium Carbonate “SCC” small scale production plant at Leuna, Germany.
Presentations were held at Leuna in September 2002 to introduce the new small
plant and our SCC technology to a variety of interested parties, including
potential project partners, financial institutions and those from the region
that may be involved with the project. A laboratory facility was also installed
adjacent to the plant. Confirmation and fine-tuning of the key operational
parameters of this plant was necessary as a result of the large scale-up from
the original pilot plant. The plant has been used to test raw materials from
various other sites located around the world in order to ascertain not only
their suitability to the SCC process but also the quality of SCC that can be
produced and for the ongoing production of samples for sales purposes and
product developments with certain customers.
  This
plant has consistently produced a range of SCC products primarily in the sub
micron range, all with a brightness of over 96% ISO and a steep particle size
distribution. The SCC process produces particles of uniform size and shape,
tailor made to the needs of our end markets.  For the paper industry
this means that a new pigment will be available that addresses key issues such
as quality and runnability improvements.
  In
October 2002, we completed trials at the Centre Technique du Papier at Grenoble
in France and with a paper manufacturer. These results met our expectations and
led to the design and launch in February 2003 of our first two SCC products:
CalciLSTM and
CalciSGTM.
 
 Development
and Marketing of SCC Product
 
 The SCC
products manufactured by the use of our SCC process involves the selective
dissolution of calcium from industrial waste and its subsequent precipitation
from solution with waste CO2 into pure
calcium carbonate. The high calcium selectivity at the initial dissolution step
guarantees the final purity of the product at a unique level. The solution
environment assures the exceptional uniformity of the final precipitate with
easy control of the desired particle size, particle size distribution and
crystal morphology.
  8
 
 We
initially developed SCC products for the paper industry. However, since the
introduction of our SCC products to the paper industry in February 2003, we have
developed three non-paper SCC products targeting the food, pharmaceutical and
cosmetic industry, and the plastic, sealant, rubber and adhesives
industries.
 
 Paper
Industry
 
 We
currently have three SCC products targeting the paper industry: CalciLSTM,
CalciSGTM and
CalciRGTM.   All
three are directed at the high value end of the paper pigment
market.
 
 CalciLSTMProducts.CalciLSTM is
designed to maximize light scattering. CalciLSTM is
targeted to partially replace and extend costly Titanium Dioxide “TiO2”,
Aluminium TriHydrate “ATH” and Precipitated Silica “PS” and substitute calcined
clay in fine paper applications and Super Calendered A+ (“SCA+”) on a cost
effective basis. Examples of such applications are Bible paper, security paper,
laminating paper, auto-adhesive labels, flexible packaging etc. Several trial
runs on various applications confirmed the high performance of CalciLSTM. Using
CalciLSTM in
pre-coating, allows board producers to totally replace calcined clay, while
finished product quality remains at the high levels
required.  CalciLSTM used as
filler in SCA+ grades shows similar impressive results. Brightness increases of
around 2.5 units can be expected, while opacity is maintained at levels reached
with standard PCC filler.  Porosity, a very important parameter for
this type of paper grade, will also improve significantly.
 
 CalciLSTM is also
very suitable for pigmentation applications. Adding CalciLSTM to a
starch based formulation helps the papermaker to increase brightness and
opacity. The low binder demand due to the absence of fines will maintain paper
dusting levels at normal levels.
 
 CalciSGTMProducts.  CalciSGTM, is
designed to provide a super gloss coating for premium grade printing and writing
papers including both Ultra Light Weight Coated (“ULWC”) and Light Weight Coated
(“LWC”) and coated folding boxboard. In the latter application, CalciSGTM allows
for a reduction in calendaring nips to improve bulk at no loss in
gloss.
 
 CalciRGTMProducts.  In
October 2004, we launched our third product, CalciRGTM for the
paper coatings market.  CalciRGTM is a
performance-enhancing additive aimed at the rotogravure market.  For
the launch of this product, we worked closely with our potential customers to
identify specific needs.  CalciRGTM was
designed and developed in collaboration with these customers, and thoroughly
tested in commercial trials, showing the unique properties of our SCC based
products.
 
 Rotogravure
is a printing method used, among others, for LWC and ULWC. These paper grades
are predominantly aimed at the highly competitive catalogue and magazine
markets, where bulk is an important factor contributing to costs. Lightweight
papers typically consist of approximately 30% coating material.  The
worldwide market for LWC and ULWC papers is estimated to be around 10 million
tonnes of which approximately 7 million tonnes is produced in Europe, with the
US and Japan accounting for the balance. This market segment of the paper
industry is intensely competitive. Other market segments using rotogravure are
super calendared papers and lightweight papers for flexible
packaging.
 
 First
commercial tests have shown that substituting as little as 10% of the original
coatings mix with CalciRGTM show a
significant improvement in opacity, a very important quality parameter in this
segment due to the thinness of the paper and the demands for high quality
prints. Other characteristics such as brightness, roughness reduction, and
smoothness also showed a significant improvement in performance.
 
 In
addition to the normal quality parameters, CalciRGTM has the
same rheological characteristics as our other SCC related products. With typical
machine speeds for these paper types of around 1,200 m/min (45 mph), rheology of
the coatings mix is extremely important. Using CalciRGTM as an
additive to an existing coating product for the LWC and ULWC can provide a paper
producer and its supplier of coating material with important cost and quality
related competitive advantages.
  9
 
 In
November 2004, we announced the results of the most exhaustive trial programme
to date of our SCC based products, carried out by BASF. BASF is the dominant
supplier to the paper coating industry for various additives. These additives do
not have a pigment related function such as SCC but impart certain properties on
the coatings mix and typically contribute up to 15%. A good example of this
group of additives is a binding agent. BASF approached us in order to ascertain
whether its additives would be compatible with SCC based products.
 
 In the
trials our SCC product was benchmarked against leading products in the mineral
pigments for paper industry.  It was shown that our SCC:
 
 ·
                Is the only
      product to show consistent low viscosity at all shear levels: applying our SCC in a
      coatings mix will positively influence the running behaviour of the paper
      producing machinery, leading to increased productivity and lower
      costs.
 
 ·
                Imparts
      superior whiteness and brightness: these are essential product
      quality parameters, required to produce high quality high-end
      paper.
 
 ·
                Leads to
      greater opacity: another very important
      quality parameter, especially important for light-weight
      papers.
 
 ·
                Has
      superior print gloss: this parameter greatly
      determines the quality of the printed product.  Our SCC imparts
      a higher gloss on the coated paper, but over and above that, the contrast
      between the print and background shows superiority as
  well.
 
 ·
                Gives slow
      ink settling: this leads to lower
      ink consumption and hence significant cost savings for the
      printer.
 
 ·
                Provides
      superior rotogravure
printability.
 
 Following these tests using
CalciSGTM, we
developed our latest product, CalciRGTM for the
rotogravure market as a high-end additive to Kaolin. In total, over twenty
trials have been conducted with both scientific institutions and commercial
paper producers, varying from lab scale to pilot machine trials.
 
 In April
2003, we appointed GUSCO Handel as our sole sales representative to the paper
and board industry for our SCC products: CalciLSTM and
CalciSGTM. GUSCO
Handel is a subsidiary of family owned G. Schürfeld Group, founded in 1937 and
is active as an accredited agency in the marketing and sales of forest products
(pulp, paper, board and timber).  The broad experience of GUSCO Handel
in the paper industry gained from its wide customer relations developed over
many years, made them spot the unique growth opportunity presented by our SCC.
GUSCO Handel was appointed as our sole European sales representative for paper
to commence pre sales and reservation for the planned production from its
proposed first commercial plant in Germany. We built a small scale plant at
Leuna, Germany on a large industrial and chemical site owned and managed by
InfraLeuna GmbH, who also provided all the necessary utilities. We also retained
the services of W S Atkins plc of Stockport, UK, as consulting engineers for our
first large scale commercial plant based on 40,000 tonnes production per annum,
which resulted in their production of an in-depth feasibility study and
technical due diligence report. InfraLeuna allocated a site in the complex upon
which it was agreed that the Company would build its first commercial plant and
an agreement was negotiated for its purchase. This agreement was to be completed
on the finalization of the project financing. It was also upon the advice of
InfraLeuna that a local company, WUP Consulting GmbH & Co. KG, was engaged
to carry out the building and environmental permitting application. In September
2007, the Company received all the permitting documents for the planned plant.
In September 2002, a launch presentation, hosted by InfraLeuna, was made by the
Company.
 
 During
2006, a major Finnish contractor, part of a multi-national Austrian group, was
engaged to complete the design and planning work on a larger first commercial
plant capable of producing 100,000 tonnes per annum. This contractor is able to
provide all the principle components from companies within its group. All the
additional design work has been carried out at the contractor’s own
cost.
  10
 
 By the
end of February 2005 we received Letters of Intent (“LOI”) from various German
companies in the paper industry for our SCC products: CalciLSTM and
CalciSGTM.  These
LOIs are subject to a definitive agreement that is to be executed upon the
completion of a full-scale production plant in Leuna.  If and when
these LOI are converted into definitive contracts, we believe that approximately
80% of the projected revenue for our first planned merchant facility in Germany
could be derived from these definitive contracts. The customers who have signed
the LOIs are a cross section of major German companies in the paper
industry.  Each customer has signed confidentiality agreements and
tested, at their own expense, our SCC sample product in their manufacturing
process. The sample product has been purchased by GUSCO Handel as part of our
agreement with GUSCO Handel and GUSCO Handel has the right to recover the sample
cost in the event that any sale revenue is generated from the definitive
agreements.  Furthermore, GUSCO Handel has undertaken to collect all
revenues earned on our behalf and guarantee our customer payments for an
additional fee.
 
 Food,
Pharmaceutical and Cosmetic Industries
 
 CalciSPTMProduct. In October 2005, we
launched our first product following the implementation of our diversification
strategy. This product, CalciSPTM, is our
first non-paper product that is aimed at the food, pharmaceutical and cosmetics
industries. We launched this product following tests by the Geneva Institute of
Technology, certifying that CalciSPTM shows
extreme high purity, especially regarding heavy metals content. With the target
industries for this product moving increasingly towards higher purity products,
we expect that both the purity and processibility characteristics of
CalciSPTM will
contribute to advantageous competitive characteristics.
 
 The first
tests carried out on CalciSPTM show
that the product has certain characteristics that make it very suitable for use
in bakery and cacao products. Further tests are currently being conducted on
other applications within the target markets. Since its introduction in October
2005, we have been marketing this product in trade shows and assessing different
opportunities for the distribution of this product.
 
 Plastic,
Sealant, Rubber and Adhesives Industry
  CalciRCTMProduct. In January 2006, we
launched our latest product, CalciRCTM.  This
product is aimed at polymer applications such as plastics, sealants, rubber and
adhesives. Initial trials within the plastics industries have shown that
CalciRCTM
significantly improves certain strength characteristics of the finished product.
When trialled in PVC profiles, significant improvements in gloss, brightness and
lifetime were measured. Due to the rheological properties of the SCC, higher
filler loadings can be achieved which reduce the amount of polymer resin used
with consequent cost savings. Further trials are currently being conducted into
the processibility characteristics of the product.
 
 Paint
Industry
 
 SCC
products are currently being developed and are expected to be launched in due
course to serve the water based decorative paint market. SCC brings benefits of
brightness and opacity that enables the producer to reduce the amount of
expensive titanium dioxide in the formulation. While paint overall is growing at
a rate of two percent (2%) annually, water based emulsion paint is growing at
nine percent (9%) driven by environmental considerations and generally carries a
premium price over paper industry products.
 
 Business
Activity: Small scale production plant
 
 We have
been operating a small-scale production plant in Leuna, Germany. The small-scale
production plant, while not a full size commercial plant is, nevertheless, a
commercial plant in that the products manufactured can be sold. In particular,
high grade SCC. High grade PCC for the pharmaceutical industry is often sold in
relatively small amounts and command prices in excess of Euro 800 per ton. We
intend to manufacture and sell high-grade product in these specialist areas
where supplies are not available to meet such demands.
  11
 
 Business
Activity: Europe
  After the
collapse of the credit markets, the European Investment Bank (“EIB”) announced
several programs late in 2008, to assist in financing of developments within the
Member States of the European Union. In particular the Innovation and New
Technology Programmes and EIB have confirmed that SCC plants, licensed with the
CalciTech IPR from outside Europe, would qualify on an aggregated CapEx basis.
This of course would be subject to all the normal due diligence requirements.
The funding allows up to 50% of CapEx at favourable interest rates for extended
terms. They have also confirmed that CalciTech Synthetic Minerals Europe Ltd.
(“CSME”) may arrange all financings for each Member State through a UK House
Bank, thereby facilitating the due diligence process. The proposed locations are
generally speaking in depressed areas and many are eligible for grants of
varying amounts depending on the rating of the region.
  Typically
all projects will require equity investment of some 20% of CapEx. We are in
discussions with London financial advisers with a view to raising, by way of an
institutional private placement for CSME, equity funding and working capital to
prepare projects for building. Industrial partners in some projects will provide
their share of funding for their equity participation.
  When CSME
equity financing is completed, CSME will operate entirely independently and
allow CalciTech to concentrate on introducing SCC into other territories,
initially the United States of America and certain developing
territories.
 
 Business
Activity: Germany
  We have
finalised our plans to build our first full scale commercial SCC plant in
Germany, on which our financing negotiations are based.  The plant
will produce 100,000 tonnes of SCC per year.
  The
commercial plant will utilise burnt lime as its raw material, whereas for future
plant development, we signed an agreement with the German government agency,
Mitteldeutsche Sanierungs - und Entsorgungsgesellschaft mbH (“MDSE”), on March
2, 2000, giving us exclusive access to the carbide lime stored in a portion of
MDSE’s waste dump in Schkopau, Germany and an option to purchase an additional
waste pond. In May 2004, we executed a further agreement with the MDSE in
Germany for the exclusive access to a further 2.5 million tonnes of carbide lime
waste at the Schkopau site near Leuna.
  Following
these transactions, we have access to over 3.5 million tonnes of carbide lime,
but the original agreements will require re-negotiation for economic reasons for
the material to be used in any future plant.  MDSE is the government
agency responsible for the management of the Environmental Legacy of Eastern
Germany.  When we use this historical waste lime it will form part of
MDSE’s plan for landscape recovery.
  The
German federal state of Sachsen-Anhalt will proceed with the approval process
for the provision of a grant on receiving the House Bank’s endorsement of the
company’s application. A grant application was filed in December 2006 and it was
proposed by the authority that this grant should be withdrawn so that the
Company could re-apply and benefit from the more favourable 2007 grant. This
will contribute up to 50% of the capital costs of the 100,000 tonnes per annum
commercial plant located in Sachsen-Anhalt. The grant is made available by the
European Regional Structural Fund and is available under the present program up
until December 2010. During the first half of 2007 our House Bank informed us
that the due diligence requirements would substantially change in seeking credit
committee approval and that they were aware that the State guarantee was under
review in Brussels and it was unlikely we would continue to qualify for this
guarantee, under which circumstances credit approval was unlikely.
  12
  In
addition we understood from PWC Berlin office and the State of Sachsen-Anhalt
that a guarantee may be available up to 80% of the project finance portion and
that we should apply for this support with our grant application.
  By the
autumn of 2007 it was still unclear as to whether we would have access to the
State guarantee and thus a new House Bank was appointed, one of several
recommended by the State of Sachsen Anhalt, who were prepared to fund 100% of
our project finance without a State guarantee. This bank, an Austrian bank,
conducted and concluded its due diligence in early 2008 and secured credit
committee approval for the project. Due to deterioration in the credit markets,
a consortium of lenders was proposed and assembled by late summer 2008, when the
House bank had to withdraw in view of financial conditions. A consortium bank
was later appointed in the role of House Bank, but this mandate was cancelled
shortly afterwards following the collapse of Lehmann Brothers.
  We were
arranging 20% equity mainly within Germany and our House Bank
would  arrange project finance of 30%.  In view of the
difficulties in the financial markets, we concluded that we should seek a
strategic partner to assist with the capital and funding of our project along
the original lines conceived.
  We intend
to produce slurry and dry products for sale in Germany and neighboring
countries.  Germany is currently the largest producer of coated paper
with 4.75 million tonnes and a further 1.25 million tonnes of coated board in
2003.  Both applications currently use a mix of kaolin and GCC in
their production.
 
 Business
Activity: Spain
 
 In September 2009, the Company has
signed a Letter of Intent with Calcinor SA of Spain. Calcinor is Spain’s largest
producer of lime, which is the principal raw material for CalciTech’s Synthetic
Calcium Carbonate (SCC). The objective is to build a plant at one of Calcinor’s
sites.
 
 Business
Activity: Republic of Slovakia
  We
originally signed a memorandum of understanding with Novaky Chemical Company
(“Novaky”) to form a joint venture company to produce SCC from Novaky's waste
lime. A joint venture agreement was signed on March 23, 2004.  Novaky
currently has over 1.5 million tonnes of waste lime in temporary storage and
continues to produce more in its ongoing acetylene production. Following the
granting of our patent in the Slovak Republic in February 2005, we commenced the
technical, financial and marketing feasibility of a large production facility
plant to serve the Central European market.
  Under the
terms of the memorandum of understanding, we will control the joint venture. We
expect the project to qualify for environmental and investment incentives from
The Republic of Slovakia, which is an early entrant to the European Union
enlargement. Following the granting of our patent in Slovakia in 2006, we are
now actively working on developing this project.
  Novaky, a
renowned chemical conglomerate with a turnover of around U.S. $170 million, was
founded in 1940. The company manufactures intermediate products such as
electrolysis products, basic organic chemicals, vinyl chloride as well as end
products manufactured from these intermediates and from polyvinyl chloride
("PVC"). Products are sold on both the domestic and the wider European
market.  Previously a state company, Novaky was partially privatized
in 2001 when Canadian company Exall Resources was selected by the Slovak
National Property Fund to buy a 40.97% stake in the company.  With the
entrance of the Slovak Republic into the EU, compliance with environmental
standards has become critical. It was, therefore, the company that approached us
for use of our proprietary technology in solving their carbide lime related
environmental problems.
  Following
a change of management at Novacky and in view of delays with our project in
Germany with the credit market turmoil, we determined to delay matters until our
phased roll out program.
  13
 
 Business
Activity: Americas
  In August
2002, we appointed Charles Kunesh, formerly research director of Specialty
Minerals Inc. in America, to represent our program to identify suitable waste
deposits for possible SCC manufacture.  This has led to a number of
discussions and we announced in April 2003 an agreement to conduct feasibility
studies for such a project with Carbide Industries LLC of Louisville,
Kentucky.  We are not pursuing this project or any other North
American project at the present time until commencement of our roll out
program.
 
 Other
Products, Patents and Licenses
  We hold
licenses to develop, produce and sell Trylene Gas, which is an acetylene based
fuel gas.  We also hold a Canadian patent covering certain processes
producing Calcium Carbonates (No. 1179138). Our Canadian patent No. 1145113
expired on April 27, 2000 and patent No. 11791138 expires on December 11,
2001.  We also hold a license to a U.S. patent on an acetylene gas
process. Currently, we are not exploiting these patents or licenses, which were
not assigned any value in the financial statements.
  We first
applied to patent our process of transforming waste lime into high quality SCC
in 1998 and subsequently a patent was granted the United Kingdom.  An
international application was filed under the European Patent Cooperation Treaty
in December of 1999 to expand the protection of our intellectual property on an
international level.  The patent examination was completed in May 2001
and patents were granted on July 31, 2003 in 13 European countries. Since then,
patents have also been granted in Eurasia (Russia and the independent states
formerly part of the Soviet Union), South Africa, Hong Kong, China, Indonesia,
Slovakia, Australia, New Zealand, The United States, Brazil, Canada, Czech
Republic, Hungary, India, Korea and Poland.
  In
October 2009, CalciTech filed an application for a new patent at the UK Patent
Office. This new patent will protect the processes to be used by CalciTech to
produce SCC with exceptional features including, but not limited to, a unique
morphology (rice grain shape), a very narrow particle size distribution and
exceptional purity, which itself gives a very high brightness.
  In
December 2009, CalciTech filed a new patent at the United Kingdom Patent Office
for a technology that enables paper producers to recycle all the minerals used
in paper, in particular after incineration of paper sludge which produces a
waste paper sludge ash.
  We have
no registered trademarks and no pending trademark applications.
 
 Financing
 
 We are
currently financed through a loan facility, up to U.S. $3,000,000, from Epsom
Asset Management Ltd (“Epsom”).  In September 2007, Epsom agreed to
convert U.S. $2,001,000 of the balance due under the credit facility agreement
into our Common Shares on the basis of one share for each U.S. $0.29 of note.
This conversion resulted in the issue of 6,900,000 Common Shares. In addition,
in December 2007, Epsom agreed to convert a further U.S. $1,259,697 of the
balance due under the credit facility agreement into our Common Shares on the
basis of one share for each U.S. $0.30 of note. This conversion resulted in the
issue of 4,198,990 Common Shares. In December 2007, Epsom agreed to extend the
credit facility to August 30, 2009. In the third quarter of 2008, Epsom agreed
to a temporary increase of the facility to $5 million up to December 31, 2008 in
the absence of any new fund raising by placement of Common
Shares.  Epsom has extended the credit facility to August 30,
2011.
 
 In
addition, we had outstanding 6% convertible debenture notes, with a maturity
date of December 31, 2009, which are only repayable in cash at our option.
Holders of the debenture notes did not have such an option and may only convert
into our Common Shares at a conversion price of U.S. $1.75 on the maturity date.
This, therefore, had no effect on our liquidity.
  14
 
 During
December 2008, all 6% convertible debenture holders with a value of U.S.
$4,642,000 agreed to convert 50% of the capital with accrued interest to
December 31, 2008, amounting to $2,321,000 into Common Shares of the Company at
a price of U.S. $0.095 per share. The remaining debenture notes were extended
until December 31, 2010 at an interest rate of 1.75% per annum, payable
quarterly, with the right to convert into Common Shares of the Company at U.S.
$0.75 per share, amended from a conversion of U.S. $1.75 per share. The Company
has the right, upon 10 days notice, without penalty, to repay all or any portion
of the outstanding principal.
  In
December 2009, the Company authorized a new series of convertible debenture
notes with an annual interest rate of 4% and a conversion rate of $0.40 per
share for a period of two years from date of issue. All other terms and
conditions are the same as the previous series of convertible notes. Epsom has
converted $1,500 of its outstanding loan facility into these new
notes.
 
 Revenue
  During
the fiscal year ended December 31, 2009 and the year ended December 31, 2008, we
received revenues totalling $NIL and $NIL respectively from the sale of SCC
samples. Only small sized samples are being sent out to potential customers for
testing, especially in non-paper applications, for which it is customary not to
charge clients. Please see the “Consolidated Statement of Comprehensive Income”
and Item 3A, “Selected Financial Data”, and Item 5, “Operating and Financial
Review and Prospects”, for more information.
 
 Dependence
on Customers and Suppliers
 
 We are not dependent upon a single or a
few customers or suppliers for revenues for our operations.
 
 Project
and Product Development
 
 During
the year ended December 31, 2007 and continuing through the fiscal year ended
December 31, 2009, we moved out of the research and development stage and into
the commercialization stage, and project and product
development.  Accordingly, we no longer expense project nor research
and development expenses.  U.S. $1,127,000 spent in the year on
project and product development appears on the Balance Sheet as an intangible
asset.
 
 We
expensed $NIL on research and development in the year ended December 31, 2009
and $NIL in the year ended December 31, 2008.
  15
 
 Organizational
Structure:The following is our
organizational chart:
  
 
 4C.           Property,
Plant and Equipment
 
 We hold a lease on our
administrative service office facility in Switzerland, expiring in October
2010.  After October 2010, we intend to continue to locate our
principal facility in Switzerland, but will reassess our need for future
expansion to meet our business plan.
  We
maintain a Synthetic Calcium Carbonate “SCC” small scale production plant at
Leuna, Germany, through a branch office of CSME. This small plant has a maximum
capacity of 800 tonnes per annum. A suitably equipped laboratory facility has
also been installed adjacent to the plant, in the same building. No additional
land or rental is involved.
  Construction
of the 100,000 tonnes per annum SCC plant in Germany has been delayed due to the
current financial climate and is expected to commence in the fourth quarter of
2010 and is pending partner and financing arrangements. The cost of the
construction is estimated at Euro 45 million. Construction and commissioning are
expected to take 18 months.
 
 Item
5.  Operating and Financial Review and Prospects
 
 Overview
 
 We are
currently in the process of commercialising our SCC based products. An important
aspect of this commercialisation has been the building and commissioning of our
small-scale production plant in Leuna, Germany. This facility has mainly been
producing samples for potential clients to assess the desirability for their use
in the production of coated paper. The trials conducted, varying from
bench-scale testing to full machine trials, have been successful. We have
received responses from paper producers indicating their interest to acquire
substantial quantities of our SCC based products once the first full-scale
commercial-scale plant has been commissioned.
  More
recently, we have provided sample material from the small-scale plant in dried
form to non-paper companies. These trials, in the plastics, food and other
industry sectors, have been successful and have led us to add a drying facility
onto the planned large-scale plant in Sachsen-Anhalt in order to be able to
serve this part of the market.
  16
  We are
securing the financing for our commercial 100,000 tonnes per annum plant in
Sachsen-Anhalt, Germany.  At completion this will be financed
by:
 
 ·
                Grant
      from European Structural Fund: up to 50% of the capital expenditure for
      the first plant,
 ·
                20%
      of capital expenditure arranged by the Company and a planned industrial
      partner, and
 ·
                30%
      of capital expenditure by the operating subsidiary company’s House
      Bank.
 
 Letters of Intent (LOIs) and contracts
have been submitted for take-off of production once this plant is
commissioned.   These LOIs and contracts substantially
oversubscribe the 100,000 tonnes per annum planned capacity.
 
 We are
currently financed through a loan facility, up to U.S. $3,000,000, from Epsom
Asset Management Ltd. (“Epsom”). Epsom has extended the credit facility to
August 30, 2011.  In addition, we have outstanding convertible
debenture notes, with a maturity date of December 31, 2010, which are only
repayable in cash at our option. Holders of the debenture notes do not have such
an option and may only convert into our Common Shares at a conversion price of
U.S. $0.75 on the maturity date.  This, therefore, has no effect on
our liquidity.
  In
December 2009, the Company authorized a new series of convertible debenture
notes with an annual interest rate of 4% and a conversion rate of $0.40 per
share for a period of two years from date of issue. All other terms and
conditions are the same as the previous series of convertible notes. Epsom has
converted $1,500 of its outstanding loan facility into these new
notes.
 
 Critical
accounting policies
  The
significant accounting policies that we believe are the most critical to aid in
fully understanding and evaluating our reported financial results include the
following:
 
 Going
concern
  The
financial statements have been prepared assuming we will continue as a going
concern. Under the going concern assumption, an entity is ordinarily viewed as
continuing in business for the foreseeable future with neither the intention nor
the necessity of liquidation, ceasing trading or seeking protection from
creditors pursuant to laws or regulations. In assessing whether the going
concern assumption is appropriate, management takes into account all available
information for the foreseeable future, in particular for the 12 months from the
approval of the financial statements.
  Assets
and liabilities are recorded on the basis that we will be able to realise our
assets and discharge our liabilities in the normal course of business.
Accordingly, the financial statements do not include any adjustments to the
carrying values of assets and liabilities that might be necessary should we be
unable to continue as a going concern.
  17
 
 5A.
              Operating
      Results
  The
following discussion and analysis relates to items that have affected our
results of operations for the years ended December 31, 2009, December 31, 2008,
and December 31, 2007.   The information contained in the table
below should be read in conjunction with our consolidated financial statements
and accompanying notes included in this Annual Report on Form 20-F.
 
 Year
      Ended
                December
      31,
                2009
              
              
              Year
      Ended
                December
      31,
                2008
              
              
              Year
      Ended
                December
      31,
                2007OPERATING
      REVENUE
              
              $NIL
              
              
              $NIL
              
              
              $
              58,000COST
      OF REVENUES
              
              $NIL
              
              
              $
              (37,000
              )
              
              $
              (60,000
              )GROSS
      MARGIN
              
              $NIL
              
              
              $
              (37,000
              )
              
              $
              (2,000
              )Research
      and development expenses
              
              $
              -0-
              
              
              $
              -0-
              
              
              $
              -0-Project
      development expenses
              
              $
              -0-
              
              
              $
              -0-
              
              
              $
              -0-Product
      development expenses
              
              $
              -0-
              
              
              $
              -0-
              
              
              $
              -0-General
      and administrative expenses
              
              $
              965,000
              
              
              $
              1,197,000
              
              
              $
              313,000OPERATING
      LOSS
              
              $
              (965,000
              )
              
              $
              (1,234,000
              )
              
              $
              (314,000
              )NET
      LOSS BEFORE INCOME TAXES
              
              $
              (1,068,000
              )
              
              $
              (2,025,000
              )
              
              $
              (656,000
              )PROVISION
      FOR INCOME TAXES
              
              $
              (13,000
              )
              
              ($NIL)
              
              
              $
              (22,000
              )NET
      LOSS
              
              $
              (1,081,000
              )
              
              $
              (2,025,000
              )
              
              $
              (678,000
              )
 
 
 December
31, 2009 compared to December 31, 2008.
  Revenue.  We had
revenues totalling U.S. $NIL for the year ended December 31, 2009 compared to
$NIL for the year ended December 31, 2008. Only small sized samples are being sent
out to potential customers for testing, especially in non-paper applications,
for which it is customary not to charge clients.
  Expenses.  Product
development and project development costs remained at $NIL. Product development
and project development expenditure of U.S. $1,127,000 (December 31, 2008: U.S.
$2,037,000) was capitalised as an intangible asset. General Administrative
expenditure decreased from $1,197,000 to $965,000.   Professional
and legal fees decreased from $355,000 to $106,000 and $113,000 to $70,000
respectively during the year. These decreases were mainly due to tight budgetary
controls. Interest charges have decreased substantially from $791,000 to
$103,000. This arose from re-negotiation of the Company’s credit facility and
remaining debentures, as interest charges were reduced to 1.75% per annum. Even
though we are now firmly engaged in the commercialisation stage, project and
product development continue but are recorded as Intangible Assets.
  Net Loss.  The net
loss in year ended December 31, 2009 decreased to U.S. $1,081,000.  In
the year ended December 31, 2008 it was U.S. $2,025,000.
 
 December
31, 2008 compared to December 31, 2007.
  Revenue.  We had
revenues totalling U.S. $NIL for the year ended December 31, 2008 compared to
$58,000 for the year ended December 31, 2007.  Revenues are derived
from sales of samples produced at the small-scale production facility in Leuna,
Germany.
  Expenses.  Product
development and project development costs remained at $NIL. Product development
and project development expenditure of U.S. $2,037,000 (December 31, 2007: U.S.
$1,020,000) was capitalised as an intangible asset. General and administrative
expenses increased by U.S. $884,000 to U.S. $1,228,000. Even though we are now
firmly engaged in the commercialisation stage, project and product development
continue but are recorded as Intangible Assets.
  Net Loss.  The net
loss in year ended December 31, 2008 increased to U.S. $2,025,000.  In
the year ended December 31, 2007 it was U.S. $678,000.
  18
 
 Foreign
Currency Exchange Rates
  A
significant portion of our business is conducted in currencies other than the
United States dollar.  As a result, we are subject to exposure from
movements in foreign currency exchange rates.  We do not currently
engage in hedging transactions designed to manage currency fluctuation
risks.  See Notes to Consolidated Financial Statements – Note 2.5.
Foreign Currency Translation.
 
 Inflation
  Historically,
inflation has not affected our business in the current locations where it does
business and we do not expect that it will do in the future.
 
 Interest
Rate Sensitivity
  We are
not currently subject to adverse movement in interest rates because our credit
facilities are fixed at an interest rate of 1.50% and Convertible Debentures at
an interest rate of 1.75% and 4.00%.  The credit facility agreement
requires repayment on August 31, 2011.  We may redeem the Convertible
Debentures before December 31, 2010.  We do not currently engage in
hedging transactions designed to manage interest rate fluctuation
risks.
 
 5B.
              Liquidity
      and Capital Resources
  As of
December 31, 2009, our working capital deficiency decreased to U.S. $577,000
from the working capital deficiency of U.S. $744,000 on December 31, 2008. Cash
deposits were down to U.S. $22,000 and current liabilities were down U.S.
$239,000 on December 31, 2008.
  As of
December 31, 2008, our working capital deficiency decreased to U.S. $744,000
from the working capital deficiency of U.S. $1,000,000 on December 31, 2007.
Cash deposits were down to U.S. $26,000 and current liabilities were down U.S.
$398,000 on December 31, 2007.
  As of
December 31, 2007, our working capital deficiency increased to U.S. $1,000,000
from the working capital deficiency of U.S. $698,000 on December 31,
2006.  Cash deposits were down U.S. $117,000 and current liabilities
were up U.S. $73,000 on December 31, 2006.
  To
develop and commercialize our SCC technology, we believe we will require
approximately U.S. $5,000,000 for working capital for the next 24
months.  However, given the cash on hand of $26,000, together with the
restructuring of our debt in order to facilitate the arrangement of on-going
working capital in early 2009, and the continuing control of expenses, the
Company has sufficient working capital to meet its obligations up to the next 12
months. We have received assurances from the provider of this credit facility
that it will continue to keep this credit facility available for this period. To
develop commercial production of the SCC products, this credit facility would be
insufficient and further funding would be required.
  We will
need approximately U.S. $33,000,000 to provide the equity portion of our first
full-scale plants with a production capacity of 500,000 tonnes per
annum.  The construction of these plants will be financed by a
combination of grants from the European Structural fund for up to 50% of the
capital expenditure , funding from the European Investment Bank and the
remainder from arrangements made by the Company and by the Company’s house
bank.
  We are
partially financed through a credit facility from Epsom Asset Management Ltd.
(“Epsom”). This credit facility was originally issued by Epsom Investment
Services, N.V., but was assigned to Epsom Asset Management Ltd. in November 2008
following a reorganization of the Epsom Group. The credit facility agreement
with Epsom to provide up to U.S. $5,000,000 was re-negotiated during February
2003 whereby the maximum amount of draw down was reduced to U.S. $2,500,000 with
a reduction in interest charged to 7.5% per annum. Pursuant to an addendum to
the credit facility agreement dated August 2006, effective as of February 2006
Epsom no longer has a right to convert outstanding balance into our Common
Shares. The credit facility has been extended several times, and as of June
2009, the credit facility has been extended until August 31, 2011.
  19
  From time
to time, the balance of this facility has been reduced by the mutually agreed
conversion of the balance into the common stock of the Company, in order to
provide on-going working capital. During February 2005, Epsom agreed to convert
part of this facility into equity for U.S. $1,400,000. As at February 28, 2006,
U.S. $213,000 of this facility had been drawn down. In September 2007, Epsom
agreed to convert U.S. $2,001,000 of the balance due under the credit facility
agreement into our Common Shares on the basis of one share for each U.S. $0.29
of note. This conversion resulted in the issue of 6,900,000 Common
Shares.  In addition, in December 2007, Epsom agreed to convert a
further U.S. $1,259,697 of the balance due under the credit facility agreement
into our Common Shares on the basis of one share for each U.S. $0.30 of note.
This conversion resulted in the issue of 4,198,990 Common Shares.  In
December 2007, Epsom agreed to extend the credit facility to August 30, 2009. As
at December 31, 2008, with the prior written consent of Epsom, the facility was
temporarily extended by U.S. $2,936,000 (December 31, 2007: U.S. $1,630,000
available).  A restructuring of the debt in order to make available
additional working capital was completed on June 2009. Epsom increased the
credit facility to U.S. $3,000,000 and extended it until August 31,
2011.
  In
addition, we have outstanding convertible debenture notes. During December 2008,
all 6% convertible debenture holders with a value of U.S. $4,642,000, agreed to
convert 50% of the capital with accrued interest to December 31, 2008, amounting
to U.S. $2,321,000 into Common Shares of the Company at a price of U.S. $0.095
per share. The remaining debenture notes were extended until December 31, 2010
at an interest rate of 1.75% per annum, payable quarterly, with the right to
convert into Common Shares of the Company at $0.75 per share, amended from a
conversion of $1.75 per share. The Company has the right, upon 10 days notice,
without penalty, to repay all or any portion of the outstanding
principal.
  In
December 2009, the Company authorized a new series of convertible debenture
notes with an annual interest rate of 4% and a conversion rate of $0.40 per
share for a period of two years from date of issue. All other terms and
conditions are the same as the previous series of convertible notes. Epsom
converted $1,500 of its outstanding facility into these new notes.
  Additional
financing will be required to enable us to implement our business strategy of
growth, which includes investment in joint ventures in the SCC
industry.  No assurances can be given that we will be able to raise
cash from additional financing efforts. If we are unable to obtain sufficient
funds from future financing, we may not be able to fully achieve our business
objectives.
 
 5C.
              Research
      and Development, Patents and Licenses,
etc.
  We
expensed U.S. $NIL in the year ended December 31, 2009 and U.S. $NIL in the year
ended December 31, 2008 on research and development.
 
 5D.
              Trend
      Information
  Revenue
from the principal activity commenced for trial purposes since the year ended
February 29, 2004.  At the present time, we have not generated any
revenue from producing SCC on a commercial scale and have incurred substantial
losses due to expenses associated with our close of past Trylene and Acetylene
Gas businesses and research and development expenses.
 
 5E.
              Off
      Balance Sheet Arrangements
 
 None.
  20
 
 5F.
              Tabular
      Disclosure of Contractual
Obligations
 
 Contractual obligations for the
fiscal year ended December 31, 2009 are disclosed as follows:
 
 Dec
      31, 2009
              
              
              Payments
      Due by PeriodContractual
      Obligations
              
              Total
              
              
              <
      1 year
              
              
              1-3
      years
              
              
              4-5
      years
              
              
              >
      5 years$
              
              
              $
              
              
              $
              
              
              $
              
              
              $Credit
      facility
              
              
              797,000
              
              
              
              0
              
              
              
              797,000
              
              
              
              0
              
              
              
              0Convertible
      debentures
              
              
              0
              
              
              
              0
              
              
              
              
              
              
              
              0
              
              
              
              0Debenture
      Interest payable
              
              
              0
              
              
              
              0
              
              
              
              
              
              
              
              0
              
              
              
              0Equipment
      leasing
              
              
              0
              
              
              
              0
              
              
              
              
              
              
              
              0
              
              
              
              0Property
      rental
              
              
              86,000
              
              
              
              86,000
              
              
              
              
              
              
              
              0
              
              
              
              0Total
      Contractual Cash Obligations
              
              
              883,000
              
              
              
              86,000
              
              
              
              797,000
              
              
              
              0
              
              
              
              0
 
 We
categorized our contractual obligations based on the following:
 
 Credit
facility.  This is the balance on the credit facility with
Epsom as at December 31, 2009.  It is not repayable until August 2011
and is therefore a non-current liability.  Under the original the
credit facility agreement with Epsom, any outstanding balance due under the
credit facility agreement can be converted in part or in whole into our Common
Shares at any time at the option of the Epsom. The conversion price is equal to
80% of the trading price per share of our Common Share on the date such note was
made or additional advances were made.  However, effective as of
February 2006, the outstanding balance is no longer convertible into our Common
Shares.
 
 Convertible
debentures.  Debenture holders were offered and accepted new
debentures with a maturity date of December 31, 2010, and falls into the 1-3
year(s) period.
 
 Interest
payable.  The interest payable on convertible debentures is due
up to the date of maturity.
 
 Property
rental.  The lease for the building containing the Small Scale
Plant expires in September 2011.
  21
 
 Item
      6.
              Directors,
      Senior Management and Employees
 
 6A.
              Directors,
      Senior Management
 
 The following is a list of our
directors and officers and a brief description of their business
experience.  There are no family relationships between any officers
and directors.
 
 At our
Annual General Meeting of Shareholders held on December 7, 2009 the Board of
Directors were elected.
 
 Name
              Age
              Positions
      Held
              PeriodRoger
      A. Leopard
              68
              Director
                
                President
      and Chief Executive Officer
              June
      2001-Present
                
                February
      2000 – PresentJohn
      M. Smith
              73
              Director
              August
      1993 – PresentHoward
      Edmund Browning
              65
              Director
              March
      2005 – PresentMichael
      J.B. Brickell
              69
              Director
              March
      2010 – Present
 
 Roger A.
Leopard.Mr. Leopard is our Chief Executive Officer, President
and Director.  Mr. Leopardis a Chartered
Accountant, initially with Deloittes until leaving the profession in 1966 to
join The Great Universal Stores as Assistant Treasurer.  He played a
key role in the development of the corporation’s financial services
division.  In 1976, Mr. Leopard was appointed Vice President of
Finance of the CIG Group, a computer leasing and related product marketing and
service operation with diversified European operations.  He was
subsequently appointed Chairman of the Board and Chief Executive of CIG Group’s
U.S. listed parent company.  During this period, he specialized in
innovative methods of financing a wide range of businesses and was involved in
early stage company development and finance.  This involved the
arranging of funding for many commercial organizations in North America, Western
Europe, Russia and the CIG Group.  Before becoming our director, Mr.
Leopard was a director of Epsom Asset Management Ltd.  Upon his
appointment, he resigned from this position and is no longer involved with Epsom
Asset Management Ltd
 
 John M. Smith.Mr.
Smith is our Director and earned his Bachelor of Arts degree with honours from
the University of Hull, England. Mr. Smith has enjoyed a distinguished career in
international banking; first with Barclays Bank from 1959 through 1971 in
various postings worldwide, and subsequently as Assistant Manager with Barclays
Geneva, which position he held until 1979.  In 1979, Mr. Smith became
a partner in a Geneva based fiduciary company. In 1989, he was appointed General
Manager and subsequently, Managing Director of Rathbone Trust Company SA, a
wholly owned subsidiary of Rathbone Brothers PLC, an established private banking
and trust company quoted on the London Stock Exchange. Mr. Smith retired from
his position as a non-executive director of Rathbone Trust Company SA on
December 31, 2007.  In 1995, Mr. Smith was awarded an MBE for
voluntary services to the British Community in Switzerland.
 
 Howard Edmund
Browning.Dr. Browning is our Director,and obtained his MA and
D. Phil.in Organic
Chemistryat Oxford
University and an IEP at Insead.  Involved in the formation of Zeneca,
he spent 27 years, from 1969 to 1996, with ICI/Zeneca, initially in research at
ICI Plastics in the United Kingdom, then subsequently as Business Manager of ICI
Resins and Petrochemicals, operating both in Europe and the Far East. Later as
General Manager of ICI Bioproducts and Planning, he created the Zeneca
Lifescience Molecules business. From 1996 until 2004, he was Chairman of the
Tullis Russell Group plc, the papermaking and converting group, in the United
Kingdom. Dr. Browning comes with a wealth of experience in the areas in which we
are embarking, such as paints, resins and more recently, the paper
industry.
  22
  Michael J.B.
Brickell. Mr. Brickellis a Chartered Accountant and has over
40 years of experience at senior management levels in business enterprises in
England, Europe and North America. He was formerly with The Great Universal
Stores Ltd and a director of a number of  subsidiary companies, both
in the UK and continental Europe. Mr. Brickell was also President and COO of
Holt, Renfrew & Co. Ltd. a leading fashion stores group
operating  throughout Canada. He is currently an owner and Chairman of
Cotswold Collections Limited, a retail mail order company in England, and Deputy
Chairman and non-executive director of Industrial Minerals Corporation, an
Australian listed company involved in the exploration and production of mineral
sands in the USA.
 
 6B.
              Compensation
  During
our fiscal year ended December 31, 2009, we paid an aggregate of U.S. $366,000
in compensation to our directors and officers as a group for services in all
capacities.  We did not make any payments for pension or retirement
plans for officers and directors.
 
 Directors’
Compensation
  Directors,
who are not our employees, are compensated by stock options and U.S. $1,000 for
each board meeting attended, in addition to travel
expenses.  Directors, who are also our officers, do not receive
additional compensation for serving as Directors.
 
 Executive
Compensation
 
 The
following table sets forth the aggregate cash compensation paid for the past
fiscal year for executive compensation:
 
 SUMMARY
COMPENSATION TABLE
  Annual
      Compensation
                  
                  
                  Awards
                  
                  
                  Long
      Term Compensation
                    and
      PayoutsSecuritiesName
      and
                  Fiscal
                  
                  Cash
                  
                  
                  Other
      Annual
                  
                  
                  Restricted
                  
                  
                  Underlying
                  
                  
                  LTIP
                  
                  
                  All
      OtherPrincipal
      Position
                  Period
                  
                  Compensation
                  
                  
                  Compensation
                  
                  
                  Stock
                  
                  
                  Options
                  
                  
                  Payouts
                  
                  
                  Compensation$
                  
                  
                  $
                  
                  
                  Award(s)
                  
                  
                  #
                  
                  
                  $
                  
                  
                  $Roger
      A. Leopard
                    C.E.O. & President
                  Dec
      2009
                  
                  
                  250,935
                  
                  
                  
                  Nil
                  
                  
                  
                  Nil
                  
                  
                  
                  1,250,000
                  
                  
                  
                  Nil
                  
                  
                  
                  Nil
  6C.
              Board
      Practices
  Our
Directors serve a one-year term and are elected at the Annual General Meeting of
Shareholders.  At the Annual General Meeting of Shareholders, held on
December 7, 2009 the shareholders elected Messrs. Roger A. Leopard, John M.
Smith, and Howard E. Browning as Directors.  Our officers are elected
by the Board to serve at the pleasure of the Board.  We have no
contracts with any of our Directors that provide for payments upon
termination.
  During
the period ended December 31, 2009, Messrs. Browning and Smith comprised the
Audit Committee and Messrs Leopard and Browning comprised the Compensation
Committee.  The primary functions of the Audit Committee are to review
the scope and result of the audit performed by our independent accountants, our
internal accounting controls, non-audit services performed by the independent
accountants and the cost of accounting services.  The Compensation
Committee reviews all compensation proposed for senior management and Board
members.
 
 23
 
 6D.
              Employees
  Our
subsidiary, CalciTech Group Services SA, has two (2) full-time employees and one
(1) part-time employees located in Switzerland.  We have two (2)
officers located in Switzerland: Mr. Leopard and Mr.
Smith.   CalciTech Synthetic Minerals Europe Ltd. has two (2)
full-time employees and no part-time employees located in Germany.  We
and our other subsidiaries do not have employees.
 
 6E.
              Share
      Ownership
 
 The following table sets forth the
share ownership of our Officers and Directors as of date of April 30,
2010.
 
 Dec
      31, 2009Number
      ofShares
              
              PercentRoger
      A. Leopard (non-beneficial)
              1,468,125
              
              1.5%John
      M. Smith
              225,668
              
              0.23%Howard
      Browning
              0
              
              0Michael
      J.B. Brickell
              0
              
              0
 
 Mr. Leopard is a non-beneficiary of
the above shares as they are owned by a trust in which he has no
interest.
 
 Stock
Option Plan/Equity Incentive Plans
  Our stock
option plan is available for directors, officers and employees. Options may be
granted with the approval of the Board of Directors and are subject to the
approval of the listing authority. All options must be exercised within 30-days
of the optionee leaving us, otherwise they lapse.  Shareholders
approved the plan and approve the directors’ authority to grant a certain number
of options in their general meeting.
  During
the fiscal year ended December 31, 2009, we issued 7,450,000 share options. The
Balance of outstanding options held by directors is shown in the table
below:
 
 Outstanding
Options
  Name
              Shares Underlying
      Options
              Exercise
      Price
              Purchase Price, if
      any
              Expiration
      DateRoger
      A Leopard
              750,000
              U.S.
      $0.30
              -
              February
      28, 2013500,000
                500,000
              U.S.
      $0.27
                U.S.
      $0.095
              -
                -
              October
      10, 2013
                December
      30, 2013John
      M Smith
              100,000
              U.S.
      $0.24
              -
              February
      25, 2010250,000
              U.S.
      $0.37
              -
              February
      25, 2013100,000
              U.S.
      $0.27
              -
              October
      10, 2013250,000
              U.S.
      $0.095
              
              December
      30, 2013Howard
      E Browning
              250,000
              U.S.
      $0.23
              -
              June
      30, 2010250,000
              U.S.
      $0.30
              
              February
      28, 2013250,000
              U.S.
      $0.095
              
              December
      30, 2013M.J.B.
      Brickell
              250,000
              U.S.
      $0.095
              
              December
      9, 2014
 
 24
 
 Item
      7.
              Major
      Shareholders and Related Party
Transactions
 
 7A.
              Major
      Shareholders
  Past
development expenditures were and are currently funded through a Credit Facility
Agreement with Epsom Asset Management Ltd (“Epsom”), whose clients collectively
hold less than 15% of the equity interest in us.  Epsom has no control
over these shares as they are held by clients in their own
right.  Subject to the foregoing, we are not directly or indirectly
owned or controlled by any other corporation or by any foreign
government.  Further, we do not know of any arrangement, which may by
its operation result in a change in our control at some subsequent
date.
  On July
18, 2005, New Star Institutional Managers, Ltd., Family UK Equity Fund, Stephen
Whittaker, Gregor Logan, Mark Beale, Ian Bettie, Timothy Bray, Keith Brown,
Howard Covington, John Duffield, Anna Kirk, Richard Lewis, Rupert Francis James
Henry Ruvigny, Michelle Sanders and Deborah Weekes collectively filed a Schedule
13G with the SEC to report their beneficial ownership of 4,419,000 Common Shares
which constituted 5.5% of the outstanding Common Shares.
  On
January 16, 2006 New Star converted 1,919,000 warrants into Common
Shares.  As per New Star’s latest filing of Schedule 13G/A with SEC,
their current holding is 6,338,000 shares which represented 6.3% of the
outstanding Common Shares.
  During
November 2009, CalciTech was advised that a Schedule 13G has been filed by
Envirinvest Ltd., reporting that it beneficially owns 12.16% of CalciTech’s
Common Stock.
  Envirinvest
Ltd. is a European private investment fund with particular emphasis on
environmental and sustainable technologies. They have been a shareholder and
supporter of the Company since 2002 and substantially increased their stake in
the recent restructuring of CalciTech previously announced.
  As of
December 31, 2009, there were 1,014 record holders of Common Shares in the
United States representing approximately 85.1% of the total shareholders as
reported to be held in the records of Computershare Trust Company, the Registrar
and Transfer Agent for the Common Shares.
 
 7B.
              Related
      Party Transactions
  The
amount paid to our shareholders, directors and officers and their related
companies for consulting and other services totaled U.S. $408,000 and U.S.
$702,000 for the year ended December 31, 2009 and for the year ended December
31, 2008 respectively.
  In the
financial year ended December 31, 2009, this amount included U.S. $7,782 paid to
directors and U.S. $40,875 paid to EuroHelvetia TrustCo S.A. In the financial
year ended December 31, 2008, this amount included U.S. $39,405 paid to
directors (U.S. $6,925 in the period ended December 31, 2007) and U.S. $57,000
paid to EuroHelvetia TrustCo S.A. (U.S. $57,000 in the period ended December 31,
2007), who were contracted by us to act as our exclusive financial
advisors.  EuroHelvetia charge their fees for work related to advice
on private placements, fund raising and project finance.  Roger A.
Leopard, our Chief Executive Officer and President, is also a director of
EuroHelvetia TrustCo S.A.  EuroHelvetia also provides administration
of Epsom.
  The fees
and services were approved by the independent directors.
 
 7C.
              Interest
      of Experts and Counsel.
 
 Not Applicable.
 
 25
 
 Item
      8.
              Financial
      Statements
 
 8A.
              Consolidated
      Statements and Other Financial
Information
 
 We have
attached the following financial statements to this Annual Report:
 
 ·
                Auditors’
      Report.
 
 ·
                Consolidated
      Statement of Financial Position as of December 31, 2009 and December 31,
      2008.
 
 ·
                Consolidated
      Statement of Comprehensive Income for the years ended December 31, 2009,
      December 31, 2008, and December 31,
2007.
 
 ·
                Consolidated
      Statement of Shareholders’ (Deficit) Equity for the years ended December
      31, 2009, December 31, 2008, and December 31,
  2007.
 
 ·
                Consolidated
      Statement of Cash Flows for the years ended December 31, 2009, December
      31, 2008, and December 31,
2007.
 
 ·
                Notes
      to Consolidated Financial
Statements.
 
 Dividend
Policy
 
 We have
never paid any dividends and do not intend to in the near future.
 
 8B.
              Significant
      Changes
 
 None.
  26
 
 Item
      9.
              The
      Offer and Listing
 
 9A.
              Price
      History of Stock
 
 Until
January 19, 2005, our Common Shares were listed in Canada on the TSX Venture
Exchange (“TSX”), under the symbol CLK and in the United States on the OTC
Electronic Bulletin Board (“OTC Bulletin Board”), under the symbol
CLKTF.OB.  On May 15, 2002, our shares were approved to trade on the
Third Segment of the Frankfurt Stock Exchange in Germany, under the symbol
XCH.  However, following our voluntary delist from the TSX, our Common
Shares no longer have a quotation on the Freiverkehr.  In July 2005,
our Common Shares were approved for listing on the OFEX under the symbol CLK.
Due to the high costs of maintaining this listing, our Common Shares were
withdrawn from OFEX in December 2008.
  The high
and low prices for our Common Shares expressed in United States dollars quoted
on the OTC Bulletin Board for the last six (6) months, each quarter for the last
two (2) fiscal years and annually for the last five (5) years are as
follows:
 
 OTC
      Bulletin Board
                
                OFEXUS$
                US$
                
                UK£
                UK£2009
                
                
                
                High
                Low
                
                High
                Low4th
      Qtr ended December 31, 2009
                
                
                
                $
      0.10
                $
      0.05
                
                N/A
                N/A3rd
      Qtr ended September 30, 2009
                
                
                
                $
      0.10
                $
      0.08
                
                N/A
                N/A2nd
      Qtr ended June 30, 2009
                
                
                
                $
      0.10
                $
      0.06
                
                N/A
                N/A1st
      Qtr ended March 31, 2009
                
                
                
                $
      0.12
                $
      0.02
                
                N/A
                N/A2008
                
                
                
                High
                Low
                
                High
                Low4th
      Qtr ended December 31, 2008
                
                
                
                $
      0.29
                $
      0.20
                
                N/A
                N/A3rd
      Qtr ended September 30, 2008
                
                
                
                $
      0.28
                $
      0.20
                
                N/A
                N/A2nd
      Qtr ended June 30, 2008
                
                
                
                $
      0.29
                $
      0.20
                
                £0.13
                £0.121st
      Qtr ended March 31, 2008
                
                
                
                $
      0.29
                $
      0.20
                
                £0.14
                £0.142007
                
                
                
                High
                Low
                
                High
                Low4th
      Qtr ended December 31, 2007
                
                
                
                $
      0.35
                $
      0.20
                
                £0.16
                £0.123rd
      Qtr ended September 30, 2007
                
                
                
                $
      0.35
                $
      0.16
                
                £0.17
                £0.112nd
      Qtr ended June 30, 2007
                
                
                
                $
      0.44
                $
      0.26
                
                £0.24
                £0.171st
      Qtr ended March 31, 2007
                
                
                
                $
      0.56
                $
      0.35
                
                £0.25
                £0.21Period
                
                
                
                High
                Low
                
                High
                LowJan
      1, 2007 - Dec 31, 2009
                
                
                
                $
      0.56
                $
      0.02
                
                £0.25
                £0.11Jan
      1, 2006 - Dec 31, 2008
                
                
                
                $
      0.60
                $
      0.13
                
                £0.29
                £0.13Jan
      1, 2005 - Dec 31, 2007
                
                
                
                $
      0.29
                $
      0.15
                
                £0.12
                £0.11
   9B.
              Plan
      of Distribution
 
 Not
Applicable.
 
 27
 
 9C.
              Markets
 
 Our
Common Shares are listed in the United States on the OTC Bulletin Board under
the symbol CLKTF.OB.  Up until January 19, 2005, our Common Shares
were listed in Canada on TSX, when delisting from this exchange was
formalized.  With effect from May 15, 2002, our Common Shares have
been listed in Germany on the Third Segment of the Frankfurt Stock Exchange
under the symbol XCH.  However, following our voluntary delist from
the TSX-V, our shares no longer have a quotation on the
Freiverkehr.  In July 2005, our Common Shares were approved for
listing on the PLUS Markets (then still named OFEX) under the symbol CLK. Due to
the high cost of maintaining this listing and the lack of market makers provided
by the PLUS markets, we decided to delist our shares in December
2008.
 
 9D.
              Selling
      Shareholders
 
 Not Applicable.
 
 9E.
              Dilution
 
 Not Applicable.
 
 9F.
              Expenses
      of the Issue
 
 Not Applicable.
 
 Item
      10.
              Additional
      Information
 
 10A.
              Share
      Capital
 
 Not
Applicable.
 
 10B.
              Memorandum
      and Articles of Association
  We were
incorporated on November 9, 1978 in from British Colombia, Canada.  On
February 13, 1995, we filed a memorandum of continuance to reincorporate
from British Colombia, Canada to Bermuda.  On September 11, 2000, we
amended our Articles to change our name to CalciTech Ltd.
 
 Common
Shares
  We are
authorized to issue 300,000,000 Common Shares, par value $0.001.  All
issued and outstanding Common Shares are fully paid and
non-assessable.  Each holder of record of Common Shares is entitled to
one vote for each common share so held on all matters requiring a vote of
shareholders, including the election of directors.  Shareholders are
not entitled to cumulative voting for directors.  The holders of
Common Shares will be entitled to dividends on a pro-rata basis, if and when
declared by the Board of Directors.  There are no preferences,
conversion rights, pre-emptive rights, subscription rights, or restrictions on
transfers attached to the Common Shares.  In the event of our
liquidation, dissolution or winding up, the shareholders are entitled to
participate in the distribution of our assets available after satisfaction of
the claims of creditors.
 
 Powers
and Duties of Directors
  The
Directors shall manage or supervise the management of our affairs and business
and shall have authority to exercise all such powers as are not, by the Company
Act, Articles or Bye-laws, required to be exercised by the shareholders in a
general meeting or prohibited by law.
  Directors
serve for one (1) year, until the next annual meeting of
shareholders.  In general, a Director who is, in any way, directly or
indirectly interested in an existing or proposed contract or transaction with us
whereby a duty or interest might be created to conflict with his duty or
interest as a director, shall declare the nature and extent of his interest in
such contract or transaction or the conflict or potential conflict with his duty
and interest as a director.  Such a Director shall not vote in respect
of any such contract or transaction with us if the Chairman disqualifies
him.  If he votes, his vote shall not be counted, but he shall be
counted in the quorum present at the meeting at which such a vote is
taken.  The shareholders at the general meeting shall determine the
remuneration of the Directors.  However, notwithstanding the
foregoing, Directors shall be paid all expenses incurred in attending meetings
or conducting business on our behalf.
  28
  The
Directors may from time to time on our behalf:  (a) borrow money in
such manner and amount from such sources and upon such terms and conditions as
they think fit; (b) issue bonds, debentures and other debt obligations; or (c)
mortgage, charge or give other security on the whole or any part of our property
and assets.
  Our
Directors are not required to be residents of Bermuda.  There is no
age limitation or minimum share ownership for our Directors.
 
 Shareholders
 
 An Annual General Meeting of
Shareholders shall be held once in every year at such time and place as may be
determined by the Directors.  Notice of the meeting must be given not
less than twenty-one (21) nor more than fifty (50) days.  A quorum at
an Annual General Meeting and Special Meeting shall be two
shareholders.  There is no limitation imposed by the laws of Bermuda
or by the charter or other constituent documents of us on the right of a
non-resident to hold or vote Common Shares.
 
 In accordance with our Bye-laws ,
Directors shall be elected by an “ordinary resolution” which means (a) a
resolution passed by our shareholders in a General Meeting by a simple majority
of the votes cast in person or by proxy, or (b) a resolution that has been
submitted to our shareholders who would have been entitled to vote on it in
person or by proxy at our general meeting and that has been consented to in
writing by all of our shareholders entitled to vote on it.
 
 The Bermuda law and our Articles and
Bye-laws contain no provisions that would prevent or delay a change in control
of us.
 
 10C.
              Material
      Contracts
 
 Credit Facility Agreement between
Epsom Investment Services N.V. and CalciTech Ltd. dated February 27,
1998.  On February 28, 1998, we entered into a credit facility
agreement of up to $2,330,000 with Epsom Investment Services N.V. bearing
interest at 8% per annum and a repayment date of 2000.  In November
2008, Epsom Investment Services, N.V., assigned the credit facility to Epsom
Asset Management Ltd. (“Epsom”) following a reorganization of the Epsom Group.
The credit facility has been amended several times over the years. Currently,
the revolving 1.75% credit facility is for U.S. $3,000,000 of which U.S. $
796,690 is owing as of December 31, 2009.  The credit facility is due
on August 31, 2011.
 
 10D.
              Exchange
      Controls
 
 Control
over foreign currency has existed in Bermuda since 1940 and is now governed by
the Exchange Control Act of 1972 (the “Exchange Control Act”) and regulations
promulgated thereunder and is administered by the Bermuda Monetary Authority
(“Foreign Exchange Control”). The Exchange Control Act regulates foreign
currency transactions between a resident of Bermuda and a non-resident of
Bermuda.  However, exempted companies, like us, are designated as
“non-resident” for purposes of the Exchange Control Act, and as such, are
entitled to maintain foreign currency bank accounts and to freely convert the
balances in such accounts into currencies of other countries.  Because
exempted companies are designated as “non-resident” under the Exchange Control
Act, consent from Foreign Exchange Control is required prior to
incorporation.  Prior consent of Foreign Exchange Control is also
required to issue or transfer any share, debenture or other security of an
exempted company.  General permission may be given to issue or
transfer shares or other securities, in connection with a public issue, which
are to be freely transferable.  We received Bermuda’s permission to
transfer our shares, which may be traded on the OTC Bulletin Board.
  29
 
 10E.
              Taxation
 
 There are no income, profits,
capital gains, sale of goods, death, or inheritance taxes in
Bermuda.  Exempted companies, such as us, pay annual fees to the
Bermuda government, which are determined by the amount of its share
capital.  Although the United States and the United Kingdom of Great
Britain and Northern Ireland (on behalf of Bermuda) signed a mutual assistance
and insurance tax agreement on July 11, 1986, the agreement does not provide for
the withholding of taxes on the distribution of dividends to United States
taxpayers.  While the convention provides for the sharing of
information, it primarily deals with the taxation of insurance premiums paid by
United States residents to insurance companies domiciled in
Bermuda.
 
 Certain
United States Federal Income Tax Considerations
 
 The following is a summary of United
States federal income tax considerations material to a holder of Common Shares
who is a United States citizen or resident or a United States domestic
corporation who owns the Common Shares ("U.S. Investor").  The summary
is of a general nature only and is not exhaustive of all possible income tax
consequences applicable to U.S. Investors and does not address the tax
consequences of U.S. Investors subject to special provisions of federal income
tax law.
 
 This summary is based on the Internal
Revenue Code of 1986, as amended (the "Code"), Treasury regulations, court
decisions and current administrative rulings and pronouncements of the United
States Internal Revenue Service ("IRS") that are currently applicable, all of
which are subject to change, possibly with retroactive effect.  There
can be no assurance that future changes in applicable law or administrative and
judicial interpretations thereof will not adversely affect the tax consequences
discussed herein.  Potential investors are advised to consult their
own tax advisors regarding the tax consequences of acquiring, holding or
disposing of the Common Shares in light of their particular
circumstances.
 
 Since your United States federal income
and withholding tax treatment may vary depending upon your particular situation,
you may be subject to special rules not discussed below.  Special
rules will apply, for example, if you are:
 
 ·
                an
      insurance company;
  ·
                a
      tax-exempt organization;
  ·
                a
      financial institution;
  ·
                a
      person subject to the alternative minimum
tax;
  ·
                a
      person who is a broker-dealer in
securities;
  ·
                an
      S corporation;
  ·
                an
      expatriate subject to Section 877 of the
  Code;
  ·
                an
      owner of, directly, indirectly or by attribution, 10% or more of the
      outstanding Common Shares; or
  ·
                an
      owner holding Common Shares as part of a hedge, straddle, synthetic
      security or conversion
transaction.
  In addition, this summary is generally
limited to persons holding common stock as “capital assets” within the meaning
of Section 1221 of the Code and whose functional currency is the U.S.
dollar. The discussion below also does not address the effect of any United
States state or local tax law or foreign tax law.  Prospective
investors are advised to consult their own tax advisors with respect to their
particular circumstances and with respect to the effects of state, local or
foreign tax laws to which they may be subject.
  30
  Dividends. For United States
federal income tax purposes, the gross amount of a distribution, including any
foreign withholding taxes, with respect to your Common Shares will be treated as
a taxable dividend to the extent of our current and accumulated earnings and
profits, computed in accordance with United States federal income tax
principles. For taxable years beginning before January 1, 2011, if you are
a non-corporate taxpayer such dividends may be taxed at the lower applicable
capital gains rate provided (1) certain holding period requirements are
satisfied, (2) we are eligible for the benefits of the income tax treaty, and
(3) we are not, for the taxable year in which the dividend was paid, or in
the preceding taxable year, a “passive foreign investment company.”
Non-corporate U.S. Investors are strongly urged to consult their own tax
advisors as to the applicability of the lower capital gains rate to dividends
received with respect to the Common Shares.  Distributions in excess
of our current or accumulated earnings and profits will be applied against and
will reduce your tax basis in your Common Shares and, to the extent in excess of
such tax basis, will be treated as gain from a sale or exchange of such Common
Shares.  You should be aware that we do not intend to calculate our
earnings and profits for United States federal income tax purposes and, unless
we make such calculations, you should assume that any distributions with respect
to common stock generally will be treated as a dividend, even if that
distribution would otherwise be treated as a return of capital or as capital
gain pursuant to the rules described above.  If you are a
corporation, you will not be allowed a deduction for dividends received in
respect of distributions on Common Shares, which is generally available for
dividends paid by U.S. corporations.
  A
dividend distribution will be treated as foreign source income and will
generally be classified as “passive income” or, in some cases, “financial
services income” for United States foreign tax credit purposes.  For
taxable years beginning after December 31, 2006, dividends will generally
constitute “passive category income” but could, in the case of certain U.S.
Investors, constitute “general category income.” The rules relating to the
determination of the foreign tax credit, or deduction in lieu of the foreign tax
credit, are complex and you should consult your own tax advisors with respect to
those rules.
  Dispositions of Common
Shares.  Subject to the discussion below of the consequences of
being treated as a passive foreign investment company, gain or loss realized by
a U.S. Investor (other than a 10-percent shareholder) on the sale or other
disposition of Common Shares will be subject to United States federal income tax
as capital gain or loss in an amount equal to the difference between such U.S.
Investor’s basis in the Common Shares and the amount realized on the
disposition.  In general, such capital gain or loss will be long-term
capital gain or loss if the U.S. Investor has held the Common Shares for more
than one year at the time of the sale or exchange.  If you are an
individual, such realized long-term capital gain is generally subject to a
reduced rate of United States federal income tax. Limitations may apply to your
ability to offset capital losses against ordinary income.
  In
general, gain from a sale, exchange or other disposition of the Common Shares by
a U.S. Investor will be treated as U.S. source income.  Therefore the
use of foreign tax credits relating to any foreign taxes imposed upon such sale
may be limited. You are strongly urged to consult your own tax advisors as to
the availability of tax credits for any foreign taxes withheld on the sale of
Common Shares.
 
 Special
United States Federal Income Tax Considerations
  Passive Foreign Investment
Company.  Management has determined that we have not been a
passive foreign investment company ("PFIC") for United States federal income tax
purposes for prior taxable years and believe that we will not be treated as a
PFIC for the current and future taxable years, but this conclusion is a factual
determination made annually and thus subject to change. We will be a PFIC with
respect to a U.S. Investor if, for any taxable year in which such U.S. Investor
held our Common Shares, either (i) at least 75% of our gross income for the
taxable year is passive income, or (ii) at least 50% our assets are attributable
to assets that produce or are held for the production of passive
income.  In each case, we must take into account a pro rata share of
the income and the assets of any company in which we own, directly or
indirectly, 25% or more of the stock by value (the "look-through"
rules).  Passive income generally includes dividends, interest,
royalties, rents (other than rents and royalties derived from the active conduct
of a trade or business and not derived from a related person), annuities, and
gains from assets that produce passive income.  Because we are not
publicly traded as defined under the statute and regulations governing PFICs,
and are not a controlled foreign corporation ("CFC"), we would apply the 50%
asset test based on fair market values unless we elect to use the adjusted tax
bases of our assets.
  31
  If we are
a passive foreign investment company for any taxable year during which a U.S.
Investor holds Common Shares the U.S. Investor will be subject to special tax
rules with respect to:
 
 ·
                any
      “excess distribution” that the U.S. Investor receives on Common Shares,
      and
 
 ·
                any
      gain the U.S. Investor realizes from a sale or other disposition
      (including a pledge) of the Common Shares, unless the U.S. Investor makes
      a “mark-to-market” election as discussed
below.
  Distributions
the U.S. Investor receives in a taxable year that are greater than 125% of the
average annual distributions the U.S. Investor received during the shorter of
the three preceding taxable years or the U.S. Investor’s holding period for the
Common Shares will be treated as an excess distribution. Under these special tax
rules:
 
 ·
                the
      excess distribution or gain will be allocated ratably over your holding
      period for the Common Shares,
 
 ·
                the
      amount allocated to the current taxable year, and any taxable year prior
      to the first taxable year in which we were a passive foreign investment
      company, will be treated as ordinary income,
and
 
 ·
                the
      amount allocated to each other year will be subject to tax at the highest
      tax rate in effect for that year and the interest charge generally
      applicable to underpayments of tax will be imposed on the resulting tax
      attributable to each such
year.
  The tax
liability for amounts allocated to years prior to the year of disposition or
“excess distribution” cannot be offset by any net operating losses, and gains
(but not losses) realized on the sale of the Common Shares cannot be treated as
capital, even if the U.S. Investor holds the Common Shares as capital
assets.
  A U.S.
Investor of a passive foreign investment company may avoid taxation under the
excess distribution rules discussed above by making a “qualified electing fund”
election to include the U.S. Investor’s share of our income on a current basis.
However, a U.S. Investor may make a qualified electing fund election only if we,
as a passive foreign investment company, agree to furnish the shareholder
annually with certain tax information.  We do not presently intend to
prepare or provide such information.
  Alternatively,
a U.S. Investor of “marketable stock” in a passive foreign investment company
may make a mark-to-market election for stock of a passive foreign investment
company to elect out of the excess distribution rules discussed
above.  If a U.S. Investor makes a mark-to-market election for the
Common Shares, the U.S. Investor will include in income each year an amount
equal to the excess, if any, of the fair market value of the Common Shares as of
the close of the U.S. Investor’s taxable year over the U.S. Investor’s adjusted
basis in such shares.  A U.S. Investor is allowed a deduction for the
excess, if any, of the adjusted basis of the shares over their fair market value
as of the close of the taxable year only to the extent of any net mark-to-market
gains on the shares included in the U.S. Investor’s income for prior taxable
years. Amounts included in a U.S. Investor’s income under a mark-to-market
election, as well as gain on the actual sale or other disposition of the Common
Shares are treated as ordinary income. Ordinary loss treatment also applies to
the deductible portion of any mark-to-market loss on the Common Shares, as well
as to any loss realized on the actual sale or disposition of the Common Shares,
to the extent that the amount of such loss does not exceed the net
mark-to-market gains previously included for such Common Shares. A U.S.
Investor’s basis in the Common Shares will be adjusted to reflect any such
income or loss amounts. The tax rules that apply to distributions by
corporations which are not passive foreign investment companies would apply to
distributions by us.
  32
  The
mark-to-market election is available only for stock which is regularly traded on
a national securities exchange that is registered with the Securities and
Exchange Commission, or the national market system established pursuant to
section 11A of the Exchange Act, or any exchange or market that the IRS has
determined has rules sufficient to carry out the purposes of the income tax
rules.  We are not currently a company meeting the requirements of
mark-to-market so such an election is not currently available if we were to be a
PFIC.
 
 Non-U.S.
Investors
  A
Non-U.S. Investor generally will not be subject to U.S. federal income tax on
dividends paid by us with respect to our Common Shares unless the income is
effectively connected with the Non-U.S. Investor’s conduct of a trade or
business in the United States.
  A
Non-U.S. Investor generally will not be subject to U.S. federal income tax
on any gain attributable to a sale or other disposition of our Common Shares
unless such gain is effectively connected with the Non-U.S. Investor’s conduct
of a trade or business within the United States or the Non-U.S. Investor is a
natural person who is present in the United States for 183 days or more and
certain other conditions exist.
  Dividends
and gains that are effectively connected with a Non-U.S. Investor’s conduct of a
trade or business in the United States generally will be subject to tax in the
same manner as they would be if the Non-U.S. Investor were a U.S. Investor,
except that the passive foreign investment company rules will not
apply.  Effectively connected dividends and gains received by a
corporate Non-U.S. Investor may also be subject to an additional branch profits
tax.
 
 U.S. Information Reporting and
Backup Withholding
  In
general, information reporting requirements will apply to dividends in respect
of our Common Shares, or the proceeds received on the sale, exchange or
redemption of our Common Shares paid within the United States (and, in certain
cases, outside the United States) to U.S. Investors other than certain exempt
recipients, such as corporations, and backup withholding tax may apply to such
amounts if the U.S. Investor fails to provide an accurate taxpayer
identification number or to report interest and dividends required to be shown
on its U.S. federal income tax returns.  The amount of any backup
withholding from a payment to a U.S. Investor will be allowed as credit against
the U.S. Investor’s U.S. federal income tax liability provided that the
appropriate returns are filed. Holders that are not U.S. persons generally are
not subject to information reporting or backup withholding, but such holders may
be required to provide certification as to their Non-U.S. status.
  A U.S.
Investor who holds Common Shares in any year in which we are a passive foreign
investment company would be required to file IRS Form 8621 regarding
distributions received on our shares and any gain realized on the disposition of
our Common Shares.
 
 10F.
              Dividends
      and Paying Agents.
 
 Not
Applicable.
 
 10G.
              Statement
      of Experts.
 
 Not
Applicable.
 
 33
  10H.
              Documents
      on Display.
 
 We file
Annual Reports and other information with the Securities and Exchange
Commission. These accounts are filed electronically at the SEC Edgar
website.  You may read and copy any document that we file at the
Commission’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549
or by accessing the SEC's website (http://www.sec.gov).  Please call
the Securities and Exchange Commission at 1-800-SEC-0330 for more information
about the Public Reference Rooms.
 
 Copies of our material contracts are
kept in our  administrative headquarters.
 
 10I.
              Subsidiary
      Information
 
 Not
Applicable.
 
 Item
11.  Quantitative and Qualitative Disclosures About Market
Risk
 
 We have no significant market sensitive
instruments other than foreign currency transactions discussed in Item
5.A.
 
 Item
12.  Description of Securities Other than Equity
Securities
 
 Not
Applicable.
 
 Item
13.  Defaults, Dividend Arrearages and Delinquencies
 
 None.
 
 Part
II
 
 Item
14.  Material Modifications to the Rights of Security Holders and Use
of Proceeds
 
 None.
 
 Item
15. Controls and Procedures.
 
 (a) Disclosure Controls and
Procedures.
  As a Bermuda company listed on the
Over-the-Counter Bulletin Board (OTCBB), CalciTech complies with the disclosure
requirements of the Securities and Exchange Commission (SEC) and the OTCBB for
foreign private issuers. These include the requirement to make certain filings
with the SEC. As a foreign private issuer, some of the SEC’s regulations and
requirements which apply to domestic issuers are not applicable to CalciTech.
CalciTech’s reports, including its annual report on Form 20-F, are available at
www.calcitech.com/investors.
  As of the end of the period covered by
this annual report, an evaluation was carried out under the supervision of
management, including the Chief Executive Officer (CEO) and Chief Financial
Officer (CFO), of the effectiveness of CalciTech’s disclosure controls and
procedures (as defined in Rule 13a–15e) under the US Securities Exchange Act of
1934.  Based upon that evaluation, the CEO and CFO concluded that
these disclosure controls and procedures were effective as of the end of the
period covered by this annual report.  No significant changes were
made in CalciTech’s internal controls or in other factors that could
significantly affect these controls subsequent to the date of their
evaluation.
  In
addition, our officers have also concluded that our disclosure controls and
procedures are effective to ensure that information required under the Exchange
Act is accumulated and communicated to our management, including our chief
executive officer and chief financial officer, to allow all timely decisions
regarding required disclosure.
  34
 
 It should
be noted that while our management believes that our disclosure controls and
procedures provide a reasonable level of assurance, they do not expect that our
disclosure controls and procedures or internal financial controls will prevent
all errors and fraud.  A control system, no matter how well conceived
or operated, can provide only reasonable, not absolute, assurance that the
objectives of the control system are met.
  (b) Management’s Annual Report on
Internal Control over Financial Reporting.
  The management of CalciTech Ltd.
(CalciTech) is responsible for establishing and maintaining adequate internal
control over financial reporting. CalciTech’s internal control over financial
reporting is designed to provide reasonable assurance regarding the preparation
and fair presentation of published financial statements in accordance with
International Financial Reporting Standards (IFRS) as issued by the
International Accounting Standards Board. CalciTech’s internal control over
financial reporting includes those policies and procedures that:
   ·
              Pertain
      to the maintenance of records that, in reasonable detail, accurately and
      fairly reflect transactions and dispositions of
  assets;
   ·
              Provide
      reasonable assurance that transactions are recorded as necessary to permit
      preparation and fair presentation of financial statements, and that
      receipts and expenditures of the company are being made only in accordance
      with authorizations of CalciTech management;
and
   ·
              Provide
      reasonable assurance regarding prevention or timely detection of
      unauthorized acquisition, use or disposition of the company’s assets that
      could have a material effect on the financial
  statements.
  Because of its inherent limitations,
internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.
  CalciTech management assessed the
effectiveness of CalciTech’s internal control over financial reporting as of
December 31, 2009 based on the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO) in Internal Control-Integrated
Framework, Guidance for Smaller Public Companies. Based on this assessment,
management believes that, as of December 31, 2009, CalciTech’s internal control
over financial reporting was effective.
  (c) Attestation Report of the
Registered Public Accounting Firm.
  Not Applicable.
  (d) Changes in Internal Control over
Financial Reporting.
  None.
  35
  Item
16.
 
 16A
              Audit
      Committee Financial Report
  There are
currently two members on the Audit Committee.  Mr. Michael J.B.
Brickell and Dr. Howard Browning constitute the members of the Audit
Committee.  Both Messrs Smith and Browning are independent
directors.  Due to the size of the Audit Committee, the Board has not
determined that a member of the Audit Committee is qualified as an Audit
Committee Financial Expert.
 
 16B
              Code
      Of Ethics
  We have
adopted a "code of ethics" (as that term is defined in Form 20-F) (the "Code of
Ethics"), which is available on our website at www.calcitech.com.
 
 16C
              Principal
      Accountant Fees And Services
  The
independent auditor for the fiscal years ended December 31, 2009, December 31,
2008 and December 31, 2007 was HW Fisher & Co.
 
 Audit
Fees
 
 The
aggregate fees billed by HW Fisher & Co for professional services rendered
for the audit of our annual financial statements on Form 20-F for the fiscal
year ended December 31, 2009 was $50,000.
 
 The
aggregate fees billed by HW Fisher & Co for professional services rendered
for the audit of our annual financial statements on Form 20-F for the fiscal
year ended December 31, 2008 was $53,250.
 
 The
aggregate fees billed by HW Fisher & Co for professional services rendered
for the audit of our annual financial statements on Form 20-F for the fiscal
year ended December 31, 2007 was $55,000.
  Audit-Related
Fees
 
 The
aggregate fees billed for assurance and related services by the principal
accountant that are reasonably related to the performance of the audit or review
of our financial statements for the year ended December 31, 2009 was $NIL,
December 31, 2008 was $NIL and December 31, 2007 was $ NIL
 
 Tax
Fees
 
 The
aggregate fees billed for tax compliance, tax advice and tax planning rendered
by our independent auditors for the fiscal year ended December 31, 2009 was
$NIL, December 31, 2008 was $NIL, and December 31, 2007 was $NIL.
 
 All
Other Fees
 
 The
aggregate fees billed for all other professional services rendered by our
independent auditors for the fiscal year ended December 31, 2009 was $NIL,
December 31, 2008 was $NIL, and December 31, 2007 was $NIL.
 
 The Audit Committee does not have any
pre-approval policies or procedures. The percentage of hours expended on the
principal accountant's engagement to audit our financial statements for the most
recent fiscal year that were attributed to work performed by persons other than
the principal accountant's full-time, permanent employees was 0%.
 
 16D
              Exemptions
      From The Listing Standards For Audit
Committees
 
 Not applicable.
  36
  16E
              Purchases
      Of Equity Securities By The Issuer And Affiliated
    Purchasers
 
 None.
 
 Part
III
 
 Item
17.  Financial Statements
 
 The following Financial Statements
pertaining to us are filed as part of this Annual report:
 
 ·
                Auditors’
      Report.
 
 ·
                Consolidated
      Statement of Financial Position as of December 31, 2009 and December 31,
      2008.
 
 ·
                Consolidated
      Statement of Comprehensive Income for the years ended December 31, 2009,
      December 31, 2008, and December 31,
2007.
 
 ·
                Consolidated
      Statement of Shareholders’ (Deficit) Equity for the years ended December
      31, 2009, December 31, 2008, and December 31,
  2007.
 
 ·
                Consolidated
      Statement of Cash Flows for the years ended December 31, 2009, December
      31, 2008, and December 31,
2007.
 
 ·
                Notes
      to Consolidated Financial
Statements.
 
 Item
18.  Financial Statements
 
 See Item 17.
 
 Item
19.  Exhibits
 
 Exhibit
No.   Name
 
 1.1
              Articles
      of Kemgas Ltd. (1)1.2
              Altered
      Memorandum of Kemgas. (1)1.3
              Altered
      Memorandum of Kemgas, dated July 29, 1994 (2)1.4
              Certificate
      of Continuance to Bermuda, dated February 13, 1995 (2)1.5
              Bye-Laws
      of Kemgas, as adopted June 1995 (2)1.6
              Certificate
      of Incorporation on Change of Name dated September 11, 2000
      (3)1.7
              Certificate
      of Deposit of Memorandum of Increase of Share Capital, dated January 5,
      2010*4.1
              Addendum
      to Credit Facility Agreement between Epsom Investment Services N.V. and
      CalciTech Ltd. dated February 28, 2005 (4)4.2
              Addendum
      to Credit Facility Agreement between Epsom Investment Services N.V. and
      CalciTech Ltd. dated April 2006 (5)
  37
  4.3
              Addendum
      to Credit Facility Agreement between Epsom Investment Services N.V. and
      CalciTech Ltd. dated August 15, 2006 (5)4.4
              Addendum
      to Credit Facility Agreement between Epsom Investment Services N.V. and
      CalciTech Ltd. dated February 25, 2009*4.5
              Addendum
      to Credit Facility Agreement between Epsom Investment Services N.V. and
      CalciTech Ltd. dated March 31, 2010*4.6
              Form
      of 5% Convertible Debenture due February 28, 2005 (4)4.6
              Form
      of Addendum to 5% Convertible Debenture Due February 28, 2005
      (4)4.7
              Consulting
      Agreement between CalciTech Ltd. and H.J. Mark Tompkins dated February 25,
      2005 (4)8.1
              List
      of Subsidiaries (4)12.1
              Certification
      of the Principal Executive Officer under the Sarbanes-Oxley
      Act*12.2
              Certification
      of the Principal Financial Officer under the Sarbanes-Oxley
      Act*13.1
              Certification
      under Section 1350*
 
 ____________________________________________
 *
                To
      be filed herewith
 (1)
                Previously
      filed with Registration Statement on Form 20-F under the Securities
      Exchange Act of 1934on
      June 29, 1992.
 (2)
                Previously
      filed with the Form 20-F submitted for the fiscal year ended February 28,
      1997.
 (3)
              Previously
      filed with the Form 20-F submitted for the fiscal year ended February 29,
      2000.
 (4)
                Previously
      filed with the Form 20-F submitted for the fiscal year ended February 28,
      2005.
 (5)
              Previously
      filed with the Form 20-F submitted for the fiscal year ended February 28,
      2006.
  38
  SIGNATURE
 
 
 The registrant hereby certifies that
it meets all of the requirements for filing on Form 20-F and that it has duly
caused and authorized the undersigned to sign this Annual Report on Form 20-F on
its behalf.
   DATED:
      June 25, 2010
              CALCITECH
      LTD.By:
              /s/
      Roger A. LeopardRoger
      A. LeopardPresident
      and Chief Executive Officer




39



















CONSOLIDATED
FINANCIAL STATEMENTS
    December
31, 2009













Report of
Independent Auditors
 CalciTech
Ltd
 
 
 To
the shareholders and board of directors of CalciTech Ltd
 
 
 We have
audited the accompanying consolidated balance sheet of CalciTech Ltd as of
December 31, 2009, December 31, 2008 and December 31, 2007, the related
consolidated statement of operations, shareholders' equity (deficiency), and
cash flows for the year ended December 31, 2009, December 31, 2008, and December
31, 2007. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
 
 We
conducted our audit in accordance with International Standards on Auditing and
with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
 
 The
financial statements have been prepared in accordance with International
Financial Reporting Standards, as issued by the International Accounting
Standards Board.
 
 In our
opinion, the financial statements referred to above present fairly, in all
material respects, the consolidated financial position of CalciTech Ltd as of
December 31, 2009, December 31, 2008 and December 31, 2007, and the consolidated
results of its operations and its cash flows for the years ended December 31,
2009, December 31, 2008, and December 31, 2007 in accordance with International
Financial Reporting Standards, as issued by the International Accounting
Standards Board.
 
 The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. As discussed in Note 2.1 to the financial
statements, the Company has incurred losses and negative cash flows from
operations for the years ended December 31, 2009, December 31, 2008, and
December 31, 2007. These matters raise doubt about its ability to continue as a
going concern. Management plans in regard to these matters are also described in
Note 2.1. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
 
 
 H. W.
Fisher & Company
 Chartered
Accountants
 Acre
House
 11-15
William Road
 London
 NW1
3ER
 United
Kingdom




F-2


CALCITECH
LTD
 CONSOLIDATED
STATEMENT OF FINANCIAL POSITION
 As
of December 31, 2009, December 31, 2008 and December 31, 2007
 (amounts
in thousands of US dollars, except per share data)




Notes
                  
                  
                  Year
      to
                    Dec
      31, 2009
                  
                  
                  Year
      to
                    Dec
      31, 2008
                  
                  
                  Year to
                    Dec 31,
    2007ASSETS
                  
                  
                  
                  
                  $
                  
                  
                  $
                  
                  
                  $Current
      assetsCash
      and cash equivalents
                  
                  
                  2.6
                  
                  
                  
                  22
                  
                  
                  
                  26
                  
                  
                  
                  117Inventories
                  
                  
                  
                  
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  7Receivables,
      prepaid expensesand
      other current assets
                  
                  
                  3
                  
                  
                  
                  165
                  
                  
                  
                  233
                  
                  
                  
                  277Total
      current assets
                  
                  
                  
                  
                  
                  
                  187
                  
                  
                  
                  259
                  
                  
                  
                  401Non-current
      assetsProperty,
      plant and equipment, net
                  
                  
                  4
                  
                  
                  
                  1,023
                  
                  
                  
                  1,029
                  
                  
                  
                  1,181Intangible
      assets
                  
                  2.8
      and 5
                  
                  
                  
                  6,996
                  
                  
                  
                  5,869
                  
                  
                  
                  3,867Total
      non-current assets
                  
                  
                  
                  
                  
                  
                  8,019
                  
                  
                  
                  6,898
                  
                  
                  
                  5,049TOTAL
      ASSETS
                  
                  
                  
                  
                  
                  $
                  8,206
                  
                  
                  $
                  7,157
                  
                  
                  $
                  5,450






The
accompanying notes are an integral part of the consolidated financial
statements




F-3




CALCITECH
LTD
 CONSOLIDATED
STATEMENT OF FINANCIAL POSITION
 As
of December 31, 2009, December 31, 2008 and December 31, 2007
 (amounts
in thousands of US dollars, except per share data)
 The
accompanying notes are an integral part of the consolidated financial
statements




LIABILITIES& SHAREHOLDERS'
      EQUITY
                
                Notes
                
                
                year
      to
                  Dec
      31, 2009
                
                
                year
      to
                  Dec
      31, 2008
                
                
                year
      to
                  Dec
      31, 2007$
                
                
                $
                
                
                $Current
      liabilitiesAccounts
      payable
                
                
                
                
                
                498
                
                
                
                534
                
                
                
                865Accruals
                
                
                
                
                
                168
                
                
                
                353
                
                
                
                211Tax
      provisions
                
                
                2.12
                
                
                
                13
                
                
                
                0
                
                
                
                22Deferred
      gain on sale and leaseback - current portion
                
                
                
                
                
                
                0
                
                
                
                0
                
                
                
                99Hire
      Purchase Agreement - current portion
                
                
                7
                
                
                
                85
                
                
                
                85
                
                
                
                177Deferred
      income - current portion
                
                
                
                
                
                
                0
                
                
                
                31
                
                
                
                27Total
      Current Liabilities
                
                
                
                
                
                $
                764
                
                
                $
                1,003
                
                
                $
                1,401Non
      Current LiabilitiesCredit
      facility
                
                
                6
                
                
                
                797
                
                
                
                5,436
                
                
                
                1,630Deferred
      income - non-current portion
                
                
                
                
                
                
                0
                
                
                
                109
                
                
                
                152Total
      Non Current Liabilities
                
                
                
                
                
                $
                797
                
                
                $
                5,545
                
                
                $
                1,782Long
      Term LiabilitiesConvertible
      debenture notes
                
                
                
                
                
                
                1,500
                
                
                
                0
                
                
                
                0Total
      liabilities
                
                
                
                
                
                $
                3,061
                
                
                $
                6,548
                
                
                $
                3,183Commitments
      and ContingenciesShareholders'
      Equity
                
                
                8Common
      stock, Cdn $ 0.001 par value; 300,000,000 shares authorised; issued &
      fully paid 185,639,086 at December 31, 2009, (126,588,812 at December 31,
      2008) (99,998,665 at December 31, 2007)
                
                
                
                
                
                
                1,898
                
                
                
                1,846
                
                
                
                1,824Share
      premium, holders' options outstanding on credit facility and contribution
      surplus
                
                
                
                
                
                
                48,652
                
                
                
                43,165
                
                
                
                40,661Convertible
      debentures
                
                
                
                
                
                
                2,321
                
                
                
                2,321
                
                
                
                4,642Accumulated
      deficit during the development stage
                
                
                
                
                
                
                (47,474
                )
                
                
                (46,393
                )
                
                
                (44,368
                )Cumulative
      foreign currency translation adjustments
                
                
                
                
                
                
                (252
                )
                
                
                (330
                )
                
                
                (492
                )Total
      Shareholders' Equity
                
                
                
                
                
                
                5,145
                
                
                
                609
                
                
                
                2,267TOTAL LIABILITIES&
      SHAREHOLDERS' EQUITY
      $
                
                
                
                
                
                
                8,206
                
                
                $
                7,157
                
                
                
                5,450






The
accompanying notes are an integral part of the consolidated financial
statements




F-4




CALCITECH
LTD
 CONSOLIDATED
STATEMENT OF COMPREHENSIVE INCOME
 For
the year ended December 31, 2009,
 the
year ended December 31, 2008,
 and
the year ended December 31, 2007,
 (amounts
in thousands of US dollars, except per share data)




Notes
              
              
              year
      to
                Dec
      31, 2009
              
              
              year
      to
                Dec
      31, 2008
              
              
              year
      to
                Dec
      31, 2007$
              
              
              $
              
              
              $Revenues
              
              
              
              
              
              0
              
              
              
              0
              
              
              
              58Cost
      of revenues
              
              
              
              
              
              
              0
              
              
              
              (37
              )
              
              
              (60
              )Gross
      profit
              
              
              
              
              
              
              0
              
              
              
              (37
              )
              
              
              (2
              )General
      and administrative expenses
              
              
              
              
              
              
              965
              
              
              
              1,197
              
              
              
              313Operating
      loss
              
              
              
              
              
              
              (965
              )
              
              
              (1,234
              )
              
              
              (314
              )Interest
      expense
              
              
              
              
              
              
              (103
              )
              
              
              (791
              )
              
              
              (341
              )Loss
      before income taxes
              
              
              
              
              
              
              (1,068
              )
              
              
              (2,025
              )
              
              
              (656
              )Provision
      for income taxes
              
              
              
              
              
              
              (13
              )
              
              
              0
              
              
              
              (22
              )Net
      Loss
              
              
              
              
              
              $
              (1,081
              )
              
              $
              (2,025
              )
      $
              
              
              (678
              )Other
      Comprehensive IncomeExchange
      differences on translation foreign operations
              
              
              
              
              
              $
              78
              
              
              
              163
              
              
              
              (227
              )TOTAL
      COMPREHENSIVE INCOME
              
              
              
              
              
              
              (1,003
              )
              
              
              (1,862
              )
              
              
              (905
              )Net
      loss per share:Basic
              
              
              
              
              
              $
              (0.001
              )
              
              $
              (0.002
              )
      $
              
              
              (0.001
              )Shares
      used in net loss per share calculation:Basic
              
              
              
              
              
              
              150,858,348
              
              
              
              99,998,665
              
              
              
              88,656,114




Please
refer to note 11 for details of related party transactions.






The
accompanying notes are an integral part of the consolidated financial
statements




F-5




CALCITECH
LTD
 CONSOLIDATED
STATEMENT OF SHAREHOLDERS' (DEFICIT) EQUITY
 For
the year ended December 31, 2009,
 the
year ended December 31, 2008,
 and
the year ended December 31, 2007
 (amounts
in thousands of US dollars except number of shares)




Note
              
              Common
      stock
              
              
              Share
      premium, holders'
                option
      outstanding and
                contributed
      surplus
              
              
              Convertible
                debentures
              
              
              Accumulated
      deficit during development stage
              
              
              Cumulative
      foreign currency translation adjustments
              
              
              Total
                consolidated
      shareholders'
                (deficit)
      equityShares
              
              
              $
              
              
              $
              
              
              $
              
              
              $
              
              
              $
              
              
              $Balances,
      December 31, 2006
              
              
              
              88,899,675
              
              
              
              1,813
              
              
              
              37,457
              
              
              
              4,613
              
              
              
              (43,690
              )
              
              
              (269
              )
              
              
              (76
              )Net
      loss
              
              
              
              
              
              
              
              
              
              
              
              (3
              )
              
              
              
              
              
              
              (678
              )
              
              
              (224
              )
              
              
              (905
              )Issuance
      of common stock on conversion
                of
      credit facility
              
              
              
              11,098,990
              
              
              
              11
              
              
              
              3,249
              
              
              
              0
              
              
              
              0
              
              
              
              0
              
              
              
              3,260Debentures:
      non-current portion adjs
              
              
              
              
              
              
              
              
              
              
              
              (42
              )
              
              
              29
              
              
              
              0
              
              
              
              0
              
              
              
              (13
              )Balances,
      December 31, 2007
              
              
              
              99,998,665
              
              
              
              1,824
              
              
              
              40,661
              
              
              
              4,642
              
              
              
              (44,368
              )
              
              
              (493
              )
              
              
              2,266Net
      loss
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (2,025
              )
              
              
              163
              
              
              
              (1,862
              )Issuance
      of common stock on conversion
              
              
              
              26,590,147
              
              
              
              22
              
              
              
              2,504
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              2,526of
      credit facilityDebentures:
      non-current portion adjs
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (2,321
              )
              
              
              
              
              
              
              
              
              
              
              (2,321
              )Balances,
      December 31, 2008
              
              
              
              126,588,812
              
              
              
              1,846
              
              
              
              43,165
              
              
              
              2,321
              
              
              
              (46,393
              )
              
              
              (330
              )
              
              
              609Net
      loss
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (1,081
              )
              
              
              78
              
              
              
              (1,003
              )Issuance
      of common stock on conversion of credit facility and
    creditors
              
              
              
              59,050,274
              
              
              
              52
              
              
              
              5,417
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              5,469Placing
      Fees
              
              
              
              
              
              
              
              
              
              
              
              70
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              70Debentures:
      non-current portion adjs
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              0
              
              
              
              
              
              
              
              
              
              
              
              0Balances,
      December 31, 2009
              
              
              
              185,639,086
              
              
              
              1,898
              
              
              
              48,652
              
              
              
              2,321
              
              
              
              (47,474
              )
              
              
              (252
              )
              
              
              5,145






The
accompanying notes are an integral part of the consolidated financial
statements




F-6




CALCITECH
LTD
 CONSOLIDATED
STATEMENT OF CASH FLOWS
 For
the year ended December 31, 2009,
 the
year ended December 31, 2008,
 the
year ended December 31, 2007
 (amounts
in thousands of US dollars)




year
      to
                Dec
      31, 2009
              
              
              year
      to
                Dec
      31, 2008
              
              
              year
      to
                Dec
      31, 2007$
              
              
              $
              
              
              $Cash
      flows from operating activitiesNet
      loss
              
              
              (1,081
              )
              
              
              (2,025
              )
              
              
              (678
              )Adjustments
      for:Loss
      on disposal of fixed assets
              
              
              36
              
              
              
              0
              
              
              
              0Depreciation
      and amortization
              
              
              12
              
              
              
              131
              
              
              
              139Interest
      expense
              
              
              0
              
              
              
              0
              
              
              
              0Operating
      loss before working capital changes
              
              
              (1,033
              )
              
              
              (1,894
              )
              
              
              (539
              )Changes
      in working capital:Receivables,
      prepayments & current assets
              
              
              68
              
              
              
              51
              
              
              
              (39
              )Accounts
      payable, accruals and provisions
              
              
              (239
              )
              
              
              (211
              )
              
              
              149Net
      cash used in operating activities
              
              
              (1,204
              )
              
              
              (2,054
              )
              
              
              (429
              )Cash
      flows from investing activities in:Purchase
      of property, plant and equipment
              
              
              (23
              )
              
              
              (33
              )
              
              
              (348
              )Plant
      pre-financing, project & product development
              
              
              (1,127
              )
              
              
              (1,893
              )
              
              
              (2,152
              )Patents
              
              
              (19
              )
              
              
              (55
              )
              
              
              (72
              )Net
      cash used in investing activities
              
              
              (1,169
              )
              
              
              (1,981
              )
              
              
              (2,572
              )Cash
      flows from financing activities:Repayment
      of other loans
              
              
              (109
              )
              
              
              (138
              )
              
              
              (197
              )Cash
      outflow from sale and leaseback
              
              
              0
              
              
              
              (92
              )
              
              
              (140
              )Proceeds
      from credit facility
              
              
              (4,639
              )
              
              
              3,806
              
              
              
              50Proceeds
      from convertible note
              
              
              1,500
              
              
              
              0
              
              
              
              0Proceeds
      from conversion
              
              
              5,539
              
              
              
              205
              
              
              
              3,261Net
      cash provided by financing activities
              
              
              2,291
              
              
              
              3,781
              
              
              
              2,974Effect
      of exchange rate changes on cash and cash equivalents
              
              
              78
              
              
              
              163
              
              
              
              (240
              )Net
      decrease in cash & cash equivalents
              
              
              (4
              )
              
              
              (91
              )
              
              
              (268
              )Cash
      and cash equivalents, beginning of year
              
              
              26
              
              
              
              117
              
              
              
              385Cash
      and cash equivalents, end of year
              
              $
              22
              
              
              $
              26
              
              
              $
              117






The
accompanying notes are an integral part of the consolidated financial
statements




F-7




CALCITECH
LTD
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 Year
ended December 31, 2009 (amounts in thousands of US dollars, except share
data)
 
 1.
BUSINESS OF THE
COMPANY
 
 CalciTech
Ltd (the "Company") is incorporated in the jurisdiction of Bermuda. Starting
from the production of acetylene from which revenues were generated until 1997,
the Company changed its business model to concentrate on the production of
precipitated calcium carbonate (PCC). PCC is a white pigment, which can only be
produced from pure, white limestone deposits and is currently mainly used in
filling and, to a lesser extent, in other industrial applications. After an
extended period of development, a PCC technology, substantially different from
the existing technology was discovered and patented. The Company’s technology to
produce Synthetic Calcium Carbonate (“SCC”) can utilize most grades of lime,
including low quality lime or industrial waste lime such as carbide lime and
paper sludge ash. SCC can be applied in a wide variety of industrial
applications including paper, polymers, paints, foods and
pharmaceuticals.
 
 The
Company has been in the development stage since 2000 and revenue from the
principal activity commenced for trial purposes in the year ended February 29,
2004. In 2006, the Company changed its accounting year-end to December 31 partly
to recognise the move from the development stage to the commercialization stage.
New patents have extended the range of waste products, which can be utilized.
Extensive project development and marketing, on a worldwide basis, has taken
place. However, the main thrust during the year has been focused on Europe where
the Company expects to develop its products in a number of industry applications
and build its first plants to produce the offtake required.
 
 2.
BASIS OF PRESENTATION AND SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES
 
 2.1
Going concern
 
 The
financial statements have been prepared assuming the Company will continue as a
going concern. Under the going concern assumption, an entity is ordinarily
viewed as continuing in business for the foreseeable future with neither the
intention nor the necessity of liquidation, ceasing trading or seeking
protection from creditors pursuant to laws or regulations. In assessing whether
the going concern assumption is appropriate, management takes into account all
available information for the foreseeable future, in particular for the twelve
months from the date of approval of the financial statements.
 
 The
Company is in the commercialization stage and has a growing portfolio of defined
products for which samples are being produced and tested by many potential
customers in a wide range of industrial applications. The Company has completed
a number of feasibility studies, some with potential industrial partners, for
the construction of plants to produce SCC and continues to seek out new
projects. An additional patent was filed during the year and will extend the
life of its original patent. Up to December 31, 2009, cumulative losses were
$47,474.
  Management
believes that given the cash and cash equivalents of $22 together with its
working capital credit facility, and the continuing control of expenses, the
Company has sufficient working capital to meet its obligations up to the next 12
months following the date of the
approval of these financial statements. However, when the Company commences the
start-up of the building of commercial plants, this credit facility would be
insufficient and further funding would be required. The Company is currently
working with a number of financial institutions, subject to market conditions,
to secure the necessary funding.
  F-8
 CALCITECH
LTD
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 Year
ended December 31, 2009 (amounts in thousands of US dollars, except share
data)
 The
Company is in the process of finalizing plans to build our first full scale SCC
plants in Europe. Construction is dependent on availability of funds through
financing.
 
 The
Company, through CSME, is now planning a matrix of plants in Europe and has made
presentations to the European Investment Bank (“EIB”) to confirm that such
projects will qualify under its technological innovation program for financial
support. The Company’s financial advisors are currently in negotiations with a
number of UK banks, in the context of the EIB borrowing and funding for all
European plants.
 
 The
German federal state of Sachsen-Anhalt will proceed with the approval process
for the provision of a grant on the planned plant in Leuna after receiving a
house bank’s endorsement of the company’s application. This will contribute 50%
of the capital costs of the 100,000 tonnes per annum planned plant. The Company
expects similar European Union grants, in varying amounts, to be
available.
 
 A working
capital facility has been available from Epsom Asset Management Ltd. (“EAM”)
since February 1998. From time to time, the balance of this facility has been
reduced by the mutually agreed conversion of the balance into the common stock
of the Company, in order to provide on-going working capital. A restructuring of
the debt in order to make available additional working capital was completed in
early 2009. The EAM working capital credit facility of $3,000 is available and
has been extended until August 31, 2011.
 
 During
2007, debentures with a value of $4,642 were re-negotiated by their retirement
against the issue of new 6% debentures with a value of $4,642 to December 31,
2009. In December 2008, following negotiations with the debenture holders, an
agreement was reached whereby all the debenture holders agreed to convert 50% of
their notes, plus accrued interest to December 31, 2008, into common shares of
the Company at a price of $0.095 per share. The notes were further amended with
an interest rate of 1.75% and a new conversion price of $0.75 per share. These
notes were also extended until December 31, 2010.
 
 In
December 2009, the Company authorised a new series of convertible debenture
notes with an annual interest rate of 4% and a conversion rate of $0.40 per
share for a period of two years from date of issue. All other terms and
conditions are the same as the previous series of convertible notes. EAM has
agreed to convert $1,500 of its outstanding facility into these new
notes.
 
 Assets
and liabilities are recorded on the basis that the Company will be able to
realise its assets and discharge its liabilities in the normal course of
business. Accordingly, the financial statements do not include any adjustments
to the carrying values of assets and liabilities that might be necessary should
the Company be unable to continue as a going concern.
 
 F-9
 CALCITECH
LTD
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 Year
ended December 31, 2009 (amounts in thousands of US dollars, except share
data)
 
 2.2
Basis of presentation
 
 The
consolidated financial statements are prepared under the historical cost
convention and they are also presented in accordance with International
Financial Reporting Standards (“IFRS”).
 
 2.3
Principles of consolidation
 
 The
accompanying consolidated financial statements include the accounts of the
Company and its subsidiaries. Intercompany balances and transactions have been
eliminated.
 
 2.4
Use of estimates
 
 The
preparation of financial statements in conformity with International Financial
Reporting Standards requires management to make estimates and assumptions that
affect reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates. For example, the carrying value of the
intangible assets are assumed on the basis that future financing will be secured
to complete the projects thus leading to future income generation.
 
 2.5
Foreign currency translation
 
 The
reporting currency of the Group is the US dollar ($), which is also the
measurement currency of the parent company. The parent company elected the US
dollar as its measurement currency rather than the Bermudan dollar (BMD), which
is the currency of its country of domicile, to reflect the fact that the
majority of its transactions are denominated in US dollars.
 
 The
measurement currency of the Company's operating foreign subsidiaries is their
local currency, generally the Euro. Assets and liabilities of the Company's
foreign subsidiaries are translated into US dollars using the exchange rate in
effect at the balance sheet date. Additionally, their expenses are translated
using exchange rates approximating average rates prevailing during the year.
Translation adjustments that arise from translating their financial statements
from their local currencies to US dollars are accumulated and reflected as a
separate component of shareholders' equity.
 
 Gains and
losses that arise from the effect of exchange rate changes on balances
denominated in currencies other than the measurement currency of each of the
Company and its subsidiaries are included in the statements of operations as
incurred.
  F-10
 CALCITECH
LTD
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 Year
ended December 31, 2009 (amounts in thousands of US dollars, except share
data)
  year
      to
                        Dec
      31, 2009
                      
                      
                      year
      to
                        Dec
      31, 2008
                      
                      
                      year
      to
                        Dec
      31, 2007$
                      
                      
                      $
                      
                      
                      $Unrealised
      gain / (loss) on currencies
                      
                      
                      88
                      
                      
                      
                      (146
                      )
                      
                      
                      370Change
      in foreign currency adjustments
                      
                      
                      78
                      
                      
                      
                      163
                      
                      
                      
                      (225
                      )Exchange
      Gain
                      
                      $
                      166
                      
                      
                      $
                      17
                      
                      
                      $
                      146
 2.6
Cash and cash equivalents
 
 Cash and
cash equivalents include all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.
 
 2.7
Property, plant and equipment
 
 Property,
plant and equipment are stated at historical cost and are depreciated on a
straightline basis over their estimated useful lives:
 
 Plant
      and equipment
                    5
      to 10 yearsOffice
      furniture and equipment
                    3
      to 8 years
  Asset
residual values and useful lives are reviewed and adjusted if appropriate at the
end of each year. The asset carrying amounts are written down to recoverable
amount if greater. Maintenance and repairs are charged to expenses when
incurred. Gains and losses on sale are equal to the proceeds less the carrying
amount and are taken to the statement of comprehensive income.
 
 2.8
Intangible Assets
 
 Expenditure
on intangible assets (Product Development, Project Development, Commercial Plant
pre-financing costs and Patents) will be capitalised and amortised against
production and sales of SCC. Legal expenditure for the protection of technology
developed by the Group is recognised as an expense in the statement of
operations, as incurred, except when additional future economic benefits can be
attributed to such protection at closing date. The intangible assets are not
amortised because the Group is not yet utilizing them on a commercial level.
Amortisation will begin upon the commencement of commercial production.
Management regularly review the intangible assets to consider their carrying
value and whether there is any impairment in light of the project or product
development.
 
 2.9
Research and development
 
 Research
and development costs are expensed as incurred, except for Project Development
and Product Development costs, which are deferred as intangible assets as the
Group can demonstrate all of the following:
  F-11
 CALCITECH
LTD
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 Year
ended December 31, 2009 (amounts in thousands of US dollars, except share
data)
 ●
                  the
      technical feasibility of completing the intangible asset so that it will
      be available for use or sale;
 
 ●
                  its
      intention and ability to use or sell the intangible
  asset;
   ●
                  the
      existence of a market for the output of the intangible asset or the
      intangible asset itself;
 
 ●
                  the
      availability of adequate technical resources to complete the development;
      the availability of adequate financial and other resources to complete the
      development and to use or sell the intangible asset, subject to the
      ability of the Company to continue as a going concern, as described in
      Note 2.1, the carrying value of the intangible assets are assumed on the
      basis that future financing will be secured to complete the projects thus
      leading to future income generation
and;
 
 ●
                  its
      ability to measure the expenditure attributable to the intangible asset
      during its development reliably.
 
 Deferred
Project Development costs of $6,097, Product Development costs of $1,091, and
Patents of $366 are recorded at cost, which include:
 
 ●
                  expenditure
      on materials and services used or consumed in generating the intangible
      asset;
 
 ●
                  the
      salaries, wages and other employment related costs of personnel directly
      engaged in generating the asset,
and
 
 ●
                  any
      expenditure that is directly attributable to generating the asset, such as
      the amortisation of patents used to generate the
  asset.
 
 Any costs
capitalised are amortized on a straight-line basis over the period of expected
future benefit.
 
 The
intangible assets of Project Development and Product Development are not yet
being amortized.
 
 2.10
Net loss per common share
 
 Basic net
loss per share is computed by dividing net loss by the weighted average number
of shares outstanding.
 
 For the
purpose of calculating diluted earnings per share, the net loss attributable to
ordinary shareholders and the weighted average number of shares outstanding is
adjusted for the effects of all dilutive potential ordinary shares. The effects
of anti-dilutive potential ordinary shares are ignored in calculating diluted
earnings per share. Potential ordinary shares are anti-dilutive when their
conversion to ordinary shares would decrease loss per share from continuing
operations. 9,750,000 options have been excluded from the loss per share
calculation, as the effect is anti-dilutive.
 
 2.11
Fair value of financial instruments
 
 Carrying
amounts of certain of the Group's financial instruments including cash and cash
equivalents, accounts receivable, accounts payable, and accrued expenses
approximate fair value due
to their short maturities, based on borrowing rates currently available to the
Company. This would include convertible debentures where the fair value of the
conversion option is recognised under shareholders’ equity.
  F-12
 CALCITECH
LTD
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 Year
ended December 31, 2009 (amounts in thousands of US dollars, except share
data)
 2.12
Deferred and current taxation
 
 Deferred
tax assets and liabilities are determined based on differences between financial
reporting and tax bases of assets and liabilities, and are measured using the
enacted tax rates and laws that will be in effect when the differences are
expected to reverse. Valuation allowances are recorded for deferred tax assets
that are not more likely that not to be realised.
 
 Deferred
tax assets are recognised only to the extent that future taxable profit will be
available such that realisation of the related tax benefit is more likely than
not.
 
 Current
tax is that payable to the Swiss Tax Authorities on profits generated by the
Company’s administrative headquarter company, CalciTech Group Services
S.A.
 
 2.13
Stock options
 
 The
Company has a stock option plan, which allows stock options to be issued up to
10% of the Company’s issued share capital. The Company does not recognise any
compensation expense with respect to stock options as all the exercise prices of
all option issues are abovethe current market price of the Company’s
shares.
 
 2.14
Convertible debt accounting
 
 On issue
of convertible debentures and credit facility, the fair value of the conversion
element is determined. This amount is recognised in shareholders' equity. The
obligation to make future payments of principal and interest to the holder of
the option is calculated using a deemed market interest rate for an equivalent
non-convertible debt. The obligation to make future payments of interest is
carried as a liability until extinguished on conversion or payment. When the
Company has the option to convert the principal and, if applicable, the interest
on these notes, the obligation to make future payments of principal to the
holder is carried as equity.
 
 The fair
value of the liability component, representing the obligation to make future
payments of interest to the holder of the conversion option is calculated on the
issue of the instrument using a deemed market interest rate for an equivalent
non-convertible instrument. The residual amount, representing the value of the
equity conversion component, is included in shareholders'
deficiency.
 
 2.15
Modification of debt instruments
 
 The
Company may effect a modification or an exchange of debt instruments with a
creditor. The modification or exchange may include changes in the principal
amount, interest rate, term to maturity, borrowing currency or creditor. Whether
a modification or exchange of debt instruments represents a settlement of the
original debt or merely a renegotiation of that debt determines
the accounting treatment that is applied by the Group. A modification or
exchange of debt instruments represents a settlement when the terms of the new
or modified debt are substantially changed from the terms of the original debt
instrument. Substantial change occurs when:
  F-13
 CALCITECH
LTD
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 Year
ended December 31, 2009 (amounts in thousands of US dollars, except share
data)
  a.
                          The
      present value of the cash flows under the terms of the modified or new
      debt instrument is at least 10% different from the present value of the
      remaining cash flows under the terms of the original debt
      instrument;
 
 b.
                          There
      is a change in the borrowing currency;
or
 
 c.
                          There
      is a change in the creditor and the original debt is legally discharged by
      the debtor through a cash payment or
otherwise.
 
 If a
modification or an exchange of debt instruments represents a settlement, the
Company calculates a loss or gain that is charged, or credited, to income when
settlement occurs. This loss or gain is the difference between the fair value of
the new debt instrument and the carrying amount of the original debt instrument,
together with all unamortized debits or credits related to the original debt
instrument.
 
 If a
modification or exchange of debt instruments does not represent a settlement
but, instead, is merely a renegotiation of a debt instrument, all existing
deferred debits and credits related to the original debt instrument are
maintained and are amortised over the remaining term of the renegotiated
debt.
 
 2.16
Government grants
 
 Government
grants are recognised when there is reasonable assurance that the Group will
comply with the conditions attaching to them, and the grants will be received or
earned. A government grant that becomes receivable as compensation for research
and development expenses already incurred with no future related costs is
recognised as a reduction in research and development expenses in the period in
which it becomes receivable.
 
 Grants
for the acquisition of assets and development activities that are capitalised
are set off against the cost price of the assets for which grants are
awarded.
 
 2.17
Leases
 
 Leases
are classified as finance leases wherever the terms of the lease transfer
substantially all the risks and rewards of ownership to the lessee. All other
leases are classified as operating leases.
 
 Assets
held under finance leases are recognised as assets of the Group at their fair
value at the date of acquisition or, if lower, at the present value of the
minimum lease payments. The corresponding liability to the lessor is included in
the balance sheet as a finance lease obligation. Lease payments are apportioned
between finance charges and reduction of the lease obligation so as to achieve a
constant rate of interest on the remaining balance of the liability. Finance
charges are charged directly against the statement of operations. Assets held
under finance leases are depreciated at the shorter of the lease term and their
useful economic lives.
  F-14
 CALCITECH
LTD
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 Year
ended December 31, 2009 (amounts in thousands of US dollars, except share
data)
 2.18
Revenue recognition
 
 The
Company has no large-scale commercial SCC plants, and since 2004 has received
revenues from the sale of SCC samples only. Revenue is measured at the fair
value of the consideration received or receivable and represents amounts
receivable for goods and services provided in the normal course of business, net
of discounts, VAT and other sales related taxes.
 
 Interest
is accrued on a time basis, by reference to the principal outstanding and at the
effective interest rate applicable, which is the rate that exactly discounts
estimated future cash receipts through the expected life of the financial asset
to that asset’s net carrying amount.
 
 The
allowance for doubtful accounts reflects management’s best estimate of probable
losses inherent in the accounts receivable balance. Management determines the
allowance based on known troubled accounts, historical experience, and other
currently available evidence. The Group writes off accounts receivable when they
become uncollectible. The Group currently has no allowance for doubtful
accounts.
 
 2.19
Borrowing costs
 
 All
borrowing costs are recognized in the consolidated statement of operations in
the period in which they are incurred.
 
 2.20
Inventories
 
 Inventories
are stated at the lower of cost and net realisable value. The Company has no
inventory at present but will apply the First In First Out (FIFO) method when
this arises.
 
 3.
RECEIVABLES, PREPAID EXPENSES AND OTHER
CURRENT ASSETS
 
 Receivables,
prepaid expenses and other current assets consist of the
following:
  Dec
      31, 2009
                    
                    
                    Dec
      31, 2008
                    
                    
                    Dec
      31, 2007$
                    
                    
                    $
                    
                    
                    $Accounts
      receivable
                    
                    
                    0
                    
                    
                    
                    195
                    
                    
                    
                    90Other
      debtors
                    
                    
                    0
                    
                    
                    
                    0
                    
                    
                    
                    13VAT
      receivable
                    
                    
                    17
                    
                    
                    
                    7
                    
                    
                    
                    72Deposits
                    
                    
                    30
                    
                    
                    
                    16
                    
                    
                    
                    45Prepaid
      expenses
                    
                    
                    118
                    
                    
                    
                    15
                    
                    
                    
                    58Total
                    
                    $
                    165
                    
                    
                    $
                    233
                    
                    
                    $
                    277
  4.
PROPERTY, PLANT AND
EQUIPMENT
 
 Property,
plant and equipment consists of the following:
  F-15
 CALCITECH
LTD
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 Year
ended December 31, 2009 (amounts in thousands of US dollars, except share
data)


Computer
      Equipment
                
                
                Building,
      Plant & Equipment
                
                
                Commercial
      Plant Pre- financing
                
                
                Office
      Furniture & Equipment
                
                
                Total$
                
                
                $
                
                
                
                
                
                
                $
                
                
                $Balance
      at December 31, 2008
                
                
                8
                
                
                
                446
                
                
                
                558
                
                
                
                17
                
                
                
                1.029Additions
                
                
                1
                
                
                
                0
                
                
                
                0
                
                
                
                22
                
                
                
                23Disposals
                
                
                0
                
                
                
                0
                
                
                
                0
                
                
                
                (17
                )
                
                
                (17
                )Depreciation
      during year
                
                
                (7
                )
                
                
                0
                
                
                
                0
                
                
                
                (4
                )
                
                
                (11
                )Foreign
      Currency Adjustments
                
                
                (1
                )
                
                
                0
                
                
                
                0
                
                
                
                
                
                
                
                (1
                )Balance
      at December 31, 2009
                
                $
                1
                
                
                
                446
                
                
                
                558
                
                
                
                18
                
                
                
                1.023Gross
      Amount
                
                
                40
                
                
                
                991
                
                
                
                558
                
                
                
                22
                
                
                
                1.611Accumulated
      Depreciation
                
                
                (39
                )
                
                
                (545
                )
                
                
                0
                
                
                
                (4
                )
                
                
                (588
                )Balance
      at December 31, 2009
                
                $
                1
                
                
                
                446
                
                
                
                558
                
                
                
                18
                
                
                
                1.023




For the
year ended December 31, 2009, the year ended December 31, 2008, and the year
ended December 31, 2007, depreciation expense totalled $12, $132 and $138
respectively. The commercial plant pre-financing costs have been reclassified
and transferred to intangible assets to reflect the true nature of this
asset.
 
 During
the year ended February 29, 2004, the Company disposed of its small-scale plant
and leased it back for an annual rental of €120 ($176) for a period of five
years at the end of which the Company retains the right to re-acquire the plant.
The amount capitalised in respect of this plant is $446, of which depreciation
of $NIL was recognised in the period ending December 31, 2009, as the plant was
not in use during the period (December 31, 2008: $120 and December 31, 2007:
$124). The final payment on the lease agreement was made in February 2010 and
under the terms of the agreement the plant was acquired for €1.
 
 The
assets and liabilities under capital leases are recorded at the lower of present
values of the minimum lease payments or the fair values of the assets. The
assets are included in property and equipment and are depreciated over their
estimated useful lives.
 
 As of
December 31, 2009, the future minimum lease payments under non-cancellable
finance leases for the following periods:
  Not
      later than one year
                
                
                85Later
      than one year and not later than five years
                
                
                0Later
      than five years
                
                
                0Total
      Future minimum lease payments
                
                $
                85
 
 5.
INTANGIBLE
ASSETS
 
 Intangible
Assets can be summarised as following:




F-16


CALCITECH
LTD
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 Year
ended December 31, 2009 (amounts in thousands of US dollars, except share
data)
  Project
      Development
                    
                    
                    Product
      Development
                    
                    
                    Commercial
                      Plant
      Pre
                      financing
                    
                    
                    Patents
                    
                    
                    Total$
                    
                    
                    $
                    
                    
                    $
                    
                    
                    $
                    
                    
                    $Balance
      at December 31, 2008
                    
                    
                    2,124
                    
                    
                    
                    1,435
                    
                    
                    
                    1,944
                    
                    
                    
                    366
                    
                    
                    
                    5,869Reclassification
                    
                    
                    718
                    
                    
                    
                    (718
                    )
                    
                    
                    0
                    
                    
                    
                    0
                    
                    
                    
                    0Additions
                    
                    
                    753
                    
                    
                    
                    374
                    
                    
                    
                    0
                    
                    
                    
                    19
                    
                    
                    
                    1,146Disposals
                    
                    
                    0
                    
                    
                    
                    0
                    
                    
                    
                    0
                    
                    
                    
                    (19
                    )
                    
                    
                    (19
                    )Amortisation
      during period
                    
                    
                    0
                    
                    
                    
                    0
                    
                    
                    
                    0
                    
                    
                    
                    0
                    
                    
                    
                    0Foreign
      Currency Adjustments
                    
                    
                    0
                    
                    
                    
                    0
                    
                    
                    
                    0
                    
                    
                    
                    0
                    
                    
                    
                    0Balance
      at December 31, 2009
                    
                    $
                    3,595
                    
                    
                    
                    1,091
                    
                    
                    
                    1,944
                    
                    
                    
                    366
                    
                    
                    
                    6,996Gross
      Amount
                    
                    
                    3,595
                    
                    
                    
                    1,091
                    
                    
                    
                    1,944
                    
                    
                    
                    393
                    
                    
                    
                    7,023Accumulated
      Amortisation
                    
                    
                    0
                    
                    
                    
                    0
                    
                    
                    
                    0
                    
                    
                    
                    (27
                    )
                    
                    
                    (27
                    )Balance
      at December 31, 2009
                    
                    $
                    3,595
                    
                    
                    
                    1,091
                    
                    
                    
                    1,944
                    
                    
                    
                    366
                    
                    
                    
                    6,996


For the
year ended December 31, 2009, the year ended December 31, 2008 and the year
ended December 31, 2007, amortization expense totaled $NIL, $NIL and $2
respectively. When full-scale production plants are producing revenues, patents
will be amortised on a straightline basis over the life of the
patent.
 
 6.
CREDIT FACILITY
AGREEMENT
 
 Since
February 28, 1998 the Company has had available a credit facility with EAM. From
time to time, the balance due payable under the facility has been reduced, by
mutually agreed conversions of the debt into the common stock of the Company. A
restructuring of the debt in order to make available additional working capital
was completed in early 2009. During February 2009, EAM agreed to convert the
full amount of the credit facility as at December 31, 2008, amounting to $5,436,
at a price of $0.095 per share. The credit facility was increased to $3,000 with
a reduced interest rate of 1.75% per annum. The conversion of the aforementioned
EAM facility and creditors resulted in the issue of 59,050,274 common
shares.
 
 As part
of the restructuring, the original charge agreement with Epsom Investment
Services N.V. was assigned, by mutual consent to EAM providing the first charge
over the intellectual property rights, collateralized by 100% of the issued
share capital of CalciTech Synthetic Minerals Ltd. with the new
facility.
 
 In
December 2009, EAM agreed to convert $1,500 of its credit facility into a new
series of convertible debenture notes and to extend the facility of $3,000 to
31stAugust
2011.
 
 The
credit facility is presented as follows:




F-17


CALCITECH
LTD
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 Year
ended December 31, 2009 (amounts in thousands of US dollars, except share
data)
  year
      to
                    Dec
      31, 2009
                  
                  
                  year
      to
                    Dec
      31, 2008
                  
                  
                  year
      to
                    Dec
      31, 2007$
                  
                  
                  $
                  
                  
                  $Face
      value of note issued during the year
                  
                  
                  2,241
                  
                  
                  
                  3,629
                  
                  
                  
                  3,136Interest
      expense
                  
                  
                  56
                  
                  
                  
                  177
                  
                  
                  
                  175Conversion
      of note into common shares
                  
                  
                  (5,436
                  )
                  
                  
                  0
                  
                  
                  
                  (3,261
                  )Convertible
      debenture notes
                  
                  
                  (1,500
                  )Payments
      made during the year
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  0(4,639
                  )
                  
                  
                  3,806
                  
                  
                  
                  50Non-current
      liability at beginning ofperiod
                  
                  
                  5,436
                  
                  
                  
                  1,630
                  
                  
                  
                  1,580Non-current
      liability at end of period
                  
                  $
                  797
                  
                  
                  $
                  5,436
                  
                  
                  $
                  1,630Effective
      interest rate at period end
                  
                  
                  1.75
                  %
                  
                  
                  8.50
                  %
                  
                  
                  7.75
                  %




The
caption “Payments made during the year” includes the effect of direct offset to
the credit facility of various transactions in the total amount of $NIL during
the year ended December 31, 2009 ($NIL, during the year ended December 31, 2008,
and $NIL for the year ended December 31, 2007), as further described in Note 11.
The carrying amount of the credit facility approximates its fair
value.
 
 7.
OTHER LOANS
 
 Other
loans are as follows:




Dec
      31, 2009
              
              
              Dec
      31, 2008
              
              
              Dec
      31, 2007$
              
              
              $
              
              
              $Other
      loans
              
              
              0
              
              
              
              0
              
              
              
              0Finance
      lease
              
              
              85
              
              
              
              85
              
              
              
              177Total
      loans $
              
              $
              85
              
              
              $
              85
              
              
              
              177Falling
      due split:Amounts
      due within one yearOther
      loans
              
              
              0
              
              
              
              0
              
              
              
              0Finance
      lease
              
              
              85
              
              
              
              85
              
              
              
              177Total
      amounts due within one year
              
              
              85
              
              
              
              85
              
              
              
              177Amounts
      due after one yearOther
      loans
              
              
              0
              
              
              
              0
              
              
              
              0Finance
      lease 1 -2 years
              
              
              0
              
              
              
              0
              
              
              
              0Finance
      lease 2 -5 years
              
              
              0
              
              
              
              0
              
              
              
              0Balance
      at the end of the year
              
              $
              85
              
              
              $
              85
              
              
              $
              177




F-18


CALCITECH
LTD
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 Year
ended December 31, 2009 (amounts in thousands of US dollars, except share
data)
  8.
SHAREHOLDERS'
EQUITY
 
 The
Company has ordinary common shares with the par value of $ 0.001 there are no
restrictions on the distribution of dividends and repayment of
capital.
 
 8.1
Capital risk management
 
 The
Group’s objectives when managing capital are to safeguard the Group’s ability to
continue as a going concern in order to provide returns for shareholders and
benefits for other stakeholders and to maintain an optimal capital structure to
reduce the cost of capital.
 
 8.2
Convertible debentures
 
 In
February 2001, the Company issued 8% convertible debenture notes in the sum of
$1,500. These notes are redeemable by the Company, in whole or in part, up to
the date of maturity. On maturity, the Company also has the right, but not the
obligation, to convert any or all of the amounts of principal and any accrued
interest, into common stock. Further debenture notes were issued in July 2001 in
the sum of $2,500.
 
 By
December 31, 2007, none of the debentures or outstanding interest were converted
into common stock. At this date, the Company’s 5% convertible debentures with a
value of $4,402 and €188 were re-negotiated by their retirement against the
issue of new 6% debentures with a value of $4,642, to December 31, 2009. The
Company had the right, but not the obligation, upon 10 days notice, without
penalty, to repay all or any portion of the outstanding principal. Debenture
holders had the right to convert on 31stDecember 2009 at $1.75. All
other terms of the convertible debentures remained unchanged from the original
debenture notes.
 
 During
December 2008, all 6% convertible debenture holders with a value of $4,642,
agreed to convert 50% of the capital with accrued interest to December 31, 2008,
amounting to $2,526 into common shares of the Company at a price of $0.095 per
share. The remaining debenture notes were extended until December 31, 2010 at an
interest rate of 1.75% per annum, payable quarterly, with the right to convert
into common shares of the Company at $0.75 per share, amended from a conversion
of $1.75 per share. The Company has the right, but not the obligation, upon 10
days notice, without penalty, to repay all or any portion of the outstanding
principal. These debentures have been classified as equity as there is no
contractual obligation to deliver cash and the contract will be settled by the
company delivering a fixed number of its own equity instruments in exchange for
a fixed amount of cash.
 
 In
December 2009, the Company authorised $5,000 in a new series of convertible
debenture notes with an annual interest rate of 4% payable quarterly in arrears.
These notes, with a two year maturity date, are convertible into ordinary shares
of the Company at $0.40 per share. All other terms and conditions remain the
same as those of the existing series of debentures.
 
 The
equity element can be summarised as follows:
  F-19
 CALCITECH
LTD
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 Year
ended December 31, 2009 (amounts in thousands of US dollars, except share
data)
  Dec
      31, 2009
                      
                      
                      Dec
      31, 2008
                      
                      
                      Dec
      31, 2007$
                      
                      
                      $
                      
                      
                      $Principal
      amount of debentures at issuance
                      
                      
                      2,321
                      
                      
                      
                      4,642
                      
                      
                      
                      4,642Less
      finders' fee
                      
                      
                      0
                      
                      
                      
                      0
                      
                      
                      
                      0Debentures
      Converted
                      
                      
                      0
                      
                      
                      
                      (2,321
                      )
                      
                      
                      0$
                      2,321
                      
                      
                      $
                      2,321
                      
                      
                      $
                      4,642
  8.3
Conversion of credit facility
 
 The
original Epsom Investment Services N.V. (“Epsom”) credity facility, effected in
February 1998, has been subject to a number of conversions of the balance into
common stock of the Company in order to reduce the balance and thereby provide
additional working capital both during and after assignment date of November
2008 to EAM.
 
 In
September 2007, Epsom agreed to convert a further $2,000 of the balance due on
the credit facility agreement into common stock of the Company on the mutually
agreed basis of one share for each $0.29 of note. This conversion resulted in
the issue of 6,900,000 common shares.
 
 In
December 2007, Epsom agreed to convert a further $1,260 of the balance due on
the credit facility agreement into common stock of the Company on the mutually
agreed basis of one share for each $0.30 of note. This conversion resulted in
the issue of 4,198,990 common shares.
 
 During
February 2009, EAM agreed to convert the full amount of the credit facility as
at December 31, 2008, amounting to $5,436, at a price of $0.095 per share. EAM
agreed to this conversion and the placement of 50% of the resulting shares with
its clients, providing other existing shareholders and new shareholders acquire
the remaining 50% of the shares at the same price per share. The proceeds were
loaned to the Company under the existing credit facility for working capital
purposes with interest charged at a reduced rate of 1.75% per annum, payable
quarterly. The conversion of the aforementioned EAM facility and creditors
resulted in the issue of 59,050,274 common shares. It was further agreed to
increase the facility to $3,000.
 
 In
December 2009, EAM agreed to convert $1,500 of its credit facility into the new
series of convertible debenture notes issued by the Company. The credit facility
was extended to 31st August
2011.
 
 8.4
Stock option plan
 
 Under the
provision of the Company’s share option plan, a maximum total of 10% of issued
shares may be granted to directors, officers and employees of the Company in the
form of stock options. The options generally expire five years from the date of
the grant. 6,650,000 stock options granted are not subject to vesting
requirements. The balance of 3,100,000 will vest upon the
construction of the first commercial plant. Stock option activity was as
follows:
  F-20
  CALCITECH
LTD
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 Year
ended December 31, 2009 (amounts in thousands of US dollars, except share
data)
  Number
      of
                      Shares
                    
                    
                    Exercise
      price per
                      shareBalance
      at December 31, 2007
                    
                    
                    2,300,000Cdn
      $0.30 to 0.45Options
      exercised
                    
                    
                    0Options
      lapsed
                    
                    
                    0Options
      granted
                    
                    
                    0Balance
      at December 31, 2008
                    
                    
                    2,300,000
                    
                    
                    $0.23
      to 0.24Cdn
      $0.23 to 0.45Options
      exercised
                    
                    
                    0Options
      lapsed
                    
                    
                    0Options
      granted
                    
                    
                    7,450,000Balance
      at December 31, 2009
                    
                    
                    9,750,000
                    
                    
                    $0.095
      to 0.24Cdn
      $0.23 to 0.45
  The
following table summarises information with respect to stock options as of
December 31, 2009:
 Exercise
                    Price
                  Weighted-
                    average
                    Number
      of
                    options
                    outstanding
                  Number
      of
                    options
                    exercisable
                  Weighted
                    average
                    remaining
                    contractual
                    life
      (years)Cdn
      $0.30
                  250,000
                  250,000
                  2.16Cdn
      $0.33
                  850,000
                  850,000
                  0.94Cdn
      $0.45
                  500,000
                  500,000
                  1.15$0.24
                  450,000
                  450,000
                  2.16$0.23
                  250,000
                  250,000
                  2.50$0.095
                  7,450,000
                  7,450,000
                  4.50Total
                  9,750,000
                  9,750,000
  All stock
options are issued at or over the market price of the Company’s shares on the
date of their granting and therefore there is no effect on profit and
loss.
 
 9.
INCOME
TAXES
 
 Under the
current Bermuda law, the Company is not required to pay any income taxes in
Bermuda. The Company has received an undertaking from the Minister of Finance of
Bermuda that in the event of any such taxes being imposed, the Company will be
exempted from such taxation until March 28, 2016.
 
 Net loss
before income taxes consists of the following:
  F-21
 CALCITECH
LTD
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 Year
ended December 31, 2009 (amounts in thousands of US dollars, except share
data)
 year
      to
                    Dec
      31, 2009
                  
                  
                  Year
      to
                    Dec
      31, 2008
                  
                  
                  year
      to
                    Dec
      31, 2007$
                  
                  
                  $
                  
                  
                  $Bermuda
                  
                  
                  (1,126
                  )
                  
                  
                  (1,657
                  )
                  
                  
                  (646
                  )Rest
      of world
                  
                  
                  46
                  
                  
                  
                  (369
                  )
                  
                  
                  (124
                  )Total
                  
                  $
                  (1,080
                  )
                  
                  $
                  (2,025
                  )
                  
                  $
                  (770
                  )
   There are
no significant deferred taxes reflecting the net tax effects of temporary
differences between the carrying amount of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes.
 
 There are
no significant operating loss carry-forwards, which would have an impact on
income tax as of December 31, 2009.
 
 10.
PROVISIONS AND
CONTINGENCIES
 
 The
Company is subject to legal proceeding, claims, and litigation arising in the
ordinary course of business. The Company and its subsidiaries are occasionally
challenged by local tax authorities. The Company records a provision for these
tax risks based on its most available information on the tax claim in each tax
jurisdiction. The Company's management does not expect that the ultimate cost to
resolve these matters will have a material adverse effect on the Company's
consolidated financial position, results of operations, or cash
flows.
 
 11.
RELATED PARTY
TRANSACTIONS
 
 For the
year ended December 31, 2009, the year ended December 31, 2008 and the year
ended December 31, 2007, the amounts paid to shareholders, directors and
officers of the Company and their related companies for consulting and other
services totalled as follows:
  year
      to
                      Dec
      31, 2009
                    
                    
                    year
      to
                      Dec
      31, 2008
                    
                    
                    year
      to
                      Dec
      31, 2007$
                    
                    
                    $
                    
                    
                    $Amounts
      paid to shareholders, directors and officers of the Company for consulting
      and other services
                    
                    $
                    259
                    
                    
                    $
                    702
                    
                    
                    $
                    106Amounts
      paid to EuroHelvetia TrustCo SA for financial advice
                    
                    $
                    222
                    
                    
                    $
                    57
                    
                    
                    $
                    66Amounts
      payable at Balance Sheet date
                    
                    $
                    183
                    
                    
                    $
                    0
                    
                    
                    $
                    39
 EuroHelvetia
TrustCo S.A. is contracted by CalciTech to act as the Company’s financial
advisors. EuroHelvetia charge their fees for work related to advice on private
placements, fund raising and project finance. Roger A. Leopard, Chief Executive
Officer and President of administration of EAM. All these transactions were at
“arms length”.
  F-22
 CALCITECH
LTD
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 Year
ended December 31, 2009 (amounts in thousands of US dollars, except share
data)
 12.
FINANCIAL INFORMATION
BY INDUSTRY SEGMENT AND GEOGRAPHIC AREA
 
 The
Company operates in one business segment. The following table presents
information by geographical area:
  year
      to
                    Dec
      31, 2009
                  
                  
                  year
      to
                    Dec
      31, 2008
                  
                  
                  year
      to
                    Dec
      31, 2007Revenues
                  
                  $
                  
                  
                  $
                  
                  
                  $Bermuda
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  0Rest
      of world
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  48Total
                  
                  $
                  0
                  
                  
                  $
                  0
                  
                  
                  $
                  48
  year
      to
                      Dec
      31, 2009
                    
                    
                    year
      to
                      Dec
      31, 2008
                    
                    
                    year
      to
                      Dec
      31, 2007Operating
      loss
                    
                    $
                    
                    
                    $
                    
                    
                    $Bermuda
                    
                    
                    (800
                    )
                    
                    
                    (865
                    )
                    
                    
                    (269
                    )Rest
      of world
                    
                    
                    59
                    
                    
                    
                    (369
                    )
                    
                    
                    (46
                    )Total
                    
                    $
                    (741
                    )
                    
                    $
                    (1,234
                    )
                    
                    $
                    (314
                    )Identifiable
      assetsBermuda
                    
                    
                    8,007
                    
                    
                    
                    3,320
                    
                    
                    
                    1,782Rest
      of world
                    
                    
                    199
                    
                    
                    
                    3,837
                    
                    
                    
                    3,668Total
                    
                    $
                    8,206
                    
                    
                    $
                    7,157
                    
                    
                    $
                    5,450
  13.
ANALYSIS OF MAJOR EXPENDITURES INCLUDED
IN GENERAL AND ADMINISTRATIVE EXPENSES
 
 The
following is a breakdown of the major expenditures included in General and
Administrative Expenses:
  year
      to
                    Dec
      31, 2009
                  
                  
                  year
      to
                    Dec
      31, 2008
                  
                  
                  year
      to
                    Dec
      31, 2007$
                  
                  
                  $
                  
                  
                  $Employee
      costs
                  
                  
                  346
                  
                  
                  
                  107
                  
                  
                  
                  159Professional
      fees
                  
                  
                  106
                  
                  
                  
                  355
                  
                  
                  
                  40Investor
      relations
                  
                  
                  57
                  
                  
                  
                  124
                  
                  
                  
                  126Rent,
      rates & charges
                  
                  
                  45
                  
                  
                  
                  93
                  
                  
                  
                  49Travel
                  
                  
                  7
                  
                  
                  
                  24
                  
                  
                  
                  18Depreciation
                  
                  
                  12
                  
                  
                  
                  131
                  
                  
                  
                  139
  14.
IFRS 7: RISKS ARISING
FROM FINANCIAL INSTRUMENTS
 
 The
Group’s market risk is identified as those financial instruments that are
subject to foreign exchange fluctuations. Below is a table of cash and cash
equivalents, accounts receivable and accounts payable that are subject to the
risk described. A sensitivity analysis is shown below suggesting the value of
such financial assets and liabilities and % risk involved had thehighest and
lowest exchange rates been applied during the year ending December 31, 2009, and
during the year ending December 31, 2008:
  F-23
 CALCITECH
LTD
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 Year
ended December 31, 2009 (amounts in thousands of US dollars, except share
data)
 year
      to
                  
                  
                  year
      to
                  
                  
                  
                  
                  
                  year
      toMarket
      Risk
                  
                  Dec
      31, 2009
                  
                  
                  Dec
      31, 2009
                  
                  
                  
                  
                  
                  Dec
      31, 2009High
                  
                  
                  %
                  
                  
                  Low
                  
                  
                  %$
                  
                  
                  $
                  
                  
                  
                  
                  
                  
                  $Cash
      at Bank
                  
                  
                  20
                  
                  
                  
                  20
                  
                  
                  
                  0
                  %
                  
                  
                  19
                  
                  
                  
                  -5.0
                  %Petty
      Cash
                  
                  
                  2
                  
                  
                  
                  2
                  
                  
                  
                  0
                  %
                  
                  
                  2
                  
                  
                  
                  0
                  %Accounts
      Receivable
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  0.
                  %
                  
                  
                  0
                  
                  
                  
                  0
                  %Accounts
      Payable
                  
                  
                  (498
                  )
                  
                  
                  (501
                  )
                  
                  
                  0.6
                  %
                  
                  
                  (438
                  )
                  
                  
                  -12.0
                  %Accruals
                  
                  
                  (181
                  )
                  
                  
                  (182
                  )
                  
                  
                  0.7
                  %
                  
                  
                  (167
                  )
                  
                  
                  -7.7
                  %
  year
      to
                  
                  
                  year
      to
                  
                  
                  
                  
                  
                  year
      toMarket
      Risk
                  
                  Dec
      31, 2008
                  
                  
                  Dec
      31, 2008
                  
                  
                  
                  
                  
                  Dec
      31, 2008High
                  
                  
                  %
                  
                  
                  Low
                  
                  
                  %$
                  
                  
                  $
                  
                  
                  
                  
                  
                  
                  $Cash
      at Bank
                  
                  
                  22
                  
                  
                  
                  23
                  
                  
                  
                  0.6
                  %
                  
                  
                  21
                  
                  
                  
                  -5.0
                  %Petty
      Cash
                  
                  
                  4
                  
                  
                  
                  4
                  
                  
                  
                  0.7
                  %
                  
                  
                  3
                  
                  
                  
                  -9.0
                  %Accounts
      Receivable
                  
                  
                  195
                  
                  
                  
                  196
                  
                  
                  
                  0.5
                  %
                  
                  
                  161
                  
                  
                  
                  -17.6
                  %Accounts
      Payable
                  
                  
                  (534
                  )
                  
                  
                  (538
                  )
                  
                  
                  0.6
                  %
                  
                  
                  (470
                  )
                  
                  
                  -12.0
                  %Accruals
                  
                  
                  (353
                  )
                  
                  
                  (355
                  )
                  
                  
                  0.7
                  %
                  
                  
                  (326
                  )
                  
                  
                  -7.70
                  %
  The Group
does not feel that exposure to currency fluctuations is material to operations
at the present time.
 
 Liquidity
risk is identified as the Group’s ability to satisfy Accounts Payables out of
liquid assets at December 31, 2009. Even though liquid assets only represent 4%
of accounts payable, the Group does not regard liquidity as a material risk at
the present time. This is because the Group has the ability to draw down
sufficient funds from its current credit facility, hence there is no strategy
currently in place to hedge against this risk.
 
 CalciTech’s
credit risk is identified as the Group’s ability to recover outstanding
receivables in full at December 31, 2009. On accounts receivable, the Group
currently offers terms of 60 days to customers. However the Group relies on
strong and longstanding relationships with its existing debtors, and therefore
has not made provision for bad and doubtful debts.
  F-24
 CALCITECH
LTD
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 Year
ended December 31, 2009 (amounts in thousands of US dollars, except share
data)
  Credit
      Risk
                          
                          2009
                          
                          
                          <30
      days
                          
                          
                          30-60
      days
                          
                          
                          60-90
      days
                          
                          
                          >90
      days$
                          
                          
                          $
                          
                          
                          $
                          
                          
                          $
                          
                          
                          $Accounts
      Receivable
                          
                          $
                          0
                          
                          
                          
                          0
                          
                          
                          
                          0
                          
                          
                          
                          0
                          
                          
                          
                          0
  Credit
      Risk
                          
                          2008
                          
                          
                          <30
      days
                          
                          
                          30-60
      days
                          
                          
                          60-90
      days
                          
                          
                          >90
      days$
                          
                          
                          $
                          
                          
                          $
                          
                          
                          $
                          
                          
                          $Accounts
      Receivable
                          
                          $
                          195
                          
                          
                          
                          0
                          
                          
                          
                          0
                          
                          
                          
                          0
                          
                          
                          
                          195
  15.
LIST OF PRINCIPAL
CONSOLIDATED COMPANIES
 
 Principal
consolidated companies are as follows:
  Name
      of Company
                    Countries
                    Holding
                    Proportion
                    Nature
      of businessheldCalciTech
      Synthetic Minerals Ltd.
                    Bermuda
                    Ordinary
      shares
                    100%
                    Technology
      licensorCalciTech
      Group Services SA
                    Switzerland
                    Ordinary
      shares
                    100%
                    HQ
      AdministrationCalciTech
      Synthetic Minerals Europe Ltd.
                    UK
                    Ordinary
      shares
                    100%
                    European
      holding company and operations
licensee
  On
February 1, 2003, the Company’s intellectual property interests in its Synthetic
Calcium Carbonate (“SCC”) technology were assigned to a new Bermuda organized
wholly owned subsidiary, CalciTech Synthetic Minerals Ltd., which now acts as
the holding Company and will license within the group rights and use of the
technology on a territorial basis.
 
 As
previously reported, CalciTech Holdings ApS and its wholly-owned subsidiary,
CalciTech Deutschland GmbH, have been liquidated. As a result, these companies
have been deconsolidated from these financial statements.
 
 As part
of the restructuring, in April 2009, a new wholly owned subsidiary of CalciTech
Synthetic Minerals Ltd. was established. CalciTech Synthetic Minerals Europe
Ltd., a UK company, has become the principal company for all European
operations. A branch office was registered in Germany for the operation of the
Company’s small scale production plant.
 
 16.
ULTIMATE CONTROLLING
PARTY
 
 No
individual has an ultimate controlling interest in the Company.
 
 17.
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
 
 Non-cash
transactions were as follows:
  year
      to
                    Dec
      31, 2009
                  
                  
                  year
      to
                    Dec
      31, 2008
                  
                  
                  year
      to
                    Dec
      31, 2007$
                  
                  
                  $
                  
                  
                  $Issuance
      of common stockUpon
      conversion of credit facility
                  
                  
                  5,436
                  
                  
                  
                  0
                  
                  
                  
                  3,261Convertible
      Debenture Notes
                  
                  
                  1,500
                  
                  
                  
                  0
                  
                  
                  
                  0Issuance
      of common stockUpon
      private placement through credit facility
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  0Interest
      expense through credit facility
                  
                  
                  (56
                  )
                  
                  
                  (428
                  )
                  
                  
                  (175
                  )Total
                  
                  $
                  6,880
                  
                  
                  $
                  (428
                  )
                  
                  $
                  3,086
  F-25
 CALCITECH
LTD
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 Year
ended December 31, 2009 (amounts in thousands of US dollars, except share
data)
  18.
COMMITMENT
 
 The Group
rents its principal management services office under an annually renewable
agreement. During the period ending December 31, 2009, the Group paid $34. There
are no future obligations for rent over 12 months.
 
 19.
NUMBER OF EMPLOYEES
(UNAUDITED)
 
 Headcount
was 5, 4 and 8 as of December 31, 2009, December 31, 2008, and December 31,
2007. It is the Group’s practice to employ consultants in various capacities due
to the specific nature of the industries in which they are operating. As at
December 31, 2009, the Group employed 7 consultants. Various additional
professional firms are also employed for the prevision of specialist
advice.
 
 20.
POST BALANCE SHEET
EVENT
 
 There
were no post balance sheet events to report.
  21.
APPROVAL OF FINANCIAL
STATEMENTS
 
 The
financial statements were approved by the board of directors and authorised for
issue on June 23, 2010.
 /s/ Roger A
Leopard
 Roger
A Leopard
  /s/ Michael Brickel
 M.J.
Brickel
 
 CalciTech
Limited
 P.O
Box HM 2257, 3rd Floor, Par la Ville Place, 14 Par-La-Ville Road
 Hamilton
HM JX, BERMUDA
  F-26