TIDMCCS
RNS Number : 6671W
Crossword Cybersecurity PLC
19 April 2023
Crossword Cybersecurity Plc
2022 Annual Report and Accounts, Convertible Loan Notes and
Investor Presentation
19 April 2023 - London, UK - Crossword Cybersecurity Plc
(AIM:CCS, "Crossword", the "Company" or the "Group"), the
technology commercialisation company focused on cyber security and
risk, is pleased to announce its final results for the year ended
31 December 2022. The Annual Report and Accounts along with the
Notice of its Annual General meeting ("AGM") and a Form of Proxy
will be posted to Shareholders shortly and will be available on the
Company's website at www.crosswordcybersecurity.com .
AGM and Investor Meeting
The AGM will be held on Monday 22(nd) May 2023 at 11.00am at the
offices of Shakespeare Martineau LLP, 6th Floor, 60 Gracechurch
Street, London EC3V 0HR.
The Company will be hosting an update on the Investor Meet
Company platform on Tuesday 25th April at 12.00pm. The presentation
is open to all existing and potential shareholders. Investors can
sign up to Investor Meet Company for free and join the Company
presentation via:
https://www.investormeetcompany.com/crossword-cybersecurity-plc/register-investor
Financial Highlights
-- Achieved highest growth rate since admission to AIM in 2018,
with revenue growing 68% to reach GBP3.65m
-- 55% organic revenue growth
-- 81% growth in ARR, year-end ARR of GBP2.4m
-- 54% recurring revenue in 2022
-- Significant investment in sales and marketing and product
development led to higher revenue per client, up 40% year on
year
-- Legal and Professional fees increased by cGBP250k, which
included costs of GBP346k relating to a potentially
transformational transaction which did not progress because the
vendor made other choices for their business
-- Oversubscribed GBP3.6m equity fund raise in September 2022
-- Loss before taxation of GBP4.6 million (Restated 2021: GBP2.7
million). For 2022 and the adjusted 2021 comparative numbers,
R&D tax credits are included in Tax and are no longer included
in Other Operating Income as in previous years
-- Loss before taxation using the 2021 presentation was GBP3.8m (2021: GBP2.4 million)
-- Total loss for the year GBP3.4m, after GBP1.1m of tax credit.
-- GBP2.1m cash and cash equivalents at year end
Operational Highlights
-- Rizikon users grew to over 1,000 by the end of 2022
-- Leonardo UK selected Rizikon to assist with assessment of
supply chain cyber risks, underlining Rizikon's capacity to deliver
at scale
-- Acquisition of T hreat Status Limited, adding two new
products: Trillion(TM) (credential breach SaaS platform) and Arc
(account protection for e-commerce platform and organisations)
-- Size of sales deals being secured by Trillion increased
significantly compared to before its acquisition by Crossword in
March 2022
-- Consulting increased its cross-selling drive, selling
services into numerous Rizikon clients and successfully introducing
Nightingale to several Consulting clients
-- Integration of Arc into Sticky Password, one of the
industry's most well-established secure password vaults
-- Opened an office in Singapore to support the 24/7 monitoring services provided by Nightingale
-- Launch of specialist Supply Chain Cyber Risk practice, with
Rizikon wrapped in a full-service consulting offer
-- Oman Data Park (ODP) signed a strategic cooperation agreement
to provide cyber security risk services to over 800 government,
corporate and SME organisations and enhance the protection of the
cyber security structure of sensitive information in Oman
-- The average number of Crossword employees grew to 63 during
2022, up from 51 in 2021, representing a 24% increase
Post Period Highlights
-- Launch of Ransomware Readiness Assessment service in March
2023, helping organisations reduce their exposure to ransomware
attacks.
Outlook
-- Targeting revenue growth of circa 50% in 2023 to GBP6m
-- Having invested significantly for rapid growth in 2022, the
focus in 2023 is on establishing a clear path to profitability
-- Increased emphasis on targeting larger clients that can make
full use of Crossword's range of products and services
R&D Tax Credits in FY2022 accounts have been reported in
Tax, due to the majority of the claim being under the SME scheme.
Historically, R&D Tax Credits have been reported as Other
Operating Income. There has also been a reclassification to R&D
Tax Credits in FY2021.
Cash and Convertible Loan Notes
On 13 July 2022, the Company announced that Tom Ilube, CEO of
Crossword, intended to extend his GBP250,000 loan notes on the same
terms as other loan note holders; these loan notes expired in
December 2022. Tom Ilube had been unable to extend his convertible
loan notes due to being in possession of inside information
relating to the potentially transformational transaction referred
to in the Chairman's Statement, which terminated earlier this year,
and due to the Company subsequently being in a closed period. Tom
Ilube is now in a position to complete loan notes of GBP250,000.
These will be on the same terms as other loan notes issued or
extended in 2022 with the conversion price based on the share price
immediately prior to the date of issue. In addition, other
potential investors, including Dr. Robert Coles Non-Executive
Director of Crossword Cybersecurity Plc, have expressed interest in
completing additional convertible loan notes on the same terms. The
Company expects to make a further announcement shortly. Cash raised
will be used to provide additional general capital for the
Group.
Following payment of fees relating to the potentially
transformational transaction which did not progress because the
vendor made other choices and 1(st) anniversary earn out payment
for Threat Status Limited, cash at 31 March 2023 was GBP0.5
million. The Company anticipates that it will need to raise
additional capital later this year as it continues to progress
towards cash break-even and further announcements in connection
with this will be made in due course.
Tom Ilube, CEO of Crossword Cybersecurity plc, commented:
" In 2022, Crossword achieved its highest growth rate since
admission to AIM in 2018, with total revenue growing 68% to reach
GBP3.65m in 2022.
In an environment of increasing number and complexity of
cyber-attacks, Crossword's business model centred around a strongly
growing Consulting division and specialist cyber security products
and services with distinct USPs, thrived in 2022.
Services (Consulting and Nightingale) recorded overall growth of
80%, of which 51% was recurring, as clients requested increased
cyber consulting services and monitoring to better evaluate their
current and potential exposure to cyber-attacks. In Products,
Rizikon and Trillion both experienced strong growth, with their
specialist features acting as a distinct draw for clients.
Rizikon user numbers grew to over 1,000 users by the year end,
with continuous improvement and the launch of new Rizikon modules
based on client feedback strengthening its offering year on year.
We are confident in continued growth for Rizikon as companies turn
to technology solutions supported by specialist consulting to
address their supply chain cyber risk requirements.
The size of sales deals being secured by Trillion became
noticeably larger compared to before its acquisition by Crossword
in March 2022, supported by an increase in dedicated and specialist
sales people, an increase in cross-selling, supporting a number of
Consulting activities, and inclusion in the sales partnerships
launched by Crossword during the period.
Increasing Annual Recurring Revenue (ARR) is a key objective for
Crossword. The value of the acquisitions made by Crossword in
recent years shone through powerfully in 2022, with all products
and services experiencing strong growth. In 2022, Crossword made
solid progress in increasing ARR, posting an excellent 81% growth
in ARR, with 54% recurring revenue in 2022 for the Company as a
whole.
In terms of specific products and services, Rizikon's ARR grew
43% during the year, Nightingale's grew 29%, and vCISO's (virtual
Chief Information Security Officer) ARR grew 68%.
Crossword's f ocus on increasing the proportion of larger
clients in its client mix continued apace. Larger clients are able
to make use of Crossword's range of products and services and
incrementally add to revenues year on year as client relationships
grow. We were pleased to see that Crossword's increased investment
in sales and marketing and products development is reaping results,
with average product and consulting revenue per client increasing
by 40% to GBP28,700 per client, up from GBP20,500 in 2021.
2022 was a year of significant investment for Crossword, as the
Company strengthened its foundations to seize the many market
opportunities available. Total cost of sales and administrative
expenses increased by GBP2.6m in 2022 compared to 2021. The
increase reflects the acquisition of Threat Status Limited in March
2022, and their inclusion of Stega UK Limited, acquired in August
2021, and Verifiable Credentials Limited, acquired in May 2021, for
a full year in the 2022 accounts. Legal and professional fees
increased by cGBP250k, reflecting Crossword's ongoing drive for
acquisitions during 2022. As an ambitious company, Crossword
attempted to execute a transformational acquisition in 2022. This
would have doubled the size of the company and given us critical
mass in one step. However, after spending considerable effort and
resources, including GBP346,000 of legal and professional costs, we
were unable to complete the deal because the vendor made other
choices for their business, late in the process. We were able to
minimise the impact on our core business whilst we worked on this
transaction, and therefore continued to drive significant organic
growth.
A primary driver for the increase in costs was a 24% increase in
the average number of staff during the year compared with 2021. In
2022, Crossword invested significantly in sales and marketing and
product development, which are the areas that saw the largest FTE
growth.
Having invested significantly for rapid growth in 2022,
Crossword has now shifted its focus in 2023 towards establishing a
clear path to profitability. Staff numbers have stabilised in 2023,
with a strong foundation now in place to drive the revenue growth
and path to profitability. Profitability will be underpinned by
improving margins, as Consulting revenue scales to achieve critical
mass and as product revenues increase. Crossword's diversified
product and services offering will drive scale while containing
risk.
The momentum from 2022 places Crossword in a strong position to
achieve at least 50% revenue growth in 2023 and our focus on margin
improvement will ensure that there is a clear, carefully managed
route to achieving profitability in the medium term."
- Ends -
The information contained within this announcement is deemed to
constitute inside information as stipulated under the retained EU
law version of the Market Abuse Regulation (EU) No. 596/2014 (the
"UK MAR") which is part of UK law by virtue of the European Union
(Withdrawal) Act 2018. The information is disclosed in accordance
with the Company's obligations under Article 17 of the UK MAR. Upon
the publication of this announcement, this inside information is
now considered to be in the public domain
Contacts
Crossword Cybersecurity plc - Tel: +44 (0) 333 090 2587
Email: info@crosswordcybersecurity.com
Tom Ilube, Chief Executive Officer
Mary Dowd, Chief Financial Officer
Grant Thornton (Nominated Adviser) - Tel: +44 (0) 20 7383
5100
Colin Aaronson / Jamie Barklem / Ciara Donnelly
Hybridan LLP (Broker) - Tel: +44 (0)203 764 2341
Claire Louise Noyce
For media enquiries contact:
Financial PR:
David Hothersall, Kinlan Communications
davidh@kinlan.net - Tel: +44 (0) 207 638 3435
General:
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
and Arc breached credentials tracking platforms, and incident
response. Crossword's work in digital identity is based on the
World Wide Web Consortium W3C verifiable credentials standard and
our current solution, Identiproof, enables secure digital
verification of individuals to prevent fraud.
Crossword serves medium and large clients including FTSE 100,
FTSE 250 and S&P listed companies in various sectors, such as
defence, insurance, investment and retail banks, private equity,
education, technology and manufacturing and has offices in the UK,
Poland and Oman. Crossword is traded on the AIM market of the
London Stock Exchange.
Visit Crossword at https://www.crosswordcybersecurity.com/
Chair's Statement
Growth accelerates rapidly in 2022
Crossword continued to build a strong and stable business,
backed by our strategy of building a significant intellectual
property-based, AIM quoted cyber security business.
Crossword recorded impressive revenue growth of 68% in 2022. The
Company completed its third acquisition and continued to reap the
benefits of successfully integrating previous acquisitions, with
annual recurring revenue growing by 81%. Rizikon ended 2022 with
over 1,000 organisations using the platform and our blue chip cyber
security consulting team is growing its client base with major FTSE
and Fortune clients.
Our focus now is to drive to profitability, underpinned by
targeting healthy revenue growth of over 50% in 2023.
Further progress with our acquisition strategy
Crossword continued to build on its acquisition strategy in 2022
with the successful acquisition of Threat Status Ltd., a threat
intelligence company. This added two additional products to the
Crossword portfolio, Trillion(TM) and Arc. Arc is a similar product
to Nixer, so post-acquisition, management took the decision to
merge the two products, under the Arc product brand.
Later in the year, in line with its stated acquisition strategy,
Crossword tested a further acquisition opportunity and decided it
would not be in the interests of the company to proceed at that
time. This exploratory approach signals the scale of Crossword's
ambition to build a scaled up, profitable
cyber security company.
A strong balance sheet and robust governance
To ensure that we had the funds to progress with our rapid
growth, Crossword issued additional GBP550k of Convertible Loan
Notes in July 2022 and carried out a GBP3.6m oversubscribed equity
fund raise in September 2022. We are very pleased that our
shareholders continue to see the growth opportunities for Crossword
and we would like to thank them for their commitment.
To ensure that we maintain a robust framework of controls and
high standards, the Board continues to adhere to the Quoted
Companies Alliance ("QCA") Corporate Governance Code (the "QCA
Code") in line with the London Stock Exchange's requirement for all
AIM quoted companies to adopt a recognised corporate governance
code. The Corporate Governance Statement on page 38 of this report
provides
further details.
Continued healthy growth with a clear path to profitability
Having invested significantly in 2022 to achieve impressive
growth of nearly 68% over the past year, Crossword has now shifted
its focus to defining a clear path to profitability. This is backed
by strong current momentum, which aims to grow revenue in the
region of 50% in 2023.
I am very proud of what our expert team has achieved over the
past year and I would like to acknowledge them all. Crossword has a
very strong culture and its core values of responsibility,
openness, flexibility and learning underpin everything we do and
are a source of particular strength that
we will leverage to grow into a strong, stable and profitable
business.
Sir Richard Dearlove KCMG OBE
Chair, Crossword Cybersecurity
18 April 2023
Chief Executive Officer's review
It is my pleasure, as Chief Executive Officer, to present the
Annual Report and audited accounts for Crossword Cybersecurity Plc
('Crossword' or the 'Company' or the 'Group') for the financial
year ended 31 December 2022.
Crossword grew revenue by a very impressive 68% to reach
GBP3.65m in 2022, its highest growth rate since admission to AIM in
2018. This proves that Crossword's services and products
have achieved real traction with a wide range of clients. With
this momentum, we expect to see our growth rate continue strongly
into 2023, whilst we drive towards profitability, which is our main
priority now.
We were particularly pleased to see annual recurring revenue
increase by 81% over the prior year and reach GBP2.4m. Whilst
acquisitions naturally contributed to this strong growth in
revenues, Crossword also recorded 55% growth in organic
revenues.
The constantly increasing number and the growing sophistication
of cyberattacks means that spending on cyber security defence is a
key priority for business and governments. In 2021, the average
number of cyberattacks and data breaches increased by 15.1 per
cent. from the previous year. Over the next two years, security
executives from over 1,200 companies polled by ThoughtLab in its
2022 cybersecurity benchmarking study see a rise in attacks from
social engineering and ransomware as nation-states
and cybercriminals grow more sophisticated. As a
result,"Cybersecurity failure" was ranked as a top-five risk over
the next two years in East Asia and the Pacific as well as in
Europe in the World Economic Forum's 2022 Global Risks Report,
while four countries, namely Australia, Great Britain, Ireland and
New Zealand ranked it as the number one risk. Many small, highly
digitalized economies such as Denmark, Israel, Japan, Taiwan
(China), Singapore and the United Arab Emirates also ranked the
risk as a top-five concern.
With the ever increasing cybersecurity market, in 2022 we made
it our mission to achieve critical mass by investing for growth.
The executive team wanted to accelerate Crossword's growth aiming
to achieve real momentum that would carry us into 2023 and beyond.
We also made the decision to continue with our acquisition strategy
and we succeeded in closing another excellent transaction by
securing Threat Status Limited. Threat Status brought two excellent
products into Crossword's portfolio, Trillion(TM) and Arc. Both
products deliver recurring revenue to the business and brought a
range of
new clients to Crossword. Trillion(TM) is a data breach platform
that contains billions of carefully curated and continuously
updated credentials that organisations can search to check the
status of their usernames and passwords. Arc makes this same vast
pool of information available in a different form to
product websites to protect against credential attacks. Due to
Arc's overlap with our existing product, Nixer, we made the
decision to merge the two products, under the product brand
name of Arc.
Rizikon, Crossword's lead product, ended 2022 with more than
1,000 organisations using the freemium version, trialling or
contracted to use the product. In June we launched a new service,
Supply Chain Cyber, with Rizikon at its heart wrapped in a
full-service consulting offer. We are developing new leading edge
modules for Rizikon and are in conversation with several potential
large scale supply chain cyber clients. Increasing regulatory
pressure on companies to monitor and take control of supply chain
cybersecurity risks is also aiding the growth of Rizikon's sales
pipeline.
Crossword's profitable and fast growing consulting business is
now a trusted supplier to a number of large and medium sized
companies, as well as continuing to work with smaller,
entrepreneurial companies. Our vCISO (virtual Chief Information
Security Officer) service, continues to be popular with all sizes
of client and delivers a growing stream of recurring revenue. Along
with our Nightingale network monitoring platform, which we acquired
the previous year with the Stega acquisition, the Services business
saw very positive overall growth of 80%, of which 51% is
recurring.
On the international front, Crossword invested time and effort
to firmly establish itself in Oman and is using that as a base to
explore opportunities in the wider Gulf region. This effort has put
us in prime position for a major Government contract in the region
that, if we are successful, will generate significant revenue as
well as make Crossword a strategic cyber security supplier across
Government. We also signed a distribution agreement with Oman's
major cloud services provider who will offer our Trillion(TM)
product and other Crossword services to their 600 client
organisations. Outside of Oman, we won business in the insurance
sector in Bermuda as well as established a small team in Singapore
to enable us to offer our Nightingale network monitoring service on
a 24 hour basis to major clients.
During 2022, Crossword took steps to ensure that it had the
funding it needed to continue executing on its strategy. Crossword
extended its Convertible Loan Note programme by adding a further
GBP550k of loan notes in July and completed a GBP3.6m equity
fundraise in September through an oversubscribed subscription of
Crossword Ordinary Shares. I was very pleased to welcome several
major new
shareholders and delighted that our existing shareholders
continue to back our vision and support our commitment to the
journey.
Crossword is now a 70-strong, well respected, British cyber
security business, with a growing reputation in the UK and beyond.
We take our wider social responsibilities seriously and have
supported our Polish colleagues in their efforts to help Ukrainians
exiled in Poland, by matching staff donations each month for a
period of 6 months up to PLN 2,500 each month.
As I close, I particularly wish to thank everyone who has helped
Crossword achieve this record revenue growth which, at 68% is our
fastest annual growth rate since Crossword joined AIM. Having
invested significantly for rapid growth in 2022, we have now
shifted our focus in 2023 towards a clear
path to profitability. The momentum from last year places us in
a strong position to achieve at least 50% revenue growth in 2023
and our focus on margin improvement will ensure that there is a
clear, carefully managed route to achieving profitability in the
medium term. Crossword's exceptional team and its culture of
responsibility, openness, flexibility and learning, gives me and
the whole Executive team the confidence that we will achieve our
goals for our staff, our clients and our investors.
Tom Ilube, Chief Executive Officer
Crossword Cybersecurity
18 April 2023
12 Months 12 Months
Consolidated Statement of Comprehensive ended 31st ended 31st
Income December December
Notes 2022 2021*
GBP GBP
Revenue 2 3,648,000 2,171,137
Cost of Sales 3 (2,755,662) (1,631,384)
Other income 6 39,814 152,347
Gross Profit 932,152 692,100
Administrative expenses 3,4 (4,967,499) (3,481,809)
Other operating expense 7 (304,457) (104,124)
Finance income-bank interest income
and foreign exchange (1,569) 4,956
Finance costs-other interest expense 8 (395,762) (220,545)
Gain on remeasurement of financial
assets and liabilities 9 170,283 456,803
Loss for the year before taxation (4,566,852) (2,652,619)
Tax credit / (expense) 11 1,144,302 378,995
Loss for the Year (3,422,550) (2,273,624)
Other Comprehensive Income
Items that may be reclassified to
profit or loss:
Foreign exchange translation Gain
/ (Loss) 1,782 (13,220)
------------------------- -------------------------
Total Other Comprehensive Income 1,782 (13,220)
Total Comprehensive Loss (3,420,768) (2,286,844)
========================= =========================
Loss for the period attributable to:
Owners of the parent (3,408,149) (2,229,296)
Non-controlling interests (14,401) (44,328)
Total Loss for the Year (3,422,550) (2,273,624)
------------------------- -------------------------
Total comprehensive loss for the period
attributable to:
Owners of the parent (3,406,367) (2,242,516)
Non-controlling interests (14,401) (44,328)
Total Comprehensive Loss (3,420,768) (2,286,844)
------------------------- -------------------------
Loss Per Share (basic) 23 (0.04) (0.03)
Loss Per Share (diluted) (0.04) (0.03)
All results are derived from continuing
operations
* Restated (as per note1.2)
Statement of Financial Position
as at 31 December Group Group Company Company
Notes 2022 2021 2022 2021
GBP GBP GBP GBP
Non-Current Assets
Intangible assets 13 2,708,423 1,103,679 2,197,206 521,603
Tangible assets 14 45,039 5,460 - -
Goodwill 15 875,277 875,277 - -
Unlisted investment 16 456,834 456,834 456,834 456,834
Investments in
subsidiaries 17 - - 1,649,145 1,637,518
Intercompany receivable
greater
than one year - - 1,067,185 918,206
Total non-current assets 4,085,573 2,441,250 5,370,370 3,534,161
------------------------ --------------------- ------------------------ ---------------------
Current Assets
Trade and other
receivables 18 2,078,050 1,066,076 1,918,525 838,622
Current tax receivable 398,511 - 368,393 -
Cash and cash equivalents 2,077,771 3,373,062 1,746,530 3,106,817
Total current assets 4,554,332 4,439,138 4,033,448 3,945,439
------------------------ --------------------- ------------------------ ---------------------
Total Assets 8,639,905 6,880,388 9,403,818 7,479,600
======================== ===================== ======================== =====================
EQUITY
Attributable to the
owners
of the Company
Share Capital 22 462,019 374,786 462,019 374,786
Share premium account 22 18,534,372 14,971,221 18,534,372 14,971,221
Convertible debt reserve 195,685 - 195,685 -
Equity reserve 24 370,762 240,310 370,762 240,310
Retained earnings (15,235,500) (11,827,351) (14,127,624) (10,800,700)
Translation of foreign
operations (13,210) (14,992) - -
Attributable to owners of
the parent 4,314,128 3,743,974 5,435,214 4,785,617
------------------------ --------------------- ------------------------ ---------------------
Non-controlling interests (153,527) (139,127) - -
Total equity 4,160,601 3,604,847 5,435,214 4,785,617
------------------------ --------------------- ------------------------ ---------------------
LIABILITIES
Current Liabilities
Trade and other payables 19 2,456,783 1,413,658 2,146,775 1,049,960
Other current liabilities 20 17,000 1,368,638 - 1,351,471
Total current liabilities 2,473,783 2,782,296 2,146,775 2,401,431
------------------------ --------------------- ------------------------ ---------------------
Long Term Liabilities
Convertible loan notes 30 1,329,678 - 1,329,678 -
Bank loans 51,000 68,000 - -
Other non-current
liabilities 21 624,843 425,245 492,151 292,552
Total long term
liabilities 2,005,521 493,245 1,821,829 292,552
------------------------ --------------------- ------------------------ ---------------------
Total Liabilities 4,479,304 3,275,541 3,968,604 2,693,983
------------------------ --------------------- ------------------------ ---------------------
Total Equity &
Liabilities 8,639,905 6,880,388 9,403,818 7,479,600
======================== ===================== ======================== =====================
The company's loss for the year was GBP3,326,925 (2021: GBP1,964,825).
The financial statements were approved by the Board and authorised for issue
on 18 April 2023. They were signed on its behalf by
Tom Ilube
Chief Executive Officer
Statement of Changes in Equity
Group Convertible Attributable
2022 Share Share Debt Equity Retained Translation to owners Non-controlling
Capital Premium Reserve Reserve Earnings Reserve of the parent interests Total
GBP
At 1st January 374,786 14,971,221 - 240,310 (11,827,351) (14,992) 3,743,974 (139,126) 3,604,848
Issue of
shares 87,233 3,750,012 - - - - 3,837,245 - 3,837,245
Transaction
costs - (186,861) - - - (186,861) - (186,861)
Issue of
convertible
debt - - 195,685 - - - 195,685 - 195,685
Employee share
schemes -
value
of employee
services - - - 130,452 - - 130,452 - 130,452
Loss for the
period - - - - (3,408,149) - (3,408,149) (14,401) (3,422,550)
Other
comprehensive
loss for the
period - - - - - 1,782 1,782 - 1,782
At 31st
December 462,019 18,534,372 195,685 370,762 (15,235,500) (13,210) 4,314,128 (153,527) 4,160,601
-------------------- ------------------------ --------------------- ------------------------ --------------------- --------------------- -------------------- ---------------------------- --------------------------------
Group
2021
At 1st January 256,605 8,518,391 - 181,618 (9,598,056) (1,772) (643,214) (94,799) (738,013)
Issue of
shares 118,181 6,770,954 - - - - 6,889,135 - 6,889,135
Transaction
costs - (318,124) - - - - (318,124) - (318,124)
Employee share
schemes -
value
of employee
services - - - 58,692 - - 58,692 - 58,692
Loss for the
period - - - - (2,229,296) - (2,229,296) (44,328) (2,273,624)
Other
comprehensive
loss for the
period - - - - - (13,220) (13,220) - (13,220)
At 31st
December 374,786 14,971,221 - 240,310 (11,827,351) (14,992) 3,743,974 (139,126) 3,604,847
-------------------- ------------------------ --------------------- ------------------------ --------------------- --------------------- -------------------- ---------------------------- --------------------------------
Company Convertible Attributable
2022 Share Share Debt Equity Retained Translation to owners Non-controlling
Capital Premium Reserve Reserve Earnings Reserve of the parent interests Total
GBP
At 1st
January 374,786 14,971,221 - 240,310 (10,800,699) - - - 4,785,617
Issue of
shares 87,233 3,750,012 - - - - - - 3,837,245
Transaction
costs - (186,861) - - - - - - (186,861)
Issue of
convertible
debt - - 195,685 - - - - - 195,685
Employee
share
schemes -
value
of employee
services - - - 130,452 - - - - 130,452
Loss for the
period - - - - (3,326,925) - - - (3,326,925)
At 31st
December 462,019 18,534,372 195,685 370,762 (14,127,624) - - - 5,435,214
-------------------- ------------------------ --------------------- ------------------------ --------------------- --------------------- --------------------- ------------------------ -------------------
Company
2021
At 1st
January 256,605 8,518,391 - 181,618 (8,835,874) - - - 120,740
Issue of
shares 118,181 6,770,954 - - - - - - 6,889,135
Transaction
costs - (318,124) - - - - - - (318,124)
Employee
share
schemes -
value
of employee
services - - - 58,692 - - - - 58,692
Loss for the
period - - - - (1,964,825) - - - (1,964,825)
At 31st
December 374,786 14,971,221 - 240,310 (10,800,699) - - - 4,785,617
-------------------- ------------------------ --------------------- ------------------------ --------------------- --------------------- --------------------- ------------------------ -------------------
12 Months 12 Months 12 Months 12 Months
Statement of ended ended ended ended
Cashflows 31st December 31st December 31st December 31st December
Group Group Company Company
Years Notes 2022 2021* 2022 2021*
Cashflows From
Operating
Activities GBP GBP GBP GBP
Loss for the year (3,422,550) (2,273,624) (3,326,924) (1,964,825)
Movement in trade
and other
receivables (786,642) (412,005) (1,649,101) (837,873)
Movement in trade
and other
payables 381,130 86,231 646,965 40,374
Depreciation 3 11,287 66,243 - 38,392
Amortisation 3 293,170 37,881 222,310 9,931
Finance costs 8 395,762 220,545 468,084 138,742
Gain on
remeasurement of
financial
assets and
liabilities (170,283) (456,803) (365,968) (456,803)
Employee share
schemes 4 130,452 58,692 130,452 58,692
Tax (credit) /
expense 11 (1,144,302) (378,995) (423,572) (206,380)
Tax received /
(paid) 348,662 200,984 295,763 206,380
Net Cashflow from
Operating
Activities (3,963,314) (2,850,851) (4,001,990) (2,973,370)
------------------------ --------------------- ------------------------ ----------------------
Cashflow From
Investing
Activities
Investment in
intangible
assets 13 (203,627) (183,796) (203,627) (183,796)
Purchase of
tangible assets 14 (48,971) - - -
Acquisition of
subsidiaries,
net of
cash acquired (625,408) (645,390) (715,415) (700,000)
Net Cashflow from
Investing
Activities (878,006) (829,186) (919,042) (883,796)
------------------------ --------------------- ------------------------ ----------------------
Cashflows From
Financing
Activities
Proceeds from
issue of
ordinary shares 3,837,245 6,639,135 3,837,245 6,639,135
Share issuance
costs (186,861) (318,124) (186,861) (318,124)
Proceeds from
issue of
convertible
loan notes 800,000 - 800,000 -
Repayment of
convertible loan
notes (700,000) - (700,000) -
Interest paid on
convertible loan
notes (189,640) (168,000) (189,640) (168,000)
Other interest
paid (16,495) (1,638) - (186)
Payments for
right of use
assets - (43,734) - (13,507)
Net Cash Inflow
from Financing
Activities 3,544,249 6,107,639 3,560,744 6,139,319
------------------------ --------------------- ------------------------ ----------------------
Net Increase in
Cash & Cash
Equivalents (1,297,071) 2,427,602 (1,360,288) 2,282,151
Foreign Currency
Translation
Difference 1,780 (12,881) - -
Cash and Cash
Equivalent at
the beginning
of the period 3,373,062 958,341 3,106,818 824,667
Cash and Cash
Equivalent at
the end
of the period 2,077,771 3,373,062 1,746,530 3,106,818
------------------------ --------------------- ------------------------ ----------------------
* Restated (as
per note1.2)
Notes to the Financial Information
1 Accounting Policies
1.1 The Group and its operations
Crossword Cybersecurity plc (the "Company") is a Company
incorporated on 6 March 2014 in England and Wales under the
Companies Act 2006. The Company is the parent company of the
Crossword Group of Companies focusing on the cybersecurity sector.
Crossword offers a range of cyber security solutions to help
companies understand and reduce cyber security risk. We do this
through a combination of people and technology, in the form of SaaS
and software products, consulting, and managed services.
The financial information includes the results of the Company
and its subsidiaries (together referred to as the "Group" and
individually as "Group entities").
The principal accounting policies applied in the preparation of
the financial information are set out below. These policies have
been consistently applied to all the periods presented, unless
otherwise stated.
1.2 Basis of preparation of financial information
The financial information has been prepared in accordance with
the requirements of the London Stock Exchange plc AIM Rules for
Companies and in accordance with International Financial Reporting
Standards as adopted in the United Kingdom ("UK adopted IFRS") and
those parts of the Companies Act 2006 applicable to companies
reporting in accordance with UK adopted IFRS.
The financial information has been prepared on the historical
cost basis. The preparation of financial information in conformity
with UK adopted IFRS requires the use of certain critical
accounting estimates. It also requires management to exercise its
judgement in the process of applying the Group's accounting
policies. Changes in assumptions may have a significant impact on
the financial information in the year the assumptions changed.
Management believes that the underlying assumptions are
appropriate. The areas involving a higher degree of judgement or
complexity, or areas where assumptions and estimates are
significant to the financial information are disclosed in
note1.21.
Changes in accounting policy and disclosures
During the year the Group has reviewed presentation of Gross
Margin in the Income Statement to align with general principles
adopted by Software-as-a-Service industry. The costs to be included
in Costs of Sales are primarily application hosting expenses,
customer success and customer service costs. Research and
Development expenses, which were previously included in Costs of
Sales, have been reclassified to Administrative expenses.
Furthermore, Amortisation and Depreciation have been separated
from Administrative expenses into Other operating expense category.
Prior period has been reclassified.
The Group has revised the treatment of Research and development
tax credits from the approach where these get recorded following
the receipt of tax relief to being recognised in the period they
relate to. Prior year has not been restated.
During the period the Group has changed presentation of Research
and development tax credits from Other operating income to Income
tax to reflect the fact that most of the credit relates to tax
relief for small and medium-sized enterprises.
The following table demonstrates re-classification of 2021
Consolidated Income Statement:
Consolidated Statement Other Operating
of Change in Expense separate Research
Comprehensive Income As previously Gross Margin from Admin and Development
reported calculation Costs Tax Credits Restated
12 Months ended 31st
December 2021
GBP
Revenue 2,171,137 - - - 2,171,137
Cost of Sales (1,957,178) 325,794 - - (1,631,384)
Other income - 152,347 152,347
Gross Profit 213,959 478,141 - - 692,100
Administrative expenses (3,260,139) (325,794) 104,124 - (3,481,809)
Other operating income 358,727 (152,347) - (206,380) -
Other operating expense - - (104,124) - (104,124)
Finance income 4,956 - - - 4,956
Finance costs-other
interest
expense (220,545) - - - (220,545)
Gain on revaluation of
financial assets 456,803 - - - 456,803
Loss for the year before
taxation (2,446,239) - - (206,380) (2,652,619)
Tax credit / (expense) 172,615 - - 206,380 378,995
Loss for the Year (2,273,624) - - - (2,273,624)
At the year end, the following standards and interpretations
which have not been applied in these financial statements were in
issue but not yet effective. The Group is considering their impact
but do not expect a material on the future results of the
Group.
New standards, interpretations and amendments effective in
current period
None of the new standards and amendments to the existing
standards effective in the current period have been applicable to
the Group's consolidated financial statements.
New standards, interpretations and amendments not yet
effective
The Group adopt early the following amendments to standards
which are not yet mandatory.
IFRS 17 Insurance Contracts (including the June 2020 Amendments
to IFRS 17, effective from 1 January 2023)
Amendments to IAS 8 Accounting Policies, Changes in Accounting
Estimates and Errors - Definition of Accounting Estimates
(effective 1 January 2023).
Amendments to IAS 1 Presentation of Financial Statements and
IFRS Practice Statement 2: Disclosure of Accounting policies
(effective 1 January 2023).
Amendments to IAS 12 Income Taxes - Deferred Tax related to
Assets and Liabilities arising from a Single Transaction (effective
1 January 2023).
Amendments to IAS 1 Presentation of Financial Statements -
Classification of Liabilities as Current or Non-current (effective
1 January 2023).
1.3 Going Concern
The financial information has been prepared on a going concern
basis. The Group's business model has been enhanced following the
two acquisitions in 2021 and a further acquisition in early 2022.
The Group's operations have incurred a loss in the financial year
whilst the Group's products and services continue to be enhanced,
developed and brought to market. The Directors' forecast in 2023
shows a trading loss with net cash outflows as the business
continues to develop and enhance its products and services and
grows revenue. In 2022, the Group's operations have been supported
by cash inflows from customers and from the issue of GBP3.6m equity
gross during 2022.
The Directors have considered the Group's future and forecast
business and cash requirements. Following the completion of a
successful fundraise in 2022, the Directors have determined that
the group wants to continue to expand, while having a clear and
determined focus on a path to profitability, which is expected to
require successful additional fundraise.
On 12 July 2022 holders of GBP700,000 of loan notes extended
their loan notes to be repayable 30 June 2025 and two loan note
holders loaned a further GBP150,000 to the Company on the above
terms. In both cases the conversion price was amended to 25.2p.
On 15 July 2022 a further GBP550,000 of loan notes were issued
repayable on 14 July 2025, otherwise on the same terms as above
save that the conversion price is 26.1p.
Currently, GBP1.5 million of loan notes remain outstanding.
The Directors have concluded that these circumstances could give
rise to a material uncertainty arising from events or conditions
that may cast significant doubt on the entity's ability to continue
as a going concern if a further fund raise was unsuccessful.
However, considering recent successful fund raises the Directors
are confident that they can continue to adopt the going concern
basis in preparing the financial statements.
The financial statements do not include any adjustment that may
arise in the event that the Group is unable to raise finance,
realise its assets and discharge its liabilities in the normal
course of business.
1.4 Basis of consolidation
Subsidiaries are fully consolidated from the date on which
control is transferred to the Group. Control exists when then the
Group has:
- the power over the investee;
- exposure, or rights, to variable returns from its involvement
with the investee;
- the ability to use its power over the investee to affect the
amount of the investor's returns.
All intra-Group transactions balances income and expenses are
eliminated on consolidation. Uniform accounting policies are
applied by the Group entities to ensure consistency.
1.5 Revenue
Revenue comprises the fair value of consideration received or
receivable for licence income and the rendering of services in the
ordinary course of the Group's activities. Revenue is shown net of
value added tax and trade discounts. Income is reported as
follows:
(a) Licence Income
Technology and product licensing revenue represents amounts
earned for licenses granted under licensing agreements and
recognized over time . Revenues relating to up-front payments are
recognised when the obligations related to the revenues have been
completed.
Revenues for maintenance and support services are recognised in
the accounting periods in which the services are rendered.
(b) Rendering of Services
Services relate to implementation and deployment fees for the
technology and products licensed to customers. Revenue is
recognised in the accounting periods in which the services are
rendered.
(c) Consulting
Consulting revenue is recognised when the performance obligation
is met, primarily at a point of time. Contracts are structured to
support the revenue recognition process by stating what the
objectives and deliverables are for each part of the project, and
the revenue attributable to each deliverable.
(d) Software Engineering Services
Revenues for software engineering services are recognised in the
accounting periods in which the services are rendered.
Contract balances
Contract related balances comprise of contract assets and
contract liabilities.
Contract assets - are recognised when services are transferred
to customers before consideration is received or before the Group
has an unconditional right to payment for performance completed to
date. Contract assets are subsequently transferred to receivables
when the right of payment becomes unconditional.
Contract liabilities - are recognised when amounts are received
from customers in advance of transfer of goods or services.
Contract liabilities are subsequently recognised in revenue as or
when the Group performs under contracts.
1.6 Functional and presentation currency
The presentation currency of the Group is pounds sterling (GBP).
The functional currency of the Company is pounds sterling. The
functional currency of the Company's polish subsidiary is Polish
Zloty (PLN).
1.7 Business combinations
The acquisition of subsidiaries is accounted for using the
acquisition method. The cost of the acquisition is measured as the
aggregate of the fair values, at the date of exchange, of assets
given, liabilities incurred or assumed, and equity instruments
issued by the Group in exchange for control of the acquiree.
Acquisition related costs are recognised in the income statement as
incurred.
Any contingent consideration to be transferred by the Group is
recognised at fair value at the acquisition date. Subsequent
changes to the fair value of the contingent consideration that is
deemed to be an asset or liability is recognised in the
consolidated income statement. Contingent consideration that is
classified as equity is not remeasured, and its subsequent
settlement is accounted for within equity.
Goodwill arising on acquisition is recognised as an asset and
initially measured at cost, being the excess of the cost of the
business combination over the Group's interest in the net fair
value of the identifiable assets, liabilities and contingent
liabilities recognised. For the purpose of impairment testing,
goodwill acquired in a business combination is, from the
acquisition date, allocated to the cash generating unit ("CGU")
that is expected to benefit from the synergies of the combination.
CGU to which goodwill has been allocated is tested for impairment
annually, or more frequently when there is an indication that the
unit may be impaired. Any impairment loss is recognised directly in
the income statement.
1.8 Foreign operations
The assets and liabilities of foreign operations are translated
into Pound sterling using the exchange rates at the reporting date.
The revenues and expenses of foreign operations are translated into
Pound sterling using the average exchange rates, which approximate
the rates at the dates of the transactions, for the period.
All resulting foreign exchange differences are recognised in
other comprehensive income through the foreign currency reserve in
equity.
On disposal of a foreign operation, the cumulative exchange
differences recognised in the foreign exchange reserve relating to
that operation up to the date of disposal are transferred to the
consolidated statement of comprehensive income as part of the
profit or loss on disposal.
1.9 Intangible assets - research and development
Expenditure on research is written off in the period in which it
is incurred.
Development expenditure incurred on specific projects is
capitalised where the management is satisfied that the following
criteria have been met:
-- it is technically feasible to complete the software product
so that it will be available for use;
-- management intends to complete the software product and use or sell it;
-- there is an ability to use or sell the software product;
-- it can be demonstrated how the software product will generate
probable future economic benefits;
-- adequate technical, financial and other resources to complete
the development and to use or sell the software product are
available; and
-- the expenditure attributable to the software product during
its development can be reliably measured.
Directly attributable costs that are capitalised as part of the
software product include the software development employee costs
and an appropriate portion of relevant overheads.
Other development expenditure that does not meet these criteria
is recognised as an expense as incurred.
1.10 Property, plant and equipment
Property, plant and equipment is stated at purchase price less
accumulated depreciation and impairment losses. The cost includes
all expenses directly related to the purchase of a relevant
asset.
All other repair and maintenance costs are charged to the income
statement for the period during the reporting period in which they
are incurred.
1.11 Depreciation and amortisation
Each item of property, plant and equipment is depreciated using
the straight- line method over the estimated useful life and
depreciation charge is included in the income statement for the
period.
The depreciation is charged to the income statement for the
period and determined using the straight- line method over the
estimated useful life of the item of property, plant and
equipment.
The expected useful lives of property, plant and equipment in
the reporting and comparative periods are as follows: Useful lives
in years
Computers 3.33
Furniture & fittings 3.33
Computer software development expenditure recognised as assets
is amortised on a straight-line basis over their estimated useful
lives, which does not exceed 5 years.
1.12 Impairment of non-financial assets
The residual value of an asset is the estimated amount that the
Group would currently obtain from disposal of the asset less the
estimated costs of disposal, if the asset was already of the age
and in the condition expected at the end of its physical life.
The assets' residual values and useful lives are reviewed, and
adjusted if appropriate, at each reporting date.
At the end of each reporting period management assesses whether
the indicators of impairment of property, plant and equipment
exists.
The carrying amounts of property, plant and equipment and all
other non-financial assets are reviewed for impairment if there is
any indication that the carrying amount may not be recoverable.
For the purpose of impairment testing the recoverable amount is
measured by reference to the higher of value in use (being the net
present value of expected future cashflows of a relevant cash
generating unit) and fair value less costs to sell (the amount
obtainable from the sale of an asset or cash generating unit in an
arm's length transaction between knowledgeable, willing parties who
are independent from each other less the costs of disposal).
Where there is no binding sale agreement or active market, fair
value less costs to sell is based on the best information available
to reflect the amount the Group would receive for the cash
generating unit.
A cash generating unit is the smallest identifiable group of
assets that generates cash inflows that are largely independent of
the cash inflows from other assets or groups of assets.
If the carrying amount of the asset exceeds its recoverable
amount, the asset is impaired and an impairment loss is charged to
the income statement so as to reduce the carrying amount in the
statement of financial position to its recoverable amount.
A previously recognised impairment loss is reversed if the
recoverable amount increases as a result of a reversal of the
conditions that originally resulted in the impairment.
This reversal is recognised in profit or loss for the period and
is limited to the carrying amount that would have been determined,
net of depreciation, had no impairment loss been recognised in
prior years.
1.13 Financial Instruments
Financial assets and financial liabilities are recognised when
the Company becomes a party to the contractual provisions of the
instrument.
Financial assets and financial liabilities are initially
measured at fair value. Transaction costs that are directly
attributable to the acquisition or issue of financial assets and
financial liabilities (other than financial assets and financial
liabilities at fair value through profit or loss) are added to or
deducted from the fair value of the financial assets or financial
liabilities, as appropriate, on initial recognition. Transaction
costs directly attributable to the acquisition of financial assets
or financial liabilities at fair value through profit or loss are
recognised immediately in profit or loss .
All financial instruments are classified in accordance with the
principles of IFRS 9 Financial Instruments.
1.13 a Financial assets
Classification of financial assets
Debt instruments that meet the following conditions are
subsequently measured at amortised cost:
-- the financial asset is held within a business model whose
objective is to hold financial assets in order to collect
contractual cash flows; and
-- the contractual terms of the financial asset give rise on
specified dates to cash flows that are solely payments of principal
and interest on the principal amount outstanding.
Debt instruments that meet the following conditions are
subsequently measured at FVTOCI:
-- the financial asset is held within a business model whose
objective is achieved by both collecting contractual cash flows and
selling the financial assets; and
-- the contractual terms of the financial asset give rise on
specified dates to cash flows that are solely payments of principal
and interest on the principal amount outstanding.
By default, all other financial assets are subsequently measured
at FVTPL.
Amortised cost and effective interest method
The effective interest method is a method of calculating the
amortised cost of a debt instrument and of allocating interest
income over the relevant period.
For financial instruments other than purchased or originated
credit-impaired financial assets, the effective interest rate is
the rate that exactly discounts estimated future cash receipts
(including all fees and points paid or received that form an
integral part of the effective interest rate, transaction costs and
other premiums or discounts) excluding expected credit losses,
through the expected life of the debt instrument, or, where
appropriate, a shorter period to the gross carrying amount of the
debt instrument on initial recognition. For purchased or originated
credit-impaired financial assets, a credit-adjusted effective
interest rate is calculated by discounting the estimated future
cash flows, including expected credit losses, to the amortised cost
of the debt instrument on initial recognition.
The amortised cost of a financial asset is the amount at which
the financial asset is measured at initial recognition minus the
principal repayments, plus the cumulative amortisation using the
effective interest method of any difference between that initial
amount and the maturity amount, adjusted for any loss allowance. On
the other hand, the gross carrying amount of a financial asset is
the amortised cost of a financial asset before adjusting for any
loss allowance.
Impairment of financial assets
The Company recognises a loss allowance for expected credit
losses on financial assets that are measured at amortised cost. The
amount of expected credit losses is updated at each reporting date
to reflect changes in credit risk since initial recognition of the
respective financial instrument.
Expected credit loss measurement
The consolidated entity has applied the simplified approach to
measuring expected credit losses, which uses a lifetime expected
loss allowance. To measure the expected credit losses, trade
receivables have been grouped based on days overdue.
1.13 b Financial liabilities and equity
Debt and equity instruments are classified as either financial
liabilities or as equity in accordance with the substance of the
contractual arrangement.
Equity instruments
An equity instrument is any contract that evidences a residual
interest in the assets of an entity after deducting all of its
liabilities. Equity instruments issued by the Company entity are
recognised at the proceeds received, net of direct issue costs.
Financial liabilities
All financial liabilities are subsequently measured at amortised
cost using the effective interest method or at "Fair Value Through
Profit or Loss" ("FVTPL").
Financial liabilities at FVTPL
Financial liabilities are classified as at FVTPL when the
financial liability is contingent consideration of an acquirer in a
business combination to which IFRS 3 applies, or it is designated
as at FVTPL.
Financial liabilities subsequently measured at amortised
cost
Financial liabilities that are not 1) contingent consideration
of an acquirer in a business combination, 2) held-for-trading, or
3) designated as at FVTPL, are subsequently measured at amortised
cost using the effective interest method.
The effective interest method is a method of calculating the
amortised cost of a financial liability and of allocating interest
expense over the relevant period. The effective interest rate is
the rate that exactly discounts estimated future cash payments
(including all fees and points paid or received that form an
integral part of the effective interest rate, transaction costs and
other premiums or discounts) through the expected life of the
financial liability, or (where appropriate) a shorter period, to
the amortised cost of a financial liability.
Derecognition of financial liabilities
The Company derecognises financial liabilities when, and only
when, the Company's obligations are discharged, cancelled or they
expire. The difference between the carrying amount of the financial
liability derecognised and the consideration paid and payable,
including any non-cash assets transferred or liabilities assumed,
is recognised in the statement of comprehensive income.
1.14 Leases
The Company assesses whether a contract is or contains a lease,
at inception of the contract. The Company recognises a right-of-use
asset and a corresponding lease liability with respect to all lease
arrangements in which it is the lessee, except for short-term
leases (defined as leases with a lease term of 12 months or less)
and leases of low value assets. For these leases, the Company
recognises the lease payments as an administrative expense on a
straight-line basis over the term of the lease.
1.15 Taxes
Current tax is calculated using rates and laws enacted or
substantively enacted at the reporting date. Current tax is
recognised in profit or loss unless it relates to an item of other
comprehensive income or equity whereby it is recognised in other
comprehensive income or equity respectively.
Deferred income tax is calculated using rates and laws enacted
or substantively enacted at the reporting date that are expected to
apply on reversal of the related temporary difference, and is
determined in accordance with the expected manner of recovery of
the related asset.
Deferred income tax is recognised in profit or loss unless it
relates to an item of other comprehensive income or equity whereby
it is recognised in other comprehensive income or equity
respectively.
1.16 Share Based Payments
On occasion, the Company has made share-based payments to
certain Directors and employees by way of issue of share options.
The fair value of these payments is calculated by the Company using
the binomial option valuation model and Monte Carlo simulation
model.
The expense, where material, is recognised on a straight-line
basis over the period from the date of award to the date of
vesting, based on the Company's best estimate of the number of
shares that will eventually vest.
1.17 Investments
Shares in subsidiary undertakings are stated at cost less
provision for impairment. Unlisted investments are measured at fair
value through profit or loss.
1.18 Intercompany Financing arrangements
The amortised cost methodology is applied to the financing
arrangement between the Company and subsidiary Crossword Consulting
Limited. An assessment in undertaken to determine the market rate
of interest for a similar loan given the credit rating of the
subsidiary to apply discounting with the principal conceptually
including a financing element.
1.19 Pension Obligations
The Group operates a defined contribution pension scheme for
employees in the United Kingdom. A defined contribution scheme is a
pension plan under which the Group pays fixed contributions into a
separate entity.
Contributions payable to the Group's pension scheme are charged
to the income statement in the year to which they relate. The Group
has no further payment obligations once the contributions have been
paid.
In Poland, the Group pays the statutory employer's contribution
into the public pension scheme for each employee, but does not
operate any pension schemes. The Group implemented the Employee
Capital Plans (PPK) programme which involved employee consultation
and selection of a financial institution.
1.20 Cash and Cash Equivalents
Cash comprises cash-in-hand and demand deposits. Cash
equivalents are short-term, highly liquid investments that are
readily convertible to known amounts of cash, and which are subject
to an insignificant risk of change in value.
1.21 Accounting for Government Grants
Government grants are not recognised until there is reasonable
assurance that the Group will comply with the conditions attached
to them and that the grants will be received.
Government grants are recognised as income over the periods
necessary to match them with the costs for which they are intended
to compensate, on a systematic basis. Government grants that are
receivable as compensation for expenses or losses already incurred
or for the purpose of giving immediate financial support to the
Group with no future related costs are recognised in the income
statement in the period in which they become receivable.
1.22 Critical accounting estimates and judgements and key sources of estimation uncertainty
Estimates and judgements are continually evaluated and are based
on experience and other factors, including expectations of future
events that are believed to be reasonable under the
circumstances.
The following are the key estimates that the directors have made
in the process of applying the Group's accounting policies and have
the most significant effect on the amounts recognised in the
financial information. There are no further critical accounting
judgements.
Fair value of options granted to employee
The Group uses the Binomial model and Monte Carlo simulation
model in determining the fair value of options granted to employees
under the Group's various share schemes. The determination of the
fair value of options requires a number of assumptions. The
alteration of these assumptions may impact charges to the income
statement over the vesting period of the award. Details of the
assumptions used are shown in note 4.
Convertible Loans
The Group has given consideration to the measurement and
presentation of the convertible loans.
On legal execution of the loans the financial liability is
initially measured at its fair value which is the face value of the
loans. Immediately after recognition, at fair value, the financial
liability is measured at amortised cost, using a reasonable
estimate of the Group's cost of capital. The difference between the
fair value and the amortised cost is taken to the P&L
account.
Impairment
An impairment assessment of the carrying value in the Company of
the investment in subsidiaries is undertaken using an NPV model
over the projected cash flows, with a discount rate based on the
assessment of weighted average cost of capital.
Business combinations
The recognition of business combinations requires management to
make estimates in order to determine fair value of consideration
payable on acquisition as well as fair value of identifiable
assets, particularly intangibles, and liabilities acquired. These
estimates are based on all available information and in some cases
assumptions with respect to the timing and amount of future
revenues and expenses associated with an asset.
Deferred tax
Deferred tax assets are recognised for unused tax losses to the
extent that it is probable that taxable profit will be available
against which the losses can be utilised. Significant management
judgement is required to determine the amount of deferred tax
assets that can be recognised, based upon the likely timing and the
level of future taxable profits, together with future tax planning
strategies. The company has taxable temporary differences that
partly support the recognition of the losses as deferred tax assets
based on the above. The company has determined that it cannot
recognise deferred tax assets on all of the tax losses carried
forward however, based on the likely characteristics, timing and
level of future taxable profits, together with future tax planning
strategies. Further details on taxes are disclosed in note 11.
2 Revenue and segmental information
An analysis of the Group's revenue for each period for its
continuing operations, is as follows:
GBP Group 2022 Group 2021
Revenue from the sale of goods/licences 479,849 189,252
Revenue from the rendering of services 64,667 183,855
Revenue from consulting services 3,013,884 1,660,207
Software engineering revenue 89,600 137,823
Total Revenue 3,648,000 2,171,137
===================== =====================
The IFRS 8 Operating segments requires the Group to determine
its operating segments based on information which is provided
internally. Based on the internal reporting information and
management structures within the Group, it has been determined that
there are two operating segments established in accordance to
differences in products and services provided - Software product
and services and Cybersecurity consulting.
These operating segments are based on the internal reports that
are reviewed and used by the Board of Directors (who are identified
as the Chief Operating Decision Makers ('CODM')) in assessing
performance and in determining the allocation of resources. There
is no aggregation of operating segments.
The CODM reviews EBITDA (earnings before interest, tax,
depreciation and amortisation). The accounting policies adopted for
internal reporting to the CODM are consistent with those adopted in
the financial statements. The information regarding the Group's
reportable segments is presented below:
2022 Software product and Cybersecurity Eliminations Total
services consulting
GBP
Revenue 634,116 3,131,103 (117,219) 3,648,000
Cost of Sales (136,287) (2,619,375) - (2,755,662)
Other income 39,814 - - 39,814
Gross Profit 537,643 511,728 (117,219) 932,152
Administrative
expenses (4,561,425) (523,292) 117,218 (4,967,499)
Other operating
expense (226,447) (78,010) - (304,457)
Financial income and
expenses (29,958) (197,090) - (227,048)
Loss for the year
before taxation (4,280,186) (286,666) - (4,566,852)
Tax credit /
(expense) 1,144,302 - - 1,144,302
Loss for the Year (3,135,884) (286,666) - (3,422,550)
Total Comprehensive
Loss (3,134,102) (286,666) - (3,420,768)
Segment assets 10,413,274 1,594,370 (3,367,738) 8,639,905
Segment liabilities 4,234,893 2,649,280 (2,404,869) 4,479,304
EBITDA (4,023,782) (11,565) - (4,035,347)
2021*
GBP
Revenue 462,108 1,784,309 (75,280) 2,171,137
Cost of Sales (32,539) (1,598,845) - (1,631,384)
Other income 152,347 - - 152,347
Gross Profit 581,917 185,464 (75,280) 692,100
Administrative
expenses (2,956,758) (600,331) 75,280 (3,481,809)
Other operating
expense (72,045) (32,079) - (104,124)
Financial income and
expenses 323,725 (82,512) - 241,214
Loss for the year
before taxation (2,123,161) (529,458) - (2,652,619)
Tax credit /
(expense) 378,995 - - 378,995
Loss for the Year (1,744,166) (529,458) - (2,273,624)
Total Comprehensive
Loss (1,757,386) (529,458) - (2,286,844)
Segment assets 8,178,282 1,029,509 (2,327,403) 6,880,388
Segment liabilities 2,924,439 1,762,053 (1,410,951) 3,275,541
EBITDA (2,168,462) (414,866) - (2,583,328)
* Restated (as per
note1.2)
During the year ended 31 December 2022 approximately 14% (2021:
17%) of the consolidated entity's external revenue was derived from
sales to a major United Kingdom client in Cybersecurity consulting
segment. No other clients accounted for more than 10% of the
consolidated entity's external revenue.
No analysis of net assets by geographic segment is provided as
the net assets are principally all within the UK.
3 Expenses by nature
GBP Group 2022 Group 2021
Staff and related costs 4,914,076 3,305,430
Consultancy and related costs 854,972 450,028
Professional fees 808,910 616,791
Property related costs 201,590 172,823
Depreciation 11,287 66,243
Amortisation 293,170 37,881
Capitalised costs (162,680) (138,067)
Other expenses 1,106,293 706,188
Total cost of sales, administrative
and
other operating expenses 8,027,618 5,217,317
======================= =======================
Included in Cost Of Sales
GBP Group 2022 Group 2021
Staff and related costs 1,874,960 1,133,519
Consultancy and related costs 854,972 450,028
Other expenses 25,730 47,837
Total cost of sales 2,755,662 1,631,384
======================= =======================
Included in Administrative expenses
GBP Group 2022 Group 2021
Staff and related costs 3,039,116 2,171,911
Professional fees 808,910 616,791
Property related costs 201,590 172,823
Capitalised costs (162,680) (138,067)
Other expenses 1,080,563 658,351
Total administrative expenses 4,967,499 3,481,809
======================= =======================
Administrative expenses include-short term lease expense
of GBP188,643 (2021: GBP171,714).
Expenses by geographic location
GBP Group 2022 Group 2021
UK 7,355,231 4,695,737
Poland 672,387 521,580
Total cost of sales, administrative
and
other operating expenses 8,027,618 5,217,317
======================= =======================
4 Staff Costs
Staff costs, including directors' remuneration, were as
follows:
Company Company
GBP Group 2022 Group 2021 2022 2021
Wages and salaries:
- Administrative 2,342,943 1,420,624 2,066,066 1,321,393
- Consulting 1,719,588 1,226,231 - -
- Research and
development 348,910 277,503 - -
Social security
costs 432,124 327,012 231,583 142,103
Other pension costs 70,511 54,061 47,838 37,003
4,914,076 3,305,430 2,345,487 1,500,499
======================= =================== ======================== =====================
The average monthly number of employees, including the
directors, during the period was as follows:
Group 2022 Group 2021 Company 2022 Company 2021
Staff 52 42 30 17
Directors 11 9 8 8
Total 63 51 38 25
=========== =========== ============= =============
Share based payments
The amount recognised in respect of share-based payments was
GBP130,452 (2021: GBP58,692).
The Group has established share option programmes that entitle
certain employees to purchase shares in the Group.
There are no performance conditions attaching to these options.
No options were exercised in 2022 (5,840 in 2021).
Total options issued as at 31 December 2022 amount to 2,278,653
(2021: 2,348,653).
-The share options have been valued using a binomial model
applying the following inputs:
-- Exercise price - equal to the share price at grant date,
-- Vesting date - all options vest in three tranches, on the
first, second and third anniversary from the grant date;
-- Expiry/Exercise date - 10 years from the grant date;
-- Volatility (sigma) - 40%. This has been calculated based on
the historic volatility of the Company's share price.
-- Risk free rate - yield on a zero coupon government security
at each grant date with a life congruent with the expected option
life;
-- Dividend yield - 0%,
-- Future staff turnover - 0%. We have however adjusted the P+L
charge for the current year (and future years) to account for
lapsed options due to Leavers; and
-- Performance conditions - none.-
Reconciliation of share options - Company
Weighted Weighted
average exercise average exercise
price price
2022 2022 2021 2021
GBP GBP
1st January 2,348,653 0.36 2,065,730 0.36
Granted during the
period 10,000 0.33 352,923 0.36
Lapsed during the
period (85,000) 0.34 (64,160) 0.36
Exercised during
the period - - (5,840) 0.28
-------------------- ------------------------ ---------------------
End of the period 2,273,653 0.36 2,348,653 0.36
-------------------- ------------------------ ---------------------
The weighted average share Price at the exercise date was
GBP0.36.
The range of exercise prices is from GBP0.05 to GBP0.55.
The weighted average remaining life of the options was 6.5 years
(2021: 6.5 years).
5 Directors' Remuneration
The remuneration of the Directors who served in the current year
was as follows:
Employer's
2022 Basic Salary Pension
GBP and Fees Bonus Taxable Benefits Contribution Total
--------------- ----------------------- --------------------- ----------------------- -------------------- --------------------
Executive
Directors
Tom Ilube 130,000 3,926 1,321 135,247
Mary Dowd* 140,000 10,000 2,216 10,000 162,216
--------------- ----------------------- --------------------- ----------------------- -------------------- --------------------
Non-Executive
Directors
Sir Richard
Dearlove 25,000 25,000 50,000
Ruth Anderson 12,000 12,000
Andy Gueritz 16,000 16,000
Dr David
Secher 16,000 16,000
Robert Coles 12,000 12,000
Tara
Cemlyn-Jones 12,000 12,000
Total 363,000 10,000 31,142 11,321 415,463
--------------- ----------------------- --------------------- ----------------------- -------------------- --------------------
2021
GBP
--------------- ----------------------- --------------------- ----------------------- -------------------- --------------------
Executive
Directors
Tom Ilube 128,311 3,942 1,318 133,572
Mary Dowd* 130,000 10,000 140,000
--------------- ----------------------- --------------------- ----------------------- -------------------- --------------------
Non-Executive
Directors
Sir Richard
Dearlove 25,000 25,000 50,000
Ruth Anderson 12,000 12,000
Andy Gueritz 16,000 16,000
Gordon Matthew 6,000 6,000
Dr David
Secher 16,000 16,000
Prof David
Stupples 4,750 4,750
Robert Coles 7,250 7,250
Tara
Cemlyn-Jones 7,231 7,231
Total 352,541 - 28,942 11,318 392,801
--------------- ----------------------- --------------------- ----------------------- -------------------- --------------------
* Denotes highest paid director
In the year ended 31 December 2022, certain of the directors
received remuneration (which is included in the amounts above)
through payments by the Group to third parties as follows:
GBP12,000 was paid to Cumberland House Consulting Ltd for the
services of R Coles (2021: GBP7,250); GBP12,000 was paid to Caprica
Nelson Ltd for the services of R Anderson (2021: GBP12,000);
GBP16,000 was paid to Cambridge KT Ltd for the services of D Secher
(2021: GBP16,000).
Share Options issued
Exercise
Year Share Options Price Total Value
Sir Richard Dearlove 2018 6,757 GBP 3.70 GBP 9,902
Mary Dowd 2018 7,936 GBP 3.15 GBP 9,993
----- ----------------------- ---------- ------------
Sir Richard Dearlove 2019 4,587 GBP 5.45 GBP 10,587
----- ----------------------- ---------- ------------
Sir Richard Dearlove 2019 5,208 GBP 4.80 GBP 10,576
----- ----------------------- ---------- ------------
Mary Dowd 2019 10,000 GBP 5.45 GBP 23,080
----- ----------------------- ---------- ------------
Mary Dowd 2020 25,000 GBP 0.31 GBP 2,903
----- ----------------------- ---------- ------------
Sir Richard Dearlove 2020 94,340 GBP 0.27 GBP 9,496
----- ----------------------- ---------- ------------
Sir Richard Dearlove 2021 70,423 GBP 0.36 GBP 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 (GBP0.005) options to acquire up to
750,000 Crossword ordinary shares of 0.5p each which vest at the
average mid-market price of the Ordinary Shares over the 20 trading
days preceding the end of the performance period which ends on 30
September 2024. 25% of the options will vest if the Award Price is
50p, and 100% will vest if the Award Price is equal to or greater
than 100p, with straight line vesting between 50p and 100p.
6 Other Operating Income
Group 2022 Group 2021
GBP GBP
Grant Income 39,814 152,347
39,814 152,347
----------- ------------------
7 Other Operating Expense
Group 2022 Group 2021
GBP GBP
Amortisation of intangible
assets 293,170 37,881
Depreciation of property,
plant and equipment 11,287 8,072
Depreciation of right-of-use
assets - 58,171
304,457 104,124
----------------------------- ---------------------------
8 Finance Costs
Group 2022 Group 2021
GBP GBP
Finance cost of loan notes 272,400 184,149
Interest on deferred consideration 115,766 34,978
Right to use assets Interest - 187
Other interest expense 7,596 1,231
395,762 220,545
----------------------------- --------------------------
9 Gain on remeasurement of financial assets and liabilities
Group 2022 Group 2021
GBP GBP
Gain on remeasurement of contingent
consideration 170,283 -
Gain on revaluation of investment
in Cyberowl - 456,803
170,283 456,803
----------------------------- -----------------------------
10 Auditor's Remuneration
The expenses for services rendered by the Group auditor present
themselves as follows:
GBP Group 2022 Group 2021
Fees for the parent company individual
and consolidated financial statements 41,400 46,000
Fees for legal audit of subsidiary
financial information 24,050 17,000
65,450 63,000
----------- -----------
11 Tax
GBP Group 2022 Group 2021*
Corporation tax on profits for the
period 6,115 5,396
R&D tax credit (753,288) (206,380)
Deferred tax credit (397,129) (178,011)
Total tax (credit) / expense (1,144,302) (378,995)
=========================== ===========================
* Restated (as per note1.2)
There is no tax charge in respect of other comprehensive
income.
The deferred tax liability arising on fair value revaluation on
acquisitions of Verifiable Credentials Ltd, Stega UK Ltd (both in
2021) and Threat Status Ltd (in 2022), as reflected in note 12, has
been offset with a deferred tax asset recognised in respect of
losses brought forward from prior periods, resulting in deferred
tax credit to the statement of comprehensive income.
There is a deferred tax liability of GBP114,201 arising on the
fair value uplift of GBP456,803 of the unlisted investment in
CyberOwl Limited. This deferred tax liability has been offset by
trading losses of the group.
Corporation tax losses carried forward for offset against future
year's trading profits amount to approximately GBP8.5m (2021:
GBP4.8m).
GBP Group 2022 Group 2021*
Loss before taxation 4,566,852 2,652,619
Average rate of corporation tax 19.00% 19.00%
Tax on loss (867,702) (503,998)
Effects of:
Expenses not deductible for tax purposes 116,084 24,578
Additional deduction for R&D expenditure (164,009) (167,168)
Adjustments in respect of prior period (354,777) -
Tax rate changes / adjustments (12,199) 104,124
Deferred tax not recognised 138,301 163,468
Total tax charge (1,144,302) (378,995)
========================== =============================
* Restated (as per note1.2)
Factors that may affect future tax changes
On 24 May 2021 the Finance Bill was substantively enacted with
the consequence that the main rate of corporation tax will increase
from 19% to the rate of 25%, with effect from 1 April 2023, with a
corresponding effect on deferred tax balances after that date.
Polish Corporation Tax has been 19% until 1 January 2017, when
Crossword started to benefit from the new small companies reduced
rate of 15% adopted by the Parliament Act amendment to Polish CIT
Law.
12 Business Combinations
On 11 March 2022 the Group acquired 100% of the issued share
capital of Threat Status Ltd ("TSL"), the threat intelligence
company and provider of Trillion, the cloud-based software as a
service platform for enterprise-level credential breach
intelligence.
The net consideration used in the acquisition of TSL and the
provisional fair value of assets acquired and liabilities assumed
on the acquisition date are detailed below:
GBP Book value Adjustment Fair value
Intangible assets - 1,694,287 1,694,287
Tangible assets 1,208 - 1,208
Deferred tax
asset 26,854 - 26,854
Non-current
assets 28,062 1,694,287 1,722,349
--------------------------------- ----------------------------- --------------------------------
Trade and other
receivables 10,420 - 10,420
Cash and cash
equivalents 90,007 - 90,007
Current assets 100,427 - 100,427
--------------------------------- ----------------------------- --------------------------------
Deferred tax
liability - 423,572 423,572
Non-current
liabilities - 423,572 423,572
--------------------------------- ----------------------------- --------------------------------
Trade and other
payables 57,784 - 57,784
Current
liabilities 57,784 - 57,784
--------------------------------- ----------------------------- --------------------------------
Total fair value
of net assets
acquired 70,706 1,270,715 1,341,420
--------------------------------- ----------------------------- --------------------------------
Fair value of
consideration
Cash on
completion 500,915
Deferred
consideration in
cash 343,339
Deferred
consideration in
shares 497,166
Total
consideration 1,341,420
--------------------------------
Acquisition costs of GBP16,894 relating to this transaction have
been recognised as part of administrative expenses in the statement
of comprehensive income.
Since the acquisition date, TSL has contributed GBP177,223 to
group revenues and GBP127,483 to group result. If the acquisition
had occurred on 1 January 2022, group revenue would have been
GBP3,703,829 and group loss for the period would have been
GBP3,229,407.
The acquisitions help to implement the Group's strategy to
create a portfolio of subscription-based, enterprise-class products
and services for its clients.
13 Intangible Assets
Software
Development
Group Company
GBP 2022 Group 2021 Company 2022 2021
Cost b/f 1,141,560 - 531,534 -
Acquired
through
business
combinations 1,694,287 957,764 1,694,287 -
Additions 203,627 183,796 203,627 531,534
3,039,473 1,141,560 2,429,447 531,534
------------------------------- ----------------------------- -------------------------------- -----------------------------
Accumulated
Depreciation
B/F 37,881 - 9,931 -
Charge for
the period 293,169 37,881 222,310 9,931
C/d 331,050 37,881 232,241 9,931
------------------------------- ----------------------------- -------------------------------- -----------------------------
Net Book
Value 2,708,423 1,103,679 2,197,206 521,603
=============================== ============================= ================================ =============================
Intangible assets comprise of 5 different software development
projects with remaining useful life of approximate between 5 and 10
years each and the carrying amounts of GBP1,173,512, GBP810,244,
GBP344,206, GBP255,491 and GBP124,970.
The intangible assets have been evaluated to determine whether
there are any indicators of impairment. Assessment of the
recoverable value for Identiproof software has been based on
calculating the net present value of the future cash flows. The
cash flow projections are based on the most recent 3 year forecast
extrapolated to 5 years with a growth rate for revenue of 20% and
costs of 10%. The pre-tax discount rate used in the calculation was
24%.
Please refer to note 15 for matters relating to impairment
assessment for Nightingale product.
14 Tangible Assets
Computers
Company
GBP Group 2022 Group 2021 Company 2022 2021
Cost b/f 31,845 24,675
Additions 48,971 -
Acquired through
business
combinations 1,207 7,170
82,023 31,845 - -
--------------------------------- ----------------------------- --------------------------------- -----------------------------
Accumulated
Depreciation
B/F 26,385 21,124
Charge for the period 11,287 4,924
Translation
adjustments (688) 337
C/d 36,984 26,385 - -
--------------------------------- ----------------------------- --------------------------------- -----------------------------
Net Book Value 45,039 5,460 - -
================================= ============================= ================================= =============================
Furniture and Fittings
Company
GBP Group 2022 Group 2021 Company 2022 2021
Cost b/f 15,157 15,157 15,157 15,157
Additions
15,157 15,157 15,157 15,157
--------------------------------- ----------------------------- --------------------------------- -----------------------------
Accumulated
Depreciation
B/F 15,157 12,009 15,157 12,009
Charge for the period - 3,148 - 3,148
C/d 15,157 15,157 15,157 15,157
--------------------------------- ----------------------------- --------------------------------- -----------------------------
Net Book Value - - - -
================================= ============================= ================================= =============================
Right of Use Assets
Company
GBP Group 2022 Group 2021 Company 2022 2021
Cost b/f - 344,058 - 231,935
Disposals - (344,058) - (231,935)
- - - -
--------------------------------- ----------------------------- --------------------------------- -----------------------------
Accumulated
Depreciation
B/F - 280,694 - 196,687
Charge for the period - 58,171 - 35,248
Translation
adjustments - 5,193 - -
Disposals - (344,058) - (231,935)
C/d - - - -
--------------------------------- ----------------------------- --------------------------------- -----------------------------
Net Book Value - - - -
================================= ============================= ================================= =============================
Total
Company
GBP Group 2022 Group 2021 Company 2021 2021
Cost b/f 47,002 383,890 15,157 247,092
Additions/(disposals) 48,971 (344,058) - (231,935)
Acquired through
business
combinations 1,207 7,170 - -
97,180 47,002 15,157 15,157
--------------------------------- ----------------------------- --------------------------------- -----------------------------
Accumulated
Depreciation
B/F 41,542 313,826 15,157 208,696
Charge for the period 11,287 66,243 - 38,396
Translation
adjustments (688) 5,530 - -
Disposals - (344,058) - (231,935)
C/d 52,141 41,542 15,157 15,157
--------------------------------- ----------------------------- --------------------------------- -----------------------------
Net Book Value 45,039 5,460 - -
================================= ============================= ================================= =============================
15 Goodwill
The goodwill arises on acquisition of Stega UK Ltd in 2021 and
forms a part of Nightingale cash generating unit. The goodwill has
been tested for impairment alongside Intangible asset of NBV of
GBP255,491 allocated to the same unit. The recoverable amount has
been determined by value in use calculation. The cash flow
projections are based on the most recent 3 year forecast
extrapolated to 5 years with a growth rate for revenue of 25% and
costs between 10% and 15%, these are based primarily on past
experience. The growth rate beyond 5 year period is assumed as a
perpetuity at 10%. The pre-tax discount rate used in the
calculation was 24%.
GBP Group 2022 Group 2021
B/F 875,277 -
Additions in the period - 875,277
C/F 875,277 875,277
--------------------------------- -----------------------------
16 Unlisted Investments
Company Company
GBP Group 2022 Group 2021 2022 2021
Fair value at 1 January and 31
December 456,834 456,834 456,834 456,834
=========== =========== ======== ========
The above Group investment represents Crossword Cybersecurity
Plc's 2022 - 3.1% (2021 - 4.4%) holding in CyberOwl Limited which
was purchased on 18 April 2016.
The investment value has not changed during the period and has
been based on the values from the latest fundraise by CyberOwl in
August 2022.
17 Investment in subsidiaries
Company Company
GBP 2022 2021
Cost b/f 1 January 1,637,518 458,164
Acquired during the year 1,341,420 1,088,740
Transfer to intangibles on hive up (1,270,715) -
Reversal of contingent consideration (170,283) -
Capital contribution 111,205 90,614
Cost c/f 31 December 1,649,145 1,637,518
------------------------- -----------------------------
The group's subsidiary undertakings are listed below, including
name, country of incorporation, and proportion of ownership
interest:
Registered Principal
Name office activity 2022 2021
% %
Cybersecuri
Crossword Consulting Limited ty services 90 90
6th Floor, 60
Gracechurch
Street,
London EC3N
0HR United
Kingdom
Crossword Cybersecurity SP Cybersecuri
Z.o.o. ty services 100 100
ul. Wiejska
12a, 00-490
Warszawa,
Poland
Cybersecuri
Stega UK Ltd ty services 100 100
6th Floor, 60
Gracechurch
Street,
London EC3N
0HR United
Kingdom
Cybersecuri
Verifiable Credentials Ltd ty services 100 100
6th Floor, 60
Gracechurch
Street,
London EC3N
0HR United
Kingdom
Cybersecuri
Crossword Cybersecurity LLC ty services 90 90
PO Box 808,
Alwattayah /
Muttrah /
Muscat
Governorate,
Postcode:
100, Oman
Cybersecuri
Threat Status Ltd ty services 100 -
6th Floor, 60
Gracechurch
Street,
London EC3N
0HR United
Kingdom
Verifiable Credentials Ltd, a company incorporated in England
and Waled, registered No 11923813 and Threat Status Ltd, a company
incorporated in England and Wales, registered No 10877044, are
exempt from the requirements from the UK Companies Act relating to
the audit of individual accounts by virtue of s479A of the Act.
18 Trade and Other Receivables
GBP Group 2022 Group 2021 Company 2022 Company 2021
Trade
receivables 1,110,697 509,576 505,451 192,975
Other
receivables 524,721 254,451 445,603 247,274
Prepayments 239,066 149,309 183,160 105,101
Accrued
income 133,883 140,708 23,383 131,025
VAT Refund 69,683 12,033 46,421 -
Intercompany
receivables
within one
year - - 714,507 162,247
2,078,050 1,066,076 1,918,525 838,622
All of the above amounts are considered to be due within one
year.
The maximum exposure to credit risk at the reporting date is the
carrying value as above and the cash and cash equivalents and none
are either past or impaired.
Of the above amounts held within the Group, GBP32,735 is
denominated in Polish Zloty with the remainder in GBP (2021:
GBP18,419).
Foreign exchange risk is currently minimal as balances in Polish
Zloty are between the parent and its wholly owned subsidiary.
19 Trade and Other Payables
Company
GBP Group 2022 Group 2021 Company 2022 2021
Trade payables 659,282 331,043 1,025,828 459,753
Employment taxes
and VAT payable 306,168 242,642 69,300 56,790
Accruals 434,705 226,623 187,197 164,284
Deferred income 460,853 331,198 279,125 94,333
Deferred consideration 568,146 261,606 568,146 261,606
Other payables 27,629 20,546 17,179 13,194
2,456,783 1,413,658 2,146,775 1,049,960
=========== ================================ ============= ==========================
All of the above amounts are considered to be due within one
year.
The deferred income relates to contract liabilities arising from
contracts with customers.
Of the Trade and Other Payables amounts held within the Group,
GBP83,965 (2021: GBP57,836) is denominated in Polish Zloty with the
remainder in GBP.
20 Other Current Liabilities
Company Company
GBP Group 2022 Group 2021 2022 2021
Convertible
loan
notes - 1,351,471 - 1,351,471
Bank loan 17,000 17,167 - -
17,000 1,368,638 - 1,351,471
================================= ================================= ================================= =============================
21 Other Non-current Liabilities
Company Company
GBP Group 2022 Group 2021 2022 2021
Deferred
consideration 492,151 111,900 492,151 111,900
Contingent
consideration - 180,652 - 180,652
Deferred grant
income 132,692 132,693 - -
624,843 425,245 492,151 292,552
================================= ================================ ================================= =============================
22 Share Capital
Allotted called up and fully paid
Number of shares (all ordinary
shares GBP0.005 each) 2022 2021
B/f 74,957,150 51,320,900
Shares Issued in period 17,446,565 23,636,250
C/d 92,403,715 74,957,150
----------- -----------
The shares issued in the period were ordinary shares of GBP0.005
at a premium of GBP3,563,151 (2021: GBP6,452,830).
All shares carry the same voting and capital distribution
rights.
GBP
Share Capital 2022 2021
Cost b/f 374,786 256,605
Shares Issued in period 87,233 118,181
462,019 374,786
----------- -----------
Share Premium
B/f 14,971,221 8,518,391
Shares Issued in period 3,563,151 6,452,830
C/d 18,534,372 14,971,221
----------- -----------
23 Loss per share
Earnings per share is calculated by dividing the loss for the
period attributable to ordinary equity shareholders of the parent
by the weighted average number of ordinary shares outstanding
during the year.
During the year the calculation for basic loss per share was
based on the loss for the year attributable to owners of the parent
of GBP3,408,149 (2021: GBP2,229,296) divided by the weighted
average number of ordinary shares of 80,022,937 (2021:
64,491,462).
24 Reserves
The following describes the nature and purpose of each reserve
within owners' equity
Reserve Description and purpose
Share capital This represents the nominal value of shares issued
Amount subscribed for share capital less any issue costs
Share premium more than nominal value
Convertible debt The residual amount after deducting from the fair value of
reserve the convertible loan notes the liability component
Represents amounts charged on share options that have been
Equity reserve granted to employees
Cumulative net gains and losses recognised in the consolidated
Retained earnings statement of comprehensive income
Translation of Is the difference that arises due to consolidation of foreign
foreign operations subsidiaries using an average rate during the period and
a closing rate for the period end statement of financial
position
25 Financial Instruments
GBP
Current
Financial Company Company
Assets Group 2022 Group 2021 2022 2021
Financial
assets
measured at
amortised
cost
Trade and
other
receivables 1,769,301 904,735 1,688,943 733,521
Cash and
cash
equivalents 2,077,771 3,373,062 1,746,530 3,106,817
Non-Current
Financial
Assets
Financial
assets
measured at
amortised
cost
Loan to
subsidiary - - 1,067,185 918,206
Financial
assets
measured at
fair value
through
profit or
loss
Financial
investments 456,834 456,834 456,834 456,834
4,303,906 4,734,631 4,959,493 5,215,378
================================= ==================================== ============================== =========================
The financial investments comprise of investment in CyberOwl
Ltd, which has been valued on the basis of valuation per share at
as March 2022 during the investment round, multiplied by the number
of shares the Company owns in it. This methodology of determining a
fair value equates to a level 2 assessment based on observed
transactions of share price in recent transactions in the entity's
equity.
GBP
Current
Financial Company Company
Liabilities Group 2022 Group 2021 2022 2021
Financial
liabilities
measured
at amortised
cost
Trade and
other
payables 1,689,761 839,818 1,798,351 898,836
Loans 17,000 17,167 - -
Convertible
loan notes - 1,351,471 - 1,351,471
Non-Current
Financial
Liabilities
Financial
liabilities
measured
at amortised
cost
Loans 51,000 68,000 - -
Convertible
loan notes 1,329,678 - 1,329,678 -
Non-current
deferred
consideration 492,151 111,900 492,151 111,900
Financial
liabilities
measured
at fair value
through profit
or
loss
Non-current
contingent
consideration - 180,652 - 180,652
3,579,590 2,569,008 3,620,180 2,542,858
================================= ==================================== ================================= =============================
In relation to the loan there was a fair value revaluation of
GBP195,685 (2021: GBPnil) recorded in Convertible debt reserve
arising from the loan notes being initially measured at fair value
and subsequently measured at amortised cost.
During the year, the management changed its estimate that Stega
would achieve its revenue target for the period between 12 and 18
months from the date of acquisition and concluded that this will be
very unlikely. Therefore, contingent consideration, recorded as
part of acquisition accounting for Stega, has been reversed via
Income Statement in full.
Reconciliation of Level 3 fair value measurements of financial
liabilities:
Contingent
GBP consideration
B/f 180,652
Unwinding of discount (10,369)
Reversed (170,283)
C/d -
=================================
26 Financial Instruments - Risk
The Group could be exposed to risks that arise from its use of
financial instruments. Risks in relation to financial assets
include:
Market risk
Market risk covers foreign exchange risk, price risk and
interest rate risk.
As the majority of the Group's transactions are either in
Sterling or in Polish Zloty the Group considers its exposure to
foreign exchange risk to be minimal.
There are no derivatives and hedging instruments.
The Group is not exposed to price risk given that no securities
are held under financial assets.
The Group is not exposed to interest rate or cash flow risk due
to the fact that the Group has no borrowing or complex financial
instruments.
Credit risk
Credit risk is considered to be the risk of financial loss
incurred by the Group in the event that a customer or counterparty
to an asset fails to meet contractual obligations. The Group has
adopted a policy of only dealing with credit worthy
counterparties.
The Group's maximum credit exposure at the reporting date is
represented by the carrying value of its financial assets. The
Group's financial instruments do not represent a concentration of
credit risk since the Group deals with a variety of
counterparties.
Financial
Assets
Company
GBP Group 2022 Group 2021 Company 2022 2021
Cash and
cash
equivalents 2,077,771 3,373,062 1,746,530 3,106,817
Trade and
other
receivables 1,769,301 904,735 1,688,943 733,521
Loan to
subsidiary - - 1,067,185 918,206
Financial
investments 456,834 456,834 456,834 456,834
Total 4,303,906 4,734,631 4,959,492 5,215,378
============= ================================= ==================================== ============================== =========================
Liquidity risk
Management monitor rolling forecasts of the Group's liquidity
reserves, cash and cash equivalents on the basis of expected cash
flows and therefore monitors liquidity risk sufficiently.
Financial
Liabilities 2022 2021
due < 1 due 1 - 2 due 1 - 2
GBP year years due < 1 year years
Trade payables 659,282 - 331,043 -
Accruals 434,705 - 226,623 -
Deferred
consideration 568,146 492,151 261,606 111,900
Contingent
consideration - - - 180,652
Other Payables 27,629 - 20,546 -
Loans 17,000 51,000 17,167 68,000
Convertible
loan notes - 1,329,678 1,351,471 -
Total 1,706,762 543,151 2,208,456 360,552
=============== ============================ ================================= ==================================== =================================
27 Capital management
The Group considers its capital to comprise of its equity share
capital, share premium, foreign exchange reserve, share options
reserve and capital redemption reserve, less its accumulated
losses. Quantitative detail is shown in the consolidated statement
of changes in equity.
The directors' objective when managing capital is to safeguard
the Group's ability to continue as a going concern in order to
provide returns for the shareholder and benefits for other
stakeholders and to maintain an optimal capital structure to reduce
the cost of capital.
The directors monitor a number of KPIs at both the Group and
individual subsidiary level on a monthly basis. As part of the
budgetary process, targets are set with respect to operating
expenses in order to effectively manage the activities of the
Group. Performance is reviewed on a regular basis and appropriate
actions are taken as required. These internal measures indicate the
performance of the business against budget/forecast and to confirm
that the Group has adequate resources to meet its working capital
requirements.
28 Pensions
Employer contributions to the Group defined contribution pension
scheme for employees in the United Kingdom were GBP70,695 (2021:
GBP46,509). A defined contribution scheme is a pension plan under
which the Group pays fixed contributions into a separate
entity.
Contributions payable to the Group's pension scheme are charged
to the income statement in the year to which they relate. The Group
has no further payment obligations once the contributions have been
paid.
In Poland, the Group pays the statutory employer's contribution
into the public pension scheme for each employee, but does not
operate any pension schemes.
29 Related Party Transactions
Crossword Crossword Stega Verifiable Cumberland
Consulting Cybersecurity UK Credentials House Consulting
2022 Limited SP Z.o.o Limited Limited Limited
Services
received
from GBP 102,877 746,355 42,000 - -
Services
supplied
to GBP - - - - 318,800
Balance
trade
payable
to GBP - 284,420 - - -
Balance
trade
receivable
from GBP 143,779 - 156,870 1,385 54,235
Intercompany
loan
receivable
from GBP 1,178,367 - 88,818 - -
2021
Services
received
from GBP 274,099 580,704 7,000 - -
Services
supplied
to GBP - - - - -
Balance
trade
payable
to GBP 150,311 102,067 4,200 - -
Balance
trade
receivable
from GBP 165,757 - - 10,736 -
Intercompany
loan
receivable
from GBP 918,207 - - -
Tom Ilube, CEO, had made a loan of GBP250,000 to the Company on
the same terms as the other Lenders as described in note 30. This
loan was repaid in December 2022.
The Company has a related party relationship with its key
management who are the Executives: Tom Ilube, Mary Dowd, Jake
Holloway, Sean Arrowsmith and Stuart Jubb, whose total compensation
amounted to GBP796,444 (2021: GBP793,233).
30 Convertible Loan Notes
The following table explains movements in the Convertible Loan
Notes in the year:
Convertible
GBP Loan Notes
B/f 2022 1,400,000
Expired in the period (1,400,000)
Extended loans 700,000
Increased loan amounts 150,000
Additional loans issued in the period 650,000
C/d 2022 1,500,000
==============================
The discounted amount of the Convertible Loan Notes at the year
end was GBP1,329,678.
The equity component of the Convertible Loan Notes at the date
of issue was GBP195,685.
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 GBP0.252. On repayment of the loans in
cash, each lender will be issued warrants valid for three months to
subscribe for Ordinary Shares representing 10% of the value of the
loan at GBP0.252.
The loan from Tom Ilube, CEO, for an amount of GBP250,000 was
repaid in December 2022.
31 Controlling Party
The Company does not have a controlling party.
32 Subsequent Events
There are no events after the reporting date to be
disclosed.
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END
FR EAELPFDKDEAA
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April 19, 2023 02:00 ET (06:00 GMT)
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