The information contained within this announcement is deemed by the Company to constitute inside information for the purposes of Regulation 11 of the Market Abuse (Amendment) (EU Exit) Regulations 2019/310.

23 March 2023

Osirium Technologies plc

("Osirium", the "Group" or the "Company")

Final Results

Osirium Technologies plc (AIM: OSI), a leading vendor of cloud-based cybersecurity and IT automation software, announces its final results for the year ended 31 December 2022.

Financial highlights

Operational highlights

Post-period highlights

Stuart McGregor, CEO of Osirium, commented:

"It has been another year of significant progress for Osirium in which we have achieved record levels in bookings and revenue and further grown our customer base while also taking substantial steps to reach cash breakeven and beyond.

"The market demand for privileged security continues to strengthen, with businesses recognising privileged security as an essential component of cybersecurity despite turbulent macroeconomic conditions. This is reflected in the healthy levels of product and license expansion from existing customers in 2022, reinforced by the emergence of PPA and PEM as standalone products during the period.

"We have started the new year with a refocused sales strategy and a partner first sales approach, through which we expect to see increased interest across a wider range of sectors and geographies. As privileged security continues to rise up the agenda of IT professionals globally, we are excited for the future and the continued growth of the business."

About Osirium

Osirium Technologies plc (AIM: OSI) is a leading UK-based cybersecurity software vendor delivering Privileged Access Management (PAM), Privileged Endpoint Management (PEM) and Privileged Process Automation (PPA) that are uniquely simple to deploy and maintain. 

With privileged credentials involved in over 80% of security breaches, customers rely on Osirium PAM's innovative technology to secure their critical infrastructure by controlling 3^rd party access, protecting against insider threats, and demonstrating rigorous compliance. Osirium Automation delivers time and cost savings by automating complex, multi-system processes securely, allowing them to be delegated to Help Desk engineers or end-users freeing specialist IT resources. The Osirium PEM solution balances security and productivity by removing risky local administrator rights from users while at the same time allowing escalated privileges for specific applications.

Founded in 2008 with its headquarters in Reading, UK, the Group was admitted to trading on AIM in April 2016. For further information, please visit  www.osirium.com.

Chairman and Chief Executive's Statement

Overview

FY22 was a significant year of operational and financial progress for Osirium as it achieved strategic milestones that enabled the Group to further establish itself as a leading mid-market provider of privileged security. The Group reports its greatest full year bookings total of £3.0 million, with revenue and deferred revenue also at record levels.

A particular highlight of FY22 is that Osirium increased its new customer average initial contract value by 93% over the course of the year. At a time when businesses are paying closer attention to costs, we believe this demonstrates the increasing priority organisations are placing on securing their IT infrastructure. This growth came alongside the continued expansion of Osirium's customer base which drove a 28% increase in Group Annual Recurring Revenue ("ARR") to £1.86 million, enhancing the Group's forward visibility.

With our three products forming the foundations of our privileged security suite, we continue to focus our product development efforts on strengthening our rapid deployment, ease of management, simplicity of use, and patentable innovation.

We have observed a considerable growth in demand for our Privileged Process Automation ("PPA") and Privileged Endpoint Management ("PEM") products, in the form of both standalone sales to new customers and as add-ons to existing Privileged Access Management ("PAM") contracts. The Group achieved two key milestones this year with our first customer using all three products and our first customer joining the platform with a PEM-only contract, demonstrating the growing strength of each product offering on a standalone basis.

FY22 saw our shift to a channel-first focused sales strategy, with our easy to use and rapidly deployable solutions proving highly marketable and popular with our channel sales partners. This growing sales channel has been an enabler, opening doors and winning contracts for us in new geographies, with our first contract wins in the US a particular highlight.

Driving our progress is a market increasingly in demand for privileged security solutions. As geopolitical instability and the further spread of malware has increased the threats businesses are facing, these cyberattacks have not targeted only one sector; we are aware of a growing trend towards more targeted attacks on small to medium size businesses.

We successfully completed two fundraises in the year and with Stuart McGregor appointed as our new Chief Executive Officer on 1 January 2023, the Group is focused on managing costs and building on the momentum seen in the past 12 months to capitalise on the clear market opportunity and reduce the timeframe to breakeven. We are focused on our goal of achieving cashflow breakeven by H2 2024 and have now implemented all the cost savings identified at the time of December's fundraise.

The significant operational and financial progress made during 2022 means the Group is now positioned more competitively to target new customer wins and expansions with existing customers and we would like to thank all of our staff for their hard work during the year to help achieve this.

Results

The Group's total bookings and revenue for the period was £3.0 million (2021: £1.61 million) and £1.92 million (2021: £1.47 million) respectively, in line with its recently upgraded market expectations. Deferred revenue as at 31 December 2022 was £2.72 million. Osirium's ARR for December 2022 was £1.86 million, up 28% over the prior year (December 2021: £1.45 million).

Cash balances as at 31 December 2022 was £1.08 million. The Group's loss before tax for the period was £3.59 million (2021: £3.43 million).

Osirium continues to invest in R&D for direct staff and contractor costs, spending £1.96 million (2021: £1.85 million) in 2022 across direct staff and contractor costs for research and development. This expenditure covers enhancements to Osirium's product suite across a range of projects, including to its user experience and security. The Group continues to invest in R&D with a view to ensuring its products remain a highly secure and compelling offering for customers.

Business model

Osirium's revenue model is built around its software subscriptions, with its licensing models adapted to best suit regional and customer needs. We frequently hear throughout the sales cycle that this simple licencing model is reassuring to prospects, who are often overwhelmed or confused when purchasing IT software and this acts as a key differentiator between us and other players in the market.

The Group's PAM product is charged per device being protected, whereas the PPA product is charged per user and number of transactions when integrated with a customers' infrastructure, and our PEM product charged is per protected endpoint. Osirium's service revenue comes both from new customers setting out on their initial Osirium deployments and existing customers growing and expanding their use of its software solutions. From the end of 2021 and throughout 2022, the Group saw increasing automation add-on sales to its PAM customers, and this progress has been seen with its PEM product as well.

The Group's innovative sales packages of software subscriptions, production support and implementation services in Osirium's PAM and PPA solutions have continued to provide a means of targeting sector-specific opportunities into 2022, particularly within healthcare and education. These packages enable new customers to acquire Osirium PAM or PPA for a small team, establishing a base for future add-on sales and license expansions.

Our marketing strategy in 2023 will continue to focus on digital and in-person marketing to drive up the volume and quality of new customer leads. There will be an increased focus on joint marketing activities with sales partners, reinforcing the "channel-first" approach.

Market - giving customers confidence in their IT

The market for privileged security has continued to mature, in line with the increasing awareness of and requirement for these services globally. In the US and UK particularly, corporate cyber insurance policies increasingly demand privileged access security within a cybersecurity stack as a prerequisite before any insurance policy is brokered with an organisation. For cyber insurance customers, strong privileged access security is also a means to reduce increasing costs of coverage. As a result, privileged security is increasingly rising to the top of the priority list for IT professionals. In July 2022, a new PAM contract was announced, worth c. £140,000 for a three-year subscription to provide protection for 1,000 devices at a UK university. The University selected our PAM solution to address requirements for improved security for IT system access, as this was a key requirement of its cybersecurity insurance provider.

Market indications are that hybrid or fully remote working is now a permanent change for most organisations. As the transition of IT systems to the cloud continues and the advent of the 'modern desktop' forces a need for on-premise and remote privileged security, our PAM, PPA and PEM products remain key aspects of a modern cybersecurity in view of the aforementioned insurance requirements. 

Ransomware continues to be the predominant threat for IT departments. A 2022 joint report co-authored by the National Cyber Security Centre suggests ransomware is the largest cyber threat facing the United Kingdom, with businesses of all sizes across the globe being targeted as threat actors shift their focus away from high-value organisations and those which provide critical services.

Growth strategy

The Group's growth strategy is centred around these core differentiators: innovation, customer focus and market expansion.

Commitment to innovation - unlocking incremental value creation  

The Group continues to make investments into its product suite as part of its strategy, ensuring its offerings remain a cutting-edge option for organisations looking to address their Privileged Access Security needs. Our overarching ambition is to produce best in class, easy to use products, that clearly differentiate us from competitors and are quick to deploy at scale.

We saw an increase in the number of contract wins or extensions where PPA and PEM products were bought alongside PAM, with our innovations in our product suite resulting in increased spend from existing customers.

10% of our customers now have more than one Osirium product under contract and this year saw our first customer win where the PPA order was significantly larger than the PAM element. As reported in March 2022, this contract with the Midlands and Lancashire Commissioning Support Unit, an NHS customer, reflected our increasing success in marketing our PPA and PEM solutions as primary or standalone products. We also saw our first standalone PEM contract win with a global imaging brand, highlighting the increasing interest in our products both individually or as part of a wider package.

An additional core focus during the period has been improvements to PPA, the Group's platform for automating essential IT processes. We have expanded on the work done in FY21 this year by developing our Automation playbooks, so they are now able to enforce Multi Factor Authentication (MFA) around steps within a task. Tasks can now be delegated to select users as well as groups, further improving flexibility of secure deployments across a business. We have also improved the reporting capabilities of the PPA product, allowing for deeper insights and actionable data points based on usage of Automation.

Investments into PEM, our solution for Privileged Endpoint Management which allows customers to increase productivity while simultaneously increasing security, have also continued. We have developed native support capability for Azure AD managed workstations, meaning PEM is available in the Azure Marketplace. This creates a new, direct to customer sales channel for us and readies us to service a growing market as the global transition to cloud computing continues.

Customer focus - providing foundations for land-and-expand opportunity

A core tenet of Osirium's strategy is to ensure excellent levels of customer support in tandem with the ease of implementation of its platform. Our 24/7 UK based support service ensures clients have immediate access to support, around the clock, directly enhancing the stickiness of our products. During the year, the Group achieved a 96% customer SaaS contract retention rate by customer value.

The Osirium Customer Network continued in 2022. This forum provides important feedback into the Company for future development but also helps customers ensure they are making the most of their investment.

In 2022, TalkTalk, the UK provider of telephony and broadband services, expanded its existing contract to now include PPA and PEM licences alongside an extension to their existing PAM contract. This renewal represented a significant step for the business, with TalkTalk being our first to utilise all three Osirium privileged security products. TalkTalk has highlighted that it was easier to use Osirium as a one stop shop for all privileged security services, representing a clear example of how our customer focus combined with the effectiveness of our products and sales partners facilitates our land and expand growth strategy.

Market expansion - opening new opportunities for growth through direct and partner channels

Osirium continued its customer acquisition through wins in its target sectors of healthcare, higher education, financial services as well as new areas such as food manufacturing. In particular, higher education and healthcare continue to be sources of growth for the Group with further wins with the NHS and universities throughout the year, not only by upselling to existing customers but by adding new customers through reference and recommendation.

Sales to new customers are driven by the Group's channel partner network alongside its own sales team. Throughout the year we transitioned further towards a "partner first" sales strategy, which means we are increasingly directing leads generated internally towards our partners to act as transaction vehicles for sales in resellers local geographies.

As a result of our excellent customer service levels and best-in-class product offering, we maintain strong relationships with existing customers who are frequently willing to act as reference points when contacted by potential customers from the same sector.

Partner and reseller network expansion

We collaborate with our global network of partners to provide them with the tools and knowledge necessary to sell our products into their local networks. This approach provides Osirium with a broad reach beyond its direct sales arm via a collection of experienced sales professionals across five continents. Over the course of the year, we have continued to fortify our partner and reseller network globally.

The Group's network of distributors enables us to transact via their portfolio of partners, avoiding the signatory process associated with direct sales, which saves time and represents a more efficient way to group our reach. Notable successes from our network in the year include our first contract win in the US, a landmark for the Group, via Prianto, a UK based software distribution firm. The network also achieved our first contract wins in Africa and Asia, as well as first wins in countries such as Austria, Turkey, Malta and Finland. With our "partner first" strategy in place, we are expecting the acceleration of customer acquisition via this network through FY23 and beyond.

Direct 

Our direct sales team is now focused on working in tandem with our sales partners, in line with our partner first approach. Our direct sales team maintains its strong relationships with customers and, for example, was instrumental in securing a three-year, c. £0.5 million PAM licence extension with a leading global asset manager. This customer also extended the use of our PPA solution for a further 12 months and since they first adopted the PPA solution in 2019, the user licence number has increased from 40 to over 75.

People

We would like to thank all our staff for their support during the year for their continued hard work.  While Osirium is not immune to the wider pressures on technology firms from wage inflation and staff churn, we are pleased to have retained the core of our teams across our technology department while evolving our commercial team.

In line with our partner first sales strategy and cost saving initiatives brought in by the new management team, this year saw a streamlining of our direct sales processes and the complete alignment of objectives across all teams and staff. Our commercial team is now a more efficient unit, with closer communications with our partners and prospects helping to drive improved collaboration with our product and support teams. This has created an effective all-round relationship with our customers and provides them an excellent continuity of service moving forwards.

As reported initially in November 2022, in order to align the management team with the Group's strategy of driving top line growth, Stuart McGregor was appointed as Chief Executive Officer and as a member of the Board of Directors, effective 1 January 2023.

In tandem, previous Chief Executive Officer David Guyatt assumed the position of Executive Chairman in a part-time capacity while the Group's Chairman Simon Lee stood down to take on the role of Senior Independent Non-Executive Director.  As part of these changes, as of 1 January 2023, Steve Purdham has stepped down from the Board. We would like to thank Steve for his contribution to Osirium and we wish him all the best.

Current trading and outlook

Entering the new financial year, the Group has continued its focus on growing its customer base as well as achieving license expansions with customers through up-selling and cross-selling and the Group is pleased to have achieved a mix of additional up-sell contract wins from its expanded base of customers. The average contract value for new customers remains strong, and the Group is seeing increasing opportunities for multi-year engagements.  

In markets where knowledge of privileged security is maturing, we are seeing shorter, more focused sales cycles where the customer already understands its objectives and is looking for differentiators that align to its resources, budgets and timescales. This is ideal for Osirium as it makes our sales cycles more efficient and has created opportunities early in the year to win new customers and expand on existing contracts.

The existing regulatory drivers and cyber insurance requirements are continuing to ensure cyber security remains a high priority part of overall IT budgets, with IBM's Cost of a Data Breach 2022 report estimating the global average total cost of a data breach to be $4.35 million.

Within this trend, organisations are also rationalising budgets and technology stacks, with the demand for good value and easy to deploy products representing another positive driver for Osirium. In particular, the Group has seen a number of contract wins, upsells and renewals with healthcare and public sector organisations in 2023 to date, as those organisations look to finalise their year-end spend and in line with the heightened awareness of cybersecurity threats posed to critical infrastructure.

Osirium's sector agnostic product suite, ability to lead with any of its three products, and well-developed global sales network mean it is well-positioned in a fast-growing market. While cognisant of wider macroeconomic conditions, we affirm our focus around reducing the timeframe to the Company becoming cashflow breakeven.

Financial Review

Overview

The Group has materially grown its customer base, revenue, Annual Recurring Revenue ("ARR") and bookings during the period, demonstrating greater customer engagement. Bookings and ARR represent the key financial measures for the Group and demonstrate the Company's progress in the period under review. Bookings for the 12 months ended 31 December 2022, represented by total invoiced sales for annual subscriptions, were £3.00 million, an increase from £1.61 million over the previous year. The headline bookings total reflected an increase of over 47% in total customer numbers to 150. ARR for December 2022 was £1.86 million, an increase of 28% over the past 12 months (December 2021: £1.45 million). The Group's revenue recognition policy recognises revenue in equal annual instalments over the course of multi-year contracts. Revenue for the year was £1.92 million, an increase from £1.45 million over the previous year.

Operating loss before tax for the Group was £3.36 million, increased from the loss of £3.23 million for the year to 31 December 2021. The losses of the Group have increased slightly due to expenditure levels returning to a more normal level. The main expenditure of the business reflects the significant investment in headcount and activity levels in the business's sales, pre-sales, marketing and engineering departments, building momentum during 2022, continuing in 2023.

Revenue Analysis

Revenue for the 12 months ended 31 December 2022 was £1.92 million (2021: £1.45 million). The Group's total customer count increased by 45 for the year ended 31 December 2022, up by over 47% compared to 2021. This customer growth reflects the growing sales momentum experienced by the business as the Group broadens its customer base. The demand for our PAM, PPA and PEM solutions all continues to increase.

The Company's deferred revenues as at 31 December 2022 were £2.72 million, compared with deferred revenues at the end of December 2021 of £1.61 million, helping provide a degree of visibility and certainty over our future revenue streams.

Taxation

The Group has benefited from the tax relief given on development expenditure, resulting in a research and development tax credit of £640,860 being claimed in respect of the year to 31 December 2022, compared with £594,562 for the previous year to 31 December 2021. The relief illustrates the consistent investment made in the Group's innovative cybersecurity product and its pioneering qualities that is expected to continue going forwards.

Loss per Share

Loss per share for the year on both a basic and fully diluted basis was 6p. In the prior year, the basic and diluted loss per share was 11p.

Results and Dividend

The Directors are unable to recommend the payment of a final dividend (2021: £nil).

Research and Development & Capital Expenditure

The Group spent £1.96 million (2021: £1.85 million) on direct staff and contractor costs for research and development, all of which was capitalised in both periods. This expenditure pertains to developing the Group's new and enhanced software offerings. The Group continues to invest in new product development and the continual modification and improvement of its current product base to meet technological advances, customer requirements, and ever-expanding new market requirements of the rapidly evolving cybersecurity market.

Future Developments

The Group has undertaken a strategy to extend its activities to provide a full range of Privileged Access Security solutions. Alongside accelerating the expansion into new geographies and industry sectors, the Group will continue to invest in developing innovative and differentiated solutions for its growing customer base.

Going Concern

As part of their going concern review, the Directors have followed the guidelines published by the Financial Reporting Council entitled "Guidance on the Going Concern Basis of Accounting and Reporting on Solvency and Liquidity Risks (2016)". The Directors have prepared detailed financial forecasts and cash flows looking beyond 12 months from the date of this Annual Report. In developing these forecasts, the Directors have made assumptions based on their view of the current and future economic conditions that will prevail over the forecast period.

The Group incurred a loss of £2.94 million in the year ended 31 December 2022 and had net current liabilities of £1.36 million at that date. The Group's cash and cash equivalents increased by £0.7 million in the same period. Cash and cash equivalents at 31 December 2022 were £1.1 million.

In its assessment, the Board has included consideration of the potential ongoing impact of the war in Ukraine and the associated volatile economic conditions domestically and internationally, including rising inflation, fluctuations in foreign exchange and interest rates, and unease in global stock markets. The Board has worked this into the financial assessment of the Group. Trading conditions started to normalise in the year ended 31 December 2022. This level of enhanced bookings has carried through to the start of the financial year, with a strong start to the new year. This early trading momentum increased the number of customers further, and a strong pipeline of new business supports the Board's business forecasts and underlines their confidence in the Group's ongoing momentum.

As reported on 22 November 2022, the Board identified a further £1.00 million of annualised cost saving measures which have been implemented effective from 1 January 2023. The Directors consider these cost savings will contribute towards shortening the timeframe by which the Company will become cash flow break-even.

Coupled with the above projections, the Directors are confident that Osirium has sufficient working capital to honour all of its obligations to creditors as and when they fall due. The Directors consider it appropriate to continue to adopt the going concern basis in preparing the Financial Statements. Accordingly, the financial statements do not include any adjustments required if the going concern basis of preparation was deemed inappropriate. However, if the Group is unable to deliver the anticipated order book and revenue growth, during the going concern period, it would give rise to a material uncertainty which may cast significant doubt about the Group's ability to continue as a going concern.

Cash Flow

The Group's cash balances at 31 December were £1.08 million

(2021: £0.38 million).

Cash generated from operations for the period was £0.46 million (2021: cash used in operations £1.10 million).

Rupert Hutton, CFO

Consolidated Statement of Comprehensive Income

Consolidated Statement of Financial Position

Consolidated Statement of Changes in Equity

Consolidated Statement of Cash Flows & Reconciliation of Net Debt

Notes to the Financial Statements

Osirium Technologies PLC is a company incorporated in the United Kingdom under the Companies Act 2006 and listed on the AIM Market. The address of the registered office is One Central Square, Cardiff, CF10 1FS.

1. Significant Accounting Policies

Osirium Technologies PLC is a company incorporated in the United Kingdom under the Companies Act 2006 and listed on the AIM Market. The address of the registered office is One Central Square, Cardiff, CF10 1FS.

Basis of Preparation

 The financial statements have been prepared on a going concern basis under the historical cost convention, and in accordance with UK-adopted International Accounting Standards that are effective or issued and early adopted as at the time of preparing these Financial Statements and in accordance with the provisions of the Companies Act 2006.

Basis of Consolidation

The consolidated financial statements incorporate the assets and liabilities of the subsidiary of Osirium Technologies PLC ('company' or 'parent entity') as at 31 December 2022 and the results of the subsidiary for the year then ended. Osirium Technologies PLC and its subsidiary together are referred to in these financial statements as the 'Group'.

Subsidiaries are all those entities over which the consolidated entity has control. The consolidated entity controls an entity when the consolidated entity is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the consolidated entity. They are de-consolidated from the date that control ceases.

Intercompany transactions, balances and unrealised gains on transactions between entities in the Group are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the consolidated entity.

The acquisition of subsidiaries is accounted for using the acquisition method of accounting. A change in ownership interest, without the loss of control, is accounted for as an equity transaction, where the difference between the consideration transferred and the book value of the share of the non-controlling interest acquired is recognised directly in equity attributable to the parent.

Non-controlling interest in the results and equity of subsidiaries are shown separately in the statement of profit or loss and other comprehensive income, statement of financial position and statement of changes in equity of the consolidated entity. Losses incurred by the consolidated entity are attributed to the non-controlling interest in full, even if that results in a deficit balance.

Where the consolidated entity loses control over a subsidiary, it derecognises the assets including goodwill, liabilities and non-controlling interest in the subsidiary together with any cumulative translation differences recognised in equity. The consolidated entity recognises the fair value of the consideration received and the fair value of any investment retained together with any gain or loss in profit or loss.

Going concern

As part of their going concern review the Directors have followed the guidelines published by the Financial Reporting Council entitled "Guidance on the Going Concern Basis of Accounting and Reporting on Solvency and Liquidity Risks (2016)". The Directors have prepared detailed financial forecasts and cash flows looking beyond 12 months from the date of these Financial Statements. In developing these forecasts, the Directors have made assumptions based upon their view of the current and future economic conditions that will prevail over the forecast period.

The Group incurred a loss of £2.94 million in the year ended 31 December 2022 and had net current liabilities of £1.36 million at that date. The Group's cash and cash equivalents increased by £0.70 million in the same period.

Cash and cash equivalents at 31 December 2022 were £1.08 million.

In its assessment, the Board has included consideration of the potential ongoing impact of the war in Ukraine and the associated volatile economic conditions domestically and internationally, including rising inflation, fluctuations in foreign exchange and interest rates, and unease in global stock markets. The Board has worked this into the financial assessment of the Group. Trading conditions started to normalise in the latter part of the year ended 31 December 2022. This level of enhanced bookings has carried through to the start of the new financial year, with a positive start to the year. This early trading momentum increased the number of customers further, and a strong pipeline of new business supports the Board's business forecasts and underlines their confidence in the Group's ongoing momentum.

Coupled with the above projections, the Directors are confident that Osirium has sufficient working capital to honour all of its obligations to creditors as and when they fall due. The Directors consider it appropriate to continue to adopt the going concern basis in preparing the Financial Statements. Accordingly, the financial statements do not include any adjustments required if the going concern basis of preparation was deemed inappropriate. However, if the Group is unable to deliver the anticipated order book and revenue growth, and raise additional capital during the going concern period, it would give rise to a material uncertainty which may cast significant doubt about the Group's ability to continue as a going concern. This additional funding is not guaranteed, however to date the Group has been successful in securing funding when required.

New and Amended Standards and Interpretations

There are no new standards or amendments to standards adopted with effect from 1 January 2022, or effective in future accounting periods, which had or are expected to have a material impact on the Group and Company financial statements.

2. Accounting Policies

Revenue Recognition

Revenue represents net invoiced sales of services, excluding value added tax. Sales of software licence subscriptions are recognised over the period of the contract with the deferred income being recognised in the statement of financial position. Sales of one-off installation services are invoiced and recognised fully on completion of the installation.

Contract Assets and Liabilities

Contract assets are recognised when Osirium has transferred goods or services to the customer but where Osirium is yet to establish an unconditional right to consideration. Contract assets are treated as financial assets for impairment purposes. Contract liabilities are recognised when Osirium receive payment in advance of satisfaction of its performance obligations. Contract liabilities are included as financial liabilities in deferred income.

Rounding

The figures in the financial statements of Osirium for the current and preceding year are rounded to nearest whole pound.

Functional and Presentational Currency

Items included in the Financial Statements of Osirium are measured using the currency of the primary economic environment in which the entity operates ('the functional currency'). The financial information is presented in UK sterling (£), which is the functional and presentational currency of Osirium.

Financial Instruments

Financial assets and financial liabilities are recognised in Osirium's statement of financial position when Osirium becomes party to the contractual provisions of the instrument. Financial assets are de-recognised when the contracted rights to the cash flows from the financial asset expire or when the contracted rights to those assets are transferred. Financial liabilities are de-recognised when the obligation specified in the contract is discharged, cancelled or expired.

Financial assets

Trade and Other Receivables

Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method less the provision for impairment. Appropriate provisions for estimated irrecoverable amounts are recognised in the statement of comprehensive income when there is objective evidence that the assets are impaired. The amount of the provision is the difference between the carrying amount and the present value of estimated future cash flows interest income is recognised by applying the effective interest rate, except for short term receivables when the recognition of interest would be immaterial. The directors have made an assessment on the amounts due from group undertakings under IFRS 9 for impairment of financial assets

Cash and Cash Equivalents

Cash and cash equivalents comprise cash on hand, demand deposits held on call with banks, and other short- term highly liquid investments with original maturities of three months or less that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. Cash and cash equivalents are shown in the financial statements as 'cash and cash equivalents'.

Impairment of Financial Assets

Osirium recognises a loss allowance for expected credit losses on financial assets which are either measured at amortised cost or fair value through other comprehensive income. The measurement of the loss allowance depends upon Osirium's assessment at the end of each reporting period as to whether the financial instrument's credit risk has increased significantly since initial recognition, based on reasonable and supportable information that is available, without undue cost or effort to obtain.

Where there has not been a significant increase in exposure to credit risk since initial recognition, a 12-month expected credit loss allowance is estimated. This represents a portion of the asset's lifetime expected credit losses that is attributable to a default event that is possible within the next 12 months. Where a financial asset has become credit impaired or where it is determined that credit risk has increased significantly, the loss allowance is based on the asset's lifetime expected credit losses. The amount of expected credit loss recognised is measured on the basis of the probability weighted present value of anticipated cash shortfalls over the life of the instrument discounted at the original effective interest rate.

For financial assets mandatorily measured at fair value through other comprehensive income, the loss allowance is recognised in other comprehensive income with a corresponding expense through profit or loss. In all other cases, the loss allowance reduces the asset's carrying value with a corresponding expense through profit or loss.

Financial Liabilities and Equity

Trade and Other Payables

Trade payables are initially measured at fair value and are subsequently measured at amortised cost using the effective interest rate method; this method allocates interest expense over the relevant period by applying the 'effective interest rate' to the carrying amount of the liability.

Borrowings

Borrowings are recognised initially at fair value less transactions costs incurred. Borrowings are subsequently stated at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the statement of comprehensive income over the period of borrowings using the effective interest method.

The component of the convertible notes that exhibits characteristics of a liability is recognised as a liability in the statement of financial position, net of transaction costs.

On the issue of the convertible notes the fair value of the liability component is determined using a market rate for an equivalent nonconvertible bond and this amount is carried as a non-current liability on the amortised cost basis until extinguished on conversion or redemption. The increase in the liability due to the passage of time is recognised as a finance cost. The remainder of the proceeds are allocated to the conversion option that is recognised and included in shareholders equity as a convertible note reserve, net of transaction costs. The carrying amount of the conversion option is not premeasured in the subsequent years. The corresponding interest on convertible notes is expensed to profit or loss.

Equity

Equity instruments issued by Osirium are recognised at fair value on initial recognition net of transaction costs.

Taxation

The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. Osirium's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the date of the Statement of Financial Position.

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial information and the corresponding tax bases used in the computation of the taxable profit and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that is probable that taxable profits will be available against which is deductible temporary differences can be utilised.

Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit not the accounting profit.

The carrying 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 tax is calculated at the tax rates that are expected to apply in the year when the liability is settled or the asset is realised based on tax laws and rates that have been enacted at the Statement of Financial Position date. Deferred tax is charged or credited in the Statement of Comprehensive Income, except when it relates to items charged or credited in other comprehensive income, in which case the deferred tax is also dealt with in other comprehensive income.

Deferred tax assets and liabilities are offset when it is a legally enforceable right to set off the current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and Osirium intends to settle its current tax assets and liabilities on a net basis.

Property, Plant and Equipment

Plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses. Depreciation is provided at the following annual rates in order to write off each asset over its estimated useful life.

Fixtures and fittings - 25% on cost

Computer equipment - 33% on cost

Osirium has elected not to recognise a right-of-use asset and corresponding lease liability for short-term leases with terms of 12 months or less and leases of low-value assets. Lease payments on these assets are expensed to profit or loss as incurred.

Internally-generated Development Intangible Assets

An internally-generated development intangible asset arising from Osirium's product development is recognised if, and only if, Osirium can demonstrate all of the following:

Internally-generated development intangible assets are amortised on a straight-line basis over their useful lives. Amortisation commences in the financial year of capitalisation. Where no internally-generated intangible asset can be recognised, development expenditure is recognised as an expense in the year in which it is incurred. The amortisation cost is recognised as part of administrative expenses in the statement of comprehensive income.

Development costs - 20% per annum, straight line

Impairment of Tangible and Intangible Assets

 At each statement of financial position date, Osirium reviews the carrying amounts of its assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, Osirium estimates the recoverable amount of the cash-generating unit to which the asset belongs. An intangible asset with an indefinite useful life is tested for impairment at least annually and whenever there is an indication that the asset may be impaired.

The recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

Right of Use Assets

A right-of-use asset is recognised at the commencement date of a lease. The right-of-use asset is measured at cost, which comprises the initial amount of the lease liability, adjusted for, as applicable, any lease payments made at or before the commencement date net of any lease incentives received, any initial direct costs incurred, and, except where included in the cost of inventories, an estimate of costs expected to be incurred for dismantling and removing the underlying asset, and restoring the site or asset.

Right-of-use assets are depreciated on a straight-line basis over the unexpired period of the lease or the estimated useful life of the asset, whichever is the shorter. Where Osirium expects to obtain ownership of the leased asset at the end of the lease term, the depreciation is over its estimated useful life. Right-of-use assets are subject to impairment or adjusted for any re-measurement of lease liabilities.

Lease Liability

The lease liability is initially measured at the present value of the lease payments during the lease term discounted using the interest rate implicit in the lease, or the incremental borrowing rate if the interest rate implicit in the lease cannot be readily determined. The weighted average lessee's incremental borrowing rate applied to the lease liabilities on 1 January 2019 was 7.5%. The lease term is the non-cancellable period of the lease plus extension periods that the Group is reasonably certain to exercise and termination periods that the Group is reasonably certain not to exercise. Leases are cancellable when each party has the right to terminate the lease without permission of the other party or incurring more than an insignificant penalty. The lease term includes any rent-free periods.

Subsequent measurement of the lease liability

The lease liability is subsequently increased for a constant periodic rate of interest on the remaining balance of the lease liability and reduced for lease payments.

Interest on the lease liability is recognised in profit or loss, unless interest is directly attributable to qualifying assets, in which case it is capitalised in accordance with the Group's policy on borrowing costs.

Employee Benefit Costs

Osirium operates a defined contribution pension scheme. Contributions payable to Osirium's pension scheme are charged to the Statement of Comprehensive Income in the year to which they relate.

Share-based Payments

Osirium issues equity-settled share-based payments to certain employees and others under which Osirium receives services as consideration for equity instruments (options) in Osirium. Equity-settled share-based payments are measured at fair value at the date of grant by reference to the fair value of the equity instruments granted. The fair value determined at the grant date of equity-settled share-based payments is recognised as an expense in Osirium's Statement of Comprehensive Income over the vesting period on a straight-line basis, based on Osirium's estimate of the number of instruments that will eventually vest with a corresponding adjustment to equity. The expected life used in the valuation is adjusted, based on management's best estimate, for the effect of non-transferability, exercise restrictions, and behavioural considerations.

Non-vesting and market vesting conditions are taken into account when estimating the fair value of the options at grant date. Service and non-market vesting conditions are taken into account by adjusting the number of options expected to vest at each reporting date. When the options are exercised Osirium issues new shares. The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium.

Segment Reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board of Directors that makes strategic decisions.

Financial Risk Factors

Osirium's activities expose it to a variety of financial risks: market risk, credit risk and liquidity risk. Osirium's overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on Osirium's financial performance. Risk management is carried out by management under policies approved by the directors.

The directors provide principals for overall risk management, as well as policies covering specific areas, such as, interest rate risk, non-derivative financial instruments and investment of excess liquidity.

Earnings per Share

Basic earnings per share is calculated by dividing the profit or loss attributable to the owners of Osirium Technologies plc, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the financial year.

Critical Accounting Estimates and Judgements

The preparation of the Financial Statements requires management to make judgements and estimates that affect the reported amounts of assets and liabilities at each statement of financial position date and the reported amounts of revenue during the reporting periods. Actual results could differ from these estimates. The directors consider the key areas to be in respect of the valuation of intangible assets and impairment of intercompany receivables. Information about such judgements and estimations are contained in individual accounting policies and trade and other receivables (Note 4).

IFRS 16 Leases

Right-of-use assets and corresponding lease liabilities are recognised in the statements of financial position. Straight line operating lease expense recognition is replaced with a depreciation charge for the right-of-us assets (included in operating costs) and an interest expense on the recognised lease liabilities (included within finance costs). For classification within the statement of cash flows, the interest portion is disclosed in operating activities and the principal portion of the lease payments are separately disclosed in financing activities

3. Segment Information and Revenue

Management information is provided to the chief operating decision maker as a whole. As a result Osirium is a single operating segment. All revenue is derived from the sale of software subscriptions and consultancy services to the customers in the UK, and is recognised over time.

The Group had one (2021: one) customer that represented over 10% of total revenue. The total revenue for this customer was £239,488 (2021: £206,807) which represents 12% (2021: 14%) of the Group's total income for the year.

4. Trade and Other Receivables

As at 31 December 2022 Osirium had no material receivables past due but not impaired (31 December 2021: £nil).

The directors have made an assessment on the amounts due from group undertakings under IFRS 9 for impairment of financial assets, with this being looked at every 12 months on a continuous basis.

The Directors consider that the carrying value of trade and other receivables approximates their fair value.

Allowance for Expected Credit Losses on Trade Receivables

The group has assessed the expected credit losses for the year ended 31 December 2022 and concluded that there is no material impairment against trade receivables.

5. Cash and Cash Equivalents

The Directors consider that the carrying value of cash and cash equivalents approximates their fair value.