Final Results

Image Scan Holdings PLC
17 December 2002


For Immediate Release                                           17 December 2002



                            IMAGE SCAN HOLDINGS PLC

                        ('Image Scan' or the 'Company')


            PRELIMINARY RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2002


Image Scan, a leading provider of multi-view, 3D X-ray imaging technologies for
the security and industrial inspection markets announces maiden preliminary
results for the year ended 30 September 2002.


Key Points

•        Turnover increased to £502,697(2001: £62,447), with over 66% in the
         security sector

•        Group loss before tax of £664,607 (2001: £523,592)

•        Basic and diluted loss per ordinary share at 4.0p (2001: 4.3p)

•        Gearing down to 12.5% with borrowings reduced to £128,000 (2001:
         £719,000)

•        Research and development expenditure up 70% to £118,000

•        Worldwide commercial agreement with security systems leader Rapiscan
         and a number of specialist development and product supply contracts for 
         security inspection to both the British Government and the Transport 
         Security Administration in USA, signed in the year

•        First commercial industrial systems to end user customers expected
         in 2003


Commenting on outlook, Nigel Tipple, Chairman of Image Scan said:

'The pace at which sales accelerated over the second half of the last financial
year, the quality of the strategic partnerships so far concluded and the extent
of growing interest in our technology, lead us to consider the remainder of the
financial year will show continued progress.  Our key focus for the forthcoming
year is convert the high level of interest generated by our technology into
tangible sales of product'

All Comparisons are for the year ended 30 September 2001.

For further information:

Nicholas Fox        Chief Executive                   (Today only) 020 7466 5000
                                                      (Thereafter) 01664 503 600

Richard Darby/Suzanne Dunne   Buchanan Communications              020 7466 5000



                              Chairman's Statement

Introduction

I am pleased to present the results of Image Scan Holdings Plc for the financial
year ended 30th September 2002.  In my statement, I shall give an overview of
the year and comment briefly on the results, significant milestones, current
trading and the Board's view of the Company's prospects for the remainder of
this financial year.  Further detail may be found in the Managing Director's
Review of Operations and the financial statements immediately following.

Financial Results and Accounting Policy

Sales for the year were in excess of £500,000, an increase of seven times the
previous year's results.  Of these increased sales, over 90 percent arose during
the second half of the year.  The overhead has increased as part of the
Company's planned expansion in the second half to £450,000 taking the annual
charge to £876,000 (£490,000 for 2001).  After adjustment for flotation costs
and other, non-recurring items, the normalised overhead was £760,000,
representing a 55.1 percent rise.

Gearing at the year-end was 12.5 percent, represented by borrowings of £128,000
(£719,000 for 2001).  Shareholders' funds rose to over £1 million.  The loss per
share was 4.0 pence (4.3 pence in 2001).

Our accounting policy is to charge research and development (R&D) costs to the
profit and loss account during the period in which they arise.  This year has
seen a 70% increase in R&D costs to £118,000.

In accordance with previously stated policy, no dividend will be recommended for
the last financial year.


The Commercial Backdrop

Our expertise lies in the application of innovative image acquisition,
interpretation and presentation technologies.  In particular, it remains focused
on further developing and commercialising its multiple view X-ray imaging
techniques, whereby three-dimensional (3-D) information about objects under
inspection may be captured and analysed.  Commercial applications for the
technology include security, from which we derived over 66 percent of sales last
year, with the balance principally arising from industrial inspection products.

The product technology and its commercialisation in differing applications are
discussed at greater length in the Managing Director's Review below.


Significant Milestones

In April, the Company was admitted to the Alternative Investment Market (AiM) of
the London Stock Exchange, following a successful Placing and Open offer which
raised over £600,000 after expenses.  In total and before costs, almost £1.8
million of additional equity capital was raised in the financial year 2001/2.

The flotation on AiM will serve to enhance our sales' and marketing profile, and
underpin our stature when conducting commercial negotiations with much larger
corporations.

Towards the end of the last financial year an agreement was reached with
Rapiscan Security Products Limited (Rapiscan), one of the dominant global
manufacturers of security screening systems, for the world wide deployment of
our innovative 3-D X-ray technology.  Following this agreement the company
obtained an order in August from a British government agency for a mobile
baggage screening system incorporating one of our 3DX-Cameras.  In addition
development and product supply contracts were concluded with both the British
government and the Transport Security Administration (formerly the Federal
Aviation Administration) in America.


Current Trading

We enter the current financial year with an order book to the value of £377,000,
and have presently issued quotations to prospective customers in excess of a
further £450,000.  The Company's 3DX-CameraTM and software, housed in a bespoke
Rapiscan chassis, were exhibited at AvSec World 2002 in Rome during the last
week of October.  This event is one of the leading, annual aviation security
exhibitions with an audience including airport operators, regulators, airlines
and security professionals from around the world.  The high level of interest
shown at AvSec in the performance and functionality of the demonstration unit
was encouraging.

Development work is in hand which will enable us to offer an industrial
inspection solution not only using many of the software features of VIXionTM and
AXIS-3D(R) but also capable of operating at higher line speeds.  This product,
designated DEX, is scheduled for launch during the current financial year.


Outlook

The pace at which sales accelerated over the second half of the last financial
year, the quality of the strategic partnerships so far concluded and the extent
of interest in our proprietary technology, particularly for security
applications, lead my colleagues and me to consider that the remainder of the
financial year will show continued progress. We are very pleased with our
developing relationship with Rapiscan, which offers us significant worldwide
opportunities and an established  'route to market'.  It is necessary, however,
to bear in mind that, although our security scanning and industrial inspection
systems offer our customers many functional and operational benefits they do
represent capital expenditure items that often require Board approval.  This
process can delay order placement but we are remain optimistic of the level of
market penetration achievable for 2003.  Our key focus is now on converting the
high level of interest generated in the technology into product sales.


Other Matters

You will see from the attached financial statements that the Board has appointed
Deloitte & Touche, Nottingham, as auditors to the Group.  I should like to thank
Pannel Kerr Forster for their past audit services.


Conclusion

The Year under review was an exciting period, during which many positive
developments transpired within the Company.  I should like to record the Board's
thanks to the enlarged complement of 16 full-time staff for their contributions,
and to shareholders for their continuing support.  I look forward to reporting
further progress after the end of the first half of the current year.



Nigel J. Tipple
Chairman

16 December 2002



                    Managing Director's Review of Operations

The key figures in the financial results and the milestones passed during 2001/2
are highlighted in the Chairman's Statement.  The increased turnover for last
year was derived from three sectoral applications of Image Scan's image capture
and image processing technology - security, industrial and medical - each of
which is discussed below:


Security

The Company's range of security products is based upon the 3DX-Camera, which
provides, real-time 3-D X-ray images for use in the security screening of
baggage, packages, freight and cargoes at airports, border crossing points,
secure buildings, logistics' centres and elsewhere.  Systems deploying the
3DX-Camera and associated software greatly assist screening operatives to assess
rapidly the presence or absence of potential threat items within the item under
scrutiny.

The second half of the financial year began with a substantial order from the
Transport Security Administration (TSA) in America for an AXIS-3D(R) baggage
screening unit, which was delivered during this period.  At the same time, the
TSA contracted Image Scan to develop a 3-D version of Threat Image Projection
(TIP) software to run on the AXIS-3D(R) system.  TIP is a software package
designed to aid the training and performance monitoring of security screening
operatives, by randomly introducing threat items (guns, knives, plastic
explosive) into the images being viewed.  The 3-D TIP software will be made
available to the TSA for evaluation during the first quarter of 2003.

In July, we concluded  a manufacturing and sales agreement with Rapiscan
Security Products Limited (Rapiscan), a major global manufacturer, and supplier
of X-ray security screening equipment.  Shortly thereafter, the Company secured
its first order under this agreement, to deliver a mobile, vehicle-mounted 3-D
X-ray security scanning unit to a department of the British government.

In late October Rapiscan exhibited the first AXIS-3D(R) built jointly by
ourselves and Rapiscan at IATA's AvSec World 2002 exhibition in Italy.  AvSec
World is an important trade fair for the aviation security industry, and the
AXIS-3D(R) baggage scanner excited considerable interest from attendees.


Business Model

Our business model for the security market is either to licence the technology
or to act as an OEM supplier of key components, rather than to sell completed
systems directly to end users.  Our recent agreements demonstrates the
implementation of this model.


Industrial

The industrial inspection systems are designed to facilitate real-time, in-line
X-ray inspection of components and assemblies, to ensure conformity with the
manufacturer's specification, and to detect and signal any divergence from this.
Such industrial inspection applications are particularly relevant if a
finished assembly contains concealed working parts, and if the component or
assembly is safety-critical, e.g., an electronic automotive component or a drug
delivery system.

In May we signed a memorandum of understanding with Bespak Plc (Bespak) and
subsequently obtained a research contract with the support of Bespak to explore
the use of our VIXionTM multiple view X-ray imaging system to inspect their
pulmonary and nasal drug delivery and dispensing products.

For lower resolution applications (up to 0.5mm), we are working on a system
incorporating industrialised versions of the 3DX-Cameras presently used in
security systems.

Discussions with potential end-users have led us to identify a market
opportunity for a medium resolution industrial inspection system, which is
capable of operating at line speeds higher than hitherto.  This product was
referred to in the Chairman's Statement; provisionally to be known as DEX, it is
currently in development and is due to be launched later this financial year.


Business Model

In the medium term, the marketing and distribution model for the industrial
inspection market is expected to follow the same strategy adopted for the
security market.  Initially, however, Image Scan will be working directly with
end users in order to develop a series of highly credible reference sites.


Medical

Whilst no contributions from medical applications are anticipated for at least
three or four years, progress on the innovative cervical smear testing research
project has exceeded expectations, and the first laboratory trials are now
scheduled for the second half of 2004. Revenue in the year of £67,000 was
derived solely from the completion of a first phase research paper.


Business Model

The Company's current policy is to ensure that all research on medical
applications of its technology are at least self-funding, owing to the long-term
nature of the commercial prospects for such research.


Research and Development

R&D lies at the heart of Image Scan's commercial potential.  The Company's
strategy is to identify gaps in existing technology in the market place, to
which it believes it can find marketable solutions, either through in-house
development, or the integration of external IPR which can be licensed into the
Company.

When considering new R&D programmes the Company will, wherever feasible, seek to
minimise both the technical and commercial risk through collaborative research
supported with external funding.  An example of the practical implementation of
this approach is the research contract awarded in May 2002.  This contract, with
a total value of £198,000, is to investigate further extending the performance
of the Company's VIXionTM system, in addition to developing specific design
rules which will enable potential customers to design X-ray inspection
capability into their products. This research programme draws on in-house
expertise in imaging, X-ray source and detector design, in collaboration with
specific key skills from research partners at the University of Bath, Pera and
Bespak.

The Company maintains close working relationships, both formal and informal,
with a number of centres of academic excellence in the UK, Canada and the USA.
Included among these organisations are the Police Scientific Development Branch,
Transport Security Administration, The Nottingham Trent University, University
College London, Barts & The London Hospital Trust, University of Bath,
University of Bristol, Pera and Manufacturing Materials Ontario.


Staff and Directors

Ian Johnson was appointed a non-executive director at the end of January.  He is
one of the country's leading security consultants, and has served on many
industry and government bodies.  He has been an adviser on security to companies
such as British Airways and Associated British Ports.

Ray Gibbs joined Image Scan as Finance Director immediately following the
admission to AiM.  He has helped to reorganise the Company's financial reporting
procedures, and his 20 years' experience in practice and industry are proving
valuable.

Louise George, the financial controller, has taken on the responsibility of
Company Secretary, bringing this function in-house.

Jan Zandhuis became business development manager with specific responsibility
for the industrial inspection market in May.  He is a highly experienced manager
of innovative technology, having held senior posts in the U.K. and continental
Europe.

The technical and administrative teams have also been strengthened during the
year, and the staff complement is now 16, of whom 12 are technical and 4 in
sales or administrative positions.


Finances

The Company raised a total of almost £1.8 million (before costs) of new equity
finance during the year, and we were therefore able to reduce our indebtedness
to a more appropriate level.  It is clear, however, that the Company's order
book, and the consequent amount of work in progress needed to fund our growth,
could rise significantly during the remainder of the current financial year.
The average lead time between receipt and delivery of order for the capital
equipment items we provide is 14 weeks, and requirements may therefore arise for
working capital funding.  With this is mind, the Company has negotiated an
additional overdraft facility of £250,000, which may be drawn down as the need
arises.

As a result of a number of special one-off contracts we saw the Company's gross
profit margins improve in the second half, from 14.9 percent to 47.7 percent as
we concentrated on the delivery of these commercial contracts.


Conclusion

I would like to thank the staff for their support in the year and ongoing
commitment to achieving the Group's continued growth and prospects for the
future outlined in the Chairman's Statement.



Nicholas D. Fox
Managing Director

16 December 2002



GROUP PROFIT AND LOSS ACCOUNT
Year ended 30 September 2002

                                                                                           2002         2001
                                                                                              £            £

TURNOVER                                                                                502,697       62,447

Cost of sales                                                                         (262,840)      (8,982)

Gross profit                                                                            239,857       53,465

Administrative expenses                                                               (875,575)    (489,921)

OPERATING LOSS                                                                        (635,718)    (436,456)

Interest receivable                                                                      13,304        8,291

Interest payable                                                                       (42,193)     (95,427)

LOSS ON ORDINARY ACTIVITIES
BEFORE TAXATION                                                                       (664,607)    (523,592)
Taxation                                                                                 61,748            -

LOSS ON ORDINARY ACTIVITIES
ATTRIBUTABLE TO SHAREHOLDERS                                                          (602,859)    (523,592)
Dividends                                                                                     -            -

Loss retained for the year                                                            (602,859)    (523,592)

                                                                                          Pence        Pence
Earnings per share
Basic and diluted loss per share                                                            4.0          4.3



There are no recognised gains or losses other than the loss for the year and the
prior year.  All amounts relate to continuing operations during each year.


CONSOLIDATED BALANCE SHEET
30 September 2002

         
                                                                                            2002          2001
                                                                                               £             £
FIXED ASSETS
Tangible fixed assets                                                                    109,050       104,276
Intangible fixed assets                                                                  192,460       265,014

                                                                                         301,510       369,290

CURRENT ASSETS
Stock and work in progress                                                                69,931         5,012
Debtors                                                                                  370,220        29,210
Short term investments - deposit account                                                  42,924       413,468
Cash at bank and in hand                                                                 535,197        22,512

                                                                                       1,018,272       470,202

CREDITORS: amounts falling due
within one year                                                                        (157,664)     (687,110)

NET CURRENT ASSETS/(LIABILITIES)                                                         860,608     (216,908)

TOTAL ASSETS LESS CURRENT
LIABILITIES                                                                            1,162,118       152,382

CREDITORS: amounts falling due
after more than one year                                                                (90,842)     (128,204)

                                                                                       1,071,276        24,178

CAPITAL AND RESERVES
Called up share capital                                                                  162,502       132,011
Share premium account                                                                  2,911,118     1,291,652
Profit and loss account as restated                                                  (2,002,344)   (1,399,485)

EQUITY SHAREHOLDERS' FUNDS                                                             1,071,276        24,178




CONSOLIDATED CASH FLOW STATEMENT
Year ended 30 September 2002
                                                                                           2002         2001
                                                                                              £            £

Net cash outflow from operating activities                                             (797,227)    (456,821)

Returns on investments and servicing of finance
Interest received                                                                         13,304        8,041
Interest payable                                                                        (42,193)     (95,427)

                                                                                        (28,889)     (87,386)
Capital expenditure and financial investment
Purchase of tangible fixed assets                                                       (74,651)    (100,890)
Purchase of intangible fixed assets                                                     (16,291)       47,976

                                                                                        (90,842)     (52,914)

Net cash outflow before management of
liquid resources                                                                       (917,058)    (597,121)

Management of liquid resources
Withdrawal/(purchase) of short term deposits                                             370,544    (413,468)

Financing
Issue of ordinary share capital                                                        1,649,957      996,178
Bank loans repaid                                                                       (37,363)    (107,363)
Other loans (repaid)/advanced                                                          (516,840)       98,280

                                                                                       1,095,754    1,093,458

Increase/(decrease) in cash in the year                                                  549,240     (24,494)



NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT

Year ended 30 September 2002


i)  RECONCILIATION OF OPERATING CASH FLOW
                                                                                            2002         2001
                                                                                               £            £

Operating loss                                                                         (635,718)    (436,456)
Depreciation                                                                              53,893       42,064
Amortisation                                                                              17,500            -
Grants received                                                                                -          250
Research and development written off                                                      71,345
(Increase)/decrease in stock                                                            (48,934)       27,382
(Increase)/decrease in debtors                                                         (279,262)       29,240
Increase/(decrease) in creditors                                                          23,949    (119,301)

Net cash flow from operating activities                                                (797,227)    (456,821)


ii)  ANALYSIS OF NET DEBT
                                                                               2002        Other
                                                                               Cash     non-cash
                                                                  2001         flow      charges         2002
                                                                     £            £            £            £

Cash at bank and in hand                                        22,512      512,685            -      535,197
Bank overdraft                                                (36,555)       36,555            -            -

                                                                            549,240

Debt due within one year                                      (37,363)       37,363     (37,363)     (37,363)
Debt due after one year                                      (128,204)            -       37,363     (90,841)
Loan from Security Change Limited                            (516,840)      516,840            -            -

                                                                            554,203

Current asset investments                                      413,468    (370,544)            -       42,924

                                                             (282,982)      732,899            -      449,917



iii)    RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS/(DEBT)
                                                                                            2002         2001
                                                                                               £            £

Increase/(decrease) in cash in the period                                                549,240     (24,494)
Cash outflow from decrease in debt                                                       554,203       10,083
Cash inflow/(outflow) from decrease/(increase) in liquid                               (370,544)      413,468
resources

Change in net debt resulting from cash flows                                             732,899      399,057

Net debt at 1 October                                                                  (282,982)    (682,039)

Net funds at 30 September 2002                                                           449,917    (282,982)


Notes

1.             The financial information set out above does not constitute the
Company's statutory accounts for the year ended 30 September or 30 September
2002 but is derived from those accounts.  Statutory accounts for 2001 have been
delivered to the Registrar of Companies, and those for 2002 will be delivered
following the Company's Annual General Meeting.  The auditors have reported on
those accounts; their reports were unqualified and did not contain statements
under section 237(2) or (3) of the Companies Act 1985.

The financial information has been prepared in accordance with the accounting
policies adopted for the 2001 accounts, with the additional note on development
costs as follows:

'Expenditure on development costs is written off as incurred unless there is a
clearly definable project with a recognisable value that will lead to known
future revenue against which the costs can be amortised.'


2.             The financial statements for the year ended 30 September 2002
will be posted to shareholders in February 2003 and will also be available
thereafter at the registered office, Pera Innovation Park, Nottingham Road,
Melton Mowbray, Leicestershire, LE13 0PB.



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