CCS Crossword Cybersecurity Plc

 

Statement of Cash Flows		12 Months ended 31st December	12 Months ended 31st December	12 Months ended 31st December	12 Months ended 31st December
		Group	Group	Company	Company
	Notes	2023	2022	2023	2022
		£	£	£	£
Loss for the year		(3,914,759)	(3,422,550)	(3,264,495)	(3,326,924)
Adjustments for:
Depreciation	3	28,176	11,287	8,231	-
Amortisation	3	389,025	293,170	318,165	222,310
Finance costs	8	468,072	395,762	185,044	468,084
Foreign exchange loss		8,844	1,569	17,639	(695)
Gain on measurement of financial assets and liabilities	9	(25,253)	(170,283)	(25,253)	(365,968)
Employee share schemes	4	6,203	130,452	6,203	130,452
Tax credit	11	(226,245)	(1,144,302)	(203,233)	(423,572)
Operating cash flows before movements in working capital		(3,265,937)	(3,904,895)	(2,957,699)	(3,296,312)
Movement in trade and other receivables		393,035	(788,211)	(65,844)	(1,648,406)
Movement in trade and other payables		(764,177)	381,130	(569,622)	646,965
Cash generated by operations		(3,637,079)	(4,311,975)	(3,593,165)	(4,297,753)
Net tax received		324,634	348,662	332,468	295,763
Net cash from operating activities		(3,312,445)	(3,963,314)	(3,260,697)	(4,001,990)
Investing activities
Investment in intangible assets	12	(348,094)	(203,627)	(348,094)	(203,627)
Purchase of tangible assets	13	(7,129)	(48,971)	(7,129)	-
Purchase of unlisted investments	15	(68,000)	-	(68,000)	-
Acquisition of subsidiaries, net of cash acquired		-	(625,408)	-	(715,415)
Net cash flow from investing activities		(423,223)	(878,006)	(423,223)	(919,042)
Financing activities
Proceeds from issue of ordinary shares		-	3,837,245	-	3,837,245
Share issuance costs		-	(186,861)	-	(186,861)
Proceeds from issue of convertible loan notes		2,620,000	800,000	2,620,000	800,000
Repayment of convertible loan notes		-	(700,000)	-	(700,000)
Interest paid on convertible loan notes		(215,701)	(189,640)	(215,701)	(189,640)
Other interest paid		(4,740)	(16,495)	-	-
Payments for the principal portion of the lease liability		(6,601)	-	(6,601)	-
Interest portion of the lease liability		(2,934)	-	(2,934)	-
Net cash flow from financing activities		2,390,024	3,544,249	2,394,764	3,560,744
Net decrease in cash & cash equivalents		(1,345,644)	(1,297,071)	(1,289,156)	(1,360,288)
Foreign currency translation difference		(1,181)	1,780	-	-
Cash and cash equivalent at the beginning of the year		2,077,771	3,373,062	1,746,530	3,106,818
Cash and cash equivalent at the end of the year		730,946	2,077,771	457,376	1,746,530

 

 

Notes to the Financial Information

1        Accounting Policies

1.1            The Group and its operations

Crossword Cybersecurity plc (the "Company") is a Company incorporated on 6 March 2014 in England and Wales under the Companies Act 2006. The Company is the parent company of the Crossword Group of Companies focusing on the cybersecurity sector. Crossword offers a range of cyber security solutions to help companies understand and reduce cyber security risk. We do this through a combination of people and technology, in the form of SaaS and software products, consulting, and managed services.

The financial information includes the results of the Company and its subsidiaries (together referred to as the "Group" and individually as "Group entities").

The material accounting policies applied in the preparation of the financial information are set out below. These policies have been consistently applied to all the periods presented, unless otherwise stated.

 

1.2        Basis of preparation of financial information

The financial information has been prepared in accordance with the requirements of the London Stock Exchange plc AIM Rules for Companies and in accordance with International Financial Reporting Standards as adopted in the United Kingdom ("UK adopted IFRS") and those parts of the Companies Act 2006 applicable to companies reporting in accordance with UK adopted IFRS.

The financial information has been prepared in accordance with UK adopted IFRS, which requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group's material accounting policies. Changes in assumptions may have a significant impact on the financial information in the year the assumptions changed. Management believes that the underlying assumptions are appropriate. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial information are disclosed in note1.22.

At the year end, the following standards and interpretations which have not been applied in these financial statements were in issue but not yet effective. The Group is considering their impact but do not expect a material on the future results of the Group.

 

New standards, interpretations and amendments effective in current period

 

In 2023 the Group has applied all of the new and revised standards and interpretations issued by the International Accounting Standards Board and adopted in the UK, that are relevant to its operations and effective for the accounting periods beginning on or after 1 January 2023. None of the new standards or revisions had a material effect on the financial statements of the Group.

 

New standards, interpretations and amendments not yet effective

 

The Group adopt early the following amendments to standards which are not yet mandatory.

 

Amendments to IAS 1 Presentation of Financial Statements - Classification of Liabilities as Current or Non-current and Non-current Liabilities with Covenants (effective 1 January 2024).

 

Amendments to IAS 7 and IFRS 7 Financial Instruments: Disclosures - Supplier Finance Arrangements (effective 1 January 2024).

 

Amendments to IFRS 16 Leases - Lease Liability in a Sale and Leaseback (effective 1 January 2024).

 

Amendments to IFRS 10 Consolidated Financial Statements and IAS 28 Investments in Associates and Joint Ventures - Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (effective date yet to be set).

 

 

1.3        Going Concern

The financial information has been prepared on a going concern basis. The Group's business model has been enhanced following the three acquisitions in 2021 and 2022. The Group's operations have incurred a loss in the financial year whilst the Group's products and services continue to be enhanced, developed and brought to market. The Directors' forecast in 2024 shows a trading loss with net cash outflows as the business continues to develop and enhance its products and services and grows revenue. In 2023, the Group's operations have been supported by cash inflows from customers and from the issue of £2.62m loan notes during 2023 and further £0.275m in 2024.

 

The Directors have considered the Group's future and forecast business and cash requirements. The Directors have determined that the group wants to continue to expand, while having a clear and determined focus on a path to profitability, which is expected to require successful additional fundraise.

 

The Directors have concluded that these circumstances could give rise to a material uncertainty arising from events or conditions that may cast significant doubt on the entity's ability to continue as a going concern if a further fund raise was unsuccessful. However, considering recent successful fund raises the Directors are confident that they can continue to adopt the going concern basis in preparing the financial statements.

 

The financial statements do not include any adjustment that may arise in the event that the Group is unable to raise finance, realise its assets and discharge its liabilities in the normal course of business.

 

 

1.4        Basis of consolidation

Subsidiaries are fully consolidated from the date on which control is transferred to the Group. Control exists when then the Group has:

- the power over the investee;

- exposure, or rights, to variable returns from its involvement with the investee;

- the ability to use its power over the investee to affect the amount of the investor's returns.

The parent company reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above.

When the parent company has less than a majority of the voting rights of an investee, it considers that it has power over the investee when the voting rights are sufficient to give it the practical ability to direct the relevant activities of the investee unilaterally.

All intra-Group transactions balances income and expenses are eliminated on consolidation. Uniform accounting policies are applied by the Group entities to ensure consistency.

 

1.5        Revenue

Revenue is measured at the fair value of the consideration received or receivable, net of returns, trade discounts and volume rebates.

 

The Group recognises revenue according to the principles of IFRS 15 using the five-step model:

1. Identify the contracts with customers

2. Identify the performance obligations in the contract

3. Determine the transaction price

4. Allocate the transaction to the performance obligations in the contract

5. Recognise the revenue when (or as) the entity satisfies the performance obligation

 

The Group recognises revenue when it transfers control over service to a customer.

The major streams of revenue for the Group are highlighted below:

 

(a)   Licence Income

Technology and product licensing revenue represents amounts earned for licenses granted under licensing agreements. Revenue is recognised over the subscription period from the start of a licencing agreement, as control is transferred to the customer, because the customer simultaneously receives and consumes the benefits provided by the Group. Revenues relating to up-front payments are recognised when the obligations related to the revenues have been completed.

(b)   Rendering of Services

Services relate to implementation and deployment fees for the technology and products licensed to customers. Revenue is recognised at a point in time when control is transferred to the customer and performance obligations satisfied.

(c)   Consulting

(d)   Consulting revenue is recognised depending on the nature of the contract with customer. For contracts stating the objectives and deliverables for each part of the project, and the revenue attributable to each deliverable, the revenue is recognised when the performance obligation is met (when confirmation has been received from the customer that the work has been satisfactorily completed), primarily at a point in time. For recurring contracts with customers, which are based on a certain number of fixed advisory hours, the revenue is recognised over time using an input method to measure progress towards complete satisfaction of the service, because the customer simultaneously receives and consumes the benefits provided by the Group.

(e)   Software Engineering Services

        Revenues for software engineering services are recognised on the basis of input method, which uses the company's efforts or inputs to the satisfaction of a performance obligation.

 

Identifying performance obligations

At contract inception, the Group assess services promised to a customer and identifies as a performance obligation each promise to transfer to the customer either:

(a) a service (or a bundle of services) that is distinct; or

(b) a series of distinct services that are substantially the same and that have the same pattern of transfer to the customer.

In arriving at the performance obligations, the Group assessed the services as capable of being distinct and as distinct within the context of the contract after considering:

1.     If the customer can benefit from the individual service on its own

2.     If the customer can use the service with other readily available resources

3.     If multiple promised services work together to deliver a combined output(s)

4.     Whether the service is integrated with, highly interdependent on, highly interrelated with, or significantly modifying or customising, other promised services in the contract

 

Significant financing component

Generally, the Group receives short-term advances from its customers. Using the practical expedient in IFRS 15, the Group does not adjust the promised amount of consideration for the effects of a significant financing component if it expects, at contract inception, that the period between the transfer of the promised good or service to the customer and when the customer pays for that good or service will be one year or less.

 

Contract balances

A contract asset is the right to consideration in exchange for goods or services transferred to the customer. If the Group performs by transferring goods or services to a customer before the customer pays consideration or before payment is due, a contract asset is recognised for the earned consideration that is conditional.

 

A trade receivable represents the Group's right to an amount of consideration that is unconditional (i.e., only the passage of time is required before payment of the consideration is due) - note 1.13.

 

A contract liability is the obligation to transfer goods or services to a customer for which the Group has received consideration (or an amount of consideration is due) from the customer. If a customer pays consideration before the Group transfers goods or services to the customer, a contract liability is recognised when the payment is made or the payment is due (whichever is earlier). Contract liabilities are recognised as revenue when the Group performs under the contract.

 

1.6        Functional and presentation currency

The presentation currency of the Group is pounds sterling (GBP). The functional currency of the Company is pounds sterling. The functional currency of the Company's polish subsidiary is Polish Zloty (PLN).

 

1.7        Business combinations

The acquisition of subsidiaries is accounted for using the acquisition method. The cost of the acquisition is measured as the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree. Acquisition related costs are recognised in the income statement as incurred.

 

Any contingent consideration to be transferred by the Group is recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability is recognised in the consolidated income statement. Contingent consideration that is classified as equity is not remeasured, and its subsequent settlement is accounted for within equity.

 

        Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of the cost of the business combination over the Group's interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to the cash generating unit ("CGU") that is expected to benefit from the synergies of the combination. CGU to which goodwill has been allocated is tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. Any impairment loss is recognised directly in the income statement. An impairment loss recognised for goodwill is not reversed in a subsequent period.

 

1.8        Foreign operations

In preparing the financial statements of the group entities, transactions in currencies other than Pound sterling (foreign currencies) are recognised at the rates of exchange prevailing on the dates of the transactions. At each reporting date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

 

All resulting foreign exchange differences are recognised in other comprehensive income through the foreign currency reserve in equity.

 

On disposal of a foreign operation, the cumulative exchange differences recognised in the foreign exchange reserve relating to that operation up to the date of disposal are transferred to the consolidated statement of comprehensive income as part of the profit or loss on disposal.

 

1.9        Intangible assets - research and development

               Expenditure on research is written off in the period in which it is incurred.

 

Development expenditure incurred on specific projects is capitalised where the management is satisfied that the following criteria have been met:

 

•           it is technically feasible to complete the software product so that it will be available for use;

•           management intends to complete the software product and use or sell it;

•           there is an ability to use or sell the software product;

•           it can be demonstrated how the software product will generate probable future economic benefits;

•           adequate technical, financial and other resources to complete the development and to use or sell the software product are available; and

•           the expenditure attributable to the software product during its development can be reliably measured.

 

        The amount initially recognised for internally-generated intangible assets is the sum of the expenditure incurred from the date when the intangible asset first meets the recognition criteria listed above. Directly attributable costs that are capitalised as part of the software product include the software development employee costs and an appropriate portion of relevant overheads.

 

Other development expenditure that does not meet these criteria is recognised as an expense as incurred.

 

        An intangible asset is derecognised on disposal, or when no future economic benefits are expected from use or disposal. Gains or losses arising from derecognition of an intangible asset, measured as the difference between the net disposal proceeds and the carrying amount of the asset, are recognised in profit or loss when the asset is derecognised.

 

1.10       Property, plant and equipment

Property, plant and equipment is stated at purchase price less accumulated depreciation and impairment losses. The cost includes all expenses directly related to the purchase of a relevant asset.

All other repair and maintenance costs are charged to the income statement for the period during the reporting period in which they are incurred.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss.

 

1.11       Depreciation and amortisation

Each item of property, plant and equipment is depreciated using the straight-line method over the estimated useful life and depreciation charge is included in the income statement for the period.

The depreciation is charged to the income statement for the period and determined using the straight-line method over the estimated useful life of the item of property, plant and equipment.

The expected useful lives of property, plant and equipment in the reporting and comparative period are as follows: Useful lives in years

Computers                                               3.33

Furniture & fittings                                   3.33

 

Computer software development expenditure recognised as assets is amortised on a straight-line basis over their estimated useful lives, which does not exceed 5 years.

 

1.12       Impairment of property, plant and equipment and intangible assets excluding goodwill

At each reporting date, the Group reviews the carrying amounts of its property, plant and equipment and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.

 

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

 

If the recoverable amount of an asset (or CGU) is estimated to be less than its carrying amount, the carrying amount of the asset (or CGU) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss.

 

Where an impairment loss subsequently reverses, the carrying amount of the asset (or CGU) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or CGU) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss to the extent that it eliminates the impairment loss which has been recognised for the asset in prior years.

 

1.13       Financial Instruments

Financial assets and financial liabilities are recognised when the Company becomes a party to the contractual provisions of the instrument.

Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are    added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through  profit  or loss  are  recognised  immediately in profit or loss.

All financial instruments are classified in accordance with the principles of IFRS 9 Financial Instruments.

 

 

  1.13 a Financial assets

Classification of financial assets

Debt instruments that meet the following conditions are subsequently measured at amortised cost:

•           the financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows; and

•           the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

Debt instruments that meet the following conditions are subsequently measured at FVTOCI:

•           the financial asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling the financial assets; and

•           the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

By default, all other financial assets are subsequently measured at FVTPL.

 

Amortised cost and effective interest method

The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating interest income over the relevant period.

For financial instruments other than purchased or originated credit-impaired financial assets, the effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) excluding expected credit losses, through the expected life of the debt instrument, or, where appropriate, a shorter period to the gross carrying amount of the debt instrument on initial recognition. For purchased or originated credit-impaired financial assets, a credit-adjusted effective interest rate is calculated by discounting the estimated future cash flows, including expected credit losses, to the amortised cost of the debt instrument on initial recognition.

The amortised cost of a financial asset is the amount at which the financial asset is measured at initial recognition minus the principal repayments, plus the cumulative amortisation using the effective interest method of any difference between that initial amount and the maturity amount, adjusted for any loss allowance. On the other hand, the gross carrying amount of a financial asset is the amortised cost of a financial asset before adjusting for any loss allowance.

 

Impairment of financial assets

The Group recognises a loss allowance for expected credit losses on financial assets that are measured at amortised cost. The amount of expected credit losses is updated at each reporting date to reflect changes in credit risk since initial recognition of the respective financial instrument.

Expected credit loss measurement

The consolidated entity has applied the simplified approach to measuring expected credit losses, which uses a lifetime expected loss allowance. To measure the expected credit losses, trade receivables have been grouped based on days overdue.

 

  1.13 b Financial liabilities and equity

Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangement.

 

Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Group entity are recognised at the proceeds received, net of direct issue costs.

Compound instruments

The component parts of convertible loan notes issued by the Group are classified separately as financial liabilities and equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument. A conversion option that will be settled by the exchange of a fixed amount of cash or another financial asset for a fixed number of the parent company's own equity instruments is an equity instrument.

At the date of issue, the fair value of the liability component is estimated using the prevailing market interest rate for a similar non-convertible instrument. This amount is recorded as a liability on an amortised cost basis using the effective interest method until extinguished upon conversion or at the instrument's maturity date.

The conversion option classified as equity is determined by deducting the amount of the liability component from the fair value of the compound instrument as a whole. This is recognised and included in equity and gets released to the retained earnings over the period of the bond to offset against the amortised cost release. Where the conversion option remains unexercised at the maturity date of the convertible loan note, the balance recognised in equity will be transferred to retained earnings. No gain or loss is recognised in profit or loss upon conversion or expiration of the conversion option.

 

Financial liabilities

All financial liabilities are subsequently measured at amortised cost using the effective interest method or at "Fair Value Through Profit or Loss" ("FVTPL").

 

Financial liabilities at FVTPL

Financial liabilities are classified as at FVTPL when the financial liability is contingent consideration of an acquirer in a business combination to which IFRS 3 applies, or it is designated as at FVTPL.

 

Financial liabilities subsequently measured at amortised cost

Financial liabilities that are not 1) contingent consideration of an acquirer in a business combination, 2) held-for-trading, or 3) designated as at FVTPL, are subsequently measured at amortised cost using the effective interest method.

The convertible loan notes issued by the Group are classified as financial liabilities when a conversion option that will be settled by the exchange of a fixed amount of cash or another financial asset for a variable number of the parent company's own equity instruments. The notes are recorded as a liability on an amortised cost basis using the effective interest method until extinguished upon conversion or at the instrument's maturity date. The difference between the fair value (i.e. future cash flows discounted at the effective interest rate) of the convertible loan notes and the transaction price (contractual amount) principal is recognised as a gain or loss through profit or loss on initial recognition of the financial liability.

The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial liability, or (where appropriate) a shorter period, to the amortised cost of a financial liability.

 

Derecognition of financial liabilities

The Group derecognises financial liabilities when, and only when, the Group's obligations are discharged, cancelled or they expire. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable, including any non-cash assets transferred or liabilities assumed, is recognised in the statement of comprehensive income.

1.14       Leases

The Group assesses whether a contract is or contains a lease, at inception of the contract. The Group recognises a right-of-use asset and a corresponding lease liability with respect to all lease arrangements in which it is the lessee, except for short-term leases (defined as leases with a lease term of 12 months or less) and leases of low value assets. For these leases, the Group recognises the lease payments as an administrative expense on a straight-line basis over the term of the lease.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted by using the rate implicit in the lease. If this rate cannot be readily determined, the Group uses its incremental borrowing rate. The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability (using the effective interest method) and by reducing the carrying amount to reflect the lease payments made.

The right-of-use assets comprise the initial measurement of the corresponding lease liability, lease payments made at or before the commencement day, less any lease incentives received and any initial direct costs. They are subsequently measured at cost less accumulated depreciation and impairment losses. Right-of-use assets are depreciated over the shorter period of lease term and useful life of the right-of-use asset.

1.15       Taxes

Current tax is calculated using rates and laws enacted or substantively enacted at the reporting date. Current tax is recognised in profit or loss unless it relates to an item of other comprehensive income or equity whereby it is recognised in other comprehensive income or equity respectively.

Deferred income tax is calculated using rates and laws enacted or substantively enacted at the reporting date that are expected to apply on reversal of the related temporary difference, and is determined in accordance with the expected manner of recovery of the related asset.

Deferred income tax is recognised in profit or loss unless it relates to an item of other comprehensive income or equity whereby it is recognised in other comprehensive income or equity respectively.

1.16       Share Based Payments

On occasion, the Company has made share-based payments to certain Directors and employees by way of issue of share options. The fair value of these payments is calculated by the Company using the binomial option valuation model and Monte Carlo simulation model.

The expense, where material, is recognised on a straight-line basis over the period from the date of award to the date of vesting, based on the Company's best estimate of the number of shares that will eventually vest.

 

1.17       Investments

Shares in subsidiary undertakings are stated at cost less provision for impairment. 

If there is objective evidence that the Group's net investment in subsidiary is impaired, the requirements of IAS 36 Impairment of Assets are applied to determine whether it is necessary to recognise any impairment loss with respect to the Group's investment. When necessary, the entire carrying amount of the investment (including goodwill) is tested for impairment in accordance with IAS 36 as a single asset by comparing its recoverable amount (higher of value in use and fair value less costs of disposal) with its carrying amount. Any impairment loss recognised is not allocated to any asset, including goodwill that forms part of the carrying amount of the investment. Any reversal of that impairment loss is recognised in accordance with IAS 36 to the extent that the recoverable amount of the investment subsequently increases.

Unlisted investments are measured at fair value through profit or loss. Fair value measurements are estimated based on the amounts for which the assets could be exchanged at the relevant transaction date or reporting period end and are therefore not necessarily reflective of the likely cash flow upon actual settlements. Where fair value measurements cannot be derived from publicly available information, they are estimated using models and other valuation methods. To the extent possible, the assumptions and inputs used take into account externally verifiable inputs. However, such information is by nature subject to uncertainty, particularly where comparable market-based transactions may not exist.

1.18       Intercompany Financing arrangements

The amortised cost methodology is applied to the financing arrangement between the Company and subsidiaries Crossword Consulting Limited and Stega UK Limited.  An assessment in undertaken to determine the market rate of interest for a similar loan given the credit rating of the subsidiaries to apply discounting with the principal conceptually including a financing element. The difference between the discounted loan balance at inception of the loan and the principal are treated as a capital contribution in the subsidiaries.

1.19       Pension Obligations

The Group operates a defined contribution pension scheme for employees in the United Kingdom. A defined contribution scheme is a pension plan under which the Group pays fixed contributions into a separate entity.

Contributions payable to the Group's pension scheme are charged to the income statement in the year to which they relate. The Group has no further payment obligations once the contributions have been paid.

In Poland, the Group pays the statutory employer's contribution into the public pension scheme for each employee, but does not operate any pension schemes.  The Group implemented the Employee Capital Plans (PPK) programme which involved employee consultation and selection of a financial institution.

1.20       Cash and Cash Equivalents

Cash comprises cash-in-hand and demand deposits.  Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash, and which are subject to an insignificant risk of change in value. An investment normally qualifies as a cash equivalent only when it has a maturity of three months or less from the date of acquisition.

1.21       Accounting for Government Grants

Government grants are not recognised until there is reasonable assurance that the Group will comply with the conditions attached to them and that the grants will be received.

Government grants are recognised as income over the periods necessary to match them with the costs for which they are intended to compensate, on a systematic basis. Government grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the Group with no future related costs are recognised in the income statement in the period in which they become receivable.

1.22       Critical accounting estimates and judgements and key sources of estimation uncertainty

Estimates and judgements are continually evaluated and are based on experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

The following are the key judgements that the directors have made which involve sources of estimation uncertainty and have the significant effect on the amounts recognised in the financial information. There are no further critical accounting judgements.

 

Convertible Loans

The Group has given consideration to the measurement and presentation of the convertible loans.

In the measurement of financial liability, a reasonable estimate of the Group's cost of debt is used.

Accounting for investment in subsidiaries

An assessment of the carrying value in the Company of the investment in subsidiaries is undertaken using an NPV model over the projected cash flows, with a discount rate based on the assessment of weighted average cost of capital. The assessment also requires an estimate of a schedule for repayment of long and short term intercompany loans.

Impairment

The Group assesses goodwill and intangible assets for possible impairment. The testing for impairment involves comparing the carrying value of the cash generating unit with its recoverable amount, that is, the higher of fair value less cost to sell and value in use.

Intercompany loans

Intergroup lending agreements are assessed by applying expected credit losses method based on the management estimates for probability of default.

        Deferred tax

Deferred tax assets are recognised for unused tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilised. Significant management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and the level of future taxable profits, together with future tax planning strategies. The Group has taxable temporary differences that partly support the recognition of the losses as deferred tax assets based on the above. The Group has determined that it cannot recognise deferred tax assets on all of the tax losses carried forward however, based on the likely characteristics, timing and level of future taxable profits, together with future tax planning strategies. Further details on taxes are disclosed in note 11.

Other estimates

These estimates do not carry significant risk of resulting in material adjustment to the carrying amounts of assets and liabilities within the next financial year.

 

Fair value of options granted to employees

The Group uses the Binomial model and Monte Carlo simulation model in determining the fair value of options granted to employees under the Group's various share schemes. The determination of the fair value of options requires a number of assumptions. The alteration of these assumptions may impact charges to the income statement over the vesting period of the award. Details of the assumptions used are shown in note 4.

 

2 Revenue and segmental information

 

An analysis of the Group's revenue for each period for its continuing operations, is as follows:

 

£	Group 2023	Group 2022
Revenue from the sale of goods/licences	881,938	479,849
Revenue from the rendering of services	58,600	64,667
Revenue from consulting services	3,098,058	3,013,884
Software engineering revenue	154,400	89,600
Total Revenue	4,192,996	3,648,000

 

 

The IFRS 8 Operating segments requires the Group to determine its operating segments based on information which is provided internally. Based on the internal reporting information and management structures within the Group, it has been determined that there are two operating segments established in accordance to differences in products and services provided - Software product and Services and Engineering Services and Consulting and Managed Services.

 

These operating segments are based on the internal reports that are reviewed and used by the Board of Directors (who are identified as the Chief Operating Decision Makers ('CODM')) in assessing performance and in determining the allocation of resources. There is no aggregation of operating segments.

 

The CODM reviews EBITDA (earnings before interest, tax, depreciation and amortisation). The accounting policies adopted for internal reporting to the CODM are consistent with those adopted in the financial statements.  The information regarding the Group's reportable segments is presented below:

 

2023	Software product and Services and Engineering Services	Consulting and Managed Services	Eliminations	Total
	£	£	£	£
Revenue	1,094,938	3,297,537	(199,480)	4,192,996
Cost of Sales	(522,091)	(2,616,818)	144,198	(2,994,711)
Gross Profit	572,847	680,719	(55,281)	1,198,285
Administrative expenses	(3,526,531)	(999,175)	55,281	(4,470,425)
Other operating expense	(407,757)	(9,444)	-	(417,201)
Financial income and expenses	(269,695)	(181,968)	-	(451,663)
Loss for the period before taxation	(3,631,136)	(509,868)	-	(4,141,004)
Tax credit / (expense)	195,399	30,846	-	226,245
Loss for the Period	(3,435,737)	(479,022)	-	(3,914,759)
Total Comprehensive Loss	(3,436,918)	(479,022)	-	(3,915,940)
Segment assets	9,224,251	1,921,925	(4,606,549)	6,539,637
Segment liabilities	5,975,766	3,676,326	(3,689,294)	5,962,798
EBITDA	(2,945,587)	(326,551)	-	(3,272,138)

 

2022	Software product and Services and Engineering Services	Consulting and Managed Services	Eliminations	Total
	£	£	£	£
Revenue	634,116	3,131,103	(117,219)	3,648,000
Cost of Sales	(136,287)	(2,619,375)	-	(2,755,662)
Other income	39,814	-	-	39,814
Gross Profit	537,643	511,728	(117,219)	932,152
Administrative expenses	(4,561,425)	(523,292)	117,218	(4,967,499)
Other operating income	(226,447)	(78,010)	-	(304,457)
Financial income and expenses	(29,958)	(197,090)	-	(227,048)
Loss for the year before taxation	(4,280,186)	(286,666)	-	(4,566,852)
Tax credit / (expense)	1,144,302	-	-	1,144,302
Loss for the Year	(3,135,884)	(286,666)	-	(3,422,550)
Total Comprehensive Loss	(3,134,102)	(286,666)	-	(3,420,768)
Segment assets	10,413,274	1,594,370	(3,367,738)	8,639,905
Segment liabilities	4,234,893	2,649,280	(2,404,869)	4,479,304
EBITDA	(4,023,782)	(11,565)	-	(4,035,347)

 

 

During the year ended 31 December 2023 approximately 15% (2022: 14%) of the consolidated entity's external revenue was derived from sales to a major United Kingdom client in Cybersecurity consulting segment.  No other clients accounted for 10% or more of the consolidated entity's external revenue.                                                                                                                                                                          

No analysis of net assets by geographic segment is provided as the net assets are principally all within the UK.       

 

3 Expenses by nature                

 

£	Group 2023	Group 2022
Staff and related costs	5,274,424	4,914,076
Consultancy and related costs	567,672	854,972
Professional fees	714,504	808,910
Property related costs	368,787	201,590
Depreciation	28,176	11,287
Amortisation	389,025	293,170
Capitalised costs	(348,094)	(162,680)
Other expenses	887,842	1,106,293
Total cost of sales, administrative and other operating expenses	7,882,337	8,027,618
Included in Cost Of Sales
£	Group 2023	Group 2022
Staff and related costs	2,256,838	1,874,960
Consultancy and related costs	567,672	854,972
Other expenses	170,201	25,730
Total cost of sales	2,994,711	2,755,662
Included in Administrative expenses
£	Group 2023	Group 2022
Staff and related costs	3,017,586	3,039,116
Professional fees	714,504	808,910
Property related costs	368,787	201,590
Capitalised costs	(348,094)	(162,680)
Other expenses	717,642	1,080,563
Total administrative expenses	4,470,425	4,967,499

 

 

 

Administrative expenses include-short term lease expense of £318,143 (2022: £188,643).

 

Expenses by geographic location
£	Group 2023	Group 2022
UK	6,974,775	7,355,231
Poland	812,638	672,387
Oman	94,924	-
Total cost of sales, administrative and other operating expenses	7,882,337	8,027,618

 

 

4 Staff Costs

 

Staff costs, including directors' remuneration, were as follows:

 

 

£
Wages and salaries:	Group 2023	Group 2022	Company 2023	Company 2022
- Administrative	2,043,075	2,342,943	2,006,440	2,066,066
- Consulting	2,001,988	1,719,588	-	-
- Research and development	592,278	348,910	-	-
Social security costs	558,279	432,124	240,814	231,583
Other pension costs	78,804	70,511	51,991	47,838
	5,274,424	4,914,076	2,299,245	2,345,487

 

 

The average monthly number of employees, including the directors, during the period was as follows:

 

	Group 2023	Group 2022	Company 2023	Company 2022
Staff	50	52	25	30
Directors	11	11	8	8
Total	61	63	33	38

 

 

Share based payments

 

The amount recognised  in respect of share based payments was £6,203 (2022: £130,452).                                                                                         

The Group has established share option programmes that entitle certain employees to purchase shares in the Group.

 

There are no performance conditions attaching to these options. No options were exercised in 2023 (2022: None).                                                                                 

Total options issued as at 31 December 2023 amount to 2,908,923 (2022:  2,273,653).                                                                                   

-The share options have been valued using a binomial model applying the following inputs:

• Exercise price - equal to the share price at grant date,

• Vesting date - all options vest in three tranches, on the first, second and third anniversary from the grant date;

• Expiry/Exercise date - 10 years from the grant date;

• Volatility (sigma) - 40%. This has been calculated based on the historic volatility of the Company's share price.

• Risk free rate - yield on a zero coupon government security at each grant date with a life congruent with the expected option life;

• Dividend yield - 0%,

• Future staff turnover - 0%. We have however adjusted the P+L charge for the current year (and future years) to account for forfeited options due to leavers; and

• Performance conditions - none.

                                                                                               

Reconciliation of share options - Company

		Weighted average exercise price		Weighted average exercise price
	2023	2023	2022	2022
		£		£
1st January	2,273,653	0.36	2,348,653	0.36
Granted during the period	775,270	0.09	10,000	0.33
Lapsed during the period	(140,000)	0.32	(85,000)	0.34
End of the period	2,908,923	0.29	2,273,653	0.36

 

 

The weighted average share Price at the exercise date was £0.29.

 

The range of exercise prices is from £0.05 to £0.55.

 

The weighted average remaining life of the options was 5.5 years (2022: 6.5 years).

 

5 Directors' Remuneration

 

The remuneration of the Directors who served in the current year was as follows:

 

2023 £		Basic Salary and Fees	Bonus	Taxable Benefits	Employer's Pension Contribution	Total
Executive Directors
Tom Ilube		130,000		4,237	771	135,007
Mary Dowd*		175,000		2,506	20,000	197,506
Non-Executive Directors
Sir Richard Dearlove		25,000		25,000		50,000
Ruth Anderson		12,000				12,000
Andy Gueritz		16,000				16,000
Dr David Secher		16,000				16,000
Robert Coles		12,000				12,000
Tara Cemlyn-Jones		12,000				12,000
Total		398,000	-	31,742	20,771	450,513
2022 £
Executive Directors
Tom Ilube		130,000		3,926	1,321	135,247
Mary Dowd*		140,000	10,000	2,216	10,000	162,216
Non-Executive Directors
Sir Richard Dearlove		25,000		25,000		50,000
Ruth Anderson		12,000				12,000
Andy Gueritz		16,000				16,000
Dr David Secher		16,000				16,000
Robert Coles		12,000				12,000
Tara Cemlyn-Jones		12,000				12,000
Total		363,000	10,000	31,142	11,321	415,463

 

In the year ended 31 December 2023, certain of the directors received remuneration (which is included in the amounts above) through payments by the Company to third parties as follows: £12,000 was paid to Cumberland House Consulting Ltd for the services of R Coles (2022: £12,000); £12,000 was paid to Caprica Nelson Ltd for the services of R Anderson (2022: £12,000); £16,000 was paid to Cambridge KT Ltd for the services of D Secher (2022: £16,000).                                                                           

 

Share Options issued

	Year	Share Options	Exercise Price	Total Value
Mary Dowd	2020	25,000	£                   0.31	£                2,903
Sir Richard Dearlove	2020	94,340	£                   0.27	£                9,496
Sir Richard Dearlove	2021	70,423	£                   0.36	£               25,000
Sir Richard Dearlove	2023	270,270	£                   0.09	£               25,000

 

In 2021 the Company implemented a Long Term Incentive Plan (LTIP) whereas awards have been made to the following executives - Mary Dowd, Stuart Jubb, Jake Holloway and Sean Arrowsmith. Each award is of nominal cost (£0.005) options to acquire up to 750,000 Crossword ordinary shares of 0.5p each which vest at the average mid-market price of the Ordinary Shares over the 20 trading days preceding the end of the performance period which ends on 30 September 2024. 25% of the options will vest if the Award Price is 50p, and 100% will vest if the Award Price is equal to or greater than 100p, with straight line vesting between 50p and 100p. Jake Holloway and Sean Arrowsmith have left the Company during 2023 and the LTIP is no longer applicable to them.                    

6 Other Income

 

			Group 2023		Group 2022
			£		£
Grant Income			-		39,814
			-		39,814

 

 

 

 

 

 

 

 

7 Other Operating Expense

		Notes	Group 2023		Group 2022
			£		£
Amortisation of intangible assets		12	389,025		293,170
Depreciation of property, plant and equipment		13	19,945		11,287
Depreciation of right-of-use assets		13	8,231		-
			417,201		304,457

 

8 Finance Costs

			Group 2023		Group 2022
			£		£
Finance cost of loan notes			377,322		272,400
Interest on deferred consideration			86,010		115,766
Interest expense on lease liabilities			2,934		-
Other interest expense			1,806		7,596
			468,072		395,762

 

9 Gain on measurement of financial assets and liabilities

			Group 2023		Group 2022
			£		£
Gain on remeasurement of contingent consideration			-		170,283
Gain on initial recognition of convertible loan notes at fair value			482,087		-
Loss on revaluation of investment in CyberOwl			(456,834)		-
			25,253		170,283

 

10 Auditor's Remuneration

 

The expenses for services rendered by the Group auditor present themselves as follows:

 

£			Group 2023		Group 2022
Fees for the parent company individual and consolidated financial statements			47,600		41,400
Fees for legal audit of subsidiary financial information			20,400		24,050
			68,000		65,450

 

11 Tax

Income tax
£			Group 2023		Group 2022
UK corporation tax			(270,004)		(753,288)
Foreign tax on income for the year			7,834		6,115
Adjustment in respect of prior periods			35,925		-
Deferred tax credit			-		(397,129)
Total tax (credit) / expense			(226,245)		(1,144,302)

 

 

There is no tax charge in respect of other comprehensive income.

 

Corporation tax losses carried forward for offset against future year's trading profits amount to approximately £14.2m (2022: £8.5m).                                                                                

£				Group 2023				Group 2022
Loss before taxation				4,141,004				4,566,852
Average rate of corporation tax				23.52%				19.00%
Tax on loss				(973,964)				(867,702)
Effects of:
Expenses not deductible for tax purposes				217,950				116,084
Additional deduction for R&D expenditure				(293,631)				(164,009)
Surrender of tax losses for R&D tax credit refund				365,059				-
Adjustments in respect of prior period				35,924				(354,777)
Tax rate changes / adjustments				2,467				(12,199)
Deferred tax not recognised				423,174				138,301
Other changes						3,224)			-
Total tax charge						(226,245)			(1,144,302)

 

                                                               

 

12 Intangible Assets

 

 

Software Development
£		Group 2023	Group 2022	Company 2023	Company 2022
Cost b/f		3,039,473	1,141,560	2,429,447	531,534
Acquired through business combinations		-	1,694,287	-	1,694,287
Additions		348,093	203,627	348,093	203,627
		3,387,566	3,039,473	2,777,540	2,429,447
Accumulated Amortisation
B/F		331,050	37,881	232,241	9,931
Charge for the period		389,025	293,169	318,164	222,310
C/d		720,075	331,050	550,405	232,241
Net Book Value		2,667,491	2,708,423	2,227,135	2,197,206

 

 

Intangible assets comprise of 6 different software development projects with remaining useful life of approximate between 5 and 10 years each and the carrying amounts of £940,932, £810,244, £344,206, £221,803, £184,631 and £165,675.

 

The intangible assets have been evaluated to determine whether there are any indicators of impairment. Assessment of the recoverable value for software development assets has been based on calculating the value in use, which is equal to net present value of the future cash flows. The cash flow projections are based on the most recent 2 year forecast extrapolated to 5 years with a growth rate for revenue between 25% and 50% and costs of 10%. The pre-tax discount rate used in the calculation was 26%.

 

Please refer to note 14 for matters relating to impairment assessment for Nightingale product.

 

13 Property, Plant and Equipment

Computers
£		Group 2023	Group 2022	Company 2023	Company 2022
Cost b/f		82,023	31,845
Additions		-	48,971
Acquired through business combinations		-	1,207
Disposals		(1,098)	-
		80,925	82,023	-	-
Accumulated Depreciation
B/F		36,984	26,385
Charge for the period		19,945	11,287
Disposals		(1,098)	0
Translation adjustments		(104)	(688)
C/d		55,727	36,984	-	-
Net Book Value		25,197	45,039	-	-
Furniture and Fittings
£		Group 2023	Group 2022	Company 2023	Company 2022
Cost b/f		15,157	15,157	15,157	15,157
Additions		7,129		7,129
		22,286	15,157	22,286	15,157
Accumulated Depreciation
B/F		15,157	15,157	15,157	15,157
Charge for the period		-	-	-	-
C/d		15,157	15,157	15,157	15,157
Net Book Value		7,129	-	7,129	-

 

 

 

Right of Use Assets
£		Group 2023	Group 2022	Company 2023	Company 2022
Cost b/f		-	-	-	-
Additions		197,536	-	197,536	-
		197,536	-	197,536	-
Accumulated Depreciation
B/F		-	-	-	-
Charge for the period		8,231	-	8,231	-
C/d		8,231	-	8,231	-
Net Book Value		189,305	-	189,305	-
Total
£		Group 2023	Group 2022	Company 2023	Company 2022
Cost b/f		97,180	47,002	15,157	15,157
Additions/(disposals)		204,665	48,971	204,665	-
Acquired through business combinations		-	1,207	-	-
Disposals		(1,098)	-	-	-
		300,746	97,180	219,822	15,157
Accumulated Depreciation
B/F		52,141	41,542	15,157	15,157
Charge for the period		28,176	11,287	8,231	-
Translation adjustments		(104)	(688)	-	-
Disposals		(1,098)	-	-	-
C/d		79,115	52,141	23,388	15,157
Net Book Value		221,631	45,039	196,434	-

 

14 Goodwill

 

The goodwill arises on acquisition of Stega UK Ltd in 2021 and forms a part of Nightingale cash generating unit. The goodwill has been tested for impairment alongside Intangible asset of NBV of £184,631 allocated to the same unit. The recoverable amount has been determined by value in use calculation. The cash flow projections are based on the most recent 2 year forecast prepared by management and extrapolated to 5 years with a growth rate for revenue of 25% and costs between 10% and 15%, these are based primarily on past experience. The pre-tax discount rate used in the calculation was 26%.

At 2023 year end the recoverable amount was determined to be higher than the value of goodwill and NBV attributable to Nightingale, therefore, no impairment has been recorded.

 

£		Group 2023	Group 2022
B/F		875,277	875,277
C/F		875,277	875,277

 

15 Unlisted investments

 

£		Group 2023	Group 2022	Company 2023	Company 2022
Fair value at 1 January		456,834	456,834	456,834	456,834
Additions		524,834	-	524,834	-
Revaluation		(456,834)	-	(456,834)	-
Fair value at 31 December		68,000	456,834	68,000	456,834

 

 

The above Group investment represents Crossword Cybersecurity Plc's 2023 - 3.1% (2022 - 3.1%) holding in CyberOwl. During 2023 the Group participated in the fundraising event to acquire preference shares in CyberOwl in order to maintain the same shareholding.                                                                                     

At the end of the reporting period the value of investment has been impaired based on unobservable inputs representing management's best estimate of the value of the investment.

                                                               

 

16 Investment in subsidiaries 

 

£			Company 2023		Company 2022
Cost b/f 1 January			1,649,145		1,637,518
Acquired during the year			-		1,341,420
Transfer to intangibles on hive up			-		(1,270,715)
Reversal of contingent consideration			-		(170,283)
Capital contribution			687,571		111,205
Cost c/f 31 December			2,336,716		1,649,145

 

 

The Group's subsidiary undertakings are listed below, including name, country of incorporation, and proportion of ownership interest:

 

Name	Registered office		Principal activity		2023	2022
	6th Floor, 60 Gracechurch Street, London EC3N 0HR United Kingdom				%	%
Crossword Consulting Limited			Cybersecurity services		90	90
Crossword Cybersecurity SP Z.o.o.	ul. Wiejska 12a, 00-490  Warszawa, Poland		Cybersecurity services		100	100
Stega UK Ltd	6th Floor, 60 Gracechurch Street, London EC3N 0HR United Kingdom		Cybersecurity services		100	100
Verifiable Credentials Ltd	6th Floor, 60 Gracechurch Street, London EC3N 0HR United Kingdom		Cybersecurity services		100	100
Crossword Cybersecurity LLC	PO Box 808, Alwattayah / Muttrah / Muscat Governorate, Postcode: 100, Oman		Cybersecurity services		90	90
Threat Status Ltd	6th Floor, 60 Gracechurch Street, London EC3N 0HR United Kingdom		Cybersecurity services		100	100

Verifiable Credentials Ltd, a company incorporated in England and Wales, registered No 11923813 and Threat Status Ltd, a company incorporated in England and Wales, registered No 10877044, are exempt from the requirements from the UK Companies Act 2006 relating to the audit of individual accounts by virtue of s479A of the Act.

 

17 Trade and Other Receivables

 

£		Group 2023	Group 2022	Company 2023	Company 2022
Trade receivables		1,223,289	1,110,697	1,002,708	505,451
Other receivables		179,946	524,721	147,522	445,603
Prepayments		233,829	239,066	179,549	183,160
Accrued income		39,107	133,883	-	23,383
VAT Refund		-	69,683	-	46,421
Intercompany receivables within one year		-	-	340,043	714,507
		1,676,171	2,078,050	1,669,822	1,918,525

 

All of the above amounts are considered to be due within one year.

 

Trade receivables are stated after deducting allowances for doubtful debts, as follows:

 

£		Group 2023	Group 2022	Company 2023	Company 2022
At 1 January		13,000	7,000	-	-
Expense		7,700	6,000	-	-
Utilised		(13,000)	-	-	-
At 31 December		7,700	13,000	-	-

 

The Group applies a simplified approach to measure the loss allowance for trade receivables classified at amortised cost, using the lifetime expected loss provision.                                                                                     

 

The maximum exposure to credit risk at the reporting date is the carrying value as above and the cash and cash equivalents and none are either past or impaired.                                                                                     

 

Of the above amounts held within the Group, £18,608 is denominated in Polish Zloty and £916 in Omani Rial with the remainder in GBP (2022: £32,735 in Polish Zloty).       

                                                                                                                                                                               

Foreign exchange risk is currently minimal as balances in Polish Zloty and Omani Real are between the parent and its subsidiaries.

                                               

18 Trade and Other Payables

 

£		Group 2023	Group 2022	Company 2023	Company 2022
Trade payables		400,748	659,282	794,117	1,025,828
Employment taxes and VAT payable		349,359	306,168	64,351	69,300
Accruals		429,451	434,705	278,948	187,197
Contract liabilities		431,161	460,853	246,577	279,125
Deferred consideration		562,532	568,146	562,532	568,146
Lease liability		88,709	-	88,709	-
Other payables		71,801	27,629	183,610	17,179
		2,333,761	2,456,783	2,218,844	2,146,775

 

All of the above amounts are considered to be due within one year.

 

The contract liabilities relate to deferred revenue arising from contracts with customers.

                                                                                               

Of the Trade and Other Payables amounts held within the Group, £72,110 (2022: £83,965) is denominated in Polish Zloty and £80,639 in Omani Rial (2022: Nil) with the remainder in GBP.                                                                                                                                                                     

19 Other Current Liabilities    

 

£		Group 2023	Group 2022	Company 2023	Company 2022
Bank loan		17,000	17,000	-	-
		17,000	17,000	-	-

 

20 Other Non-current Liabilities         

 

 

£		Group 2023	Group 2022	Company 2023	Company 2022
Deferred consideration		-	492,151	-	492,151
Lease liability		102,224	-	102,227	-
Deferred grant income		132,693	132,692	-	-
		234,917	624,843	102,227	492,151

 

21 Share Capital

 

Allotted called up and fully paid

 

Number of shares (all ordinary shares £0.005 each)			2023		2022
B/f			92,403,715		74,957,150
Shares Issued in period			1,313,926		17,446,565
C/d			93,717,641		92,403,715

 

The shares issued in the period were ordinary shares of £0.005 at a premium of £215,457 (2022: £3,563,151).                       

All shares carry the same voting and capital distribution rights.                                                                                               

 

£
Share Capital			2023		2022
Cost b/f			462,019		374,786
Shares Issued in period			6,570		87,233
			468,589		462,019
Share Premium
B/f			18,534,372		14,971,221
Shares Issued in period			215,457		3,563,151
C/d			18,749,829		18,534,372

 

22 Loss per share

               

Earnings per share is calculated by dividing the loss for the period attributable to ordinary equity shareholders of the parent by the weighted average number of ordinary shares outstanding during the year.                                                                         

 

During the year the calculation for basic loss per share was based on the loss for the year attributable to owners of the parent of £3,896,106 (2022:  £3,408,149) divided by the weighted average number of ordinary shares of 93,466,981 (2022: 80,022,937).         

 

 

 

 

                                                                                                               

23 Reserves                   

 

The following describes the nature and purpose of each reserve within owners' equity

 

Reserve	Description and purpose
Share capital	This represents the nominal value of shares issued
Share premium	Amount subscribed for share capital less any issue costs more than nominal value
Convertible debt reserve	The residual amount after deducting from the fair value of the convertible loan notes the liability component
Equity reserve	Represents amounts charged on share options that have been granted to employees
Retained earnings	Cumulative net gains and losses recognised in the consolidated statement of comprehensive income
Translation of foreign operations	Is the difference that arises due to consolidation of foreign subsidiaries using an average rate during the period and a closing rate for the period end statement of financial position

 

24 Financial Instruments

 

£
Current Financial Assets		Group 2023	Group 2022	Company 2023	Company 2022
Financial assets measured at amortised cost
Trade and other receivables		1,442,342	1,769,301	1,490,273	1,688,943
Cash and cash equivalents		730,946	2,077,771	457,376	1,746,530
Non-Current Financial Assets
Financial assets measured at amortised cost
Loan to subsidiary		-	-	972,449	1,067,185
Financial assets measured at fair value through profit or loss
Financial investments		68,000	456,834	68,000	456,834
		2,241,288	4,303,906	2,988,098	4,959,493

 

 

The financial investments comprise of investment in CyberOwl Ltd, which has been revalued on the basis of valuation of preference shares held in the company. This methodology of determining a fair value equates to a level 3 assessment based on unobservable inputs.   

                                                               

£
Current Financial Liabilities		Group 2023	Group 2022	Company 2023	Company 2022
Financial liabilities measured at amortised cost
Trade and other payables		1,553,240	1,689,761	1,907,917	1,798,351
Loans		17,000	17,000	-	-
Finance lease obligations		88,709	-	88,709	-
Non-Current Financial Liabilities
Financial liabilities measured at amortised cost
Loans		34,000	51,000	-	-
Convertible loan notes		3,343,121	1,329,678	3,343,121	1,329,678
Finance lease obligations		102,224	-	102,227	-
Non-current deferred consideration		-	492,151	-	492,151
		5,138,294	3,579,590	5,441,974	3,620,180

 

Out of £2,060,000 of new convertible loan notes issued in the year, £2,015,000 of convertible loan notes were accounted for as financial liability and initially measured at fair value (and subsequently measured at amortised cost) with a gain of £482,087 recorded in the Income Statement. The remaining £605,000 were accounted for as a compound instrument resulting in an equity component on initial recognition of £103,948 recorded in Convertible debt reserve.

 

25 Financial Instruments - Risk

 

The Group could be exposed to risks that arise from its use of financial instruments. Risks in relation to financial assets include:                                                                                         

Market risk                                                                                           

Market risk covers foreign exchange risk, price risk and interest rate risk.                                                                                             

As the majority of the Group's transactions are either in Sterling or in Polish Zloty the Group considers its exposure to foreign exchange risk to be minimal.                                                                                              

There are no derivatives and hedging instruments.                                                                                    

The Group is not exposed to price risk given that no securities are held under financial assets.                                                                                      

The Group is not exposed to interest rate or cash flow risk due to the fact that the Group has no borrowing or complex financial instruments.                                                                                         

Credit risk                                                                                             

Credit risk is considered to be the risk of financial loss incurred by the Group in the event that a customer or counterparty to an asset fails to meet contractual obligations. The Group has adopted a policy of only dealing with credit worthy counterparties. 

               

The Group's maximum credit exposure at the reporting date is represented by the carrying value of its financial assets. The Group's financial instruments do not represent a concentration of credit risk since the Group deals with a variety of counterparties.

 

Financial Assets
£		Group 2023	Group 2022	Company 2023	Company 2022
Cash and cash equivalents		730,946	2,077,771	457,376	1,746,530
Trade and other receivables		1,442,342	1,769,301	1,490,273	1,688,943
Loan to subsidiary		-	-	1,312,492	1,781,692
Financial investments		68,000	456,834	68,000	456,834
Total		2,241,288	4,303,906	3,328,142	5,673,999

 

Liquidity risk                                                                                        

Management monitor rolling forecasts of the Group's liquidity reserves, cash and cash equivalents on the basis of expected cash flows and therefore monitors liquidity risk sufficiently.                                                                                         

 

Financial Liabilities	2023		2022
£	due < 1 year	due 1 - 5 years	due < 1 year	due 1 - 5 years
Trade payables	400,748	-	659,282	-
Accruals	429,451	-	434,705	-
Deferred consideration	562,532	-	568,146	492,151
Other Payables	71,801	-	27,629	-
Loans	17,000	34,000	17,000	51,000
Convertible loan notes	-	3,343,121	-	1,329,678
Finance lease obligations	88,709	102,224	-	-
Total	1,570,241	3,479,345	1,706,762	1,872,829

 

26 Capital management

 

The Group considers its capital to comprise of its equity share capital, share premium, foreign exchange reserve, share options reserve and convertible debt reserve, less its accumulated losses. Quantitative detail is shown in the consolidated statement of changes in equity.               

                                                                               

The directors' objective when managing capital is to safeguard the Group's ability to continue as a going concern in order to provide returns for the shareholder and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.               

                                                                               

The directors monitor a number of KPIs at both the Group and individual subsidiary level on a monthly basis. As part of the budgetary process, targets are set with respect to operating expenses in order to effectively manage the activities of the Group. Performance is reviewed on a regular basis and appropriate actions are taken as required. These internal measures indicate the performance of the business against budget/forecast and to confirm that the Group has adequate resources to meet its working capital requirements.      

27 Pensions

 

Employer contributions to the Group defined contribution pension scheme for employees in the United Kingdom were £87,954 (2022: £70,695).  A defined contribution scheme is a pension plan under which the Group pays fixed contributions into a separate entity.                                                                                                                                                                                                                      

Contributions payable to the Group's pension scheme are charged to the income statement in the year to which they relate. The Group has no further payment obligations once the contributions have been paid.                                                                                        

In Poland, the Group pays the statutory employer's contribution into the public pension scheme for each employee, but does not operate any pension schemes.

                                                                                               

 

28 Related Party Transactions

2023	Crossword Consulting Limited	Crossword Cybersecurity SP Z.o.o	Stega UK Limited	Verifiable Credentials Limited	Cumberland House Consulting Limited*
Services received from £	157,479	884,060	42,000	-	-
Services supplied to £	-	-	-	-	637,350
Balance trade payable to £	-	363,820	-	-	-
Balance trade receivable from £	420,514	-	423,992	1,367	214,712
Intercompany loan receivable from £	1,326,069	-	157,251	-	-
2022
Services received from £	102,877	746,355	42,000	-	-
Services supplied to £	-	-	-	-	318,800
Balance trade payable to £	-	284,420	-	-	-
Balance trade receivable from £	143,779	-	156,870	1,385	54,235
Intercompany loan receivable from £	1,178,367	-	88,818	-	-
* Dr Robert Coles is a director for both Cumberland House Consulting Ltd and Crossword Cybersecurity Plc

 

Tom Ilube, CEO, had made a loan of £250,000 to the Company in 2023. On 5 March 2024 the following directors made loans to the Company - Tom Ilube - £40,000, Sir Richard Dearlove - £15,000, Dr David Secher - £10,000, Dr Robert Coles - £100,000. All of the loans made by directors are on the same terms as the other Lenders as described in note 29.

                                                                                               

The Company has a related party relationship with its key management who are the Executives: Tom Ilube, Mary Dowd, Jake Holloway, Sean Arrowsmith and Stuart Jubb, whose total compensation amounted to £773,535 (2022: £796,444). Jake Holloway and Sean Arrowsmith resigned during the year.            

                                                                                                                                                                               

29 Convertible Loan Notes

 

The following table explains movements in the Convertible Loan Notes in the year:

 

£		Convertible Loan Notes
B/f 2023		1,500,000
Additional loans issued in the period		2,620,000
C/d 2023		4,120,000

 

The discounted amount of the Convertible Loan Notes at the year end was £3,343,121 (2022: £1,329,678).              

 

The gain on initial recognition of the convertible loan recorded as a liability on an amortised cost basis using the effective interest method is £482,087 (2022: nil).

                                                                                                                                                               

The equity component of the new Convertible Loan Notes at the date of issue was £103,948 (2022: £195,685).                       

 

Repayment of the loan notes is at the end of the term, in cash, save that each lender may opt to convert part or all of their loan into Ordinary Shares at a certain fixed or variable price per share depending on agreement.  On repayment of the Loans in cash, each lender will be issued warrants valid for three months to subscribe for Ordinary Shares representing 10% of the value of the Loan.                                                                                                                                                                                                                   

30 Controlling Party

 

The Company does not have a controlling party.                                                                                        

 

31 Subsequent Events

 

On 5 March 2024 the Company announced that it has entered into agreements for a five year, unsecured, convertible loan to the value of £275,000. The funds raised will be used to support sales and marketing, product and services development and to provide general working capital. The interest rate is fixed at 12% and is payable quarterly.

On 12 March 2024 the Company issued 7,749,226 new ordinary shares of 0.5 pence each in respect of the second anniversary deferred consideration of £450,000 for the acquisition of Threat Status Limited originally acquired in 2022.