TIDMCCS
RNS Number : 4793I
Crossword Cybersecurity PLC
19 April 2022
Crossword Cybersecurity Plc
2021 Annual Report and Accounts
19 April 2022 - London, UK - Crossword Cybersecurity Plc
(AIM:CCS, "Crossword", the "Company" or the "Group"), the
technology commercialisation company focused on cyber security and
risk, is pleased to announce its final results for the year ended
31 December 2021. The Annual Report and Accounts along with the
Notice of its Annual General meeting ("AGM") and a Form of Proxy
will be posted to Shareholders shortly.
A copy of the Annual Report and Accounts and the notice of AGM
are available on the Company's website at
www.crosswordcybersecurity.com .
AGM and Investor Meeting
The AGM will be held on Monday 16 May 2022 at 10.00am at the
offices of Shakespeare Martineau LLP, 6th Floor, 60 Gracechurch
Street, London EC3V 0HR.
Additionally, the Company will be hosting an update on the
Investor Meet Company platform on Tuesday 17 May at 2.00pm. Click
here to register for this event.
2021 Financial Highlights
-- Delivered 43% revenue growth to GBP2.3m (including Grant
Income of GBP152k included in 'Other Income'), despite the
turbulence in the economy.
-- Revenues from product and services expanded by 56%.
-- Annual recurring revenue doubled during 2021.
-- GBP1.6m equity fund raise February 2021, and a GBP5.0m equity fund raise July 2021.
-- GBP1.3m cost increases driven by headcount increasing by 74%,
with continued investment in sales and marketing and product
development, and increased professional fees in 2021 driven by two
acquisitions, two equity fund raises and the opening of an overseas
company in Oman.
-- GBP457k gain on revaluation of CyberOwl Limited shareholding
measured at fair value. Crossword catalysed the creation of
CyberOwl Limited in 2016.
-- Loss of GBP2.5m.
-- GBP3.4m closing cash.
2021 Operational Highlights
-- Rizikon users grew to over 500 users by the end of 2021.
-- Acquired Verifiable Credentials Limited in May 2021, adding
IdentiProof to the product portfolio.
-- Acquired Stega UK Limited in August 2021. Integrated the
threat intelligence and monitoring company and their sophisticated
in-house platform, Nightingale.
-- Integrated DarkBeam's cyber risk audits into Rizikon,
significantly enhancing its functionality.
-- Completed grant funded feasibility study with Liverpool John
Moores University to investigate the underlying problems and causes
of failures in supply chain risk and assurance.
-- The IASME Consortium Limited commenced using Rizikon to
deliver its Counter Fraud Fundamentals Certification. This is as
well as delivering its Internet of Things security
certification.
-- Consulting secured two more FTSE250 clients.
-- Crossword Cybersecurity LLC was formed in the Sultanate of Oman.
-- Designed, built and market tested a completely new product in
the privacy governance space, for the University of Glasgow.
-- Refreshed the Board with the appointment of Dr Robert Coles and Tara Cemlyn-Jones.
-- Share split where each Ordinary Share of 5p was sub-divided
into ten new ordinary shares of 0.5p.
-- Great progress on gender diversity with the Board being 37.5%
women and Advisory Board at 50:50 parity. The Women at Crossword
Group was established.
-- Office move in London from Richmond to a flexible Waterloo office.
Post Period Highlights
-- Acquired Threat Status Limited, the threat intelligence
company and provider of Trillion(TM), the cloud-based software as a
service (SaaS) platform for enterprise-level credential breach
intelligence. This takes the number of acquisitions in the past 12
months to three.
-- The IASME Consortium Limited commenced using Rizikon to
deliver its Maritime Security Certification. This is as well as
delivering its Internet of Things security and Counter Fraud
Fundamentals certifications.
-- Continued to expand the membership body network to distribute
Rizikon. Launched an offer to members of techUK, the UK technology
trade association, and BESA, the British Educational Suppliers
Association, for a single-use cyber security assessment to support
them towards Cyber Essentials certification.
Outlook
-- Expect rate of growth in income to be circa 75% in 2022, in line with market expectations.
-- Continue rapid roll out of Rizikon Pro, on the back of partnerships and membership deals.
-- Target over 1,000 organisations using Rizikon to assess over 10,000 suppliers by end 2022.
-- Take Identiproof to market as well as continuing product development.
-- Continued focus on Sales and Marketing.
-- Complete the integration of Threat Status Ltd into Crossword.
-- Focus on cross sell opportunities following three
acquisitions in less than 12 months, with the addition of circa 50
new clients, three new products (Identiproof, Trillion and Arc),
and new threat monitoring service using Nightingale, our world
class platform.
-- Growing client interest in Nixer and Nixer functionality being used to enhance Rizikon.
Tom Ilube, CEO of Crossword Cybersecurity plc, commented: "I am
incredibly pleased with the progress Crossword made in 2021,
achieving 43% total revenue growth, and 56% growth in our product
and services revenue. We expanded our product portfolio with the
addition of Identiproof, our services offering with the addition of
Nightingale, and our geographical reach with the opening of our
Oman office. We were delighted to welcome new institutional
investors in our February and July 2021 fund raises and are
appreciative of the ongoing support of our shareholders.
" We have welcomed the teams from Stega UK Ltd and Verifiable
Credentials into the Crossword fold during 2021, and the team from
Threat Status Ltd post period in March 2022. Crossword employees
continue to embody our culture and values of responsibility,
openness, flexibility and learning.
" We have had a strong start to 2022, commencing delivery of
services to a new FTSE 100 company, also to a company which
supports UK critical national infrastructure, progressed cross sell
opportunities of Nightingale into our consulting client base and
have already sold Trillion into our Rizikon network.
" Following our three successful acquisitions in the past 12
months, we will continue to make targeted acquisitions to
accelerate growth, where we see interesting cyber security
companies. "
- Ends -
The information contained within this announcement is deemed to
constitute inside information as stipulated under the retained EU
law version of the Market Abuse Regulation (EU) No. 596/2014 (the
"UK MAR") which is part of UK law by virtue of the European Union
(Withdrawal) Act 2018. The information is disclosed in accordance
with the Company's obligations under Article 17 of the UK MAR. Upon
the publication of this announcement, this inside information is
now considered to be in the public domain
Contacts
Crossword Cybersecurity plc - Tel: +44 (0) 333 090 2587
Email: info@crosswordcybersecurity.com
Tom Ilube, Chief Executive Officer
Mary Dowd, Chief Financial Officer
Grant Thornton (Nominated Adviser) - Tel: +44 (0) 20 7383
5100
Colin Aaronson / Daphne Zhang / Ciara Donnelly
Hybridan LLP (Broker) - Tel: +44 (0)203 764 2341
Claire Louise Noyce
For media enquiries contact:
Duncan Gurney, GingerPR
duncan@gingerpr.co.uk - Tel: +44 (0)1932 485 300
About Crossword Cybersecurity plc
Crossword Cybersecurity plc reduces the cyber risks for clients
by providing a portfolio of products and services, powered by
university and other research-driven insights. Crossword focuses on
the development and commercialisation of cyber security and risk
management related software and cyber security services. The
Group's specialist cyber security product development and software
engineering teams develop the research concept into a fully-fledged
commercial product that it will then take to market. The Group's
aim is to build up a portfolio of revenue generating, intellectual
property based, cyber security products. Rizikon Assurance,
Crossword's leading product, is a SaaS platform that enables medium
to large companies to assess and manage all risks from their
suppliers. Nixer CyberML, another Crossword product, is a new tool
for businesses that want to solve advanced security and cybercrime
problems, such as detecting and dealing with compromised accounts,
fraud, and in-application denial of service attacks. Identiproof,
is the World Wide Web Consortium (W3C) verifiable credentials
compatible middleware and wallet technology. Trillion and Arc are
the latest additions to Crossword's product suite, offering some of
the strongest and most advanced credential leak monitoring services
in the market. Crossword's team of expert cyber security
consultants leverages years of experience in national security,
defence and commercial cyber intelligence and operations to provide
bespoke cyber security consulting advice tailored to its clients'
business needs, including threat monitoring using Nightingale, our
world class platform.
Chairman's Statement
Strong growth as the economy emerges from the pandemic
As the world emerged slowly from the challenging pandemic
period, Crossword continued to progress rapidly with our strategy
of building a significant intellectual property-based, AIM quoted
cyber security business.
By the end of 2021, Crossword had grown revenue (including Grant
Income) by a very healthy 43%. 2022 has started positively, and the
company is confident of achieving growth of circa 75% in the coming
year. Rizikon now has over 500 organisations using the platform, we
have integrated two acquisitions and our first-class specialist
cyber security consulting team is building on its major client
relationships.
Management and staff are to be congratulated on achieving 43%
revenue growth in 2021, as the economy emerged gradually from a
very tough period. We look forward to continuing to build value for
shareholders in the year ahead.
A series of smart acquisitions
During 2021, Crossword continued to expand its product portfolio
and accelerate growth through a series of targeted acquisitions.
Crossword acquired Verifiable Credentials Limited in the first half
of the year and Stega UK Limited in the second half. The company
also signed a head of terms to acquire a cyber threat company,
Threat Status Limited, in December and the transaction completed in
March 2022.
Robust Governance
We strengthened the Group Balance Sheet in 2021 by completing
two equity fund raises, with significant shareholder support and
new investors coming on board. We completed a GBP1.6m fundraise
early in the year followed by a GBP5m raise in July. We would like
to thank our shareholders for their support as we build for the
future.
We were delighted to welcome aboard two new Board members, Dr
Robert Coles and Tara Cemlyn-Jones, at the AGM. Once again, I would
like to take this opportunity to thank Dr David Stupples and Gordon
Matthew for their invaluable contributions as they retired from the
Board.
The Board maintains a robust framework of controls and high
standards, enabling the company to adapt quickly and securely in a
way that safeguards our stakeholders longer-term interests. The
Board continues to adhere to the Quoted Companies Alliance
Corporate Governance Code (the 'QCA Code') in line with the London
Stock Exchange's requirement for all AIM listed companies to adopt
a recognised corporate governance code. The Chairman's Corporate
Governance Statement within the Annual Report provides further
details.
Significant growth in 2021, set to accelerate in 2022
The last year has been one of rapid growth once again as we
emerge from the worst of the pandemic. Crossword is well set for
faster growth in 2022. We have experienced leadership, an expert
cyber security team and a strong set of best-in-class cyber
security products and services to offer in the fast-growing cyber
security market.
Our diverse and committed team of employees has performed
remarkably during this period and I would like to acknowledge them
all. Crossword's core values of responsibility, openness,
flexibility and learning underpin everything we do and will enable
our company to accelerate in 2022 and beyond.
Sir Richard Dearlove KCMG OBE
13 April 2022
Chief Executive Officer ' s Statement
It is my pleasure, as Chief Executive Officer, to present the
Annual Report and audited accounts for Crossword Cybersecurity Plc
('Crossword' or the 'Company' or the 'Group') for the financial
year ended 31 December 2021.
Crossword grew strongly in 2021, as the economy and wider
society started to emerge from the pandemic albeit with stops and
starts along the way. Overall, the business grew by an impressive
43% through the year.
In the period under review, product and services revenue
(including Grant Income) grew by 56% over the comparative period.
The Group revenue growth of 43% includes software development
services to related party which has now discontinued. We were
particularly pleased to see consulting services recurring revenue
increase by almost 100% over the prior year.
Despite the pandemic reaching new heights and negatively
impacting the economy worldwide, the field of cyber security
experienced high demand and demonstrated its resilience with
another consecutive record year of investment in cyber security
firms. Crossword's products and services have seen a growing demand
throughout 2021 leading to another successful year of operations.
According to the UK Cyber Security Sectoral Analysis 2022, the UK
remains the largest cyber security market in Europe with a total
revenue of GBP10.15bn, which represents growth of 14% from last
year's figure (GBP8.9bn). The UK maintained its spot as the biggest
exporter of cyber services in Europe, increasing its exports from
GBP3.9bn to GBP4.24bn.
Going into 2021, after a tough period the previous year due to
the pandemic, the Executive team was determined to make solid
progress in building the business. We decided to accelerate our
growth and enhance our product portfolio through a series of
tactical acquisitions, and we successfully completed two
transactions during the year. The first was Verifiable Credentials
Limited which has been assigned intellectual property from the
University of Kent, adding its product Identiproof to our product
portfolio. Identiproof addresses the growing 'digital credentials'
market whereby tens of millions of physical certificates (such as
academic certificates, insurance documents, health certificates and
many others) will be converted into digital certificates that need
to be verified to confirm their authenticity. Identiproof was
created by Professor David Chadwick, an acknowledged expert and
co-author of the global W3C standard in the digital credentials
field, who joined Crossword's team. The second, Stega UK Limited,
the threat intelligence and monitoring company that is particularly
strong in the financial services and hedge fund sector, added
significant technical expertise, in-depth cyber threat data and
thirty new clients, bringing our revenue generating services client
base to over 100 organisations. We also signed a heads of terms for
our third acquisition, Threat Status Limited, a threat intelligence
company, that we completed in March 2022. Following the acquisition
of Threat Status Limited, products Trillion(TM) and Arc will be
incorporated into Crossword's product suite, completing our aim of
having five products in the market by the end of 2022.
Rizikon, Crossword's leading product, continued to make strong
progress as we rolled it out to a wide range of clients, driven by
our membership body programme. Our agreement to launch Rizikon to
the 10,000 Chartered Institute of Information Security members
resulted in great take-up. We also signed up a number of other
membership organisations. As a result, we ended 2021 with more than
500 organisations using Rizikon, either in trials or contracted. We
also enhanced the product by integrating Darkbeam cyber risk audits
into Rizikon. Our R&D team, who work closely with universities
on cyber risk intellectual property-based product ideas, completed
a revenue generating project with the University of Glasgow on
privacy governance software. They also completed an Innovate
UK-funded project to investigate Manufacturing Supply Chain Risk
with Liverpool John Moores University and a number of industry
partners. Concepts generated by this project will be used to
enhance Rizikon over the coming year.
Crossword's Consulting division continued to secure projects
with major FTSE, mid-market and fast-growing entrepreneurial
companies. We are particularly pleased that our consulting services
division has secured a good mix of vCISO revenue contracts, which
will deliver recurring revenue through 2022 and beyond. vCISO is a
virtual/remote CISO (Chief Information Security Officer) service,
provided by Crossword Consulting cyber security experts at a
fraction of the cost of an in-house CISO. Crossword services
recurring revenue, strengthened by the acquisition of Stega UK Ltd,
increased by almost 100% over the prior year.
Following consulting and market research projects carried out in
the region in 2020, Crossword established an Oman subsidiary, in
partnership with Al-Rawahy Holdings, a significant Omani Group with
extensive interests across the Gulf region. Our subsidiary,
Crossword Cybersecurity LLC, will be the exclusive third-party
distributor of Crossword's existing and future cyber security
products, including Rizikon. Our full range of products and
services will be made available across the region to help
organisations improve their cyber security posture.
On the corporate front, Crossword strengthened its balance
sheet, completing a GBP1.6m equity fundraise in 2021 through a
placing and subscription of Crossword Ordinary Shares at a price of
260 pence per share. In May, we competed a 10:1 share split to
support liquidity and following the share split, we raised GBP5m at
a price of 30 pence in July 2021. I was delighted with the level of
support from our existing shareholders through this period and was
very pleased to welcome several major new shareholders.
At our AGM in May 2021, we welcomed two new Board members, Dr
Robert Coles and Tara Cemlyn-Jones. Robert was lead partner for
KPMG's Information Security consulting business prior to moving
into industry where he held a number of CISO positions at large
corporations including GlaxoSmithKline. Robert previously chaired
Crossword's Advisory Board and continues to chair our consulting
business. Tara has 28 years' experience in financial services with
specialist knowledge of capital markets, M&A, strategy and
digital transformation. We would like to thank Dr David Stupples
and Gordon Matthew for their excellent contribution over the years
as they retired from the Board at the AGM.
As Crossword continues to grow and mature as an organisation, a
keen focus is kept on our wider stakeholder and social
responsibilities. Our Polish team reacted quickly to the suffering
of Ukrainians evacuating to Poland, putting a donations scheme in
place, and sharing experiences with the whole group. Crossword is
considering the BCorp accreditation, as we believe that this will
provide external parties with confidence that Crossword holds
itself to high standards in relation to stakeholders, in areas such
as governance, employees, community, environment and customers.
I want to close by thanking all those who helped Crossword
accelerate through a tricky year which ended with an excellent
result. As we look forward, 2022 looks incredibly exciting for
Crossword. We are aiming for 75% revenue growth across the Group
and with Crossword's outstanding team and our culture of
responsibility, openness, flexibility and learning, I am confident
that we will achieve our goals.
Tom Ilube
Chief Executive Officer
13 April 2022
Consolidated Statement of Comprehensive 12 Months ended 12 Months ended
Income 31st December 31st December
Notes 2021 2020
GBP GBP
Revenue 2 2,171,137 1,627,611
Cost of Sales 3 (1,957,178) (1,582,194)
Gross Profit 213,959 45,416
Administrative expenses 3,4 (3,260,139) (2,320,675)
Other operating income 6 358,727 209,647
Finance income-bank interest income
and foreign exchange 4,956 (3,205)
Finance costs-other interest expense 7 (220,545) (204,679)
Gain on revaluation of financial assets 22 456,803 -
Loss for the year before taxation (2,446,239) (2,273,497)
Tax credit / expense 9 172,615 (4,840)
Loss for the Year (2,273,624) (2,278,336)
Other Comprehensive Income
Items that may be reclassified to profit
or loss:
Foreign exchange translation Gain /
(Loss) (13,220) 9,595
---------------------- ----------------------
Other Comprehensive Income (13,220) 9,595
Total Comprehensive Loss (2,286,844) (2,268,741)
====================== ======================
Loss for the period attributable to:
Owners of the parent (2,229,296) (2,249,707)
Non-controlling interests (44,328) (28,629)
Total Loss for the Year (2,273,624) (2,278,336)
---------------------- ----------------------
Total comprehensive loss for the period
attributable to:
Owners of the parent (2,242,516) (2,240,112)
Non-controlling interests (44,328) (28,629)
Total Comprehensive Loss (2,286,844) (2,268,741)
---------------------- ----------------------
Loss Per Share (basic)* 20 (0.03) (0.05)
Loss Per Share (diluted) (0.03) (0.05)
All results are derived from continuing
operations
* 2020 Loss per share was re-stated following
share split in 2021
Statements of Financial
Position
as at 31 December Group Group Company Company
Notes 2021 2020 2021 2020
GBP GBP GBP GBP
Non-Current
Assets
Intangible assets 11 1,103,679 - 521,603 -
Tangible assets 12 5,460 70,064 - 38,392
Investments in
subsidiaries 14 - - 1,637,518 458,164
Goodwill 10 875,277 - - -
Unlisted
investment 13 456,834 31 456,834 31
Intercompany
receivable
greater
than one year - - 918,206 653,316
Total non-current
assets 2,441,250 70,095 3,534,161 1,149,902
--------------------- --------------------- --------------------- ---------------------
Current Assets
Trade and other
receivables 15 1,066,076 497,912 838,622 275,680
Cash and cash
equivalents 3,373,062 958,341 3,106,817 824,667
Total current
assets 4,439,138 1,456,253 3,945,439 1,100,347
--------------------- --------------------- --------------------- ---------------------
TOTAL ASSETS 6,880,388 1,526,348 7,479,600 2,250,249
===================== ===================== ===================== =====================
EQUITY
Attributable to
the owners
of the Company
Share Capital 19 374,786 256,605 374,786 256,605
Share premium
account 19 14,971,221 8,518,391 14,971,221 8,518,391
Other reserves 21 240,310 181,618 240,310 181,618
Retained earnings (11,827,351) (9,598,055) (10,800,700) (8,835,874)
Translation of
foreign
operations (14,992) (1,772) - -
Attributable to
owners of
the parent 3,743,974 (643,213) 4,785,617 120,740
--------------------- --------------------- --------------------- ---------------------
Non-controlling
interests (139,127) (94,799) - -
Total equity 3,604,847 (738,012) 4,785,617 120,740
--------------------- --------------------- --------------------- ---------------------
LIABILITIES
Current
Liabilities
Trade and other
payables 16 1,413,658 929,038 1,049,960 794,187
Other current
liabilities 17 1,368,638 - 1,351,471 -
Total current
liabilities 2,782,296 929,038 2,401,431 794,187
--------------------- --------------------- --------------------- ---------------------
Long Term
Liabilities
Other non-current
liabilities 18 493,245 1,335,322 292,552 1,335,322
Total long term
liabilities 493,245 1,335,322 292,552 1,335,322
--------------------- --------------------- --------------------- ---------------------
Total Liabilities 3,275,541 2,264,360 2,693,983 2,129,509
--------------------- --------------------- --------------------- ---------------------
Total Equity &
Liabilities 6,880,388 1,526,348 7,479,600 2,250,249
===================== ===================== ===================== =====================
The company's loss for the year was GBP1,964,825
(2020: GBP1,921,160).
The financial statements were approved by the Board and authorised for
issue on 13 April 2022. They were signed on its behalf by
Tom Ilube
Chief Executive
Officer
Statements of Changes in Equity
Group Share Equity Retained Translation Non-controlling
2021 Capital Share Premium Reserve Earnings Reserve interests Total
GBP
At 1st January 256,605 8,518,391 181,618 (9,598,056) (1,772) (94,799) (738,012)
Issue of
shares 118,181 6,770,954 - - - - 6,889,135
Transaction costs - (318,124) - - - - (318,124)
Employee share
schemes - value
of employee
services - - 58,692 - - - 58,692
Loss for the
period - - - (2,229,296) - (44,328) (2,273,624)
Other
comprehensive
loss for the
period - - - - (13,220) - (13,220)
At 31st December 374,786 14,971,221 240,310 (11,827,351) (14,992) (139,127) 3,604,847
--------------------- --------------------- --------------------- --------------------- --------------------- -------------------------- ---------------------
Group
2020
At 1st January 234,061 7,515,744 128,826 (7,428,818) (11,367) - 438,447
Issue of
shares 22,543 1,021,108 - - - - 1,043,651
Transaction costs - (18,461) - - - - (18,461)
Employee share
schemes - value
of employee
services - - 52,792 - - - 52,792
Transfer on issue
of shares to
non-controlling
interest - - - 66,169 - (66,169) -
Gain from issue
of shares to
non-controlling
interest - - - 14,300 - - 14,300
Loss for the
period - - - (2,249,707) - (28,629) (2,278,336)
Other
comprehensive
loss for the
period - - - 9,595 - 9,595
At 31st December 256,605 8,518,391 181,618 (9,598,056) (1,772) (94,799) (738,012)
--------------------- --------------------- --------------------- --------------------- --------------------- -------------------------- ---------------------
Company Share Equity Retained Translation Non-controlling
2021 Capital Share Premium Reserve Earnings Reserve interests Total
GBP
At 1st January 256,605 8,518,391 181,618 (8,835,874) - - 120,740
Issue of
shares 118,181 6,770,954 - - - - 6,889,135
Transaction costs - (318,124) - - - - (318,124)
Employee share
schemes - value
of employee
services - - 58,692 - - - 58,692
Loss for the
period - - - (1,964,825) - - (1,964,825)
At 31st December 374,786 14,971,221 240,310 (10,800,699) - - 4,785,617
--------------------- --------------------- --------------------- --------------------- --------------------- -------------------------- ---------------------
Company
2020
At 1st January 234,061 7,515,744 128,826 (6,914,714) - - 963,917
Issue of
shares 22,543 1,021,108 - - - - 1,043,651
Transaction costs - (18,461) - - - - (18,461)
Employee share
schemes - value
of employee
services - - 52,792 - - - 52,792
Loss for the
period - - - (1,921,160) - - (1,921,160)
At 31st December 256,605 8,518,391 181,618 (8,835,874) - - 120,740
--------------------- --------------------- --------------------- --------------------- --------------------- -------------------------- ---------------------
12 Months 12 Months 12 Months 12 Months
Statements of ended 31st ended 31st ended 31st ended 31st
Cashflows December December December December
Group Group Company Company
Years Notes 2021 2020 2021 2020
Cashflows From
Operating
Activities GBP GBP GBP GBP
Loss for the
year (2,273,624) (2,278,336) (1,964,825) (1,921,160)
Movement in trade and
other
receivables (412,005) 128,385 (837,873) 450,691
Movement in trade and
other
payables 86,231 457,260 40,374 (265,054)
Depreciation 3 66,243 10,740 38,392 7,774
Amortisation 3 37,881 139,697 9,931 98,478
Finance Costs 7 220,545 204,681 138,742 200,844
Gain on
measurement
of financial
assets 22 (456,803) - (456,803) -
Employee share
schemes 4 58,692 52,792 58,692 52,792
Tax (credit) /
expense 9 (172,615) 4,840 - -
Tax paid (5,396) (4,840) - -
Net Cashflow from
Operating
Activities (2,850,851) (1,284,780) (2,973,370) (1,375,635)
--------------------- --------------------- ---------------------- ----------------------
Cashflow From
Investing
Activities
Investment in
intangible
assets 11 (183,796) - (183,796) -
Purchase of
tangible
assets 12 - (2,001) - -
Acquisition of
subsidiaries,
net of cash
acquired 10 (645,390) - (700,000) -
Net Cashflow from
Investing
Activities (829,186) (2,001) (883,796) -
--------------------- --------------------- ---------------------- ----------------------
Cashflows From
Financing Activities
Proceeds from issue of
ordinary
shares 6,639,135 1,043,651 6,639,135 1,043,651
Share issuance
costs (318,124) (18,461) (318,124) (18,461)
Interest paid on
convertible
loan notes (168,000) (168,000) (168,000) (168,000)
Proceeds from issue of
shares
in subsidiary to
non-controlling
interests - 14,300 - -
Interest paid (1,638) (1,592) (186) (460)
(43,734) (148,536) (13,507) (108,513)
Payments for right of
use assets
Net Cash Inflow from
Financing
Activities 6,107,639 721,362 6,139,319 748,217
--------------------- --------------------- ---------------------- ----------------------
Net Increase in Cash &
Cash
Equivalents 2,427,602 (565,419) 2,282,151 (627,418)
Foreign Currency
Translation
Difference (12,881) 9,595 - -
Cash and Cash
Equivalent at
the beginning of the
period 958,341 1,514,166 824,667 1,452,085
Cash and Cash
Equivalent at
the end of the period 3,373,062 958,341 3,106,818 824,667
--------------------- --------------------- ---------------------- ----------------------
Notes to the Financial Information
1 Accounting Policies
1.1 The Group and its operations
Crossword Cybersecurity plc (the "Company") is a Company
incorporated on 6 March 2014 in England and Wales under the
Companies Act 2006. The Company is the parent company of the
Crossword Group of Companies focusing on the cybersecurity sector.
The principal activities are the development and commercialisation
of university research-based cyber security related software and
cybersecurity consulting.
The financial information includes the results of the Company
and its subsidiaries (together referred to as the "Group" and
individually as "Group entities").
The principal accounting policies applied in the preparation of
the financial information are set out below. These policies have
been consistently applied to all the periods presented, unless
otherwise stated.
1.2 Basis of preparation of financial information
The financial information has been prepared in accordance with
the requirements of the London Stock Exchange plc AIM Rules for
Companies and in accordance with International Financial Reporting
Standards as adopted in the United Kingdom ("UK adopted IFRS") and
those parts of the Companies Act 2006 applicable to companies
reporting in accordance with UK adopted IFRS.
The financial information has been prepared on the historical
cost basis. The preparation of financial information in conformity
with UK adopted IFRS requires the use of certain critical
accounting estimates. It also requires management to exercise its
judgement in the process of applying the Group's accounting
policies. Changes in assumptions may have a significant impact on
the financial information in the year the assumptions changed.
Management believes that the underlying assumptions are
appropriate. The areas involving a higher degree of judgement or
complexity, or areas where assumptions and estimates are
significant to the financial information are disclosed in note
1.21.
Changes in accounting policy and disclosures
There were no changes in the accounting policy and disclosures
in the current financial year.
At the year end, the following standards and interpretations
which have not been applied in these financial statements were in
issue but not yet effective. The group is considering their impact
but do not expect a material on the future results of the
Group.
New standards, interpretations and amendments adopted in current
period
The following new standards or amendments to existing standards
were applicable for the first time and have not had an impact on
the financial statements.
Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16
Interest Rate Benchmark Reform - Phase 2 (issued in August
2020)
The amendments are aimed at helping companies to provide
investors with useful information about the effects of the reform
of interest rate benchmarks on those companies' financial
statements.
The amendments complement those issued in 2019 and focus on the
effects on financial statements when a company replaces the old
interest rate benchmark with an alternative benchmark rate as a
result of the reform. The Phase 2 amendments relate to:
-- changes to contractual cash flows -a company will not have to
derecognise or adjust the carrying amount of financial instruments
for changes required by the reform, but will instead update the
effective interest rate to reflect the change to the alternative
benchmark rate;
-- hedge accounting -a company will not have to discontinue its
hedge accounting solely because it makes changes required by the
reform, if the hedge meets other hedge accounting criteria; and
-- disclosures -a company is required to disclose information
about new risks arising from the reform and how it manages the
transition to alternative benchmark rates.
The Group has not had a material impact on its consolidated
financial statements from these amendments.
New standards, interpretations and amendments not yet
adopted
The Group adopt early the following amendments to standards
which are not yet mandatory.
IFRS 17 Insurance Contracts (including the June 2020 Amendments
to IFRS 17, effective from 1 January 2023)
Amendments to IFRS 3 Business Combinations - Reference to the
Conceptual Framework (effective from 1 January 2022)
Amendments to IAS 16 Property, Plant and Equipment - Proceeds
before Intended Use (effective from 1 January 2022).
Amendments to IAS 8 Accounting Policies, Changes in Accounting
Estimates and Errors - Definition of Accounting Estimates
(effective 1 January 2023).
Amendments to IAS 1 Presentation of Financial Statements and
IFRS Practice Statement 2: Disclosure of Accounting policies
(effective 1 January 2023).
Amendments to IAS 12 Income Taxes - Deferred Tax related to
Assets and Liabilities arising from a Single Transaction (effective
1 January 2023).
Amendments to IAS 1 Presentation of Financial Statements -
Classification of Liabilities as Current or Non-current (effective
1 January 2024).
1.3 Going Concern
The financial information has been prepared on a going concern
basis. The Group's business model has been enhanced following the
two acquisitions in 2021 and a further acquisition in early 2022.
The Group's operations have incurred a loss in the financial year
whilst the Group's products and services continue to be enhanced,
developed and brought to market. The Directors forecast in 2022
show a trading loss with net cash outflows as the business
continues to develop and enhance its products and services and
grows revenue. In 2021, the Groups operations have been supported
by cash inflows from customers and from the issue of GBP6.3m equity
net of costs during 2021.
The Directors have considered the Group's future and forecast
business and cash requirements. Following the completion of
successful fundraises in 2021, the Directors have determined that
the group wants to continue to expand, potentially through future
acquisitions, which will require a further fund raise in 2022.
In December 2022, the GBP1.4m convertible loan notes mature and
will either be converted to equity, repaid, or re-negotiated. The
outcome of the settlement of the convertible loan notes is
uncertain but may require further finance for repayment of the
debt.
Whilst the Group has GBP3.4m as cash and cash equivalent at 31
December 2021, on 14 March 2022, the Group acquired another
acquisition for a total consideration of GBP1.5m.
The Directors have concluded that these circumstances could give
rise to a material uncertainty arising from events or conditions
that may cast significant doubt on the entity's ability to continue
as a going concern if a further fund raise was unsuccessful.
However, considering recent successful fund raises the Directors
are confident that they can continue to adopt the going concern
basis in preparing the financial statements.
The financial statements do not include any adjustment that may
arise in the event that the Group is unable to raise finance,
realise its assets and discharge its liabilities in the normal
course of business.
1.4 Basis of consolidation
Subsidiaries are fully consolidated from the date on which
control is transferred to the Group. Control exists when then the
Group has:
- the power over the investee;
- exposure, or rights, to variable returns from its involvement
with the investee;
- the ability to use its power over the investee to affect the
amount of the investor's returns.
All intra-Group transactions balances income and expenses are
eliminated on consolidation. Uniform accounting policies are
applied by the Group entities to ensure consistency.
1.5 Revenue
Revenue comprises the fair value of consideration received or
receivable for licence income and the rendering of services in the
ordinary course of the Group's activities. Revenue is shown net of
value added tax and trade discounts. Income is reported as
follows:
(a) Licence income
Technology and product licensing revenue represents amounts
earned for licenses granted under licensing agreements and
recognized over time . Revenues relating to up-front payments are
recognised when the obligations related to the revenues have been
completed.
Revenues for maintenance and support services are recognised in
the accounting periods in which the services are rendered.
(b) Rendering of Services
Services relate to implementation and deployment fees for the
technology and products licensed to customers. Revenue is
recognised in the accounting periods in which the services are
rendered.
(c) Consulting
Consulting revenue is recognised when the performance obligation
is met, primarily at a point of time. Contracts are structured to
support the revenue recognition process by stating what the
objectives and deliverables are for each part of the project, and
the revenue attributable to each deliverable.
1.6 Functional and presentation currency
The presentation currency of the Group is pounds sterling (GBP).
The functional currency of the Company is pounds sterling. The
functional currency of the Company's polish subsidiary is Polish
Zloty (PLN).
1.7 Business combinations
The acquisition of subsidiaries is accounted for using the
acquisition method. The cost of the acquisition is measured as the
aggregate of the fair values, at the date of exchange, of assets
given, liabilities incurred or assumed, and equity instruments
issued by the Group in exchange for control of the acquiree.
Acquisition related costs are recognised in the income statement as
incurred.
Any contingent consideration to be transferred by the Group is
recognised at fair value at the acquisition date. Subsequent
changes to the fair value of the contingent consideration that is
deemed to be an asset or liability is recognised in the
consolidated income statement. Contingent consideration that is
classified as equity is not remeasured, and its subsequent
settlement is accounted for within equity.
Goodwill arising on acquisition is recognised as an asset and
initially measured at cost, being the excess of the cost of the
business combination over the Group's interest in the net fair
value of the identifiable assets, liabilities and contingent
liabilities recognised. For the purpose of impairment testing,
goodwill acquired in a business combination is, from the
acquisition date, allocated to the cash generating unit ("CGU")
that is expected to benefit from the synergies of the combination.
CGU to which goodwill has been allocated is tested for impairment
annually, or more frequently when there is an indication that the
unit may be impaired. Any impairment loss is recognised directly in
the income statement.
1.8 Foreign operations
The assets and liabilities of foreign operations are translated
into Pound sterling using the exchange rates at the reporting date.
The revenues and expenses of foreign operations are translated into
Pound sterling using the average exchange rates, which approximate
the rates at the dates of the transactions, for the period.
All resulting foreign exchange differences are recognised in
other comprehensive income through the foreign currency reserve in
equity.
On disposal of a foreign operation, the cumulative exchange
differences recognised in the foreign exchange reserve relating to
that operation up to the date of disposal are transferred to the
consolidated statement of comprehensive income as part of the
profit or loss on disposal.
1.9 Intangible assets - research and development
Expenditure on research is written off in the period in which it
is incurred.
Development expenditure incurred on specific projects is
capitalised where the management is satisfied that the following
criteria have been met:
-- it is technically feasible to complete the software product
so that it will be available for use;
-- management intends to complete the software product and use or sell it;
-- there is an ability to use or sell the software product;
-- it can be demonstrated how the software product will generate
probable future economic benefits;
-- adequate technical, financial and other resources to complete
the development and to use or sell the software product are
available; and
-- the expenditure attributable to the software product during
its development can be reliably measured.
Directly attributable costs that are capitalised as part of the
software product include the software development employee costs
and an appropriate portion of relevant overheads.
Other development expenditure that does not meet these criteria
is recognised as an expense as incurred.
1.10 Property, plant and equipment
Property, plant and equipment is stated at purchase price less
accumulated depreciation and impairment losses. The cost includes
all expenses directly related to the purchase of a relevant
asset.
All other repair and maintenance costs are charged to the income
statement for the period during the reporting period in which they
are incurred.
1.11 Depreciation and amortisation
Each item of property, plant and equipment is depreciated using
the straight- line method over the estimated useful life and
depreciation charge is included in the income statement for the
period.
The depreciation is charged to the income statement for the
period and determined using the straight- line method over the
estimated useful life of the item of property, plant and
equipment.
The expected useful lives of property, plant and equipment in
the reporting and comparative periods are as follows: Useful lives
in years
Computers 3.33
Furniture & fittings 3.33
Computer software development expenditure recognised as assets
is amortised on a straight-line basis over their estimated useful
lives, which does not exceed 5 years.
1.12 Impairment of non-financial assets
The residual value of an asset is the estimated amount that the
Group would currently obtain from disposal of the asset less the
estimated costs of disposal, if the asset was already of the age
and in the condition expected at the end of its physical life.
The assets' residual values and useful lives are reviewed, and
adjusted if appropriate, at each reporting date.
At the end of each reporting period management assesses whether
the indicators of impairment of property, plant and equipment
exists.
The carrying amounts of property, plant and equipment and all
other non-financial assets are reviewed for impairment if there is
any indication that the carrying amount may not be recoverable.
For the purpose of impairment testing the recoverable amount is
measured by reference to the higher of value in use (being the net
present value of expected future cashflows of a relevant cash
generating unit) and fair value less costs to sell (the amount
obtainable from the sale of an asset or cash generating unit in an
arm's length transaction between knowledgeable, willing parties who
are independent from each other less the costs of disposal).
Where there is no binding sale agreement or active market, fair
value less costs to sell is based on the best information available
to reflect the amount the Group would
receive for the cash generating unit.
A cash generating unit is the smallest identifiable group of
assets that generates cash inflows that are largely independent of
the cash inflows from other assets or groups of assets.
If the carrying amount of the asset exceeds its recoverable
amount, the asset is impaired and an impairment loss is charged to
the income statement so as to reduce the carrying amount in the
statement of financial position to its recoverable amount.
A previously recognised impairment loss is reversed if the
recoverable amount increases as a result of a reversal of the
conditions that originally resulted in the impairment.
This reversal is recognised in profit or loss for the period and
is limited to the carrying amount that would have been determined,
net of depreciation, had no impairment loss been recognised in
prior years.
1.13 Financial Instruments
Financial assets and financial liabilities are recognised when
the Company becomes a party to the contractual provisions of the
instrument.
Financial assets and financial liabilities are initially
measured at fair value. Transaction costs that are directly
attributable to the acquisition or issue of financial assets and
financial liabilities (other than financial assets and financial
liabilities at fair value through profit or loss) are added to or
deducted from the fair value of the financial assets or financial
liabilities, as appropriate, on initial recognition. Transaction
costs directly attributable to the acquisition of financial assets
or financial liabilities at fair value through profit or loss are
recognised immediately in profit or loss .
All financial instruments are classified in accordance with the
principles of IFRS 9 Financial Instruments.
1.13 a Financial assets
Classification of financial assets
Debt instruments that meet the following conditions are
subsequently measured at amortised cost:
-- the financial asset is held within a business model whose
objective is to hold financial assets in
order to collect contractual cash flows; and
-- the contractual terms of the financial asset give rise on
specified dates to cash flows that are
solely payments of principal and interest on the principal amount outstanding.
Debt instruments that meet the following conditions are
subsequently measured at FVTOCI:
-- the financial asset is held within a business model whose
objective is achieved by both collecting
contractual cash flows and selling the financial assets; and
-- the contractual terms of the financial asset give rise on
specified dates to cash flows that are
solely payments of principal and interest on the principal amount outstanding.
By default, all other financial assets are subsequently measured
at FVTPL.
Amortised cost and effective interest method
The effective interest method is a method of calculating the
amortised cost of a debt instrument and of allocating interest
income over the relevant period.
For financial instruments other than purchased or originated
credit-impaired financial assets, the effective interest rate is
the rate that exactly discounts estimated future cash receipts
(including all fees and points paid or received that form an
integral part of the effective interest rate, transaction costs and
other premiums or discounts) excluding expected credit losses,
through the expected life of the debt instrument, or, where
appropriate, a shorter period to the gross carrying amount of the
debt instrument on initial recognition. For purchased or originated
credit-impaired financial assets, a credit-adjusted effective
interest rate is calculated by discounting the estimated future
cash flows, including expected credit losses, to the
amortised cost of the debt instrument on initial recognition.
The amortised cost of a financial asset is the amount at which
the financial asset is measured at initial recognition minus the
principal repayments, plus the cumulative amortisation using the
effective interest method of any difference between that initial
amount and the maturity amount, adjusted for any loss allowance. On
the other hand, the gross carrying amount of a financial asset is
the amortised cost of a financial asset
before adjusting for any loss allowance.
Impairment of financial assets
The Company recognises a loss allowance for expected credit
losses on financial assets that are measured at amortised cost. The
amount of expected credit losses is updated at each reporting date
to reflect changes in credit risk since initial recognition of the
respective financial instrument.
Expected credit loss measurement
The consolidated entity has applied the simplified approach to
measuring expected credit losses, which uses a lifetime expected
loss allowance. To measure the expected credit losses, trade
receivables have been grouped based on days overdue.
1.13 b Financial liabilities and equity
Debt and equity instruments are classified as either financial
liabilities or as equity in accordance with the substance of the
contractual arrangement.
Equity instruments
An equity instrument is any contract that evidences a residual
interest in the assets of an entity after deducting all of its
liabilities. Equity instruments issued by the Company entity are
recognised at the proceeds received, net of direct issue costs.
Financial liabilities
All financial liabilities are subsequently measured at amortised
cost using the effective interest method or at "Fair Value Through
Profit or Loss" ("FVTPL").
Financial liabilities at FVTPL
Financial liabilities are classified as at FVTPL when the
financial liability is contingent consideration of an acquirer in a
business combination to which IFRS 3 applies, or it is designated
as at FVTPL.
Financial liabilities subsequently measured at amortised
cost
Financial liabilities that are not 1) contingent consideration
of an acquirer in a business combination, 2) held-for-trading, or
3) designated as at FVTPL, are subsequently measured at amortised
cost using the effective interest method.
The effective interest method is a method of calculating the
amortised cost of a financial liability and of allocating interest
expense over the relevant period. The effective interest rate is
the rate that exactly discounts estimated future cash payments
(including all fees and points paid or received that form an
integral part of the effective interest rate, transaction costs and
other premiums or discounts) through the expected life of the
financial liability, or (where appropriate) a shorter period, to
the amortised cost of a financial liability.
Derecognition of financial liabilities
The Company derecognises financial liabilities when, and only
when, the Company's obligations are discharged, cancelled or they
expire. The difference between the carrying amount of the financial
liability derecognised and the consideration paid and payable,
including any non-cash assets transferred or liabilities assumed,
is recognised in the statement of comprehensive income.
1.14 Leases
The Company assesses whether a contract is or contains a lease,
at inception of the contract. The Company recognises a right-of-use
asset and a corresponding lease liability with respect to all lease
arrangements in which it is the lessee, except for short-term
leases (defined as leases with a lease term of 12 months or less)
and leases of low value assets. For these leases, the Company
recognises the lease payments as an administrative expense on a
straight-line basis over the term of the lease.
1.15 Taxes
Current tax is calculated using rates and laws enacted or
substantively enacted at the reporting date. Current tax is
recognised in profit or loss unless it relates to an item of other
comprehensive income or equity whereby it is recognised in other
comprehensive income or equity respectively.
Deferred income tax is calculated using rates and laws enacted
or substantively enacted at the reporting date that are expected to
apply on reversal of the related temporary difference, and is
determined in accordance with the expected manner of recovery of
the related asset.
Deferred income tax is recognised in profit or loss unless it
relates to an item of other comprehensive income or equity whereby
it is recognised in other comprehensive income or equity
respectively.
1.16 Share Based Payments
On occasion, the Company has made share-based payments to
certain Directors and employees by way of issue of share options.
The fair value of these payments is calculated by the Company using
the binomial option valuation model and Monte Carlo simulation
model.
The expense, where material, is recognised on a straight-line
basis over the period from the date of award to the date of
vesting, based on the Company's best estimate of the number of
shares that will eventually vest.
1.16 Investments
Shares in subsidiary undertakings are stated at cost less
provision for impairment. Unlisted investments are measured at fair
value through profit or loss.
1.17 Intercompany Financing arrangements
The amortised cost methodology is applied to the financing
arrangement between the Company and subsidiary Crossword Consulting
Limited. An assessment in undertaken to determine the market rate
of interest for a similar loan given the credit rating of the
subsidiary to apply discounting with the principal conceptually
including a financing element.
1.18 Pension Obligations
The Group operates a defined contribution pension scheme for
employees in the United Kingdom. A defined contribution scheme is a
pension plan under which the Group pays fixed contributions into a
separate entity.
Contributions payable to the Group's pension scheme are charged
to the income statement in the year to which they relate. The Group
has no further payment obligations once the contributions have been
paid.
In Poland, the Group pays the statutory employer's contribution
into the public pension scheme for each employee, but does not
operate any pension schemes. In 2021, the Group implemented the
Employee Capital Plans (PPK) programme which involved employee
consultation and selection of a financial institution.
1.19 Cash and Cash Equivalents
Cash comprises cash-in-hand and demand deposits. Cash
equivalents are short-term, highly liquid investments that are
readily convertible to known amounts of cash, and which are subject
to an insignificant risk of change in value.
1.20 Accounting for Government Grants
Government grants are not recognised until there is reasonable
assurance that the Group will comply with the conditions attached
to them and that the grants will be received.
Government grants are recognised as income over the periods
necessary to match them with the costs for which they are intended
to compensate, on a systematic basis. Government grants that are
receivable as compensation for expenses or losses already incurred
or for the purpose of giving immediate financial support to the
Group with no future related costs are recognised in the income
statement in the period in which they become receivable.
UK Government Furlough Funding is netted of against Gross Staff
Costs in the period in which it is incurred, while all other grants
recognised as income are presented within Other Operating
Income.
1.21 Critical accounting estimates and judgements and key sources of estimation uncertainty
Estimates and judgements are continually evaluated and are based
on experience and other factors, including expectations of future
events that are believed to be reasonable under the
circumstances.
The following are the key estimates that the directors have made
in the process of applying the Group's accounting policies and have
the most significant effect on the amounts recognised in the
financial information. There are no further critical accounting
judgements.
Fair value of options granted to employee
The Group uses the Binomial model and Monte Carlo simulation
model in determining the fair value of options granted to employees
under the Group's various share schemes. The determination of the
fair value of options requires a number of assumptions. The
alteration of these assumptions may impact charges to the income
statement over the vesting period of the award. Details of the
assumptions used are shown in note 4.
Convertible Loans
The Group has given consideration to the measurement and
presentation of the convertible loans.
On legal execution of the loans the financial liability is
initially measured at its fair value which is the face value of the
loans. Immediately after recognition, at fair value, the financial
liability is measured at amortised cost, using a reasonable
estimate of the Group's cost of capital. The difference between the
fair value and the amortised cost is taken to the P&L
account.
Impairment
An impairment assessment of the carrying value in the Company of
the investment in subsidiaries is undertaken using an NPV model
over the projected cash flows, with a discount rate based on the
assessment of weighted average cost of capital.
Business combinations
The recognition of business combinations requires management to
make estimates in order to determine fair value of consideration
payable on acquisition as well as fair value of identifiable
assets, particularly intangibles, and liabilities acquired. These
estimates are based on all available information and in some cases
assumptions with respect to the timing and amount of future
revenues and expenses associated with an asset.
Deferred tax
Deferred tax assets are recognised for unused tax losses to the
extent that it is probable that taxable profit will be available
against which the losses can be utilised. Significant management
judgement is required to determine the amount of deferred tax
assets that can be recognised, based upon the likely timing and the
level of future taxable profits, together with future tax planning
strategies. The company has taxable temporary differences that
partly support the recognition of the losses as deferred tax assets
based on the above. The company has determined that it cannot
recognise deferred tax assets on all of the tax losses carried
forward however, based on the likely characteristics, timing and
level of future taxable profits, together with future tax planning
strategies. Further details on taxes are disclosed in note 9.
2 Revenue and segmental information
An analysis of the Group's revenue for each period for its
continuing operations, is as follows:
GBP Group 2021 Group 2020
Revenue from the sale of goods/licences 189,252 136,206
Revenue from the rendering of services 183,855 34,675
Revenue from Consulting 1,660,207 1,229,000
Revenue from Byzgen Limited for software development 137,823 203,030
Revenue from Cyberowl Limited for software development - 24,700
Total Revenue 2,171,137 1,627,611
===================== ===========
The IFRS 8 Operating segments requires the Group to determine
its operating segments based on information which is provided
internally. Based on the internal reporting information and
management structures within the Group, it has been determined that
there are two operating segments established in accordance to
differences in products and services provided - Software product
and services and Cybersecurity consulting.
These operating segments are based on the internal reports that
are reviewed and used by the Board of Directors (who are identified
as the Chief Operating Decision Makers ('CODM')) in assessing
performance and in determining the allocation of resources. There
is no aggregation of operating segments.
The CODM reviews EBITDA (earnings before interest, tax,
depreciation and amortisation). The accounting policies adopted for
internal reporting to the CODM are consistent with those adopted in
the financial statements. The information regarding the Group's
reportable segments is presented below:
2021 Software product and Cybersecurity Eliminations Total
services consulting
GBP
Revenue 462,108 1,784,309 (75,280) 2,171,137
Cost of Sales (358,333) (1,598,845) - (1,957,178)
Gross Profit 103,775 185,464 (75,280) 213,959
Administrative
expenses (2,703,009) (632,410) 75,280 (3,260,139)
Other operating income 358,727 - - 358,727
Financial income and
expenses 323,725 (82,512) - 241,213
Loss for the year
before taxation (1,916,782) (529,457) - (2,446,239)
Tax credit / (expense) 172,615 - - 172,615
Loss for the Year (1,744,167) (529,457) - (2,273,624)
Total Comprehensive
Loss (1,757,387) (529,457) - (2,286,844)
Segment assets 8,178,282 1,029,509 (2,327,403) 6,880,388
Segment liabilities 2,924,439 1,762,053 (1,410,951) 3,275,541
EBITDA (2,168,462) (414,866) - (2,583,328)
2020
Revenue 553,946 1,285,293 (211,629) 1,627,611
Cost of Sales (483,580) (1,098,615) - (1,582,194)
Gross Profit 70,366 186,679 (211,629) 45,416
Administrative
expenses (2,060,206) (472,097) 211,628 (2,320,675)
Other operating income 209,647 - - 209,647
Financial income and
expenses (102,818) (105,067) - (207,885)
Loss for the year
before taxation (1,883,011) (390,486) - (2,273,497)
Tax expense (4,840) - - (4,840)
Loss for the Year (1,887,850) (390,486) - (2,278,336)
Total Comprehensive
Loss (1,878,256) (390,486) - (2,268,741)
Segment assets 2,480,051 375,437 (1,329,141) 1,526,348
Segment liabilities 2,129,509 1,340,505 (1,205,654) 2,264,360
EBITDA (1,625,501) (284,918) - (1,910,419)
During the year ended 31 December 2021 approximately 17% (2020:
32%) of the consolidated entity's external revenue was derived from
sales to a major United Kingdom client. No other clients accounted
for 10% or more of the consolidated entity's external revenue.
No analysis of net assets by geographic segment is provided as
the net assets are principally all within the UK.
3 Expenses by nature
Expenses By Nature
GBP Group 2021 Group 2020
Staff and related costs 3,305,430 2,643,670
Consultancy and related costs 450,028 280,917
Professional fees 616,791 268,567
Property related costs 172,823 82,776
Depreciation 66,243 150,437
Amortisation 37,881 -
Capitalised costs (138,067) -
Other expenses 706,188 476,502
Total cost of sales and administrative expenses 5,217,317 3,902,870
=================== =====================
Expenses by geographic location
GBP Group 2021 Group 2020
UK 4,695,737 3,410,235
Poland 521,580 492,635
Total cost of sales and administrative expenses 5,217,317 3,902,870
=================== =====================
4 Staff Costs
Staff costs, including directors' remuneration, were as
follows:
GBP Group 2021 Group 2020 Company 2021 Company 2020
Wages and salaries 2,924,357 2,454,980 1,321,393 1,150,153
Furlough receipts for
wages and salary - (93,510) - (36,218)
Social security costs 327,012 243,642 142,103 119,755
Furlough receipts for
social security costs - (6,363) - (2,430)
Other pension costs 54,061 46,509 37,003 31,470
Furlough receipts for
pension costs - (1,588) - (625)
--------------------- --------------------- --------------------- ----------------------
3,305,430 2,643,670 1,500,499 1,262,106
===================== ===================== ===================== ======================
The average monthly number of employees, including the
directors, during the period was as follows:
Group 2021 Group 2020 Company 2021 Company 2020
Staff 42 34 17 13
Directors 9 10 8 8
Total 51 44 25 21
=========== =========== ============= =============
Share based payments
The amount recognised in respect of share-based payments was
GBP58,692 (2020: GBP52,792).
The Group has established share option programmes that entitle
certain employees to purchase shares in the Group.
There are no performance conditions attaching to these options.
5,840 options were exercised in 2021 (133,330 in 2020).
Total options issued as at 31 December 2021 amount to 2,348,653
(2020: 2,065,730, re-stated for share split).
"The share options have been valued using a binomial model
applying the following inputs:
-- Exercise price - equal to the share price at grant date,
-- Vesting date - all options vest in three tranches, on the
first, second and third anniversary from the grant date;
-- Expiry/Exercise date - 10 years from the grant date;
-- Volatility (sigma) - 40%. This has been calculated based on
the historic volatility of the Company's share price.
-- Risk free rate - yield on a zero coupon government security
at each grant date with a life congruent with the expected option
life;
-- Dividend yield - 0%,
-- Future staff turnover - 0%. We have however adjusted the P+L
charge for the current year (and future years) to account for
lapsed options due to Leavers; and
-- Performance conditions - none."
Reconciliation of share options - Company
Weighted average Weighted average
exercise price exercise price
2021 2021 2020 2020
GBP GBP
1st January 2,065,730 0.36 1,888,890 0.26
Granted during the
period 352,923 0.36 496,840 0.70
Lapsed during the period (64,160) 0.36 (186,670) 0.31
Exercised during the
period (5,840) 0.28 (133,330) 0.28
------------------ ------------------------ -------------------
End of the period 2,348,653 0.36 2,065,730 0.36
------------------ ------------------------ -------------------
The 2020 numbers and 2021 opening have been re-stated for share
split (note 19).
The weighted average share Price at the exercise date was
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
(2020: 6.7 years).
5 Directors' Remuneration
The remuneration of the Directors who served in the current year
was as follows:
2021 Basic Salary and Employer's Pension
GBP Fees Bonus Taxable Benefits Contribution Total
--------------- -------------------- --------------------- -------------------- -------------------- ------------------
Executive
Directors
Tom Ilube 128,311 3,942 1,318 133,572
Mary Dowd* 130,000 10,000 140,000
---------------- -------------------- --------------------- -------------------- -------------------- ------------------
-
Non-Executive
Directors -
Sir Richard
Dearlove 25,000 25,000 50,000
Ruth Anderson 12,000 12,000
Andy Gueritz 16,000 16,000
Gordon Matthew 6,000 6,000
Dr David Secher 16,000 16,000
Prof David
Stupples 4,750 4,750
Robert Coles 7,250 7,250
Tara
Cemlyn-Jones 7,231 7,231
Total 352,541 - 28,942 11,318 392,801
---------------- -------------------- --------------------- -------------------- -------------------- ------------------
2020
GBP
--------------- -------------------- --------------------- -------------------- -------------------- ------------------
Executive
Directors
Tom Ilube 126,622 3,689 1,314 131,625
Mary Dowd* 130,000 10,000 140,000
---------------- -------------------- --------------------- -------------------- -------------------- ------------------
-
Non-Executive
Directors -
Sir Richard
Dearlove 25,000 25,000 50,000
Ruth Anderson 12,000 12,000
Andy Gueritz 16,000 16,000
Gordon Matthew 12,000 12,000
Dr David Secher 16,000 16,000
Prof David
Stupples 12,000 12,000
Total 349,622 - 28,690 11,314 389,625
---------------- -------------------- --------------------- -------------------- -------------------- ------------------
* Denotes highest paid director
Share Options issued
Year Share Options Exercise Price Total Value
--------------------- ----- ------------------- --------------- ------------
Mary Dowd 2020 25,000 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
----- ------------------- --------------- ------------
During the year the Company implemented a Long Term Incentive
Plan (LTIP) whereas awards have been made to the following
executives - Mary Dowd, Stuart Jubb, Jake Holloway and Sean
Arrowsmith. Each award is of nominal cost (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 2021 Group 2020
GBP GBP
Research & development tax credits 206,380 209,647
Grant Income 152,347 -
358,727 209,647
----------- ---------------------
The grant income represents award from Innovate UK for Group's
participation in feasibility studies on digital supply chain.
7 Finance Costs
Group 2021 Group 2020
GBP GBP
Finance Cost of Financial Liabilities (Loan Notes) 184,149 196,546
Interest on deferred and contingent considerations 34,978 -
Company right to use assets Interest 187 4,298
Crossword Cybersecurity sp z.o.o. right to use assets interest 452 2,705
Crossword Consulting Ltd Overdraft Annual Fees & Interest 735 876
Crossword Cybersecurity Spolka z.o.o Interest 44 256
220,545 204,679
----------- ---------------------
8 Auditor's Remuneration
The expenses for services rendered by the Group auditor present
themselves as follows:
GBP Group 2021 Group 2020
Fees for the parent company individual and consolidated financial
statements 46,000 40,250
Fees for legal audit of subsidiary financial information 17,000 6,204
Fees for tax advisory services - 6,000
63,000 52,454
--------------------- --------------------
9 Tax
GBP Group 2021 Group 2020
Current income tax expense 5,396 4,840
Deferred tax credit (178,011) -
Total tax (credit) / expense (172,615) 4,840
=================== =====================
There is no tax charge in respect of other comprehensive
income.
The deferred tax liability arising on fair value revaluation on
acquisitions of Verifiable Credentials Ltd and Stega UK Ltd (note
10) has been offset with a deferred tax asset recognised in respect
of losses brought forward from prior periods, resulting in deferred
tax credit to the statement of comprehensive income.
There is a deferred tax liability of 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 GBP4,800,000 (2020:
GBP4,400,000).
GBP Group 2021 Group 2020
Loss before taxation 2,446,239 2,273,497
Average rate of corporation tax 19.00% 19.00%
Tax on loss (464,785) (431,964)
Effects of:
Expenses not deductible for tax purposes 24,578 17,640
Depreciation for the period in excess of capital allowances 104,124 150,437
Trading loss carried forward 508,699 259,047
Total tax charge 172,615 (4,840)
=================== =====================
Factors that may affect future tax changes
The rate of corporation tax in the United Kingdom had been
expected to reduce from 19% to 17% per cent from 1 April 2020.
However in March 2020 it was announced that the rate would continue
at 19%. In March 2021 it was announced that UK corporation tax
rates would rise to 25% from 2023.
Polish Corporation Tax has been 19% until 1 January 2017, when
Crossword started to benefit from the new small companies reduced
rate of 15% adopted by the Parliament Act amendment to Polish CIT
Law.
10 Business Combinations
On 26 May 2021 the Group acquired 100% of the issued share
capital of Verifiable Credentials Ltd ("VCL"), the provider of
Identiproof, the World Wide Web Consortium verifiable credentials
compatible middleware and wallet technology.
The net consideration used in the acquisition of VCL and the
provisional fair value of assets acquired and liabilities assumed
on the acquisition date are detailed below:
GBP Book value Adjustment Fair value
Intangible assets 127,306 477,728 605,034
Tangible assets 1,098 1,098
Non-current assets 128,404 477,728 606,132
--------------------- -------------------------- ---------------------
Trade and other receivables 69,538 - 69,538
Cash and cash equivalents 37,684 - 37,684
Current assets 107,222 - 107,222
--------------------- -------------------------- ---------------------
Other non-current liabilities 135,953 - 135,953
Deferred tax liability - 95,545 95,545
Non-current liabilities 135,953 95,545 231,498
--------------------- -------------------------- ---------------------
Trade and other payables 101,421 - 101,421
Current liabilities 101,421 - 101,421
--------------------- -------------------------- ---------------------
Total fair value of net assets acquired (1,748) 382,183 380,435
--------------------- -------------------------- ---------------------
Fair value of consideration
Cash on completion 100,000
Shares at acquisition date 150,000
Deferred consideration in shares 130,435
Total consideration 380,435
---------------------
Goodwill -
---------------------
Acquisition costs of GBP17,345 arose as a result of the
transaction, which have been recognised as part of administrative
expenses in the statement of comprehensive income.
The Share Purchase Agreement stipulates that contingent
consideration becomes payable once certain revenue targets are
achieved, this can range from 0 to GBP750k for the first earn-out
period (12 months after acquisition) and from 0 to GBP1.5m for the
second earn-out period (24 months after acquisition). The
management estimates that it is unlikely that the company will
achieve the revenue necessary to trigger earn-out payments for both
periods, hence no contingent consideration has been recorded. The
company did not generate any revenue in 2021.
On 9 August 2021 the Group acquired 100% of the issued share
capital of Stega UK Ltd ("Stega"), the threat intelligence and
monitoring company.
The net consideration used in the acquisition of Stega and the
provisional fair value of assets acquired and liabilities assumed
on the acquisition date are detailed below:
GBP Book value Adjustment Fair value
Intangible assets - 354,301 354,301
Tangible assets 30,509 (24,437) 6,072
Non-current assets 30,509 329,864 360,373
--------------------- ----------------------- --------------------
Trade and other receivables 86,619 - 86,619
Cash and cash equivalents 16,927 - 16,927
Current assets 103,546 - 103,546
--------------------- ----------------------- --------------------
Bank loans 68,000 - 68,000
Deferred tax liability - 82,466 82,466
Non-current liabilities 68,000 82,466 150,466
--------------------- ----------------------- --------------------
Trade and other payables 82,990 - 82,990
Current liabilities 17,000 - 17,000
Current liabilities 99,990 - 99,990
--------------------- ----------------------- --------------------
Total fair value of net assets acquired (33,935) 247,398 213,463
--------------------- ----------------------- --------------------
Fair value of consideration
Cash on completion 600,000
Shares at acquisition date 100,000
Deferred consideration in cash 134,435
Deferred consideration in shares 84,022
Contingent consideration in cash 119,604
Contingent consideration in shares 50,679
Total consideration 1,088,740
--------------------
Goodwill 875,277
--------------------
The goodwill relates mainly to the expected synergies and
assembled workforce that do not meet criteria for recognition as a
separate intangible assets.
The acquisition terms include additional consideration which is
contingent upon achieving certain revenue targets. The contingent
consideration ranges from 0 to GBP420k for the first earn-out
period (12 months after acquisition) and from 0 to GBP420k for the
second earn-out period (18 months after acquisition).
The Group has recorded the contingent consideration at
management's estimate of fair value. For the specific purpose of
estimating the fair value of the contingent liability, management
assumes that Stega UK Ltd will achieve revenue target in the second
earn-out period, that the contingent consideration will
consequently become payable, and that the timing and the amount of
the resulting cash outflows will be consistent with the terms
outlined in the agreement with the seller.
Acquisition costs of GBP17,780 relating to this transaction have
been recognised as part of administrative expenses in the statement
of comprehensive income.
Since the acquisition date, Stega has contributed GBP210,650 to
group revenues and GBP93,177 to group loss. If the acquisition had
occurred on 1 January 2021, group revenue would have been
GBP2,500,250 and group loss for the period would have been
GBP2,535,237.
These two acquisitions help to implement Group's strategy to
create a portfolio of subscription-based, enterprise-class products
and services for its clients.
11 Intangible Assets
Software Development
GBP Group 2021 Group 2020 Company 2021 Company 2020
Cost b/f - - - -
Acquired through
business combinations 957,764 - 347,738 -
Additions 183,796 183,796
1,141,560 - 531,534 -
--------------------- --------------------- --------------------- ---------------------
Accumulated
Depreciation
B/F - - - -
Charge for the period 37,881 - 9,931 -
C/d 37,881 - 9,931 -
--------------------- --------------------- --------------------- ---------------------
Net Book Value 1,103,679 - 521,603 -
===================== ===================== ===================== =====================
Intangible assets comprise of 3 different software development
projects with remaining useful life of approximate 5 years each and
the carrying amounts of GBP676,022, GBP326,351 and GBP101,306.
12 Tangible Assets
Computers
GBP Group 2021 Group 2020 Company 2021 Company 2020
Cost b/f 24,675 22,674
Additions - 2,001
Acquired through
business combinations 7,170 -
31,845 24,675 - -
--------------------- --------------------- --------------------- ---------------------
Accumulated
Depreciation
B/F 21,124 18,157
Charge for the period 4,924 2,966
Translation
adjustments 337 -
C/d 26,385 21,124 - -
--------------------- --------------------- --------------------- ---------------------
Net Book Value 5,460 3,551 - -
===================== ===================== ===================== =====================
Furniture and Fittings
GBP Group 2021 Group 2020 Company 2021 Company 2020
Cost b/f 15,157 15,157 15,157 15,157
15,157 15,157 15,157 15,157
--------------------- --------------------- --------------------- ---------------------
Accumulated
Depreciation
B/F 12,009 4,235 12,009 4,235
Charge for the period 3,148 7,773 3,148 7,773
C/d 15,157 12,009 15,157 12,009
--------------------- --------------------- --------------------- ---------------------
Net Book Value - 3,148 - 3,148
===================== ===================== ===================== =====================
Right of Use Assets
GBP Group 2021 Group 2020 Company 2021 Company 2020
Cost b/f 344,058 344,058 231,935 231,935
Disposals (344,058) - (231,935) -
- 344,058 - 231,935
--------------------- --------------------- --------------------- ---------------------
Accumulated
Depreciation
B/F 280,694 140,996 196,687 98,209
Charge for the period 58,171 139,697 35,248 98,478
Translation
adjustments 5,193 - - -
Disposals (344,058) - (231,935) -
C/d - 280,694 - 196,687
--------------------- --------------------- --------------------- ---------------------
Net Book Value - 63,365 - 35,248
===================== ===================== ===================== =====================
Total
GBP Group 2021 Group 2020 Company 2021 Company 2020
Cost b/f 383,890 381,889 247,092 247,092
Additions/(disposals) (344,058) 2,001 (231,935) -
Acquired through
business combinations 7,170 - - -
47,002 383,890 15,157 247,092
-------------------- --------------------- --------------------- ---------------------
Accumulated
Depreciation
B/F 313,826 163,389 208,696 102,445
Charge for the period 66,243 150,437 38,396 106,252
Translation adjustments 5,530 - - -
Disposals (344,058) - (231,935) -
C/d 41,542 313,826 15,157 208,696
-------------------- --------------------- --------------------- ---------------------
Net Book Value 5,460 70,064 - 38,395
==================== ===================== ===================== =====================
13 Unlisted Investments
Group 2021 Group 2020 Company 2021 Company 2020
Fair value at 1 January and 31 December 456,834 31 456,834 31
=========== =========== ============= =============
The above Group investment represents Crossword Cybersecurity
Plc's 2021 - 4.4% (2020 - 4.4%) holding in CyberOwl Limited which
was purchased on 18 April 2016.
The investment has been revalued at a fair value following
successful fundraise by CyberOwl in February 2022.
14 Investment in subsidiaries
GBP 2021 2020
Cost b/f 1 January 458,164 11,017
Acquired during the year 1,088,740 -
Capital contribution 90,614 447,147
Cost c/f 31 December 1,637,518 458,164
=================== =====================
The group's subsidiary undertakings are listed below, including
name, country of incorporation, and proportion of ownership
interest:
Principal
Name Registered office activity 2021 2020
% %
Crossword Consulting Cybersecurity
Limited services 90 90
6th Floor, 60 Gracechurch
Street, London EC3N
0HR United Kingdom
Crossword Cybersecurity Cybersecurity
SP Z.o.o. services 100 100
ul. Wiejska 12a,
00-490 Warszawa,
Poland
Cybersecurity
Stega UK Ltd services 100 -
6th Floor, 60 Gracechurch
Street, London EC3N
0HR United Kingdom
Verifiable Credentials Cybersecurity
Ltd services 100 -
6th Floor, 60 Gracechurch
Street, London EC3N
0HR United Kingdom
Crossword Cybersecurity Cybersecurity
LLC services 90 -
PO Box 808, Alwattayah
/ Muttrah / Muscat
Governorate, Postcode:
100, Oman
15 Trade and Other Receivables
GBP Group 2021 Group 2020 Company 2021 Company 2020
Trade receivables 509,576 289,811 192,975 125,115
Other receivables 254,451 66,714 247,274 63,067
Prepayments 149,309 102,112 105,101 83,749
Accrued income 140,708 27,394 131,025 3,750
VAT Refund 12,033 11,881 - -
Intercompany
receivables within one
year - - 162,247 -
1,066,076 497,913 838,622 275,680
All of the above amounts are considered to be due within one
year.
The maximum exposure to credit risk at the reporting date is the
carrying value as above and the cash and cash equivalents and none
are either past or impaired.
Of the above amounts held within the Group, GBP18,419 is
denominated in Polish Zloty with the remainder in GBP (2020:
GBP15,529).
Foreign exchange risk is currently minimal as balances in Polish
Zloty are between the parent and its wholly owned subsidiary.
16 Trade and Other Payables
GBP Group 2021 Group 2020 Company 2021 Company 2020
Trade payables 331,043 204,243 459,753 372,359
Employment taxes and VAT payable 242,642 163,002 56,790 38,746
Accruals 226,623 403,997 164,284 289,488
Deferred income 331,198 101,438 94,333 71,789
Deferred consideration 261,606 - 261,606 -
Other payables 20,546 56,360 13,194 21,805
1,413,658 929,038 1,049,960 794,187
=========== ===================== ============= =====================
All of the above amounts are considered to be due within one
year.
The deferred income relates to contract liabilities arising from
contracts with customers.
Of the Trade and Other Payables amounts held within the Group,
GBP57,836 (2020: GBP29,630) is denominated in Polish Zloty with the
remainder in GBP.
17 Other Current Liabilities
GBP Group 2021 Group 2020 Company 2021 Company 2020
Convertible loan notes 1,351,471 - 1,351,471 -
Bank loan 17,167 - - -
1,368,638 - 1,351,471 -
=========== ===================== ===================== =====================
18 Other Non-current Liabilities
GBP Group 2021 Group 2020 Company 2021 Company 2020
Convertible loan notes - 1,335,322 - 1,335,322
Bank loan 68,000 - - -
Deferred consideration 111,900 - 111,900 -
Contingent
consideration 180,652 - 180,652 -
Deferred grant income 132,693 - - -
493,245 1,335,322 292,552 1,335,322
===================== ===================== ===================== =====================
19 Share Capital
Allotted called up and fully paid
Number of shares 2021 2020
B/f 51,320,900 46,805,610
Shares Issued in period 23,636,250 4,515,290
C/d 74,957,150 51,320,900
----------- -----------
In May 2021 the company sub-divided each existing ordinary share
of GBP0.05 into 10 new ordinary shares of GBP0.005 each.
The shares issued consequently were ordinary shares of GBP0.005
issued at a premium of GBP6,452,830 (2020: GBP1,002,647).
All shares carry the same voting and capital distribution
rights.
GBP
Share Capital 2021 2020
Cost b/f 256,605 234,061
Shares Issued in period 118,181 22,544
374,786 256,605
----------- ----------
Share Premium
B/f 8,518,391 7,515,744
Shares Issued in period 6,452,830 1,002,647
C/d 14,971,221 8,518,391
----------- ----------
20 Loss per share
Earnings per share is calculated by dividing the loss for the
period attributable to ordinary equity shareholders of the parent
by the weighted average number of ordinary shares outstanding
during the year.
During the year the calculation for basic loss per share was
based on the loss for the year attributable to owners of the parent
of GBP2,229,296 (2020: GBP2,249,707) divided by the weighted
average number of ordinary shares of 64,491,462 (2020: 49,819,800,
re-stated following share split in 2021).
21 Reserves
The following describes the nature and purpose of each reserve
within owners' equity
Reserve Description and purpose
Share capital This represents the nominal value of shares issued
Amount subscribed for share capital less any issue costs more than nominal
Share premium value
Equity reserve Represents amounts charged on share options that have been granted to employees
Cumulative net gains and losses recognised in the consolidated statement of
comprehensive
Retained earnings income
Translation of foreign operations Is the difference that arises due to consolidation of foreign subsidiaries using
an average
rate during the period and a closing rate for the period end statement of
financial position
22 Financial Instruments
GBP
Current Financial Assets Group 2021 Group 2020 Company 2021 Company 2020
Financial assets measured
at amortised cost
Trade and other
receivables 904,735 383,920 733,521 191,932
Cash and cash equivalents 3,373,062 958,341 3,106,817 824,667
Non-Current Financial
Assets
Financial assets measured
at amortised cost
Loan to subsidiary - - 918,206 653,316
Financial assets measured
at fair value through
profit or loss
Financial investments 456,834 31 456,834 31
4,734,631 1,342,292 5,215,378 1,669,945
===================== ===================== ================== =====================
The financial investments comprise of investment in CyberOwl
Ltd, which has been revalued on the basis of valuation per share at
as 1 February 2022 during the investment round, multiplied by the
number of shares the Company owns in it. This methodology of
determining a fair value equates to a level 2 assessment based on
observed transactions of share price in recent transactions in the
entity's equity.
GBP
Current Financial Group Group Company Company
Liabilities 2021 2020 2021 2020
Financial liabilities
measured
at amortised cost
Trade and other payables 839,818 664,599 898,836 683,653
Short-term loans and leases 1,368,638 - 1,351,471 -
Non-Current Financial
Liabilities
Financial liabilities
measured
at amortised cost
Loans 68,000 1,335,322 - 1,335,322
Non-current deferred
consideration 111,900 - 111,900 -
Financial liabilities measured
at fair value through profit
or loss
Non-current contingent
consideration 180,652 - 180,652 -
2,569,008 1,999,921 2,542,858 2,018,974
================== ===================== ===================== =======================
The contingent consideration becomes payable upon achieving
certain revenue targets stipulated in Share Purchase Agreement of
Stega.
The fair value of the liability was established by using income
approach, i. e. management's estimate that Stega will achieve its
revenue target for the period between 12 and 18 months from the
date of acquisition based on the latest internal revenue forecasts
(IFRS 13 Level 3 hierarchy approach) and was determined by
calculating the present value of estimated future cash outflows
using the discount rate adjustment technique (the discount rate of
15% has been applied).
Reconciliation of Level 3 fair value measurements of financial
liabilities:
Contingent
GBP consideration
B/f -
Fair value on initial recognition 170,283
Interest 10,369
C/d 180,652
=====================
Lease capital liabilities of the group and of the company
amounted to GBPnil in 2021 (2020: GBP43,734 and GBP13,416
respectively).
23 Financial Instruments - Risk
The Group could be exposed to risks that arise from its use of
financial instruments. Risks in relation to financial assets
include:
Market risk
Market risk covers foreign exchange risk, price risk and
interest rate risk.
As the majority of the Group's transactions are either in
Sterling or in Polish Zloty the Group considers its exposure to
foreign exchange risk to be minimal.
There are no derivatives and hedging instruments.
The Group is not exposed to price risk given that no securities
are held under financial assets.
The Group is not exposed to interest rate or cash flow risk due
to the fact that the Group has no borrowing or complex financial
instruments.
Credit risk
Credit risk is considered to be the risk of financial loss
incurred by the Group in the event that a customer or counterparty
to an asset fails to meet contractual obligations. The Group has
adopted a policy of only dealing with credit worthy
counterparties.
The Group's maximum credit exposure at the reporting date is
represented by the carrying value of its financial assets. The
Group's financial instruments do not represent a concentration of
credit risk since the Group deals with a variety of
counterparties.
Financial Assets
GBP Group 2021 Group 2020 Company 2021 Company 2020
Cash and cash equivalents 3,373,062 958,341 3,106,817 824,667
Trade and other
receivables 904,735 383,920 733,521 191,932
Loan to subsidiary - - 918,206 653,316
Financial investments 456,834 31 456,834 31
Total 4,734,631 1,342,292 5,215,378 1,669,945
=========================== ===================== ===================== ================== =====================
Liquidity risk
Management monitor rolling forecasts of the Group's liquidity
reserves, cash and cash equivalents on the basis of expected cash
flows and therefore monitors liquidity risk sufficiently.
Financial Liabilities 2021 2020
GBP due < 1 year due 1 - 2 years due < 1 year due 1 - 2 years
Trade payables 331,043 - 204,243 -
Accruals 226,623 - 403,997 -
Deferred consideration 261,606 111,900 - -
Contingent consideration - 180,652 - -
Other Payables 20,546 - 56,360 -
Loans 1,368,638 68,000 - 1,335,322
Total 2,208,456 360,552 664,600 1,335,322
========================== ================== ===================== ===================== =====================
24 Capital management
The Group considers its capital to comprise of its equity share
capital, share premium, foreign exchange reserve, share options
reserve and capital redemption reserve, less its accumulated
losses. Quantitative detail is shown in the consolidated statement
of changes in equity.
The directors' objective when managing capital is to safeguard
the Group's ability to continue as a going concern in order to
provide returns for the shareholder and benefits for other
stakeholders and to maintain an optimal capital structure to reduce
the cost of capital.
The directors monitor a number of KPIs at both the Group and
individual subsidiary level on a monthly basis. As part of the
budgetary process, targets are set with respect to operating
expenses in order to effectively manage the activities of the
Group. Performance is reviewed on a regular basis and appropriate
actions are taken as required. These internal measures indicate the
performance of the business against budget/forecast and to confirm
that the Group has adequate resources to meet its working capital
requirements.
25 Pensions
Employer contributions to the Group defined contribution pension
scheme for employees in the United Kingdom were GBP51,485 (2020:
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.
26 Related Party Transactions
Subsidiary
Transactions
Crossword Consulting Crossword Stega Verifiable
Limited Cybersecurity SP UK Credentials Limited
2021 Z.o.o Limited
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 - - -
2020
Services received from
GBP 56,294 502,374 - -
Services supplied to
GBP 145,466 - - -
Balance trade payable
to GBP 5,629 189,541 - -
Balance trade
receivable from GBP 368,271 - - -
Intercompany loan
receivable from GBP 653,316 - - -
Tom Ilube, CEO, has made a loan of GBP250,000 to the Company on
the same terms as the other Lenders as described in Note 27.
The Company has a related party relationship with its key
management who are the Executives: Tom Ilube, Mary Dowd, Jake
Holloway, Sean Arrowsmith and Stuart Jubb, whose total compensation
amounted to GBP744,483 (2020: GBP697,924).
In March 2020, the subsidiary Crossword Consulting Limited
issued 110,000 A shares to Stuart Jubb, Managing Director of the
subsidiary and member of the executive team which equated to 10% of
the subsidiary entity, for a subscription price of GBP15,400, which
was estimated to equate to fair value.
27 Convertible Loan Notes
In 2019, the company received funds for GBP1.4m of Convertible
Loan Notes. The term of the loans is 3 years and the interest is
12% payable quarterly in arrears. Early repayment is at the
Company's sole option, subject to a minimum repayment amount of
GBP10,000. Repayment is at the end of the term, in cash, save that
each lender may opt to convert part or all of their loan into
Ordinary Shares at GBP0.48 (value adjusted following share split in
2021). On repayment of the Loans in cash, each lender will be
issued warrants valid for three months to subscribe for Ordinary
Shares representing 10% of the value of the Loan at GBP0.48.
Included among the loan notes is one from Tom Ilube, CEO, for an
amount of GBP250,000. Tom Ilube made a loan to the Company on the
same terms as the other Lenders as described above.
28 Controlling Party
The Company does not have a controlling party.
29 Subsequent Events
On the 14th March 2022, Crossword Cybersecurity Plc acquired the
whole of the share capital of Threat Status Limited, the threat
intelligence company and provider of Trillion, the cloud based
software as a service (SaaS) platform for enterprise-level
credential breach intelligence, for a total consideration of
GBP1,529,000 (GBP500,000 paid on completion and the rest deferred
between first and second anniversary of the transaction, all
amounts are undiscounted).
The acquisition of Threat Status adds a new cyber security
offering to the Group's portfolio, cross sell opportunities are
currently being explored with the acquisition, alongside operating
synergies.
At the date of finalisation of these consolidated financial
statements, the necessary market valuations and other calculations
in relation to acquisition accounting had not been completed
yet.
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END
FR IIMFTMTMBBFT
(END) Dow Jones Newswires
April 19, 2022 02:00 ET (06:00 GMT)
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