Ixico Regulatory News (IXI)

4 December 2018

IXICO plc

("IXICO" or the "Company")

Financial results for the year ended 30 September 2018

Continued strong revenue growth, reduced operating losses and cash outflow, together with new contract wins.

Provides a solid foundation for continued growth momentum

IXICO plc (AIM: IXI), the data analytics company delivering insights in neuroscience, today announces its final results for the year ended 30 September 2018.

Highlights

Commercial and Operational

· Secured £15m of new and expanded multi-year client contracts across all phases of clinical development

· Concluded an over-subscribed placing of £5.5m to invest in new product and new market development

· A broadening base of expertise in neurological disease areas and diversification of biopharmaceutical clients

· Achievement of key milestones in the Assessa® PML programme

· Successful completion of the Cygnus project for wearable biosensors (funded by Innovate UK) and expansion of key scientific collaborations to develop new artificial intelligence (AI) algorithms for imaging and digital biomarkers

· Investment in increasing management bandwidth to drive growth, by strengthening leadership and operations team

Financial

· Reported record revenues of £5.4m (2017: £4.1m*) or 32% growth at actual exchange rates

· Revenue of £5.2m (2017: £3.7m*) or 41% underlying growth at Project Exchange Rates (PER)**

· Gross margin increased to 58.8% (2017: 56.4%*) an improvement of 240 base points over prior year

· Reduced EBITDA loss of £0.6m (2017: £1.4m*) from increased project volumes, improved productivity and cost control

· Reduced operating loss of £0.8m (2017: £1.9m*)

· Reduced loss per share of 2.0 pence (2017: 5.7 pence)

· Operating cash outflows significantly reduced in the year to £0.1m (2017: £1.2m)

· Closing cash balance of £7.9m (2017: £2.4m)

 * Adjusted to reflect the early adoption of IFRS 15 'Revenue from Contracts with Customers'

**PER revenue is recognised from multi-year contracts with fixed Project Exchange Rates. PER revenue demonstrates the underlying performance of the business, excluding the impact of foreign exchange.

Post year-end Events

· Signed an extension to an existing contract which was awarded in January 2018 with a top 10 biopharmaceutical client. Contract value has increased from $2.7m to $5.1m over a six-year term, of which $0.2m has been recognised to date.

Giulio Cerroni, CEO of IXICO, said: "2018 has been another year of significant progress in which we have delivered on our financial commitments, whilst continuing to invest in the long-term future of the company. We have reported record revenues with underlying growth of 41%, further improved gross profit performance and reduced operating losses. Consequently, operating cash outflows have been significantly reduced in the year to £0.1m. The combination of a strong orderbook and healthy pipeline, in conjunction with senior management hires to execute our strategy, provides a solid foundation for continued growth momentum. With a successful capital placing to invest in new market and product development, we go into the new financial year with increased commercial traction, ambitious growth plans and a strengthened organisation focused on delivering technology-driven data analytics to our global biopharmaceutical clients".

Notice of AGM

IXICO also announces that its Annual General Meeting (AGM) will be held at 9.30am on 18 January 2019 at the offices of FTI Consulting, 200 Aldersgate Street, London EC1A 4HD. The full annual report and accounts along with notice of AGM will be posted to shareholders on 14 December 2018.

For further information please contact:

About IXICO

IXICO is dedicated to delivering insights in neuroscience. Our mission is to transform the progression of our biopharmaceutical clients' neurological therapeutic pipelines through the application of novel medical imaging and mobile health digital technologies.

IXICO's data analytics services are used by the global biopharmaceutical industry to interpret data from brain scans and digital biosensors to enable better trial design, site qualification, patient selection and clinical outcomes. We provide technology-enabled services across all phases of clinical evaluation. Our integrated digital platform provides a scalable and secure infrastructure for the capture and analysis of regulatory compliant clinical data to enable clients to make rapid, better informed decisions. IXICO is also collaborating with partners to develop new analytical techniques and companion digital health products targeted at improving patient outcomes.

More information is available on www.IXICO.com

Chairman's Statement

Increasing commercial traction

Overview

IXICO is now well-positioned as a data analytics company delivering insights in neuroscience. Our mission is to transform the progression of our clients' neurodegenerative therapeutic pipelines through the application of novel medical imaging and digital health technologies.

We have reported record revenue, improved gross margins, significantly reduced operating losses and reduced cash outflow as we move forward on our path to profitability. During the year, we announced new contracts with leading biopharmaceutical clients. These demonstrate our healthy business pipeline, and especially our ability to execute major, multi-year phase III studies. Together these provide a solid foundation for future revenue growth.

In May, we placed an additional £5.5 million of growth capital predominantly from new institutional shareholders. This has substantially strengthened our balance sheet and we intend to deploy the capital over the coming years to accelerate our development of new products and markets.

Strengthened management team and systems

Over the past twelve months we have invested in the management team to provide the necessary bandwidth to support our platform for growth through senior appointments across key functions in the business including operations, commercial and quality functions.

We are confident that the investments we are making in people, systems and processes, coupled with continued client service improvement and technology development, will continue to deliver growth and increased shareholder value.

Governance

In March 2018, the London Stock Exchange made several changes to the AIM Rules, following which, we adopted the Quoted Companies Alliance Corporate Governance Code (the 'Code'). This comprises 10 broad principles, which we use to explain our application of the principles of the Code and our corporate governance arrangements.

At IXICO, our core values reflect the technical and scientific expertise which has been developed over the last fourteen years, our innovative and talented people, driving quality in business operations and conducting our business relationships with integrity as a trusted partner of choice. The Board believes that these values and principles are a fundamental part of our sustainable, growing business and the Company's culture.

Board

At the 2019 Annual General Meeting ('AGM'), in accordance with the Company's Articles of Association, John Bradshaw, Mark Warne and I will stand for re-election, supported by the Board of Directors' recommendation.

Shareholders

We are grateful to all our shareholders for their continued support and interest. I would also like to welcome our new shareholders who joined during the year whose vision and support are an important part of our accelerated growth plans.

Outlook

Having made demonstrable progress executing our business strategy in the year, we reported record revenue in our core imaging business which was further enhanced by strong first year revenue from our wearable biosensor contracts.

We enter the new year with a healthy orderbook from our blue-chip clients and the Board is confident in meeting our expectations for growth. We are looking forward to the future with enthusiasm and confidence. We will continue to work closely with our clients, collaborators and business partners to realise our vision. I would like to thank them as well as all our staff, shareholders and advisers for their continued commitment and enthusiasm.

Chief Executive's Statement

Delivering our strategy

Put simply, our success is based on our unique capabilities in digitising information from clinical trials, combined with our commitment to innovate and commercialise new digital health solutions with our global biopharmaceutical clients.

Increasing commercial momentum

We are well-placed to benefit from macro trends in the industry, with a long-term runway for growth driven by the increasing outsourcing requirements of the biopharmaceutical industry, the significant unmet medical need in neurological disease and the emergence of innovative digital health solutions.

This year's reported revenue of £5.4 million is testament to our traction in delivering on our commercial goals, representing 32% revenue growth (41% excluding forex). During the year, we announced £15 million of new and expanded multi-year contracts across a range of therapeutic areas. Record revenue in our core imaging business was further enhanced by strong first year revenue from our wearable biosensor contracts and continuation of our Assessa PML programme.

Commitment to continuous improvement

We continue to invest in the long-term future of the company to deliver enhanced project service levels to our clients in high impact areas such as technology deployment timelines and clinical site management. This strengthened focus on operational efficiency resulted in significant progress in our staff productivity Key Performance Indicators (KPIs) such as income per head and 240 basis points improvement in gross margins to 58.8%.

Investing in innovation

Other highlights in 2018 included an over-subscribed placing in May, of £5.5 million, adding a number of new institutions to our register and enabling additional investment in new digital products and markets to further accelerate our growth trajectory in future years. In particular, we are excited about the emerging markets for our wearable biosensor data solutions to generate patient Real-World Evidence ('RWE') and our Assessa companion product for post-marketing surveillance.

We also achieved significant milestones in our scientific collaborations. The Cygnus project, which explored the use of wearable biosensors to support dementia sufferers, was successfully concluded in March and we were pleased to receive positive feedback on the pilot of our Assessa PML programme to support clinical management decisions from multiple sclerosis patients.

Strengthened management team and systems

I am delighted to report that we continue to attract and develop the highest calibre of talent, welcoming new, experienced, senior management in key functions including Quality, Operations, IT and Commercial. With this strengthened team in place, we have initiated several improvement programmes (such as upgrading IT infrastructure and data governance) to enable us to better serve the requirements of more complex and larger clinical trials across a wider range of therapeutic areas.

A bright outlook

We recognise that the unique value we offer our clients is built on scientific and technical capabilities and our ability to combine this with a deep understanding of neuroscience. As such, as we invest the additional capital placed in May, our innovation programmes will be substantially expanded. This will include building on our collaborations with the broader scientific community, enabling us to continue to provide global biopharma clients with highly differentiated technology solutions for imaging and digital biomarkers.

We go into the new financial year with increased and accelerating commercial traction, ambitious growth plans and a strengthened organisation focused on delivering unique, valuable technology solutions. Our commercial trajectory in an attractive market, strong cash balance and good visibility of future revenue from our orderbook underpins our confidence for the coming year.

Risk Management

The Board has ultimate responsibility for the Company's system of internal control and for reviewing its effectiveness.

Any such system of internal financial and operational controls can provide reasonable, but not absolute assurance, against material mis-statement or loss. The Board considers that the internal controls in place are appropriate for the size, stage of development, complexity and risk profile of the Group. The Group's internal control system is split into the following 2 areas.

Financial controls

The Group has an established framework of policies and procedures to maintain a system of internal financial and operational control. The effectiveness of such control is monitored and reviewed by the Leadership Team, Executive Directors, the Audit Committee and the Board.

· Group policies, accounting and administrative procedures cover significant areas of the business and key systems. This includes formal authorisation procedures for treasury management, operating and capital expenditure. Major expenditure or commitment requires Board approval.

· The Board is responsible for reviewing and approving Group strategy, annual budgets and determining the financial structure of the Group.

· The Audit Committee assists the Board in discharging its duties in respect of the annual and interim financial statements, accounting policies and the maintenance of internal financial controls.

· There are comprehensive procedures for monitoring and reporting to the Board, the Group's performance against budgets and forecasts. Such reports include financial statements, cash flows and capital expenditure. Results are compared with the prior year and expected performance over the remainder of the financial period.

Non-financial controls

The Board recognises that maintaining sound controls and vigilance is an important part of managing risk. The non-financial controls that have been established to date include:

· Close management of the day-to-day activities of the Group by the Executive Directors.

· A Leadership Team that operates within an organisational structure that has defined levels of responsibility.

· Carrying out business operations in accordance with ISO 13485:2016.

· Appropriate standards and codes of conduct that are set out in written policies and part of mandatory training for employees. These are wide-ranging and include policies such as dealing fairly with stakeholders and one another, privacy, handling confidential information, conflict of interest, anti-bribery and corruption.

· The VP of Quality, Compliance and Regulatory Affairs works closely with the Leadership Team to oversee the Standard Operating Procedures used to perform services for our clients and Company policies and procedures.

· All material contracts are reviewed and signed by an Executive Director.

A risk register is maintained which details potential risks and mitigating actions for all client projects. Such risks are reviewed by members of the operational leadership and discussed at Leadership Team meetings. Material risks or uncertainties, together with potential mitigating actions, are communicated to the Board.

Principal Risks and Uncertainties

The following are the principal risks and uncertainties that the Board considers could have a material impact on the Group's operational results, financial condition and prospects.

These risks and uncertainties reflect the business environment within which the Group operates together with risks in the execution of our business strategy.

Financial

Management and employees

Industry

Competition

BREXIT

Reliance on key customers

Regulatory and compliance

Intellectual property and proprietary technology

Cybersecurity

Financial Review

Ahead of expectations

We have delivered a strong financial performance as part of our 5-point growth plan.

This financial review includes a comparison of KPIs that we use to measure our progress over the prior year. Revenue KPIs are reported at actual exchange rates and Project Exchange Rates ('PER'). The KPI of revenue at PER demonstrates the underlying movement in the revenue performance by excluding the impact of foreign exchange. PER represents a fixed foreign exchange rate agreed in each individual customer contract.

KPIs

The KPIs currently used to monitor the business are linked into financial performance and cash resources as shown below:

*Adjusted to reflect the early adoption of IFRS 15 'Revenue from Contracts with Customers'.

Revenue

This is the first financial year that we are reporting revenue in accordance with IFRS 15 'Revenue from Contracts with Customers'. We have decided to early adopt this new accounting standard as it resulted in changes to the revenue recognition policy. Comparative figures have been adjusted to reflect this change.

Revenue for the period of £5.4 million (2017: £4.1 million*) represented an increase of 32%. This growth was generated from clinical trials services, Assessa PML, wearables projects and licensing revenue.

Revenue at PER of £5.2 million (2017: £3.7 million) represented a strong underlying growth of 41%.

Gross profit

The improved gross profit performance reflected increased revenue and operational efficiencies. The gross profit of £3.2 million increased by £0.9 million or 39% in the year. This resulted in an improved gross margin of 58.8%.

Other income

Other income comprised income from grants of £0.5 million (2017: £0.5 million) and R&D expenditure credit of £0.1 million (2017: £0.1 million). The £0.1 million reduction in grant income reflected the completion of 2 projects which had been ongoing in the prior year.

EBITDA

Reduced EBITDA loss of £0.6m (2017: £1.4m*) reflected increased project volumes, improved productivity and cost control.

Operating loss

Operating expenditure in the year reflected continued investment in people and product development:

· research and development expenses of £1.0 million (2017: £1.3 million) included improvements to existing products together with new product development;

· sales and marketing expenses were materially unchanged at £0.8 million (2017: £0.8 million); and

· general and administrative expenses increased to £2.7 million (2017: £2.3 million).

The reported operating loss of £0.8 million reflected an improved gross profit performance and reduced operating expenditure.

Cash

Operating cash outflows significantly reduced in the year to £0.1 million (2017: £1.2 million). The Group completed a placing of £5.5 million which combined with neutral operating cash flows, resulted in a closing cash balance of £7.9 million (2017: £2.4 million).

Loss per share

Loss per share improved to 2.0p from 5.7p reflecting a strong performance in the year.

Following the successful placing we are able to continue to invest in the business to ensure that we have the people, products, processes and IT infrastructure to further accelerate our commercially-led growth strategy.

Results and dividends

The Group's net loss after tax for the year decreased to £0.7 million (2017: £1.5 million adjusted*).

The Board of Directors does not recommend the payment of a dividend.

Placing

On 30 May 2018, the Group placed £5.5 million before expenses of £0.3 million, comprising a placing of VCT/EIS qualifying investment and ordinary shares at a price of £0.28. The placing will be used over the coming years to accelerate development of new products and markets.

Financial risk management

The financial risk management and objectives of the Group are set out in note 23 of the consolidated financial statements.

Political donations

The Group made no political donations during the period (2017: £nil) as part of our corporate social responsibility activities.

Charitable donations

The Group made charitable donations of £2,000 during the period (2017: £nil).

Consolidated Statement of Comprehensive Income

for the year ended 30 September 2018 and 30 September 2017

* Revenue reflects early adoption of IFRS 15 'Revenue from Contracts with Customers' which is set out in note 2 of the consolidated financial statements.

Consolidated Statement of Financial Position

as at 30 September 2018, 30 September 2017 and 1 October 2016

* Trade and other payables and accumulated losses reflect early adoption of IFRS 15 'Revenue from Contracts with Customers' which is set out in note 2 of the consolidated financial statements.

Company Statement of Financial Position

as at 30 September 2018 and 30 September 2017

Parent Company Income Statement

As permitted by Section 408 of the Companies Act 2006, the income statement of the Company is not presented as part of these financial statements. The Company's loss for the financial year was £1,296,000 (2017: £1,388,000).

Consolidated Statement of Changes in Equity

for the year ended 30 September 2018, 30 September 2017 and 1 October 2016

Company Statement of Changes in Equity

for the year ended 30 September 2018 and 30 September 2017

Consolidated and Company Statements of Cash Flows

for the year ended 30 September 2018 and September 2017

* Loss for the period and trade and other payables reflect early adoption of IFRS 15 'Revenue from Contracts with Customers' which is set out in note 2 of the consolidated financial statements.

Notes to the Financial Statements

The Group controls a subsidiary when the Group is exposed or has rights, to variable returns from its involvement with a subsidiary and has the ability to affect those returns through its power over a subsidiary.

1. General information

IXICO plc (the 'Company') is a public limited company incorporated in England and Wales; and is admitted to trading on the AIM market of the London Stock Exchange under the symbol IXI. The address of its registered office is 4th Floor, Griffin Court, 15 Long Lane, London EC1A 9PN.

The Company is an established provider of technology enabled speciality services to the global biopharmaceutical industry. The Company's services are used to select patients for clinical trials, assess the safety and efficacy of new drugs in development and in post marketing surveillance.

2. Significant accounting policies and basis of preparation

Basis of preparation

The consolidated financial statements have been prepared in accordance with IFRS as adopted by the EU, IFRIC interpretations and the Companies Act 2006 applicable to companies operating under IFRS.

The consolidated financial statements have been prepared under the historical cost convention modified by the revaluation of certain financial instruments.

The consolidated financial statements are presented in Sterling (£). This is the predominant functional currency of the Company, and is the currency of the primary economic environment in which it operates. Foreign transactions are accounted in accordance with the policies set out below.

The Group and Company financial statements for the year ended 30 September 2018 are the first financial statements prepared in accordance with IFRS 15 'Revenue from Contracts with Customers', in advance of its effective date (accounting periods starting 1 January 2018). The Directors have decided to early adopt IFRS 15 'Revenue from Contracts with Customers' as it resulted in changes to revenue recognition policy.

Comparative figures have been adjusted to reflect the adjustments made and are presented below. There is no impact on the Company's financial statements.

Basis of consolidation

The consolidated financial statements incorporate the accounts of the Company and its subsidiary companies adjusted to eliminate intra-Group balances and any unrealised gains and losses or income and expenses arising from intra-Group transactions. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Group's accounting policies.

Subsidiaries are entities controlled by the Group. In assessing control, potential voting rights that are currently exercisable or convertible are taken into account.

The results of subsidiary companies are included in the consolidated financial statements from the date that control commences until the date that control ceases. The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on consolidation, are translated into Sterling at exchange rates ruling at the end of the reporting period. Income statements and cash flows of foreign operations are translated into Sterling at average monthly exchange rates which approximate foreign exchange rates at the date of the transaction. Foreign exchange differences arising on retranslation are recognised directly in a separate translation reserve.

The acquisition method is used to account for the acquisition of subsidiaries.

Going concern

At the time of approving the consolidated financial statements, the Directors have considered the expected future performance together with the Group's estimated future cash inflows from existing long-term contracts and sales pipeline. The Directors have also considered the Group's strategy following the placing during the year. Changes to the cost base are made in the normal course of business, so that operating expenditure and planned investment are in line with the Group's strategy and financial resources. After due consideration and taking into account management's estimate of future revenue and expenditure, the Directors have a reasonable expectation that the Company and the Group will have adequate financial resources to continue in operation for the foreseeable future. Thus they have adopted the going concern basis of accounting in preparing the consolidated financial statements.

Significant management judgement in applying accounting policies and estimation uncertainty

When preparing the consolidated financial statements, the Directors make a number of judgements, estimates and assumptions about the recognition and measurement of assets, liabilities, income and expenses.

Significant management judgements

The following are significant management judgements in applying the accounting policies of the Group that have the most significant effect on the consolidated financial statements.

Revenue recognition

The Group recognises revenue in accordance with amounts charged to customers under service contracts. All contracts include an agreed, detailed work order which defines the deliverables. The service contracts are typically multi-year and may be amended through a change order process. Change orders represent a contract modification because they represent a distinct performance obligation in addition to the obligations in the contract. This could include changes to data volumes (increased or decreased), different methods of data analysis or changes to the timing of providing the deliverables.

Revenue is recognised upon achievement of deliverables set out in the service contract. The recognition is expected to approximate to the timing of the physical performance of the contracts. The Group records the performance of the contractual obligations to determine that the deliverables and actual work performed is in accordance with the contract and agreed change orders. The scope of the project and contract terms are reviewed to determine whether the Group is acting as principal or agent in respect of the project, which depends on facts and circumstances and requires judgement.

There are two principle revenue recognition sensitivities. The first is in respect of the timing of transferring the deliverable to the customer which is not always directly under the Group's control. The second sensitivity is the volumes of data to be analysed. The price per unit of analysis is fixed in the contract, however if data volumes are lower than expected then revenue recognition would be correspondingly lower. Equally if the data volumes are higher than expected the revenue recognition would be correspondingly higher. Significant judgement is therefore required to determine that the distinct performance obligations under which revenue is recognised have occurred. There is also significant judgement involved in determining whether the performance obligations are transferred over time or at a point in time.

Customer contracts include an agreed work order so the transaction price for a contract is allocated against distinct performance obligations based on their relative stand-alone selling prices. Management determines the fair value of individual components based on actual amounts charged by the Group on a stand-alone basis. The transaction price for a contract excludes any amounts collected on behalf of third parties.

Capitalisation of internally developed software

Distinguishing the research and development phases of a new software product and determining whether the requirements for the capitalisation of development costs are met requires judgement. During the year ended 30 September 2018, research and development expenses of £1,033,000 (2017: £1,256,000) have been recognised in the consolidated statement of comprehensive income.

The Group will recognise an intangible asset arising from development only if it can demonstrate its technical feasibility, intent to use or sell the intangible asset and measure reliably the expenditure attributable to the intangible asset during its development.

Intangible assets that do not meet the capitalisation criterial are recognised as an expense as incurred.

Internal development costs are capitalised only after technical and commercial feasibility of the software for sale or use have been established, meeting the criteria for capitalisation in the year.

Recovery of deferred tax assets

Deferred tax assets have not been recognised for deductible temporary differences and tax losses. The Directors consider that there is not sufficient certainty that future taxable profits will be available to utilise those temporary differences and tax losses. Further information of the Group's deferred tax asset can be found in note 17 of the consolidated financial statements.

Estimation uncertainty

Information about estimates and assumptions that have the most significant effect on recognition and measurement of assets, liabilities, income and expenses is provided below. Actual results may be substantially different.

Share-based payments

The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. The fair value of the options granted is measured using an option valuation model, taking into account the terms and conditions upon which the options were granted, detailed in note 21 of the consolidated financial statements.

Useful lives of depreciable assets

Management reviews its estimate of the useful lives of depreciable assets at each reporting date, based on the expected utility of the assets. Uncertainties in these estimates relate to technological obsolescence that may change the utility of certain software and IT equipment.

Changes in accounting policies

The group provides its TrialTracker technology platform together with associated services including the collection, analysis and interpretation of images and other data that may be generated in the course of a clinical study. The Group also uses wearable biosensors to collect and analyse data that measures changes in symptoms such as sleep quality or walking gait. The Group's Assessa PML platform provides access to expert neuroradiologists to provide second opinion reads of MRI images. The revenue associated with the Group's provision of these technology and associated services is recognised over time as the different services are provided or performed.

Early adoption of IFRS 15 'Revenue from Contracts with Customers'

The Group has early adopted IFRS 15 'Revenue from Contracts with Customers' from 1 October 2017. As part of transitioning to the new financial standard, management reviewed all contracts with customers and identified distinct performance obligations.

IFRS 15 establishes the principles that the Group applies when reporting information about the nature, amount, timing and uncertainty of revenue and cash flows from a contract with a customer. Applying IFRS 15, the Group recognises revenue to depict the transfer of promised goods or services to the customer in an amount that reflects the consideration to which the Group expects to be entitled in exchange for those goods or services.

It replaced IAS 18 'Revenue', IAS 11 'Construction Contracts' and related interpretations. Under IFRS 15 'Revenue from Contracts with Customers', revenue is recognised when a customer obtains control of the goods or services. Determining the distinct performance obligations within contracts and the timing of the transfer of control, at a point in time or over time, requires significant management judgement.

The Group's revenue is recognised in 2 main categories: service revenue and licensing revenue.

Service revenue

Service revenue is mainly derived from activities related to technology services provided to biopharmaceutical clients carrying out clinical development. The Group applied the IFRS 15 'Revenue from Contracts with Customers' 5-step model framework on all activities. The technology service contracts include a number of activities which can be allocated to discrete contract phases. The activities within each phase have been examined to determine distinct performance obligations. As a result, the Group has identified 2 activities which have resulted in a change in revenue recognition:

1. Set-up and configuration of the TrialTracker platform: Under IAS 18 'Revenue', revenue for these activities was recognised when the set-up and configuration was completed, provided that all other criteria for revenue recognition was met. Under IFRS 15 'Revenue from Contracts with Customers', revenue is recognised against 2 separate performance obligations. The first performance obligation is the set-up of TrialTracker and revenue is recognised when the configuration and platform set-up is completed. A second performance obligation is a platform access fee recognised over the duration of the project.

Some historic, long-standing, existing contracts combined the access fee and configuration fee which were agreed on a contract by contract basis. Management could not differentiate between the set-up, configuration and access fee as distinct performance obligations on these contracts, therefore revenue associated with these activities has been treated as an access fee and recognised over the duration of the project term.

Consequently, revenue recognition of the set-up and configuration of TrialTracker is recognised later under IFRS 15 'Revenue from Contracts with Customers' than under IAS 18 'Revenue'.

2. Project set-up activities: Under IAS 18 'Revenue', revenue for these activities was recognised when the set-up was completed, provided that all other criteria for revenue recognition was met. Under IFRS 15 'Revenue from Contracts with Customers', project set-up revenue is recognised as part of a bundle of activities as they do not on a stand-alone basis meet the definition of distinct performance. The set-up activities have been recognised when all the activities that together comprise the distinct performance obligation have been delivered.

Consequently, revenue recognition of Project set-up activities is recognised later under IFRS 15 'Revenue from Contracts with Customers' than under IAS 18 'Revenue'.

License revenue

Licensing revenue includes one agreement, which grants the right to use TrialTracker software.

The license is a distinct performance obligation and under IFRS 15 'Revenue from Contracts with Customers' revenue is recognised over the contract term. The license grants a right to use the software and receive associated technical support during the license period.

The revenue recognition under IFRS 15 'Revenue from Contracts with Customers' is consistent with recognition under IAS 18 'Revenue', therefore there is no change to the recognition of licensing revenue.

Transition to IFRS 15 'Revenue from Contracts with Customers'

The Group has early adopted IFRS 15 'Revenue from Contracts with Customers' using the retrospective effect method and has applied this standard from 1 October 2017. Accordingly, the information presented for year ended 30 September 2017 has been adjusted.

The principal changes arising from the early adoption of IFRS 15 'Revenue from Contracts with Customers' refer to changes in revenue recognition in 1. Set-up and configuration of the TrialTracker and 2. Project set-up activities as outlined above.

The following tables summarise the impact of early adopting IFRS 15 'Revenue from Contracts with Customers' on the Group's consolidated statement of comprehensive income for the year ended 30 September 2017 and its consolidated statement of financial position as at 30 September 2016 and 30 September 2017. There is no impact on the Group's consolidated statement of cash flows.

Impact on consolidated statement of comprehensive income for year ended 30 September 2017:

Impact on the consolidated statement of financial position at 30 September 2016:

Impact on the consolidated statement of financial position at 30 September 2017:

Accounting developments

At the date of approval of the consolidated financial statements, the following Standards which have not been applied in the consolidated financial statements were in issue but not yet effective:

• IFRS 9 Financial instruments (effective 1 January 2018)

• IFRS 16 Leases (effective 1 January 2019)

• IFRS 17 Insurance contracts (effective 1 January 2021)

The Group is preparing for the introduction of IFRS 16 'Leases' under which right to use assets arising under operating lease commitments will be recognised in the statement of financial position. Apart from this standard, the Directors anticipate, based on the current business processes, that the introduction of the above standards, and other amendments and interpretations will not have a material impact on the consolidated and Company financial statements.

Revenue

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.

In recognising revenue, the Group follows a 5-step process:

1. Identifying the contract with a customer.

2. Identifying the performance obligations.

3. Determining the transaction price.

4. Allocating the transaction price to the performance obligations.

5. Recognising revenue when/as performance obligation(s) are satisfied.

Revenue from short-term contracts, such as consultancy and training, is recognised as the service is performed.

Contracts with customers include a detailed schedule of work or work order with promised goods and services. The Group identifies each promised goods and services as performance obligations only if the goods or services are distinct or a series of distinct goods or services that are substantially the same and that have the same pattern or transfer to the customers. Performance obligations do not include activities that the Group must undertake to fulfil a contract unless those activities transfer a good or service to a customer.

The transaction price for a contract is allocated against distinct performance obligations based on their relative stand-alone selling prices. Management determines the fair value of individual components based on actual amounts charged by the Group on a stand-alone basis. The transaction price for a contract excludes any amounts collected on behalf of third parties.

Revenue is recognised either at a point in time or over time, when (or as) the Group satisfies performance obligations by delivering the contracted goods or services to its customers.

Revenue is recognised over time when the biopharmaceutical customers simultaneously receive and consume the benefits provided by the Group's performance. This is mainly derived from monthly management fees and access to TrialTracker.

Revenue is recognised at a point in time when the Group's has a present right to payment for the services provided to its biopharmaceutical customers. This is mainly derived from the study reports and materials used within clinical trials.

When an invoicing schedule is different to revenue recognition, appropriate adjustments are made through deferred and accrued income.

The Group's revenue is recognised in 2 main categories: service revenue and licensing revenue.

Service revenue

Service revenue is mainly derived from activities related to technology services provided to biopharmaceutical customers engaged in clinical development.

Many of the Group's contracts comprise a variety of performance obligations including, but not limited to, project set-up and management, site set-up and management, TrialTracker configuration and access, data reading and analysis, data management and quality control and scientific study reporting.

Under IFRS 15 'Revenue from Contracts with Customers', the Group must evaluate the separability of the contracted goods or services if they are 'distinct' which means that:

· the customer benefits from the item either in combination with other items; and

· it is 'separately identifiable' (i.e. the Group does not provide a significant service integrating, modifying or customising it).

Project set-up and management

Each project has a dedicated project manager who co-ordinates the project set-up and ongoing delivery of the service. They prepare the clinical study protocol and other essential study documents.

Revenue from project management reflects the provision of an on-going service so the straight-line method of recognition is used.

Revenue from study documentation is recognised at a point in time when the Group has delivered the material to the customer.

Site set-up and management

Site management and science teams design data acquisition protocols for each site, prepare site training materials and provide interactive training courses.

Revenue from site management reflects the provision of an on-going service so the straight-line method of recognition is used.

Revenue from site training is recognised when the activity is completed and the performance obligation is satisfied.

Materials prepared as tools for site training are preliminary activities that the Group undertakes to deliver the training. These activities are bundled with the revenue for site training and are recognised once this service has been completed.

TrialTracker configuration and access

TrialTracker platform delivers a robust and comprehensive set of centralised imaging services designed to efficiently manage the complex imaging workflow from: image upload, quality control, reading and analysis to reporting and data transfer.

Under IAS 18 'Revenue', revenue for these activities was recognised when the set-up and configuration was completed, provided that all other criteria for revenue recognition was met. Under IFRS 15 'Revenue from Contracts with Customers', revenue is recognised against 2 separate performance obligations. The first performance obligation is the set-up of TrialTracker and revenue is recognised when the configuration and platform set-up is completed. A second performance obligation is a platform access fee recognised over the duration of the project.

Data reading and analysis

The Group provides data analysis services across a range of biomarkers, providing high-quality, clinically meaningful data.

Fees are charged on a per data reading basis. Revenue from these services is recognised at the point in time when the Group has provided the discrete service to the customer.

Data management

Both the data management and imaging teams work in collaboration to ensure ongoing integrity of data.

Revenue from data management is recognised on a straight-line basis over the duration of the project. It represents the provision of an on-going service so the straight-line method of recognition is used.

Revenue from data quality control is recognised at a point in time when the Group has delivered the service to the customer.

Scientific reports

Scientific reports are provided at study end and at interim time points. Such reports contain data analysis and statistical interpretation.

Revenue from these services is recognised at a point in time when the Group provided a study report to the customer.

For revenue recognition purposes, the Group treats change order or contract modification to a customer agreement as a separate contract, if both:

· the scope changes due to the addition of 'distinct' goods or services; and

· the price change reflects the goods' or services' stand-alone selling prices ('SSP') under the circumstances of the modified contract.

The revenue recognition for the original customer agreement will be unchanged.

License revenue

Licensing revenue arises from one agreement, which solely grants the right to use TrialTracker.

The license is a distinct performance obligation and under IFRS 15 'Revenue from Contracts with Customers' revenue is recognised over the contract term. The license grants a right to use the software and receive associated technical support during the license period.

In this case, only future revenue is impacted as the Group will continue to account for the pre-modification contract as before. The accounting for a contract modification that is not a separate contract depends on whether the remaining goods and services to be delivered under the modified contract are 'distinct' from those already transferred to the customer at the modification date.

Where longer-term contracts for services allow for the reimbursement of certain expenses incurred by the Group in the execution of the service contract, revenue is recognised only to the extent that the expenses incurred are eligible to be recovered. These reimbursements (pass-through) are included in revenue and are subject to a nil gross margin.

Where it has been assessed that the Group is acting as agent in respect of an agency relationship, revenue is recognised on a net basis after deducting revenue earned by the principal.

Other income

A government grant is recognised only when there is reasonable assurance that the Group will comply with any conditions attached to the grant and the grant will be received.

The grant is recognised as income over the period necessary to match them with the related costs, for which they are intended to compensate, on a systematic basis. The Group recognises grant income as an item of other income.

Other government or European grants received are recognised on a work performed and delivered basis.

The Group has elected to take advantage of the RDEC introduced in the Finance Act 2013. A company may surrender corporation tax losses on research and development expenditure incurred on or after 1 April 2013 for a corporation tax refund. Relief is given as a taxable credit on 12% of qualifying research and development expenditure. The Group recognises research and development expenditure credit as an item of other income, taking advantage of the 'above the line' presentation.

Research and development expenditure

An intangible asset arising from development is recognised only if the Group can demonstrate its technical feasibility, intent to use or sell the intangible asset and measure reliably the expenditure attributable to the intangible asset during its development. If the intangible assets do not meet the capitalisation criteria, then expenditure on development is recognised as an expense when it is incurred.

Expenditure on research (or on the research phase of an internal project) is recognised as an expense when it is incurred.

Internal development costs have been capitalised only after technical and commercial feasibility of the software for sale or use have been established, meeting the criteria for capitalisation in the year.

Exceptional items

Exceptional items are disclosed separately in the consolidated financial statements where it is necessary to do so to provide further understanding of the financial performance of the Group. They are material items of income or expense that have been shown separately due to the significance of their nature or amount. These amounts are of a non-recurring nature.

Share-based payments

Equity-settled share-based payments are measured at the fair value of the equity instruments at the grant date. Details regarding the determination of the fair value of equity-settled share-based transactions are set out in note 21 of the consolidated financial statements. 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 equity instruments that will eventually vest. At each statement of financial position date, the Group revises its estimate of the number of equity instruments expected to vest as a result of the effect of non-market-based vesting conditions.

The impact of the revision of the original estimates, if any, is recognised in profit or loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to equity reserves.

Employee benefits

All employee benefit costs, notably holiday pay and contributions to the Group or personal defined contribution plans, are recognised in the statement of comprehensive income as they are incurred.

As at 30 September 2018, all employees have been automatically enrolled into the Group's defined contribution plan. The assets of the Group scheme are held separately from those of the Group in independently administered funds. The Group does not offer any other post-retirement benefits.

Operating leases

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

Property, plant and equipment

Property, plant and equipment are stated at historic purchase cost less accumulated depreciation.

The cost of property, plant and equipment is its purchase cost, together with any directly attributable expenses of acquisition. Depreciation is calculated so as to write off the cost of property, plant and equipment, less its estimated residual value, on a straight-line basis over the expected useful economic lives of the assets concerned.

The principal rates used for this purpose are:

· Leasehold improvements: straight-line over the shorter of 5 years or the lease term

· Fixtures and fittings: 33% straight-line

· Equipment: 33% straight-line

The assets' residual values and useful lives are reviewed, and adjusted if necessary, at each statement of financial position date.

Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised within the consolidated statement of comprehensive income.

Intangible assets

Acquired intangible assets are recognised as an intangible asset if it is separable from the acquired business or arises from contractual or legal rights, is expected to generate future economic benefits and its fair value can be reliably measured.

Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is their fair value at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and accumulated impairment losses.

Intangible assets are amortised using the straight-line method over their estimated useful economic life as following:

· Neurodegenerative disease technology and marketing know-how: 20% straight-line

· Computer Software: 33% straight-line

Amortisation is disclosed under general and administrative expenses in the consolidated statement of comprehensive income.

The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at the end of each reporting period. Changes are treated as changes in accounting estimates.

Intangible assets are assessed for impairment whenever there is an indication that the intangible asset may be impaired.

Impairment of assets

Non-current assets are reviewed for impairment both annually and when there is an indication that an asset may be impaired (when events or changes in circumstances indicate that carrying value may not be recoverable). An impairment loss is recognised in the consolidated statement of comprehensive income for the amount by which the asset's carrying value exceeds its recoverable amount.

The recoverable amount is the higher of an asset's fair value less cost to sell and value in use. Non-financial assets, other than goodwill, which have suffered an impairment are reviewed for possible reversal of the impairment at each reporting date.

Investments in Group undertakings

Investments in Group undertakings are carried at cost less any impairment provision. Such investments are subject to an annual impairment review.

Trade and other receivables

Trade and other receivables are initially recognised at fair value and subsequently stated at amortised cost using the effective interest method, less provision for impairment. A provision for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments (exceeding credit terms) are considered indicators that the trade receivable is impaired.

The amount of the provision is the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account, and the amount of the loss is recognised in the statement of comprehensive income within general and administrative expenses. When a trade receivable is uncollectible, it is written off against the allowance account for trade receivables. Subsequent recoveries of amounts previously written off are credited against general and administrative expenses in the consolidated statement of comprehensive income.

Current tax

Current tax represents United Kingdom tax recoverable and is provided at amounts expected to be recovered using the tax rates and laws that have been enacted at the statement of financial position date.

Cash and cash equivalents

Cash and cash equivalents comprise cash at bank and in hand with original maturities at inception of 3 months or less.

Foreign currency translation

Transactions denominated in foreign currencies are translated into Sterling at actual rates of exchange ruling at the date of transaction. Monetary assets and liabilities expressed in foreign currencies are translated into Sterling at rates of exchange ruling at the end of the financial year. All foreign currency exchange differences are taken to the consolidated statement of comprehensive income in the year in which they arise.

Non-monetary items are not retranslated at year-end and are measured at historical cost (translated using the exchange rates at the transaction date), except for non-monetary items measured at fair value which are translated using the exchange rates at the date when fair value was determined.

Trade and other payables

Trade and other payables are non-interest bearing and are initially recognised at fair value and subsequently stated at amortised cost.

Equity instruments

Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.

Financial instruments

Financial assets and financial liabilities are recognised on the consolidated statement of financial position when the Group or the Company becomes a party to the contractual provisions of the instrument. Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangement.

Borrowings are classified as current liabilities unless the Group or the Company has an unconditional right to defer settlement of the liability for at least twelve months after the end of the reporting period.

Deferred taxation

Deferred tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities; and their carrying amounts in the consolidated financial statements in accordance with IAS 12 'Income taxes'. Deferred tax liabilities are recognised for all taxable temporary differences and deferred tax asset is recognised only to the extent that it is probable that sufficient taxable profit will be available in future years to utilise the temporary difference. Deferred tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction, other than a business combination, that at the time of the transaction affects neither the accounting, nor taxable profit or loss.

The carrying amount of deferred tax assets is reviewed at each statement of financial position date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the statement of financial position date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.

3. Investments in Subsidiaries

The consolidated financial statements of the Group as at 30 September 2018 include:

4. Revenue

For the year ended 30 September 2018, revenue includes £249,000 (2017: £143,000) included in the deferred income within trade and other payables at the beginning of the period.

An analysis of the Group's revenue by type and geographic location are as follows:

An analysis of the Group's revenue by pattern of revenue recognition is as follows:

The performance obligations from existing contracts that are unsatisfied or partially unsatisfied as at 30 September 2018:

Revenue at Project Exchange Rates ('PER') reflects revenue excluding the impact of foreign exchange. PER represents a fixed foreign exchange rate agreed in individual customer contracts.

* Reflects the early adoption of IFRS 15 'Revenue from Contracts with Customers', which is set out in note 2 of the consolidated financial statements.

5. Segmental Information

The Group's development, commercial and operational delivery teams operate across all of the Company's activities. The Group's customer projects are managed by Project Managers with inputs to each project provided by other functional team members. The leadership team review the Group's management information reports to assess performance and allocate resources. The customer projects are reported as a single business unit and management monitor the operating performance of the business based on these reports. The chief operating decision maker has been identified as the Chief Executive Officer.

Accordingly, the Board consider that there is only one reporting segment.

The Group is domiciled in the United Kingdom with all sales originating in the United Kingdom.

In the year ended 30 September 2018, the Group had 3 customers that exceeded 10% of total revenue, being 14%, 13% and 12%. In the year ended 30 September 2017, the Group had 3 customers that exceeded 10% of total revenue, being 14%, 13% and 11%.

Analysis of the Group's revenue by geographic location is set out in note 4 of the consolidated financial statements.

As at 30 September 2018, the Group's non-current assets of £109,000 were solely derived from the United Kingdom (2017: £188,000).

6. Other Income

All grant income originates in the United Kingdom.

The Group recognised RDEC as an item of other income, taking advantage of the above the line presentation.

7. Exceptional expenses

During the year ended 30 September 2018 there were no exceptional expenses incurred.

During the year ended 30 September 2017, exceptional expenses included the impairment of an intangible asset, redundancy costs and professional fees incurred in the dissolution of Optimal Medicine SARL together with the transfer of trade and assets of IXITech Limited and Optimal Medicine Limited to IXICO Technologies Limited.

These expenses have been recognised in the consolidated statement of comprehensive income as exceptional expenses due to theirnon-recurring nature.

8. Auditor's remuneration

The analysis of the auditor's remuneration is as follows:

9. Employees and Directors

The average monthly number of persons (including Executive Directors) employed by the Group was:

At 30 September 2018 the Group had 67 employees (2017: 59).

Staff costs in respect of these employees were:

The Group operates a defined contribution pension scheme for employees. The assets of the scheme are held separately from thoseof the Group in independently administered funds. The amounts outstanding at 30 September 2018 in respect of pension costs were £22,000 (2017: £21,000).

Key management remuneration:

Key management includes Executive Directors, Non-Executive Directors and senior management who have the responsibility for managing directly or indirectly, the activities of the Group.

The aggregate Directors' remuneration was £958,000 (2017: £665,000) and aggregate pension of £21,000 (2017: £28,000).

10. Operating loss

An analysis of the Group's operating loss has been arrived at after charging:

(1) Impairment charge of nil for the year ended 30 September 2018 (2017: £316,000) is disclosed under exceptional expenses. See note 7 of the consolidated financial statements for further information.

11. Taxation

The tax charge for each period can be reconciled to the loss per consolidated statement of comprehensive income as follows:

The tax credit for each period can be reconciled as follows: