Interim Results

    RNS Number : 3628E
  ClearSpeed Technology plc
  26 September 2008
   

    26 September 2008

    ClearSpeed Technology plc

    Interim Results

    ClearSpeed Technology plc ('ClearSpeed' or the 'Group', AIM: CSD), a leader in high-performance processors for supercomputing and
embedded systems, announces its interim results for the six months to 30 June 2008.

    Highlights

    *     First sales of the CSX700 next generation processor
    *     Next generation ClearSpeed Accelerated Terascale System (CATS) incorporating CSX700 board product launched 
    *     Cost reductions implemented successfully with a further restructuring proposed

    Richard Farleigh, ClearSpeed Chairman commented:
    
'We have developed a very strong product offering but, as with many new technologies, the challenge is to gain acceptance in the
marketplace. Consequently, we have continued to reduce costs and focus on the careful management of our resources. 

    "We are focussing on partnering, to further control costs and to produce tailored customer solutions incorporating current and future
ClearSpeed product. "

    Enquiries:

 ClearSpeed Technology plc                     0117 317 2000
 Tom Beese, Chief Executive Officer
 Chris Allen, Chief Financial Officer

 College Hill                                  020 7457 2020
 Adrian Duffield/Jon Davies

 KBC Peel Hunt (Nominated Adviser and Broker)  020 7418 8900
 Oliver Scott / Richard Kauffer

    Note to editors

    ClearSpeed is a semiconductor company that delivers the world's most advanced parallel processing solutions for the most challenging
applications ranging from commerce to science to security. This leadership exists because ClearSpeed is unrivalled in meeting the most
intense processing needs with maximum energy efficiency and full programmability. ClearSpeed's products include chips, accelerator boards,
rack modules, software and support. ClearSpeed has over 100 patents granted or pending. For more information, visit www.clearspeed.com.


    Overview

    At the end of H1 2008, ClearSpeed implemented a restructuring in order to reduce further the Group's cost base whilst at the same time
aiming to:

    *     Focus on its core competencies of advanced silicon design and programming tools
    *     Extend its indirect sales model and develop engagements with a key set of partners
    *     Widen its addressable markets
    *     Maintain a strong cash position by significantly reducing cost base; and 
    *     Accelerate the development of the Group's patenting and patent exploitation strategy.

    In order to focus on developing partner relations, ClearSpeed will carry out a further restructuring in September 2008, which will
result in a significant reduction in the Group's cost base and also allow retention of the core team to work with development partners.

    Financial results
    
ClearSpeed had revenues of £0.5m in the six months to 30 June 2008, a 213% growth over the same period last year (2007: £0.1m).  

    The move towards an indirect sales model and subsequent rationalisation of the organisation in Q4 2007, led to operating expenses being
significantly reduced to £6.2m in H1 2008 (H2 2007: £9.2m).  

    The annualised savings from the restructuring programme implemented in June 2008 are expected to exceed £3.0m. The proposed
restructuring for September has commenced with a consultation process with the objective of reducing the Group's annual cost base to less
than £3m. 

    R&D costs in the first half amounted to £3.2m; these will be specifically controlled and only incurred going forward to fulfil customer
orders.  The Group's cash position at 30 June 2008 was £13.9m (31 December 2007: £19.6m).
    
Business development
    
At the end of June 2008, the Group launched its new processor, the CSX700 at the International SuperComputing Conference in Dresden.
Launching this new product "ready to ship" and with the development completed on budget, was significant proof of the effectiveness of
ClearSpeed's execution and significantly strengthened the Group's market position.

    At launch, the CSX700 was approved by HP to provide acceleration to its blade servers opening up a significant potential market for the
product. The CSX700 has also been selected by BAE Systems for future US government satellite processing needs, highlighting a widening of
interest in the Group's technology for defence, aerospace and related markets.  

    However, the market for acceleration remains immature and is not developing at the anticipated rate. Furthermore, these new products are
yet to deliver their expected impact in the marketplace despite setting new industry standards for power efficiency and reliability in High
Performance Computing (HPC) acceleration. 

    Outlook

    The Group has continued to pursue its plan to develop an indirect sales model, working with partners and distributors to expand
ClearSpeed's international routes to market. There are early indications that this model is making progress in Asia Pacific, but
long-standing engagements have yet to come to fruition, despite strong apparent interest. To date, the Group has not yet replicated this
level of interest in the important US and European markets as the overall slow growth of the HPC acceleration market has made revenue growth
both more difficult and slower than expected.
    
The Board believes, despite its confidence that the Group is well positioned at the leading edge of high-performance processors for
supercomputing and embedded systems, that it is prudent to focus on controlling costs and also to be cautious about the timing of future
revenue.


    Condensed Group Income Statement
    June 2008


                                                   Reviewed              Reviewed              Audited
                                       Note        6 months ended 30     6 months ended 30     12 months ended 31 Dec 2007
                                                   June 2008             June 2007
                                                   £'000                 £'000                 £'000

 Revenue                                              447                   143                   1,227 
 Cost of Sales                                        (138)                 (97)                  (458)
 Gross Profit                                         309                   46                    769 

 Operating Expenses
 Research, design and                                 (3,186)               (3,093)               (6,431)
 development
 Marketing and administrative                         (3,055)               (4,049)               (9,731)
 expenses
 Restructuring costs                                 -                    -                       (134)
                                                      (6,241)               (7,142)              (16,296)

 Operating loss                         4             (5,932)               (7,096)              (15,527)
 Investment revenues                                     525                401                   1,025 
 Finance costs                                       -                      (9)                   (9)
 Loss before taxation                                 (5,407)               (6,704)              (14,511)
 Tax on loss on ordinary                5             676                   1,961                 2,657 
 activities
 Loss for the period                    8             (4,731)               (4,743)              (11,854)
 Loss per share
 Basic and diluted                      6          -8.1p                 -9.1p                 -22.8p

 All results are derived from continuing
 operations.


    Condensed Group Statement of Recognised Income and Expense
    June 2008


                                 Reviewed              Reviewed              Audited
                                 6 months ended 30     6 months ended 30     12 months ended 31 Dec 2007
                                 June 2008             June 2007
                                 £'000                 £'000                 £'000

 Exchange differences on            28                       (19)               (39)
 translation of foreign
 operations
 Net income recognised directly     28                    (19)                  (39)
 in equity


 Loss for the period                (4,731)               (4,743)              (11,854)
 Total recognised income and        (4,703)               (4,762)            (11,893)
 expense for the period


    Condensed Group Balance Sheet
    June 2008

                                       Reviewed            Reviewed            Audited
                                 Note  As at 30 June 2008  As at 30 June 2007  As at 31 Dec 2007
                                       £'000               £'000               £'000

 Non-current assets
 Intangible assets                     201                 267                  316 
 Property, plant and equipment         613                 705                 774 
                                       814                 972                 1,090 

 Current assets
 Inventories                           1,561               525                 245 
 Current tax receivable                1,906               1,962               1,230 
 Trade and other receivables           1,284               1,886               998 
 Cash and cash equivalents             13,883              24,683              19,638 
 Derivative financial                    -                   -                 208 
 instruments
                                       18,634              29,056              22,319 
                                                                                
 Total assets                          19,448              30,028              23,409 

 Current liabilities
 Trade and other payables              2,152               1,781               1,686 
 Provisions                            465                 146                 253 
 Derivative financial                  9                   9                     -  
 instruments
                                       2,626               1,936               1,939 
                                                                                
 Net current assets                    16,008              27,120              20,380 
                                                                                
 Total liabilities                     2,626               1,936               1,939 

 Net assets                            16,822              28,092              21,470 


 Equity
 Share capital                    7    584                 584                 584 
 Share premium account                 49,203              49,203              49,203 
 Own shares                            42                  42                  42 
 Capital redemption reserve            6,361               6,361               6,361 
 Merger reserve                        33,153              33,153              33,153 
 Foreign exchange reserve              261                 253                 233 
 Retained earnings                     (72,782)            (61,504)            (68,106)
 Total equity                     8    16,822              28,092              21,470 

    

    Condensed Group Cashflow Statement
    June 2008


                                       Reviewed              Reviewed              Audited
                                 Note  6 months ended 30     6 months ended 30     12 months ended 31 Dec 2007
                                       June 2008             June 2007
                                       £'000                 £'000                 £'000
 Net cash from operating          9       (6,233)               (6,442)               (11,851)
 activities

 Investing activities
 Interest received                        525                   271                   1,025 
 Purchases of property, plant             (33)                  (191)                 (462)
 and equipment
 Purchases of intangible assets           (42)                  (89)                  (191)
                                                                                    
 Net cash from / (used in)                450                   (9)                   372 
 investing activities

 Financing activities
 Proceeds on exercise of                 -                      16                    16 
 options
 Proceeds on issue of shares             -                      20,056                20,056 
 Share issue costs                       -                      (674)                 (674)
                                                                                    
 Net cash from financing                 -                      19,398                19,398 
 activities
                                                                                    
 Effect of foreign exchange               28                       (19)               (36)
 rate changes
                                                                                    
 Net (decrease)/increase in               (5,755)               12,928                7,883 
 cash and cash equivalents

 Cash and cash equivalents at             19,638                  11,755              11,755 
 beginning of period

 Cash and cash equivalents at          13,883                24,683                   19,638 
 end of period


    Notes to the Interim Financial Statements
    June 2008

    1.  General information

    ClearSpeed Technology plc is a company incorporated in the United Kingdom under the Companies Act 1985. The address of the registered
office is 3110 Great Western Court, Hunts Ground Road, Stoke Gifford, Bristol BS34 8HP.

    These condensed interim financial statements do not comprise statutory accounts under the meaning of Section 240 of the Companies Act
1985. Statutory accounts for the year ended 31 December 2007, as prepared under International Financial Reporting Standards (IFRSs), were
approved by the Board of Directors on 17 March 2008 and delivered to the Registrar of Companies. The report of the auditors on those
accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under Section 237 (2) or (3) of
the Companies Act 1985.

    2.  Basis of preparation

    The condensed financial statements have been prepared using accounting policies consistent with International Financial Reporting
Standards as adopted for use in the European Union.

    These financial statements are presented in pounds sterling because that is the currency of the primary economic environment in which
the Group operates. Foreign operations are included in accordance with the policies set out in note 10.

    3.  Segmented Reporting

    Geographical segments

    The Group's operations are located in the United Kingdom and the USA. The Group has only one type of business and therefore does not
have separately identifiable business segments. No secondary segment information is therefore given.

    Segment information about these businesses is presented below.


 Revenue
                                6 months ended 30 June 2008     6 months ended 30 June 2007     12 months ended 31 Dec 2007
                                United    USA       Total       United    USA       Total       United    USA      Total
                                Kingdom                         Kingdom                         Kingdom
                                £'000     £'000     £'000       £'000     £'000     £'000       £'000     £'000    £'000
 United Kingdom                 146       -         146         74        -         74          157       -        157
 Europe                         18        -         18          15        -         15          53        -        53
 USA                            11        55        66          10        36        46          459       507      966
 Japan                          -         175       175         -         -         -           -         -        -
 Rest of the World              -         42        42          3         5         8           51        -        51

 Revenue                        175       272       447         102       41        143         720       507      1,227


 Result
                                6 months ended 30 June 2008     6 months ended 30 June 2007     12 months ended 31 Dec 2007
                                United    USA       Total       United    USA       Total       United    USA      Total
                                Kingdom                         Kingdom                         Kingdom
                                £'000     £'000     £'000       £'000     £'000     £'000       £'000     £'000    £'000
 Segmented loss                 (4,192)   (1,740)   (5,932)     (5,407)   (1,689)   (7,096)     (12,824)  (2,703)  (15,527)
                                                                                                                    
 Investment revenues            525                 525         401                 401         1,025              1,025
 Finance costs                  -                   -           (9)                 (9)         (9)                (9)
 Tax                            676                 676         1,961               1,961       2,657              2,657
 Loss for the period            (2,991)   (1,740)   (4,731)     (3,054)   (1,689)   (4,743)     (9,151)   (2,703)  (11,854)


 Balance sheet
                                      At 30 June 2008                 At 30 June 2007                 At 31 Dec 2007
                                United    USA       Total       United    USA       Total       United    USA      Total
                                Kingdom                         Kingdom                         Kingdom
                                £'000     £'000     £'000       £'000     £'000     £'000       £'000     £'000    £'000
 Segment assets                 19,100    348       19,448      29,793    235       30,028      23,259    150      23,409

 Segment liabilities            (2,244)   (382)     (2,626)     (1,694)   (242)     (1,936)     (1,682)   (257)    (1,939)

 Other information
                                6 months ended 30 June 2008     6 months ended 30 June 2007     12 months ended 31 Dec 2007
                                United    USA       Total       United    USA       Total       United    USA      Total
                                Kingdom                         Kingdom                         Kingdom
                                £'000     £'000     £'000       £'000     £'000     £'000       £'000     £'000    £'000
 Capital additions              67        8         75          260       22        282         585       68       653
 Depreciation and amortisation  278       28        306         201       23        224         429       50       479

    4.  Operating loss

    Operating loss has been arrived at after charging / (crediting):-


                                 6 months ended 30     6 months   12 months ended 31
                                 June 2008             ended 30   Dec 2007
                                                       June 2007
                                 £'000                 £'000      £'000
 Net foreign exchange losses     9                     20         35
 Depreciation of property,       243                   172        374
 plant and equipment
 Amortisation of intangible      63                    52         105
 assets included in other
 operating expenses
 Cost of inventories recognised  161                   158        163
 as an expense
 Management charges to           -                     -          (7)
 Pixelfusion

    5.  Taxation

    The tax reflected in the Income Statement represents tax credits arising in connection with Research and Development activities up until
30 June 2008.

    There is no tax charge in the period (30 June 2007: £nil, 31 December 2007: £nil) due to the available losses.

    6.  Loss per share


                                 6 months ended 30     6 months    12 months ended 31 Dec 2007
                                 June 2008             ended 30 
                                                       June 2007
                
 Retained loss for the period    (4,743)               (4,743)     (11,854)
 (£'000)
 Weighted average shares in      58,471,702            52,024,337  52,066,368
 issue (number)
 Basic and diluted loss per      (8.1)                 (9.1)       (22.8)
 ordinary share (pence)


    7.  Share capital

    As at 30 June 2008 the Company had authorised share capital of 100,000,000 (30 June 2007 and 31 December 2007: 100,000,000) ordinary
shares of 1p each, of which 62,634,497 (30 June 2007 and 31 December 2007: 62,634,497) ordinary shares have been allotted, called up and
fully paid.

    At 30 June 2008, of the called up share capital, 4,162,029 (30 June 2007 and 31 December 2007: 4,162,029) ordinary shares were held by
the ClearSpeed Technology Employee Benefit Trust and are included within Own shares.


    8.  Reconciliation of movement in equity

                                 Share  Share premium  Capital redemption    Merger reserve  Own    Foreign exchange      Profit and loss   
   Total
                                 capit                 reserve                               share  reserve               account
                                 al                                                          s
                                 £'000  £'000          £'000                 £'000           £'000  £'000                 £'000             
   £'000
 At 1 January 2007               384    30,021         6,361                 33,153          42     272                   (57,144)          
   13,089
 Exercise of options             -      -              -                     -               -      -                     16                
   16
 Share based payments            -      -              -                     -               -      -                     367               
   367
 Share issue                     200    19,856         -                     -               -      -                     -                 
   20,056
 Share issue costs               -      (674)          -                     -               -      -                     -                 
   (674)
 Exchange differences on         -      -              -                     -               -      (19)                  -                 
   (19)
 translation of overseas
 operations
 Retained loss for the period    -      -              -                     -               -      -                     (4,743)           
   (4,743)
 At 1 July 2007                  584    49,203         6,361                 33,153          42     253                   (61,504)          
   28,092
 Share based payments            -      -              -                     -               -      -                     509               
   509
 Exchange differences on         -      -              -                     -               -      (20)                  -                 
   (20)
 translation of overseas
 operations
 Retained loss for the period    -      -              -                     -               -      -                     (7,111)           
   (7,111)
 At 1 January 2008               584    49,203         6,361                 33,153          42     233                   (68,106)          
   21,470
 Share based payments            -      -              -                     -               -      -                     55                
   55
 Exchange differences on         -      -              -                     -               -      28                    -                 
   28
 translation of overseas
 operations
 Retained loss for the period    -      -              -                     -               -      -                     (4,731)           
   (4,731)
 At 30 June 2008                 584    49,203         6,361                 33,153          42     261                   (72,782)          
   16,822


    9.  Note to the cashflow statement

                                 6 months ended 30     6 months   12 months ended 31 Dec 2007
                                 June 2008             ended 30 
                                                       June 2007
                                 £'000                 £'000      £'000

 Loss for the period               (4,731)               (4,743)    (11,854)

 Adjustments for:
 Investment revenues               (525)                 (401)      (1,025)
 Finance costs                     -                     9          9 
 Income tax on loss for the        (676)                 (1,961)    (2,657)
 period
 Depreciation of property,         243                   172        374 
 plant and equipment
 Amortisation of intangible        63                    52         105 
 assets
 Share-based payment expense       55                    367        876 
 Increase in provisions            102                   6          113 
                                                                   
 Operating cash flows before       (5,469)               (6,499)    (14,059)
 movements in working capital

 Increase in inventories           (1,315)               (342)      (62)
 (Increase) / decrease in          (79)                  44         592 
 receivables
 Increase in payables              630                   356        251 
                                                                   
 Cash used by operations           (6,233)               (6,441)    (13,278)

 Income taxes (paid) / received    -                     (1)        1,427 
                                  
 Net cash outflow from             (6,233)               (6,442)    (11,851)
 operating activities

    10.  Accounting policies

    Basis of accounting

    The condensed financial statements have been prepared using accounting policies consistent with International Financial Reporting
Standard (IFRS) as adopted for use in the European Union.
    The financial statements have been prepared on the historical cost basis, except for the revaluation of certain financial instruments.
The principal accounting policies adopted are set out below.

    Basis of consolidation

    The consolidated financial statements incorporate the financial statements of ClearSpeed Technology plc (the "Company") and entities
controlled by the Company (its subsidiaries) made up to 31 December each year. Control is achieved where the Company has the power to govern
the financial and operating policies of an investee entity so as to obtain benefits from its activities.

    Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with
those used by the Group.

    All intra-Group transactions, balances, income and expenses are eliminated on consolidation.

    Revenue recognition

    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.

    Sales of goods

    Revenue from sales of goods is recognised when the risks and rewards of ownership are transferred.  

    Sale of software licences

    Revenue on any associated software licence fees is recognised when delivery of the software has occurred, provided that a signed
agreement is in place, the licence fee is fixed and determinable, no specific modification of the software is required and that the
collection of the fee is probable.

    Sale of support agreements

    Revenue from support agreements is recognised over the term of the contract.

    Interest income

    Interest income 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.

    Leasing

    Leases are classified as finance leases whenever 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 or, if lower, at the present value of the
minimum lease payments, each determined at the inception of the lease. 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 income.

    Rentals payable under operating leases are charged to income on a straight-line basis over the term of the relevant lease.

    Benefits received and receivable as an incentive to enter into an operating lease are also spread on a straight-line basis over the
lease term.

    Foreign currencies

    The individual financial statements of each Group Company are presented in the currency of the primary economic environment in which it
operates (its functional currency). For the purpose of the consolidated financial statements, the results and financial position of each
Group Company are expressed in pounds sterling, which is the functional currency of the Company, and the presentation currency for the
consolidated financial statements. The functional currency of the Company's subsidiary ClearSpeed Solutions Limited is pounds sterling. The
functional currency of the Company's subsidiary ClearSpeed Technology Inc is the United States dollar.

    In preparing the financial statements of the individual companies, transactions in currencies other than the entity's functional
currency (foreign currencies) are recorded at the rates of exchange prevailing on the dates of the transactions. At each balance sheet date,
monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet
date. Non-monetary items carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date
when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not
retranslated.

    Exchange differences are recognised in profit or loss in the period in which they arise except for:

    *     exchange differences on transactions entered into to hedge certain foreign currency risks (see below under derivative financial
instruments and hedge accounting); and
    *     exchange differences on monetary items receivable from or payable to a foreign operation for which settlement is neither planned
nor likely to occur, which form part of the net investment in a foreign operation, and which are recognised in the foreign currency
translation reserve and recognised in profit or loss on disposal of the net investment.

    For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group's foreign operations are
translated at exchange rates prevailing on the balance sheet date. Income and expense items are translated at the average exchange rates for
the period, unless exchange rates fluctuate significantly during that period, in which case the exchange rates at the date of transactions
are used. Exchange differences arising, if any, are classified as equity and recognised in the Group's foreign currency translation reserve.
Such translation differences are recognised as income or as expenses in the period in which the operation is disposed of.

    Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign
entity and translated at the closing rate.

    Government grants

    Government grants in respect of research and development are recognised as income over the periods necessary to match them with the
costs received.

    Operating loss

    Operating loss is stated after charging restructuring costs but before investment income and finance costs.

    Retirement benefit costs

    Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.

    Taxation

    The tax expense represents the sum of the tax currently payable and deferred tax.

    The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the income
statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that
are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively
enacted by the balance sheet date.

    Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in
the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance
sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are
recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be
utilised. Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill or from
the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the
taxable profit nor the accounting profit.

    Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, and
interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the
temporary difference will not reverse in the foreseeable future.

    Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is
realised. Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited directly to
equity, in which case the deferred tax is also dealt with in equity.
    Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current
tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax
assets and liabilities on a net basis.

    Property, plant and equipment

    Fixtures and equipment are stated at cost less accumulated depreciation and any recognised impairment loss.

    Depreciation is charged so as to write off the cost or valuation of assets, other than land and properties under construction, over
their estimated useful lives, using the straight-line method, on the following bases:

 Plant and machinery  -  over three years
 Office equipment     -  over five years
 Computer equipment   -  over three years

    The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sales proceeds and the
carrying amount of the asset and is recognised in income.

    Internally-generated intangible assets - research and development expenditure

    Expenditure on research activities is recognised as an expense in the period in which it is incurred.

    An internally-generated intangible asset arising from the Group's development activity is recognised only if all of the following
conditions are met:

    *     an asset is created that can be identified (such as software and new processes);
    *     it is probable that the asset created will generate future economic benefits; and
    *     the development cost of the asset can be measured reliably.
    Internally-generated intangible assets are amortised on a straight-line basis over their useful lives. Where no internally-generated
intangible asset can be recognised, development expenditure is recognised as an expense in the period in which it is incurred.  

    Patents and trademarks

    Patents and trademarks are measured initially at purchase cost and are amortised on a straight-line basis over their estimated useful
lives.  

    Impairment of tangible and intangible assets excluding goodwill

    At each balance sheet date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is
any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is
estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are
independent from other assets, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. An
intangible asset with an indefinite useful life is tested for impairment annually and whenever there is an indication that the asset may be
impaired.

    Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash
flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of
money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

    If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of
the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately, unless
the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

    Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised
estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been
determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years. A reversal of an impairment loss is
recognised as income immediately, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment
loss is treated as a revaluation increase.

    Inventories

    Inventories are stated at the lower of cost and net realisable value. Cost comprises direct materials and, where applicable, direct
labour costs and those overheads that have been incurred in bringing the inventories to their present location and condition. Cost is
calculated using the weighted average method. Net realisable value represents the estimated selling price less all estimated costs of
completion and costs to be incurred in marketing, selling and distribution.

    Financial instruments

    Financial instruments are defined as: "Any contract which gives rise to a financial asset of one entity and a financial liability of
another."

    Financial assets and financial liabilities are recognised in the Group's balance sheet when the Group becomes a party to the contractual
provisions of the instrument.

    Financial Assets

    Financial assets are classified into the following specified categories:

    *     Interests in subsidiaries;
    *     Trade receivables.

    Investments

    Investments are recognised and derecognised on a trade date where the purchase or sale of an investment is under a contract whose terms
require delivery of the investment within the timeframe established by the market concerned, and are initially measured at fair value,
including transaction costs.

    Investments are classified as either held-for-trading or available for sale, and are measured at subsequent reporting dates at fair
value. Where securities are held for trading purposes, gains and losses arising from changes in fair value are included in net profit or
loss for the period. For available-for sale investments, gains and losses arising from changes in fair value are recognised directly in
equity until the security is disposed of or deemed to be impaired, at which time the cumulative gain or loss recognised in equity is
recognised in the profit or loss for the period.

    Investments in subsidiaries are stated at cost less, where appropriate, provisions for impairment.

    Loans and receivables

    Trade receivables, loans, and other receivables that have fixed or determinable payments that are not quoted in an active market are
classified as loans and receivables. Loans and receivables are measured at amortised cost using the effective interest method, less any
impairment. Interest income is recognised by applying the effective interest rate, except for short-term receivables when the recognition of
interest would be immaterial.

    Impairment of financial assets

    Financial assets, other than those at Fair Value Through the Profit and Loss (FVTPL), are assessed for indicators of impairment at each
balance sheet date. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred
after the initial recognition of the financial asset, the estimated future cash flows of the investment have been impacted.  
    For shares classified as Available For Sale (AFS), a significant or prolonged decline in the fair value of the security below its cost
is considered to be objective evidence of impairment. For all other financial assets, including redeemable notes classified as AFS and
finance lease receivables, objective evidence of impairment could include:

    *     significant financial difficulty of the issuer or counterparty; or
    *     default or delinquency in interest or principal payments; or
    *     it becoming probable that the borrower will enter bankruptcy or financial re-organisation.

    For certain categories of financial asset, such as trade receivables, assets that are assessed not to be impaired individually are
subsequently assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables could include
the Group's past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit
period of 60 days, as well as observable changes in national or local economic conditions that correlate with default on receivables.

    The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of
trade receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable is considered
uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against
the allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss.

    With the exception of AFS equity instruments, if, in a subsequent period, the amount of the impairment loss decreases and the decrease
can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed
through profit or loss to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what
the amortised cost would have been had the impairment not been recognised.  
    In respect of AFS equity securities, impairment losses previously recognised through profit or loss are not reversed through profit or
loss. Any increase in fair value subsequent to an impairment loss is recognised directly in equity.

    Cash and cash equivalents

    Cash and cash equivalents comprise cash on hand and demand deposits, and other short-term highly liquid investments that are readily
convertible to a known amount of cash and are subject to an insignificant risk of changes in value.

    Derecognition of financial assets

    The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire; or it transfers the
financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Group neither transfers nor
retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group recognises its
retained interest in the asset and an associated liability for amounts it may have to pay. If the Group retains substantially all the risks
and rewards of ownership of a transferred financial asset, the Group continues to recognise the financial asset and also recognises a
collateralised borrowing for the proceeds received.

    Financial liabilities and equity

    Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into.  

    Equity instruments

    An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its
liabilities. Equity instruments issued by the Group are recorded at the proceeds received, net of direct issue costs.

    Financial liabilities

    Financial liabilities are classified as either financial liabilities 'at FVTPL' or 'other financial liabilities'.

    Financial liabilities held by the Group include:

    *     Trade payables;
    *     Derivative financial instruments - forward foreign exchange contracts.

    Financial liabilities at FVTPL

    Financial liabilities are classified as at FVTPL where the financial liability is either held for trading or it is designated as at
FVTPL.

    A financial liability is classified as held for trading if:

    *     it has been incurred principally for the purpose of disposal in the near future; or
    *     it is a part of an identified portfolio of financial instruments that the Group manages together and has a recent actual pattern
of short-term profit-taking; or 
    *     it is a derivative that is not designated and effective as a hedging instrument.

    A financial liability other than a financial liability held for trading may be designated as at FVTPL upon initial recognition if:

    *     such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or 
    *     the financial liability forms part of a Group of financial assets or financial liabilities or both, which is managed and its
performance is evaluated on a fair value basis, in accordance with the Group's documented risk management or investment strategy, and
information about the Group is provided internally on that basis; or
    *     it forms part of a contract containing one or more embedded derivatives, and IAS 39 Financial Instruments: Recognition and
Measurement permits the entire combined contract (asset or liability) to be designated as at FVTPL.

    Financial liabilities at FVTPL are stated at fair value, with any resultant gain or loss recognised in profit or loss. The net gain or
loss recognised in profit or loss incorporates any interest paid on the financial liability.  

    Other financial liabilities

    Other financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs. Other financial
liabilities are subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an
effective yield basis. The effective interest method is a method of calculating the amortised cost of a financial liability and of
allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash
payments through the expected life of the financial liability, or, where appropriate, a shorter period.

    Derecognition of financial liabilities

    The Group derecognises financial liabilities when, and only when, the Group's obligations are discharged, cancelled or they expire.

    Derivative financial instruments and hedge accounting

    The Group's activities expose it primarily to the financial risks of changes in foreign currency exchange rates and interest rates.
During 2007, the Group began using foreign exchange forward contracts to hedge these exposures. The Group does not use derivative financial
instruments for speculative purposes.

    The use of financial derivatives is governed by the Group's policies approved by the Board of Directors, which provide written
principles on the use of financial derivatives.

    Changes in the fair value of derivative financial instruments that are designated and effective as hedges of future cash flows are
recognised directly in equity and the ineffective portion is recognised immediately in the income statement. If the cash flow hedge of a
firm commitment or forecasted transaction results in the recognition of an asset or a liability, then, at the time the asset or liability is
recognised, the associated gains or losses on the derivative that had previously been recognised in equity are included in the initial
measurement of the asset or liability. For hedges that do not result in the recognition of an asset or a liability, amounts deferred in
equity are recognised in the income statement in the same period in which the hedged item affects net profit or loss.

    Changes in the fair value of derivative financial instruments that do not qualify for hedge accounting are recognised in the income
statement as they arise.  

    Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or exercised, or no longer qualifies for
hedge accounting. At that time, any cumulative gain or loss on the hedging instrument recognised in equity is retained in equity until the
forecasted transaction occurs. If a hedged transaction is no longer expected to occur, the net cumulative gain or loss recognised in equity
is transferred to net profit or loss for the period.

    Provisions

    Provisions are recognised when the Group has a present obligation as a result of a past event, and it is probable that the Group will be
required to settle that obligation. Provisions are measured at the Directors' best estimate of the expenditure required to settle the
obligation at the balance sheet date, and are discounted to present value where the effect is material.

    Share-based payments

    The Group has applied the requirements of IFRS 2 Share-based Payment. In accordance with the transitional provisions, IFRS 2 has been
applied to all grants of equity instruments after 7 November 2002 that were unvested at 1 January 2006.

    The Group issues equity-settled share-based payments to certain employees including share options with non market-based vesting
conditions. Equity-settled share-based payments are measured at fair value (excluding the effect of non market-based vesting conditions) at
the date of grant. The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line
basis over the vesting period, based on the Group's estimate of shares that will eventually vest and adjusted for the effect of non
market-based vesting conditions.

    Fair value is measured by use of the Black-Scholes model. The expected life used in the model has been adjusted, based on management's
best estimate, for the effects of non-transferability, exercise restrictions, and behavioural considerations.

    For certain share options which include market-related conditions, the fair value is estimated using the Binomial model.

    11.  Events after the balance sheet date

    On 2 July 2008, the Group announced a plan to restructure in order to continue rationalisation of its cost base. While retaining a team
in the US, the reorganisation will involve transfer of a number of functions from ClearSpeed's US office in San Jose, California, to its UK
office, so reducing the direct sales force and associated sales support functions. The annualised savings from the reorganisation are
expected to exceed £3.0m.  In September 2008, the Group announced a strategic review which is detailed in the overview.

    As at 30 June 2008, the requirements of IAS 37 were not met, and hence a provision to recognise the costs of restructuring has not been
created.

    12.  Availability of Interim Report

    The Interim Report will be available from 26 September 2008 on the Company's website: www.clearspeed.com



    Independent Review Report To Clearspeed Technology plc

    We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six
months ended 30 June 2008 which comprises the income statement, the balance sheet, the statement of recognised income and expense, the cash
flow statement and related notes 1 to 12. We have read the other information contained in the half-yearly financial report and considered
whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial
statements.

    This report is made solely to the company in accordance with International Standard on Review Engagements 2410 issued by the Auditing
Practices Board. Our work has been undertaken so that we might state to the company those matters we are required to state to them in an
independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to
anyone other than the company, for our review work, for this report, or for the conclusions we have formed.

    Directors' responsibilities

    The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for
preparing the half-yearly financial report in accordance with the AIM Rules of the London Stock Exchange

    As disclosed in note 1, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European
Union. The condensed set of financial statements included in this half-yearly financial report have been prepared in accordance with the
accounting policies the group intends to use in preparing its next annual financial statements.

    Our responsibility

    Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half*yearly financial
report based on our review.

    Scope of Review

    We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim
Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United
Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

    Conclusion

    Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the
half-yearly financial report for the six months ended 30 June 2008 is not prepared, in all material respects, in accordance with the AIM
Rules of the London Stock Exchange.

    DELOITTE & TOUCHE LLP
    Chartered Accountants and Registered Auditor
    Bristol, United Kingdom  
    24 September 2008

This information is provided by RNS
The company news service from the London Stock Exchange
 
  END 
 
IR ILFIRALIEFIT