Preliminary Results

Image Scan Holdings PLC
31 January 2008


                                                                 31 JANUARY 2007





                            IMAGE SCAN HOLDINGS PLC

                        ('Image Scan' or the 'Company')

                              PRELIMINARY RESULTS

                      FOR THE YEAR ENDED 30 SEPTEMBER 2007



Image Scan, specialist in the field of real-time 3D and 2D x-ray imaging for the
'Homeland Security' and 'Industrial Inspection' markets, announces preliminary
results for the year ended 30 September 2007.




KEY POINTS



  • Sales at £1,542,000 (2006: £1,422,000);
  • Gross margin at 46% (2006: 50%);
  • Loss on ordinary activities after taxation at £761,000 (2006: £470,000);
  • Year end order book at £782,000 (2006: £1,682,000);
  • Year end net cash of £1,531,000 (2006: net debt of £36,000);
  • Cash balances currently stand at £1,300,000;
  • Strengthening of the Board; and
  • Restructure of business strategy for 2008.



Gilbert Chalk, Chairman of Image Scan, commented:



'The reduction in overheads and other personnel changes implemented since the
2007 year end should now place the Company onto a much better base from which to
produce positive results for shareholders. The drive to make Image Scan a
customer focused business will be the Board's main priority and this should
produce improving results over the coming months'.



Enquiries:



Image Scan Holdings plc                              Tel: [phone]
Gilbert Chalk, Chairman
Nicholas Fox, CEO
[e-mail]



Bishopsgate Communications Ltd                       Tel: [phone]
Dominic Barretto
Jenni Herbert
[e-mail]



Seymour Pierce                                       Tel: [phone]
David Newton
Sarah Jacobs


CHAIRMAN'S STATEMENT



Introduction

I became involved with the Company as a consultant in October 2007 and was
appointed to the Board as Chairman on 30 November 2007.  Accordingly I report on
the Preliminary Results for the year ended 30 September 2007, and take the
opportunity to detail the actions that have been taken since the 2007 financial
year end and to outline the Board's plans for the future direction of the
Company.



Financial Results

After half year sales at £1,133,000, the second half year proved disappointing
with total sales for the year of £1,542,000 (2006: £1,422,000), an increase of
8%.  Revenue arose mainly from contracts with British Nuclear Group and Johnson
Matthey.



The reduced activity in the second half saw the gross margin fall for the full
year to 46% (2006: 50%).  Whilst the margins proved strong on the British
Nuclear contract, the need to develop the second generation MDXi-NT industrial
inspection system for Johnson Matthey and customer-led delays in the
installation of that system had a significant impact on the margins and also on
additional R&D expenditure during the year.



Overheads rose to £1,522,000 (2006: £1,220,000) mainly reflecting a net increase
of 5 staff in the period to June 2007 partly in order to meet the Company's
obligations on the Johnson Matthey and British Nuclear Group contracts.  These
contracts and other developments led to a higher R&D spend of £267,000 (2006:
£174,000).



The shortfall from plan in the second half, together with increased overheads
resulted in a loss of £761,000 (2006: £470,000).  These losses include
impairment provisions against formerly capitalised R&D and IPR, and a provision
against a prospective bad debt.  The loss per share was 1.9p (2006: 1.3p).



During the year the Company raised £3m by means of a placing, part of which was
used to repay £600,000 loan stock.  There are warrants outstanding relating to
these loans to subscribe for 6 million shares at 15p, 2m of which expire on 31
March 2008 and the remainder on 30 September 2008.  The Company also has an
agreed £100,000 overdraft facility with the Royal Bank of Scotland to cover
working capital requirements.  At 30 September 2007 the net cash balance was
£1,531,000 (2006: net debt of £36,000).

Overview

As indicated above, during the year the Company developed the second generation
MDXi-NT industrial inspection system for installation at Johnson Matthey plants
in South Africa and in the UK, and worked closely with British Nuclear Group on
developing a new industrial inspection system.  In addition, the Company
extended functionality of the TPXi portable suspect package inspection system to
incorporate airport-style materials discrimination screening, high penetration
and multilingual functionality.



Security

The Company worked with the US Government's Transport Security Administration ('
TSA') which is the regulator and principal purchasing authority for the USA
aviation security sector, to develop a glassesless 3D x-ray baggage inspection
system.  The need to wear glasses has been perceived as one of the barriers to
wide-spread adoption of the technology.



Following the sale in 2006 of an Axis-3d(R) system into China for evaluation
ahead of the 2008 Olympic Games, our customer has recently placed an order for a
further four units to provide heightened security measures for key locations at
this year's Beijing Olympics.



Sales of the TPXi system through our Belgium-based distributor, Industrial
Control Machines S.A. ('ICM') totalled 15 in 2007 and were followed by a further
14 systems in the first quarter of our current  financial year.  ICM spent much
of 2007 working with their world-wide network of agents to get the TPXi system
on the relevant tender lists and to place evaluation units with key potential
purchasers.  As a result of their marketing activities and the enhanced
functionality of the TPXi system, ICM now have a substantial sales lead
pipeline.  Achievement of the 2008 budget will be dependent on ICM meeting their
indicated sales targets.  In addition, within the UK, the British Transport
Police, who were the first adopters of the technology, have recently placed a
£116,000 order for further systems.



Industrial

During the year the Company installed the new MDXi-NT system at two Johnson
Matthey plants and has been awarded the maintenance contracts for the installed
x-ray inspection equipment at Johnson Matthey bases in the UK, the US and South
Africa. Annual support revenue arising under these contracts exceeds £100,000
plus sales of spares.  Discussions are underway regarding the provision of
equipment at future Johnson Matthey production lines.



The Company has made good progress on the British Nuclear Group contract with
£450,000 of revenue falling in 2007 and the final £400,000 expected within the
first half of 2008.  Further opportunities within the nuclear industry are being
explored.



Sales & Marketing

The Company had high expectations for revenue growth which did not materialise
in the second half of 2007.  As a result changes have been made to the sales and
marketing personnel with Nick Fox taking on the responsibility for the sales
area at the Board level and the appointment of Jerry Horwood as a non executive
director in November 2007 to provide fresh impetus to this area.  I am also
pleased to announce the appointment of Vince Deery as Group Sales and Marketing
Manager as of 1 January 2008.



Sales to the industrial sector are being managed directly within Europe and
through a distributor, X-metrix, within the US.  Focus continues to be on the
pharmaceutical and automotive industries.



Staff

During the year Image Scan invested in additional staff with key industrial
experience of project management, operations, service and applications.
Following the shortfall in orders in the second half, headcount was reduced by
3, and subsequent to the year end there has been a further net reduction of 4
staff.  These changes reflect a shift from a technology-driven, R&D organisation
to a business focused on its customers and the delivery of commercial solutions.
Total overhead savings as a result of these reductions amount to approximately
£330,000 in a full year.  Current headcount is 16 staff and in addition 2
executive and 3 non-executive directors.



This has been a difficult and challenging year for all concerned and the Board
would like to express its appreciation for the loyalty and dedication of our
staff.



We believe that we now have a strengthened operational team that should be
better able to deliver on the sales opportunities that are clearly available for
the Company's leading technology and to deliver projects on time and to budget.


Outlook

On being invited to join the Board of Image Scan, I carried out my own review of
the Company's products and this included discussions with some of Image Scan's
major customers.  My findings were positive with regard to the technical
capability of the products and the close working relationships with customers.
The challenge is to position the Company to best exploit its leading technology
through further focus on its existing and potential customer base.  With the
support of Jerry Horwood and Ian Johnson on the sales and marketing strategy and
of myself on corporate strategy, this step-change is achievable, but the Company
still has to demonstrate that it can deliver on its promise.  The objective for
the current year is to strengthen the financial position of the Company through
increased trading.  This achievement will be skewed towards the second half of
the year and remains particularly dependent on the Company converting
significant order prospects in the homeland security market into firm sales
wins.  Given that the Company has now reduced its overheads substantially such
sales conversion will lead to the fulfilment of this objective.


At the year end the order book stood at £0.8m (2006: £1.7m).  As stated our
sales lead pipeline has some strong prospects both from direct sales and through
our distributor activity.  The Board will remain focused on increasing turnover
through the commercial realisation of our technology whilst retaining a tight
control over costs.  The Board will also pursue strategic options available for
expansion of the Company.


Gilbert Chalk
Chairman
31 January 2008



                                                                                      2007          2006
GROUP PROFIT AND LOSS ACCOUNT             Note                                           £             £
Year ended 30 September 2007

TURNOVER                                                                          1,541,862     1,422,272
Cost of sales                                                                     (830,327)     (705,082)

Gross profit                                                                      711,535       717,190

Administrative expenses                                                        (1,521,716)   (1,219,813)

OPERATING LOSS                                                                   (810,181)     (502,623)

Interest receivable                                                                31,191         4,016

Interest payable                                                                  (45,236)       (9,126)

LOSS ON ORDINARY ACTIVITIES BEFORE                                               (824,226)     (507,733)
TAXATION

Taxation                                                                          62,831        37,283

RETAINED LOSS FOR THE FINANCIAL YEAR                                            (761,395)     (470,450)
Retained reserves brought forward                                             (5,163,686)   (4,693,236)

Revenue reserves carried forward                                              (5,925,081)   (5,163,686)

                                                                                  Pence         Pence
Earnings per share                        (i)
Basic and diluted loss per share                                                  1.9           1.3


(i)         EARNINGS PER SHARE                                                   2007         2006
                                                                                Pence        Pence

Loss for the year                                                             761,395      470,450

Weighted average number of ordinary shares in issue                        40,865,928   34,888,284
                                                            
Basic and diluted loss per share                                                  1.9          1.3


FRS14 requires presentation of diluted earnings per share (EPS) when a company
could be called upon to issue shares that would decrease net profit or increase
net loss per share.  For a loss making company with outstanding share options,
net loss per share would only be increased by the exercise of out-of-the-money
options.  Since it seems inappropriate to assume that option holders would act
irrationally and there are no other diluting future share issues, diluted EPS
equals basic EPS.


                                                                                   2007          2006
CONSOLIDATED BALANCE SHEET                                                        
30 September 2007                                                                     £             £

FIXED ASSETS
Tangible fixed assets                                                            110,651       174,198
Intangible fixed assets                                                                -        16,231

                                                                                 110,651       190,429

CURRENT ASSETS
Stock and work in progress                                                       289,180        83,073
Debtors                                                                          460,984       384,205
Cash at bank and in hand                                                       1,531,269       164,046

                                                                               2,281,433       631,324

CREDITORS: amounts falling due
   within one year                                                              (485,810)     (742,336)

NET CURRENT ASSETS/(LIABILITIES)                                               1,795,623      (111,012)

TOTAL ASSETS LESS CURRENT LIABILITIES                                          1,906,274        79,417

CREDITORS: amounts falling due after
more than one year                                                                     -      (200,000)

Provisions for liabilities and charges                                           (28,967)      (22,373)

                                                                               1,877,307      (142,956)


CAPITAL AND RESERVES
Called up share capital                                                          549,481       349,481
Share premium account                                                          7,252,907     4,671,249
Profit and loss account                                                       (5,925,081)   (5,163,686)

EQUITY SHAREHOLDERS' FUNDS                                                     1,877,307      (142,956)



                                                                                    2007          2006
CONSOLIDATED CASH FLOW STATEMENT                Note                                   £             £
Year ended 30 September 2007

Net cash outflow from operating        (ii)                                   (1,158,482)     (146,278)
activities

Returns on investments and servicing of finance
Interest received                                                                 31,191         4,016
Interest payable                                                                 (45,236)       (9,126)

                                                                                 (14,045)       (5,110)
Taxation
Corporation tax recovered                                                         34,035        30,288

Capital expenditure and financial investment
Purchase of tangible fixed assets                                                (76,692)     (135,904)
Receipts from sales of tangible fixed                                                749        72,500
assets

                                                                                 (75,943)      (63,404)

Net cash outflow                                                              (1,214,435)     (184,504)

Financing
Issue of ordinary share capital                                                2,781,658        12,000
Bank loans repaid                                                                      -       (17,307)
Other loans advanced                                                             400,000       200,000
Other loans repaid                                                              (600,000)            -

                                                                               2,581,658       194,693

Increase in cash in the year             (iii), (iv)                           1,367,223        10,189




                                                                                    2007          2006
ii) RECONCILIATION OF OPERATING CASH FLOWS                                             £             £
                                                                                      

Operating loss                                                                  (810,181)     (502,623)
Depreciation                                                                      56,581        97,478
Amounts written off intangible fixed assets                                       16,231         1,682
Profit on sale of tangible fixed asset                                              (104)      (52,512)
(Increase)/decrease in stock                                                    (123,094)       11,572
(Increase) in debtors (excluding corporation tax recoverable)                    (47,983)      (36,035)
(Decrease)/increase in creditors                                                (249,932)      334,160

Net cash outflow from operating activities                                    (1,158,482)     (146,278)


                                                                       2007          Other
iii)       ANALYSIS OF NET FUNDS                                       Cash         non-cash
                                                         2006          flow          changes       2007
                                                            £             £                £          £

Cash at bank and in hand                              164,046     1,367,223                -  1,531,269

Debt due after one year                              (200,000)      200,000                -          -


                                                      (35,954)    1,567,223                -  1,531,269


iv)        RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET (DEBT)/FUNDS
                                                                                 2007         2006
                                                                                    £            £

Increase in cash in the period                                              1,367,223       10,189
Cash inflow from increase in debt                                                   -     (200,000)
Cash outflow from decrease in debt                                            200,000       17,307

Change in net funds/(debt) resulting from cash flows                        1,567,223     (172,504)

Net (debt)/funds at 1 October                                                 (35,954)     136,550

Net funds/(debt) at 30 September                                            1,531,269      (35,954)




Notes to the Preliminary Statement



 1. The financial information set out above does not constitute the Company's
    statutory accounts for the years ended 30 September 2007 and 30 September
    2006 but is derived from those accounts.  Statutory accounts for 2006 have
    been delivered to the Registrar of Companies, and those for 2007 will be
    delivered following the Company's Annual General Meeting.  The auditors have
    reported on those accounts; their reports were unqualified and did not
    contain statements under section 237(2) or (3) of the Companies Act 1985.


    The financial information has been prepared in accordance with the
    accounting policies adopted for the 2006 accounts.



 2. It is intended that the financial statements for the year ended 30 September
    2007 will be posted to shareholders in February 2008 and will also be
    available thereafter at the registered office, Pera Innovation Park,
    Nottingham Road, Melton Mowbray, Leicestershire, LE13 0PB.



 3. The Annual General Meeting will be held at 11am on Thursday 13 March 2007, at
    the offices of Seymour Pierce, 20 Old Bailey, London, EC4M 7EN.




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