REG - Crossword Cybersec - 2022 Annual Report and Accounts and Notice of AGM
19/04/2023 07:00
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RNS Number : 6671W Crossword Cybersecurity PLC 19 April 2023
Crossword Cybersecurity Plc
2022 Annual Report and Accounts, Convertible Loan Notes and Investor
Presentation
19 April 2023 - 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 2022. 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 and will be 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 22(nd) May 2023 at 11.00am at the offices of
Shakespeare Martineau LLP, 6th Floor, 60 Gracechurch Street, London EC3V 0HR.
The Company will be hosting an update on the Investor Meet Company platform on
Tuesday 25th April at 12.00pm. The presentation is open to all existing and
potential shareholders. Investors can sign up to Investor Meet Company for
free and join the Company presentation via:
https://www.investormeetcompany.com/crossword-cybersecurity-plc/register-investor
(https://www.investormeetcompany.com/crossword-cybersecurity-plc/register-investor)
Financial Highlights
· Achieved highest growth rate since admission to AIM in 2018, with
revenue growing 68% to reach £3.65m
· 55% organic revenue growth
· 81% growth in ARR, year-end ARR of £2.4m
· 54% recurring revenue in 2022
· Significant investment in sales and marketing and product development
led to higher revenue per client, up 40% year on year
· Legal and Professional fees increased by c£250k, which included
costs of £346k relating to a potentially transformational transaction which
did not progress because the vendor made other choices for their business
· Oversubscribed £3.6m equity fund raise in September 2022
· Loss before taxation of £4.6 million (Restated 2021: £2.7 million).
For 2022 and the adjusted 2021 comparative numbers, R&D tax credits are
included in Tax and are no longer included in Other Operating Income as in
previous years
· Loss before taxation using the 2021 presentation was £3.8m (2021:
£2.4 million)
· Total loss for the year £3.4m, after £1.1m of tax credit.
· £2.1m cash and cash equivalents at year end
Operational Highlights
· Rizikon users grew to over 1,000 by the end of 2022
· Leonardo UK selected Rizikon to assist with assessment of supply
chain cyber risks, underlining Rizikon's capacity to deliver at scale
· Acquisition of Threat Status Limited, adding two new products:
Trillion™ (credential breach SaaS platform) and Arc (account protection for
e-commerce platform and organisations)
· Size of sales deals being secured by Trillion increased significantly
compared to before its acquisition by Crossword in March 2022
· Consulting increased its cross-selling drive, selling services into
numerous Rizikon clients and successfully introducing Nightingale to several
Consulting clients
· Integration of Arc into Sticky Password, one of the industry's most
well-established secure password vaults
· Opened an office in Singapore to support the 24/7 monitoring services
provided by Nightingale
· Launch of specialist Supply Chain Cyber Risk practice, with Rizikon
wrapped in a full-service consulting offer
· Oman Data Park (ODP) signed a strategic cooperation agreement to
provide cyber security risk services to over 800 government, corporate and
SME organisations and enhance the protection of the cyber security structure
of sensitive information in Oman
· The average number of Crossword employees grew to 63 during 2022, up
from 51 in 2021, representing a 24% increase
Post Period Highlights
· Launch of Ransomware Readiness Assessment service in March 2023,
helping organisations reduce their exposure to ransomware attacks.
Outlook
· Targeting revenue growth of circa 50% in 2023 to £6m
· Having invested significantly for rapid growth in 2022, the focus in
2023 is on establishing a clear path to profitability
· Increased emphasis on targeting larger clients that can make full use
of Crossword's range of products and services
R&D Tax Credits in FY2022 accounts have been reported in Tax, due to the
majority of the claim being under the SME scheme. Historically, R&D Tax
Credits have been reported as Other Operating Income. There has also been a
reclassification to R&D Tax Credits in FY2021.
Cash and Convertible Loan Notes
On 13 July 2022, the Company announced that Tom Ilube, CEO of Crossword,
intended to extend his £250,000 loan notes on the same terms as other loan
note holders; these loan notes expired in December 2022. Tom Ilube had been
unable to extend his convertible loan notes due to being in possession of
inside information relating to the potentially transformational transaction
referred to in the Chairman's Statement, which terminated earlier this year,
and due to the Company subsequently being in a closed period. Tom Ilube is
now in a position to complete loan notes of £250,000. These will be on the
same terms as other loan notes issued or extended in 2022 with the conversion
price based on the share price immediately prior to the date of issue. In
addition, other potential investors, including Dr. Robert Coles Non-Executive
Director of Crossword Cybersecurity Plc, have expressed interest in completing
additional convertible loan notes on the same terms. The Company expects to
make a further announcement shortly. Cash raised will be used to provide
additional general capital for the Group.
Following payment of fees relating to the potentially transformational
transaction which did not progress because the vendor made other choices and
1(st) anniversary earn out payment for Threat Status Limited, cash at 31 March
2023 was £0.5 million. The Company anticipates that it will need to raise
additional capital later this year as it continues to progress towards cash
break-even and further announcements in connection with this will be made in
due course.
Tom Ilube, CEO of Crossword Cybersecurity plc, commented:
"In 2022, Crossword achieved its highest growth rate since admission to AIM in
2018, with total revenue growing 68% to reach £3.65m in 2022.
In an environment of increasing number and complexity of cyber-attacks,
Crossword's business model centred around a strongly growing Consulting
division and specialist cyber security products and services with distinct
USPs, thrived in 2022.
Services (Consulting and Nightingale) recorded overall growth of 80%, of which
51% was recurring, as clients requested increased cyber consulting services
and monitoring to better evaluate their current and potential exposure to
cyber-attacks. In Products, Rizikon and Trillion both experienced strong
growth, with their specialist features acting as a distinct draw for
clients.
Rizikon user numbers grew to over 1,000 users by the year end, with continuous
improvement and the launch of new Rizikon modules based on client feedback
strengthening its offering year on year. We are confident in continued growth
for Rizikon as companies turn to technology solutions supported by specialist
consulting to address their supply chain cyber risk requirements.
The size of sales deals being secured by Trillion became noticeably larger
compared to before its acquisition by Crossword in March 2022, supported by an
increase in dedicated and specialist sales people, an increase in
cross-selling, supporting a number of Consulting activities, and inclusion in
the sales partnerships launched by Crossword during the period.
Increasing Annual Recurring Revenue (ARR) is a key objective for Crossword.
The value of the acquisitions made by Crossword in recent years shone through
powerfully in 2022, with all products and services experiencing strong growth.
In 2022, Crossword made solid progress in increasing ARR, posting an excellent
81% growth in ARR, with 54% recurring revenue in 2022 for the Company as a
whole.
In terms of specific products and services, Rizikon's ARR grew 43% during the
year, Nightingale's grew 29%, and vCISO's (virtual Chief Information Security
Officer) ARR grew 68%.
Crossword's focus on increasing the proportion of larger clients in its client
mix continued apace. Larger clients are able to make use of Crossword's
range of products and services and incrementally add to revenues year on year
as client relationships grow. We were pleased to see that Crossword's
increased investment in sales and marketing and products development is
reaping results, with average product and consulting revenue per client
increasing by 40% to £28,700 per client, up from £20,500 in 2021.
2022 was a year of significant investment for Crossword, as the Company
strengthened its foundations to seize the many market opportunities available.
Total cost of sales and administrative expenses increased by £2.6m in 2022
compared to 2021. The increase reflects the acquisition of Threat Status
Limited in March 2022, and their inclusion of Stega UK Limited, acquired in
August 2021, and Verifiable Credentials Limited, acquired in May 2021, for a
full year in the 2022 accounts. Legal and professional fees increased by
c£250k, reflecting Crossword's ongoing drive for acquisitions during 2022.
As an ambitious company, Crossword attempted to execute a transformational
acquisition in 2022. This would have doubled the size of the company and given
us critical mass in one step. However, after spending considerable effort and
resources, including £346,000 of legal and professional costs, we were unable
to complete the deal because the vendor made other choices for their business,
late in the process. We were able to minimise the impact on our core business
whilst we worked on this transaction, and therefore continued to drive
significant organic growth.
A primary driver for the increase in costs was a 24% increase in the average
number of staff during the year compared with 2021. In 2022, Crossword
invested significantly in sales and marketing and product development, which
are the areas that saw the largest FTE growth.
Having invested significantly for rapid growth in 2022, Crossword has now
shifted its focus in 2023 towards establishing a clear path to profitability.
Staff numbers have stabilised in 2023, with a strong foundation now in place
to drive the revenue growth and path to profitability. Profitability will be
underpinned by improving margins, as Consulting revenue scales to achieve
critical mass and as product revenues increase. Crossword's diversified
product and services offering will drive scale while containing risk.
The momentum from 2022 places Crossword in a strong position to achieve at
least 50% revenue growth in 2023 and our focus on margin improvement will
ensure that there is a clear, carefully managed route to achieving
profitability in the medium term."
- 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 / Jamie Barklem / Ciara Donnelly
Hybridan LLP (Broker) - Tel: +44 (0)203 764 2341
Claire Louise Noyce
For media enquiries contact:
Financial PR:
David Hothersall, Kinlan Communications
davidh@kinlan.net (mailto:davidh@kinlan.net) - Tel: +44 (0) 207 638 3435
General:
Duncan Gurney, GingerPR
duncan@gingerpr.co.uk (mailto:duncan@gingerpr.co.uk) - Tel: +44 (0)1932 485
300
About Crossword Cybersecurity plc
Crossword offers a range of cyber security solutions to help companies
understand and reduce cyber security risk. We do this through a combination of
people and technology, in the form of SaaS and software products, consulting,
and managed services. Crossword's areas of emphasis are cyber security
strategy and risk, supply chain cyber, threat detection and response, and
digital identity and the aim is to build up a portfolio of cyber security
products and services with recurring revenue models in these four areas. We
work closely with UK universities and our products and services are often
powered by academic research-driven insights. In the area of cybersecurity
strategy and risk our consulting services include cyber maturity assessments,
industry certifications, and virtual chief information security officer
(vCISO) managed services.
Crossword's end-to-end supply chain cyber standard operating model (SCC SOM)
is supported by our best-selling SaaS platform, Rizikon Assurance, along with
cost-effective cyber audits, security testing services and complete managed
services for supply chain cyber risk management. Threat detection and response
services include our Nightingale AI-based network monitoring, our Trillion and
Arc breached credentials tracking platforms, and incident response.
Crossword's work in digital identity is based on the World Wide Web Consortium
W3C verifiable credentials standard and our current solution, Identiproof,
enables secure digital verification of individuals to prevent fraud.
Crossword serves medium and large clients including FTSE 100, FTSE 250 and
S&P listed companies in various sectors, such as defence, insurance,
investment and retail banks, private equity, education, technology and
manufacturing and has offices in the UK, Poland and Oman. Crossword is traded
on the AIM market of the London Stock Exchange.
Visit Crossword at https://www.crosswordcybersecurity.com/
(https://www.crosswordcybersecurity.com/)
Chair's Statement
Growth accelerates rapidly in 2022
Crossword continued to build a strong and stable business, backed by our
strategy of building a significant intellectual property-based, AIM quoted
cyber security business.
Crossword recorded impressive revenue growth of 68% in 2022. The Company
completed its third acquisition and continued to reap the benefits of
successfully integrating previous acquisitions, with annual recurring revenue
growing by 81%. Rizikon ended 2022 with over 1,000 organisations using the
platform and our blue chip cyber security consulting team is growing its
client base with major FTSE and Fortune clients.
Our focus now is to drive to profitability, underpinned by targeting healthy
revenue growth of over 50% in 2023.
Further progress with our acquisition strategy
Crossword continued to build on its acquisition strategy in 2022 with the
successful acquisition of Threat Status Ltd., a threat intelligence company.
This added two additional products to the Crossword portfolio, Trillion™ and
Arc. Arc is a similar product to Nixer, so post-acquisition, management took
the decision to merge the two products, under the Arc product brand.
Later in the year, in line with its stated acquisition strategy, Crossword
tested a further acquisition opportunity and decided it would not be in the
interests of the company to proceed at that time. This exploratory approach
signals the scale of Crossword's ambition to build a scaled up, profitable
cyber security company.
A strong balance sheet and robust governance
To ensure that we had the funds to progress with our rapid growth, Crossword
issued additional £550k of Convertible Loan Notes in July 2022 and carried
out a £3.6m oversubscribed equity fund raise in September 2022. We are very
pleased that our shareholders continue to see the growth opportunities for
Crossword and we would like to thank them for their commitment.
To ensure that we maintain a robust framework of controls and high standards,
the Board continues to adhere to the Quoted Companies Alliance ("QCA")
Corporate Governance Code (the "QCA Code") in line with the London Stock
Exchange's requirement for all AIM quoted companies to adopt a recognised
corporate governance code. The Corporate Governance Statement on page 38 of
this report provides
further details.
Continued healthy growth with a clear path to profitability
Having invested significantly in 2022 to achieve impressive growth of nearly
68% over the past year, Crossword has now shifted its focus to defining a
clear path to profitability. This is backed by strong current momentum, which
aims to grow revenue in the region of 50% in 2023.
I am very proud of what our expert team has achieved over the past year and I
would like to acknowledge them all. Crossword has a very strong culture and
its core values of responsibility, openness, flexibility and learning underpin
everything we do and are a source of particular strength that
we will leverage to grow into a strong, stable and profitable business.
Sir Richard Dearlove KCMG OBE
Chair, Crossword Cybersecurity
18 April 2023
Chief Executive Officer's review
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 2022.
Crossword grew revenue by a very impressive 68% to reach £3.65m in 2022, its
highest growth rate since admission to AIM in 2018. This proves that
Crossword's services and products
have achieved real traction with a wide range of clients. With this momentum,
we expect to see our growth rate continue strongly into 2023, whilst we drive
towards profitability, which is our main priority now.
We were particularly pleased to see annual recurring revenue increase by 81%
over the prior year and reach £2.4m. Whilst acquisitions naturally
contributed to this strong growth in revenues, Crossword also recorded 55%
growth in organic revenues.
The constantly increasing number and the growing sophistication of
cyberattacks means that spending on cyber security defence is a key priority
for business and governments. In 2021, the average number of cyberattacks and
data breaches increased by 15.1 per cent. from the previous year. Over the
next two years, security executives from over 1,200 companies polled by
ThoughtLab in its 2022 cybersecurity benchmarking study see a rise in attacks
from social engineering and ransomware as nation-states
and cybercriminals grow more sophisticated. As a result,"Cybersecurity
failure" was ranked as a top-five risk over the next two years in East Asia
and the Pacific as well as in Europe in the World Economic Forum's 2022 Global
Risks Report, while four countries, namely Australia, Great Britain, Ireland
and New Zealand ranked it as the number one risk. Many small, highly
digitalized economies such as Denmark, Israel, Japan, Taiwan (China),
Singapore and the United Arab Emirates also ranked the risk as a top-five
concern.
With the ever increasing cybersecurity market, in 2022 we made it our mission
to achieve critical mass by investing for growth. The executive team wanted to
accelerate Crossword's growth aiming to achieve real momentum that would carry
us into 2023 and beyond. We also made the decision to continue with our
acquisition strategy and we succeeded in closing another excellent transaction
by securing Threat Status Limited. Threat Status brought two excellent
products into Crossword's portfolio, Trillion™ and Arc. Both products
deliver recurring revenue to the business and brought a range of
new clients to Crossword. Trillion™ is a data breach platform that contains
billions of carefully curated and continuously updated credentials that
organisations can search to check the status of their usernames and passwords.
Arc makes this same vast pool of information available in a different form to
product websites to protect against credential attacks. Due to Arc's overlap
with our existing product, Nixer, we made the decision to merge the two
products, under the product brand
name of Arc.
Rizikon, Crossword's lead product, ended 2022 with more than 1,000
organisations using the freemium version, trialling or contracted to use the
product. In June we launched a new service, Supply Chain Cyber, with Rizikon
at its heart wrapped in a full-service consulting offer. We are developing new
leading edge modules for Rizikon and are in conversation with several
potential large scale supply chain cyber clients. Increasing regulatory
pressure on companies to monitor and take control of supply chain
cybersecurity risks is also aiding the growth of Rizikon's sales pipeline.
Crossword's profitable and fast growing consulting business is now a trusted
supplier to a number of large and medium sized companies, as well as
continuing to work with smaller, entrepreneurial companies. Our vCISO (virtual
Chief Information Security Officer) service, continues to be popular with all
sizes of client and delivers a growing stream of recurring revenue. Along with
our Nightingale network monitoring platform, which we acquired the previous
year with the Stega acquisition, the Services business saw very positive
overall growth of 80%, of which 51% is recurring.
On the international front, Crossword invested time and effort to firmly
establish itself in Oman and is using that as a base to explore opportunities
in the wider Gulf region. This effort has put us in prime position for a major
Government contract in the region that, if we are successful, will generate
significant revenue as well as make Crossword a strategic cyber security
supplier across Government. We also signed a distribution agreement with
Oman's major cloud services provider who will offer our Trillion™ product
and other Crossword services to their 600 client organisations. Outside of
Oman, we won business in the insurance sector in Bermuda as well as
established a small team in Singapore to enable us to offer our Nightingale
network monitoring service on a 24 hour basis to major clients.
During 2022, Crossword took steps to ensure that it had the funding it needed
to continue executing on its strategy. Crossword extended its Convertible Loan
Note programme by adding a further £550k of loan notes in July and completed
a £3.6m equity fundraise in September through an oversubscribed subscription
of Crossword Ordinary Shares. I was very pleased to welcome several major new
shareholders and delighted that our existing shareholders continue to back our
vision and support our commitment to the journey.
Crossword is now a 70-strong, well respected, British cyber security business,
with a growing reputation in the UK and beyond. We take our wider social
responsibilities seriously and have supported our Polish colleagues in their
efforts to help Ukrainians exiled in Poland, by matching staff donations each
month for a period of 6 months up to PLN 2,500 each month.
As I close, I particularly wish to thank everyone who has helped Crossword
achieve this record revenue growth which, at 68% is our fastest annual growth
rate since Crossword joined AIM. Having invested significantly for rapid
growth in 2022, we have now shifted our focus in 2023 towards a clear
path to profitability. The momentum from last year places us in a strong
position to achieve at least 50% revenue growth in 2023 and our focus on
margin improvement will ensure that there is a clear, carefully managed route
to achieving profitability in the medium term. Crossword's exceptional team
and its culture of responsibility, openness, flexibility and learning, gives
me and the whole Executive team the confidence that we will achieve our goals
for our staff, our clients and our investors.
Tom Ilube, Chief Executive Officer
Crossword Cybersecurity
18 April 2023
Consolidated Statement of Comprehensive Income 12 Months ended 31st December 12 Months ended 31st December
Notes 2022 2021*
£ £
Revenue 2 3,648,000 2,171,137
Cost of Sales 3 (2,755,662) (1,631,384)
Other income 6 39,814 152,347
Gross Profit 932,152 692,100
Administrative expenses 3,4 (4,967,499) (3,481,809)
Other operating expense 7 (304,457) (104,124)
Finance income-bank interest income and foreign exchange (1,569) 4,956
Finance costs-other interest expense 8 (395,762) (220,545)
Gain on remeasurement of financial assets and liabilities 9 170,283 456,803
Loss for the year before taxation (4,566,852) (2,652,619)
Tax credit / (expense) 11 1,144,302 378,995
Loss for the Year (3,422,550) (2,273,624)
Other Comprehensive Income
Items that may be reclassified to profit or loss:
Foreign exchange translation Gain / (Loss) 1,782 (13,220)
Total Other Comprehensive Income 1,782 (13,220)
Total Comprehensive Loss (3,420,768) (2,286,844)
Loss for the period attributable to:
Owners of the parent (3,408,149) (2,229,296)
Non-controlling interests (14,401) (44,328)
Total Loss for the Year (3,422,550) (2,273,624)
Total comprehensive loss for the period attributable to:
Owners of the parent (3,406,367) (2,242,516)
Non-controlling interests (14,401) (44,328)
Total Comprehensive Loss (3,420,768) (2,286,844)
Loss Per Share (basic) 23 (0.04) (0.03)
Loss Per Share (diluted) (0.04) (0.03)
All results are derived from continuing operations
* Restated (as per note1.2)
Statement of Financial Position as at 31 December Group Group Company Company
Notes 2022 2021 2022 2021
£ £ £ £
Non-Current Assets
Intangible assets 13 2,708,423 1,103,679 2,197,206 521,603
Tangible assets 14 45,039 5,460 - -
Goodwill 15 875,277 875,277 - -
Unlisted investment 16 456,834 456,834 456,834 456,834
Investments in subsidiaries 17 - - 1,649,145 1,637,518
Intercompany receivable greater than one year - - 1,067,185 918,206
Total non-current assets 4,085,573 2,441,250 5,370,370 3,534,161
Current Assets
Trade and other receivables 18 2,078,050 1,066,076 1,918,525 838,622
Current tax receivable 398,511 - 368,393 -
Cash and cash equivalents 2,077,771 3,373,062 1,746,530 3,106,817
Total current assets 4,554,332 4,439,138 4,033,448 3,945,439
Total Assets 8,639,905 6,880,388 9,403,818 7,479,600
EQUITY
Attributable to the owners of the Company
Share Capital 22 462,019 374,786 462,019 374,786
Share premium account 22 18,534,372 14,971,221 18,534,372 14,971,221
Convertible debt reserve 195,685 - 195,685 -
Equity reserve 24 370,762 240,310 370,762 240,310
Retained earnings (15,235,500) (11,827,351) (14,127,624) (10,800,700)
Translation of foreign operations (13,210) (14,992) - -
Attributable to owners of the parent 4,314,128 3,743,974 5,435,214 4,785,617
Non-controlling interests (153,527) (139,127) - -
Total equity 4,160,601 3,604,847 5,435,214 4,785,617
LIABILITIES
Current Liabilities
Trade and other payables 19 2,456,783 1,413,658 2,146,775 1,049,960
Other current liabilities 20 17,000 1,368,638 - 1,351,471
Total current liabilities 2,473,783 2,782,296 2,146,775 2,401,431
Long Term Liabilities
Convertible loan notes 30 1,329,678 - 1,329,678 -
Bank loans 51,000 68,000 - -
Other non-current liabilities 21 624,843 425,245 492,151 292,552
Total long term liabilities 2,005,521 493,245 1,821,829 292,552
Total Liabilities 4,479,304 3,275,541 3,968,604 2,693,983
Total Equity & Liabilities 8,639,905 6,880,388 9,403,818 7,479,600
The company's loss for the year was £3,326,925 (2021: £1,964,825).
The financial statements were approved by the Board and authorised for issue
on 18 April 2023. They were signed on its behalf by
Tom Ilube
Chief Executive Officer
Statement of Changes in Equity
Group Share Capital Share Premium Convertible Debt Reserve Equity Reserve Retained Earnings Translation Reserve Attributable to owners of the parent Non-controlling interests Total
2022
£
At 1st January 374,786 14,971,221 - 240,310 (11,827,351) (14,992) 3,743,974 (139,126) 3,604,848
Issue of shares 87,233 3,750,012 - - - - 3,837,245 - 3,837,245
Transaction costs - (186,861) - - - (186,861) - (186,861)
Issue of convertible debt - - 195,685 - - - 195,685 - 195,685
Employee share schemes - value of employee services - - - 130,452 - - 130,452 - 130,452
Loss for the period - - - - (3,408,149) - (3,408,149) (14,401) (3,422,550)
Other comprehensive loss for the period - - - - - 1,782 1,782 - 1,782
At 31st December 462,019 18,534,372 195,685 370,762 (15,235,500) (13,210) 4,314,128 (153,527) 4,160,601
Group
2021
At 1st January 256,605 8,518,391 - 181,618 (9,598,056) (1,772) (643,214) (94,799) (738,013)
Issue of shares 118,181 6,770,954 - - - - 6,889,135 - 6,889,135
Transaction costs - (318,124) - - - - (318,124) - (318,124)
Employee share schemes - value of employee services - - - 58,692 - - 58,692 - 58,692
Loss for the period - - - - (2,229,296) - (2,229,296) (44,328) (2,273,624)
Other comprehensive loss for the period - - - - - (13,220) (13,220) - (13,220)
At 31st December 374,786 14,971,221 - 240,310 (11,827,351) (14,992) 3,743,974 (139,126) 3,604,847
Company Share Capital Share Premium Convertible Debt Reserve Equity Reserve Retained Earnings Translation Reserve Attributable to owners of the parent Non-controlling interests Total
2022
£
At 1st January 374,786 14,971,221 - 240,310 (10,800,699) - - - 4,785,617
Issue of shares 87,233 3,750,012 - - - - - - 3,837,245
Transaction costs - (186,861) - - - - - - (186,861)
Issue of convertible debt - - 195,685 - - - - - 195,685
Employee share schemes - value of employee services - - - 130,452 - - - - 130,452
Loss for the period - - - - (3,326,925) - - - (3,326,925)
At 31st December 462,019 18,534,372 195,685 370,762 (14,127,624) - - - 5,435,214
Company
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
Statement 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 2022 2021* 2022 2021*
Cashflows From Operating Activities £ £ £ £
Loss for the year (3,422,550) (2,273,624) (3,326,924) (1,964,825)
Movement in trade and other receivables (786,642) (412,005) (1,649,101) (837,873)
Movement in trade and other payables 381,130 86,231 646,965 40,374
Depreciation 3 11,287 66,243 - 38,392
Amortisation 3 293,170 37,881 222,310 9,931
Finance costs 8 395,762 220,545 468,084 138,742
Gain on remeasurement of financial assets and liabilities (170,283) (456,803) (365,968) (456,803)
Employee share schemes 4 130,452 58,692 130,452 58,692
Tax (credit) / expense 11 (1,144,302) (378,995) (423,572) (206,380)
Tax received / (paid) 348,662 200,984 295,763 206,380
Net Cashflow from Operating Activities (3,963,314) (2,850,851) (4,001,990) (2,973,370)
Cashflow From Investing Activities
Investment in intangible assets 13 (203,627) (183,796) (203,627) (183,796)
Purchase of tangible assets 14 (48,971) - - -
Acquisition of subsidiaries, net of cash acquired (625,408) (645,390) (715,415) (700,000)
Net Cashflow from Investing Activities (878,006) (829,186) (919,042) (883,796)
Cashflows From Financing Activities
Proceeds from issue of ordinary shares 3,837,245 6,639,135 3,837,245 6,639,135
Share issuance costs (186,861) (318,124) (186,861) (318,124)
Proceeds from issue of convertible loan notes 800,000 - 800,000 -
Repayment of convertible loan notes (700,000) - (700,000) -
Interest paid on convertible loan notes (189,640) (168,000) (189,640) (168,000)
Other interest paid (16,495) (1,638) - (186)
Payments for right of use assets - (43,734) - (13,507)
Net Cash Inflow from Financing Activities 3,544,249 6,107,639 3,560,744 6,139,319
Net Increase in Cash & Cash Equivalents (1,297,071) 2,427,602 (1,360,288) 2,282,151
Foreign Currency Translation Difference 1,780 (12,881) - -
Cash and Cash Equivalent at the beginning of the period 3,373,062 958,341 3,106,818 824,667
Cash and Cash Equivalent at the end of the period 2,077,771 3,373,062 1,746,530 3,106,818
* Restated (as per note1.2)
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. Crossword offers a range of cyber security solutions to
help companies understand and reduce cyber security risk. We do this through a
combination of people and technology, in the form of SaaS and software
products, consulting, and managed services.
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
note1.21.
Changes in accounting policy and disclosures
During the year the Group has reviewed presentation of Gross Margin in the
Income Statement to align with general principles adopted by
Software-as-a-Service industry. The costs to be included in Costs of Sales are
primarily application hosting expenses, customer success and customer service
costs. Research and Development expenses, which were previously included in
Costs of Sales, have been reclassified to Administrative expenses.
Furthermore, Amortisation and Depreciation have been separated from
Administrative expenses into Other operating expense category. Prior period
has been reclassified.
The Group has revised the treatment of Research and development tax credits
from the approach where these get recorded following the receipt of tax relief
to being recognised in the period they relate to. Prior year has not been
restated.
During the period the Group has changed presentation of Research and
development tax credits from Other operating income to Income tax to reflect
the fact that most of the credit relates to tax relief for small and
medium-sized enterprises.
The following table demonstrates re-classification of 2021 Consolidated Income
Statement:
Consolidated Statement of As previously reported Change in Gross Margin calculation Other Operating Expense separate from Admin Costs Research and Development Tax Credits Restated
Comprehensive Income
12 Months ended 31st December 2021
£
Revenue 2,171,137 - - - 2,171,137
Cost of Sales (1,957,178) 325,794 - - (1,631,384)
Other income - 152,347 152,347
Gross Profit 213,959 478,141 - - 692,100
Administrative expenses (3,260,139) (325,794) 104,124 - (3,481,809)
Other operating income 358,727 (152,347) - (206,380) -
Other operating expense - - (104,124) - (104,124)
Finance income 4,956 - - - 4,956
Finance costs-other interest expense (220,545) - - - (220,545)
Gain on revaluation of financial assets 456,803 - - - 456,803
Loss for the year before taxation (2,446,239) - - (206,380) (2,652,619)
Tax credit / (expense) 172,615 - - 206,380 378,995
Loss for the Year (2,273,624) - - - (2,273,624)
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 effective in current period
None of the new standards and amendments to the existing standards effective
in the current period have been applicable to the Group's consolidated
financial statements.
New standards, interpretations and amendments not yet effective
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 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 2023).
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 2023 shows a trading loss with net cash outflows as the business
continues to develop and enhance its products and services and grows revenue.
In 2022, the Group's operations have been supported by cash inflows from
customers and from the issue of £3.6m equity gross during 2022.
The Directors have considered the Group's future and forecast business and
cash requirements. Following the completion of a successful fundraise in 2022,
the Directors have determined that the group wants to continue to expand,
while having a clear and determined focus on a path to profitability, which is
expected to require successful additional fundraise.
On 12 July 2022 holders of £700,000 of loan notes extended their loan notes
to be repayable 30 June 2025 and two loan note holders loaned a further
£150,000 to the Company on the above terms. In both cases the conversion
price was amended to 25.2p.
On 15 July 2022 a further £550,000 of loan notes were issued repayable on 14
July 2025, otherwise on the same terms as above save that the conversion price
is 26.1p.
Currently, £1.5 million of loan notes remain outstanding.
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.
(d) Software Engineering Services
Revenues for software engineering services are recognised in the accounting
periods in which the services are rendered.
Contract balances
Contract related balances comprise of contract assets and contract
liabilities.
Contract assets - are recognised when services are transferred to customers
before consideration is received or before the Group has an unconditional
right to payment for performance completed to date. Contract assets are
subsequently transferred to receivables when the right of payment becomes
unconditional.
Contract liabilities - are recognised when amounts are received from customers
in advance of transfer of goods or services. Contract liabilities are
subsequently recognised in revenue as or when the Group performs under
contracts.
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.
1.17 Investments
Shares in subsidiary undertakings are stated at cost less provision for
impairment. Unlisted investments are measured at fair value through profit
or loss.
1.18 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.
1.19 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. The Group implemented the Employee Capital Plans (PPK) programme
which involved employee consultation and selection of a financial institution.
1.20 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.
1.21 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.
1.22 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
11.
2 Revenue and segmental information
An analysis of the Group's revenue for each period for its continuing
operations, is as follows:
£ Group 2022 Group 2021
Revenue from the sale of goods/licences 479,849 189,252
Revenue from the rendering of services 64,667 183,855
Revenue from consulting services 3,013,884 1,660,207
Software engineering revenue 89,600 137,823
Total Revenue 3,648,000 2,171,137
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:
2022 Software product and services Cybersecurity consulting Eliminations Total
£
Revenue 634,116 3,131,103 (117,219) 3,648,000
Cost of Sales (136,287) (2,619,375) - (2,755,662)
Other income 39,814 - - 39,814
Gross Profit 537,643 511,728 (117,219) 932,152
Administrative expenses (4,561,425) (523,292) 117,218 (4,967,499)
Other operating expense (226,447) (78,010) - (304,457)
Financial income and expenses (29,958) (197,090) - (227,048)
Loss for the year before taxation (4,280,186) (286,666) - (4,566,852)
Tax credit / (expense) 1,144,302 - - 1,144,302
Loss for the Year (3,135,884) (286,666) - (3,422,550)
Total Comprehensive Loss (3,134,102) (286,666) - (3,420,768)
Segment assets 10,413,274 1,594,370 (3,367,738) 8,639,905
Segment liabilities 4,234,893 2,649,280 (2,404,869) 4,479,304
EBITDA (4,023,782) (11,565) - (4,035,347)
2021*
£
Revenue 462,108 1,784,309 (75,280) 2,171,137
Cost of Sales (32,539) (1,598,845) - (1,631,384)
Other income 152,347 - - 152,347
Gross Profit 581,917 185,464 (75,280) 692,100
Administrative expenses (2,956,758) (600,331) 75,280 (3,481,809)
Other operating expense (72,045) (32,079) - (104,124)
Financial income and expenses 323,725 (82,512) - 241,214
Loss for the year before taxation (2,123,161) (529,458) - (2,652,619)
Tax credit / (expense) 378,995 - - 378,995
Loss for the Year (1,744,166) (529,458) - (2,273,624)
Total Comprehensive Loss (1,757,386) (529,458) - (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)
* Restated (as per note1.2)
During the year ended 31 December 2022 approximately 14% (2021: 17%) of the
consolidated entity's external revenue was derived from sales to a major
United Kingdom client in Cybersecurity consulting segment. No other clients
accounted for more than 10% 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
£ Group 2022 Group 2021
Staff and related costs 4,914,076 3,305,430
Consultancy and related costs 854,972 450,028
Professional fees 808,910 616,791
Property related costs 201,590 172,823
Depreciation 11,287 66,243
Amortisation 293,170 37,881
Capitalised costs (162,680) (138,067)
Other expenses 1,106,293 706,188
Total cost of sales, administrative and 8,027,618 5,217,317
other operating expenses
Included in Cost Of Sales
£ Group 2022 Group 2021
Staff and related costs 1,874,960 1,133,519
Consultancy and related costs 854,972 450,028
Other expenses 25,730 47,837
Total cost of sales 2,755,662 1,631,384
Included in Administrative expenses
£ Group 2022 Group 2021
Staff and related costs 3,039,116 2,171,911
Professional fees 808,910 616,791
Property related costs 201,590 172,823
Capitalised costs (162,680) (138,067)
Other expenses 1,080,563 658,351
Total administrative expenses 4,967,499 3,481,809
Administrative expenses include-short term lease expense of £188,643 (2021:
£171,714).
Expenses by geographic location
£ Group 2022 Group 2021
UK 7,355,231 4,695,737
Poland 672,387 521,580
Total cost of sales, administrative and 8,027,618 5,217,317
other operating expenses
4 Staff Costs
Staff costs, including directors' remuneration, were as follows:
£ Group 2022 Group 2021 Company 2022 Company 2021
Wages and salaries:
- Administrative 2,342,943 1,420,624 2,066,066 1,321,393
- Consulting 1,719,588 1,226,231 - -
- Research and development 348,910 277,503 - -
Social security costs 432,124 327,012 231,583 142,103
Other pension costs 70,511 54,061 47,838 37,003
4,914,076 3,305,430 2,345,487 1,500,499
The average monthly number of employees, including the directors, during the
period was as follows:
Group 2022 Group 2021 Company 2022 Company 2021
Staff 52 42 30 17
Directors 11 9 8 8
Total 63 51 38 25
Share based payments
The amount recognised in respect of share-based payments was £130,452 (2021:
£58,692).
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. No options
were exercised in 2022 (5,840 in 2021).
Total options issued as at 31 December 2022 amount to 2,278,653 (2021:
2,348,653).
-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
2022 2022 2021 2021
£ £
1st January 2,348,653 0.36 2,065,730 0.36
Granted during the period 10,000 0.33 352,923 0.36
Lapsed during the period (85,000) 0.34 (64,160) 0.36
Exercised during the period - - (5,840) 0.28
End of the period 2,273,653 0.36 2,348,653 0.36
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 (2021: 6.5
years).
5 Directors' Remuneration
The remuneration of the Directors who served in the current year was as
follows:
2022 Basic Salary and Fees Bonus Taxable Benefits Employer's Pension Contribution Total
£
Executive Directors
Tom Ilube 130,000 3,926 1,321 135,247
Mary Dowd* 140,000 10,000 2,216 10,000 162,216
Non-Executive Directors
Sir Richard Dearlove 25,000 25,000 50,000
Ruth Anderson 12,000 12,000
Andy Gueritz 16,000 16,000
Dr David Secher 16,000 16,000
Robert Coles 12,000 12,000
Tara Cemlyn-Jones 12,000 12,000
Total 363,000 10,000 31,142 11,321 415,463
2021
£
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
* Denotes highest paid director
In the year ended 31 December 2022, certain of the directors received
remuneration (which is included in the amounts above) through payments by the
Group to third parties as follows: £12,000 was paid to Cumberland House
Consulting Ltd for the services of R Coles (2021: £7,250); £12,000 was paid
to Caprica Nelson Ltd for the services of R Anderson (2021: £12,000);
£16,000 was paid to Cambridge KT Ltd for the services of D Secher (2021:
£16,000).
Share Options issued
Year Share Options Exercise Price Total Value
Sir Richard Dearlove 2018 6,757 £ 3.70 £ 9,902
Mary Dowd 2018 7,936 £ 3.15 £ 9,993
Sir Richard Dearlove 2019 4,587 £ 5.45 £ 10,587
Sir Richard Dearlove 2019 5,208 £ 4.80 £ 10,576
Mary Dowd 2019 10,000 £ 5.45 £ 23,080
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
In 2021 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 2022 Group 2021
£ £
Grant Income 39,814 152,347
39,814 152,347
7 Other Operating Expense
Group 2022 Group 2021
£ £
Amortisation of intangible assets 293,170 37,881
Depreciation of property, plant and equipment 11,287 8,072
Depreciation of right-of-use assets - 58,171
304,457 104,124
8 Finance Costs
Group 2022 Group 2021
£ £
Finance cost of loan notes 272,400 184,149
Interest on deferred consideration 115,766 34,978
Right to use assets Interest - 187
Other interest expense 7,596 1,231
395,762 220,545
9 Gain on remeasurement of financial assets and liabilities
Group 2022 Group 2021
£ £
Gain on remeasurement of contingent consideration 170,283 -
Gain on revaluation of investment in Cyberowl - 456,803
170,283 456,803
10 Auditor's Remuneration
The expenses for services rendered by the Group auditor present themselves as
follows:
£ Group 2022 Group 2021
Fees for the parent company individual and consolidated financial statements 41,400 46,000
Fees for legal audit of subsidiary financial information 24,050 17,000
65,450 63,000
11 Tax
£ Group 2022 Group 2021*
Corporation tax on profits for the period 6,115 5,396
R&D tax credit (753,288) (206,380)
Deferred tax credit (397,129) (178,011)
Total tax (credit) / expense (1,144,302) (378,995)
* Restated (as per note1.2)
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, Stega UK Ltd (both in 2021) and Threat Status
Ltd (in 2022), as reflected in note 12, 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 £8.5m (2021: £4.8m).
£ Group 2022 Group 2021*
Loss before taxation 4,566,852 2,652,619
Average rate of corporation tax 19.00% 19.00%
Tax on loss (867,702) (503,998)
Effects of:
Expenses not deductible for tax purposes 116,084 24,578
Additional deduction for R&D expenditure (164,009) (167,168)
Adjustments in respect of prior period (354,777) -
Tax rate changes / adjustments (12,199) 104,124
Deferred tax not recognised 138,301 163,468
Total tax charge (1,144,302) (378,995)
* Restated (as per note1.2)
Factors that may affect future tax changes
On 24 May 2021 the Finance Bill was substantively enacted with the consequence
that the main rate of corporation tax will increase from 19% to the rate of
25%, with effect from 1 April 2023, with a corresponding effect on deferred
tax balances after that
date.
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.
12 Business Combinations
On 11 March 2022 the Group acquired 100% of the issued share capital of Threat
Status Ltd ("TSL"), the threat intelligence company and provider of Trillion,
the cloud-based software as a service platform for enterprise-level credential
breach intelligence.
The net consideration used in the acquisition of TSL 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 - 1,694,287 1,694,287
Tangible assets 1,208 - 1,208
Deferred tax asset 26,854 - 26,854
Non-current assets 28,062 1,694,287 1,722,349
Trade and other receivables 10,420 - 10,420
Cash and cash equivalents 90,007 - 90,007
Current assets 100,427 - 100,427
Deferred tax liability - 423,572 423,572
Non-current liabilities - 423,572 423,572
Trade and other payables 57,784 - 57,784
Current liabilities 57,784 - 57,784
Total fair value of net assets acquired 70,706 1,270,715 1,341,420
Fair value of consideration
Cash on completion 500,915
Deferred consideration in cash 343,339
Deferred consideration in shares 497,166
Total consideration 1,341,420
Acquisition costs of £16,894 relating to this transaction have been
recognised as part of administrative expenses in the statement of
comprehensive income.
Since the acquisition date, TSL has contributed £177,223 to group revenues
and £127,483 to group result. If the acquisition had occurred on 1 January
2022, group revenue would have been £3,703,829 and group loss for the period
would have been £3,229,407.
The acquisitions help to implement the Group's strategy to create a portfolio
of subscription-based, enterprise-class products and services for its
clients.
13 Intangible Assets
Software Development
£ Group 2022 Group 2021 Company 2022 Company 2021
Cost b/f 1,141,560 - 531,534 -
Acquired through business combinations 1,694,287 957,764 1,694,287 -
Additions 203,627 183,796 203,627 531,534
3,039,473 1,141,560 2,429,447 531,534
Accumulated Depreciation
B/F 37,881 - 9,931 -
Charge for the period 293,169 37,881 222,310 9,931
C/d 331,050 37,881 232,241 9,931
Net Book Value 2,708,423 1,103,679 2,197,206 521,603
Intangible assets comprise of 5 different software development projects with
remaining useful life of approximate between 5 and 10 years each and the
carrying amounts of £1,173,512, £810,244, £344,206, £255,491 and
£124,970.
The intangible assets have been evaluated to determine whether there are any
indicators of impairment. Assessment of the recoverable value for Identiproof
software has been based on calculating the net present value of the future
cash flows. The cash flow projections are based on the most recent 3 year
forecast extrapolated to 5 years with a growth rate for revenue of 20% and
costs of 10%. The pre-tax discount rate used in the calculation was 24%.
Please refer to note 15 for matters relating to impairment assessment for
Nightingale product.
14 Tangible Assets
Computers
£ Group 2022 Group 2021 Company 2022 Company 2021
Cost b/f 31,845 24,675
Additions 48,971 -
Acquired through business combinations 1,207 7,170
82,023 31,845 - -
Accumulated Depreciation
B/F 26,385 21,124
Charge for the period 11,287 4,924
Translation adjustments (688) 337
C/d 36,984 26,385 - -
Net Book Value 45,039 5,460 - -
Furniture and Fittings
£ Group 2022 Group 2021 Company 2022 Company 2021
Cost b/f 15,157 15,157 15,157 15,157
Additions
15,157 15,157 15,157 15,157
Accumulated Depreciation
B/F 15,157 12,009 15,157 12,009
Charge for the period - 3,148 - 3,148
C/d 15,157 15,157 15,157 15,157
Net Book Value - - - -
Right of Use Assets
£ Group 2022 Group 2021 Company 2022 Company 2021
Cost b/f - 344,058 - 231,935
Disposals - (344,058) - (231,935)
- - - -
Accumulated Depreciation
B/F - 280,694 - 196,687
Charge for the period - 58,171 - 35,248
Translation adjustments - 5,193 - -
Disposals - (344,058) - (231,935)
C/d - - - -
Net Book Value - - - -
Total
£ Group 2022 Group 2021 Company 2021 Company 2021
Cost b/f 47,002 383,890 15,157 247,092
Additions/(disposals) 48,971 (344,058) - (231,935)
Acquired through business combinations 1,207 7,170 - -
97,180 47,002 15,157 15,157
Accumulated Depreciation
B/F 41,542 313,826 15,157 208,696
Charge for the period 11,287 66,243 - 38,396
Translation adjustments (688) 5,530 - -
Disposals - (344,058) - (231,935)
C/d 52,141 41,542 15,157 15,157
Net Book Value 45,039 5,460 - -
15 Goodwill
The goodwill arises on acquisition of Stega UK Ltd in 2021 and forms a part of
Nightingale cash generating unit. The goodwill has been tested for impairment
alongside Intangible asset of NBV of £255,491 allocated to the same unit. The
recoverable amount has been determined by value in use calculation. The cash
flow projections are based on the most recent 3 year forecast extrapolated to
5 years with a growth rate for revenue of 25% and costs between 10% and 15%,
these are based primarily on past experience. The growth rate beyond 5 year
period is assumed as a perpetuity at 10%. The pre-tax discount rate used in
the calculation was 24%.
£ Group 2022 Group 2021
B/F 875,277 -
Additions in the period - 875,277
C/F 875,277 875,277
16 Unlisted Investments
£ Group 2022 Group 2021 Company 2022 Company 2021
Fair value at 1 January and 31 December 456,834 456,834 456,834 456,834
The above Group investment represents Crossword Cybersecurity Plc's 2022 -
3.1% (2021 - 4.4%) holding in CyberOwl Limited which was purchased on 18 April
2016.
The investment value has not changed during the period and has been based on
the values from the latest fundraise by CyberOwl in August 2022.
17 Investment in subsidiaries
£ Company 2022 Company 2021
Cost b/f 1 January 1,637,518 458,164
Acquired during the year 1,341,420 1,088,740
Transfer to intangibles on hive up (1,270,715) -
Reversal of contingent consideration (170,283) -
Capital contribution 111,205 90,614
Cost c/f 31 December 1,649,145 1,637,518
The group's subsidiary undertakings are listed below, including name, country
of incorporation, and proportion of ownership interest:
Name Registered office Principal activity 2022 2021
6th Floor, 60 Gracechurch Street, London EC3N 0HR United Kingdom % %
Crossword Consulting Limited Cybersecurity services 90 90
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 100 100
Verifiable Credentials Ltd 6th Floor, 60 Gracechurch Street, London EC3N 0HR United Kingdom Cybersecurity services 100 100
Crossword Cybersecurity LLC PO Box 808, Alwattayah / Muttrah / Muscat Governorate, Postcode: 100, Oman Cybersecurity services 90 90
Threat Status Ltd 6th Floor, 60 Gracechurch Street, London EC3N 0HR United Kingdom Cybersecurity services 100 -
Verifiable Credentials Ltd, a company incorporated in England and Waled,
registered No 11923813 and Threat Status Ltd, a company incorporated in
England and Wales, registered No 10877044, are exempt from the requirements
from the UK Companies Act relating to the audit of individual accounts by
virtue of s479A of the Act.
18 Trade and Other Receivables
£ Group 2022 Group 2021 Company 2022 Company 2021
Trade receivables 1,110,697 509,576 505,451 192,975
Other receivables 524,721 254,451 445,603 247,274
Prepayments 239,066 149,309 183,160 105,101
Accrued income 133,883 140,708 23,383 131,025
VAT Refund 69,683 12,033 46,421 -
Intercompany receivables within one year - - 714,507 162,247
2,078,050 1,066,076 1,918,525 838,622
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, £32,735 is denominated in Polish
Zloty with the remainder in GBP (2021:
£18,419).
Foreign exchange risk is currently minimal as balances in Polish Zloty are
between the parent and its wholly owned
subsidiary.
19 Trade and Other Payables
£ Group 2022 Group 2021 Company 2022 Company 2021
Trade payables 659,282 331,043 1,025,828 459,753
Employment taxes and VAT payable 306,168 242,642 69,300 56,790
Accruals 434,705 226,623 187,197 164,284
Deferred income 460,853 331,198 279,125 94,333
Deferred consideration 568,146 261,606 568,146 261,606
Other payables 27,629 20,546 17,179 13,194
2,456,783 1,413,658 2,146,775 1,049,960
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, £83,965 (2021:
£57,836) is denominated in Polish Zloty with the remainder in
GBP.
20 Other Current Liabilities
£ Group 2022 Group 2021 Company 2022 Company 2021
Convertible loan notes - 1,351,471 - 1,351,471
Bank loan 17,000 17,167 - -
17,000 1,368,638 - 1,351,471
21 Other Non-current Liabilities
£ Group 2022 Group 2021 Company 2022 Company 2021
Deferred consideration 492,151 111,900 492,151 111,900
Contingent consideration - 180,652 - 180,652
Deferred grant income 132,692 132,693 - -
624,843 425,245 492,151 292,552
22 Share Capital
Allotted called up and fully paid
Number of shares (all ordinary shares £0.005 each) 2022 2021
B/f 74,957,150 51,320,900
Shares Issued in period 17,446,565 23,636,250
C/d 92,403,715 74,957,150
The shares issued in the period were ordinary shares of £0.005 at a premium
of £3,563,151 (2021: £6,452,830).
All shares carry the same voting and capital distribution rights.
£
Share Capital 2022 2021
Cost b/f 374,786 256,605
Shares Issued in period 87,233 118,181
462,019 374,786
Share Premium
B/f 14,971,221 8,518,391
Shares Issued in period 3,563,151 6,452,830
C/d 18,534,372 14,971,221
23 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 £3,408,149 (2021:
£2,229,296) divided by the weighted average number of ordinary shares of
80,022,937 (2021: 64,491,462).
24 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
Convertible debt reserve The residual amount after deducting from the fair value of the convertible
loan notes the liability component
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
25 Financial Instruments
£
Current Financial Assets Group 2022 Group 2021 Company 2022 Company 2021
Financial assets measured at amortised cost
Trade and other receivables 1,769,301 904,735 1,688,943 733,521
Cash and cash equivalents 2,077,771 3,373,062 1,746,530 3,106,817
Non-Current Financial Assets
Financial assets measured at amortised cost
Loan to subsidiary - - 1,067,185 918,206
Financial assets measured at fair value through profit or loss
Financial investments 456,834 456,834 456,834 456,834
4,303,906 4,734,631 4,959,493 5,215,378
The financial investments comprise of investment in CyberOwl Ltd, which has
been valued on the basis of valuation per share at as March 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 2022 Group 2021 Company 2022 Company 2021
Financial liabilities measured at amortised cost
Trade and other payables 1,689,761 839,818 1,798,351 898,836
Loans 17,000 17,167 - -
Convertible loan notes - 1,351,471 - 1,351,471
Non-Current Financial Liabilities
Financial liabilities measured at amortised cost
Loans 51,000 68,000 - -
Convertible loan notes 1,329,678 - 1,329,678 -
Non-current deferred consideration 492,151 111,900 492,151 111,900
Financial liabilities measured at fair value through profit or loss
Non-current contingent consideration - 180,652 - 180,652
3,579,590 2,569,008 3,620,180 2,542,858
In relation to the loan there was a fair value revaluation of £195,685
(2021: £nil) recorded in Convertible debt reserve arising from the loan notes
being initially measured at fair value and subsequently measured at amortised
cost.
During the year, the management changed its estimate that Stega would achieve
its revenue target for the period between 12 and 18 months from the date of
acquisition and concluded that this will be very unlikely. Therefore,
contingent consideration, recorded as part of acquisition accounting for
Stega, has been reversed via Income Statement in full.
Reconciliation of Level 3 fair value measurements of financial
liabilities:
£ Contingent consideration
B/f 180,652
Unwinding of discount (10,369)
Reversed (170,283)
C/d -
26 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 2022 Group 2021 Company 2022 Company 2021
Cash and cash equivalents 2,077,771 3,373,062 1,746,530 3,106,817
Trade and other receivables 1,769,301 904,735 1,688,943 733,521
Loan to subsidiary - - 1,067,185 918,206
Financial investments 456,834 456,834 456,834 456,834
Total 4,303,906 4,734,631 4,959,492 5,215,378
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 2022 2021
£ due < 1 year due 1 - 2 years due < 1 year due 1 - 2 years
Trade payables 659,282 - 331,043 -
Accruals 434,705 - 226,623 -
Deferred consideration 568,146 492,151 261,606 111,900
Contingent consideration - - - 180,652
Other Payables 27,629 - 20,546 -
Loans 17,000 51,000 17,167 68,000
Convertible loan notes - 1,329,678 1,351,471 -
Total 1,706,762 543,151 2,208,456 360,552
27 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.
28 Pensions
Employer contributions to the Group defined contribution pension scheme for
employees in the United Kingdom were £70,695 (2021: £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.
29 Related Party Transactions
2022 Crossword Consulting Limited Crossword Cybersecurity SP Z.o.o Stega Verifiable Credentials Limited Cumberland House Consulting Limited
UK
Limited
Services received from £ 102,877 746,355 42,000 - -
Services supplied to £ - - - - 318,800
Balance trade payable to £ - 284,420 - - -
Balance trade receivable from £ 143,779 - 156,870 1,385 54,235
Intercompany loan receivable from £ 1,178,367 - 88,818 - -
2021
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 - - -
Tom Ilube, CEO, had made a loan of £250,000 to the Company on the same terms
as the other Lenders as described in note 30. This loan was repaid in December
2022.
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 £796,444 (2021:
£793,233).
30 Convertible Loan Notes
The following table explains movements in the Convertible Loan Notes in the
year:
£ Convertible Loan Notes
B/f 2022 1,400,000
Expired in the period (1,400,000)
Extended loans 700,000
Increased loan amounts 150,000
Additional loans issued in the period 650,000
C/d 2022 1,500,000
The discounted amount of the Convertible Loan Notes at the year end was
£1,329,678.
The equity component of the Convertible Loan Notes at the date of issue was
£195,685.
Repayment of the loan notes 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
£0.252. 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
£0.252.
The loan from Tom Ilube, CEO, for an amount of £250,000 was repaid in
December 2022.
31 Controlling Party
The Company does not have a controlling
party.
32 Subsequent Events
There are no events after the reporting date to be disclosed.
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