MEMPHASYS LIMITED. — Management Reports 2010

May 16, 2010

NuSep News May 2010

From the Chairman

NuSep is hitting its targets and delivering on its promises. In September 2009 we talked about “Significant sales growth, increased production efficiencies, higher gross margins and significantly reduced losses”. In February 2010 we delivered on these promises with our maiden operational or EBITDA profit of $89,984 .

This is an incredible turn around, but that comment only tells half the story! NuSep is a Company that consistently achieves its goals. Without a doubt this turnaround is a direct result of a focused management and Board working hand in glove to achieve agreed targets. Let me highlight just two of our recent achievements:

• Maiden operational profit for the six months to 31 December 2009; and

• Constant Gels manufacturing pass rate over 90% which has increased our gross margin to 44% of sales and an operational profit to 31st December 2009.

Having achieved the long term goal, which we set two years ago, of an operational profit we have now set a new goal. We have set this new long term goal in light of the BioInquire acquisition, the commercial release of the SpermSep and the sales growth in both the Gels and ProteoFusion products.

Our new long term goal is:

• To grow NuSep so that it has yearly sales of $100 million and $20 million in profit per annum within 5 years.

Whilst this is a challenging goal, it is achievable. As a Board we believe it will be achieved through the commercialization of our patented PrIME technology. We have already taken the first steps in this direction with the launch of the second generation ProteomeSep and the acquisition of BioInquire. This will be followed by the launch of the SpermSep early in the 2011 calendar year.

Importantly, we recently announced a 1:2 Rights Issue and as a sign of our commitment the Board and the Company’s two largest shareholders underwrote $3m of this issue. The Directors have also bought additional shares on market. Funds raised from this issue will be used to make the initial payment for the BioInquire acquisition and complete the SpermSep clinical trials. As a Board we don’t anticipate any additional fund raisings for the foreseeable future.

Finally, I draw great satisfaction from the knowledge that we are bringing products to market which improve the lives of many people, particularly in the IVF community. These are products which redefine BioSeparations such as the ɳ UV iew gels, while also creating commercial rewards for our shareholders. We see NuSep as the perfect synergy of Science and Commercial reality. I look forward to reporting our profit results in August this year.

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Yours sincerely,

John Manusu Executive Chairman

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Redefining BioSeparations through innovation and simplification

Acquisition BioInquire will double of BioInquire NuSep’s profit to $1.8m

NuSep completed the acquisition of BioInquire LLC effective 1st April 2010. Operationally the company has been working as an integrated single entity from that date. BioInquire sells a software package called ProteoIQ™ which effectively provides customers with a ‘ search engine’ for proteins. It has many novel features, but most importantly it enables researchers to identify biomarkers in hours as opposed to months. It becomes an even more powerful package when tied to NuSep’s ProteomeSep instrument, and financially, will more than double NuSep’s 2010/11 profit.

Rationale for the Acquisition

We have undertaken this acquisition for two simple reasons:

• The ProteoIQ software will increase the sales of the ProteomeSep; and

• This is an earnings per share positive acquisition from day one. In raw numbers this acquisition will more than double NuSep’s 30 June 2011 profit and increase earnings to 3.6¢ per share.

Terms of the Deal

NuSep acquired 100% of BioInquire’s assets effective from 1st April 2010. NuSep will pay three (3) times BioInquire’s Net Profit for the year ended 31st March 2011 based on the following PERFORMANCE based formula: i) An initial payment of US$1.5m.

• ii) A payment of US$500,000 in NuSep shares based on the 31st December 2010 share price.

• iii) A further US$1m will be paid on receipt of the audited results for the 31st March 2011 year. This payment will ONLY be made if BioInquire achieves 90% of the agreed US$1.2m profit.

• iv) A final cash payment will be made on 30th September 2011 and will be the difference between three times the audited 31st March 2011 year profit and the payments made above. The BioInquire shareholders can elect to take this final payment in cash or up to 50% in NuSep shares.

Market for the ProteoIQ Software

The ProteoIQ software allows researchers to quickly move from experimental mass spectrometry data to the discovery of novel biological markers. Mass Spectrometry based studies can generate gigabytes of data hourly, producing tens to hundreds of hours of hand-indexing and cataloguing per sample. In addition it is difficult to compare the results from different mass spec instrument as each manufacturer has their own database language. ProteoIQ offers a unified “Vendor Independent” software platform that takes the researcher from analysis to publication in hours relative to weeks/months using existing software provided by the Mass Spec manufactures.

Software addresses a $130m market in the US and with the international proteome effort this market is growing rapidly. ProteoIQ addresses an otherwise unmet need and we expect with our marketing efforts will become the market leader in the analysis market over the next 12 months.

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nUView gels

NuSep manufactures and sells precast Electrophoresis gels including gels with the innovative ɳ UV iew 2 minute visualisation technology. ɳ UV iew is probably the most novel innovation in the Gel Electrophoresis market over the last 10 years. ɳ UV iew allows a customer to eliminate the staining steps which are both time consuming and cumbersome. Have a look at the 2 minute video clip at www.nusep.com

NuSep currently has approximately 5% of the US gels market, mainly via its private label sales. Our objective is to increase sales to 7.5% of the US market by 31st December 2010 based on gels containing the ɳ UV iew technology. This additional 1.5% market share would translate into a sales increase of US$900,000.

In April 2010 NuSep launch its first promotional ɳ UV iew campaign. As a result of this activity NuSep has identified two significant markets in which the gels with ɳ UV iew technology address unmet needs. One of these markets is the educational market, see the break out box on the following page for more details. This is an exciting and unbudgeted discovery.

NuSep Holdings Ltd www.nusep.com 324 Burns Bay Rd Lane Cove NSW 2066 Ph: +61 2 8197 3377

NuSep is a Consumables Company

NuSep’s main objective is to make profits by providing innovative yet easy to use biological separation consumables to its customers. Our constant catch phrase is “Redefining BioSeparations”. These consumables income streams, once in place, will continue to generate income and profits for years to come. Our products span both the research and therapeutic markets.

NuSep develops products which meet a customers unmet needs, often through tailoring product attributes to address a new submarket. In this way we become the market leader and can generate above average returns. One such product is the SpermSep which is the first major development in the IVF sperm separation field in over 30 years. Our market position will be protected by patents, undisclosed technology and regulatory hurdles. NuSep will derive profits from both the sale of the instruments and the ongoing consumable sales streams.

NuSep’s Objectives

NuSep has a number of stated short term objectives. These are:

Short Term Objectives

• Achieve 7.5% of the US Gel market by 31 December 2010; and

• Complete clinical trials for the SpermSep by 31 December 2010.

These short term objectives were set in order for NuSep to achieve its long term objective of achieving an operational profit. This has now been achieved and a new long term objective has been set.

Long Term Objectives

• To grow NuSep so that it has yearly sales of $100 million and $20 million in profit per annum within 5 years.

NuSep aims to achieve this new long term goal by developing the SpermSep and ProteoFusion markets. The Gels and Diagnostic products will contribute to this growth, but the highest sales and profit growth will come from these two PrIME technology applications.

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2011 Projections & Long Term Goal

Following on from the acquisition of BioInquire and the launch of the ProteoFusion package NuSep has increased its 2010/11 financial year projections as follows.

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Sales $6.5m
Gross Profit $4.8m
Net Profit $1.8m
EBITDA $1.9m
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The ProteoIQ software accounts for US$1.2m (A$1.3) of the above A$1.8m profit and the existing NuSep business will contribute the remaining $500,000. These projections do not include any new products such as the SpermSep.

A profit of $1.8m equates to approximately 3.6¢ per share on a fully diluted basis, or a Price Earnings (PE) ratio of 5.5 times the recent 20¢ 1:2 Rights Issue price.

ɳ UV iew for Educators: A Revolutionary Aid for Teachers

Recently, during the Chicago BIO 2010 conference, University educators were introduced to the use of NuSep gels with its ɳ UV iew technology for teaching students in laboratory classes. These classes last for about 60 to 90 minutes. The 2 minute visualisation of these gels and the generally rapid running of the NuSep gels mean that students can see what they run within a class. This has been hailed a revolution in education by those attending the course. The company is now in validation mode and expects the gels to be available to educators from July 1, 2010. NuSep will make a further announcement on this exciting development soon.

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Ordering: www.nusepstore.com USA ph: 1 877 592 1060 Australia Ph: 1800 500 108 Sales@nusep.com

SpermSep update

SpermSep First Sales in 2011

A new patent has been lodged for the SpermSep cartridge. This patent application relates to a new design of the SpermSep disposable cartridge that eliminates any potential for cross contamination and establishes the SpermSep as a fully disposable system. This invention is also relevant to the ProteomeSep and all other applications of the PrIME separation technology, further enhancing NuSep’s intellectual property.

Launch of the ProteomeSep

The second generation ProteomeSep was launched in April 2010. This second generation instrument addresses a number of customer suggestions and makes the instrument far more versatile. This redesign will enable us to manufacture both the SpermSep and the ProteomeSep on the same production line.

The new design for the cartridge and clinical tests associated with this will see the first SpermSep system being commercially available in the first half of 2011.

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Our New VP for Sales

NuSep is pleased to annouce the appointment of James Atwood the third Ph.D, he was the is co-founder and CEO of BioInquire. Prior to becoming CEO of BioInquire, James served as a Research Scientist at the University of Georgia where he directed research in the area of proteomics and glycomics. Dr. Atwood brings over ten years of research experience in proteomics with more than 20 peer reviewed scientific publications and numerous patents. Atwood holds a Ph.D. in Chemistry from the University of Georgia.

A Fresh look for a Successful Company

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To further capitalise on the company’s vibrancy and focus a refreshed logo has been designed and implemented. The new logo incorporates the wiggly protein tail which was part of the BioInquire logo and shows the concept of fusing the ProteomeSep and ProteoIQ technologies. It further highlights our mantra “Redefining BioSeparations”

Veterinary Application of the SpermSep

NuSep is also collaborating with two Australia Veterinary schools in developing SpermSep applications for the lesser regulated animal health area. This is an exciting development which will see the SpermSep initially used in IVF therapy for animals like horses and cattle.

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Redefining BioSeparations through innovation and simplification