Final Results

RNS Number : 9980J

Imaginatik PLC

24 July 2013

 

24 July 2013

Imaginatik Plc

("Imaginatik" or the "Company")

Final Results

Imaginatik plc (AIM: IMTK.L), the world's first full service innovation provider, announces its audited results for the year ended 31 March 2013.

Imaginatik enables organisations to compete in the information-rich, rapidly-changing 21^st century by helping clients build a sustainable innovation discipline.

Key points*

·      Revenue of £3.01m (2012 restated: £3.06m)

·      Loss after tax of £1.14m (2012 restated: £1.37m)

·      Increased deferred revenue, as of 31 March 2013: £2.45m (31 March 2012 restated: £2.20m)

·      Substantial number of new customer wins: 24 new customers on either annual or pilot contracts (2012: 9)

·      Increasing proportion of customers taking consultancy services alongside technology offering including Yorkshire Building Society, Mead Johnson, Proctor & Gamble and The Society of Petroleum Engineers

·      Placing in June 2012 raising, £1.0m before expenses

·      Post period end, additional placing raising £1.26m before expenses

*all financials for both 2013 and 2012 have been restated under the Company's revised revenue recognition policy

Matt Cooper, Executive Chairman of Imaginatik, commented, "We continue to make strong strategic progress, delivering on our intention to evolve into a full service innovation company as evidenced by the growing proportion of revenues generated via consulting and the record number of new customers added in the year.

"The new financial year has begun well, in line with management's forecast for the year and we have a strong pipeline of business opportunities, across the US and Europe. With an experienced team of senior individuals, a growing customer base and increasing level of industry recognition we are confident in the future success of Imaginatik."

For further information please contact:  

Imaginatik plc	Tel: [phone]
Matt Cooper, Executive Chairman / Shawn Taylor, CFO
finnCap	Tel: [phone]
Charlotte Stranner/ Victoria Bates
Newgate Threadneedle	Tel: [phone]
Caroline Evans-Jones / Hilary Millar

About Imaginatik

Imaginatik® is the world's first full-service innovation provider. We have 16 years of experience building innovation into a sustainable competence at some of the world's largest and most respected companies. Through a mix of consulting and advisory, hands-on innovation projects and program management, and our award-winning enterprise software platform, we help clients develop innovation capability into a permanent competitive advantage. Imaginatik is the trusted partner of leading organisations including Blue Cross Blue Shield, CSC, Cargill, The World Bank,  Mayo Clinic, The Chubb Group of Insurance Companies, HCA, Dow Chemical and Goodyear.

Imaginatik is a public company whose shares are traded on the AIM market of the London Stock Exchange (LSE:IMTK.L) and is a World Economic Forum Technology Pioneer with offices in Boston, MA, and Fareham, UK. For more information visit www.imaginatik.com.

Chairman's Statement

We view innovation as an essential competence for any organisation that is serious about developing its business. Innovative companies are able to adapt more effectively in the rapidly changing, information rich "Innovation Age". Furthermore, innovation enables companies to launch new products, open new markets and build a strong customer following, all of which allow them to outperform their competitors.

This last year was one of transition for Imaginatik, which witnessed our continued evolution from an idea management software company to a full-service innovation provider. Over the year we have strengthened our consulting team, developed an array of consulting offerings and broadened the technology platform. We are now in a position to help organisations develop both the "mind" (innovation readiness) and the "body" (innovation execution) of the enterprise innovation discipline - through an integrated mix of consulting, advisory, software, and program management offerings.

The number of new blue-chip companies turning to Imaginatik as their innovation partner is endorsement of the progress made to date. Twenty-four new clients were signed in the year under review, substantially more than the previous year (2012: 9), comprising a mixture of pure consulting engagements, pilot projects and 13 new annual contracts. Over 50% of these contracts were for integrated innovation services, incorporating high levels of consultancy, as compared to approximately 25% in the prior year.

We continue to receive good feedback regarding our offering from clients and opinion formers in the industry, which we see as continued validation for our business model and were recently placed top within our industry for completeness of product suite by a leading industry research house. In contrast, the stand-alone idea management players with purely technology offerings appear to be struggling.

There is growing evidence of an increasingly active innovation marketplace. Companies are trying to become more innovative and the major opinion formers are dedicating increased resource to analysis of the area. Collaboration technologies, such as ours, that enable shared working and interaction both within organisations and externally are also seeing growth validation, for example being placed 4^th in a list of top priorities for CTOs in a recent report by Gartner. 

A recent survey of more than 500 executives by Accenture revealed that, while 18 percent of respondents rate innovation as their top strategic priority and 67 percent depend strongly on innovation for their long-term strategy success, more than half feel they have a sluggish innovation process that requires improvement. This embodies our opportunity, providing them with the tools and support to build a sustained innovation competence. Similar to where the CRM consulting and services industry was 20 years ago, we believe that while this is indeed only a nascent market, it has the potential to be significant. 

We were delighted by the positive response from institutional shareholders, both existing and new, who provided us with additional funds in June 2012 and May 2013, giving us the financial resources to continue to build our business.

Our main focus in the year ahead will be on developing our brand in the market and strengthening the sales function through hiring high caliber individuals with the experience of selling complex solutions that comprise a mix of technology and consulting to senior clients.

I would like to thank all Imaginatik's staff, partners and customers for their enthusiasm for our business and what we are trying to achieve, and look forward to a successful year ahead.

Matt Cooper

Executive Chairman

24 July 2013

Operational and Financial Review

Introduction

Imaginatik continues to make excellent strides forward in the development of its strong innovation consultancy offering, building on its 16 years of experience in the innovation industry to develop the means for companies to build their own, sustainable innovation competence.

Imaginatik has built the skills, competencies and insights to understand how innovation is best achieved at scale. It is not the domain of a single individual, but rather best accomplished through harnessing the collective wisdom of a company's employees, customers and partners. Through a series of processes, innovation can be learned, institutionalized and then repeated. Our mission is to ensure innovation becomes embedded within our customers, achieved through a mixture of sophisticated software and market leading consultancy.

The focus in this year has been the transitioning of the business away from a standalone technology company to an innovation partner, providing both strategic and operational consulting alongside our award-winning enterprise software platform, Innovation Central.

We have continued to invest in all key areas of the business; our consulting team, sales team and technology platform, while also keeping a close control on costs. We secured an excellent level of new business in the year, signing 24 new clients, although unfortunately we also lost some stand-alone technology contracts due to organisational changes within the customers. The net impact of this was 17 new clients, providing a strong basis on which to build future revenue growth.

Financial Review

These are the first set of results reported under a revised revenue recognition policy, within which the Company now recognises all Technology revenue on a monthly basis over the life of the contract. Previously a large element of the contract value was attributed to the software licence fee and was recognised in the month the contract was signed. The selection of accounting policies in respect of revenue involves a degree of judgement and having reconsidered this critical judgement, the directors now consider it more appropriate to recognise this revenue evenly over the term of the contract.  This revised policy has been applied retrospectively as this results in these financial statements providing reliable and more relevant information about the effects of transactions on the Company's financial position and financial performance. The revised policy provides more relevant and reliable information as it is more reflective of the on-going relationship with clients through the licence term.

The primary impacts of the policy on the financial years under report have been as follows:

·      revenue for the year to 31 March 2013 has decreased by £0.12m from £3.13m to £3.01m (2012: reduced from £3.45m to £3.06m)

·      the loss after tax for the year to 31 March 2013 has increased by an additional £0.12m from £1.02m to £1.14m (2012: losses increased from £0.98m to £1.37m)

·      the amount of deferred revenue on the balance sheet has increased by £1.58m to £2.45m (2012: increased from £0.74m to £2.20m)

·      cumulative losses carried forward as at 31 March 2013 have been increased by £1.58m from £7.26m to £8.84m (2012 increased from £6.24m to £7.70m)

·      EPS for 2012 decreased to £0.40 loss per share from £0.28 loss per share

·      EPS for 2013 decreased to £0.15 loss per share from £0.13 loss per share

All numbers in the section below for the years ended 31 March 2013 and 31 March 2012 have been restated under the revised revenue recognition policy.

Total revenue for the year ended 31 March 2013 was £3.01m (2012: £3.06m). During the period, 13% of gross contracted revenue was from up-selling our software and consultancy services into existing customers, 60% from selling into new clients, and 27% from recurring business (2012: 33%: 14%: 53% respectively). We secured a significantly higher level of new clients during the period, adding 24 (2012: 9), with 13 of these being on annual contracts (2012: 4).

The US continues to be our core market, with revenues generated from the region in the period accounting for 88% of the total (2012: 87%). We believe that the European market offers significant opportunity. We have increased our presence in the region in the year, and are encouraged by the progress achieved in the period and believe there is significant scope for further growth.

The results for the year were impacted by a lower level of renewals than achieved in previous periods, with 70% of the renewal revenue available being renewed. This lower renewal rate was as a result of a loss of several contracts in the year, where corporate changes within the customer impacted their budgetary decisions. We are not aware of being replaced by a competitor at any of these companies. In recent years our levels of renewals were closer to 90% and a focus of the management team is on moving this figure back to a higher level.

The Company has entered the new financial year with £1.5m of contracts due for renewal over the next financial year to 31 March 2014, comprising 17 clients, with a further 13 clients, amounting to £0.6m, with a renewal date beyond 31 March 2014.

Investment into our technology and software platform remains a key focus of the Company, and we have continued to invest in the development of our software platform, including improved functionality, multi-lingual capabilities and connectors for various corporate and social media platforms.  During the period, the Company capitalised internal development costs amounting to £0.20m, (2012: £nil) as the Company now meets the necessary accounting requirements set out in IAS38: Intangible assets.

We have once again secured an R&D tax credit from HMRC of £0.13m (2012: £0.11m) reflecting the pioneering nature of the research and development work we undertake. This is reflected in the taxation line in the consolidated statement of comprehensive income.

Administrative expenses for the period decreased by 6% to £3.98m compared to the prior year, (2012: £4.21m) despite the costs associated with the increase in the senior headcount as a result of a continued focus within the business on cost control.

Operating losses before share-based payments fell to £1.19m (2012: £1.36m) and is a function of the marginally lower revenues as well as the reduced cost base.

Cash outflows from operating activities narrowed to £1.07 million (2012: £1.15 million). These outflows were met through institutional fundraisings, referred to below.

The Company completed a placing of new ordinary shares with institutional and other investors in June 2012 raising £1.0m before expenses. The Company completed a further placing of new ordinary shares with institutional and other investors in May 2013, post the period end, raising approximately £1.26m before expenses. In addition, as part of the May 2013 funding round certain of the Directors committed to being paid a proportion of their salary in equity, subscribing for 262,400,000 new ordinary shares, raising a further £164,000. In addition to providing working capital, these funds have strengthened the financial position of the Company, providing reassurance to existing and new clients as to the Company's continued ability to provide and to develop its software and range of consulting services. The funds are being used to expand Imaginatik's sales and consulting capacity in the US and European markets.

During the year the Company successfully concluded its litigation against the former CEO, Mark Turrell. As we announced on 2 October 2012, following a High Court hearing, the Company and Matt Cooper were granted an order over all of Mr. Turrell's 64.4 million shares in Imaginatik plc. Those shares have been split in an equitable manner between the Company and Matt Cooper and as a result the Company now has an order over 54.1 million shares, which will be sold in an orderly manner in due course. The proceeds of any such share sale will be retained for the benefit of the Company.

Operational Review

We continue to believe Imaginatik's key differentiator is its consulting offering, which showed very encouraging signs of progress in the year, seeing a strong increase in gross contracted revenue from consulting from £0.39m from 14 clients, to £0.60m from 25 clients, of which £0.14m is deferred to future periods. In total, we contracted with 24 new clients, substantially more than the previous year (2012: 9), comprising a mixture of pure consulting engagements, pilot projects and 13 new annual contracts. Clients on new annual contracts include Yorkshire Building Society, Lincoln Financial Group, Air Products and Chemicals, Inc. and Chartis Global Services, Inc., and pilot engagements included Yale University, MillerCoors and Merck & Co., Inc.. The net customer gain during the period was 17 clients.

The general economy stills poses a challenge, as evidenced by the clients lost in the year. However the majority of these contracts were based on our 'old model' with no consultancy support and we are confident that as an increasing number of our customers rely on Imaginatik to provide them with full innovation capabilities, we will increase the resilience of our client base.

The Company has executed many successful programmes for clients over the year, including the following:

Ladbrokes

·      A world leader in online betting and gaming with more than 2,700 retail shops in the UK, Ireland, Spain and Belgium.

·      The issue: previous ideation workshops were costly to implement and slow - and in Ladbrokes' experience this process only revealed small, incremental changes to the business. The difficulty is in finding the breakthrough ideas that will translate into real, measurable business value.

·      The goal: To understand the organisation's innovation maturity then develop a process plan for rapidly collecting and implementing new ideas.

·      Implementation: Imaginatik's Innovation Maturity Assessment methodology was used with senior leaders, identifying a definition and strategy for innovation that aligned with business goals of improved customer service and online gaming capabilities. An online challenge was launched with Imaginatik's Innovation Central platform to engage more than 1,500 employees across the company.

·      The results: Store-based employees are engaged in improving the customer experience, and employee ideas shape a new shop design and a repeatable process for the origination of breakthrough ideas now exists within Ladbrokes.

With Imaginatik as its innovation partner, Ladbrokes has transformed the way in which it engages employees. What began as an ad hoc idea-gathering exercise is now a structured, repeatable process for engaging front-line employees and managers. That input will help to transform the way in which Ladbrokes serves its customers in many years to come.

Windsor Foods

·      A world leading manufacturer and marketer of frozen ethnic foods and appetizers.

·      The goal: To create a culture of innovation that taps into the best ideas of employees, suppliers and customers, while providing a system that tracks innovation activities from discovery through implementation.

·      The results: Cost savings of $500,000+ and new product concepts estimated at $2m+ over 18 months while engaging customers and suppliers in the innovation conversation.

Lynn Hall, SVP Revenue Team, Windsor Foods, commented, "Imaginatik's Innovation Central software and best-practices support have been instrumental to our success toward introducing our entire organisation to processes and tools for a long-term sustainable innovation culture."

Consultancy

Since early 2012, Imaginatik has been building out its capabilities in this area, providing strong differentiation in the innovation market. Most companies wish to be more innovative than they are today, but are unsure of the precise steps to execute. Through the additional consultancy modules developed during the year, our consultancy offering now charts the path of innovation, from initial assessment of an organisation's innovation capabilities through to innovation programme planning and implementation. 

It is clear from independent industry research that Imaginatik's consultancy offering is the most compelling in the market, with Imaginatik's 'strong consulting offering' described as a 'clear differentiator' by Forrester in a recent report.

Our consultancy successes have continued post the year end, securing several new contracts in both the US and Europe. These include projects with new clients such as SPX, a global industrial equipment and manufacturing business, Ingredion, Inc., a US based ingredients provider, and additional engagements with existing clients Energizer, Cotton Inc., and food manufacturer Windsor Food. These projects are in areas such as new product development, placement, distribution and breakthrough strategies.

We have also recruited a Managing Consultant, Megan Shea, who joins us from Innosight, with responsibility for new methods development, business development and client delivery. Megan brings the number of innovation consultants within Imaginatik to six and joins Imaginatik with a wealth of experience in enterprise innovation practices.

The focus in the year ahead will be on increasing the level of engagement with existing and new clients and the further development of our suite of consulting offerings, providing a credible face for a new entrant into the area of innovation consultancy.

Technology

Imaginatik's development focus is now on building innovative additions to our platform, making the innovation process more scalable and accessible. We now have a suite of products which spans the innovation spectrum. Starting with Discovery Central, which helps customers identify where to focus their innovation efforts, deploying its 'four lens' methodology, through to the core platform, Innovation Central, which enables companies to engage the collective brain power of their employees, partners and customers in innovation challenges, and finally to Results Engine which allows organisations to manage and track projects resulting in ideas being implemented.

During the year we developed multilingual capabilities within the platform, which will be completed in the next few months. We are also in the process of establishing connectors with some of the fastest growing corporate platforms, such as SharePoint, Jive and Yammer and continue to work on other social media integrations. All of these initiatives are significantly increasing our addressable market.

We have also spent time developing powerful analytic technologies, enabling clients to identify unique ideas from amongst the more mundane. This, we believe, increases our competitiveness and helps make the product set stickier within our client base.

Sales and Marketing

We have invested considerable effort over the year in building out our sales and marketing team and their activities. Including the senior members of the consulting team, we now have nine senior sales executives based in the US and UK who are experienced in both platform and consulting sales to large corporates.  We are looking to further expand our sales team in the year ahead with additional senior executives.

Imaginatik's marketing efforts in the year focused on gaining traction with increasingly senior business executives, in line with our strategy of re-positioning the Imaginatik brand towards premium innovation offerings targeted at the senior management level.

To support this go-to-market strategy, we increased and focused our inbound and outbound lead-generation efforts. In 2013, we began working with several telemarketing and appointment-setting firms focused on contacting very senior executives, with encouraging results to date. Furthermore, web and content marketing efforts have been re-oriented to attract higher caliber decision makers. As a first step in this direction, Imaginatik re-designed both the graphical style and written content of www.imaginatik.com in the first half of fiscal 2013.

PR has been a particular highlight of the year's marketing efforts, with a new US-based PR firm delivering a marked increase in media attention for Imaginatik. Imaginatik has received greater attention from industry analysts including Forrester, Gartner, and IDC. IDC and Forrester conducted the first comprehensive vendor evaluations of Imaginatik's market place in 2013. Imaginatik has placed very highly in both, published in May and July 2013, respectively.

As part of Imaginatik's continuing effort to court senior-level corporate innovation leaders, marketing places heavy emphasis on live events and community organising. The Innovation Masters Series, Imaginatik's popular webinar series, included 9 broadcasts in fiscal 2013, with average live attendance well over 100 and producing a continuous fresh stream of both new inbound leads and returning guests. In addition, we have continued to organise our marquee Innovation Leaders Forum ("ILF"), with successful ILFs in Boston in both February 2012 and April 2013.

Looking forward, Imaginatik's marketing strategy is to continue sharpening the firm's core messaging and thought leadership around "Building the Innovation Discipline" - as both a hallmark of our work as a firm, and a depiction of the macro "innovation" trend in the marketplace. We will hold Innovation Roundtables in select cities in the US and Europe, complemented by corresponding online communities on Imaginatik.com, LinkedIn, and elsewhere. Imaginatik's first annual Global State of Innovation survey and thought leadership report will be published in early fiscal 2014, followed by additional papers and bylined articles throughout the year.

Board Changes

On 20 June 2012 the Company announced that Brian Hays, Non-executive Director, had stepped down from the Board to pursue other business interests. We are grateful for his guidance during his time with Imaginatik and wish him well for the future.

Post the year end, the Company announced further changes to the Board, reducing the number of board members from six to four, which is considered more appropriate for a company of its size. The Board now consists of Executive Chairman, Matt Cooper, COO and CFO Shawn Taylor, Non-executive Directors, David Gammon and Simon Charles. Current Directors, with Nick Goss (CTO) and Luis Solis (President, Americas) both stepping down from their positions on the Board while maintaining their full time roles on the management team of the Company. The Board thanks them for their valuable contributions to the Board and look forward to continuing to work together as a strong operational management team as we seek to build on our successes in the growing innovation services marketplace.

Going Concern

Net funds at 31 March 2013 was £136,000 (2012: £543,000). Net cash outflows from operating activities has reduced to £1.07 million (2012: £1.12 million).

The Company completed a placing of new ordinary shares with institutional and other investors in June 2012 raising £1.0 million before expenses. The Company completed a further placing of new ordinary shares with institutional and other investors in May 2013, post the period end, raising approximately £1.26m before expenses.

The directors have prepared detailed Group budgets and forecasts for the period to March 2015. They have reviewed the Group's budgets and forecasts for the coming 12 months, which have been prepared with appropriate regard to the current macroeconomic environment and the conditions in the principal markets served by the Group. The directors have taken into consideration the Group's net funds, the level of anticipated renewals by reviewing on a customer by customer basis, forecast new and upsell revenues based on sales in the pipeline and anticipated costs including the ability to flex these cost should predicted revenues be lower than forecast.  As a result, at the time of approving the financial statements, the Directors consider that the Company has sufficient financial resources to continue in operational existence for the foreseeable future and, therefore, that it is appropriate to adopt the going concern basis in preparing these financial statements. As with all business forecasts, the directors' statement cannot guarantee that the going concern basis will remain appropriate given the inherent uncertainty about future events.

Outlook

We continue to make strong strategic progress, delivering on our intention to evolve into a full service innovation company as evidenced by the growing proportion of revenues generated via consulting and the record number of new customers added in the year.

Imaginatik has continued to make solid progress since the year end, in line with management's expectations. There is a strong pipeline of business opportunities in both the US and Europe and this, together with our experienced team, our growing customer base and greater industry recognition, gives us confidence in the future success of Imaginatik.

Shawn Taylor

Chief Operating and Financial Officer

24 July 2013

Consolidated statement of comprehensive income for the year ended 31 March 2013

						Restated
			Note	2013		2012
				£'000		£'000
Revenue			3	3,009		3,059
Cost of sales				(295)		(321)
Gross profit				2,714		2,738
Administrative expenses				(3,980)		(4,211)
Operating loss				(1,266)		(1,473)
Operating loss before share option costs				(1,187)		(1,364)
Share option costs				(79)		(109)
Finance costs				(7)		(8)
Loss before taxation				(1,273)		(1,481)
Income tax expense				131		108
Loss on ordinary activities for the year and total comprehensive income				(1,142)		(1,373)
Loss per share: Basic and diluted			5		(0.15p)	(0.40p)

Consolidated statement of financial position as at 31 March 2013

				Restated		Restated
	Note	2013		2012		2011
		£'000	£'000	£'000	£'000	£'000	£'000
ASSETS
Non-current assets
Property, plant and equipment		29		51		100
Intangible assets		254		51		104
Trade and other receivables		339		106		-
			622		208		204
Current assets
Trade and other receivables		1,063		1,034		983
Cash and cash equivalents		136		543		469
			1,199		1,577		1,452
Total assets			1,821		1,785		1,656
EQUITY AND LIABILITIES
Equity
Issued capital	6	341		321		135
Share premium		6,592		5,704		4,691
Share option reserve		843		764		655
Retained earnings		(8,838)		(7,696)		(6,323)
Total equity			(1,062)		(907)		(842)
Liabilities
Non-current liabilities
Other payables		115		136		24
			115		136		24
Current liabilities
Trade and other payables		2,768		2,556		2,474
			2,768		2,556		2,474
Total liabilities			2,883		2,692		2,498
Total equity and liabilities			1,821		1,785		1,656

Consolidated cash flow statement for the year ended 31 March 2013

				Restated
		2013		2012
	Note	£'000	£'000	£'000	£'000
Cash outflows from operating activities	7		(1,072)		(1,115)
Investing activities
Acquisition of property, plant and equipment		(17)		(9)
Acquisition of intangible assets		(226)		-
Net cash used in investing activities			(243)		(9)
Net cash flow before financing activities			(1,315)		(1,124)
Financing activities
Net proceeds from the issue of share capital		908		1,199
Net cash generated from financing activities			908		1,199
Net (decrease)/increase in cash and cash equivalents			(407)		75
Opening net cash and cash equivalents			543		469
Net foreign exchange difference			-		(1)
Closing net cash and cash equivalents			136		543

Statement of changes in equity for the year ended 31 March 2013

	Share capital	Share premium	Share option reserve	Retained earnings	Total attributable to owners of parent
	£'000	£'000	£'000	£'000	£'000
Balance at 1 April 2012 (restated)	321	5,704	764	(7,696)	(907)
Employee share-based payment options	-	-	79	-	79
Issue of share capital	20	888	-	-	908
Transactions with owners	20	888	79	-	987
Loss for the year and total comprehensive income	-	-	-	(1,142)	(1,142)
Balance at 31 March 2013	341	6,592	843	(8,838)	(1,062)
Balance at 1 April 2011	135	4,691	655	(6,323)	(842)
Employee share-based payment options	-	-	109	-	109
Issue of share capital	186	1,013	-	-	1,199
Transactions with owners	186	1,013	109	-	1,308
Loss for the year and total comprehensive income	-	-	-	(1,373)	(1,373)
Balance at 31 March 2012	321	5,704	764	(7,696)	(907)

Note to the Financial Statements

1.         Basis of preparation and statement of compliance

The financial information contained in this preliminary announcement does not constitute the Group's statutory financial statements for the year ended 31 March 2013 or 2012, but is derived from these financial statements. The financial statements for the year ended 31 March 2012 have been delivered to the Registrar of Companies. 

The financial statements for the year ended 31 March 2013 have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union and the Group has complied with International Financial Reporting Standards as issued by the IASB.   Those financial statements have not yet been delivered to the Registrar.

In preparing the financial statements the Directors are required to make judgements and estimates in applying accounting policies. The most significant areas where judgements and estimates have been applied are as follows:

Critical judgements and significant accounting estimates

In determining and applying accounting policies, judgement is often required in respect of items where the choice of specific policy, accounting estimate or assumption to be followed could materially affect the reported results or net asset position of the Group should it later be determined that a different choice would be more appropriate. The most significant areas where judgements and estimates have been applied are as follows:

Judgements

The recognition policy choice in respect of the software license fee element of Technology revenues requires judgement. Previously a large element of the contract value was attributed to the software licence fee and was recognised in the month the contract was signed. Having reconsidered this critical judgement, the directors now considered it more appropriate to recognise the licence fee element evenly over the term of the contract. This revised policy has been applied retrospectively as this results in these financial statements providing reliable and more relevant information about the effects of transactions on the Company's financial position and financial performance. The revised policy provides more relevant and reliable information as it is more reflective of the on-going relationship with clients through the licence term.

The value of the awards under the modified and new share option scheme was measured, in accordance with IFRS 2, by reference to their fair value at the date on which they were granted.  Judgement was required in determining the most appropriate valuation model .

Estimates

Significant assumptions were necessary in arriving at the inputs into the valuation model for modified and new share option scheme.

Accounting policies

Revenue

Revenue is measured at the fair value of the consideration received or receivable.  Income for the group is derived from two different sources: Technology and Consultancy. These sources are service-based rather than through the sale of goods. Following the principles of IAS 18 'Revenue', the policies for income recognition are such that income is recognised by reference to the stage of completion of the transaction at the end of the reporting period. In applying the income recognition policies below where there is a requirement for a contract to be signed, income is recognised in accordance with the policy when the contract has been signed or persuasive evidence of an arrangement exists.

a) Consulting:

Income derived from our consulting offering subject to contracts is recognised in the month in which the consulting takes place. Income from longer term consulting arrangements shall be recognised evenly over the term of the contract.

b) Technology:

The provision of our suite of technology products includes provision of software licences, hosting and maintenance in relation to the product over the contract term. Income arising from the provision of technology services are recognised evenly over the term of the contract, once an agreement has been signed or persuasive evidence of an arrangement exists.

Going Concern

Net funds at 31 March 2013 was £136,000 (2012: £543,000). Net cash outflows from operating activities has reduced to £1.07 million (2012: £1.12 million).

The Company completed a placing of new ordinary shares with institutional and other investors in June 2012 raising £1.0 million before expenses. The Company completed a further placing of new ordinary shares with institutional and other investors in May 2013, post the period end, raising approximately £1.26m before expenses.

The directors have prepared detailed Group budgets and forecasts for the period to March 2015. They have reviewed the Group's budgets and forecasts for the coming 12 months, which have been prepared with appropriate regard to the current macroeconomic environment and the conditions in the principal markets served by the Group. The directors have taken into consideration the Group's net funds, the level of anticipated renewals by reviewing on a customer by customer basis, forecast new and upsell revenues based on sales in the pipeline and anticipated costs including the ability to flex these cost should predicted revenues be lower than forecast.  As a result, at the time of approving the financial statements, the Directors consider that the Company has sufficient financial resources to continue in operational existence for the foreseeable future and, therefore, that it is appropriate to adopt the going concern basis in preparing these financial statements. As with all business forecasts, the directors' statement cannot guarantee that the going concern basis will remain appropriate given the inherent uncertainty about future events.

2          Prior period adjustment

The directors have revised the revenue recognition policy for the software licence fee element of the Technology services provided. Previously an element of the contract value was attributed to provision of the licence and recognised in the month the contract was signed. Further description of the change is noted in Critical judgements and significant accounting estimates.

The primary impacts of the policy on the financial years under report have been as follows:

·      revenue for the year to 31 March 2013 has decreased by £0.12m from £3.13m to £3.01m (2012: reduced from £3.45m to £3.06m)

·      the loss after tax for the year to 31 March 2013 has increased by an additional £0.12m from £1.02m to £1.14m (2012: losses increased from £0.98m to £1.37m)

·      the amount of deferred revenue on the balance sheet has increased by £1.58m to £2.45m (2012: increased from £0.74m to £2.20m)

·      cumulative losses carried forward as at 31 March 2013 have been increased by £1.58m from £7.26m to £8.84m (2012 increased from £6.24m to £7.70m)

·      EPS for 2012 decreased to £0.40 loss per share from £0.28 loss per share.

·      EPS for 2013 decreased to £0.15 loss per share from £0.13 loss per share.

3          Segmental reporting

Management currently identifies the Group's two revenue streams as its operating segments. These operating segments are monitored by the Group's chief operating decision maker. For these operating segments only revenues are reported the  Group's chief operating decision maker as results, other costs and assets and liabilities cannot be reliably allocated to the operating segments.

	2013	Restated 2012
	£'000	£'000
Segmental revenue:
Technology	2,456	2,669
Consultancy	553	390
	3,009	3,059

All other information presented to the Chief Operating Decision Maker is the same as is reported in these financial statements.

The Group's revenues from external customers and its non-current assets are divided into the following geographical areas:

	2013	Restated 2012
	£'000	£'000
Segmental revenue:
United States of America	2,628	2,770
Rest of the World	381	289
	3,009	3,059
Segmental non-current assets:
United States of America	309	126
Rest of the World	313	82
	622	208

Revenues from external customers have been identified on the basis of the customer's geographical location. Non-current assets are allocated based on their physical location.

The Group has one customers (2012: nil customers), who accounted for revenues of £302,000 (2012: £nil), which amount to more than 10% of Group revenues. These revenues arose in the Technology segment.

4.        Operating loss

	2013	2012
This has been arrived at after charging:	£'000	£'000
Auditor's remuneration
Fees for the audit of Imaginatik plc	19	15
Fees for the audit of other group companies	1	1
Services relating to taxation	7	15
Other services	2	2
Operating lease costs:      Land and buildings	84	86
Depreciation	39	59
Amortisation	23	53
Foreign exchange losses	127	48
Litigation costs	41	153
Research and development	183	451

5.      Earnings per share

Basic loss per share (EPS) has been calculated in accordance with IAS 33 'Earnings per share'.  The calculation of EPS is based on losses of £1,142,000 (2012: £1,373,000) and on a weighted average number of ordinary shares in existence during the year of 763,032,110 (2012: 347,464,893). 

The share options issued during the current and prior year are considered to be anti-dilutive, and therefore diluted EPS equals basic EPS.

6     Share capital

		Number	£ £'000
Allotted, called up and fully paid ordinary shares 0.0625p each
As at 1 April 2012		513,032,110	321
Issued in the year		333,333,333	20
As at 31 March 2013		846,365,443	341

On 28 June 2012:

-      333,333,333 new ordinary shares of 0.0625p each were issued for a gross cash consideration of   

        £1,000,000. Issue costs relating to the above placing were £92,000 and have been deducted from the share   premium account.

7          Reconciliation of operating loss to net cash outflow from operating activities

	Group	Restated Group
	2013	2012
	£'000	£'000
Operating loss	(1,266)	(1,473)
Depreciation of plant, property and equipment	39	59
Amortisation of intangible assets	23	53
Share option charge	79	109
Operating cash flows before movements in working capital	(1,125)	(1,252)
Decrease/(Increase) in trade and other receivables	(262)	(157)
Increase/(Decrease) in payables	191	194
Net movement in working capital	(71)	37
Cash used by operations	(1,196)	(1,215)
Corporation tax received	131	108
Net interest paid	(7)	(8)
Net cash from operating activities	(1,072)	(1,115)

8.         Post-balance sheet event

The company announced on 26 April 2013 that it had successfully raised £1.26m (before expenses) by way of a conditional placing of new ordinary shares in the share capital of the Company ("Placing"). The terms of the Placing were described in a circular which was despatched to shareholders of the Company on 26 April 2013. The new ordinary shares were admitted to trading on AIM on 14 May 2013.

9.         Report and Accounts

Copies of the Company's full statutory financial statements will be available from the offices at Carnac Cottage, Cams Hall Estate, Fareham, PO16 8UU and on its website, www.imaginatik.com. A copy of the Report and Accounts will be sent to all shareholders with notice of the AGM in due course.  

 

END

 

 

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