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
 
 x
              ANNUAL
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934 FOR THE YEAR ENDED DECEMBER 31,
2008
 
 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, 2008
 
 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)
 
 Roger
A. Leopard
 President
and Chief Executive Officer
 CalciTech
Ltd.
 10
route de l’aeroport
 1215
Geneva, Switzerland
 Telephone:
+ 41 22 7104020
 Fax: + 41 22
7883092
 (Name,
Telephone, E-mail and/or Facsimile number
 and
Address of Company Contact Person)
 
 Securities
registered or to be registered pursuant to Section 12(b) of the
Act:  NONE
 
 Title
      of each class
                              
                              Name
      of exchange on which registeredNONE
 
 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
 (Title of
Class)
 
 Indicate
the number of outstanding shares of each of the issuer’s classes of capital or
common stock as of the close of the period covered by the annual
report:
 126,588,812
 
 Indicate
by check mark if the Company is a well-known seasoned issuer, as defined in Rule
405 of the Securities Act.
  ̈Yes  xNo
 
 If this
report is an annual or transition report, 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.
 xYes   ̈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.
 xYes   ̈No
 
 Indicate
by check mark whether the Company 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  xNo
 
 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   ̈
                  
                  Non-accelerated
      filer  x
 
 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 issued
                    By
      the International Accounting Standards Board x
                  
                  Other
       ̈
 
 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.
 xItem
17     ̈Item 18
 
 If this
is an annual report, indicate by check mark whether the Company is a shell
company (as defined in Rule 12b-2 of the Exchange Act.
  ̈
Yes   x  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                                  ̈
Yes    ̈   No
  
  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.
                              
                              Information
      on the Company
                              
                              54A.
                              
                              History
      and Development of the Company
                              
                              54B.
                              
                              Business
      Overview
                              
                              64C.
                              
                              OrganizationalStructure
                              
                              184D.
                              
                              Property,
      Plants and Equipment
                              
                              18Item 4(A).
                              
                              Unresolved
      Staff Comments
                              
                              19Item
      5.
                              
                              Operating
      and Financial Review and Prospects
                              
                              195A.
                              
                              Operating
      Results
                              
                              195B.
                              
                              Liquidity
      and Capital Resources
                              
                              215C.
                              
                              Research
      and Development, Patents and Licenses, etc.
                              
                              235D.
                              
                              Trend
      Information
                              
                              235E.
                              
                              Off
      Balance Sheet Arrangements
                              
                              235F.
                              
                              Tabular
      Disclosure of Contractual Obligations
                              
                              23Item
      6.
                              
                              Directors,
      Senior Management and Employees
                              
                              246A.
                              
                              Directors,
      Senior Management
                              
                              246B.
                              
                              Compensation
                              
                              256C.
                              
                              Board
      Practices
                              
                              266D.
                              
                              Employees
                              
                              266E.
                              
                              Share
      Ownership
                              
                              26Item
      7.
                              
                              Major
      Shareholders and Related Party Transactions
                              
                              277A.
                              
                              Major
      Shareholders
                              
                              277B.
                              
                              Related
      Party Transactions
                              
                              287C.
                              
                              Interest
      of Experts and Counsel.
                              
                              28Item
      8.
                              
                              Financial
      Statements
                              
                              288A.
                              
                              Consolidated
      Statements and Other Financial Information
                              
                              288B.
                              
                              Significant
      Changes
                              
                              29Item
      9.
                              
                              The
      Offer and Listing
                              
                              299A.
                              
                              Price
      History of Stock
                              
                              299B.
                              
                              Plan
      of Distribution
                              
                              319C.
                              
                              Markets
                              
                              319D.
                              
                              Selling
      Shareholders
                              
                              319E.
                              
                              Dilution
                              
                              31
 
 
 
 9F.
                                                
                                                Expenses
      of the Issue
                                                
                                                31Item
      10.
                                                
                                                Additional
      Information
                                                
                                                3110A.
                                                
                                                Share
      Capital
                                                
                                                3110B.
                                                
                                                Memorandum
      and Articles of Association
                                                
                                                3110C.
                                                
                                                Material
      Contracts
                                                
                                                3210D.
                                                
                                                Exchange
      Controls
                                                
                                                3310E.
                                                
                                                Taxation
                                                
                                                3410F.
                                                
                                                Dividends
      and Paying Agents.
                                                
                                                3710G.
                                                
                                                Statement
      of Experts.
                                                
                                                3710H.
                                                
                                                Documents
      on Display.
                                                
                                                3710I.
                                                
                                                Subsidiary
      Information
                                                
                                                38Item
      11.
                                                
                                                Quantitative
      and Qualitative Disclosures About Market Risk
                                                
                                                38Item
      12.
                                                
                                                Description
      of Securities Other than Equity Securities
                                                
                                                38Item
      13.
                                                
                                                Defaults,
      Dividend Arrearages and Delinquencies
                                                
                                                38Part
      II
                                                
                                                
                                                
                                                38Item
      14.
                                                
                                                Material
      Modifications to the Rights of Security Holders and Use of
      Proceeds
                                                
                                                38Item
      15T.
                                                
                                                Controls
      and Procedures.
                                                
                                                38Item
      16.
                                                
                                                [Reserved]
                                                
                                                39Item
      16A
                                                
                                                Audit
      Committee Financial Report
                                                
                                                39Item
      16B
                                                
                                                Code
      of Ethics
                                                
                                                40Item
      16C
                                                
                                                Principal
      Accountant Fees and Services
                                                
                                                40Item
      16D
                                                
                                                Exemptions
      From The Listing Standards For Audit Committees
                                                
                                                41Item
      16E
                                                
                                                Purchases
      Of Equity Securities By The Issuer And Affiliated
    Purchasers
                                                
                                                41Part
      III
                                                
                                                
                                                
                                                41Item
      17.
                                                
                                                Financial
      Statements
                                                
                                                41Item
      18.
                                                
                                                Financial
      Statements
                                                
                                                41Item
      19.
                                                
                                                Exhibits
                                                
                                                41SIGNATURES
                                                
                                                43INDEX
      TO CONSOLIDATED FINANCIAL STATEMENTS
                                                
                                                F
  
 
 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 financial data regarding our operating
results and financial position prepared in accordance with International
Financial Reporting Standards (IFRS).  This data has been derived from
our financial statements for the year ended December 31, 2008, the year ended
December 31, 2007, and the ten (10) months ended December 31,
2006.  The following table sets forth selected financial data with
respect to the Company and is qualified in its entirety by, and should be read
in conjunction with, the financial statements and notes thereto for the fiscal
year ended December 31, 2008, the year ended December 31, 2007, and the ten (10)
months ended December 31, 2006.  Historical information for periods
prior to the ten (10) months ended December 31, 2006 are derived from restated
financial statements, not included herein.  The financial data for
fiscal years 2008 and 2007 are presented on a consolidated basis.
 
 All
financial information is presented in U.S. dollars, unless indicated
otherwise.
 
 year to
                        
                        
                        year to
                        
                        
                        10 months to
                        
                        
                        Year to
                        
                        
                        year toDec 31, 2008
                        
                        
                        Dec 31, 2007
                        
                        
                        Dec 31, 2006
                        
                        
                        Feb 28, 2006
                        
                        
                        Feb 28, 2005$
                        
                        
                        $
                        
                        
                        $
                        
                        
                        $
                        
                        
                        $Operations
      DataRevenue
                        
                        
                        0
                        
                        
                        
                        58,291
                        
                        
                        
                        47,649
                        
                        
                        
                        59,805
                        
                        
                        
                        75,000Income
      (loss) from operations
                        
                        
                        (1,234,000
                        )
                        
                        
                        (314,000
                        )
                        
                        
                        (394,000
                        )
                        
                        
                        (1,438,000
                        )
                        
                        
                        (1,319,000
                        )Net
      loss
                        
                        
                        (2,025,000
                        )
                        
                        
                        (678,000
                        )
                        
                        
                        (620,000
                        )
                        
                        
                        (1,858,000
                        )
                        
                        
                        (1,668,000
                        )Number
      of shares
                        
                        
                        126,588,812
                        
                        
                        
                        99,998,665
                        
                        
                        
                        88,899,675
                        
                        
                        
                        88,899,675
                        
                        
                        
                        79,899,675Loss
      per Common Share
                        
                        
                        (0.016
                        )
                        
                        
                        (0.007
                        )
                        
                        
                        (0.07
                        )
                        
                        
                        (0.02
                        )
                        
                        
                        (0.03
                        )Balance
      Sheet DataCumulative
      DeferredDevelopment
      Expenditure
                        
                        
                        0
                        
                        
                        
                        0
                        
                        
                        
                        0
                        
                        
                        
                        0
                        
                        
                        
                        0Total
      Assets
                        
                        
                        7,157,000
                        
                        
                        
                        5,450,000
                        
                        
                        
                        3,244,000
                        
                        
                        
                        2,507,000
                        
                        
                        
                        1,481,000Long
      Term Obligations
                        
                        
                        5,545,000
                        
                        
                        
                        1,782,000
                        
                        
                        
                        1,993,000
                        
                        
                        
                        847,000
                        
                        
                        
                        1,577,000Capital
      stock
                        
                        
                        1,846,000
                        
                        
                        
                        1,824,000
                        
                        
                        
                        1,813,000
                        
                        
                        
                        1,813,000
                        
                        
                        
                        1,805,000Total
      Stockholders’ Equity/ (Deficiency)
                        
                        
                        609,000
                        
                        
                        
                        2,267,000
                        
                        
                        
                        (77,000
                        )
                        
                        
                        (730,000
                        )
                        
                        
                        (1,141,000
                        )
  1
  For
further information on this selected financial data, please see our Consolidated
Financial Statements.
 
 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:
 
 Risks Related to Our
Business.
 
 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.  Historically and since fiscal year
ended February 29, 2004, we have earned some revenues from the limited sale of
our Synthetic Calcium Carbonate (“SCC”) samples.  However, for the
year ended December 31, 2008, we had no sales of Synthetic Calcium Carbonate
(“SCC”) samples since the samples were produced to test non-paper applications.
In addition, no revenues were earned during the period commencing with the
fiscal year ended February 28, 1999 up to the fiscal year ended February 29,
2004. For the year ended December 31, 2008, we had a net loss of U.S. $2,025,000
and an accumulated deficit of U.S. $46,393,000. The report of independent
auditors on our December 31, 2008 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 $26,000 in cash and
together with the restructuring of its 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 following the date of the approval of our
consolidated financial statements for the fiscal year ended December 31,
2008.
 
 In an
effort to build our planned 100,000 tonnes per annum plant in Sachsen Anhalt,
Germany, we tried to applied for a grant from the European Regional Structural
Fund using a house bank in Germany to secure 50% of the capital
expenditure.  Unfortunately, we have failed to secure the endorsement
of a house bank in Germany to cover the 50% of the capital expenditure
requirements of our planned 100,000 tonnes per annum plant in Sachsen Anhalt,
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 we have determined to seek a strategic
partner , there is no assurance in the current economic climate that such a
partner will participate in the total projected capital expenditures, which are
now estimated at €45 million.
  2
  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.  For information on the dilution of
our current stockholders in the event of subsequent equity financing, please see
the Risk Factor entitled “If
we have to raise capital by selling securities in the future, the rights of our
stockholders and the value of their investment in the Company could be
reduced.”
 
 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.
 
 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 10 kg per
hour pilot plant based in Norway, which was moved to Leuna in Germany in
2002.  The equipment has now been 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.
  3
  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.  To the
extent that we have sales from our SCC samples, currently 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,
  ·
              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.
 
 We Are Subject To
the Laws, Regulations and Taxes of Various Jurisdictions.  The
Company is a Bermuda company and has subsidiaries in Denmark, Germany,
Switzerland and Norway, as well as a new subsidiary in the United
Kingdom.  As such, the Company is subject to numerous national, state
and local governmental regulations, including environmental, labor, waste
management, health and safety matters and product specifications.  It
is subject to laws and regulations governing its relationship with its
employees, including: wage and hour requirements, working and safety conditions,
citizenship requirements, work permits and travel restrictions.  These
include local labor laws and regulations, which may require substantial
resources for compliance.
 
 Additionally,
the Company is subject to the tax regimes of the countries listed
above.  Any change in tax laws and regulation or the interpretation or
application thereof, either internally in one of those jurisdictions or as
between those jurisdictions, may adversely affect our profitability and tax
liabilities.
 
 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.
 
 Risks Related to Our Common
Shares.
 
 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.
  4
  If we have to
raise capital by selling securities in the future, the rights of our
stockholders and the value of their investment in the Company could be
reduced.If we issue debt securities, the lenders would have a
claim to our assets that would be superior to the stockholders’
rights.  Interest on the debt would increase costs and negatively
impact operating results.  If we issue more stock, our current
stockholders’ percentage of ownership will decrease and their stock may
experience additional dilution.  It is likely that we will sell our
securities in the future.  The terms of such future transactions
presently are not determinable.
 
 If the market for
our common share is illiquid in the future, our stockholders could encounter
difficulty if they try to sell their stock.Our stock trades
on the “OTCBB” but it is not actively traded.  If there is no active
trading market, our stockholders may not be able to resell their shares at any
price, if at all.  It is possible that the trading market in the
future will continue to be "thin" or "illiquid," which could result in increased
price volatility.  Prices may be influenced by investors' perceptions
of us and general economic conditions, as well as the market for energy
companies generally.   Until our financial performance indicates
substantial success in executing our business plan, it is unlikely that there
will be coverage by stock market analysts. Without such coverage, institutional
investors are not likely to buy the stock.  Until such time, if ever,
as such coverage by analysts and wider market interest develops, the market may
have a limited capacity to absorb significant amounts of trading.
 
 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, 2008, 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.
              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.  Our resident agent in
Bermuda is Consolidated Services Ltd., located at Par La Ville Place, 14
Par-La-Ville Road, Hamilton, Bermuda.
  5
  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 three wholly owned
companies, CalciTech Group Services SA, a Swiss corporation, CalciTech Holdings
ApS, a Danish corporation us, and a newly formed subsidiary, as of April, 2009,
CalciTech Synthetic Minerals Europe Ltd., a UK company. We also own through
CalciTech Holdings ApS, a 51% interest in CalciTech Odda A.S., a Norwegian
corporation (now in liquidation) and a 100% interest in CalciTech Deutschland
GmbH, a German corporation (now in liquidation).
 
 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
limited sales activity to place the first 100,000 tonnes per annum plant
production under letters of intent. However, for year ended December 31, 2008,
we had no sales of SCC samples since the samples were produced to test non-paper
applications.  Construction and commissioning are expected to take
eighteen (18) months from the conclusion of the project finance.
 
 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 and sell our sample material to support other projects in
other regions. We are also engaged in the preliminary stage of planning and
developing proposed full-scale commercial plants located elsewhere in Europe.
See “4B.  Business Overview – Business Activity.” 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 and (iii) 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.
 
 Currently,
we are in discussions with industrial partner(s) to establish our first full
scale commercial plant and are engaged in sales activity within the paper,
polymer, food, pharmaceutical and cosmetic industries to seek commitment from
potential customers to purchase SCC products from this first full scale
commercial plant.  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 a further thirteen (13) to fifteen (15) commercial plants over the next
three (3) to four (4) years, 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.
  6
  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 in particular 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 half a million tonnes
of waste lime is created as a by-product of on-going acetylene plants 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.
 
 Conventional
PCC Process
 
 Other PCC
producers must use the conventional method for producing their PCC starting from
high-grade limestone. 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 or as
slurry.
  7
  SCC
Versus PCC Production Process
 
 Below are
figures, which describe the differences between the SCC process and the PCC
process.
 
 The SCC Process
 
 
  8
  Conventional PCC
Production
 
 
 
 As shown
above, 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.
  9
  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. Patent registration is still pending in a number of
other countries, including Japan and Norway.
 
 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.  Sales of PCC totalled approximately U.S. $1.3
billion. However, the entire pigments for paper market totalled 27 million
tonnes per annum worth approximately U.S. $5 billion. 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.
  10
  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.
 
 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.
  11
  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.
 
 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, and we also retained the services of W S Atkins plc of
Stockport, UK, as consulting engineers for our first large scale commercial
plant, which resulted in their production of an in-depth feasibility study and
technical due diligence report. In September 2007, the Company received all the
permitting document for the planned plant.
  12
  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 Sachsen Anhalt,
Germany.  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 (high grade SCC, in
particular) can be sold.  High grade PCC for the pharmaceutical
industry is often sold in relatively small amounts and command prices in excess
of EU 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.
  13
  Business
Activity: Germany
 
 We have
finalized our plans to build our first full scale commercial SCC plant in
Germany, on which our financing negotiations are based.  The
commercial 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.
 
 In
December 2006, we filed for a grant from the European Regional Structural Fund
in order to finance the initial capital expenditures for the commercial
plant.   While waiting for the German house bank’s endorsement of
the grant application, we were advised by the authorities to withdraw the
original application and re-apply for the 2007 grant since the benefits and
conditions were more favourable.  The more favourable 2007 grant would
contribute up to 50% of the capital costs of the commercial plant. 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.  In addition, we learned
from 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.  However, due to deterioration in
the credit markets and financial conditions of the house bank, the house bank
had to withdraw, and a consortium of lenders was proposed and assembled by late
summer 2008. A consortium bank was later appointed in the role of house bank,
but this mandate was cancelled shortly after execution in view of acquisition of
the house bank by a third party German bank.
 
 In view
of the difficulties in the financial markets and the inability of the house bank
to provided the necessary funding, 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 are now advised that a company at our stage of development
could now qualify for the State guarantee we had previously understood was
withdrawn.  We are currently evaluating our options in terms of how to
best proceed given the new information provided and the current turmoil in the
credit market. We anticipate securing the financing for our commercial 100,000
tonnes per annum plant in Sachsen Anhalt, Germany by:
 
 ·
              A
      grant from European Structural Fund: up to 50% of the capital expenditure
      for the first plant,
 ·
              20%
      of capital expenditure arranged by us and a planned industrial partner,
      and
 ·
              30%
      of capital expenditure by the operating subsidiary company’s house
      bank.
  14
  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: 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.
 
 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.
 
 Bubbletube
 
 To
address the problems associated with scaling up of reactors in the chemical
industry from a small pilot plant to full-scale production, we worked with the
Swiss Federal Institute of Technology in Lausanne, Switzerland in a project
sponsored by the European Commission called the “Bubbletube.”  Scaling
up can take about a third of the time it takes to bring a product to market and
often affects its quality and yield.
  15





In
November 2000, we received the European patent for the Bubbletube followed in
January 2003 by the grant of the US patent. The Bubbletube is a new tubular
segmented plug flow reactor for the synthesis of fine powders by precipitation.
The technology uses two non-miscible fluids to generate micro reactors in which
the precipitation reagents are thoroughly mixed. The micro-reactors yield
precipitated particles that are uniform, small with a controlled morphology.
Although this technology may have future uses for PCC, it is not expected to
have uses in the SCC technology we are currently bringing in to use. Our
participation with Ecole Polytechnique Fédérale de Lausanne (“EPFL”) led to its
acquisition of patent rights with the agreement to license certain fields,
particularly in the area of Ceramics, back to EPFL. We had been the financial
coordinator of a development program consisting of seven participating
organizations funded by a three million Euro grant from the European
Union.  We participated in the market research element of this
development. This program ceased on January 1, 2002 and certain participants are
continuing to develop the technology to the next stage.  However, we
are not participating in this stage.





We
decided the technology had no value in relation to our SCC technology, nor as a
stand-alone product for development warranting further investment and decided to
cease spending technology development funds on this initiative. In December of
2004, we assigned the patents relating to the intellectual property rights for
CHF 35,000, the amount of the direct patenting costs, to TechPowder SA of
Lausanne, Switzerland, a spin off of the original consortium.





No value
was previously assigned to the Bubbletube patent in our financial
statements.





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.  We have implemented
patent registration in an extensive number of countries worldwide, including
Japan and Poland.





We have
no registered trademarks and no pending trademark applications.





Financing





During February 2004, our 6%
convertible debentures with a value of $4,402,000 were re-negotiated by their
retirement against the issue of new 5% debentures with a value of $4,642,000 to
December 28, 2007. At maturity these were extended until December 31, 2009. All
terms of the convertible debentures remain unchanged from the original debenture
notes. During June 2004, holders were offered a proposal to amend the terms of
their notes. The notes were amended to change (i) the conversion date to
December 31, 2007 and (ii) the conversion price to $1.75 per share. All other
terms and conditions of the 5% convertible debenture remained the same. As of
this date, all of the 5% convertible debentures have been amended. 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. This resulted in the issuance of 26,590,147 common
shares, and a reduction of the note, to $2,526,064.  The notes now
carry an interest rate of 1.75% and a new conversion price of $0.75 per share.
These notes have since been amended to extend the maturity date to December 31,
2010. The Company has the right, upon ten (10) business days prior written
notice, without penalty, to repay all or any portion of the outstanding
principal.


16





On
January 26, 2005, we concluded a private placement for a total of U.S.
$2,250,000. The placement consisted of the issuing of 9,000,000 units, each unit
consisting of one common share priced at U.S. $0.25, with one full common share
purchase warrant for twelve months priced at U.S. $0.35 and one half warrant for
twenty four months priced at U.S. $0.25.  The placement was conducted
pursuant to an exemption from the registration requirements of the Securities
Act of 1933, as amended, provided for in Regulation S promulgated thereunder, as
a placement made exclusively to persons who are not “U.S. Persons” as defined in
the exemption. The proceeds of the placement were used in part towards upgrading
our small-scale production plant in Germany from a batch process to a more fully
integrated operation, thereby increasing our production capacity; completion of
worldwide patent applications; further development of our new premium additive
product, CalciRGTM, and
for general working capital purposes.





On
January 26, 2006 warrant holders exercised their right to convert 9,000,000
warrants to ordinary shares at a cost of U.S. $0.35 per share, raising U.S.
$3,150,000.  The proceeds were used to further the Company's
commercial projects, working capital and reduction of convertible short-term
debt.





On
January 24, 2007, we announced that the Directors of the Company had agreed to
extend its U.S. $0.50 warrants, originally to mature on January 25, 2007, by one
month, the new maturity date being February 25, 2007. The extended warrants were
not covered and have now lapsed.  The Company has no further warrants
outstanding.





We are
currently financed through a credit facility, up to U.S. $3,000,000, from Epsom
Asset Management Ltd. (“Epsom”). The 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.  In
September 2007, Epsom Investment Services N.V. agreed to convert U.S. $2,001,000
of the balance due under the loan facility 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 Investment
Services N.V. agreed to convert a further U.S. $1,259,697 of the balance due
under the loan facility 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. The credit facility was temporarily extended to U.S. $5,000,000
during 2008 to December 31, 2008.  Epsom has extended the credit
facility to August 30, 2010 and the balance as at December 31, 2008 stood at
U.S. $5,436,000.





In the
first quarter of 2009, we successfully concluded a restructuring of our debt
under the credit facility agreement.  Epsom agreed to convert all of
the outstanding debt under the credit facility into an aggregate amount of
57,222,053 common shares of which 27,305,844 shares were to be placed with
Epsom’s clients and the other remaining common shares were placed with new
investors outside of the United States by Epsom.  Proceeds from the
sale of the shares by Epsom will be made available to us under the terms of the
current credit facility for working capital purposes with interest charged at a
rate of 1.75% per annum, payable quarterly.





On April
24, 2009, we issued 1,828,221 common shares, at $0.095 per share, to eight (8)
creditors located in Europe in exchange for extinguishing certain debt owed to
the creditors totaling $173,681.  The shares were issued pursuant to
an exemption from registration requirements provided by Regulation
S.





Revenue





During the fiscal year ended December
31, 2008 and the year ended December 31, 2007, we received revenues totaling
U.S. $NIL and U.S. $58,000 respectively from the sale of SCC
samples.  Please see the Consolidated Statement of Income and Item 8,
Selected Financial Data, and Item 9, Management’s Discussion and Analysis of
Financial Condition and Results of Operations, 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.


17


Project
and Product Development





During
the year ended December 31, 2007 and continuing through the fiscal year ended
December 31, 2008, we moved out of the research and development stage and into
the commercialization stage, and project and product
development.  Accordingly, we no longer expense qualifying project nor
qualifying research and development expenses.  U.S. $2,431,000 spent
in the year on project and product development appears on the Balance Sheet as
an intangible asset.





We
expensed U.S. $NIL on research and development in the year ended December 31,
2008, U.S. $NIL in the year ended December 31, 2007, and U.S. $NIL in the ten
months ended December 31, 2006.





4C.         Organizational
Structure:The following is our
organizational chart:











4D.  
      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. 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
2009 and is pending partner and financing arrangements. The cost of the
construction is estimated at Euros 45 million. Construction and commissioning
are expected to take 18 months.


18


Item
4(A).  Unresolved Staff Comments





Not Applicable.





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, Germany, in order to be able to serve this part of the
market.





We are currently attempting to secure
financing for our commercial 100,000 tonnes per annum plant in Sachsen Anhalt,
Germany.  Please see “Item 4B. Business Overview- Business Activity,”
above, for more information.





We are
currently financed through our credit facility with Epsom.  For more
information on this facility, please see “Item 4B.  Business Overview-
Financing,” above.





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 twelve (12) months from the approval of the
financial statements.





Assets
and liabilities are recorded on the basis that we will be able to realize 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.





5A.         Operating
Results





The following discussion and
analysis relates to items that have affected our results of operations for the
years ended December 31, 2008, December 31, 2007, and ten months ended December
31, 2006. During 2006, we changed our fiscal year end from February 28 to
December 31, effective December 31, 2006.  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.


19





Year Ended
                            December 31,
                            2008
                          
                          
                          Year Ended
                            December 31,
                            2007
                          
                          
                          10 Months Ended
                            December 31,
                            2006OPERATING
      REVENUE
                          
                          $
                          NIL
                          
                          
                          $
                          58,000
                          
                          
                          $
                          48,000COST
      OF REVENUES
                          
                          $
                          (37,000
                          )
                          
                          $
                          (60,000
                          )
                          
                          $
                          (32,000
                          )GROSS
      MARGIN
                          
                          $
                          (37,000
                          )
                          
                          $
                          (2,000
                          )
                          
                          $
                          16,000Research
      and development expenses
                          
                          $
                          -0-
                          
                          
                          $
                          -0-
                          
                          
                          $
                          -0-Project
      development expenses
                          
                          $
                          -0-
                          
                          
                          $
                          -0-
                          
                          
                          $
                          -0-Product
      development expenses
                          
                          $
                          -0-
                          
                          
                          $
                          -0-
                          
                          
                          $
                          -0-General
      and administrative expenses
                          
                          $
                          1,197,000
                          
                          
                          $
                          313,000
                          
                          
                          $
                          410,000OPERATING
      LOSS
                          
                          $
                          (1,234,000
                          )
                          
                          $
                          (314,000
                          )
                          
                          $
                          (394,000
                          )LOSS
      BEFORE INCOME TAXES
                          
                          $
                          (2,025,000
                          )
                          
                          $
                          (656,000
                          )
                          
                          $
                          (622,000
                          )PROVISION
      FOR INCOME TAXES
                          
                          $
                          (NIL
                          )
                          
                          $
                          (22,000
                          )
                          
                          $
                          2,000NET
      LOSS
                          
                          $
                          (2,025,000
                          )
                          
                          $
                          (678,000
                          )
                          
                          $
                          (620,000
                          )





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
U.S. $58,000 for the year ended December 31, 2007.  Whilst the
small-scale production plant in Leuna, Germany continued to produce samples, no
further sales have been generated as these have been mainly smaller sample sizes
for the non-paper applications.  Revenues are
derived from sales of SCC 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 expenditures of U.S. $2,431,000 (December
31, 2007: U.S. $1,020,000) were capitalized as an intangible
asset.   During 2008, we continued to contain and reduce overhead
costs. Despite this, general and administrative expenditures increased from
$313,000 to $1,197,000 due to factors outside the control of the management such
as the down turn in the world economy. The majority of the increase was as a
result of a currency loss of $145,520 during the year caused by the average
decline of the U.S. Dollar against the Euro and Pound Sterling against a
currency gain in 2007 of $370,442.  Professional and legal fees
increased from $40,000 to $355,000 and $37,000 to $113,000 respectively during
the year. These increases were mainly due to the project financing efforts and
due diligence requirements. Interest charges have increased substantially from
$341,000 to $791,000. This is due to a failure of a planned share placement
during the year requiring additional bridge facilities to
year-end.  We are rearranging our debt and expect interest charges to
be considerably reduced for the fiscal year ending December 31,
2009.





Net Loss.  The net
loss in year ended December 31, 2008 increased to U.S. $2,025,000 from $678,000
in the year ended December 31, 2007.





December
31, 2007 compared to December 31, 2006 .





Revenue.  We had
revenues totalling U.S. $58,000 for the period ended December 31, 2007 compared
to U.S. $48,000 for December 31, 2006.  Revenues are derived from
sales of samples produced at the small-scale production facility in Leuna,
Germany.





Expenses.  Product
development remained at U.S. $NIL, and project development costs remained at
U.S. $NIL.  Project Development expenditure of U.S. $1,020,000 was
capitalised as an intangible asset.  General and administrative
expenses decreased U.S. $97,000 to U.S. $313,000. This is explained by
expenditure that was incurred on the Commercial Plant and which has been
included in Intangible Assets in the Balance Sheet.  Even though we
are now in the commercialisation stage, project and product development continue
but are recorded as Intangible Assets.





Net Loss.  The net
loss in fiscal year 2007 increased to U.S. $678,000 from U.S. $620,000 in
2006.


20


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.





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 1.75% and Convertible Debentures at an interest rate of
1.75%.  The credit facility agreement requires repayment on August 31,
2010.  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, 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. $91,000 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. $267,000 and current liabilities were up U.S. $73,000 on December 31,
2006.





As of December 31, 2006, our working
capital deficiency decreased to U.S. $698,000 from the working capital
deficiency of U.S. $990,000 on December 31, 2005.  This decrease was
largely as a result of the exercise of warrants, completed in January 2006,
which raised U.S. $3,150,000.  On February 28, 2005, our working
capital deficiency decreased to U.S. $359,000 from a working capital deficiency
of U.S. $1,848,000 on February 29, 2004. This decrease was a result of raising
U.S. $2,250,000 on January 27, 2005 from a private placement of 9,000,000 shares
priced at U.S. $0.25.





To develop and commercialize our SCC
technology, we believe we will require approximately U.S. $6,000,000 for working
capital for the next 12 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 are
currently financed through a credit facility, up to U.S. $3,000,000, from Epsom
Asset Management Ltd. (“Epsom”). The 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.  In
September 2007, Epsom Investment Services N.V. agreed to convert U.S. $2,001,000
of the balance due under the loan facility 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 Investment
Services N.V. agreed to convert a further U.S. $1,259,697 of the balance due
under the loan facility 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. The credit facility was temporarily extended to U.S. $5,000,000
during 2008 to December 31, 2008.  Epsom has extended the credit
facility to August 30, 2010 and the balance as at December 31, 2008 stood at
U.S. $5,436,000.


21


In the
first quarter of 2009, we successfully concluded a restructuring of our debt
under the credit facility agreement.  Epsom agreed to convert all of
the outstanding debt under the credit facility into an aggregate amount of
57,222,053 common shares of which 27,305,844 shares were to be placed with
Epsom’s clients and the other remaining common shares were placed with new
investors outside of the United States by Epsom.  Proceeds from the
sale of the shares by Epsom will be made available to us under the terms of the
current credit facility for working capital purposes with interest charged at a
rate of 1.75% per annum, payable quarterly.





On April
24, 2009, we issued 1,828,221 common shares, at $0.095 per share, to eight (8)
creditors located in Europe in exchange for extinguishing certain debt owed to
the creditors totaling $173,681.  The shares were issued pursuant to
an exemption from registration requirements provided by Regulation
S.





We will
need approximately U.S. $15,000,000 to build our first full-scale plant with a
production capacity of 100,000 tonnes per annum.  In view of the
difficulties in the financial markets and the inability of the house bank to
provide the necessary funding, we plan to fund the construction of the
commercial plant by:





·
            A
      grant from European Structural Fund: up to 50% of the capital expenditure
      for the first plant,


·
            20%
      of capital expenditure arranged by us and a planned industrial partner,
      and


·
            30%
      of capital expenditure by the operating subsidiary company’s house
      bank.





During June 2004, holders were offered
a proposal to amend the terms of their notes. The notes were amended to change
(i) the conversion date to December 31, 2007 and (ii) the conversion price to
$1.75 per share. All other terms and conditions of the 5% convertible debenture
remained the same. As of this date, all of the 5% convertible debentures have
been amended.





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.  This resulted in the issuance of 26,590,147 common
shares and a reduction of the note to $2,526,064.  The notes now carry
an interest rate of 1.75% and a new conversion price of $0.75 per share. These
notes have since been amended to extend the maturity date to December 31,
2010.  The Company has the right, upon ten (10) business days prior
written notice, without penalty, to repay all or any portion of the outstanding
principal.





On
January 26, 2005, we concluded a private placement for a total of U.S.
$2,250,000. The placement consisted of the issuing of 9,000,000 units, each unit
consisting of one common share priced at U.S. $0.25, with one full common share
purchase warrant for twelve months priced at U.S. $0.35 and one half warrant for
twenty four months priced at U.S. $0.25.  The placement was conducted
pursuant to an exemption from the registration requirements of the Securities
Act of 1933, as amended, provided for in Regulation S promulgated thereunder, as
a placement made exclusively to persons who are not “U.S. Persons” as defined in
the exemption. The proceeds of the placement were used in part towards upgrading
our small-scale production plant in Germany from a batch process to a more fully
integrated operation, thereby increasing our production capacity; completion of
worldwide patent applications; further development of our new premium additive
product, CalciRGTM, and
for general working capital purposes.





On
January 26, 2006 warrant holders exercised their right to convert 9,000,000
warrants to ordinary shares at a cost of U.S. $0.35 per share, raising U.S.
$3,150,000.  The proceeds were used to further the Company's
commercial projects, working capital and reduction of convertible short-term
debt.





On
January 24, 2007, we announced that the Directors of the Company had agreed to
extend its U.S. $0.50 warrants, originally to mature on January 25, 2007, by one
month, the new maturity date being February 25, 2007. The extended warrants were
not covered and have now lapsed.  The Company has no further warrants
outstanding.


22


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, 2008, U.S. $NIL in the year ended December 31, 2007, and U.S.
$NIL in the ten months ended December 31, 2006, 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.





We anticipate no increase in sales of
samples in the near future due to the allocation of samples to non-paper
applications where samples are small and not usually paid for.





5E.         Off
Balance Sheet Arrangements





None.





5F.         Tabular
Disclosure of Contractual Obligations





Contractual obligations for the
fiscal year ended December 31, 2008 are disclosed as follows:





Dec 31, 2008
                          
                          
                          Payments Due by PeriodContractual Obligations
                          
                          Total
                          
                          
                          < 1 year
                          
                          
                          1-3 years
                          
                          
                          4-5 years
                          
                          
                          > 5 years$
                          
                          
                          $
                          
                          
                          $
                          
                          
                          $
                          
                          
                          $Credit
      facility
                          
                          
                          5,436,000
                          
                          
                          
                          0
                          
                          
                          
                          5,436,000
                          
                          
                          
                          0
                          
                          
                          
                          0Convertible
      debentures
                          
                          
                          2,321,000
                          
                          
                          
                          2,231,000
                          
                          
                          
                          0
                          
                          
                          
                          0
                          
                          
                          
                          0Debenture
      Interest payable
                          
                          
                          0
                          
                          
                          
                          0
                          
                          
                          
                          0
                          
                          
                          
                          0
                          
                          
                          
                          0Equipment
      leasing
                          
                          
                          0
                          
                          
                          
                          0
                          
                          
                          
                          0
                          
                          
                          
                          0
                          
                          
                          
                          0Property
      Rental
                          
                          
                          86,000
                          
                          
                          
                          86,000
                          
                          
                          
                          0
                          
                          
                          
                          0
                          
                          
                          
                          0Purchase
      Obligations
                          
                          
                          0
                          
                          
                          
                          0
                          
                          
                          
                          0
                          
                          
                          
                          0
                          
                          
                          
                          0Total
      Contractual Cash Obligations
                          
                          
                          7,843,000
                          
                          
                          
                          2,407,000
                          
                          
                          
                          5,436,000
                          
                          
                          
                          0
                          
                          
                          
                          0





We
categorized our contractual obligations based on the following:





Credit
facility.  This is the balance on the credit facility with
Epsom Asset Management Ltd. as of December 31, 2008.  It is not
repayable until August 2010 and is therefore a non-current
liability.  In the first quarter of 2009, we concluded a restructuring
of the debt under the credit facility agreement in which Epsom agreed to convert
the substantially all of the outstanding debt under the credit facility into an
aggregate amount of 57,222,053 common shares.  Under the terms of the
revised credit facility, Epsom agreed to provide up to U.S. $3,000,000 for
working capital purposes with interest charged at a rate of 1.75% per annum,
payable quarterly. The credit facility is due August 31,
2010.


23


Convertible
Debentures.  Debenture holders were offered and accepted new
debentures with a maturity date of December 31, 2010, and fall into the 1-3
year(s) period.  Please see “Item 4B. Business Overview- Financing”
for further information.





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.





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 November 8, 2008 the Board of
Directors were elected.





Name
                            
                            Age
                            
                            Positions Held
                            
                            PeriodRoger
      A. Leopard
                            
                            67
                            
                            Director
                            
                            June
      2001-PresentPresident
      and Chief Executive Officer
                            
                            February
      2000 – PresentJohn
      M. Smith
                            
                            73
                            
                            Director
                            
                            August
      1993 – PresentHoward
      Edmund Browning
                            
                            65
                            
                            Director
                            
                            March
      2005 – PresentNicholas
      Meadmore
                            
                            59
                            
                            Chief
      Financial Officer
                            
                            September
      2005 – December
2008





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 Investment Services N.V..  Upon his
appointment, he resigned from this position and is no longer involved with Epsom
Investment Services N.V. and is not affiliated 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.


24


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.





Nicholas
Meadmore.  Mr. Meadmore was our Chief Financial Officer, and
brought to us over 30 years experience in international accounting and financial
reporting.  Following the completion of an MBA at Henley Management
College in 1994, he spent six years in the international hotel and hospitality
industry, among others, with Four Seasons. More recently, he spent four years
with NGO’s in Geneva, Switzerland, including the World Health
Organization.





6B.         Compensation





During our fiscal year ended
December 31, 2008, 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





Long Term
                                        CompensationAnnual Compensation
                                      
                                      Awards
                                      
                                      
                                      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
                                      Dec
      2008
                                      
                                      
                                      234,000
                                      
                                      
                                      Nil
                                      
                                      Nil
                                      
                                      
                                      1,250,000
                                      
                                      
                                      Nil
                                      
                                      
                                      NilC.E.O.
      & PresidentNicholas
      Meadmore
                                      Dec
      2008
                                      
                                      
                                      132,000
                                      
                                      
                                      Nil
                                      
                                      Nil
                                      
                                      Nil
                                      
                                      
                                      Nil
                                      
                                      
                                      NilC.F.O.




25


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 November 3, 2008, the
shareholders elected Messrs. Roger A. Leopard, John M. Smith, and Howard Edmund
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,
2008, Dr. Browning and Mr. Smith comprised the Audit Committee and Messrs
Leopard and Browning comprised the Compensation Committee.  Prior to
Mr. Perkin’s death, Mr. Perkins was a member of the Audit Committee (Dr.
Browning replaced him upon his death). 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.




On June 2008, Mr. Alan E. Perkins, a
member of the Board of Directors, passed away. Since February 2005, Mr. Perkins
served as a member of the Audit Committee. Dr. Browning assumed Mr. Perkins role
as a member of the Audit Committee.




6D.         Employees





Our subsidiary, CalciTech Group
Services SA, has three (3) full-time employees and no part-time employees
located in Switzerland.  We have two (2) officers located in
Switzerland: Mr. Leopard and Mr. Smith.   CalciTech Deutschland
GmbH has no (0) 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 March 31,
2009.





Dec 31, 2008Number ofShares
                    
                    
                    PercentRoger
      A. Leopard (non-beneficial)(1)
                    
                    
                    1,840,625
                    
                    
                    
                    0.99
                    %John
      M. Smith
                    
                    
                    225,668
                    
                    
                    
                    0.12
                    %Alan
      Perkins(2)
                    
                    
                    100,000
                    
                    
                    
                    0.05
                    %Howard
      Browning
                    
                    
                    0
                    
                    
                    
                    0Nicholas
      Meadmore
                    
                    
                    0
                    
                    
                    
                    0





(1)
            Mr.
      Leopard is a non-beneficiary of the above shares as they are owned by a
      trust in which he has no interest.


(2)
            Mr.
      Alan Perkins passed away on June
2008.





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.


26


In 2005, following Mr. Tompkins’
decision not to stand for re-election to the Board of Directors, we entered into
a consulting agreement with Mr. Tompkins for the delivery of services relating
to the financing of projects by way of equity or debt as the parties may agree
in writing from time to time.  As part of the agreement, Mr. Tompkins’
options as granted will be maintained by us through to maturity.





During the fiscal year ended
December 31, 2008, we issued no share options. The Balance of outstanding
options is shown in the table below:





Outstanding
Options





Name
                                                        
                                                        Shares Underlying
                                                          Options
                                                        
                                                        Exercise Price
                                                        
                                                        Purchase Price, if
                                                          any
                                                        
                                                        Expiration DateRoger
      A Leopard
                                                        
                                                        750,000
                                                        
                                                        USD
      $
                                                        0.33
                                                        
                                                        -
                                                        
                                                        February
      28, 2013500,000
                                                        
                                                        USD
      $
                                                        0.27
                                                        
                                                        -
                                                        
                                                        October
      10, 2013500,000
                                                        
                                                        USD
      $
                                                        0.095
                                                        
                                                        -
                                                        
                                                        January
      27, 2014H J
      M Tompkins
                                                        
                                                        250,000
                                                        
                                                        CAD
      $
                                                        0.30
                                                        
                                                        -
                                                        
                                                        February
      25, 2010250,000
                                                        
                                                        CAD
      $
                                                        0.45
                                                        
                                                        -
                                                        
                                                        February
      25, 2010100,000
                                                        
                                                        CAD
      $
                                                        0.33
                                                        
                                                        -
                                                        
                                                        February
      25, 2010100,000
                                                        
                                                        CAD
      $
                                                        0.24
                                                        
                                                        -
                                                        
                                                        February
      25, 2010John
      M Smith
                                                        
                                                        100,000
                                                        
                                                        USD
      $
                                                        0.24
                                                        
                                                        -
                                                        
                                                        February
      25, 2010250,000
                                                        
                                                        USD
      $
                                                        0.37
                                                        
                                                        -
                                                        
                                                        February
      25, 2013100,000
                                                        
                                                        USD
      $
                                                        0.27
                                                        
                                                        -
                                                        
                                                        October
      10, 2013250,000
                                                        
                                                        USD
      $
                                                        0.095
                                                        
                                                        -
                                                        
                                                        December 30, 2013Marc
      Lakmaaker
                                                        
                                                        50,000
                                                        
                                                        USD
      $
                                                        0.27
                                                        
                                                        -
                                                        
                                                        October
      10, 2013200,000
                                                        
                                                        USD
      $
                                                        0.095
                                                        
                                                        -
                                                        
                                                        January
      27, 2014The
      Estate of Alan E Perkins(1)
                                                        
                                                        250,000
                                                        
                                                        USD
      $
                                                        0.24
                                                        
                                                        -
                                                        
                                                        February
      25, 2010Howard
      E Browning
                                                        
                                                        250,000
                                                        
                                                        USD
      $
                                                        0.23
                                                        
                                                        -
                                                        
                                                        June
      30, 2010250,000
                                                        
                                                        USD
      $
                                                        0.30
                                                        
                                                        -
                                                        
                                                        February
      28, 2013250,000
                                                        
                                                        USD
      $
                                                        0.095
                                                        
                                                        -
                                                        
                                                        January
      27, 2014Nicholas
      Meadmore
                                                        
                                                        0





(1)
            Mr.
      Alan Perkins passed away on June
2008.





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 Investment
Services, N.V., and now 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.


27


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 on January 11, 2009, their current
holding is 6,338,000 shares which represents 6.34% of the outstanding common
shares.





As of December 31, 2008, there were
1,350 record holders of common shares in the United States representing
approximately 97.5% 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. $702,000 for the year ended December 31, 2008, U.S.
$105,000 for the year ended December 31, 2007, and U.S. $230,000 for the ten
months ended December 31, 2006.





In the
financial year ended December 31, 2008, this amount included U.S. $39,000 paid
to directors and U.S. $663,000 paid to EuroHelvetia TrustCo S.A.  In
the financial year ended December 31, 2007, this amount included U.S. $7,000
paid to directors (U.S. $52,000 for the ten months ended December 31, 2006) and
U.S. $99,000 paid to EuroHelvetia TrustCo S.A. (U.S. $275,000 for the ten months
ended December 31, 2006), 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 Investment Services N.V.





The fees
and services were approved by the independent directors.





7C.         Interest
of Experts and Counsel.





Not Applicable.





Item
8.  Financial Statements





8A.         Consolidated
Statements and Other Financial Information





We have attached the following
Financial Statements as part of this Annual report:





·
            Consolidated
      Balance Sheets as of December 31, 2008, 2007 and
  2006.





·
            Consolidated
      Statements of Operations for the years ended December 31, 2008, 2007 and
      the ten month period ended December 31,
2006.




·
            Consolidated
      Statements of Shareholders’ (Deficit) Equity for the years ended December
      31, 2008, 2007 and the ten month period ended December 31,
      2006.




·
            Consolidated
      Statements of Cash Flows for the years ended December 31, 2008, 2007 and
      the ten month period ended December 31,
2006.




·
            Notes
      to Consolidated Financial
Statements.





The Financial Statements are attached
hereto following the Signature Page.


28


Legal
Proceedings





The Company currently is not involved
in any legal proceedings.





Dividend
Policy





We have
never paid any dividends and do not intend to in the near future.





8B.         Significant
Changes





None.





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 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 on December 30, 2008.





On
September 27, 2004, following a full review by our Board of Directors, we
decided that it was in our best interest as well as our shareholders to request
to delist our common shares from the TSX Venture Exchange.  Permission
for the delist had been granted by our shareholders at the Annual General
Meeting held on October 29, 2003.  Permission to delist was granted on
January 19, 2005.  The reasons underlying the request to delist were
as follows:





·
            The
      continuing obligations and resulting demands on our financial and
      personnel resources required in maintaining the TSX listing, were
      considered to be in no proportion to the benefits received from this
      listing.





·
            Service
      levels received by us were considered to fall substantially short of those
      to be expected from a professionally run
  exchange.





·
            The
      level of competence and swiftness of response from the TSX in relation to
      issues raised by us were considered to be lacking.  Example of
      aforementioned is the serious delay by the TSX, of over one year, in
      approving newly issued CalciTech
stock.





·
            During
      our time on the TSX, we had been confronted with a number of unjustifiable
      trade halts.  In these instances it was found that the TSX
      refused to communicate clearly and in a timely fashion to the arguments
      brought up by us.  The insistence by the regulatory bodies in
      Canada on two occasions that we file a Quarterly Management Discussion and
      Analysis as a prerequisite for resumption of trade, were wholly unfounded
      under BCSC and ASC regulation.  We were forced to expend
      significant resources in resolving a situation we had been forced into
      unnecessarily.





·
            We
      felt our resources were better spent in consolidating our North American
      listing on the OTC Bulletin Board while focusing on implementing new and
      anticipated procedures in compliance with the Sarbanes-Oxley
      Act.





·
            It
      was felt that a consolidation on the OTC Bulletin Board would concentrate
      trading in our shares, thereby providing a more accurate picture to
      shareholders of trading pattern on the North American
    market.


29


·
            The
      consolidation was also seen as a measure to reduce arbitrage trading on
      the North American markets.





The high and low prices expressed in
Canadian dollars on the TSX for our common shares and the high and low prices
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:





TSX Venture Exchange
                                                                                        
                                                                                        
                                                                                        OTC Bulletin Board
                                                                                        
                                                                                        
                                                                                        OFEXC$
                                                                                        
                                                                                        
                                                                                        C$
                                                                                        
                                                                                        
                                                                                        US$
                                                                                        
                                                                                        
                                                                                        US$
                                                                                        
                                                                                        
                                                                                        UK£
                                                                                        
                                                                                        
                                                                                        UK£2009
                                                                                        
                                                                                        High
                                                                                        
                                                                                        
                                                                                        Low
                                                                                        
                                                                                        
                                                                                        High
                                                                                        
                                                                                        
                                                                                        Low
                                                                                        
                                                                                        
                                                                                        High
                                                                                        
                                                                                        
                                                                                        LowMay
      31, 2009
                                                                                        
                                                                                        
                                                                                        N/A
                                                                                        
                                                                                        
                                                                                        
                                                                                        N/A
                                                                                        
                                                                                        
                                                                                        $
                                                                                        0.10
                                                                                        
                                                                                        
                                                                                        $
                                                                                        0.08
                                                                                        
                                                                                        
                                                                                        
                                                                                        N/A
                                                                                        
                                                                                        
                                                                                        
                                                                                        N/AApril
      30, 2009
                                                                                        
                                                                                        
                                                                                        N/A
                                                                                        
                                                                                        
                                                                                        
                                                                                        N/A
                                                                                        
                                                                                        
                                                                                        $
                                                                                        0.10
                                                                                        
                                                                                        
                                                                                        $
                                                                                        0.08
                                                                                        
                                                                                        
                                                                                        
                                                                                        N/A
                                                                                        
                                                                                        
                                                                                        
                                                                                        N/AMarch
      31, 2009
                                                                                        
                                                                                        
                                                                                        N/A
                                                                                        
                                                                                        
                                                                                        
                                                                                        N/A
                                                                                        
                                                                                        
                                                                                        $
                                                                                        0.11
                                                                                        
                                                                                        
                                                                                        $
                                                                                        0.06
                                                                                        
                                                                                        
                                                                                        
                                                                                        N/A
                                                                                        
                                                                                        
                                                                                        
                                                                                        N/AFebruary
      38, 3009
                                                                                        
                                                                                        
                                                                                        N/A
                                                                                        
                                                                                        
                                                                                        
                                                                                        N/A
                                                                                        
                                                                                        
                                                                                        $
                                                                                        0.12
                                                                                        
                                                                                        
                                                                                        $
                                                                                        0.07
                                                                                        
                                                                                        
                                                                                        
                                                                                        N/A
                                                                                        
                                                                                        
                                                                                        
                                                                                        N/AJanuary
      31, 2009
                                                                                        
                                                                                        
                                                                                        N/A
                                                                                        
                                                                                        
                                                                                        
                                                                                        N/A
                                                                                        
                                                                                        
                                                                                        $
                                                                                        0.10
                                                                                        
                                                                                        
                                                                                        $
                                                                                        0.02
                                                                                        
                                                                                        
                                                                                        
                                                                                        N/A
                                                                                        
                                                                                        
                                                                                        
                                                                                        N/A2008
                                                                                        
                                                                                        High
                                                                                        
                                                                                        
                                                                                        Low
                                                                                        
                                                                                        
                                                                                        High
                                                                                        
                                                                                        
                                                                                        Low
                                                                                        
                                                                                        
                                                                                        High
                                                                                        
                                                                                        
                                                                                        Low4th
      Qtr ended December 31, 2008
                                                                                        
                                                                                        
                                                                                        N/A
                                                                                        
                                                                                        
                                                                                        
                                                                                        N/A
                                                                                        
                                                                                        
                                                                                        $
                                                                                        0.18
                                                                                        
                                                                                        
                                                                                        $
                                                                                        0.02
                                                                                        
                                                                                        
                                                                                        £
                                                                                        0.12
                                                                                        
                                                                                        
                                                                                        £
                                                                                        0.013rd
      Qtr ended September 30, 2008
                                                                                        
                                                                                        
                                                                                        N/A
                                                                                        
                                                                                        
                                                                                        
                                                                                        N/A
                                                                                        
                                                                                        
                                                                                        $
                                                                                        0.25
                                                                                        
                                                                                        
                                                                                        $
                                                                                        0.14
                                                                                        
                                                                                        
                                                                                        £
                                                                                        0.15
                                                                                        
                                                                                        
                                                                                        £
                                                                                        0.092nd
      Qtr ended June 30, 2008
                                                                                        
                                                                                        
                                                                                        N/A
                                                                                        
                                                                                        
                                                                                        
                                                                                        N/A
                                                                                        
                                                                                        
                                                                                        $
                                                                                        0.25
                                                                                        
                                                                                        
                                                                                        $
                                                                                        0.18
                                                                                        
                                                                                        
                                                                                        £
                                                                                        0.13
                                                                                        
                                                                                        
                                                                                        £
                                                                                        0.121st
      Qtr ended March 31, 2008
                                                                                        
                                                                                        
                                                                                        N/A
                                                                                        
                                                                                        
                                                                                        
                                                                                        N/A
                                                                                        
                                                                                        
                                                                                        $
                                                                                        0.29
                                                                                        
                                                                                        
                                                                                        $
                                                                                        0.20
                                                                                        
                                                                                        
                                                                                        £
                                                                                        0.14
                                                                                        
                                                                                        
                                                                                        £
                                                                                        0.142007
                                                                                        
                                                                                        High
                                                                                        
                                                                                        
                                                                                        Low
                                                                                        
                                                                                        
                                                                                        High
                                                                                        
                                                                                        
                                                                                        Low
                                                                                        
                                                                                        
                                                                                        High
                                                                                        
                                                                                        
                                                                                        Low4th
      Qtr ended December 31, 2007
                                                                                        
                                                                                        
                                                                                        N/A
                                                                                        
                                                                                        
                                                                                        
                                                                                        N/A
                                                                                        
                                                                                        
                                                                                        $
                                                                                        0.35
                                                                                        
                                                                                        
                                                                                        $
                                                                                        0.20
                                                                                        
                                                                                        
                                                                                        £
                                                                                        0.16
                                                                                        
                                                                                        
                                                                                        £
                                                                                        0.123rd
      Qtr ended September 30, 2007
                                                                                        
                                                                                        
                                                                                        N/A
                                                                                        
                                                                                        
                                                                                        
                                                                                        N/A
                                                                                        
                                                                                        
                                                                                        $
                                                                                        0.35
                                                                                        
                                                                                        
                                                                                        $
                                                                                        0.16
                                                                                        
                                                                                        
                                                                                        £
                                                                                        0.17
                                                                                        
                                                                                        
                                                                                        £
                                                                                        0.112nd
      Qtr ended June 30, 2007
                                                                                        
                                                                                        
                                                                                        N/A
                                                                                        
                                                                                        
                                                                                        
                                                                                        N/A
                                                                                        
                                                                                        
                                                                                        $
                                                                                        0.44
                                                                                        
                                                                                        
                                                                                        $
                                                                                        0.26
                                                                                        
                                                                                        
                                                                                        £
                                                                                        0.24
                                                                                        
                                                                                        
                                                                                        £
                                                                                        0.171st
      Qtr ended March 31, 2007
                                                                                        
                                                                                        
                                                                                        N/A
                                                                                        
                                                                                        
                                                                                        
                                                                                        N/A
                                                                                        
                                                                                        
                                                                                        $
                                                                                        0.56
                                                                                        
                                                                                        
                                                                                        $
                                                                                        0.35
                                                                                        
                                                                                        
                                                                                        £
                                                                                        0.25
                                                                                        
                                                                                        
                                                                                        £
                                                                                        0.212006
                                                                                        
                                                                                        High
                                                                                        
                                                                                        
                                                                                        Low
                                                                                        
                                                                                        
                                                                                        High
                                                                                        
                                                                                        
                                                                                        Low
                                                                                        
                                                                                        
                                                                                        High
                                                                                        
                                                                                        
                                                                                        Low4th
      Qtr ended December 31, 2006
                                                                                        
                                                                                        
                                                                                        N/A
                                                                                        
                                                                                        
                                                                                        
                                                                                        N/A
                                                                                        
                                                                                        
                                                                                        $
                                                                                        0.44
                                                                                        
                                                                                        
                                                                                        $
                                                                                        0.25
                                                                                        
                                                                                        
                                                                                        £
                                                                                        0.21
                                                                                        
                                                                                        
                                                                                        £
                                                                                        0.173rd
      Qtr ended September 30, 2006
                                                                                        
                                                                                        
                                                                                        N/A
                                                                                        
                                                                                        
                                                                                        
                                                                                        N/A
                                                                                        
                                                                                        
                                                                                        $
                                                                                        0.30
                                                                                        
                                                                                        
                                                                                        $
                                                                                        0.18
                                                                                        
                                                                                        
                                                                                        £
                                                                                        0.17
                                                                                        
                                                                                        
                                                                                        £
                                                                                        0.132nd
      Qtr ended June 30, 2006
                                                                                        
                                                                                        
                                                                                        N/A
                                                                                        
                                                                                        
                                                                                        
                                                                                        N/A
                                                                                        
                                                                                        
                                                                                        $
                                                                                        0.51
                                                                                        
                                                                                        
                                                                                        $
                                                                                        0.25
                                                                                        
                                                                                        
                                                                                        £
                                                                                        0.27
                                                                                        
                                                                                        
                                                                                        £
                                                                                        0.171st
      Qtr ended March 31, 2006
                                                                                        
                                                                                        
                                                                                        N/A
                                                                                        
                                                                                        
                                                                                        
                                                                                        N/A
                                                                                        
                                                                                        
                                                                                        $
                                                                                        0.59
                                                                                        
                                                                                        
                                                                                        $
                                                                                        0.31
                                                                                        
                                                                                        
                                                                                        £
                                                                                        0.29
                                                                                        
                                                                                        
                                                                                        £
                                                                                        0.21Period
                                                                                        
                                                                                        High
                                                                                        
                                                                                        
                                                                                        Low
                                                                                        
                                                                                        
                                                                                        High
                                                                                        
                                                                                        
                                                                                        Low
                                                                                        
                                                                                        
                                                                                        High
                                                                                        
                                                                                        
                                                                                        LowJan
      1, 2007 - Dec 31, 2007
                                                                                        
                                                                                        
                                                                                        N/A
                                                                                        
                                                                                        
                                                                                        
                                                                                        N/A
                                                                                        
                                                                                        
                                                                                        $
                                                                                        0.56
                                                                                        
                                                                                        
                                                                                        $
                                                                                        0.16
                                                                                        
                                                                                        
                                                                                        £
                                                                                        0.25
                                                                                        
                                                                                        
                                                                                        £
                                                                                        0.11Jan
      1, 2006 - Dec 31, 2006
                                                                                        
                                                                                        
                                                                                        N/A
                                                                                        
                                                                                        
                                                                                        
                                                                                        N/A
                                                                                        
                                                                                        
                                                                                        $
                                                                                        0.60
                                                                                        
                                                                                        
                                                                                        $
                                                                                        0.13
                                                                                        
                                                                                        
                                                                                        £
                                                                                        0.29
                                                                                        
                                                                                        
                                                                                        £
                                                                                        0.13Jan
      1, 2005 - Dec 31, 2005
                                                                                        
                                                                                        $
                                                                                        0.40
                                                                                        
                                                                                        
                                                                                        $
                                                                                        0.30
                                                                                        
                                                                                        
                                                                                        $
                                                                                        0.29
                                                                                        
                                                                                        
                                                                                        $
                                                                                        0.15
                                                                                        
                                                                                        
                                                                                        £
                                                                                        0.12
                                                                                        
                                                                                        
                                                                                        £
                                                                                        0.11Jan
      1, 2004 - Dec 31, 2004
                                                                                        
                                                                                        $
                                                                                        0.49
                                                                                        
                                                                                        
                                                                                        $
                                                                                        0.24
                                                                                        
                                                                                        
                                                                                        $
                                                                                        0.31
                                                                                        
                                                                                        
                                                                                        $
                                                                                        0.18
                                                                                        
                                                                                        
                                                                                        
                                                                                        N/A
                                                                                        
                                                                                        
                                                                                        
                                                                                        N/AJan
      1, 2003 - Dec 31, 2003
                                                                                        
                                                                                        $
                                                                                        0.73
                                                                                        
                                                                                        
                                                                                        $
                                                                                        0.39
                                                                                        
                                                                                        
                                                                                        $
                                                                                        0.41
                                                                                        
                                                                                        
                                                                                        $
                                                                                        0.25
                                                                                        
                                                                                        
                                                                                        
                                                                                        N/A
                                                                                        
                                                                                        
                                                                                        
                                                                                        N/A




30


9B.         Plan
of Distribution





Not
Applicable.





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 on December 30,
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 200,000,000
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 By-laws, required to
be exercised by the shareholders in a general meeting or prohibited by
law.


31


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.





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 By-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
By-laws contain no provisions that would prevent or delay a change in control of
us.





10C.       Material
Contracts





Addendum to the 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 April 1999, we amended the credit facility agreement to
provide up to $5,000,000 until February 28, 2001, and reduced the interest rate
to 7.75%.  Subsequently, the credit facility agreement was amended in
February 2001. On February 28, 2003, this credit facility agreement was further
amended to reduce the maximum amount of credit to $2,500,000, in addition to a
reduction in interest charged to 7.5% per annum. During April 2006, this credit
facility was amended and extended to August 30, 2007.





Under the terms of the credit facility
agreement, any outstanding balance due on the credit facility agreement can be
converted in part or in whole into our common shares at any time at the option
of the holder. The conversion price is equal to 80% of the trading price per
share of common shares on the date such note was made or additional advances
were made. The credit facility is secured by shares of CalciTech Synthetic
Minerals Ltd.  No additional consideration was paid for the extensions
on the repayment date for the credit facility.


32


Addendum to the Credit Facility
Agreement between Epsom Investment Services N.V. and CalciTech Ltd. dated
February 27, 2006.On November 16, 2006, we announced that the
conversion rights to convert the balance of the Epsom Investment Services N.V.
credit facility were withdrawn by Epsom with effect from February 27,
2006.





Addendum to the Credit Facility
Agreement between Epsom Investment Services N.V. and CalciTech Ltd. dated
September 7, 2007.Under this Addendum, Epsom agreed to
convert $2,001,000 of the outstanding credit facility into 6,900,000 shares of
the Company’s common stock at the then current market price of
$0.29.  The credit facility was maintained at $2.5 million, the
repayment date was extended to August 31, 2009, and the interest charge was
increased to 8.5%.





Addendum to the Credit Facility
Agreement between Epsom Investment Services N.V. and CalciTech Ltd. dated August
31, 2008.Under this Addendum, Epsom agreed to increase the
credit facility to U.S. $5,000,000 on a temporary basis until the closing of a
placing with Newlands Stockbrokers or December 31, 2008, whichever was earlier.





Addendum to the 6% Convertible
Debenture Due December 31, 2009 between the Company and certain
Holders.Under this Addendum, the Company and the Holders
agreed to convert 50% of the outstanding principal under the Debenture into
shares of the Company’s common stock at a price of U.S. $0.095, and to extend
the payment date for the remaining principal to December 31, 2010 at a revised
interest rate of 1.75% per annum.





Addendum to the Credit Facility
Agreement between Epsom Asset Management Ltd. and CalciTech Ltd. dated February
23, 2009.Under this Addendum, Epsom agreed to convert the
outstanding balance on the credit facility as of December 31, 2008, into the
Company’s common shares at a conversion price of $0.095 per share, provided that
Epsom is able to resell 50% of the converted common shares to new and existing
investors. Epsom converted all of the outstanding balance under the credit
facility per this addendum in the first quarter of 2009.  The proceeds
of the conversion will be made available to the Company under the current credit
facility for working capital purposes.





Addendum to the Credit Facility
Agreement between Epsom Asset Management Ltd. and CalciTech Ltd. dated February
25, 2009.  Under this Addendum, Epsom agreed to increase the
credit facility limit from $2,500,000 to $3,000,000 and to decrease the
effective interest rate from 3.5% to 1.75%.





Addendum to the Credit Facility
Agreement between Epsom Asset Management Ltd. and CalciTech Ltd. dated May 29,
2009.Under this Addendum, Epsom agreed to extend the balance
of the credit facility past U.S. $5,000,000 to meet the Company’s working
capital needs until the conversion of the outstanding balance on the credit
facility agreement was converted into the Company’s common shares.





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.


33





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 shares 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.


34


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 shares 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.


35


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.


36


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.


37


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.





Our common shares are listed on the OTC
Bulletin Board and similar information can be inspected and copied at the
offices of the National Association of Securities Dealers, Inc., 1735 K Street,
N.W., Washington, D.C. 20006.  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
15T. 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.


38


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, 2008 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, 2007, CalciTech’s internal control
over financial reporting was effective.




This
annual report does not include an attestation report of the company’s
independent registered public accounting firm regarding internal control over
financial reporting. Management’s report was not subject to attestation by the
company’s registered public accounting firm pursuant to temporary rules of the
Securities and Exchange Commission that permit the company to provide only
management’s report in this annual report.




(c) Changes in Internal Control
over Financial Reporting.




None.





Item
16.   [Reserved]





Item
16A           Audit
Committee Financial Report





There are currently two members on the
Audit Committee.  Mr. John M. Smith 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 does not have an audit committee financial expert serving on its Audit
Committee.


39


Item
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.





Item
16C           Principal
Accountant Fees and Services





The independent auditor for the fiscal
years ended December 31, 2008, December 31, 2007 and 10 months ended December
31, 2006 was HW Fisher & Co, for the year ended February 28, 2006 was HW
Fisher & Co, and for the year ended February 28, 2005 was MRI Moores Rowland
LLP.





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, 2008 was $47,491.





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.





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, 2006 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 year ended
February 28, 2006 was $35,000.





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, 2008 was $NIL,
December 31, 2007 was $NIL, ten months ended December 31, 2006 was $ NIL and the
year ended February 28, 2006 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, 2008 was
$NIL, December 31, 2007 was $NIL, ten months ended December 31, 2006 was $NIL
and the year ended February 28, 2006 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, 2008 was $NIL,
December 31, 2007 was $NIL, ten months ended December 31, 2006 was $NIL and the
year ended February 28, 2006 was $NIL.





Pre-Approval
Policies or Procedures





The Audit Committee does not have any
pre-approval policies or procedures.





Percentage
of Fees Approved





The percentage of fees disclosed
(above) that were approved by the Audit Committee is 100%.  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%.


40


Item
16D           Exemptions
From The Listing Standards For Audit Committees





Not applicable.





Item
16E           Purchases
Of Equity Securities By The Issuer And Affiliated Purchasers





None.





Item
16F           Change in
Registrant’s Certifying Accountant





No change.





Part
III





Item
17.  Financial Statements





The following Financial Statements
pertaining to us are filed as part of this Annual report:





·
            Consolidated
      Balance Sheets as of December 31, 2008, 2007 and
  2006.





·
            Consolidated
      Statements of Operations for the years ended December 31, 2008, 2007 and
      the ten month period ended December 31,
2006.




·
            Consolidated
      Statements of Shareholders’ (Deficit) Equity for the years ended December
      31, 2008, 2007 and the ten month period ended December 31,
      2006.




·
            Consolidated
      Statements of Cash Flows for the years ended December 31, 2008, 2007 and
      the ten month period ended December 31,
2006.




·
            Notes
      to Consolidated Financial
Statements.





The Financial Statements are attached
hereto following the Signature Page.





Item
18.  Financial Statements





See Item 17.





Item
19.  Exhibits





Exhibit No.
              
              Name1.1
              
              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
              
              By-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 November 12,
      2008*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)4.3
              
              Addendum
      to Credit Facility Agreement between Epsom Investment Services N.V. and
      CalciTech Ltd. dated August 15, 2006(5)




41





4.4
              
              Form
      of 5% Convertible Debenture due February 28, 2005(4)4.5
              
              Form
      of Addendum to 5% Convertible Debenture Due February 28, 2005(4)4.6
              
              Consulting
      Agreement between CalciTech Ltd. and H.J. Mark Tompkins dated February 25,
      2005(4)4.7
              
              Form
      of 6% Convertible Debenture due December 31, 2009*4.8
              
              Addendum
      to the Credit Facility Agreement between Epsom Investment Services N.V.
      and CalciTech Ltd. dated September 7, 2007*4.9
              
              Addendum
      to the Credit Facility Agreement between Epsom Investment Services N.V.
      and CalciTech Ltd. dated August 31, 2008*4.10
              
              Addendum
      to the 6% Convertible Debenture Due December 31, 2009 between the Company
      and certain Holders*4.11
              
              Addendum
      to the Credit Facility Agreement between Epsom Asset Management Ltd. and
      CalciTech Ltd. dated February 23, 2009*4.12
              
              Addendum
      to the Credit Facility Agreement between Epsom Asset Management Ltd. and
      CalciTech Ltd. dated February 25, 2009*4.13
              
              Addendum
      to the Credit Facility Agreement between Epsom Asset Management Ltd. and
      CalciTech Ltd. dated May 29, 2009*8.1
              
              List
      of Subsidiaries*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*








* Filed
herewith


(1)
            Previously
      filed with Registration Statement on Form 20-F under the Securities
      Exchange Act of 1934 on
      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.




42


SIGNATURES





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 24, 2009
              CALCITECH
      LTD.(Registrant)By:
              /s/ Roger A. LeopardRoger
      A. LeopardPresident
      and Chief Executive Officer




43


INDEX TO CONSOLIDATED
FINANCIAL STATEMENTS


OF


CALCITECH,
LTD.





Report
      of Auditors
              F -
      1Consolidated
      Balance Sheets as of December 31, 2008, 2007 and 2006
              F -
      2Consolidated
      Statements of Operations for the years ended December 31, 2008, 2007 and
      the ten month period ended December 31, 2006
              F -
      4Consolidated
      Statements of Shareholders’ (Deficit) Equity for the years ended December
      31, 2008, 2007 and the ten month period ended December 31,
      2006
              F -
      5Consolidated
      Statements of Cash Flows for the years ended December 31, 2008, 2007 and
      the ten month period ended December 31, 2006
              F -
      6Notes
      to Consolidated Financial Statements
              F -
      7




F


REPORT
OF AUDITORS
 
 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, 2008, December 31, 2007 and December 31, 2006, the related
consolidated statement of operations, shareholders' equity (deficiency), and
cash flows for the year ended December 31, 2008, December 31, 2007, and 10
months ended December 31, 2006. 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, 2008, December 31, 2007 and December 31, 2006, and the consolidated
results of its operations and its cash flows for the year ended December 31,
2008, December 31, 2007, and the 10 months ended December 31, 2006 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 year ended December 31, 2008, and the period ended 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.
 
 /s/ H.W. Fisher &
    CompanyH.
      W. Fisher & CompanyChartered
      AccountantsAcre
      House11-15
      William RoadLondonNW1
      3ERUnited
      Kingdom
 
 Dated:
June 23, 2009
  F-1
  CALCITECH
LTD
 CONSOLIDATED
BALANCE SHEET
 As
of December 31, 2008, December 31, 2007 and December 31, 2006
 (amounts
in thousands of US dollars, except per share data)
 
 year to
                                              
                                              
                                              year to
                                              
                                              
                                              10 months
                                                toNotes
                                              
                                              
                                              Dec 31, 2008
                                              
                                              
                                              Dec 31, 2007
                                              
                                              
                                              Dec 31, 2006$
                                              
                                              
                                              $
                                              
                                              
                                              $ASSETSCurrent
      assetsCash
      and cash equivalents
                                              
                                              2.6
                                              
                                              
                                              
                                              26
                                              
                                              
                                              
                                              117
                                              
                                              
                                              
                                              385Stock
                                              
                                              
                                              
                                              
                                              
                                              
                                              0
                                              
                                              
                                              
                                              7
                                              
                                              
                                              
                                              6Receivables,
      prepaid expensesand
      other current assets
                                              
                                              3
                                              
                                              
                                              
                                              233
                                              
                                              
                                              
                                              277
                                              
                                              
                                              
                                              238Total
      current assets
                                              
                                              
                                              
                                              
                                              
                                              
                                              259
                                              
                                              
                                              
                                              401
                                              
                                              
                                              
                                              629Non-current
      assetsProperty,
      plant and equipment, net
                                              
                                              4
                                              
                                              
                                              
                                              1,029
                                              
                                              
                                              
                                              1,181
                                              
                                              
                                              
                                              972Intangible
      assets
                                              
                                              2.8
      and 5
                                              
                                              
                                              
                                              5,869
                                              
                                              
                                              
                                              3,867
                                              
                                              
                                              
                                              1,643Total
      non-current assets
                                              
                                              
                                              
                                              
                                              
                                              
                                              6,898
                                              
                                              
                                              
                                              5,049
                                              
                                              
                                              
                                              2,615TOTAL
      ASSETS
                                              
                                              
                                              
                                              
                                              
                                              $
                                              7,157
                                              
                                              
                                              $
                                              5,450
                                              
                                              
                                              $
                                              3,244
  The
accompanying notes are an integral part of the consolidated financial
statements
  F-2
  CALCITECH
LTD
 CONSOLIDATED
BALANCE SHEET
 As
of December 31, 2008, December 31, 2007 and December 31, 2006
 (amounts
in thousands of US dollars, except per share data)
  year to
                                  
                                  
                                  year to
                                  
                                  
                                  10 months toNotes
                                  
                                  Dec 31, 2008
                                  
                                  
                                  Dec 31, 2007
                                  
                                  
                                  Dec 31, 2006$
                                  
                                  
                                  $
                                  
                                  
                                  $LIABILITIES & SHAREHOLDERS' EQUITY /(DEFICIENCY)Current
      liabilitiesAccounts
      payable
                                  
                                  
                                  
                                  
                                  534
                                  
                                  
                                  
                                  865
                                  
                                  
                                  
                                  757Accruals
                                  
                                  
                                  
                                  
                                  353
                                  
                                  
                                  
                                  233
                                  
                                  
                                  
                                  192Convertible
      debentures - current portion
                                  
                                  2.14
      & 8.1
                                  
                                  
                                  0
                                  
                                  
                                  
                                  0
                                  
                                  
                                  
                                  92Deferred
      gain on sale and leaseback - current portion
                                  
                                  
                                  
                                  
                                  0
                                  
                                  
                                  
                                  99
                                  
                                  
                                  
                                  99Other
      loans
                                  
                                  7
                                  
                                  
                                  0
                                  
                                  
                                  
                                  0
                                  
                                  
                                  
                                  0Asset
      Agreement - current portion
                                  
                                  7
                                  
                                  
                                  85
                                  
                                  
                                  
                                  177
                                  
                                  
                                  
                                  158Provisions
      - current portion
                                  
                                  10
                                  
                                  
                                  31
                                  
                                  
                                  
                                  27
                                  
                                  
                                  
                                  29Total
      Current Liabilities
                                  
                                  
                                  
                                  $
                                  1,003
                                  
                                  
                                  $
                                  1,401
                                  
                                  
                                  $
                                  1,327Non
      Current LiabilitiesConvertible
      debentures - non-current portion
                                  
                                  2.14
      & 8.1
                                  
                                  
                                  0
                                  
                                  
                                  
                                  0
                                  
                                  
                                  
                                  0Credit
      facility
                                  
                                  6
                                  
                                  
                                  5,436
                                  
                                  
                                  
                                  1,630
                                  
                                  
                                  
                                  1,580Deferred
      gain on sale and leaseback
                                  
                                  
                                  
                                  
                                  0
                                  
                                  
                                  
                                  0
                                  
                                  
                                  
                                  99Other
      loans
                                  
                                  7
                                  
                                  
                                  0
                                  
                                  
                                  
                                  0
                                  
                                  
                                  
                                  0Asset
      Agreement - non-current portion
                                  
                                  7
                                  
                                  
                                  0
                                  
                                  
                                  
                                  0
                                  
                                  
                                  
                                  158Provisions
      - non-current portion
                                  
                                  10
                                  
                                  
                                  109
                                  
                                  
                                  
                                  152
                                  
                                  
                                  
                                  156Total
      Non Current Liabilities
                                  
                                  
                                  
                                  $
                                  5,545
                                  
                                  
                                  $
                                  1,782
                                  
                                  
                                  $
                                  1,993Total
      liabilities
                                  
                                  
                                  
                                  $
                                  6,548
                                  
                                  
                                  $
                                  3,183
                                  
                                  
                                  $
                                  3,320Commitments
      and ContingenciesShareholders'
      Equity
                                  
                                  8Common
      stock, Cdn $ 0.001 par value;200,000,000
      shares authorised; issued & outstanding(88,899,675
      at December 31, 2006)99,998,665
      at December 31, 2007,(126,588,812
      at December 31, 2008)
                                  
                                  
                                  
                                  
                                  1,846
                                  
                                  
                                  
                                  1,824
                                  
                                  
                                  
                                  1,813Share
      premium, holders' options outstandingOn
      credit facility and contribution surplus
                                  
                                  
                                  
                                  
                                  43,165
                                  
                                  
                                  
                                  40,661
                                  
                                  
                                  
                                  37,457Convertible
      debentures
                                  
                                  
                                  
                                  
                                  2,321
                                  
                                  
                                  
                                  4,642
                                  
                                  
                                  
                                  4,613Accumulated
      deficit during the development stage
                                  
                                  
                                  
                                  
                                  (46,393
                                  )
                                  
                                  
                                  (44,368
                                  )
                                  
                                  
                                  (43,690
                                  )Cumulative
      foreign currency translation adjustments
                                  
                                  
                                  
                                  
                                  (330
                                  )
                                  
                                  
                                  (492
                                  )
                                  
                                  
                                  (269
                                  )Total
      Shareholders' (Deficit) Equity
                                  
                                  
                                  
                                  
                                  609
                                  
                                  
                                  
                                  2,267
                                  
                                  
                                  
                                  (77
                                  )TOTAL
      LIABILITIES & SHAREHOLDERS' EQUITY
                                  
                                  
                                  
                                  $
                                  7,157
                                  
                                  
                                  $
                                  5,450
                                  
                                  
                                  $
                                  3,244
  The
accompanying notes are an integral part of the consolidated financial
statements
  F-3
  CALCITECH
LTD
 CONSOLIDATED
STATEMENT OF OPERATIONS
 For
the year ended December 31, 2008,
 the
year ended December 31, 2007,
 and
the ten month period ended December 31, 2006,
 (amounts
in thousands of US dollars, except per share data)
 
 year to
                    
                    
                    year to
                    
                    
                    10 months toNotes
                    
                    Dec 31, 2008
                    
                    
                    Dec 31, 2007
                    
                    
                    Dec 31, 2006$
                    
                    
                    $
                    
                    
                    $Revenues
                    
                    
                    
                    
                    0
                    
                    
                    
                    58
                    
                    
                    
                    48Cost
      of revenues
                    
                    
                    
                    
                    (37
                    )
                    
                    
                    (60
                    )
                    
                    
                    (32
                    )Gross
      margin
                    
                    
                    
                    
                    (37
                    )
                    
                    
                    (2
                    )
                    
                    
                    16Research
      and development expenses
                    
                    
                    
                    
                    0
                    
                    
                    
                    0
                    
                    
                    
                    0Project
      development expenses
                    
                    
                    
                    
                    0
                    
                    
                    
                    0
                    
                    
                    
                    0Product
      development expenses
                    
                    
                    
                    
                    0
                    
                    
                    
                    0
                    
                    
                    
                    0General
      and administrative expenses
                    
                    
                    
                    
                    1,197
                    
                    
                    
                    313
                    
                    
                    
                    410Operating
      loss
                    
                    
                    
                    
                    (1,234
                    )
                    
                    
                    (314
                    )
                    
                    
                    (394
                    )Profit
      on disposals
                    
                    
                    
                    
                    0
                    
                    
                    
                    0
                    
                    
                    
                    0Interest
      expense
                    
                    
                    
                    
                    (791
                    )
                    
                    
                    (341
                    )
                    
                    
                    (228
                    )Loss
      before income taxes
                    
                    
                    
                    
                    (2,025
                    )
                    
                    
                    (656
                    )
                    
                    
                    (622
                    )Provision
      for income taxes
                    
                    9
                    
                    
                    0
                    
                    
                    
                    (22
                    )
                    
                    
                    2Net
      Loss
                    
                    
                    
                    $
                    (2,025
                    )
                    
                    $
                    (678
                    )
                    
                    $
                    (620
                    )Net
      deficit per share:Basic
      and diluted
                    
                    
                    
                    $
                    (0.016
                    )
                    
                    $
                    (0.007
                    )
                    
                    $
                    (0.01
                    )Shares
      used in net loss per share calculation:Basic
      and diluted
                    
                    
                    
                    
                    126,588,812
                    
                    
                    
                    99,998,665
                    
                    
                    
                    88,899,675
 
 Please
refer to note 11 for details of related party transactions.
 
 The
accompanying notes are an integral part of the consolidated financial
statements
  F-4
  CALCITECH
LTD
 CONSOLIDATED
STATEMENT OF SHAREHOLDERS' (DEFICIT) EQUITY
 For
the year ended December 31, 2008,
 the
year ended December 31, 2007,
 and
the ten month period ended December 31, 2006
 (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) equityBalances,
      February 28, 2006
                              
                              
                              
                              
                              88,899,675
                              
                              
                              
                              1,813
                              
                              
                              
                              37,457
                              
                              
                              
                              4,613
                              
                              
                              
                              (43,070
                              )
                              
                              
                              (82
                              )
                              
                              
                              731Net
      loss
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              0
                              
                              
                              
                              0
                              
                              
                              
                              (620
                              )
                              
                              
                              0
                              
                              
                              
                              (620
                              )Foreign
      currency translation adjustments
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              0
                              
                              
                              
                              0
                              
                              
                              
                              0
                              
                              
                              
                              (187
                              )
                              
                              
                              (187
                              )Balances,
      December 31, 2006
                              
                              
                              
                              
                              88,899,675
                              
                              
                              
                              1,813
                              
                              
                              
                              37,457
                              
                              
                              
                              4,613
                              
                              
                              
                              (43,690
                              )
                              
                              
                              (269
                              )
                              
                              
                              (76
                              )Net
      loss
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              0
                              
                              
                              
                              0
                              
                              
                              
                              (678
                              )
                              
                              
                              0
                              
                              
                              
                              (678
                              )Issuance
      of common stock on conversionof
      credit facility
                              
                              8.2
                              
                              
                              11,098,990
                              
                              
                              
                              11
                              
                              
                              
                              3,249
                              
                              
                              
                              0
                              
                              
                              
                              0
                              
                              
                              
                              0
                              
                              
                              
                              3,260Debentures:
      non-current portion adjs
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              (42
                              )
                              
                              
                              29
                              
                              
                              
                              0
                              
                              
                              
                              0
                              
                              
                              
                              (13
                              )Foreign
      currency translation adjustments
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              (3
                              )
                              
                              
                              0
                              
                              
                              
                              0
                              
                              
                              
                              (224
                              )
                              
                              
                              (227
                              )Balances,
      December 31, 2007
                              
                              
                              
                              
                              99,998,665
                              
                              
                              
                              1,824
                              
                              
                              
                              40,661
                              
                              
                              
                              4,642
                              
                              
                              
                              (44,368
                              )
                              
                              
                              (493
                              )
                              
                              
                              2,266Net
      loss
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              0
                              
                              
                              
                              0
                              
                              
                              
                              (2,025
                              )
                              
                              
                              0
                              
                              
                              
                              (2,025
                              )Issuance
      of common stock on conversion
                              
                              
                              
                              
                              26,590,147
                              
                              
                              
                              22
                              
                              
                              
                              2,504
                              
                              
                              
                              0
                              
                              
                              
                              0
                              
                              
                              
                              0
                              
                              
                              
                              2,526of
      debentures
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              (2,321
                              )
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              (2,321
                              )Debentures:
      non-current portion adjs
                              
                              
                              
                              
                              
                              
                              
                              
                              0
                              
                              
                              
                              0
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              0Foreign
      currency translation adjustments
                              
                              
                              
                              
                              
                              
                              
                              
                              0
                              
                              
                              
                              0
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              163
                              
                              
                              
                              163Balances,
      December 31, 2008
                              
                              
                              
                              
                              126,588,812
                              
                              
                              
                              1,846
                              
                              
                              
                              43,165
                              
                              
                              
                              2,321
                              
                              
                              
                              (
      46,393
                              )
                              
                              
                              (330
                              )
                              
                              
                              609
 
 The
accompanying notes are an integral part of the consolidated financial
statements
  F-5
  CALCITECH
LTD
 CONSOLIDATED
STATEMENT OF CASH FLOWS
 For
the year ended December 31, 2008,
 The
year ended December 31, 2007,
 the
ten month periods ended December 31, 2006,
 (amounts
in thousands of US dollars)
 
 year to
                    
                    
                    year to
                    
                    
                    year toDec 31, 2008
                    
                    
                    Dec 31, 2007
                    
                    
                    Dec 31, 2006$
                    
                    
                    $
                    
                    
                    $Cash
      flows from operating activitiesNet
      loss
                    
                    
                    (2,025
                    )
                    
                    
                    (678
                    )
                    
                    
                    (620
                    )Adjustments
      for:Loss
      on disposal of fixed assets
                    
                    
                    0
                    
                    
                    
                    0
                    
                    
                    
                    0Depreciation
      and amortization
                    
                    
                    131
                    
                    
                    
                    139
                    
                    
                    
                    76Interest
      expense
                    
                    
                    0
                    
                    
                    
                    0
                    
                    
                    
                    0Operating
      loss before working capital changes
                    
                    
                    (1,894
                    )
                    
                    
                    (539
                    )
                    
                    
                    (544
                    )Changes
      in working capital:Receivables,
      prepayments & current assets
                    
                    
                    51
                    
                    
                    
                    (39
                    )
                    
                    
                    (4
                    )Accounts
      payable, accruals and provisions
                    
                    
                    (211
                    )
                    
                    
                    149
                    
                    
                    
                    478Net
      cash used in operating activities
                    
                    
                    (2,054
                    )
                    
                    
                    (429
                    )
                    
                    
                    (70
                    )Cash
      flows from investing activities in:Property,
      plant and equipment
                    
                    
                    (33
                    )
                    
                    
                    (348
                    )
                    
                    
                    (136
                    )Plant
      pre-financing, project & product development
                    
                    
                    (1,893
                    )
                    
                    
                    (2,152
                    )
                    
                    
                    (1,560
                    )Patents
                    
                    
                    (55
                    )
                    
                    
                    (72
                    )
                    
                    
                    (42
                    )Net
      cash used in investing activities
                    
                    
                    (1,981
                    )
                    
                    
                    (2,572
                    )
                    
                    
                    (1,738
                    )Cash
      flows from financing activities:Other
      loans
                    
                    
                    (138
                    )
                    
                    
                    (197
                    )
                    
                    
                    (190
                    )Sale
      and leaseback
                    
                    
                    (92
                    )
                    
                    
                    (140
                    )
                    
                    
                    (110
                    )Proceeds
      from credit facility
                    
                    
                    3,806
                    
                    
                    
                    50
                    
                    
                    
                    1,653Repayment
      of credit facility
                    
                    
                    0
                    
                    
                    
                    0
                    
                    
                    
                    (287
                    )Proceeds
      from conversion
                    
                    
                    205
                    
                    
                    
                    3,261
                    
                    
                    
                    0Net
      cash provided by financing activities
                    
                    
                    3,781
                    
                    
                    
                    2,974
                    
                    
                    
                    1,066Effect
      of exchange rate changes on cashand
      cash equivalents
                    
                    
                    163
                    
                    
                    
                    (240
                    )
                    
                    
                    (186
                    )Net
      (decrease)/increase in cash & cash equivalents
                    
                    
                    (91
                    )
                    
                    
                    (268
                    )
                    
                    
                    (928
                    )Cash
      and cash equivalents, beginning of year
                    
                    
                    117
                    
                    
                    
                    385
                    
                    
                    
                    1,313Cash
      and cash equivalents, end of year
                    
                    $
                    26
                    
                    
                    $
                    117
                    
                    
                    $
                    385
 
 The
accompanying notes are an integral part of the consolidated financial
statements
  F-6
  CALCITECH
LTD
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 Year
ended December 31, 2008      (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. 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.
Extensive project development and marketing, on a worldwide basis, has taken
place.
 
 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. It continues to seek out new
projects. Up to December 31, 2008, cumulative losses were $46,393.
 
 Management
believes that given the cash on hand of $26 together with the restructuring of
its debt in order to facilitate the arrangement of on-going working capital in
early 2009 (see Note 20), 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.
  F-7
  CALCITECH
LTD
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 Year
ended December 31, 2008      (amounts in thousands
of US dollars, except share data)
 
 We have
finalised our plans to build our first full scale SCC plant in Germany.
Construction is dependent on availability of funds through financing. The plant
is planned to produce 100,000 tonnes of SCC per year.
 
 The
German federal state of Sachsen-Anhalt will proceed with the approval process
for the provision of a grant on 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 will also seek
approval of an 80% state guarantee that is also available. The grant is made
available by the European Regional Structural Fund. The Company now expects to
bring in an industrial / financial partner to complete the project.
 
 Since
February 1998, a working capital facility agreement with Epsom Investment
Services N.V. (“Epsom”) has been available. In November 2008, following a
re-organisation within Epsom, the facility was assigned to Epsom Asset
Management Ltd., part of the Epsom Group. 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.
As at December 31, 2008, with the prior written consent of Epsom, the facility
was temporarily extended by $2,936 (December 31, 2007: $1,630 available). A
restructuring of the debt in order to make available additional working capital
is planned in early 2009 (see Note 20). Epsom has increased the credit facility
to $3,000 and extended it until August 31, 2010.
 
 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.
 
 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.
 
 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”).
 
 As the
Company is now firmly in the commercialization stage, in 2006 the board decided
to change the accounting date from February 28 to December 31. Accounts for the
year ended December 31, 2008 together with accounts to December 31, 2007 are
presented.
  F-8
  CALCITECH
LTD
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 Year
ended December 31, 2008      (amounts in thousands
of US dollars, except share data)
 
 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 generally accepted
accounting principles 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.
 
 2.5
Foreign currency translation
 
 The
reporting currency of the Company 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.
 
 year to
                    
                    
                    year to
                    
                    
                    10 months toDec 31, 2008
                    
                    
                    Dec 31, 2007
                    
                    
                    Dec 31, 2006$
                    
                    
                    $
                    
                    
                    $Unrealised
      gain / (loss) on currencies
                    
                    
                    (146
                    )
                    
                    
                    370
                    
                    
                    
                    216Change
      in foreign currency adjustments
                    
                    
                    163
                    
                    
                    
                    (225
                    )
                    
                    
                    (187
                    )Exchange
      Gain / (Loss)
                    
                    $
                    17
                    
                    
                    $
                    146
                    
                    
                    $
                    29
 
 2.6
Cash and cash equivalents
 
 The
Company considers all highly liquid investments purchased with an original
maturity of three months or less to be cash equivalents.
  F-9
  CALCITECH
LTD
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 Year
ended December 31, 2008      (amounts in thousands
of US dollars, except share data)
 
 2.7
Property, plant and equipment
 
 Property,
plant and equipment are stated at cost and are depreciated on a straight-line
basis over their estimated useful lives:
 
 Plant and equipment
                  
                  5
      to 10 yearsOffice
      furniture and equipment
                  
                  3
      to 8 years
 
 An
impairment review is undertaken where there are indicators of
impairment.
 Maintenance
and repairs are charged to expenses when incurred.
 
 2.8
Intangible Assets
 
 Expenditure
on intangible assets (Product Development, Project Development, Commercial Plant
pre-financing costs and Patents) is capitalised and amortised over their useful
lives on a straight-line basis. Legal expenditure for the protection of
technology developed by the Company 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 Company is not yet utilizing them on a commercial level.
Amortisation will begin upon the commencement of commercial
production.
 
 2.9
Research and development
 
 Research
and development costs are expensed as incurred, except for Project Development
costs, which are deferred as intangible assets as the Company can demonstrate
all of the following:
  ·
              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 and;
  ·
              its
      ability to measure the expenditure attributable to the intangible asset
      during its development reliably.
 
 Deferred
Project Development costs of $2,124, Product Development costs of $1,435,
Commercial Plant pre-finance costs of $1,944 and Patents of $365 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
  F-10
  CALCITECH
LTD
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 Year
ended December 31, 2008      (amounts in thousands
of US dollars, except share data)
  ·
              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 amortised on a straight-line basis over the period of expected
future benefit.
 
 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. 2,300,000 options have been excluded from the Earnings per Share
calculation, as the effect is anti-dilutive.
 
 2.11
Fair value of financial instruments
 
 Carrying
amounts of certain of the Company'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.
 
 2.12
Deferred 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.
 
 2.13
Stock options
 
 The
Company does not recognise any compensation expense with respect to stock
options.
 
 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.
  F-11
  CALCITECH
LTD
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 Year
ended December 31, 2008      (amounts in thousands
of US dollars, except share data)
 
 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 Company. 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:
  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 Company 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.
  F-12
  CALCITECH
LTD
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 Year
ended December 31, 2008      (amounts in thousands
of US dollars, except share data)
 
 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.
During the year ended December 31, 2008, CalciTech Deutschland GmbH, a 100%
owned subsidiary company, was awarded grants of €22 and the comparative is as
follows:
 
 year to
                    
                    
                    year to
                    
                    
                    10 months toGovernment Grants
                    
                    Dec 31, 2008
                    
                    
                    Dec 31, 2007
                    
                    
                    Dec 31, 2006Germany
                    
                    €
                    22
                    
                    
                    €
                    19
                    
                    
                    €
                    22
 
 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.
 
 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 Company writes off accounts receivable when
they become uncollectible. The Company 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.
  F-13


CALCITECH
LTD
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 Year
ended December 31, 2008      (amounts in thousands
of US dollars, except share data)
 
 3.
RECEIVABLES, PREPAID
EXPENSES AND OTHER CURRENT ASSETS
 
 Receivables,
prepaid expenses and other current assets consist of the following:
 
 Dec
      31, 2008
                          
                          
                          Dec
      31, 2007
                          
                          
                          Dec
      31, 2006$
                          
                          
                          $
                          
                          
                          $Accounts
      receivable
                          
                          
                          195
                          
                          
                          
                          90
                          
                          
                          
                          68Other
      debtors
                          
                          
                          0
                          
                          
                          
                          13
                          
                          
                          
                          25VAT
      receivable
                          
                          
                          7
                          
                          
                          
                          72
                          
                          
                          
                          38Deposits
                          
                          
                          16
                          
                          
                          
                          45
                          
                          
                          
                          40Prepaid
      expenses
                          
                          
                          15
                          
                          
                          
                          58
                          
                          
                          
                          67Total
                          
                          $
                          233
                          
                          
                          $
                          277
                          
                          
                          $
                          238
 
 4.
PROPERTY, PLANT AND
EQUIPMENT
 
 Property,
plant and equipment consists of the following:
 
 Computer
                                  Equipment
                                
                                
                                Building,
                                  Plant
                                  & Equipment
                                
                                
                                Commercial
                                  Plant Pre-
                                  Financing
                                
                                
                                Office
                                  Furniture
                                  & Equipment
                                
                                
                                Total$
                                
                                
                                $
                                
                                
                                
                                
                                
                                $
                                
                                
                                $Balance
      at December 31, 2007
                                
                                
                                18
                                
                                
                                
                                583
                                
                                
                                
                                562
                                
                                
                                
                                18
                                
                                
                                
                                1,181Additions
                                
                                
                                0
                                
                                
                                
                                8
                                
                                
                                
                                72
                                
                                
                                
                                0
                                
                                
                                
                                80Disposals
                                
                                
                                0
                                
                                
                                
                                0
                                
                                
                                
                                (53
                                )
                                
                                
                                0
                                
                                
                                
                                (53
                                )Depreciation
      during year
                                
                                
                                (11
                                )
                                
                                
                                (120
                                )
                                
                                
                                0
                                
                                
                                
                                (1
                                )
                                
                                
                                (132
                                )Foreign
      Currency Adjustments
                                
                                
                                1
                                
                                
                                
                                (25
                                )
                                
                                
                                (24
                                )
                                
                                
                                0
                                
                                
                                
                                (47
                                )Balance
      at December 31, 2008
                                
                                $
                                8
                                
                                
                                
                                446
                                
                                
                                
                                558
                                
                                
                                
                                17
                                
                                
                                
                                1,029Gross
      Amount
                                
                                
                                39
                                
                                
                                
                                991
                                
                                
                                
                                558
                                
                                
                                
                                111
                                
                                
                                
                                1,700Accumulated
      Depreciation
                                
                                
                                (32
                                )
                                
                                
                                (545
                                )
                                
                                
                                0
                                
                                
                                
                                (94
                                )
                                
                                
                                (671
                                )Balance
      at December 31, 2008
                                
                                $
                                8
                                
                                
                                
                                446
                                
                                
                                
                                558
                                
                                
                                
                                17
                                
                                
                                
                                1,029
 
 For the
year ended December 31, 2008, the year ended December 31, 2007, and the period
ended December 31, 2006, depreciation expense totalled $132, $138 and $76
respectively.
 
 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 $685, of which depreciation
of $124 was recognised in the period ending December 31, 2007 (December 31,
2006: $87 and February 28, 2006: $75).
  F-14
  CALCITECH
LTD
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 Year
ended December 31, 2008      (amounts in thousands
of US dollars, except share data)
 
 On
December 31, 2003 the Company obtained a small-scale production plant costing
$495 under a capital lease expiring on December 31, 2008. 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, 2008, the future minimum lease payments under non-cancellable
operating 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:
 
 Project
                                    Development
                                  
                                  
                                  Product
                                    Development
                                  
                                  
                                  Commercial
                                    Plant Pre-
                                    financing
                                  
                                  
                                  Patents
                                  
                                  
                                  Total$
                                  
                                  
                                  $
                                  
                                  
                                  $
                                  
                                  
                                  $
                                  
                                  
                                  $Balance
      at December 31, 2007
                                  
                                  
                                  1,403
                                  
                                  
                                  
                                  846
                                  
                                  
                                  
                                  1,309
                                  
                                  
                                  
                                  310
                                  
                                  
                                  
                                  3,867Additions
                                  
                                  
                                  731
                                  
                                  
                                  
                                  654
                                  
                                  
                                  
                                  1,046
                                  
                                  
                                  
                                  55
                                  
                                  
                                  
                                  2,487Disposals
                                  
                                  
                                  0
                                  
                                  
                                  
                                  (43
                                  )
                                  
                                  
                                  (354
                                  )
                                  
                                  
                                  0
                                  
                                  
                                  
                                  (397
                                  )Amortisation
      during period
                                  
                                  
                                  0
                                  
                                  
                                  
                                  0
                                  
                                  
                                  
                                  0
                                  
                                  
                                  
                                  0
                                  
                                  
                                  
                                  0Foreign
      Currency Adjustments
                                  
                                  
                                  (10
                                  )
                                  
                                  
                                  (22
                                  )
                                  
                                  
                                  (57
                                  )
                                  
                                  
                                  0
                                  
                                  
                                  
                                  (89
                                  )Balance
      at December 31, 2008
                                  
                                  $
                                  2,124
                                  
                                  
                                  
                                  1,435
                                  
                                  
                                  
                                  1,944
                                  
                                  
                                  
                                  365
                                  
                                  
                                  
                                  5,869Gross
      Amount
                                  
                                  
                                  2,124
                                  
                                  
                                  
                                  1,435
                                  
                                  
                                  
                                  1,944
                                  
                                  
                                  
                                  392
                                  
                                  
                                  
                                  5,896Accumulated
      Amortisation
                                  
                                  
                                  0
                                  
                                  
                                  
                                  0
                                  
                                  
                                  
                                  0
                                  
                                  
                                  
                                  (28
                                  )
                                  
                                  
                                  (28
                                  )Balance
      at December 31, 2008
                                  
                                  $
                                  2,124
                                  
                                  
                                  
                                  1,435
                                  
                                  
                                  
                                  1,944
                                  
                                  
                                  
                                  365
                                  
                                  
                                  
                                  5,869
 
 For the
year ended December 31, 2008, the period ended December 31, 2007 and the year
ended February 28, 2006, amortization expense totaled $NIL, $2
and  $NIL respectively.  When full-scale production plants
are producing revenues, patents will be amortised on a straight-line basis over
the life of the patent.
 
 6.
CREDIT FACILITY
AGREEMENT
 
 On
February 28, 1998 the Company entered in a credit facility with Epsom Investment
Services N.V. (“Epsom”). Since this date, 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. As at December 31, 2008, with the
prior written consent of Epsom, the facility was temporarily extended by $2,936
(December 31, 2007: $1,630 available). The interest rate per annum is 3.5%. A
restructuring of the debt in order to make available additional working capital
is planned in early 2009 (see Note 21). As part of the restructuring in February
2009, Epsom has agreed to a revised credit facility of $3,000 and extending it
until August 31, 2010.
  F-15
  CALCITECH
LTD
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 Year
ended December 31, 2008      (amounts in thousands
of US dollars, except share data)
 
 The
credit facility is presented as follows:
 
 year
      to
                  
                  
                  year
      to
                  
                  
                  10
      months toDec
      31, 2008
                  
                  
                  Dec
      31, 2007
                  
                  
                  Dec
      31, 2006$
                  
                  
                  $
                  
                  
                  $Face
      value of note issued during the year
                  
                  
                  3,629
                  
                  
                  
                  3,136
                  
                  
                  
                  1,653Less
      equity conversion component
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  03,629
                  
                  
                  
                  3,136
                  
                  
                  
                  1,653Interest
      expense
                  
                  
                  177
                  
                  
                  
                  175
                  
                  
                  
                  27Conversion
      of note into common shares
                  
                  
                  0
                  
                  
                  
                  (3,261
                  )
                  
                  
                  0Payments
      made during the year
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  (314
                  )3,806
                  
                  
                  
                  50
                  
                  
                  
                  1,366Non-current
      liability at beginning of period
                  
                  
                  1,630
                  
                  
                  
                  1,580
                  
                  
                  
                  214Non-current
      liability at end of period
                  
                  $
                  5,436
                  
                  
                  $
                  1,630
                  
                  
                  $
                  1,580Effective
      interest rate at period end
                  
                  
                  8.50
                  %
                  
                  
                  7.75
                  %
                  
                  
                  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 $NIL during
the year ended December 31, 2008 ($NIL, during the year ended December 31, 2007,
and $314 for the period ended December 31, 2006), as further described in Note
18. The carrying amount of the credit facility approximates its fair
value.
 
 7.
OTHER
LOANS
 
 Other
loans are as follows:
 Dec
      31, 2008
                    
                    
                    Dec
      31, 2007
                    
                    
                    Dec
      31, 2006$
                    
                    
                    $
                    
                    
                    $Other
      loans
                    
                    
                    0
                    
                    
                    
                    0
                    
                    
                    
                    0Operating
      lease
                    
                    
                    85
                    
                    
                    
                    177
                    
                    
                    
                    316Total
      loans
                    
                    $
                    85
                    
                    
                    $
                    177
                    
                    
                    $
                    316Falling
      due split:Amounts
      due within one yearOther
      loans
                    
                    
                    0
                    
                    
                    
                    0
                    
                    
                    
                    0Operating
      lease
                    
                    
                    85
                    
                    
                    
                    177
                    
                    
                    
                    158Total
      amounts due within one year
                    
                    
                    85
                    
                    
                    
                    177
                    
                    
                    
                    158Amounts
      due after one yearOther
      loans
                    
                    
                    0
                    
                    
                    
                    0
                    
                    
                    
                    0Finance
      lease 1 -2 years
                    
                    
                    0
                    
                    
                    
                    0
                    
                    
                    
                    158Finance
      lease 2 -5 years
                    
                    
                    0
                    
                    
                    
                    0
                    
                    
                    
                    0Balance
      at the end of the year
                    
                    $
                    85
                    
                    
                    $
                    177
                    
                    
                    $
                    316
  F-16
  CALCITECH
LTD
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 Year
ended December 31, 2008      (amounts in thousands
of US dollars, except share data)
 
 As at
December 31, 2008, included in other loans above is $85, which is secured upon
the assets to which it relates. See note 4 for further details of the sale and
leaseback.
 
 8.
SHAREHOLDERS' EQUITY
(DEFICIT)
 
 8.1
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 31st
December 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.
 
 The
equity element can be summarised as follows:
 Dec
      31, 2008
                    
                    
                    Dec
      31, 2007
                    
                    
                    Dec
      31, 2006$
                    
                    
                    $
                    
                    
                    $Principal
      amount of debentures at issuance
                    
                    
                    4,642
                    
                    
                    
                    4,642
                    
                    
                    
                    4,642Less
      present value of futureinterest
      payments at issuance
                    
                    
                    0
                    
                    
                    
                    0
                    
                    
                    
                    (545
                    )Less
      finders' fee
                    
                    
                    0
                    
                    
                    
                    0
                    
                    
                    
                    (177
                    )Debentures
      Converted
                    
                    
                    (2,321
                    )Adjustment
      for non-current portion
                    
                    
                    0
                    
                    
                    
                    0
                    
                    
                    
                    693$
                    2,321
                    
                    
                    $
                    4,642
                    
                    
                    $
                    4,613
  F-17
  CALCITECH
LTD
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 Year
ended December 31, 2008      (amounts in thousands
of US dollars, except share data)
 
 8.2
Conversion of credit facility
 
 The
original Epsom credity facility loan 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.
 
 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.
 
 8.3
Warrant Exercise
 
 During
January 2006, 9 million warrants were exercised at a price of $0.35 raising
$3,150. These warrants arose out the private placement of 9 million common
shares, priced at $0.25 completed during November 2004.
 
 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. All stock options granted are not subject to vesting
requirements.  Stock option activity was as follows:
 Number
      of
                                    Shares
                                  
                                  Exercise
      price per
                                    shareBalance
      at December 31, 2005
                                  
                                  
                                  2,300,000Options
      exercised
                                  
                                  
                                  0Options
      lapsed
                                  
                                  
                                  0Options
      granted
                                  
                                  
                                  0Balance
      at February 28, 2006
                                  
                                  
                                  2,300,000
                                  
                                  Cdn
      $0.23 to 0.45Options
      exercised
                                  
                                  
                                  0Options
      lapsed
                                  
                                  
                                  0Options
      granted
                                  
                                  
                                  0Balance
      at December 31, 2006
                                  
                                  
                                  2,300,000
                                  
                                  Cdn
      $0.23 to 0.45Options
      exercised
                                  
                                  
                                  0Options
      lapsed
                                  
                                  
                                  0Options
      granted
                                  
                                  
                                  0Balance
      at December 31, 2007
                                  
                                  
                                  2,300,000
                                  
                                  Cdn
      $0.23 to 0.45Options
      exercised
                                  
                                  
                                  0Options
      lapsed
                                  
                                  
                                  0Options
      granted
                                  
                                  
                                  0Balance
      at December 31, 2008
                                  
                                  
                                  2,300,000
                                  
                                  Cdn
      $0.23 to
0.45
  F-18
  CALCITECH
LTD
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 Year
ended December 31, 2008      (amounts in thousands
of US dollars, except share data)
 
 The
following table summarises information with respect to stock options as of
December 31, 2008:
 
 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
                    
                    
                    
                    2.50Total
                    
                    
                    2,300,000
                    
                    
                    
                    2,300,000
 
 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.
 
 Loss
before income taxes consists of the following:
 
 year
      to
                            
                            
                            Year
      to
                            
                            
                            10
      month toDec
      31, 2008
                            
                            
                            Dec
      31, 2007
                            
                            
                            Dec
      31, 2006$
                            
                            
                            $
                            
                            
                            $Bermuda
                            
                            
                            (1,657
                            )
                            
                            
                            (646
                            )
                            
                            
                            (457
                            )Rest
      of world
                            
                            
                            (369
                            )
                            
                            
                            (124
                            )
                            
                            
                            (165
                            )Total
                            
                            $
                            (
      2,025
                            )
                            
                            $
                            (770
                            )
                            
                            $
                            (622
                            )
 
 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.
  F-19
  CALCITECH
LTD
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 Year
ended December 31, 2008      (amounts in thousands
of US dollars, except share data)
 
 There are
no significant operating loss carry-forwards, which would have an impact on
income tax as of December 31, 2008.
 
 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, 2008, the year ended December 31, 2007 and the period
ended December 31, 2006, 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
                    
                    
                    year
      to
                    
                    
                    10
      months toDec
      31, 2008
                    
                    
                    Dec
      31, 2007
                    
                    
                    Dec
      31, 2006$
                    
                    
                    $
                    
                    
                    $Amounts
      paid to shareholders, directors and officers of the Company for consulting
      and other services
                    
                    $
                    702
                    
                    
                    $
                    106
                    
                    
                    $
                    230Amounts
      paid to EuroHelvetia TrustCo SA for financial advice
                    
                    $
                    57
                    
                    
                    $
                    66
                    
                    
                    $
                    66Amounts
      payable at Balance Sheet date
                    
                    $
                    0
                    
                    
                    $
                    39
                    
                    
                    $
                    233
 
 EuroHelvetia
TrustCo S.A. is contracted by CalciTech to act as the Company’s exclusive
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 the Company, is also a director of
EuroHelvetia TrustCo S.A. EuroHelvetia also provides the administration of
Epsom.
 
 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
                                    
                                    
                                    Year
      to
                                    
                                    
                                    10
      months toDec
      31, 2008
                                    
                                    
                                    Dec
      31, 2007
                                    
                                    
                                    Dec
      31, 2006Revenues
                                    
                                    $
                                    
                                    
                                    $
                                    
                                    
                                    $Bermuda
                                    
                                    
                                    0
                                    
                                    
                                    
                                    0
                                    
                                    
                                    
                                    0Rest
      of world
                                    
                                    
                                    0
                                    
                                    
                                    
                                    48
                                    
                                    
                                    
                                    48Total
                                    
                                    $
                                    0
                                    
                                    
                                    $
                                    48
                                    
                                    
                                    $
                                    48year
      to
                                    
                                    
                                    year
      to
                                    
                                    
                                    10
      months toDec
      31, 2008
                                    
                                    
                                    Dec
      31, 2007
                                    
                                    
                                    Dec
      31, 2006Operating
      loss
                                    
                                    $
                                    
                                    
                                    $
                                    
                                    
                                    $Bermuda
                                    
                                    
                                    (865
                                    )
                                    
                                    
                                    (269
                                    )
                                    
                                    
                                    (231
                                    )Rest
      of world
                                    
                                    
                                    (369
                                    )
                                    
                                    
                                    (46
                                    )
                                    
                                    
                                    (163
                                    )Total
                                    
                                    $
                                    (1,234
                                    )
                                    
                                    $
                                    (314
                                    )
                                    
                                    $
                                    (394
                                    )Identifiable
      assetsBermuda
                                    
                                    
                                    3,320
                                    
                                    
                                    
                                    1,782
                                    
                                    
                                    
                                    1,364Rest
      of world
                                    
                                    
                                    3,837
                                    
                                    
                                    
                                    3,668
                                    
                                    
                                    
                                    1,880Total
                                    
                                    $
                                    7,157
                                    
                                    
                                    $
                                    5,450
                                    
                                    
                                    $
                                    3,244
  F-20
  CALCITECH
LTD
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 Year
ended December 31, 2008      (amounts in thousands
of US dollars, except share data)
 
 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
                    
                    
                    year
      to
                    
                    
                    10
      months toDec
      31, 2008
                    
                    
                    Dec
      31, 2007
                    
                    
                    Dec
      31, 2006$
                    
                    
                    $
                    
                    
                    $Employee
      costs
                    
                    
                    107
                    
                    
                    
                    159
                    
                    
                    
                    180Professional
      fees
                    
                    
                    355
                    
                    
                    
                    40
                    
                    
                    
                    60Investor
      relations
                    
                    
                    124
                    
                    
                    
                    126
                    
                    
                    
                    122Rent,
      rates & charges
                    
                    
                    93
                    
                    
                    
                    49
                    
                    
                    
                    33Travel
                    
                    
                    24
                    
                    
                    
                    18
                    
                    
                    
                    (21
                    )Administrative
      fees & expenses
                    
                    
                    0
                    
                    
                    
                    0
                    
                    
                    
                    0Depreciation
                    
                    
                    131
                    
                    
                    
                    139
                    
                    
                    
                    76
 
 14.
      IFRS 7: RISKS
      ARISING FROM FINANCIAL
INSTRUMENTS
 
 The
Company’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 the highest and
lowest exchange rates been applied during the year ending December 31, 2008, and
during the year ending December 31, 2007:
  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
                        )
                        
                        
                        -7.7
                        %year
      to
                        
                        
                        year
      to
                        
                        
                        
                        
                        
                        
                        year toMarket
      Risk
                        
                        Dec
      31, 2007
                        
                        
                        Dec
      31, 2007
                        
                        
                        
                        
                        
                        
                        Dec
      31, 2007High
                        
                        
                        %
                        
                        
                        Low
                        
                        
                        %$
                        
                        
                        $
                        
                        
                        
                        
                        
                        $Cash
      at Bank
                        
                        
                        113
                        
                        
                        
                        114
                        
                        
                        
                        0.6
                        %
                        
                        
                        102
                        
                        
                        
                        -9.3
                        %Petty
      Cash
                        
                        
                        5
                        
                        
                        
                        5
                        
                        
                        
                        0.1
                        %
                        
                        
                        5
                        
                        
                        
                        -1.6
                        %Accounts
      Receivable
                        
                        
                        72
                        
                        
                        
                        72
                        
                        
                        
                        0.4
                        %
                        
                        
                        63
                        
                        
                        
                        -12.0
                        %Accounts
      Payable
                        
                        
                        (865
                        )
                        
                        
                        (868
                        )
                        
                        
                        0.4
                        %
                        
                        
                        (775
                        )
                        
                        
                        -10.3
                        %Accruals
                        
                        
                        (233
                        )
                        
                        
                        (234
                        )
                        
                        
                        0.4
                        %
                        
                        
                        (221
                        )
                        
                        
                        -5.0
                        %
  F-21
  CALCITECH
LTD
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 Year
ended December 31, 2008      (amounts in thousands
of US dollars, except share data)
 
 The
Company does not feel that exposure to currency fluctuations is material to
operations at the present time.
 
 Liquidity
risk is identified as the Company’s ability to satisfy Accounts Payables out of
liquid assets at December 31, 2008. Even though liquid assets only represent 3%
of accounts payable, the Company does not regard liquidity as a material risk at
the present time. This is because the Company 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 Company’s ability to recover outstanding
receivables in full at December 31, 2008. On accounts receivable, the Company
currently offers terms of 60 days to customers. However the Company relies on
strong and longstanding relationships with its existing debtors, and therefore
has not made provision for bad and doubtful debts.
 
 Credit
      Risk
                                
                                2008
                                
                                
                                <30
      days
                                
                                
                                30-60
      days
                                
                                
                                60-90
      days
                                
                                
                                >90
      days$
                                
                                
                                $
                                
                                
                                $
                                
                                
                                $
                                
                                
                                $Accounts
      Receivable
                                
                                $
                                195
                                
                                
                                
                                0
                                
                                
                                
                                0
                                
                                
                                
                                0
                                
                                
                                
                                195Credit
      Risk
                                
                                2007
                                
                                
                                <30
      days
                                
                                
                                30-60
      days
                                
                                
                                60-90
      days
                                
                                
                                >90
      days$
                                
                                
                                $
                                
                                
                                $
                                
                                
                                $
                                
                                
                                $Accounts
      Receivable
                                
                                $
                                72
                                
                                
                                
                                0
                                
                                
                                
                                0
                                
                                
                                
                                0
                                
                                
                                
                                72
  F-22
  CALCITECH
LTD
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 Year
ended December 31, 2008      (amounts in thousands
of US dollars, except share data)
 
 15.
LIST OF PRINCIPAL
CONSOLIDATED COMPANIES
 
 Principal
consolidated companies are as follows:
 
 Name
      of Company
                                Countries
                                Holding
                                
                                Proportion
                                  held
                                
                                
                                Nature
      of businessCalciTech
      Synthetic Minerals Ltd.
                                Bermuda
                                Ordinary
      shares
                                
                                
                                100
                                %
                                
                                Technology
      licensorCalciTech
      Group Services SA
                                Switzerland
                                Ordinary
      shares
                                
                                
                                100
                                %
                                
                                AdministrationCalciTech
      Holdings ApS
                                Denmark
                                Ordinary
      shares
                                
                                
                                100
                                %
                                
                                Holding
      CompanyCalciTech
      Odda A-S (in liquidation)
                                Norway
                                Ordinary
      shares
                                
                                
                                51
                                %
                                
                                Production
      of SCCCalciTech
      Deutschland GmbH (in liq)
                                Germany
                                Ordinary
      shares
                                
                                
                                100
                                %
                                
                                Production
      of
SCC
 
 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. All group subsidiary
companies were transferred to 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.
 
 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
                    
                    
                    year
      to
                    
                    
                    10
      months toDec
      31, 2008
                    
                    
                    Dec
      31, 2007
                    
                    
                    Dec
      31, 2006$
                    
                    
                    $
                    
                    
                    $Issuance
      of common stock Upon conversion of credit facility
                    
                    
                    0
                    
                    
                    
                    3,261
                    
                    
                    
                    0Issuance
      of common stock Upon private placement through credit
    facility
                    
                    
                    0
                    
                    
                    
                    0
                    
                    
                    
                    0Interest
      expense through credit facility
                    
                    
                    (428
                    )
                    
                    
                    (175
                    )
                    
                    
                    (28
                    )Total
                    
                    $
                    (428
                    )
                    
                    $
                    3,086
                    
                    
                    $
                    (28
                    )
 
 18.
COMMITMENT
 
 The
Company rents its principal management services office under an annually
renewable agreement.   During the period ending December 31,
2008, the Company paid $12.  There are no future obligations for rent
over 12 months.
 
 19.
NUMBER OF EMPLOYEES
(UNAUDITED)
 
 Headcount
was 4, 8 and 7 as of December 31, 2008, December 31, 2007, and December 31,
2006. It is the Company’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, 2008, the Company employed 8 consultants. Various additional
professional firms are also employed for the prevision of specialist
advice.
  F-23
  CALCITECH
LTD
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 Year
ended December 31, 2008      (amounts in thousands
of US dollars, except share data)
 
 20.
POST BALANCE SHEET
EVENT
 
 During
February 2009, Epsom 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. Epsom
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 will
be 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. In addition, creditors amounting to $174 have agreed to convert their
outstanding balance into common shares of the Company at a price of $0.095 per
share. The conversion of the aforementioned Epsom facility and creditors will
result in the issue of 59,050,274 common shares. It was further agreed to
increase the facility to $3,000 and extend it until August 31,
2010.
 
 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, which will become the principal company for all
European operations. A branch office is being registered in
Germany. CalciTech Deutschland GmbH was placed into liquidation on December
16, 2008. CalciTech Aps in Denmark, a holding company for CalciTech Deutschland
GmbH, not meeting original purposes, will now also be
liquidated.
 
 21.
APPROVAL OF FINANCIAL
STATEMENTS
 
 The
financial statements were approved by the board of directors and authorised for
issue on June 23, 2009.
 
 /s/ Roger A. LeopardRoger
      A Leopard/s/ John M. SmithJohn
      M Smith
  F-24