Highlights

    * Entered into a Joint Development Agreement with Samsung SDI
    * Entered into Collaborative DTI funded development partnership with Johnson Matthey Plc and Accelrys Inc
    * Developed and demonstrated a stack delivering a power density of greater than 500 watts per litre
    * Continued to operate well within budget, with strong cash reserves

Chairman’s Statement

The six month period to 30 June 2007 has been one of continued progress for CMR, and I am very pleased to report that we have strengthened our already strong position with consumer electronics OEMs and suppliers around the world. 2006 saw the Company make great technical, organisational and corporate strides which will be the foundation for deeper commercial engagement with our partners. CMR continues to build respect and trust with its partners; essential pre-requisites for building strong business relationships in our key Asian markets.

Regular and close liaison with our potential customers has shown that as their plans are becoming more tangible and focussed on obtaining workable power solutions and less focussed on selecting specific technologies, CMR’s world-class team, superb facilities and clear commercial focus mean that we have the flexibility and capability to be confident in our ability to provide the solutions they require.

Demand for small, cost-effective and efficient portable fuel cell systems continues to grow – driven by the need to overcome the stagnating power density and safety issues associated with Lithium batteries. We believe that many OEMs will field-trial Methanol powered portable fuel cell systems into Asian markets in 2008/9 ahead of mass-market launches from 2010 onwards. However, price volatility of platinum and ruthenium metals, commonly used to make catalysts, is a significant concern for these OEMs, and the elimination of these materials has become a key objective across the industry. This should enhance the prospects for CMR. Our R&D program has already demonstrated very high volumetric power density in our stacks and, as anticipated in our final results for 2006, we have been successfully focussing on using lower cost materials and achieving higher efficiencies. These will remain key activities for the foreseeable future. We have continued to build strong relationships with innovative suppliers of catalysts, membranes, membrane-electrode assemblies (MEAs) and other key components whilst continuing to develop our own capabilities in these areas.

The announcement of our Joint Development Agreement with Samsung SDI during the period was a major endorsement of our proposition. Major OEMs have a history of closely guarding their brand and do not normally allow such announcements. We expect to be able to announce more of this type of agreement, both on the customer and supplier sides of our business, in future reports.

We continue to invest funds and resources, as planned, to develop new and improved technologies for future products. Our technical team is wholly focussed on developing our first generation products, but having a credible road-map of improved products is an essential part of being regarded as a long-term partner by our customers. To this end we have continued to work with Solvay SA and XAAR plc on novel low-cost, high-throughput MEA production, as well as entering into collaboration with Johnson Matthey plc and Accelrys Inc. to facilitate the discovery of better catalysts. These are not planned to feed into the first generation products, but show our commitment to working with market leaders in allied fields to attain and maintain the market leadership position from which we aim to build CMR’s future revenue streams.

The Company’s finances continue to be tightly managed and the Company continues to operate well within our budget. We currently anticipate that our cash reserves are sufficient for planned operations until late 2009. At 31 June 2007, assets totalled £10.3m (June 2006: £12.1m), of which £9.6m was held in cash and short term deposits (June 2006: £11.5m).
 
In accordance with the dividend policy disclosed at the time of the IPO, the Board is not recommending payment of a dividend.

Michael Priestnall, one of CMR's founders, will be leaving the company to pursue alternative opportunities.  He will be continuing to provide intellectual property services to the company on a consultancy basis.  We wish him well for the future and sincere thanks for his contribution to date.  Further details will follow in due course.

Finally I would like to thank all our staff for their commitment, innovation and hard work that has produced the sustained progress that is central to the success of the business and I look forward to reporting on their continued success throughout the rest of the year.

Chief Executive’s report

I am very pleased to report that the Company has made good progress in all of the areas specified as key activities in the 2006 Annual Report.

During the period we have maintained a high level of commercial activity in our target areas and CMR's direct approach to OEMs and system integrators continues to be fruitful with closer ties being forged in a number of areas with major industry players for both customer and supplier relationships.  The highlight of this was the announcement of a Joint Development Agreement with Samsung SDI, a world leader in the delivery of innovative, leading-edge consumer products. Samsung SDI is in the vanguard of major OEMs who recognise the potential that fuel cells have to power the next generation of connected, feature rich, ‘always on’ electronic devices. I expect to be able to announce similar agreements in future reports.

The Period also saw the Company's global reputation for technical leadership further recognised, with invitations to deliver key-note presentations at major industry events in Japan, USA and Taiwan.  CMR also exhibited at the two premier global fuel cell exhibitions where relationships, new and old, were established and strengthened with particular interest in CMR's stack demonstrator product which was the smallest on show at both events.

CMR remains the UK's only developer of direct methanol fuel cell stacks and one of only a handful of such companies in the world. Our development team continues to demonstrate the world-class capability for which they are justifiably recognised. The stack supplied to Samsung SDI under the Joint Development Agreement was delivered on time and was successfully accepted at first time of testing.

We have continued to make significant progress in developing the small, low-cost, efficient stacks that the market needs – during the Period the R&D program targets of increasing fuel and air utilisation in the stack from C.25% to C.50% and operation at lower temperatures were successfully met.

Rising Platinum and Ruthenium prices have become a major concern in the industry and we are able to actively respond to this.  Our team has the capability to develop and use a wide variety of underlying technologies and we are evaluating alternative catalysts in acid (proton exchange) and alkali (anion exchange) environments. Additionally, we are working closely with suppliers of Platinum and Ruthenium free catalysts to test and integrate their products into our stacks. Developing solutions to such problems is not trivial, but we believe that they are signs of a market that is maturing and moving closer to reality. Whilst there is still much development to do, CMR’s broad technical strength positions the Company very well to meet our customers’ stringent requirements.

During the six month period, the adjusted loss before tax (that is, loss before tax adjusted for the cost of share options) was £1.1m (June 2006: £0.6m), reflecting the budgeted increased level of development activity during 2007. The increased activity has required additional technical staff, equipment and office space, the expenditure on which was in line with budget. At the balance sheet date, staff numbers were 26 in total.

Our objectives for the remainder of 2007 remain as per those outlined in the 2006 annual report, with specific focus on:

    * Developing and announcing more commercial agreements with OEMs
    * Building valuable and committed relationships with suppliers
    * Remaining responsive and market driven – providing solutions for our customers
    * Continuing to address key technical targets – including efficiency and cost, by flexible use of our world-class technical capability
    * Securing granted patents in key territories

The Company now has a world-class, motivated and dynamic team with clear technical and commercial goals and we continue to believe that the portable electronics market will embrace fuel cell technology as the next generation of long running power supply.