REG - Crossword Cybersec - 2023 Annual Report and Accounts and Notice of AGM
23/04/2024 07:15
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RNS Number : 6554L Crossword Cybersecurity PLC 23 April 2024
Crossword Cybersecurity Plc
2023 Annual Report and Accounts and Investor Presentation
23 April 2024 - 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 2023. 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 Thursday 23rd May 2024 at 3.00pm 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 28th May at 11.00am. 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
· 15% revenue growth to £4.2m
· Continued growth in ARR, year-end ARR of £2.5m
· 65% recurring revenue in 2023
· 9% growth in revenue per client
· Loss before taxation of £4.1 million
· £0.7m cash and cash equivalents at year end
Operational Highlights
· AI Workshops in partnership with major industry partners and leading
academics to investigate the application of Generative AI to cybersecurity
· Software Engineering services revenue in 2023 helped to strengthen
ties with a key partner
· Launched Ransomware Readiness Assessment service in March 2023,
helping organisations reduce their exposure to ransomware attacks
· Awarded a threat intelligence contract with a FTSE 250 engineering
company, which was already a Consulting client
· Inclusion in the CYBERTECH100, an annual list of 100 of the world's
most innovative CyberTech companies
· £2.62m Convertible Loans issued to support sales and marketing,
product and services development and to provide general working capital
Post Period Highlights
· Launch of Trillion Harvista, a first of its kind solution which
allows enterprise security teams to search conversations on the dark web in a
clean and sanitised environment
· Partnership with TD Synnex for Trillion™ platform to become
available through the distributor's extensive community of small and
medium-sized resellers across Europe
· Launch a new CyberAI Practice. The practice, which sits within
Crossword Cybersecurity's Consulting business, consolidates Crossword's
artificial intelligence (AI) expertise into a centre of excellence that will
deliver AI-focused cybersecurity consulting services and products to help
clients harness the power of AI in the organisation
Outlook
· Targeting strong revenue growth in 2024. At this stage of the year,
we expect to be within 10% of our anticipated revenue of £7m, albeit at the
lower end of the range
· Crossword is on track to deliver EBITDA and cash breakeven on a
monthly basis during the second half of 2024
· Crossword is targeting a drop by half in administrative expenses as a
percentage of revenue in 2024 compared to 2022
· Crossword has a strong sales pipeline, the continued conversion of
which will drive revenue growth
· Crossword's diversified product and services offering will drive
scale while managing risk
· Focus on margin improvement will ensure that there is a clear,
carefully managed route to achieving profitability in the short term
Tom Ilube, CEO of Crossword Cybersecurity plc, commented:
"In 2023, Crossword achieved a revenue growth rate of 15%. Although the UK
economy was in recession during H2 2023, Crossword continued to grow, which
demonstrates the resilience of the cybersecurity sector. With reducing
inflation and interest rates having peaked, we expect growth rates to improve
during 2024. With costs continuing to be tightly controlled, Crossword is
determined to achieve EBITDA and cash breakeven during the second half of
2024.
2024 has started well with the launch of HarVista, a first of its kind tool
which allows enterprise security teams to search conversations on the dark web
in a clean and sanitised environment.
HarVista is part of the Trillion Threat Intelligence suite of products and
services. We have also launched a new CyberAI Practice. Our engineering team
and experienced consultants position Crossword well to support our clients
incorporate future technology concepts.
We are seeing international expansion into the Caribbean via a partner,
primarily with our managed cyber-security monitoring service, Nightingale.
Crossword has secured over $500k of new business in this region since the
start of 2024 and the outlook for the rest of the year is strong.
Earlier in April 2024, I was pleased to welcome our new Managing Director,
Consulting, Chris Dunning Walton, who will use his considerable sector and
business experience to drive revenue and profitability growth in our
Consulting offering. I also welcomed Stuart Jubb, Group Managing Director, to
the PLC Board reflecting his wide range of responsibilities and leadership
role across the Group.
In 2023, we saw the continued support of our shareholders when £2.62m
Convertible Loans were issued to support sales and marketing, product and
services development and to provide general working capital. A working
capital fund raise is anticipated in 2024 to further support the drive to
profitability, which remains the key focus of the Company. We are grateful for
the ongoing support of our shareholders.
I would like to thank the Crossword team for their hard work in delivering our
mission to reduce cyber risks for our clients by providing a portfolio of
innovative products and services, powered by university and other research
driven insights."
- 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:
Duncan Gurney, GingerPR
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™
suite of threat intelligence products, Trillion Breach, Harvista and Arc 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
Heading to profitability, with growth
2023 was a pivotal year for Crossword. Revenue growth of 15% to £4.2m was
achieved while the costs of the business were managed, to improve margin and
create stable overheads to support business growth. Crossword is now on track
to monthly EBITDA and cash breakeven, which it aims to achieve in the second
half of 2024. Crossword in its near term strategy of achieving monthly EBITDA
and cash breakeven later in 2024.
Following three acquisitions in 2021 and 2022, Crossword's strategy in 2023
was organic revenue growth. With the acquisitions successfully integrated,
cross selling and key account management have been the drivers for growth. The
structure of the sales and customer success team and cross departmental
collaboration are integral to our growth plans.
Well documented issues within the UK equity markets have taken their toll on
Crossword's AIM market capitalisation. The Company remains hopeful that
government initiatives and the hard work of The Quoted Companies Alliance will
result in a truer reflection of Company value on AIM.
Board Governance
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 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 29 of this report provides further
details.
In December 2023, Tara Cemlyn-Jones resigned from the Board. I would like to
thank Tara for the contribution she has made to Crossword during her time on
the Board and wish her the best for the future.
I am pleased to announce that Stuart Jubb joined the board of the Company as
executive director in early April 2024. Stuart joined Crossword in February
2016 to head up Crossword's newly established cybersecurity Consulting
division. From 1 January 2022, Stuart has been Group Managing Director of
Crossword, with responsibility for Consulting, Sales and Managed Services, and
in September 2023 also became responsible for Product. Prior to joining
Crossword, Stuart worked at KPMG where he was Associate Director, Defence
& Security. Prior to that, he was Chief Operating Officer of a global
Consulting team of over 200 in KPMG Advisory. Stuart spent nine years as an
officer in HM Forces, after commissioning from the Royal Military Academy
Sandhurst, serving in Afghanistan, NATO and elsewhere.
Stakeholders Support
Crossword is grateful for the ongoing support of our shareholders. £2.62m
convertible loan notes were issued in 2023, including £2m to Gresham House
Asset Management Limited, Crossword's largest shareholder, and £250k to Tom
Ilube CEO. This funding is for sales & marketing, product and services
development and support and working capital, and will support Crossword in its
near term strategy of EBITDA and cash breakeven later in 2024.
Crossword's mission is to reduce cyber risks for our clients by providing a
portfolio of innovative products and services, powered by university and other
research-driven insights. We are grateful for the trust our client and
partners place in us to achieve our mission. This is clearly evidenced by
referrals and cross selling of our product and services portfolio.
I am very appreciative of the hard work and expertise of the Crossword team
over the past year, and I would like to acknowledge them all.
Crossword's core values are responsibility towards its customers and staff,
openness, flexibility, and constant learning. This company culture underpins
everything we do and will act as a catalyst in leveraging our growth into
profitability.
Outlook
Since the launch of ChatGPT in November 2022, businesses across all industry
sectors have awoken to the disruptive potential of AI based on Large Language
Models (LLMs). LLMs have led to the emergence of many new tools, which must be
assessed and assured so that adoption is controlled and does not pose legal,
reputational, or commercial threats. Simultaneously, the dual-use nature of
LLMs has empowered would-be attackers by lowering information and capability
barriers to launching successful attacks. Cybersecurity teams are at the
forefront of these changes. Crossword is well poised to support clients with
frameworks that let businesses adopt new technology and
services, whilst ensuring their safety.
Crossword is looking forward to a strong performance in 2024, predicting
revenue growth and breakeven on a monthly basis in the second half of 2024.
Sir Richard Dearlove KCMG OBE
Chair, Crossword Cybersecurity PLC
22 April 2024
CEO's Statement
It is my pleasure, as Chief Executive Officer, to present the Annual Report
and audited accounts for Crossword Cybersecurity PLC ('Crossword' or the
'Company' or the 'Group') for the financial year ended 31 December 2023.
Crossword's revenue grew by 15% in 2023. Although the UK economy was in
recession during H2 2023, Crossword continued to grow, which demonstrates the
resilience of the cybersecurity sector. However, we didn't achieve our
aspirations for revenue growth during 2023, as we experienced our clients
being somewhat cautious in committing to projects, particularly in the second
half of the year. As we entered 2024, with inflation continuing to fall, costs
of living improving and optimism in economic outlook, this caution is
dissipating, and we are seeing our pipeline growing and converting into
contracts at a pleasing rate.
A key priority for Crossword in 2023 was to drive to profitability. We are
well on our way to achieving EBITDA profitability, with administrative
expenses having stabilised in 2023. Excluding one-off professional fees in
2022 and 2023, administrative expenses have decreased by 10% in 2023 compared
to 2022. This represents a reduction of 27% in administrative expenses as a
percentage of revenue in 2023.
The UK Cybersecurity Market size is estimated at USD 15.72 billion in 2024,
and is expected to reach USD 25.81 billion by 2029, growing at a CAGR of
10.42% during the forecast period (2024-2029) (Mordor Intelligence). As the
digital economy grows, digital crime grows with it. Soaring numbers of online
and mobile interactions are creating millions of attack opportunities. Many
lead to data breaches that threaten both people and businesses. At the current
rate of growth, damage from cyberattacks will amount to about $10.5 trillion
annually by 2025, a 300 percent increase from
2015 levels (McKinsey). In France recently, half the populations' data was
stolen in a major cybersecurity breach - the largest ever in France - leaving
33 million people at risk. In this particular incident, two French service
providers for medical insurance companies were targeted, with the companies
admitting that millions of people's data were potentially exposed to the
hackers (Euronews).
In 2023, Crossword's development teams worked hard to upgrade and develop our
products and services. The launch of Trillion HarVista early in 2024 was one
of the outputs of their work. Part of the Trillion Threat Intelligence suite
of products and services, Trillion HarVista enables security teams, for the
first time, to be able to identify the threats developing both from hacker
discussions and shared compromised credential data all from a single
interface, without the risk of searches on hostile websites being linked to
your organisation.
During 2023, Crossword was awarded a contract with a FTSE 250 engineering
company, to provide forward looking Dark Web Threat Intelligence services. The
service will be delivered via Crossword's Trillion platform using its market
leading credential leak and discussion monitoring services. The solution will
be backed up by expert human analysis to deliver the service. The FTSE 250
engineering company is already a Consulting client of Crossword's. The close
relationship between the Consulting team and the product team at Crossword
helped identify the benefits the client will derive from the Dark Web Threat
Intelligence services.
We were pleased to be included in the CYBERTECH100 in 2023, an annual list of
100 of the world's most innovative CyberTech companies selected by a panel of
industry experts and analysts. Companies were selected for inclusion in the
fourth annual CYBERTECH100 based on their innovative use of technology to
solve a significant industry problem or generate cost savings or efficiency
improvements across the security value chain. CYBERTECH100 considers that
these are the companies every financial institution needs to know about as
they consider and develop their information security and financial crime
fighting strategies.
The quality of Crossword's engineering team, our experienced consultants, and
our impressive portfolio of clients, positioned Crossword to lead a
significant initiative with major industry partners and leading universities,
including academics from Oxford University and MIT in the USA and AI
researchers from the world famous Alan Turing Institute, to investigate the
application of Generative AI to cybersecurity. This funded CyberAI Initiative
was designed to bring together several world-leading universities, chosen for
their expertise in GenerativeAI/Large Language Models, and a select group of
industry partners in an indepth programme.
The first phase of the CyberAI Initiative commenced in October 2023 with a
three-month exercise to explore the Generative AI landscape in depth, share a
full understanding of how Generative AI/Large Language Model techniques are
currently being applied to cybersecurity challenges, assess the landscape of
current and emerging solutions appearing in the market, identify a long list
of real world problems that would benefit from a Generative AI/Large Language
Model techniques approach, demonstrate several of these approaches and select
a target list of challenges that the CyberAI Initiative could take forward.
Following the successful first phase of our CyberAI programme, we are
evaluating the suitability of AI based technologies and services to improve
our current product and services and developing new services which incorporate
future technology concepts early to enable us to get ahead of the competition.
Crossword is grateful for the ongoing support of our shareholders. £2.62m
convertible loan notes were issued in 2023, including £2m invested by Gresham
House Asset Management Limited, Crossword's largest shareholder, and £250k
invested myself. This funding is for sales & marketing, product and
services development and support and working capital, and will support
Crossword in its short-term strategy of EBITDA and cash breakeven later in
2024.
In December 2023, Tara Cemlyn-Jones resigned from the Board. I would like to
thank Tara for the contribution she has made to Crossword during her time on
the Board and wish her the best for the future.
Crossword is focused on achieving EBITDA profitability and cash breakeven on a
monthly basis and delivering revenue growth in 2024. We hope that our positive
performance and commitment from those in power to addressing the issues in UK
equities will result in a better reflection of Crossword's value on the AIM
market.
I would like to thank the Crossword team for their hard work in delivering our
mission to reduce cyber risks for our clients by providing a portfolio of
innovative products and services, powered by university and other research
driven insights. Crosswords strong culture and values of responsibility,
openness, flexibility and learning have been in evidence in many ways
throughout 2023, and hold us in good stead for 2024.
Tom Ilube, Chief Executive Officer
Crossword Cybersecurity PLC
22 April 2024
Consolidated Financial Statements
for Crossword Cybersecurity PLC company number 08927013
Consolidated Statement of Comprehensive Income 12 Months ended 31st December 12 Months ended 31st December
Notes 2023 2022
£ £
Revenue 2 4,192,996 3,648,000
Cost of sales 3 (2,994,711) (2,755,662)
Other income 6 - 39,814
Gross Profit 1,198,285 932,152
Administrative expenses 3,4 (4,470,425) (4,967,499)
Other operating expense 7 (417,201) (304,457)
Finance costs-other interest expense 8 (468,072) (395,762)
Foreign exchange loss (8,844) (1,569)
Gain on measurement of financial assets and liabilities 9 25,253 170,283
Loss for the year before taxation (4,141,004) (4,566,852)
Tax credit 11 226,245 1,144,302
Loss for the year (3,914,759) (3,422,550)
Other comprehensive Income
Items that may be reclassified to profit or loss when specific conditions are
met:
Foreign exchange differences on translation of foreign operations (1,181) 1,782
Total other comprehensive income (1,181) 1,782
Total Comprehensive Loss (3,915,940) (3,420,768)
Loss for the year attributable to:
Owners of the parent (3,896,106) (3,408,149)
Non-controlling interests (18,653) (14,401)
Total Loss for the Year (3,914,759) (3,422,550)
Total comprehensive loss for the year attributable to:
Owners of the parent (3,897,287) (3,406,367)
Non-controlling interests (18,653) (14,401)
Total Comprehensive Loss (3,915,940) (3,420,768)
Loss Per Share 22 (0.04) (0.04)
Loss Per Share (diluted) 22 (0.04) (0.04)
All results are derived from continuing operations
Consolidated and Company Statements of Financial Position as at 31 December
Group Group Company Company
Notes 2023 2022 2023 2022
£ £ £ £
Non-Current Assets
Intangible assets 12 2,667,491 2,708,423 2,227,135 2,197,206
Property, plant and equipment 13 221,631 45,039 196,434 -
Goodwill 14 875,277 875,277 - -
Unlisted investments 15 68,000 456,834 68,000 456,834
Investments in subsidiaries 16 - - 2,336,716 1,649,145
Intercompany receivables - - 972,449 1,067,185
Total non-current assets 3,832,399 4,085,573 5,800,734 5,370,370
Current Assets
Trade and other receivables 17 1,676,171 2,078,050 1,669,822 1,918,525
Current tax receivable 300,122 398,511 239,157 368,393
Cash and cash equivalents 730,946 2,077,771 457,376 1,746,530
Total current assets 2,707,239 4,554,332 2,366,355 4,033,448
Total Assets 6,539,638 8,639,905 8,167,089 9,403,818
EQUITY
Attributable to the owners of the Company
Share Capital 21 468,589 462,019 468,589 462,019
Share premium account 21 18,749,829 18,534,372 18,749,829 18,534,372
Convertible debt reserve 233,712 195,685 233,712 195,685
Equity reserve 23 376,965 370,762 376,965 370,762
Retained earnings (19,065,685) (15,235,500) (17,326,198) (14,127,624)
Translation of foreign operations (14,391) (13,210) - -
Attributable to owners of the parent 749,019 4,314,128 2,502,897 5,435,214
Non-controlling interests (172,180) (153,527) - -
Total equity 576,839 4,160,601 2,502,897 5,435,214
LIABILITIES
Current Liabilities
Trade and other payables 18 2,333,761 2,456,783 2,218,844 2,146,775
Other current liabilities 19 17,000 17,000 - -
Total current liabilities 2,350,761 2,473,783 2,218,844 2,146,775
Long Term Liabilities
Convertible loan notes 29 3,343,121 1,329,678 3,343,121 1,329,678
Bank loans 34,000 51,000 - -
Other non-current liabilities 20 234,917 624,843 102,227 492,151
Total long term liabilities 3,612,038 2,005,521 3,445,348 1,821,829
Total Liabilities 5,962,799 4,479,304 5,664,192 3,968,604
Total Equity & Liabilities 6,539,638 8,639,905 8,167,089 9,403,818
The Company has taken advantage of the exemption allowed under Section 408 of the Companies Act 2006 and has not presented its own Statement of Comprehensive Income in these financial statements.
The Company's loss for the year was £3,264,495 (2022: £3,326,925).
The financial statements were approved by the Board and authorised for issue on xx April 2024. 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
2023
£
462,019 18,534,372 195,685 370,762 (15,235,500) (13,210) 4,314,128 (153,527) 4,160,601
At 1st January
Loss for the year - - - - (3,896,106) - (3,896,106) (18,653) (3,914,759)
Other comprehensive income for the year - - - - - (1,181) (1,181) - (1,181)
Total comprehensive income for the year - - - - (3,896,106) (1,181) (3,897,287) (18,653) (3,915,940)
Issue of shares 6,570 215,457 - - - - 222,027 - 222,027
Issue of convertible debt - - 103,948 - - - 103,948 - 103,948
Transfer of convertible debt reserve to retained - - (65,921) - 65,921 - - - -
earnings
Employee share schemes - value of employee services - - - 6,203 - - 6,203 - 6,203
Changes from transactions with owners 6,570 215,457 38,027 6,203 65,921 - 332,178 - 332,178
At 31st December 468,589 18,749,829 233,712 376,965 (19,065,685) (14,391) 749,019 (172,180) 576,839
2022
£
14,971,221 - 240,310 (11,827,351) (14,992) 3,743,974 (139,126) 3,604,848
At 1st January 374,786
Loss for the year - - - - (3,408,149) - (3,408,149) (14,401) (3,422,550)
Other comprehensive loss for the year - - - - - 1,782 1,782 - 1,782
Total comprehensive income for the year - - - - (3,408,149) 1,782 (3,406,367) (14,401) (3,420,768)
Issue of shares 87,233 3,563,151 - - - - 3,650,384 - 3,650,384
Issue of convertible debt - - 195,685 - - - 195,685 - 195,685
Employee share schemes - value of employee services - - - 130,452 - - 130,452 - 130,452
Changes from transactions with owners 87,233 3,563,151 195,685 130,452 - - 3,976,521 - 3,976,521
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
Attributable to owners of the parent Non-controlling interests
Company Share Capital Share Premium Convertible Debt Reserve Equity Reserve Retained Earnings Translation Reserve
2023
Total
£
195,685 (14,127,624) - - - 5,435,214
At 1st January 462,019 18,534,372 370,762
Loss for the year - - - - (3,264,495) - - - (3,264,495)
Total comprehensive income for the year - - - - (3,264,495) - - - (3,264,495)
Issue of shares 6,570 215,457 - - - - - - 222,026
Issue of convertible debt - - 103,948 - - - - - 103,948
Transfer of convertible debt reserve to retained - (65,921) - 65,921 - - - -
earnings
Employee share schemes - value of employee services - - - 6,203 - - - - 6,203
Changes from transactions with owners 6,570 215,457 38,027 6,203 65,921 - - - 332,178
At 31st December 468,589 18,749,829 233,712 376,965 (17,326,198) - - - 2,502,897
2022
£
- (10,800,699) - - - 4,785,617
At 1st January 374,786 14,971,221 240,310
Loss for the year - - - - (3,326,925) - - - (3,326,925)
Total comprehensive income for the year - - - - (3,326,925) - - - (3,326,925)
Issue of shares 87,233 3,563,151 - - - - - - 3,650,384
Issue of convertible debt - - 195,685 - - - - - 195,685
Employee share schemes - value of employee services - - - 130,452 - - - - 130,452
Changes from transactions with owners 87,233 3,563,151 195,685 130,452 - - - - 3,976,521
At 31st December 462,019 18,534,372 195,685 370,762 (14,127,624) - - - 5,435,214
Statement of Cash Flows 12 Months ended 31st December 12 Months ended 31st December 12 Months ended 31st December 12 Months ended 31st December
Group Group Company Company
Notes 2023 2022 2023 2022
£ £ £ £
Loss for the year (3,914,759) (3,422,550) (3,264,495) (3,326,924)
Adjustments for:
Depreciation 3 28,176 11,287 8,231 -
Amortisation 3 389,025 293,170 318,165 222,310
Finance costs 8 468,072 395,762 185,044 468,084
Foreign exchange loss 8,844 1,569 17,639 (695)
Gain on measurement of financial assets and liabilities 9 (25,253) (170,283) (25,253) (365,968)
Employee share schemes 4 6,203 130,452 6,203 130,452
Tax credit 11 (226,245) (1,144,302) (203,233) (423,572)
Operating cash flows before movements in working capital (3,265,937) (3,904,895) (2,957,699) (3,296,312)
Movement in trade and other receivables 393,035 (788,211) (65,844) (1,648,406)
Movement in trade and other payables (764,177) 381,130 (569,622) 646,965
Cash generated by operations (3,637,079) (4,311,975) (3,593,165) (4,297,753)
Net tax received 324,634 348,662 332,468 295,763
Net cash from operating activities (3,312,445) (3,963,314) (3,260,697) (4,001,990)
Investing activities
Investment in intangible assets 12 (348,094) (203,627) (348,094) (203,627)
Purchase of tangible assets 13 (7,129) (48,971) (7,129) -
Purchase of unlisted investments 15 (68,000) - (68,000) -
Acquisition of subsidiaries, net of cash acquired - (625,408) - (715,415)
Net cash flow from investing activities (423,223) (878,006) (423,223) (919,042)
Financing activities
Proceeds from issue of ordinary shares - 3,837,245 - 3,837,245
Share issuance costs - (186,861) - (186,861)
Proceeds from issue of convertible loan notes 2,620,000 800,000 2,620,000 800,000
Repayment of convertible loan notes - (700,000) - (700,000)
Interest paid on convertible loan notes (215,701) (189,640) (215,701) (189,640)
Other interest paid (4,740) (16,495) - -
Payments for the principal portion of the lease liability (6,601) - (6,601) -
Interest portion of the lease liability (2,934) - (2,934) -
Net cash flow from financing activities 2,390,024 3,544,249 2,394,764 3,560,744
Net decrease in cash & cash equivalents (1,345,644) (1,297,071) (1,289,156) (1,360,288)
Foreign currency translation difference (1,181) 1,780 - -
Cash and cash equivalent at the beginning of the year 2,077,771 3,373,062 1,746,530 3,106,818
Cash and cash equivalent at the end of the year 730,946 2,077,771 457,376 1,746,530
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 material 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 in accordance with UK adopted
IFRS, which requires the use of certain critical accounting estimates. It also
requires management to exercise its judgement in the process of applying the
Group's material 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 note1.22.
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
In 2023 the Group has applied all of the new and revised standards and
interpretations issued by the International Accounting Standards Board and
adopted in the UK, that are relevant to its operations and effective for the
accounting periods beginning on or after 1 January 2023. None of the new
standards or revisions had a material effect on the financial statements of
the Group.
New standards, interpretations and amendments not yet effective
The Group adopt early the following amendments to standards which are not yet
mandatory.
Amendments to IAS 1 Presentation of Financial Statements - Classification of
Liabilities as Current or Non-current and Non-current Liabilities with
Covenants (effective 1 January 2024).
Amendments to IAS 7 and IFRS 7 Financial Instruments: Disclosures - Supplier
Finance Arrangements (effective 1 January 2024).
Amendments to IFRS 16 Leases - Lease Liability in a Sale and Leaseback
(effective 1 January 2024).
Amendments to IFRS 10 Consolidated Financial Statements and IAS 28 Investments
in Associates and Joint Ventures - Sale or Contribution of Assets between an
Investor and its Associate or Joint Venture (effective date yet to be set).
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 three acquisitions in
2021 and 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 2024 shows a
trading loss with net cash outflows as the business continues to develop and
enhance its products and services and grows revenue. In 2023, the Group's
operations have been supported by cash inflows from customers and from the
issue of £2.62m loan notes during 2023 and further £0.275m in 2024.
The Directors have considered the Group's future and forecast business and
cash requirements. 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.
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.
The parent company reassesses whether or not it controls an investee if facts
and circumstances indicate that there are changes to one or more of the three
elements of control listed above.
When the parent company has less than a majority of the voting rights of an
investee, it considers that it has power over the investee when the voting
rights are sufficient to give it the practical ability to direct the relevant
activities of the investee unilaterally.
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 is measured at the fair value of the consideration received or
receivable, net of returns, trade discounts and volume rebates.
The Group recognises revenue according to the principles of IFRS 15 using the
five-step model:
1. Identify the contracts with customers
2. Identify the performance obligations in the contract
3. Determine the transaction price
4. Allocate the transaction to the performance obligations in the contract
5. Recognise the revenue when (or as) the entity satisfies the performance
obligation
The Group recognises revenue when it transfers control over service to a
customer.
The major streams of revenue for the Group are highlighted below:
(a) Licence Income
Technology and product licensing revenue represents amounts earned for
licenses granted under licensing agreements. Revenue is recognised over the
subscription period from the start of a licencing agreement, as control is
transferred to the customer, because the customer simultaneously receives and
consumes the benefits provided by the Group. Revenues relating to up-front
payments are recognised when the obligations related to the revenues have been
completed.
(b) Rendering of Services
Services relate to implementation and deployment fees for the technology and
products licensed to customers. Revenue is recognised at a point in time when
control is transferred to the customer and performance obligations satisfied.
(c) Consulting
(d) Consulting revenue is recognised depending on the nature of the
contract with customer. For contracts stating the objectives and deliverables
for each part of the project, and the revenue attributable to each
deliverable, the revenue is recognised when the performance obligation is met
(when confirmation has been received from the customer that the work has been
satisfactorily completed), primarily at a point in time. For recurring
contracts with customers, which are based on a certain number of fixed
advisory hours, the revenue is recognised over time using an input method to
measure progress towards complete satisfaction of the service, because the
customer simultaneously receives and consumes the benefits provided by the
Group.
(e) Software Engineering Services
Revenues for software engineering services are recognised on
the basis of input method, which uses the company's efforts or inputs to the
satisfaction of a performance obligation.
Identifying performance obligations
At contract inception, the Group assess services promised to a customer and
identifies as a performance obligation each promise to transfer to the
customer either:
(a) a service (or a bundle of services) that is distinct; or
(b) a series of distinct services that are substantially the same and that
have the same pattern of transfer to the customer.
In arriving at the performance obligations, the Group assessed the services as
capable of being distinct and as distinct within the context of the contract
after considering:
1. If the customer can benefit from the individual service on its own
2. If the customer can use the service with other readily available
resources
3. If multiple promised services work together to deliver a combined
output(s)
4. Whether the service is integrated with, highly interdependent on,
highly interrelated with, or significantly modifying or customising, other
promised services in the contract
Significant financing component
Generally, the Group receives short-term advances from its customers. Using
the practical expedient in IFRS 15, the Group does not adjust the promised
amount of consideration for the effects of a significant financing component
if it expects, at contract inception, that the period between the transfer of
the promised good or service to the customer and when the customer pays for
that good or service will be one year or less.
Contract balances
A contract asset is the right to consideration in exchange for goods or
services transferred to the customer. If the Group performs by transferring
goods or services to a customer before the customer pays consideration or
before payment is due, a contract asset is recognised for the earned
consideration that is conditional.
A trade receivable represents the Group's right to an amount of consideration
that is unconditional (i.e., only the passage of time is required before
payment of the consideration is due) - note 1.13.
A contract liability is the obligation to transfer goods or services to a
customer for which the Group has received consideration (or an amount of
consideration is due) from the customer. If a customer pays consideration
before the Group transfers goods or services to the customer, a contract
liability is recognised when the payment is made or the payment is due
(whichever is earlier). Contract liabilities are recognised as revenue when
the Group performs under the contract.
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. If the
recoverable amount of the cash-generating unit is less than the carrying
amount of the unit, the impairment loss is allocated first to reduce the
carrying amount of any goodwill allocated to the unit and then to the other
assets of the unit pro-rata on the basis of the carrying amount of each asset
in the unit. Any impairment loss is recognised directly in the income
statement. An impairment loss recognised for goodwill is not reversed in a
subsequent period.
1.8 Foreign operations
In preparing the financial statements of the group entities, transactions in
currencies other than Pound sterling (foreign currencies) are recognised at
the rates of exchange prevailing on the dates of the transactions. At each
reporting date, monetary assets and liabilities that are denominated in
foreign currencies are retranslated at the rates prevailing at that date.
Non-monetary items carried at fair value that are denominated in foreign
currencies are translated at the rates prevailing at the date when the fair
value was determined. Non-monetary items that are measured in terms of
historical cost in a foreign currency are not retranslated.
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.
The amount initially recognised for internally-generated
intangible assets is the sum of the expenditure incurred from the date when
the intangible asset first meets the recognition criteria listed above.
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.
An intangible asset is derecognised on disposal, or when no
future economic benefits are expected from use or disposal. Gains or losses
arising from derecognition of an intangible asset, measured as the difference
between the net disposal proceeds and the carrying amount of the asset, are
recognised in profit or loss when the asset is derecognised.
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.
An item of property, plant and equipment is derecognised upon disposal or when
no future economic benefits are expected to arise from the continued use of
the asset. The gain or loss arising on the disposal or retirement of an asset
is determined as the difference between the sales proceeds and the carrying
amount of the asset and is recognised in profit or loss.
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 period 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 property, plant and equipment and intangible
assets excluding goodwill
At each reporting date, the Group reviews the carrying amounts of its
property, plant and equipment and intangible assets to determine whether there
is any indication that those assets have suffered an impairment loss. If any
such indication exists, the recoverable amount of the asset is estimated to
determine the extent of the impairment loss (if any). Where the asset does not
generate cash flows that are independent from other assets, the Group
estimates the recoverable amount of the cash-generating unit to which the
asset belongs.
Recoverable amount is the higher of fair value less costs of disposal and
value in use. In assessing value in use, the estimated future cash flows are
discounted to their present value using a pre-tax discount rate that reflects
current market assessments of the time value of money and the risks specific
to the asset for which the estimates of future cash flows have not been
adjusted.
If the recoverable amount of an asset (or CGU) is estimated to be less than
its carrying amount, the carrying amount of the asset (or CGU) is reduced to
its recoverable amount. An impairment loss is recognised immediately in profit
or loss.
Where an impairment loss subsequently reverses, the carrying amount of the
asset (or CGU) is increased to the revised estimate of its recoverable amount,
but so that the increased carrying amount does not exceed the carrying amount
that would have been determined had no impairment loss been recognised for the
asset (or CGU) in prior years. A reversal of an impairment loss is recognised
immediately in profit or loss to the extent that it eliminates the impairment
loss which has been recognised for the asset 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 Group 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 Group entity are recognised at the proceeds received, net of
direct issue costs.
Compound instruments
The component parts of convertible loan notes issued by the Group are
classified separately as financial liabilities and equity in accordance with
the substance of the contractual arrangements and the definitions of a
financial liability and an equity instrument. A conversion option that will be
settled by the exchange of a fixed amount of cash or another financial asset
for a fixed number of the parent company's own equity instruments is an equity
instrument.
At the date of issue, the fair value of the liability component is estimated
using the prevailing market interest rate for a similar non-convertible
instrument. This amount is recorded as a liability on an amortised cost basis
using the effective interest method until extinguished upon conversion or at
the instrument's maturity date.
The conversion option classified as equity is determined by deducting the
amount of the liability component from the fair value of the compound
instrument as a whole. This is recognised and included in equity and gets
released to the retained earnings over the period of the bond to offset
against the amortised cost release. Where the conversion option remains
unexercised at the maturity date of the convertible loan note, the balance
recognised in equity will be transferred to retained earnings. No gain or loss
is recognised in profit or loss upon conversion or expiration of the
conversion option.
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 convertible loan notes issued by the Group are classified as financial
liabilities when a conversion option that will be settled by the exchange of a
fixed amount of cash or another financial asset for a variable number of the
parent company's own equity instruments. The notes are recorded as a liability
on an amortised cost basis using the effective interest method until
extinguished upon conversion or at the instrument's maturity date. The
difference between the fair value (i.e. future cash flows discounted at the
effective interest rate) of the convertible loan notes and the transaction
price (contractual amount) principal is recognised as a gain or loss through
profit or loss on initial recognition of the financial liability.
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 Group derecognises financial liabilities when, and only when, the Group'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 Group assesses whether a contract is or contains a lease, at inception of
the contract. The Group 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 Group
recognises the lease payments as an administrative expense on a straight-line
basis over the term of the lease.
The lease liability is initially measured at the present value of the lease
payments that are not paid at the commencement date, discounted by using the
rate implicit in the lease. If this rate cannot be readily determined, the
Group uses its incremental borrowing rate. The lease liability is subsequently
measured by increasing the carrying amount to reflect interest on the lease
liability (using the effective interest method) and by reducing the carrying
amount to reflect the lease payments made.
The right-of-use assets comprise the initial measurement of the corresponding
lease liability, lease payments made at or before the commencement day, less
any lease incentives received and any initial direct costs. They are
subsequently measured at cost less accumulated depreciation and impairment
losses. Right-of-use assets are depreciated over the shorter period of lease
term and useful life of the right-of-use asset.
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.
If there is objective evidence that the Group's net investment in subsidiary
is impaired, the requirements of IAS 36 Impairment of Assets are applied to
determine whether it is necessary to recognise any impairment loss with
respect to the Group's investment. When necessary, the entire carrying amount
of the investment (including goodwill) is tested for impairment in accordance
with IAS 36 as a single asset by comparing its recoverable amount (higher of
value in use and fair value less costs of disposal) with its carrying amount.
Any impairment loss recognised is not allocated to any asset, including
goodwill that forms part of the carrying amount of the investment. Any
reversal of that impairment loss is recognised in accordance with IAS 36 to
the extent that the recoverable amount of the investment subsequently
increases.
Unlisted investments are measured at fair value through profit or loss. Fair
value measurements are estimated based on the amounts for which the assets
could be exchanged at the relevant transaction date or reporting period end
and are therefore not necessarily reflective of the likely cash flow upon
actual settlements. Where fair value measurements cannot be derived from
publicly available information, they are estimated using models and other
valuation methods. To the extent possible, the assumptions and inputs used
take into account externally verifiable inputs. However, such information is
by nature subject to uncertainty, particularly where comparable market-based
transactions may not exist.
1.18 Intercompany Financing arrangements
The amortised cost methodology is applied to the financing arrangement between
the Company and subsidiaries Crossword Consulting Limited and Stega UK
Limited. An assessment in undertaken to determine the market rate of
interest for a similar loan given the credit rating of the subsidiaries to
apply discounting with the principal conceptually including a financing
element. The difference between the discounted loan balance at inception of
the loan and the principal are treated as a capital contribution in the
subsidiaries.
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. An investment normally qualifies as a cash equivalent only when it has
a maturity of three months or less from the date of acquisition.
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 judgements that the directors have made which
involve sources of estimation uncertainty and have the significant effect on
the amounts recognised in the financial information. There are no further
critical accounting judgements.
Convertible Loans
The Group has given consideration to the measurement and presentation of the
convertible loans.
In the measurement of financial liability, a reasonable estimate of the
Group's cost of debt is used.
Accounting for investment in subsidiaries
An 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. The assessment also requires an estimate of a schedule for repayment
of long and short term intercompany loans.
Impairment
The Group assesses goodwill and intangible assets for possible impairment. The
testing for impairment involves comparing the carrying value of the cash
generating unit with its recoverable amount, that is, the higher of fair value
less cost to sell and value in use.
Intercompany loans
Intergroup lending agreements are assessed by applying expected credit losses
method based on the management estimates for probability of default.
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 Group has taxable temporary differences that partly
support the recognition of the losses as deferred tax assets based on the
above. The Group 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.
Other estimates
These estimates do not carry significant risk of resulting in material
adjustment to the carrying amounts of assets and liabilities within the next
financial year.
Fair value of options granted to employees
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.
2 Revenue and segmental information
An analysis of the Group's revenue for each period for its continuing
operations, is as follows:
£ Group 2023 Group 2022
Revenue from the sale of goods/licences 881,938 479,849
Revenue from the rendering of services 58,600 64,667
Revenue from consulting services 3,098,058 3,013,884
Software engineering revenue 154,400 89,600
Total Revenue 4,192,996 3,648,000
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 Engineering Services and Consulting and Managed Services.
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:
2023 Software product and Services and Engineering Services Consulting and Managed Services Eliminations Total
£ £ £ £
Revenue 1,094,938 3,297,537 (199,480) 4,192,996
Cost of Sales (522,091) (2,616,818) 144,198 (2,994,711)
Gross Profit 572,847 680,719 (55,281) 1,198,285
Administrative expenses (3,526,531) (999,175) 55,281 (4,470,425)
Other operating expense (407,757) (9,444) - (417,201)
Financial income and expenses (269,695) (181,968) - (451,663)
Loss for the period before taxation (3,631,136) (509,868) - (4,141,004)
Tax credit / (expense) 195,399 30,846 - 226,245
Loss for the Period (3,435,737) (479,022) - (3,914,759)
Total Comprehensive Loss (3,436,918) (479,022) - (3,915,940)
Segment assets 9,224,251 1,921,925 (4,606,549) 6,539,637
Segment liabilities 5,975,766 3,676,326 (3,689,294) 5,962,798
EBITDA (2,945,587) (326,551) - (3,272,138)
2022 Software product and Services and Engineering Services Consulting and Managed Services 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 income (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)
During the year ended 31 December 2023 approximately 15% (2022: 14%) 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 10% or more of the consolidated entity's external
revenue.
No analysis of net assets by geographic segment is provided as the net assets
are principally all within the UK.
3 Expenses by nature
£ Group 2023 Group 2022
Staff and related costs 5,274,424 4,914,076
Consultancy and related costs 567,672 854,972
Professional fees 714,504 808,910
Property related costs 368,787 201,590
Depreciation 28,176 11,287
Amortisation 389,025 293,170
Capitalised costs (348,094) (162,680)
Other expenses 887,842 1,106,293
Total cost of sales, administrative and 7,882,337 8,027,618
other operating expenses
Included in Cost Of Sales
£ Group 2023 Group 2022
Staff and related costs 2,256,838 1,874,960
Consultancy and related costs 567,672 854,972
Other expenses 170,201 25,730
Total cost of sales 2,994,711 2,755,662
Included in Administrative expenses
£ Group 2023 Group 2022
Staff and related costs 3,017,586 3,039,116
Professional fees 714,504 808,910
Property related costs 368,787 201,590
Capitalised costs (348,094) (162,680)
Other expenses 717,642 1,080,563
Total administrative expenses 4,470,425 4,967,499
Administrative expenses include-short term lease expense of £318,143 (2022:
£188,643).
Expenses by geographic location
£ Group 2023 Group 2022
UK 6,974,775 7,355,231
Poland 812,638 672,387
Oman 94,924 -
Total cost of sales, administrative and 7,882,337 8,027,618
other operating expenses
4 Staff Costs
Staff costs, including directors' remuneration, were as follows:
£
Wages and salaries: Group 2023 Group 2022 Company 2023 Company 2022
- Administrative 2,043,075 2,342,943 2,006,440 2,066,066
- Consulting 2,001,988 1,719,588 - -
- Research and development 592,278 348,910 - -
Social security costs 558,279 432,124 240,814 231,583
Other pension costs 78,804 70,511 51,991 47,838
5,274,424 4,914,076 2,299,245 2,345,487
The average monthly number of employees, including the directors, during the
period was as follows:
Group 2023 Group 2022 Company 2023 Company 2022
Staff 50 52 25 30
Directors 11 11 8 8
Total 61 63 33 38
Share based payments
The amount recognised in respect of share based payments was £6,203 (2022:
£130,452).
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 2023 (2022:
None).
Total options issued as at 31 December 2023 amount to 2,908,923 (2022:
2,273,653).
-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 forfeited options due to
leavers; and
• Performance conditions - none.
Reconciliation of share options - Company
Weighted average exercise price Weighted average exercise price
2023 2023 2022 2022
£ £
1st January 2,273,653 0.36 2,348,653 0.36
Granted during the period 775,270 0.09 10,000 0.33
Lapsed during the period (140,000) 0.32 (85,000) 0.34
End of the period 2,908,923 0.29 2,273,653 0.36
The weighted average share Price at the exercise date was £0.29.
The range of exercise prices is from £0.05 to £0.55.
The weighted average remaining life of the options was 5.5 years (2022: 6.5
years).
5 Directors' Remuneration
The remuneration of the Directors who served in the current year was as
follows:
2023 Basic Salary and Fees Bonus Taxable Benefits Employer's Pension Contribution Total
£
Executive Directors
Tom Ilube 130,000 4,237 771 135,007
Mary Dowd* 175,000 2,506 20,000 197,506
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 398,000 - 31,742 20,771 450,513
2022
£
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
In the year ended 31 December 2023, certain of the directors received
remuneration (which is included in the amounts above) through payments by the
Company to third parties as follows: £12,000 was paid to Cumberland House
Consulting Ltd for the services of R Coles (2022: £12,000); £12,000 was paid
to Caprica Nelson Ltd for the services of R Anderson (2022: £12,000);
£16,000 was paid to Cambridge KT Ltd for the services of D Secher (2022:
£16,000).
Share Options issued
Year Share Options Exercise Price Total Value
Mary Dowd 2020 25,000 £ 0.31 £ 2,903
Sir Richard Dearlove 2020 94,340 £ 0.27 £ 9,496
Sir Richard Dearlove 2021 70,423 £ 0.36 £ 25,000
Sir Richard Dearlove 2023 270,270 £ 0.09 £ 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. Jake Holloway and Sean Arrowsmith
have left the Company during 2023 and the LTIP is no longer applicable to
them.
6 Other Income
Group 2023 Group 2022
£ £
Grant Income - 39,814
- 39,814
7 Other Operating Expense
Notes Group 2023 Group 2022
£ £
Amortisation of intangible assets 12 389,025 293,170
Depreciation of property, plant and equipment 13 19,945 11,287
Depreciation of right-of-use assets 13 8,231 -
417,201 304,457
8 Finance Costs
Group 2023 Group 2022
£ £
Finance cost of loan notes 377,322 272,400
Interest on deferred consideration 86,010 115,766
Interest expense on lease liabilities 2,934 -
Other interest expense 1,806 7,596
468,072 395,762
9 Gain on measurement of financial assets and liabilities
Group 2023 Group 2022
£ £
Gain on remeasurement of contingent consideration - 170,283
Gain on initial recognition of convertible loan notes at fair value 482,087 -
Loss on revaluation of investment in CyberOwl (456,834) -
25,253 170,283
10 Auditor's Remuneration
The expenses for services rendered by the Group auditor present themselves as
follows:
£ Group 2023 Group 2022
Fees for the parent company individual and consolidated financial statements 47,600 41,400
Fees for legal audit of subsidiary financial information 20,400 24,050
68,000 65,450
11 Tax
Income tax
£ Group 2023 Group 2022
UK corporation tax (270,004) (753,288)
Foreign tax on income for the year 7,834 6,115
Adjustment in respect of prior periods 35,925 -
Deferred tax credit - (397,129)
Total tax (credit) / expense (226,245) (1,144,302)
There is no tax charge in respect of other comprehensive income.
Corporation tax losses carried forward for offset against future year's
trading profits amount to approximately £14.2m (2022: £8.5m).
£ Group 2023 Group 2022
Loss before taxation 4,141,004 4,566,852
Average rate of corporation tax 23.52% 19.00%
Tax on loss (973,964) (867,702)
Effects of:
Expenses not deductible for tax purposes 217,950 116,084
Additional deduction for R&D expenditure (293,631) (164,009)
Surrender of tax losses for R&D tax credit refund 365,059 -
Adjustments in respect of prior period 35,924 (354,777)
Tax rate changes / adjustments 2,467 (12,199)
Deferred tax not recognised 423,174 138,301
Other changes 3,224) -
Total tax charge (226,245) (1,144,302)
12 Intangible Assets
Software Development
£ Group 2023 Group 2022 Company 2023 Company 2022
Cost b/f 3,039,473 1,141,560 2,429,447 531,534
Acquired through business combinations - 1,694,287 - 1,694,287
Additions 348,093 203,627 348,093 203,627
3,387,566 3,039,473 2,777,540 2,429,447
Accumulated Amortisation
B/F 331,050 37,881 232,241 9,931
Charge for the period 389,025 293,169 318,164 222,310
C/d 720,075 331,050 550,405 232,241
Net Book Value 2,667,491 2,708,423 2,227,135 2,197,206
Intangible assets comprise of 6 different software development projects with
remaining useful life of approximate between 5 and 10 years each and the
carrying amounts of £940,932, £810,244, £344,206, £221,803, £184,631 and
£165,675.
The intangible assets have been evaluated to determine whether there are any
indicators of impairment. Assessment of the recoverable value for software
development assets has been based on calculating the value in use, which is
equal to net present value of the future cash flows. The cash flow projections
are based on the most recent 2 year forecast extrapolated to 5 years with a
growth rate for revenue between 25% and 50% and costs of 10%. The pre-tax
discount rate used in the calculation was 26%.
Please refer to note 14 for matters relating to impairment assessment for
Nightingale product.
13 Property, Plant and Equipment
Computers
£ Group 2023 Group 2022 Company 2023 Company 2022
Cost b/f 82,023 31,845
Additions - 48,971
Acquired through business combinations - 1,207
Disposals (1,098) -
80,925 82,023 - -
Accumulated Depreciation
B/F 36,984 26,385
Charge for the period 19,945 11,287
Disposals (1,098) 0
Translation adjustments (104) (688)
C/d 55,727 36,984 - -
Net Book Value 25,197 45,039 - -
Furniture and Fittings
£ Group 2023 Group 2022 Company 2023 Company 2022
Cost b/f 15,157 15,157 15,157 15,157
Additions 7,129 7,129
22,286 15,157 22,286 15,157
Accumulated Depreciation
B/F 15,157 15,157 15,157 15,157
Charge for the period - - - -
C/d 15,157 15,157 15,157 15,157
Net Book Value 7,129 - 7,129 -
Right of Use Assets
£ Group 2023 Group 2022 Company 2023 Company 2022
Cost b/f - - - -
Additions 197,536 - 197,536 -
197,536 - 197,536 -
Accumulated Depreciation
B/F - - - -
Charge for the period 8,231 - 8,231 -
C/d 8,231 - 8,231 -
Net Book Value 189,305 - 189,305 -
Total
£ Group 2023 Group 2022 Company 2023 Company 2022
Cost b/f 97,180 47,002 15,157 15,157
Additions/(disposals) 204,665 48,971 204,665 -
Acquired through business combinations - 1,207 - -
Disposals (1,098) - - -
300,746 97,180 219,822 15,157
Accumulated Depreciation
B/F 52,141 41,542 15,157 15,157
Charge for the period 28,176 11,287 8,231 -
Translation adjustments (104) (688) - -
Disposals (1,098) - - -
C/d 79,115 52,141 23,388 15,157
Net Book Value 221,631 45,039 196,434 -
14 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 £184,631 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 2 year forecast prepared by
management and 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 pre-tax discount rate used in the calculation was 26%.
At 2023 year end the recoverable amount was determined to be higher than the
value of goodwill and NBV attributable to Nightingale, therefore, no
impairment has been recorded.
£ Group 2023 Group 2022
B/F 875,277 875,277
C/F 875,277 875,277
15 Unlisted investments
£ Group 2023 Group 2022 Company 2023 Company 2022
Fair value at 1 January 456,834 456,834 456,834 456,834
Additions 524,834 - 524,834 -
Revaluation (456,834) - (456,834) -
Fair value at 31 December 68,000 456,834 68,000 456,834
The above Group investment represents Crossword Cybersecurity Plc's 2023 -
3.1% (2022 - 3.1%) holding in CyberOwl. During 2023 the Group participated in
the fundraising event to acquire preference shares in CyberOwl in order to
maintain the same shareholding.
At the end of the reporting period the value of investment has been impaired
based on unobservable inputs representing management's best estimate of the
value of the investment.
16 Investment in subsidiaries
£ Company 2023 Company 2022
Cost b/f 1 January 1,649,145 1,637,518
Acquired during the year - 1,341,420
Transfer to intangibles on hive up - (1,270,715)
Reversal of contingent consideration - (170,283)
Capital contribution 687,571 111,205
Cost c/f 31 December 2,336,716 1,649,145
The Group's subsidiary undertakings are listed below, including name, country
of incorporation, and proportion of ownership interest:
Name Registered office Principal activity 2023 2022
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 100 100
Verifiable Credentials Ltd, a company incorporated in England and Wales,
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 2006 relating to the audit of individual accounts by
virtue of s479A of the Act.
17 Trade and Other Receivables
£ Group 2023 Group 2022 Company 2023 Company 2022
Trade receivables 1,223,289 1,110,697 1,002,708 505,451
Other receivables 179,946 524,721 147,522 445,603
Prepayments 233,829 239,066 179,549 183,160
Accrued income 39,107 133,883 - 23,383
VAT Refund - 69,683 - 46,421
Intercompany receivables within one year - - 340,043 714,507
1,676,171 2,078,050 1,669,822 1,918,525
All of the above amounts are considered to be due within one year.
Trade receivables are stated after deducting allowances for doubtful debts, as
follows:
£ Group 2023 Group 2022 Company 2023 Company 2022
At 1 January 13,000 7,000 - -
Expense 7,700 6,000 - -
Utilised (13,000) - - -
At 31 December 7,700 13,000 - -
The Group applies a simplified approach to measure the loss allowance for
trade receivables classified at amortised cost, using the lifetime expected
loss
provision.
The maximum exposure to credit risk at the reporting date is the carrying
value as above and the cash and cash equivalents and none are either past or
impaired.
Of the above amounts held within the Group, £18,608 is denominated in Polish
Zloty and £916 in Omani Rial with the remainder in GBP (2022: £32,735 in
Polish Zloty).
Foreign exchange risk is currently minimal as balances in Polish Zloty and
Omani Real are between the parent and its subsidiaries.
18 Trade and Other Payables
£ Group 2023 Group 2022 Company 2023 Company 2022
Trade payables 400,748 659,282 794,117 1,025,828
Employment taxes and VAT payable 349,359 306,168 64,351 69,300
Accruals 429,451 434,705 278,948 187,197
Contract liabilities 431,161 460,853 246,577 279,125
Deferred consideration 562,532 568,146 562,532 568,146
Lease liability 88,709 - 88,709 -
Other payables 71,801 27,629 183,610 17,179
2,333,761 2,456,783 2,218,844 2,146,775
All of the above amounts are considered to be due within one year.
The contract liabilities relate to deferred revenue arising from contracts
with customers.
Of the Trade and Other Payables amounts held within the Group, £72,110 (2022:
£83,965) is denominated in Polish Zloty and £80,639 in Omani Rial (2022:
Nil) with the remainder in
GBP.
19 Other Current Liabilities
£ Group 2023 Group 2022 Company 2023 Company 2022
Bank loan 17,000 17,000 - -
17,000 17,000 - -
20 Other Non-current Liabilities
£ Group 2023 Group 2022 Company 2023 Company 2022
Deferred consideration - 492,151 - 492,151
Lease liability 102,224 - 102,227 -
Deferred grant income 132,693 132,692 - -
234,917 624,843 102,227 492,151
21 Share Capital
Allotted called up and fully paid
Number of shares (all ordinary shares £0.005 each) 2023 2022
B/f 92,403,715 74,957,150
Shares Issued in period 1,313,926 17,446,565
C/d 93,717,641 92,403,715
The shares issued in the period were ordinary shares of £0.005 at a premium
of £215,457 (2022:
£3,563,151).
All shares carry the same voting and capital distribution
rights.
£
Share Capital 2023 2022
Cost b/f 462,019 374,786
Shares Issued in period 6,570 87,233
468,589 462,019
Share Premium
B/f 18,534,372 14,971,221
Shares Issued in period 215,457 3,563,151
C/d 18,749,829 18,534,372
22 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 £3,896,106 (2022:
£3,408,149) divided by the weighted average number of ordinary shares of
93,466,981 (2022: 80,022,937).
23 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
24 Financial Instruments
£
Current Financial Assets Group 2023 Group 2022 Company 2023 Company 2022
Financial assets measured at amortised cost
Trade and other receivables 1,442,342 1,769,301 1,490,273 1,688,943
Cash and cash equivalents 730,946 2,077,771 457,376 1,746,530
Non-Current Financial Assets
Financial assets measured at amortised cost
Loan to subsidiary - - 972,449 1,067,185
Financial assets measured at fair value through profit or loss
Financial investments 68,000 456,834 68,000 456,834
2,241,288 4,303,906 2,988,098 4,959,493
The financial investments comprise of investment in CyberOwl Ltd, which has
been revalued on the basis of valuation of preference shares held in the
company. This methodology of determining a fair value equates to a level 3
assessment based on unobservable inputs.
£
Current Financial Liabilities Group 2023 Group 2022 Company 2023 Company 2022
Financial liabilities measured at amortised cost
Trade and other payables 1,553,240 1,689,761 1,907,917 1,798,351
Loans 17,000 17,000 - -
Finance lease obligations 88,709 - 88,709 -
Non-Current Financial Liabilities
Financial liabilities measured at amortised cost
Loans 34,000 51,000 - -
Convertible loan notes 3,343,121 1,329,678 3,343,121 1,329,678
Finance lease obligations 102,224 - 102,227 -
Non-current deferred consideration - 492,151 - 492,151
5,138,294 3,579,590 5,441,974 3,620,180
Out of £2,060,000 of new convertible loan notes issued in the year,
£2,015,000 of convertible loan notes were accounted for as financial
liability and initially measured at fair value (and subsequently measured at
amortised cost) with a gain of £482,087 recorded in the Income Statement. The
remaining £605,000 were accounted for as a compound instrument resulting in
an equity component on initial recognition of £103,948 recorded in
Convertible debt reserve.
25 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 2023 Group 2022 Company 2023 Company 2022
Cash and cash equivalents 730,946 2,077,771 457,376 1,746,530
Trade and other receivables 1,442,342 1,769,301 1,490,273 1,688,943
Loan to subsidiary - - 1,312,492 1,781,692
Financial investments 68,000 456,834 68,000 456,834
Total 2,241,288 4,303,906 3,328,142 5,673,999
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 2023 2022
£ due < 1 year due 1 - 5 years due < 1 year due 1 - 5 years
Trade payables 400,748 - 659,282 -
Accruals 429,451 - 434,705 -
Deferred consideration 562,532 - 568,146 492,151
Other Payables 71,801 - 27,629 -
Loans 17,000 34,000 17,000 51,000
Convertible loan notes - 3,343,121 - 1,329,678
Finance lease obligations 88,709 102,224 - -
Total 1,570,241 3,479,345 1,706,762 1,872,829
26 Capital management
The Group considers its capital to comprise of its equity share capital, share
premium, foreign exchange reserve, share options reserve and convertible debt
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.
27 Pensions
Employer contributions to the Group defined contribution pension scheme for
employees in the United Kingdom were £87,954 (2022: £70,695). 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.
28 Related Party Transactions
2023 Crossword Consulting Limited Crossword Cybersecurity SP Z.o.o Stega Verifiable Credentials Limited Cumberland House Consulting Limited*
UK
Limited
Services received from £ 157,479 884,060 42,000 - -
Services supplied to £ - - - - 637,350
Balance trade payable to £ - 363,820 - - -
Balance trade receivable from £ 420,514 - 423,992 1,367 214,712
Intercompany loan receivable from £ 1,326,069 - 157,251 - -
2022
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 - -
* Dr Robert Coles is a director for both Cumberland House Consulting Ltd and
Crossword Cybersecurity Plc
Tom Ilube, CEO, had made a loan of £250,000 to the Company in 2023. On 5
March 2024 the following directors made loans to the Company - Tom Ilube -
£40,000, Sir Richard Dearlove - £15,000, Dr David Secher - £10,000, Dr
Robert Coles - £100,000. All of the loans made by directors are on the same
terms as the other Lenders as described in note 29.
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 £773,535 (2022: £796,444).
Jake Holloway and Sean Arrowsmith resigned during the
year.
29 Convertible Loan Notes
The following table explains movements in the Convertible Loan Notes in the
year:
£ Convertible Loan Notes
B/f 2023 1,500,000
Additional loans issued in the period 2,620,000
C/d 2023 4,120,000
The discounted amount of the Convertible Loan Notes at the year end was
£3,343,121 (2022: £1,329,678).
The gain on initial recognition of the convertible loan recorded as a
liability on an amortised cost basis using the effective interest method is
£482,087 (2022: nil).
The equity component of the new Convertible Loan Notes at the date of issue
was £103,948 (2022: £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 a
certain fixed or variable price per share depending on agreement. 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.
30 Controlling Party
The Company does not have a controlling
party.
31 Subsequent Events
On 5 March 2024 the Company announced that it has entered into agreements for
a five year, unsecured, convertible loan to the value of £275,000. The funds
raised will be used to support sales and marketing, product and services
development and to provide general working capital. The interest rate is fixed
at 12% and is payable quarterly.
On 12 March 2024 the Company issued 7,749,226 new ordinary shares of 0.5 pence
each in respect of the second anniversary deferred consideration of £450,000
for the acquisition of Threat Status Limited originally acquired in
2022.
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