REG - Crossword Cybersec - 2021 Annual Report and Accounts
19/04/2022 07:00
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RNS Number : 4793I Crossword Cybersecurity PLC 19 April 2022
Crossword Cybersecurity Plc
2021 Annual Report and Accounts
19 April 2022 - London, UK - Crossword Cybersecurity Plc
(http://www.crosswordcybersecurity.com/) (AIM:CCS, "Crossword", the "Company"
or the "Group"), the technology commercialisation company focused on cyber
security and risk, is pleased to announce its final results for the year ended
31 December 2021. The Annual Report and Accounts along with the Notice of its
Annual General meeting ("AGM") and a Form of Proxy will be posted to
Shareholders shortly.
A copy of the Annual Report and Accounts and the notice of AGM are available
on the Company's website at www.crosswordcybersecurity.com
(http://www.crosswordcybersecurity.com) .
AGM and Investor Meeting
The AGM will be held on Monday 16 May 2022 at 10.00am at the offices of
Shakespeare Martineau LLP, 6th Floor, 60 Gracechurch Street, London EC3V 0HR.
Additionally, the Company will be hosting an update on the Investor Meet
Company platform on Tuesday 17 May at 2.00pm. Click here
(https://www.investormeetcompany.com/crossword-cybersecurity-plc/register-investor)
to register for this event.
2021 Financial Highlights
· Delivered 43% revenue growth to £2.3m (including Grant Income of
£152k included in 'Other Income'), despite the turbulence in the economy.
· Revenues from product and services expanded by 56%.
· Annual recurring revenue doubled during 2021.
· £1.6m equity fund raise February 2021, and a £5.0m equity fund
raise July 2021.
· £1.3m cost increases driven by headcount increasing by 74%, with
continued investment in sales and marketing and product development, and
increased professional fees in 2021 driven by two acquisitions, two equity
fund raises and the opening of an overseas company in Oman.
· £457k gain on revaluation of CyberOwl Limited shareholding measured
at fair value. Crossword catalysed the creation of CyberOwl Limited in
2016.
· Loss of £2.5m.
· £3.4m closing cash.
2021 Operational Highlights
· Rizikon users grew to over 500 users by the end of 2021.
· Acquired Verifiable Credentials Limited in May 2021, adding
IdentiProof to the product portfolio.
· Acquired Stega UK Limited in August 2021. Integrated the threat
intelligence and monitoring company and their sophisticated in-house platform,
Nightingale.
· Integrated DarkBeam's cyber risk audits into Rizikon,
significantly enhancing its functionality.
· Completed grant funded feasibility study with Liverpool John
Moores University to investigate the underlying problems and causes of
failures in supply chain risk and assurance.
· The IASME Consortium Limited commenced using Rizikon to deliver
its Counter Fraud Fundamentals
(https://iasme.co.uk/counter-fraud-fundamentals/) Certification. This is as
well as delivering its Internet of Things security certification.
· Consulting secured two more FTSE250 clients.
· Crossword Cybersecurity LLC was formed in the Sultanate of Oman.
· Designed, built and market tested a completely new product in the
privacy governance space, for the University of Glasgow.
· Refreshed the Board with the appointment of Dr Robert Coles and
Tara Cemlyn-Jones.
· Share split where each Ordinary Share of 5p was sub-divided into
ten new ordinary shares of 0.5p.
· Great progress on gender diversity with the Board being 37.5%
women and Advisory Board at 50:50 parity. The Women at Crossword Group was
established.
· Office move in London from Richmond to a flexible Waterloo
office.
Post Period Highlights
· Acquired Threat Status Limited, the threat intelligence company and
provider of Trillion™, the cloud-based software as a service (SaaS) platform
for enterprise-level credential breach intelligence. This takes the number
of acquisitions in the past 12 months to three.
· The IASME Consortium Limited commenced using Rizikon to deliver its
Maritime Security Certification. This is as well as delivering its Internet of
Things security and Counter Fraud Fundamentals
(https://iasme.co.uk/counter-fraud-fundamentals/) certifications.
· Continued to expand the membership body network to distribute
Rizikon. Launched an offer to members of techUK, the UK technology trade
association, and BESA, the British Educational Suppliers Association, for a
single-use cyber security assessment to support them towards Cyber Essentials
certification.
Outlook
· Expect rate of growth in income to be circa 75% in 2022, in line with
market expectations.
· Continue rapid roll out of Rizikon Pro, on the back of partnerships
and membership deals.
· Target over 1,000 organisations using Rizikon to assess over 10,000
suppliers by end 2022.
· Take Identiproof to market as well as continuing product development.
· Continued focus on Sales and Marketing.
· Complete the integration of Threat Status Ltd into Crossword.
· Focus on cross sell opportunities following three acquisitions in
less than 12 months, with the addition of circa 50 new clients, three new
products (Identiproof, Trillion and Arc), and new threat monitoring service
using Nightingale, our world class platform.
· Growing client interest in Nixer and Nixer functionality being used
to enhance Rizikon.
Tom Ilube, CEO of Crossword Cybersecurity plc, commented: "I am incredibly
pleased with the progress Crossword made in 2021, achieving 43% total revenue
growth, and 56% growth in our product and services revenue. We expanded our
product portfolio with the addition of Identiproof, our services offering with
the addition of Nightingale, and our geographical reach with the opening of
our Oman office. We were delighted to welcome new institutional investors in
our February and July 2021 fund raises and are appreciative of the ongoing
support of our shareholders.
"We have welcomed the teams from Stega UK Ltd and Verifiable Credentials into
the Crossword fold during 2021, and the team from Threat Status Ltd post
period in March 2022. Crossword employees continue to embody our culture and
values of responsibility, openness, flexibility and learning.
"We have had a strong start to 2022, commencing delivery of services to a new
FTSE 100 company, also to a company which supports UK critical national
infrastructure, progressed cross sell opportunities of Nightingale into our
consulting client base and have already sold Trillion into our Rizikon
network.
"Following our three successful acquisitions in the past 12 months, we will
continue to make targeted acquisitions to accelerate growth, where we see
interesting cyber security companies."
- Ends -
The information contained within this announcement is deemed to constitute
inside information as stipulated under the retained EU law version of the
Market Abuse Regulation (EU) No. 596/2014 (the "UK MAR") which is part of UK
law by virtue of the European Union (Withdrawal) Act 2018. The information is
disclosed in accordance with the Company's obligations under Article 17 of the
UK MAR. Upon the publication of this announcement, this inside information is
now considered to be in the public domain
Contacts
Crossword Cybersecurity plc - Tel: +44 (0) 333 090 2587
Email: info@crosswordcybersecurity.com
Tom Ilube, Chief Executive Officer
Mary Dowd, Chief Financial Officer
Grant Thornton (Nominated Adviser) - Tel: +44 (0) 20 7383 5100
Colin Aaronson / Daphne Zhang / Ciara Donnelly
Hybridan LLP (Broker) - Tel: +44 (0)203 764 2341
Claire Louise Noyce
For media enquiries contact:
Duncan Gurney, GingerPR
duncan@gingerpr.co.uk - Tel: +44 (0)1932 485 300
About Crossword Cybersecurity plc
Crossword Cybersecurity plc reduces the cyber risks for clients by providing a
portfolio of products and services, powered by university and other
research-driven insights. Crossword focuses on the development and
commercialisation of cyber security and risk management related software and
cyber security services. The Group's specialist cyber security product
development and software engineering teams develop the research concept into a
fully-fledged commercial product that it will then take to market. The Group's
aim is to build up a portfolio of revenue generating, intellectual property
based, cyber security products. Rizikon Assurance, Crossword's leading
product, is a SaaS platform that enables medium to large companies to assess
and manage all risks from their suppliers. Nixer CyberML, another Crossword
product, is a new tool for businesses that want to solve advanced security and
cybercrime problems, such as detecting and dealing with compromised accounts,
fraud, and in-application denial of service attacks. Identiproof, is the World
Wide Web Consortium (W3C) verifiable credentials compatible middleware and
wallet technology. Trillion and Arc are the latest additions to Crossword's
product suite, offering some of the strongest and most advanced credential
leak monitoring services in the market. Crossword's team of expert cyber
security consultants leverages years of experience in national security,
defence and commercial cyber intelligence and operations to provide bespoke
cyber security consulting advice tailored to its clients' business needs,
including threat monitoring using Nightingale, our world class platform.
Chairman's Statement
Strong growth as the economy emerges from the pandemic
As the world emerged slowly from the challenging pandemic period, Crossword
continued to progress rapidly with our strategy of building a significant
intellectual property-based, AIM quoted cyber security business.
By the end of 2021, Crossword had grown revenue (including Grant Income) by a
very healthy 43%. 2022 has started positively, and the company is confident of
achieving growth of circa 75% in the coming year. Rizikon now has over 500
organisations using the platform, we have integrated two acquisitions and our
first-class specialist cyber security consulting team is building on its major
client relationships.
Management and staff are to be congratulated on achieving 43% revenue growth
in 2021, as the economy emerged gradually from a very tough period. We look
forward to continuing to build value for shareholders in the year ahead.
A series of smart acquisitions
During 2021, Crossword continued to expand its product portfolio and
accelerate growth through a series of targeted acquisitions. Crossword
acquired Verifiable Credentials Limited in the first half of the year and
Stega UK Limited in the second half. The company also signed a head of terms
to acquire a cyber threat company, Threat Status Limited, in December and the
transaction completed in March 2022.
Robust Governance
We strengthened the Group Balance Sheet in 2021 by completing two equity fund
raises, with significant shareholder support and new investors coming on
board. We completed a £1.6m fundraise early in the year followed by a £5m
raise in July. We would like to thank our shareholders for their support as we
build for the future.
We were delighted to welcome aboard two new Board members, Dr Robert Coles and
Tara Cemlyn-Jones, at the AGM. Once again, I would like to take this
opportunity to thank Dr David Stupples and Gordon Matthew for their invaluable
contributions as they retired from the Board.
The Board maintains a robust framework of controls and high standards,
enabling the company to adapt quickly and securely in a way that safeguards
our stakeholders longer-term interests. The Board continues to adhere to the
Quoted Companies Alliance Corporate Governance Code (the 'QCA Code') in line
with the London Stock Exchange's requirement for all AIM listed companies to
adopt a recognised corporate governance code. The Chairman's Corporate
Governance Statement within the Annual Report provides further details.
Significant growth in 2021, set to accelerate in 2022
The last year has been one of rapid growth once again as we emerge from the
worst of the pandemic. Crossword is well set for faster growth in 2022. We
have experienced leadership, an expert cyber security team and a strong set of
best-in-class cyber security products and services to offer in the
fast-growing cyber security market.
Our diverse and committed team of employees has performed remarkably during
this period and I would like to acknowledge them all. Crossword's core values
of responsibility, openness, flexibility and learning underpin everything we
do and will enable our company to accelerate in 2022 and beyond.
Sir Richard Dearlove KCMG OBE
13 April 2022
Chief Executive Officer's Statement
It is my pleasure, as Chief Executive Officer, to present the Annual Report
and audited accounts for Crossword Cybersecurity Plc ('Crossword' or the
'Company' or the 'Group') for the financial year ended 31 December 2021.
Crossword grew strongly in 2021, as the economy and wider society started to
emerge from the pandemic albeit with stops and starts along the way. Overall,
the business grew by an impressive 43% through the year.
In the period under review, product and services revenue (including Grant
Income) grew by 56% over the comparative period. The Group revenue growth of
43% includes software development services to related party which has now
discontinued. We were particularly pleased to see consulting services
recurring revenue increase by almost 100% over the prior year.
Despite the pandemic reaching new heights and negatively impacting the economy
worldwide, the field of cyber security experienced high demand and
demonstrated its resilience with another consecutive record year of investment
in cyber security firms. Crossword's products and services have seen a growing
demand throughout 2021 leading to another successful year of operations.
According to the UK Cyber Security Sectoral Analysis 2022, the UK remains the
largest cyber security market in Europe with a total revenue of £10.15bn,
which represents growth of 14% from last year's figure (£8.9bn). The UK
maintained its spot as the biggest exporter of cyber services in Europe,
increasing its exports from £3.9bn to £4.24bn.
Going into 2021, after a tough period the previous year due to the pandemic,
the Executive team was determined to make solid progress in building the
business. We decided to accelerate our growth and enhance our product
portfolio through a series of tactical acquisitions, and we successfully
completed two transactions during the year. The first was Verifiable
Credentials Limited which has been assigned intellectual property from the
University of Kent, adding its product Identiproof to our product portfolio.
Identiproof addresses the growing 'digital credentials' market whereby tens of
millions of physical certificates (such as academic certificates, insurance
documents, health certificates and many others) will be converted into digital
certificates that need to be verified to confirm their authenticity.
Identiproof was created by Professor David Chadwick, an acknowledged expert
and co-author of the global W3C standard in the digital credentials field, who
joined Crossword's team. The second, Stega UK Limited, the threat intelligence
and monitoring company that is particularly strong in the financial services
and hedge fund sector, added significant technical expertise, in-depth cyber
threat data and thirty new clients, bringing our revenue generating services
client base to over 100 organisations. We also signed a heads of terms for our
third acquisition, Threat Status Limited, a threat intelligence company, that
we completed in March 2022. Following the acquisition of Threat Status
Limited, products Trillion™ and Arc will be incorporated into Crossword's
product suite, completing our aim of having five products in the market by the
end of 2022.
Rizikon, Crossword's leading product, continued to make strong progress as we
rolled it out to a wide range of clients, driven by our membership body
programme. Our agreement to launch Rizikon to the 10,000 Chartered Institute
of Information Security members resulted in great take-up. We also signed up a
number of other membership organisations. As a result, we ended 2021 with more
than 500 organisations using Rizikon, either in trials or contracted. We also
enhanced the product by integrating Darkbeam cyber risk audits into Rizikon.
Our R&D team, who work closely with universities on cyber risk
intellectual property-based product ideas, completed a revenue generating
project with the University of Glasgow on privacy governance software. They
also completed an Innovate UK-funded project to investigate Manufacturing
Supply Chain Risk with Liverpool John Moores University and a number of
industry partners. Concepts generated by this project will be used to enhance
Rizikon over the coming year.
Crossword's Consulting division continued to secure projects with major FTSE,
mid-market and fast-growing entrepreneurial companies. We are particularly
pleased that our consulting services division has secured a good mix of vCISO
revenue contracts, which will deliver recurring revenue through 2022 and
beyond. vCISO is a virtual/remote CISO (Chief Information Security Officer)
service, provided by Crossword Consulting cyber security experts at a fraction
of the cost of an in-house CISO. Crossword services recurring revenue,
strengthened by the acquisition of Stega UK Ltd, increased by almost 100% over
the prior year.
Following consulting and market research projects carried out in the region in
2020, Crossword established an Oman subsidiary, in partnership with Al-Rawahy
Holdings, a significant Omani Group with extensive interests across the Gulf
region. Our subsidiary, Crossword Cybersecurity LLC, will be the exclusive
third-party distributor of Crossword's existing and future cyber security
products, including Rizikon. Our full range of products and services will be
made available across the region to help organisations improve their cyber
security posture.
On the corporate front, Crossword strengthened its balance sheet, completing a
£1.6m equity fundraise in 2021 through a placing and subscription of
Crossword Ordinary Shares at a price of 260 pence per share. In May, we
competed a 10:1 share split to support liquidity and following the share
split, we raised £5m at a price of 30 pence in July 2021. I was delighted
with the level of support from our existing shareholders through this period
and was very pleased to welcome several major new shareholders.
At our AGM in May 2021, we welcomed two new Board members, Dr Robert Coles and
Tara Cemlyn-Jones. Robert was lead partner for KPMG's Information Security
consulting business prior to moving into industry where he held a number of
CISO positions at large corporations including GlaxoSmithKline. Robert
previously chaired Crossword's Advisory Board and continues to chair our
consulting business. Tara has 28 years' experience in financial services with
specialist knowledge of capital markets, M&A, strategy and digital
transformation. We would like to thank Dr David Stupples and Gordon Matthew
for their excellent contribution over the years as they retired from the Board
at the AGM.
As Crossword continues to grow and mature as an organisation, a keen focus is
kept on our wider stakeholder and social responsibilities. Our Polish team
reacted quickly to the suffering of Ukrainians evacuating to Poland, putting a
donations scheme in place, and sharing experiences with the whole group.
Crossword is considering the BCorp accreditation, as we believe that this will
provide external parties with confidence that Crossword holds itself to high
standards in relation to stakeholders, in areas such as governance, employees,
community, environment and customers.
I want to close by thanking all those who helped Crossword accelerate through
a tricky year which ended with an excellent result. As we look forward, 2022
looks incredibly exciting for Crossword. We are aiming for 75% revenue growth
across the Group and with Crossword's outstanding team and our culture of
responsibility, openness, flexibility and learning, I am confident that we
will achieve our goals.
Tom Ilube
Chief Executive Officer
13 April 2022
Consolidated Statement of Comprehensive Income 12 Months ended 31st December 12 Months ended 31st December
Notes 2021 2020
£ £
Revenue 2 2,171,137 1,627,611
Cost of Sales 3 (1,957,178) (1,582,194)
Gross Profit 213,959 45,416
Administrative expenses 3,4 (3,260,139) (2,320,675)
Other operating income 6 358,727 209,647
Finance income-bank interest income and foreign exchange 4,956 (3,205)
Finance costs-other interest expense 7 (220,545) (204,679)
Gain on revaluation of financial assets 22 456,803 -
Loss for the year before taxation (2,446,239) (2,273,497)
Tax credit / expense 9 172,615 (4,840)
Loss for the Year (2,273,624) (2,278,336)
Other Comprehensive Income
Items that may be reclassified to profit or loss:
Foreign exchange translation Gain / (Loss) (13,220) 9,595
Other Comprehensive Income (13,220) 9,595
Total Comprehensive Loss (2,286,844) (2,268,741)
Loss for the period attributable to:
Owners of the parent (2,229,296) (2,249,707)
Non-controlling interests (44,328) (28,629)
Total Loss for the Year (2,273,624) (2,278,336)
Total comprehensive loss for the period attributable to:
Owners of the parent (2,242,516) (2,240,112)
Non-controlling interests (44,328) (28,629)
Total Comprehensive Loss (2,286,844) (2,268,741)
Loss Per Share (basic)* 20 (0.03) (0.05)
Loss Per Share (diluted) (0.03) (0.05)
All results are derived from continuing operations
* 2020 Loss per share was re-stated following share split in 2021
Statements of Financial Position as at 31 December Group Group Company Company
Notes 2021 2020 2021 2020
£ £ £ £
Non-Current Assets
Intangible assets 11 1,103,679 - 521,603 -
Tangible assets 12 5,460 70,064 - 38,392
Investments in subsidiaries 14 - - 1,637,518 458,164
Goodwill 10 875,277 - - -
Unlisted investment 13 456,834 31 456,834 31
Intercompany receivable greater than one year - - 918,206 653,316
Total non-current assets 2,441,250 70,095 3,534,161 1,149,902
Current Assets
Trade and other receivables 15 1,066,076 497,912 838,622 275,680
Cash and cash equivalents 3,373,062 958,341 3,106,817 824,667
Total current assets 4,439,138 1,456,253 3,945,439 1,100,347
TOTAL ASSETS 6,880,388 1,526,348 7,479,600 2,250,249
EQUITY
Attributable to the owners of the Company
Share Capital 19 374,786 256,605 374,786 256,605
Share premium account 19 14,971,221 8,518,391 14,971,221 8,518,391
Other reserves 21 240,310 181,618 240,310 181,618
Retained earnings (11,827,351) (9,598,055) (10,800,700) (8,835,874)
Translation of foreign operations (14,992) (1,772) - -
Attributable to owners of the parent 3,743,974 (643,213) 4,785,617 120,740
Non-controlling interests (139,127) (94,799) - -
Total equity 3,604,847 (738,012) 4,785,617 120,740
LIABILITIES
Current Liabilities
Trade and other payables 16 1,413,658 929,038 1,049,960 794,187
Other current liabilities 17 1,368,638 - 1,351,471 -
Total current liabilities 2,782,296 929,038 2,401,431 794,187
Long Term Liabilities
Other non-current liabilities 18 493,245 1,335,322 292,552 1,335,322
Total long term liabilities 493,245 1,335,322 292,552 1,335,322
Total Liabilities 3,275,541 2,264,360 2,693,983 2,129,509
Total Equity & Liabilities 6,880,388 1,526,348 7,479,600 2,250,249
The company's loss for the year was £1,964,825 (2020: £1,921,160).
The financial statements were approved by the Board and authorised for issue
on 13 April 2022. They were signed on its behalf by
Tom Ilube
Chief Executive Officer
Statements of Changes in Equity
Group Share Capital Share Premium Equity Reserve Retained Earnings Translation Reserve Non-controlling interests Total
2021
£
At 1st January 256,605 8,518,391 181,618 (9,598,056) (1,772) (94,799) (738,012)
Issue of shares 118,181 6,770,954 - - - - 6,889,135
Transaction costs - (318,124) - - - - (318,124)
Employee share schemes - value of employee services - - 58,692 - - - 58,692
Loss for the period - - - (2,229,296) - (44,328) (2,273,624)
Other comprehensive loss for the period - - - - (13,220) - (13,220)
At 31st December 374,786 14,971,221 240,310 (11,827,351) (14,992) (139,127) 3,604,847
Group
2020
At 1st January 234,061 7,515,744 128,826 (7,428,818) (11,367) - 438,447
Issue of shares 22,543 1,021,108 - - - - 1,043,651
Transaction costs - (18,461) - - - - (18,461)
Employee share schemes - value of employee services - - 52,792 - - - 52,792
Transfer on issue of shares to non-controlling interest - - - 66,169 - (66,169) -
Gain from issue of shares to non-controlling interest - - - 14,300 - - 14,300
Loss for the period - - - (2,249,707) - (28,629) (2,278,336)
Other comprehensive loss for the period - - - 9,595 - 9,595
At 31st December 256,605 8,518,391 181,618 (9,598,056) (1,772) (94,799) (738,012)
Company Share Capital Share Premium Equity Reserve Retained Earnings Translation Reserve Non-controlling interests Total
2021
£
At 1st January 256,605 8,518,391 181,618 (8,835,874) - - 120,740
Issue of shares 118,181 6,770,954 - - - - 6,889,135
Transaction costs - (318,124) - - - - (318,124)
Employee share schemes - value of employee services - - 58,692 - - - 58,692
Loss for the period - - - (1,964,825) - - (1,964,825)
At 31st December 374,786 14,971,221 240,310 (10,800,699) - - 4,785,617
Company
2020
At 1st January 234,061 7,515,744 128,826 (6,914,714) - - 963,917
Issue of shares 22,543 1,021,108 - - - - 1,043,651
Transaction costs - (18,461) - - - - (18,461)
Employee share schemes - value of employee services - - 52,792 - - - 52,792
Loss for the period - - - (1,921,160) - - (1,921,160)
At 31st December 256,605 8,518,391 181,618 (8,835,874) - - 120,740
Statements of Cashflows 12 Months ended 31st December 12 Months ended 31st December 12 Months ended 31st December 12 Months ended 31st December
Group Group Company Company
Years Notes 2021 2020 2021 2020
Cashflows From Operating Activities £ £ £ £
Loss for the year (2,273,624) (2,278,336) (1,964,825) (1,921,160)
Movement in trade and other receivables (412,005) 128,385 (837,873) 450,691
Movement in trade and other payables 86,231 457,260 40,374 (265,054)
Depreciation 3 66,243 10,740 38,392 7,774
Amortisation 3 37,881 139,697 9,931 98,478
Finance Costs 7 220,545 204,681 138,742 200,844
Gain on measurement of financial assets 22 (456,803) - (456,803) -
Employee share schemes 4 58,692 52,792 58,692 52,792
Tax (credit) / expense 9 (172,615) 4,840 - -
Tax paid (5,396) (4,840) - -
Net Cashflow from Operating Activities (2,850,851) (1,284,780) (2,973,370) (1,375,635)
Cashflow From Investing Activities
Investment in intangible assets 11 (183,796) - (183,796) -
Purchase of tangible assets 12 - (2,001) - -
Acquisition of subsidiaries, net of cash acquired 10 (645,390) - (700,000) -
Net Cashflow from Investing Activities (829,186) (2,001) (883,796) -
Cashflows From Financing Activities
Proceeds from issue of ordinary shares 6,639,135 1,043,651 6,639,135 1,043,651
Share issuance costs (318,124) (18,461) (318,124) (18,461)
Interest paid on convertible loan notes (168,000) (168,000) (168,000) (168,000)
Proceeds from issue of shares in subsidiary to non-controlling interests - 14,300 - -
Interest paid (1,638) (1,592) (186) (460)
Payments for right of use assets (43,734) (148,536) (13,507) (108,513)
Net Cash Inflow from Financing Activities
6,107,639 721,362 6,139,319 748,217
Net Increase in Cash & Cash Equivalents 2,427,602 (565,419) 2,282,151 (627,418)
Foreign Currency Translation Difference (12,881) 9,595 - -
Cash and Cash Equivalent at the beginning of the period 958,341 1,514,166 824,667 1,452,085
Cash and Cash Equivalent at the end of the period 3,373,062 958,341 3,106,818 824,667
Notes to the Financial Information
1 Accounting Policies
1.1 The Group and its operations
Crossword Cybersecurity plc (the "Company") is a Company incorporated on 6
March 2014 in England and Wales under the Companies Act 2006. The Company is
the parent company of the Crossword Group of Companies focusing on the
cybersecurity sector. The principal activities are the development and
commercialisation of university research-based cyber security related software
and cybersecurity consulting.
The financial information includes the results of the Company and its
subsidiaries (together referred to as the "Group" and individually as "Group
entities").
The principal accounting policies applied in the preparation of the financial
information are set out below. These policies have been consistently applied
to all the periods presented, unless otherwise stated.
1.2 Basis of preparation of financial information
The financial information has been prepared in accordance with the
requirements of the London Stock Exchange plc AIM Rules for Companies and in
accordance with International Financial Reporting Standards as adopted in the
United Kingdom ("UK adopted IFRS") and those parts of the Companies Act 2006
applicable to companies reporting in accordance with UK adopted IFRS.
The financial information has been prepared on the historical cost basis. The
preparation of financial information in conformity with UK adopted IFRS
requires the use of certain critical accounting estimates. It also requires
management to exercise its judgement in the process of applying the Group's
accounting policies. Changes in assumptions may have a significant impact on
the financial information in the year the assumptions changed. Management
believes that the underlying assumptions are appropriate. The areas involving
a higher degree of judgement or complexity, or areas where assumptions and
estimates are significant to the financial information are disclosed in note
1.21.
Changes in accounting policy and disclosures
There were no changes in the accounting policy and disclosures in the current
financial year.
At the year end, the following standards and interpretations which have not
been applied in these financial statements were in issue but not yet
effective. The group is considering their impact but do not expect a material
on the future results of the Group.
New standards, interpretations and amendments adopted in current period
The following new standards or amendments to existing standards were
applicable for the first time and have not had an impact on the financial
statements.
Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 Interest Rate
Benchmark Reform - Phase 2 (issued in August 2020)
The amendments are aimed at helping companies to provide investors with useful
information about the effects of the reform of interest rate benchmarks on
those companies' financial statements.
The amendments complement those issued in 2019 and focus on the effects on
financial statements when a company replaces the old interest rate benchmark
with an alternative benchmark rate as a result of the reform. The Phase 2
amendments relate to:
· changes to contractual cash flows-a company will not have to
derecognise or adjust the carrying amount of financial instruments for changes
required by the reform, but will instead update the effective interest rate to
reflect the change to the alternative benchmark rate;
· hedge accounting-a company will not have to discontinue its hedge
accounting solely because it makes changes required by the reform, if the
hedge meets other hedge accounting criteria; and
· disclosures-a company is required to disclose information about
new risks arising from the reform and how it manages the transition to
alternative benchmark rates.
The Group has not had a material impact on its consolidated financial
statements from these amendments.
New standards, interpretations and amendments not yet adopted
The Group adopt early the following amendments to standards which are not yet
mandatory.
IFRS 17 Insurance Contracts (including the June 2020 Amendments to IFRS 17,
effective from 1 January 2023)
Amendments to IFRS 3 Business Combinations - Reference to the Conceptual
Framework (effective from 1 January 2022)
Amendments to IAS 16 Property, Plant and Equipment - Proceeds before Intended
Use (effective from 1 January 2022).
Amendments to IAS 8 Accounting Policies, Changes in Accounting Estimates and
Errors - Definition of Accounting Estimates (effective 1 January 2023).
Amendments to IAS 1 Presentation of Financial Statements and IFRS Practice
Statement 2: Disclosure of Accounting policies (effective 1 January 2023).
Amendments to IAS 12 Income Taxes - Deferred Tax related to Assets and
Liabilities arising from a Single Transaction (effective 1 January 2023).
Amendments to IAS 1 Presentation of Financial Statements - Classification of
Liabilities as Current or Non-current (effective 1 January 2024).
1.3 Going Concern
The financial information has been prepared on a going concern basis. The
Group's business model has been enhanced following the two acquisitions in
2021 and a further acquisition in early 2022. The Group's operations have
incurred a loss in the financial year whilst the Group's products and services
continue to be enhanced, developed and brought to market. The Directors
forecast in 2022 show a trading loss with net cash outflows as the business
continues to develop and enhance its products and services and grows revenue.
In 2021, the Groups operations have been supported by cash inflows from
customers and from the issue of £6.3m equity net of costs during 2021.
The Directors have considered the Group's future and forecast business and
cash requirements. Following the completion of successful fundraises in 2021,
the Directors have determined that the group wants to continue to expand,
potentially through future acquisitions, which will require a further fund
raise in 2022.
In December 2022, the £1.4m convertible loan notes mature and will either be
converted to equity, repaid, or re-negotiated. The outcome of the settlement
of the convertible loan notes is uncertain but may require further finance for
repayment of the debt.
Whilst the Group has £3.4m as cash and cash equivalent at 31 December 2021,
on 14 March 2022, the Group acquired another acquisition for a total
consideration of £1.5m.
The Directors have concluded that these circumstances could give rise to a
material uncertainty arising from events or conditions that may cast
significant doubt on the entity's ability to continue as a going concern if a
further fund raise was unsuccessful. However, considering recent successful
fund raises the Directors are confident that they can continue to adopt the
going concern basis in preparing the financial statements.
The financial statements do not include any adjustment that may arise in the
event that the Group is unable to raise finance, realise its assets and
discharge its liabilities in the normal course of business.
1.4 Basis of consolidation
Subsidiaries are fully consolidated from the date on which control is
transferred to the Group. Control exists when then the Group has:
- the power over the investee;
- exposure, or rights, to variable returns from its involvement with the
investee;
- the ability to use its power over the investee to affect the amount of the
investor's returns.
All intra-Group transactions balances income and expenses are eliminated on
consolidation. Uniform accounting policies are applied by the Group entities
to ensure consistency.
1.5 Revenue
Revenue comprises the fair value of consideration received or receivable for
licence income and the rendering of services in the ordinary course of the
Group's activities. Revenue is shown net of value added tax and trade
discounts. Income is reported as follows:
(a) Licence income
Technology and product licensing revenue represents amounts earned for
licenses granted under licensing agreements and recognized over time. Revenues
relating to up-front payments are recognised when the obligations related to
the revenues have been completed.
Revenues for maintenance and support services are recognised in the accounting
periods in which the services are rendered.
(b) Rendering of Services
Services relate to implementation and deployment fees for the technology and
products licensed to customers. Revenue is recognised in the accounting
periods in which the services are rendered.
(c) Consulting
Consulting revenue is recognised when the performance obligation is met,
primarily at a point of time. Contracts are structured to support the
revenue recognition process by stating what the objectives and deliverables
are for each part of the project, and the revenue attributable to each
deliverable.
1.6 Functional and presentation currency
The presentation currency of the Group is pounds sterling (GBP). The
functional currency of the Company is pounds sterling. The functional currency
of the Company's polish subsidiary is Polish Zloty (PLN).
1.7 Business combinations
The acquisition of subsidiaries is accounted for using the acquisition method.
The cost of the acquisition is measured as the aggregate of the fair values,
at the date of exchange, of assets given, liabilities incurred or assumed, and
equity instruments issued by the Group in exchange for control of the
acquiree. Acquisition related costs are recognised in the income statement as
incurred.
Any contingent consideration to be transferred by the Group is recognised at
fair value at the acquisition date. Subsequent changes to the fair value of
the contingent consideration that is deemed to be an asset or liability is
recognised in the consolidated income statement. Contingent consideration that
is classified as equity is not remeasured, and its subsequent settlement is
accounted for within equity.
Goodwill arising on acquisition is recognised as an asset and initially
measured at cost, being the excess of the cost of the business combination
over the Group's interest in the net fair value of the identifiable assets,
liabilities and contingent liabilities recognised. For the purpose of
impairment testing, goodwill acquired in a business combination is, from the
acquisition date, allocated to the cash generating unit ("CGU") that is
expected to benefit from the synergies of the combination. CGU to which
goodwill has been allocated is tested for impairment annually, or more
frequently when there is an indication that the unit may be impaired. Any
impairment loss is recognised directly in the income statement.
1.8 Foreign operations
The assets and liabilities of foreign operations are translated into Pound
sterling using the exchange rates at the reporting date. The revenues and
expenses of foreign operations are translated into Pound sterling using the
average exchange rates, which approximate the rates at the dates of the
transactions, for the period.
All resulting foreign exchange differences are recognised in other
comprehensive income through the foreign currency reserve in equity.
On disposal of a foreign operation, the cumulative exchange differences
recognised in the foreign exchange reserve relating to that operation up to
the date of disposal are transferred to the consolidated statement of
comprehensive income as part of the profit or loss on disposal.
1.9 Intangible assets - research and development
Expenditure on research is written off in the period in which it is incurred.
Development expenditure incurred on specific projects is capitalised where the
management is satisfied that the following criteria have been met:
• it is technically feasible to complete the software
product so that it will be available for use;
• management intends to complete the software product
and use or sell it;
• there is an ability to use or sell the software
product;
• it can be demonstrated how the software product will
generate probable future economic benefits;
• adequate technical, financial and other resources to
complete the development and to use or sell the software product are
available; and
• the expenditure attributable to the software product
during its development can be reliably measured.
Directly attributable costs that are capitalised as part of the software
product include the software development employee costs and an appropriate
portion of relevant overheads.
Other development expenditure that does not meet these criteria is recognised
as an expense as incurred.
1.10 Property, plant and equipment
Property, plant and equipment is stated at purchase price less accumulated
depreciation and impairment losses. The cost includes all expenses directly
related to the purchase of a relevant asset.
All other repair and maintenance costs are charged to the income statement for
the period during the reporting period in which they are incurred.
1.11 Depreciation and amortisation
Each item of property, plant and equipment is depreciated using the
straight-line method over the estimated useful life and depreciation charge is
included in the income statement for the period.
The depreciation is charged to the income statement for the period and
determined using the straight-line method over the estimated useful life of
the item of property, plant and equipment.
The expected useful lives of property, plant and equipment in the reporting
and comparative periods are as follows: Useful lives in years
Computers
3.33
Furniture & fittings
3.33
Computer software development expenditure recognised as assets is amortised on
a straight-line basis over their estimated useful lives, which does not exceed
5 years.
1.12 Impairment of non-financial assets
The residual value of an asset is the estimated amount that the Group would
currently obtain from disposal of the asset less the estimated costs of
disposal, if the asset was already of the age and in the condition expected at
the end of its physical life.
The assets' residual values and useful lives are reviewed, and adjusted if
appropriate, at each reporting date.
At the end of each reporting period management assesses whether the indicators
of impairment of property, plant and equipment exists.
The carrying amounts of property, plant and equipment and all other
non-financial assets are reviewed for impairment if there is any indication
that the carrying amount may not be recoverable.
For the purpose of impairment testing the recoverable amount is measured by
reference to the higher of value in use (being the net present value of
expected future cashflows of a relevant cash generating unit) and fair value
less costs to sell (the amount obtainable from the sale of an asset or cash
generating unit in an arm's length transaction between knowledgeable, willing
parties who are independent from each other less the costs of disposal).
Where there is no binding sale agreement or active market, fair value less costs to sell is based on the best information available to reflect
the amount the Group would receive for the cash generating unit.
A cash generating unit is the smallest identifiable group of assets that
generates cash inflows that are largely independent of the cash inflows from
other assets or groups of assets.
If the carrying amount of the asset exceeds its recoverable amount, the asset
is impaired and an impairment loss is charged to the income statement so as to
reduce the carrying amount in the statement of financial position to its
recoverable amount.
A previously recognised impairment loss is reversed if the recoverable amount
increases as a result of a reversal of the conditions that originally resulted
in the impairment.
This reversal is recognised in profit or loss for the period and is limited to
the carrying amount that would have been determined, net of depreciation, had
no impairment loss been recognised in prior years.
1.13 Financial Instruments
Financial assets and financial liabilities are recognised when the Company
becomes a party to the contractual provisions of the instrument.
Financial assets and financial liabilities are initially measured at fair
value. Transaction costs that are directly attributable to the acquisition or
issue of financial assets and financial liabilities (other than financial
assets and financial liabilities at fair value through profit or loss)
are added to or deducted from the fair value of the financial assets or
financial liabilities, as appropriate, on initial recognition. Transaction
costs directly attributable to the acquisition of financial assets or
financial liabilities at fair value through profit or loss are
recognised immediately in profit or loss.
All financial instruments are classified in accordance with the principles of
IFRS 9 Financial Instruments.
1.13 a Financial assets
Classification of financial assets
Debt instruments that meet the following conditions are subsequently measured
at amortised cost:
• the financial asset is held within a business model
whose objective is to hold financial assets in order to collect contractual
cash flows; and
• the contractual terms of the financial asset give rise
on specified dates to cash flows that are solely payments of principal and
interest on the principal amount outstanding.
Debt instruments that meet the following conditions are subsequently measured
at FVTOCI:
• the financial asset is held within a business model
whose objective is achieved by both collecting contractual cash flows and
selling the financial assets; and
• the contractual terms of the financial asset give rise
on specified dates to cash flows that are solely payments of principal and
interest on the principal amount outstanding.
By default, all other financial assets are subsequently measured at FVTPL.
Amortised cost and effective interest method
The effective interest method is a method of calculating the amortised cost of
a debt instrument and of allocating interest income over the relevant period.
For financial instruments other than purchased or originated credit-impaired financial assets, the effective interest rate is the rate
that exactly discounts estimated future cash receipts (including all fees and points paid or received that form an integral part of the
effective interest rate, transaction costs and other premiums or discounts) excluding expected credit losses, through the expected life
of the debt instrument, or, where appropriate, a shorter period to the gross
carrying amount of the debt instrument on initial recognition. For purchased
or originated credit-impaired financial assets, a credit-adjusted effective
interest rate is calculated by
discounting the estimated future cash flows, including expected credit losses, to the amortised cost of the debt instrument on initial
recognition.
The amortised cost of a financial asset is the amount at which the financial
asset is measured at initial recognition minus the principal repayments, plus
the cumulative amortisation using the effective interest method of any
difference between that initial amount and the maturity amount, adjusted for
any loss allowance. On the other hand, the gross carrying amount of a
financial asset
is the amortised cost of a financial asset before adjusting for any loss
allowance.
Impairment of financial assets
The Company recognises a loss allowance for expected credit losses on
financial assets that are measured at amortised cost. The amount of expected
credit losses is updated at each reporting date to reflect changes in credit
risk since initial recognition of the respective financial instrument.
Expected credit loss measurement
The consolidated entity has applied the simplified approach to measuring
expected credit losses, which uses a lifetime expected loss allowance. To
measure the expected credit losses, trade receivables have been grouped based
on days overdue.
1.13 b Financial liabilities and equity
Debt and equity instruments are classified as either financial liabilities or
as equity in accordance with the substance of the contractual arrangement.
Equity instruments
An equity instrument is any contract that evidences a residual interest in the
assets of an entity after deducting all of its liabilities. Equity instruments
issued by the Company entity are recognised at the proceeds received, net of
direct issue costs.
Financial liabilities
All financial liabilities are subsequently measured at amortised cost using
the effective interest method or at "Fair Value Through Profit or Loss"
("FVTPL").
Financial liabilities at FVTPL
Financial liabilities are classified as at FVTPL when the financial liability
is contingent consideration of an acquirer in a business combination to which
IFRS 3 applies, or it is designated as at FVTPL.
Financial liabilities subsequently measured at amortised cost
Financial liabilities that are not 1) contingent consideration of an acquirer
in a business combination, 2) held-for-trading, or 3) designated as at FVTPL,
are subsequently measured at amortised cost using the effective interest
method.
The effective interest method is a method of calculating the amortised cost of
a financial liability and of allocating interest expense over the relevant
period. The effective interest rate is the rate that exactly discounts
estimated future cash payments (including all fees and points paid or received
that form an integral part of the effective interest rate, transaction costs
and other premiums or discounts) through the expected life of the financial
liability, or (where appropriate) a shorter period, to the amortised cost of a
financial liability.
Derecognition of financial liabilities
The Company derecognises financial liabilities when, and only when, the
Company's obligations are discharged, cancelled or they expire. The difference
between the carrying amount of the financial liability derecognised and the
consideration paid and payable, including any non-cash assets transferred or
liabilities assumed, is recognised in the statement of comprehensive income.
1.14 Leases
The Company assesses whether a contract is or contains a lease, at inception
of the contract. The Company recognises a right-of-use asset and a
corresponding lease liability with respect to all lease arrangements in which
it is the lessee, except for short-term leases (defined as leases with a lease
term of 12 months or less) and leases of low value assets. For these leases,
the Company recognises the lease payments as an administrative expense on a
straight-line basis over the term of the lease.
1.15 Taxes
Current tax is calculated using rates and laws enacted or substantively
enacted at the reporting date. Current tax is recognised in profit or loss
unless it relates to an item of other comprehensive income or equity whereby
it is recognised in other comprehensive income or equity respectively.
Deferred income tax is calculated using rates and laws enacted or
substantively enacted at the reporting date that are expected to apply on
reversal of the related temporary difference, and is determined in accordance
with the expected manner of recovery of the related asset.
Deferred income tax is recognised in profit or loss unless it relates to an
item of other comprehensive income or equity whereby it is recognised in other
comprehensive income or equity respectively.
1.16 Share Based Payments
On occasion, the Company has made share-based payments to certain Directors
and employees by way of issue of share options. The fair value of these
payments is calculated by the Company using the binomial option valuation
model and Monte Carlo simulation model.
The expense, where material, is recognised on a straight-line basis over the
period from the date of award to the date of vesting, based on the Company's
best estimate of the number of shares that will eventually vest.
1.16 Investments
Shares in subsidiary undertakings are stated at cost less provision for
impairment. Unlisted investments are measured at fair value through profit
or loss.
1.17 Intercompany Financing arrangements
The amortised cost methodology is applied to the financing arrangement between
the Company and subsidiary Crossword Consulting Limited. An assessment in
undertaken to determine the market rate of interest for a similar loan given
the credit rating of the subsidiary to apply discounting with the principal
conceptually including a financing element.
1.18 Pension Obligations
The Group operates a defined contribution pension scheme for employees in the
United Kingdom. A defined contribution scheme is a pension plan under which
the Group pays fixed contributions into a separate entity.
Contributions payable to the Group's pension scheme are charged to the income
statement in the year to which they relate. The Group has no further payment
obligations once the contributions have been paid.
In Poland, the Group pays the statutory employer's contribution into the
public pension scheme for each employee, but does not operate any pension
schemes. In 2021, the Group implemented the Employee Capital Plans (PPK)
programme which involved employee consultation and selection of a financial
institution.
1.19 Cash and Cash Equivalents
Cash comprises cash-in-hand and demand deposits. Cash equivalents are
short-term, highly liquid investments that are readily convertible to known
amounts of cash, and which are subject to an insignificant risk of change in
value.
1.20 Accounting for Government Grants
Government grants are not recognised until there is reasonable assurance that
the Group will comply with the conditions attached to them and that the grants
will be received.
Government grants are recognised as income over the periods necessary to match
them with the costs for which they are intended to compensate, on a systematic
basis. Government grants that are receivable as compensation for expenses or
losses already incurred or for the purpose of giving immediate financial
support to the Group with no future related costs are recognised in the income
statement in the period in which they become receivable.
UK Government Furlough Funding is netted of against Gross Staff Costs in the
period in which it is incurred, while all other grants recognised as income
are presented within Other Operating Income.
1.21 Critical accounting estimates and judgements and key sources of
estimation uncertainty
Estimates and judgements are continually evaluated and are based on experience
and other factors, including expectations of future events that are believed
to be reasonable under the circumstances.
The following are the key estimates that the directors have made in the
process of applying the Group's accounting policies and have the most
significant effect on the amounts recognised in the financial information.
There are no further critical accounting judgements.
Fair value of options granted to employee
The Group uses the Binomial model and Monte Carlo simulation model in
determining the fair value of options granted to employees under the Group's
various share schemes. The determination of the fair value of options requires
a number of assumptions. The alteration of these assumptions may impact
charges to the income statement over the vesting period of the award. Details
of the assumptions used are shown in note 4.
Convertible Loans
The Group has given consideration to the measurement and presentation of the
convertible loans.
On legal execution of the loans the financial liability is initially measured
at its fair value which is the face value of the loans. Immediately after
recognition, at fair value, the financial liability is measured at amortised
cost, using a reasonable estimate of the Group's cost of capital. The
difference between the fair value and the amortised cost is taken to the
P&L account.
Impairment
An impairment assessment of the carrying value in the Company of the
investment in subsidiaries is undertaken using an NPV model over the projected
cash flows, with a discount rate based on the assessment of weighted average
cost of capital.
Business combinations
The recognition of business combinations requires management to make estimates
in order to determine fair value of consideration payable on acquisition as
well as fair value of identifiable assets, particularly intangibles, and
liabilities acquired. These estimates are based on all available information
and in some cases assumptions with respect to the timing and amount of future
revenues and expenses associated with an asset.
Deferred tax
Deferred tax assets are recognised for unused tax losses to the extent that it
is probable that taxable profit will be available against which the losses can
be utilised. Significant management judgement is required to determine the
amount of deferred tax assets that can be recognised, based upon the likely
timing and the level of future taxable profits, together with future tax
planning strategies. The company has taxable temporary differences that partly
support the recognition of the losses as deferred tax assets based on the
above. The company has determined that it cannot recognise deferred tax assets
on all of the tax losses carried forward however, based on the likely
characteristics, timing and level of future taxable profits, together with
future tax planning strategies. Further details on taxes are disclosed in note
9.
2 Revenue and segmental information
An analysis of the Group's revenue for each period for its continuing
operations, is as follows:
£ Group 2021 Group 2020
Revenue from the sale of goods/licences 189,252 136,206
Revenue from the rendering of services 183,855 34,675
Revenue from Consulting 1,660,207 1,229,000
Revenue from Byzgen Limited for software development 137,823 203,030
Revenue from Cyberowl Limited for software development - 24,700
Total Revenue 2,171,137 1,627,611
The IFRS 8 Operating segments requires the Group to determine its operating
segments based on information which is provided internally. Based on the
internal reporting information and management structures within the Group, it
has been determined that there are two operating segments established in
accordance to differences in products and services provided - Software product
and services and Cybersecurity consulting.
These operating segments are based on the internal reports that are reviewed
and used by the Board of Directors (who are identified as the Chief Operating
Decision Makers ('CODM')) in assessing performance and in determining the
allocation of resources. There is no aggregation of operating segments.
The CODM reviews EBITDA (earnings before interest, tax, depreciation and
amortisation). The accounting policies adopted for internal reporting to the
CODM are consistent with those adopted in the financial statements. The
information regarding the Group's reportable segments is presented below:
2021 Software product and services Cybersecurity consulting Eliminations Total
£
Revenue 462,108 1,784,309 (75,280) 2,171,137
Cost of Sales (358,333) (1,598,845) - (1,957,178)
Gross Profit 103,775 185,464 (75,280) 213,959
Administrative expenses (2,703,009) (632,410) 75,280 (3,260,139)
Other operating income 358,727 - - 358,727
Financial income and expenses 323,725 (82,512) - 241,213
Loss for the year before taxation (1,916,782) (529,457) - (2,446,239)
Tax credit / (expense) 172,615 - - 172,615
Loss for the Year (1,744,167) (529,457) - (2,273,624)
Total Comprehensive Loss (1,757,387) (529,457) - (2,286,844)
Segment assets 8,178,282 1,029,509 (2,327,403) 6,880,388
Segment liabilities 2,924,439 1,762,053 (1,410,951) 3,275,541
EBITDA (2,168,462) (414,866) - (2,583,328)
2020
Revenue 553,946 1,285,293 (211,629) 1,627,611
Cost of Sales (483,580) (1,098,615) - (1,582,194)
Gross Profit 70,366 186,679 (211,629) 45,416
Administrative expenses (2,060,206) (472,097) 211,628 (2,320,675)
Other operating income 209,647 - - 209,647
Financial income and expenses (102,818) (105,067) - (207,885)
Loss for the year before taxation (1,883,011) (390,486) - (2,273,497)
Tax expense (4,840) - - (4,840)
Loss for the Year (1,887,850) (390,486) - (2,278,336)
Total Comprehensive Loss (1,878,256) (390,486) - (2,268,741)
Segment assets 2,480,051 375,437 (1,329,141) 1,526,348
Segment liabilities 2,129,509 1,340,505 (1,205,654) 2,264,360
EBITDA (1,625,501) (284,918) - (1,910,419)
During the year ended 31 December 2021 approximately 17% (2020: 32%) of the
consolidated entity's external revenue was derived from sales to a major
United Kingdom client. No other clients accounted for 10% or more of the
consolidated entity's external revenue.
No analysis of net assets by geographic segment is provided as the net assets
are principally all within the UK.
3 Expenses by nature
Expenses By Nature
£ Group 2021 Group 2020
Staff and related costs 3,305,430 2,643,670
Consultancy and related costs 450,028 280,917
Professional fees 616,791 268,567
Property related costs 172,823 82,776
Depreciation 66,243 150,437
Amortisation 37,881 -
Capitalised costs (138,067) -
Other expenses 706,188 476,502
Total cost of sales and administrative expenses 5,217,317 3,902,870
Expenses by geographic location
£ Group 2021 Group 2020
UK 4,695,737 3,410,235
Poland 521,580 492,635
Total cost of sales and administrative expenses 5,217,317 3,902,870
4 Staff Costs
Staff costs, including directors' remuneration, were as follows:
£ Group 2021 Group 2020 Company 2021 Company 2020
Wages and salaries 2,924,357 2,454,980 1,321,393 1,150,153
Furlough receipts for wages and salary - (93,510) - (36,218)
Social security costs 327,012 243,642 142,103 119,755
Furlough receipts for social security costs - (6,363) - (2,430)
Other pension costs 54,061 46,509 37,003 31,470
Furlough receipts for pension costs - (1,588) - (625)
3,305,430 2,643,670 1,500,499 1,262,106
The average monthly number of employees, including the directors, during the
period was as follows:
Group 2021 Group 2020 Company 2021 Company 2020
Staff 42 34 17 13
Directors 9 10 8 8
Total 51 44 25 21
Share based payments
The amount recognised in respect of share-based payments was £58,692 (2020:
£52,792).
The Group has established share option programmes that entitle certain
employees to purchase shares in the Group.
There are no performance conditions attaching to these options. 5,840 options
were exercised in 2021 (133,330 in 2020).
Total options issued as at 31 December 2021 amount to 2,348,653 (2020:
2,065,730, re-stated for share split).
"The share options have been valued using a binomial model applying the
following inputs:
• Exercise price - equal to the share price at grant date,
• Vesting date - all options vest in three tranches, on the first, second
and third anniversary from the grant date;
• Expiry/Exercise date - 10 years from the grant date;
• Volatility (sigma) - 40%. This has been calculated based on the historic
volatility of the Company's share price.
• Risk free rate - yield on a zero coupon government security at each grant
date with a life congruent with the expected option life;
• Dividend yield - 0%,
• Future staff turnover - 0%. We have however adjusted the P+L charge for
the current year (and future years) to account for lapsed options due to
Leavers; and
• Performance conditions - none."
Reconciliation of share options - Company
Weighted average exercise price Weighted average exercise price
2021 2021 2020 2020
£ £
1st January 2,065,730 0.36 1,888,890 0.26
Granted during the period 352,923 0.36 496,840 0.70
Lapsed during the period (64,160) 0.36 (186,670) 0.31
Exercised during the period (5,840) 0.28 (133,330) 0.28
End of the period 2,348,653 0.36 2,065,730 0.36
The 2020 numbers and 2021 opening have been re-stated for share split (note
19).
The weighted average share Price at the exercise date was £0.36.
The range of exercise prices is from £0.05 to £0.55.
The weighted average remaining life of the options was 6.5 years (2020: 6.7
years).
5 Directors' Remuneration
The remuneration of the Directors who served in the current year was as
follows:
2021 Basic Salary and Fees Bonus Taxable Benefits Employer's Pension Contribution Total
£
Executive Directors
Tom Ilube 128,311 3,942 1,318 133,572
Mary Dowd* 130,000 10,000 140,000
-
Non-Executive Directors -
Sir Richard Dearlove 25,000 25,000 50,000
Ruth Anderson 12,000 12,000
Andy Gueritz 16,000 16,000
Gordon Matthew 6,000 6,000
Dr David Secher 16,000 16,000
Prof David Stupples 4,750 4,750
Robert Coles 7,250 7,250
Tara Cemlyn-Jones 7,231 7,231
Total 352,541 - 28,942 11,318 392,801
2020
£
Executive Directors
Tom Ilube 126,622 3,689 1,314 131,625
Mary Dowd* 130,000 10,000 140,000
-
Non-Executive Directors -
Sir Richard Dearlove 25,000 25,000 50,000
Ruth Anderson 12,000 12,000
Andy Gueritz 16,000 16,000
Gordon Matthew 12,000 12,000
Dr David Secher 16,000 16,000
Prof David Stupples 12,000 12,000
Total 349,622 - 28,690 11,314 389,625
* Denotes highest paid director
Share Options issued
Year Share Options Exercise Price Total Value
Mary Dowd 2020 25,000 £ 0.31 £ 2,903
Sir Richard Dearlove 2020 94,340 £ 0.27 £ 9,496
Sir Richard Dearlove 2021 70,423 £ 0.36 £ 25,000
During the year the Company implemented a Long Term Incentive Plan (LTIP)
whereas awards have been made to the following executives - Mary Dowd, Stuart
Jubb, Jake Holloway and Sean Arrowsmith. Each award is of nominal cost
(£0.005) options to acquire up to 750,000 Crossword ordinary shares of 0.5p
each which vest at the average mid-market price of the Ordinary Shares over
the 20 trading days preceding the end of the performance period which ends on
30 September 2024. 25% of the options will vest if the Award Price is 50p, and
100% will vest if the Award Price is equal to or greater than 100p, with
straight line vesting between 50p and 100p.
6 Other Operating Income
Group 2021 Group 2020
£ £
Research & development tax credits 206,380 209,647
Grant Income 152,347 -
358,727 209,647
The grant income represents award from Innovate UK for Group's participation
in feasibility studies on digital supply chain.
7 Finance Costs
Group 2021 Group 2020
£ £
Finance Cost of Financial Liabilities (Loan Notes) 184,149 196,546
Interest on deferred and contingent considerations 34,978 -
Company right to use assets Interest 187 4,298
Crossword Cybersecurity sp z.o.o. right to use assets interest 452 2,705
Crossword Consulting Ltd Overdraft Annual Fees & Interest 735 876
Crossword Cybersecurity Spolka z.o.o Interest 44 256
220,545 204,679
8 Auditor's Remuneration
The expenses for services rendered by the Group auditor present themselves as
follows:
£ Group 2021 Group 2020
Fees for the parent company individual and consolidated financial statements 46,000 40,250
Fees for legal audit of subsidiary financial information 17,000 6,204
Fees for tax advisory services - 6,000
63,000 52,454
9 Tax
£ Group 2021 Group 2020
Current income tax expense 5,396 4,840
Deferred tax credit (178,011) -
Total tax (credit) / expense (172,615) 4,840
There is no tax charge in respect of other comprehensive income.
The deferred tax liability arising on fair value revaluation on acquisitions
of Verifiable Credentials Ltd and Stega UK Ltd (note 10) has been offset with
a deferred tax asset recognised in respect of losses brought forward from
prior periods, resulting in deferred tax credit to the statement of
comprehensive income.
There is a deferred tax liability of £114,201 arising on the fair value
uplift of £456,803 of the unlisted investment in CyberOwl Limited. This
deferred tax liability has been offset by trading losses of the group.
Corporation tax losses carried forward for offset against future year's
trading profits amount to approximately £4,800,000 (2020: £4,400,000).
£ Group 2021 Group 2020
Loss before taxation 2,446,239 2,273,497
Average rate of corporation tax 19.00% 19.00%
Tax on loss (464,785) (431,964)
Effects of:
Expenses not deductible for tax purposes 24,578 17,640
Depreciation for the period in excess of capital allowances 104,124 150,437
Trading loss carried forward 508,699 259,047
Total tax charge 172,615 (4,840)
Factors that may affect future tax changes
The rate of corporation tax in the United Kingdom had been expected to reduce
from 19% to 17% per cent from 1 April 2020. However in March 2020 it was
announced that the rate would continue at 19%. In March 2021 it was announced
that UK corporation tax rates would rise to 25% from
2023.
Polish Corporation Tax has been 19% until 1 January 2017, when Crossword
started to benefit from the new small companies reduced rate of 15% adopted by
the Parliament Act amendment to Polish CIT
Law.
10 Business Combinations
On 26 May 2021 the Group acquired 100% of the issued share capital of
Verifiable Credentials Ltd ("VCL"), the provider of Identiproof, the World
Wide Web Consortium verifiable credentials compatible middleware and wallet
technology.
The net consideration used in the acquisition of VCL and the provisional fair
value of assets acquired and liabilities assumed on the acquisition date are
detailed below:
£ Book value Adjustment Fair value
Intangible assets 127,306 477,728 605,034
Tangible assets 1,098 1,098
Non-current assets 128,404 477,728 606,132
Trade and other receivables 69,538 - 69,538
Cash and cash equivalents 37,684 - 37,684
Current assets 107,222 - 107,222
Other non-current liabilities 135,953 - 135,953
Deferred tax liability - 95,545 95,545
Non-current liabilities 135,953 95,545 231,498
Trade and other payables 101,421 - 101,421
Current liabilities 101,421 - 101,421
Total fair value of net assets acquired (1,748) 382,183 380,435
Fair value of consideration
Cash on completion 100,000
Shares at acquisition date 150,000
Deferred consideration in shares 130,435
Total consideration 380,435
Goodwill -
Acquisition costs of £17,345 arose as a result of the transaction, which have
been recognised as part of administrative expenses in the statement of
comprehensive income.
The Share Purchase Agreement stipulates that contingent consideration becomes
payable once certain revenue targets are achieved, this can range from 0 to
£750k for the first earn-out period (12 months after acquisition) and from 0
to £1.5m for the second earn-out period (24 months after acquisition). The
management estimates that it is unlikely that the company will achieve the
revenue necessary to trigger earn-out payments for both periods, hence no
contingent consideration has been recorded. The company did not generate any
revenue in 2021.
On 9 August 2021 the Group acquired 100% of the issued share capital of Stega
UK Ltd ("Stega"), the threat intelligence and monitoring company.
The net consideration used in the acquisition of Stega and the provisional
fair value of assets acquired and liabilities assumed on the acquisition date
are detailed below:
£ Book value Adjustment Fair value
Intangible assets - 354,301 354,301
Tangible assets 30,509 (24,437) 6,072
Non-current assets 30,509 329,864 360,373
Trade and other receivables 86,619 - 86,619
Cash and cash equivalents 16,927 - 16,927
Current assets 103,546 - 103,546
Bank loans 68,000 - 68,000
Deferred tax liability - 82,466 82,466
Non-current liabilities 68,000 82,466 150,466
Trade and other payables 82,990 - 82,990
Current liabilities 17,000 - 17,000
Current liabilities 99,990 - 99,990
Total fair value of net assets acquired (33,935) 247,398 213,463
Fair value of consideration
Cash on completion 600,000
Shares at acquisition date 100,000
Deferred consideration in cash 134,435
Deferred consideration in shares 84,022
Contingent consideration in cash 119,604
Contingent consideration in shares 50,679
Total consideration 1,088,740
Goodwill 875,277
The goodwill relates mainly to the expected synergies and assembled workforce
that do not meet criteria for recognition as a separate intangible
assets.
The acquisition terms include additional consideration which is contingent
upon achieving certain revenue targets. The contingent consideration ranges
from 0 to £420k for the first earn-out period (12 months after acquisition)
and from 0 to £420k for the second earn-out period (18 months after
acquisition).
The Group has recorded the contingent consideration at management's estimate
of fair value. For the specific purpose of estimating the fair value of the
contingent liability, management assumes that Stega UK Ltd will achieve
revenue target in the second earn-out period, that the contingent
consideration will consequently become payable, and that the timing and the
amount of the resulting cash outflows will be consistent with the terms
outlined in the agreement with the seller.
Acquisition costs of £17,780 relating to this transaction have been
recognised as part of administrative expenses in the statement of
comprehensive income.
Since the acquisition date, Stega has contributed £210,650 to group revenues
and £93,177 to group loss. If the acquisition had occurred on 1 January 2021,
group revenue would have been £2,500,250 and group loss for the period would
have been £2,535,237.
These two acquisitions help to implement Group's strategy to create a
portfolio of subscription-based, enterprise-class products and services for
its
clients.
11 Intangible Assets
Software Development
£ Group 2021 Group 2020 Company 2021 Company 2020
Cost b/f - - - -
Acquired through business combinations 957,764 - 347,738 -
Additions 183,796 183,796
1,141,560 - 531,534 -
Accumulated Depreciation
B/F - - - -
Charge for the period 37,881 - 9,931 -
C/d 37,881 - 9,931 -
Net Book Value 1,103,679 - 521,603 -
Intangible assets comprise of 3 different software development projects with
remaining useful life of approximate 5 years each and the carrying amounts of
£676,022, £326,351 and
£101,306.
12 Tangible Assets
Computers
£ Group 2021 Group 2020 Company 2021 Company 2020
Cost b/f 24,675 22,674
Additions - 2,001
Acquired through business combinations 7,170 -
31,845 24,675 - -
Accumulated Depreciation
B/F 21,124 18,157
Charge for the period 4,924 2,966
Translation adjustments 337 -
C/d 26,385 21,124 - -
Net Book Value 5,460 3,551 - -
Furniture and Fittings
£ Group 2021 Group 2020 Company 2021 Company 2020
Cost b/f 15,157 15,157 15,157 15,157
15,157 15,157 15,157 15,157
Accumulated Depreciation
B/F 12,009 4,235 12,009 4,235
Charge for the period 3,148 7,773 3,148 7,773
C/d 15,157 12,009 15,157 12,009
Net Book Value - 3,148 - 3,148
Right of Use Assets
£ Group 2021 Group 2020 Company 2021 Company 2020
Cost b/f 344,058 344,058 231,935 231,935
Disposals (344,058) - (231,935) -
- 344,058 - 231,935
Accumulated Depreciation
B/F 280,694 140,996 196,687 98,209
Charge for the period 58,171 139,697 35,248 98,478
Translation adjustments 5,193 - - -
Disposals (344,058) - (231,935) -
C/d - 280,694 - 196,687
Net Book Value - 63,365 - 35,248
Total
£ Group 2021 Group 2020 Company 2021 Company 2020
Cost b/f 383,890 381,889 247,092 247,092
Additions/(disposals) (344,058) 2,001 (231,935) -
Acquired through business combinations 7,170 - - -
47,002 383,890 15,157 247,092
Accumulated Depreciation
B/F 313,826 163,389 208,696 102,445
Charge for the period 66,243 150,437 38,396 106,252
Translation adjustments 5,530 - - -
Disposals (344,058) - (231,935) -
C/d 41,542 313,826 15,157 208,696
Net Book Value 5,460 70,064 - 38,395
13 Unlisted Investments
Group 2021 Group 2020 Company 2021 Company 2020
Fair value at 1 January and 31 December 456,834 31 456,834 31
The above Group investment represents Crossword Cybersecurity Plc's 2021 -
4.4% (2020 - 4.4%) holding in CyberOwl Limited which was purchased on 18 April
2016.
The investment has been revalued at a fair value following successful
fundraise by CyberOwl in February
2022.
14 Investment in subsidiaries
£ 2021 2020
Cost b/f 1 January 458,164 11,017
Acquired during the year 1,088,740 -
Capital contribution 90,614 447,147
Cost c/f 31 December 1,637,518 458,164
The group's subsidiary undertakings are listed below, including name, country
of incorporation, and proportion of ownership interest:
Name Registered office Principal activity 2021 2020
6th Floor, 60 Gracechurch Street, London EC3N 0HR United Kingdom % %
Crossword Consulting Limited Cybersecurity services 90
9
0
Crossword Cybersecurity SP Z.o.o. ul. Wiejska 12a, 00-490 Warszawa, Poland Cybersecurity services 100 100
Stega UK Ltd 6th Floor, 60 Gracechurch Street, London EC3N 0HR United Kingdom Cybersecurity services 100 -
Verifiable Credentials Ltd 6th Floor, 60 Gracechurch Street, London EC3N 0HR United Kingdom Cybersecurity services 100 -
Crossword Cybersecurity LLC PO Box 808, Alwattayah / Muttrah / Muscat Governorate, Postcode: 100, Oman Cybersecurity services 90 -
15 Trade and Other Receivables
£ Group 2021 Group 2020 Company 2021 Company 2020
Trade receivables 509,576 289,811 192,975 125,115
Other receivables 254,451 66,714 247,274 63,067
Prepayments 149,309 102,112 105,101 83,749
Accrued income 140,708 27,394 131,025 3,750
VAT Refund 12,033 11,881 - -
Intercompany receivables within one year - - 162,247 -
1,066,076 497,913 838,622 275,680
All of the above amounts are considered to be due within one
year.
The maximum exposure to credit risk at the reporting date is the carrying
value as above and the cash and cash equivalents and none are either past or
impaired.
Of the above amounts held within the Group, £18,419 is denominated in Polish
Zloty with the remainder in GBP (2020:
£15,529).
Foreign exchange risk is currently minimal as balances in Polish Zloty are
between the parent and its wholly owned
subsidiary.
16 Trade and Other Payables
£ Group 2021 Group 2020 Company 2021 Company 2020
Trade payables 331,043 204,243 459,753 372,359
Employment taxes and VAT payable 242,642 163,002 56,790 38,746
Accruals 226,623 403,997 164,284 289,488
Deferred income 331,198 101,438 94,333 71,789
Deferred consideration 261,606 - 261,606 -
Other payables 20,546 56,360 13,194 21,805
1,413,658 929,038 1,049,960 794,187
All of the above amounts are considered to be due within one year.
The deferred income relates to contract liabilities arising from contracts
with customers.
Of the Trade and Other Payables amounts held within the Group, £57,836 (2020:
£29,630) is denominated in Polish Zloty with the remainder in
GBP.
17 Other Current Liabilities
£ Group 2021 Group 2020 Company 2021 Company 2020
Convertible loan notes 1,351,471 - 1,351,471 -
Bank loan 17,167 - - -
1,368,638 - 1,351,471 -
18 Other Non-current Liabilities
£ Group 2021 Group 2020 Company 2021 Company 2020
Convertible loan notes - 1,335,322 - 1,335,322
Bank loan 68,000 - - -
Deferred consideration 111,900 - 111,900 -
Contingent consideration 180,652 - 180,652 -
Deferred grant income 132,693 - - -
493,245 1,335,322 292,552 1,335,322
19 Share Capital
Allotted called up and fully paid
Number of shares 2021 2020
B/f 51,320,900 46,805,610
Shares Issued in period 23,636,250 4,515,290
C/d 74,957,150 51,320,900
In May 2021 the company sub-divided each existing ordinary share of £0.05
into 10 new ordinary shares of £0.005 each.
The shares issued consequently were ordinary shares of £0.005 issued at a
premium of £6,452,830 (2020: £1,002,647).
All shares carry the same voting and capital distribution rights.
£
Share Capital 2021 2020
Cost b/f 256,605 234,061
Shares Issued in period 118,181 22,544
374,786 256,605
Share Premium
B/f 8,518,391 7,515,744
Shares Issued in period 6,452,830 1,002,647
C/d 14,971,221 8,518,391
20 Loss per share
Earnings per share is calculated by dividing the loss for the period
attributable to ordinary equity shareholders of the parent by the weighted
average number of ordinary shares outstanding during the
year.
During the year the calculation for basic loss per share was based on the loss
for the year attributable to owners of the parent of £2,229,296 (2020:
£2,249,707) divided by the weighted average number of ordinary shares of
64,491,462 (2020: 49,819,800, re-stated following share split in 2021).
21 Reserves
The following describes the nature and purpose of each reserve within owners'
equity
Reserve Description and purpose
Share capital This represents the nominal value of shares issued
Share premium Amount subscribed for share capital less any issue costs more than nominal
value
Equity reserve Represents amounts charged on share options that have been granted to
employees
Retained earnings Cumulative net gains and losses recognised in the consolidated statement of
comprehensive income
Translation of foreign operations Is the difference that arises due to consolidation of foreign subsidiaries
using an average rate during the period and a closing rate for the period end
statement of financial position
22 Financial Instruments
£
Current Financial Assets Group 2021 Group 2020 Company 2021 Company 2020
Financial assets measured at amortised cost
Trade and other receivables 904,735 383,920 733,521 191,932
Cash and cash equivalents 3,373,062 958,341 3,106,817 824,667
Non-Current Financial Assets
Financial assets measured at amortised cost
Loan to subsidiary - - 918,206 653,316
Financial assets measured at fair value through profit or loss
Financial investments 456,834 31 456,834 31
4,734,631 1,342,292 5,215,378 1,669,945
The financial investments comprise of investment in CyberOwl Ltd, which has
been revalued on the basis of valuation per share at as 1 February 2022 during
the investment round, multiplied by the number of shares the Company owns in
it. This methodology of determining a fair value equates to a level 2
assessment based on observed transactions of share price in recent
transactions in the entity's
equity.
£
Current Financial Liabilities Group 2021 Group 2020 Company 2021 Company 2020
Financial liabilities measured at amortised cost
Trade and other payables 839,818 664,599 898,836 683,653
Short-term loans and leases 1,368,638 - 1,351,471 -
Non-Current Financial Liabilities
Financial liabilities measured at amortised cost
Loans 68,000 1,335,322 - 1,335,322
Non-current deferred consideration 111,900 - 111,900 -
Financial liabilities measured at fair value through profit or loss
Non-current contingent consideration 180,652 - 180,652 -
2,569,008 1,999,921 2,542,858 2,018,974
The contingent consideration becomes payable upon achieving certain revenue
targets stipulated in Share Purchase Agreement of Stega.
The fair value of the liability was established by using income approach, i.
e. management's estimate that Stega will achieve its revenue target for the
period between 12 and 18 months from the date of acquisition based on the
latest internal revenue forecasts (IFRS 13 Level 3 hierarchy approach) and was
determined by calculating the present value of estimated future cash outflows
using the discount rate adjustment technique (the discount rate of 15% has
been applied).
Reconciliation of Level 3 fair value measurements of financial
liabilities:
£ Contingent consideration
B/f -
Fair value on initial recognition 170,283
Interest 10,369
C/d 180,652
Lease capital liabilities of the group and of the company amounted to £nil in
2021 (2020: £43,734 and £13,416 respectively).
23 Financial Instruments - Risk
The Group could be exposed to risks that arise from its use of financial
instruments. Risks in relation to financial assets
include:
Market
risk
Market risk covers foreign exchange risk, price risk and interest rate
risk.
As the majority of the Group's transactions are either in Sterling or in
Polish Zloty the Group considers its exposure to foreign exchange risk to be
minimal.
There are no derivatives and hedging
instruments.
The Group is not exposed to price risk given that no securities are held under
financial
assets.
The Group is not exposed to interest rate or cash flow risk due to the fact
that the Group has no borrowing or complex financial
instruments.
Credit
risk
Credit risk is considered to be the risk of financial loss incurred by the
Group in the event that a customer or counterparty to an asset fails to meet
contractual obligations. The Group has adopted a policy of only dealing with
credit worthy counterparties.
The Group's maximum credit exposure at the reporting date is represented by
the carrying value of its financial assets. The Group's financial instruments
do not represent a concentration of credit risk since the Group deals with a
variety of counterparties.
Financial Assets
£ Group 2021 Group 2020 Company 2021 Company 2020
Cash and cash equivalents 3,373,062 958,341 3,106,817 824,667
Trade and other receivables 904,735 383,920 733,521 191,932
Loan to subsidiary - - 918,206 653,316
Financial investments 456,834 31 456,834 31
Total 4,734,631 1,342,292 5,215,378 1,669,945
Liquidity
risk
Management monitor rolling forecasts of the Group's liquidity reserves, cash
and cash equivalents on the basis of expected cash flows and therefore
monitors liquidity risk sufficiently.
Financial Liabilities 2021 2020
£ due < 1 year due 1 - 2 years due < 1 year due 1 - 2 years
Trade payables 331,043 - 204,243 -
Accruals 226,623 - 403,997 -
Deferred consideration 261,606 111,900 - -
Contingent consideration - 180,652 - -
Other Payables 20,546 - 56,360 -
Loans 1,368,638 68,000 - 1,335,322
Total 2,208,456 360,552 664,600 1,335,322
24 Capital management
The Group considers its capital to comprise of its equity share capital, share
premium, foreign exchange reserve, share options reserve and capital
redemption reserve, less its accumulated losses. Quantitative detail is shown
in the consolidated statement of changes in equity.
The directors' objective when managing capital is to safeguard the Group's
ability to continue as a going concern in order to provide returns for the
shareholder and benefits for other stakeholders and to maintain an optimal
capital structure to reduce the cost of capital.
The directors monitor a number of KPIs at both the Group and individual
subsidiary level on a monthly basis. As part of the budgetary process, targets
are set with respect to operating expenses in order to effectively manage the
activities of the Group. Performance is reviewed on a regular basis and
appropriate actions are taken as required. These internal measures indicate
the performance of the business against budget/forecast and to confirm that
the Group has adequate resources to meet its working capital
requirements.
25 Pensions
Employer contributions to the Group defined contribution pension scheme for
employees in the United Kingdom were £51,485 (2020: £46,509). A defined
contribution scheme is a pension plan under which the Group pays fixed
contributions into a separate entity.
Contributions payable to the Group's pension scheme are charged to the income
statement in the year to which they relate. The Group has no further payment
obligations once the contributions have been
paid.
In Poland, the Group pays the statutory employer's contribution into the
public pension scheme for each employee, but does not operate any pension
schemes.
26 Related Party Transactions
Subsidiary Transactions
2021 Crossword Consulting Limited Crossword Cybersecurity SP Z.o.o Stega Verifiable Credentials Limited
UK
Limited
Services received from £ 274,099 580,704 7,000 -
Services supplied to £ - - - -
Balance trade payable to £ 150,311 102,067 4,200 -
Balance trade receivable from £ 165,757 - - 10,736
Intercompany loan receivable from £ 918,207 - - -
2020
Services received from £ 56,294 502,374 - -
Services supplied to £ 145,466 - - -
Balance trade payable to £ 5,629 189,541 - -
Balance trade receivable from £ 368,271 - - -
Intercompany loan receivable from £ 653,316 - - -
Tom Ilube, CEO, has made a loan of £250,000 to the Company on the same terms
as the other Lenders as described in Note
27.
The Company has a related party relationship with its key management who are
the Executives: Tom Ilube, Mary Dowd, Jake Holloway, Sean Arrowsmith and
Stuart Jubb, whose total compensation amounted to £744,483 (2020:
£697,924).
In March 2020, the subsidiary Crossword Consulting Limited issued 110,000 A
shares to Stuart Jubb, Managing Director of the subsidiary and member of the
executive team which equated to 10% of the subsidiary entity, for a
subscription price of £15,400, which was estimated to equate to fair
value.
27 Convertible Loan Notes
In 2019, the company received funds for £1.4m of Convertible Loan Notes.
The term of the loans is 3 years and the interest is 12% payable quarterly in
arrears. Early repayment is at the Company's sole option, subject to a
minimum repayment amount of £10,000. Repayment is at the end of the term,
in cash, save that each lender may opt to convert part or all of their loan
into Ordinary Shares at £0.48 (value adjusted following share split in
2021). On repayment of the Loans in cash, each lender will be issued
warrants valid for three months to subscribe for Ordinary Shares representing
10% of the value of the Loan at
£0.48.
Included among the loan notes is one from Tom Ilube, CEO, for an amount of
£250,000. Tom Ilube made a loan to the Company on the same terms as the other
Lenders as described above.
28 Controlling Party
The Company does not have a controlling
party.
29 Subsequent Events
On the 14th March 2022, Crossword Cybersecurity Plc acquired the whole of the
share capital of Threat Status Limited, the threat intelligence company and
provider of Trillion, the cloud based software as a service (SaaS) platform
for enterprise-level credential breach intelligence, for a total consideration
of £1,529,000 (£500,000 paid on completion and the rest deferred between
first and second anniversary of the transaction, all amounts are
undiscounted).
The acquisition of Threat Status adds a new cyber security offering to the
Group's portfolio, cross sell opportunities are currently being explored with
the acquisition, alongside operating synergies.
At the date of finalisation of these consolidated financial statements, the
necessary market valuations and other calculations in relation to acquisition
accounting had not been completed yet.
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