Statement of Cashflows		12 Months ended 31st December	12 Months ended 31st December	12 Months ended 31st December	12 Months ended 31st December
		Group	Group	Company	Company
Years	Notes	2022	2021*	2022	2021*
Cashflows From Operating Activities		£	£	£	£
Loss for the year		(3,422,550)	(2,273,624)	(3,326,924)	(1,964,825)
Movement in trade and other receivables		(786,642)	(412,005)	(1,649,101)	(837,873)
Movement in trade and other payables		381,130	86,231	646,965	40,374
Depreciation	3	11,287	66,243	-	38,392
Amortisation	3	293,170	37,881	222,310	9,931
Finance costs	8	395,762	220,545	468,084	138,742
Gain on remeasurement of financial assets and liabilities		(170,283)	(456,803)	(365,968)	(456,803)
Employee share schemes	4	130,452	58,692	130,452	58,692
Tax (credit) / expense	11	(1,144,302)	(378,995)	(423,572)	(206,380)
Tax received / (paid)		348,662	200,984	295,763	206,380
Net Cashflow from Operating Activities		(3,963,314)	(2,850,851)	(4,001,990)	(2,973,370)
Cashflow From Investing Activities
Investment in intangible assets	13	(203,627)	(183,796)	(203,627)	(183,796)
Purchase of tangible assets	14	(48,971)	-	-	-
Acquisition of subsidiaries, net of cash acquired		(625,408)	(645,390)	(715,415)	(700,000)
Net Cashflow from Investing Activities		(878,006)	(829,186)	(919,042)	(883,796)
Cashflows From Financing Activities
Proceeds from issue of ordinary shares		3,837,245	6,639,135	3,837,245	6,639,135
Share issuance costs		(186,861)	(318,124)	(186,861)	(318,124)
Proceeds from issue of convertible loan notes		800,000	-	800,000	-
Repayment of convertible loan notes		(700,000)	-	(700,000)	-
Interest paid on convertible loan notes		(189,640)	(168,000)	(189,640)	(168,000)
Other interest paid		(16,495)	(1,638)	-	(186)
Payments for right of use assets		-	(43,734)	-	(13,507)
Net Cash Inflow from Financing Activities		3,544,249	6,107,639	3,560,744	6,139,319
Net Increase in Cash & Cash Equivalents		(1,297,071)	2,427,602	(1,360,288)	2,282,151
Foreign Currency Translation Difference		1,780	(12,881)	-	-
Cash and Cash Equivalent at the beginning of the period		3,373,062	958,341	3,106,818	824,667
Cash and Cash Equivalent at the end of the period		2,077,771	3,373,062	1,746,530	3,106,818
* Restated (as per note1.2)

 

 

 

 

Notes to the Financial Information

1        Accounting Policies

1.1        The Group and its operations

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

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

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

 

1.2        Basis of preparation of financial information

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

The financial information has been prepared on the historical cost basis. The preparation of financial information in conformity with UK adopted IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group's accounting policies. Changes in assumptions may have a significant impact on the financial information in the year the assumptions changed. Management believes that the underlying assumptions are appropriate. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial information are disclosed in note1.21.

 

Changes in accounting policy and disclosures

 

During the year the Group has reviewed presentation of Gross Margin in the Income Statement to align with general principles adopted by Software-as-a-Service industry. The costs to be included in Costs of Sales are primarily application hosting expenses, customer success and customer service costs. Research and Development expenses, which were previously included in Costs of Sales, have been reclassified to Administrative expenses.

 

Furthermore, Amortisation and Depreciation have been separated from Administrative expenses into Other operating expense category. Prior period has been reclassified.

 

The Group has revised the treatment of Research and development tax credits from the approach where these get recorded following the receipt of tax relief to being recognised in the period they relate to. Prior year has not been restated.

 

During the period the Group has changed presentation of Research and development tax credits from Other operating income to Income tax to reflect the fact that most of the credit relates to tax relief for small and medium-sized enterprises.

 

The following table demonstrates re-classification of 2021 Consolidated Income Statement:

 

Consolidated Statement of Comprehensive Income		As previously reported	Change in Gross Margin calculation	Other Operating Expense separate from Admin Costs			Research and Development Tax Credits		Restated
12 Months ended 31st December 2021
£
Revenue		2,171,137	-	-			-		2,171,137
Cost of Sales		(1,957,178)	325,794	-			-		(1,631,384)
Other income		-	152,347						152,347
Gross Profit		213,959	478,141	-			-		692,100
Administrative expenses		(3,260,139)	(325,794)	104,124			-		(3,481,809)
Other operating income		358,727	(152,347)	-			(206,380)		-
Other operating expense		-	-	(104,124)			-		(104,124)
Finance income		4,956	-	-			-		4,956
Finance costs-other interest expense		(220,545)	-	-			-		(220,545)
Gain on revaluation of financial assets		456,803	-	-			-		456,803
Loss for the year before taxation		(2,446,239)	-	-			(206,380)		(2,652,619)
Tax credit / (expense)		172,615	-	-			206,380		378,995
Loss for the Year		(2,273,624)	-	-			-		(2,273,624)

 

 

 

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

 

New standards, interpretations and amendments effective in current period

 

None of the new standards and amendments to the existing standards effective in the current period have been applicable to the Group's consolidated financial statements.

 

New standards, interpretations and amendments not yet effective

 

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

 

IFRS 17 Insurance Contracts (including the June 2020 Amendments to IFRS 17, effective from 1 January 2023)

 

Amendments to IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors - Definition of Accounting Estimates (effective 1 January 2023).

 

Amendments to IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2: Disclosure of Accounting policies (effective 1 January 2023).

 

Amendments to IAS 12 Income Taxes - Deferred Tax related to Assets and Liabilities arising from a Single Transaction (effective 1 January 2023).

 

Amendments to IAS 1 Presentation of Financial Statements - Classification of Liabilities as Current or Non-current (effective 1 January 2023).

 

1.3        Going Concern

The financial information has been prepared on a going concern basis. The Group's business model has been enhanced following the two acquisitions in 2021 and a further acquisition in early 2022. The Group's operations have incurred a loss in the financial year whilst the Group's products and services continue to be enhanced, developed and brought to market. The Directors' forecast in 2023 shows a trading loss with net cash outflows as the business continues to develop and enhance its products and services and grows revenue. In 2022, the Group's operations have been supported by cash inflows from customers and from the issue of £3.6m equity gross during 2022.

 

The Directors have considered the Group's future and forecast business and cash requirements. Following the completion of a successful fundraise in 2022, the Directors have determined that the group wants to continue to expand, while having a clear and determined focus on a path to profitability, which is expected to require successful additional fundraise.

 

On 12 July 2022 holders of £700,000 of loan notes extended their loan notes to be repayable 30 June 2025 and two loan note holders loaned a further £150,000 to the Company on the above terms. In both cases the conversion price was amended to 25.2p.

 

On 15 July 2022 a further £550,000 of loan notes were issued repayable on 14 July 2025, otherwise on the same terms as above save that the conversion price is 26.1p.

 

Currently, £1.5 million of loan notes remain outstanding.

 

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

 

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

 

1.4        Basis of consolidation

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

- the power over the investee;

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

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

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

 

1.5        Revenue

Revenue comprises the fair value of consideration received or receivable for licence income and the rendering of services in the ordinary course of the Group's activities. Revenue is shown net of value added tax and trade discounts. Income is reported as follows:

 

(a)   Licence Income

Technology and product licensing revenue represents amounts earned for licenses granted under licensing agreements and recognized over time. Revenues relating to up-front payments are recognised when the obligations related to the revenues have been completed.

Revenues for maintenance and support services are recognised in the accounting periods in which the services are rendered.

(b)   Rendering of Services

Services relate to implementation and deployment fees for the technology and products licensed to customers. Revenue is recognised in the accounting periods in which the services are rendered.

(c)   Consulting

Consulting revenue is recognised when the performance obligation is met, primarily at a point of time.  Contracts are structured to support the revenue recognition process by stating what the objectives and deliverables are for each part of the project, and the revenue attributable to each deliverable. 

(d)   Software Engineering Services

Revenues for software engineering services are recognised in the accounting periods in which the services are rendered.

 

Contract balances

 

Contract related balances comprise of contract assets and contract liabilities.

 

Contract assets - are recognised when services are transferred to customers before consideration is received or before the Group has an unconditional right to payment for performance completed to date. Contract assets are subsequently transferred to receivables when the right of payment becomes unconditional.

 

Contract liabilities - are recognised when amounts are received from customers in advance of transfer of goods or services. Contract liabilities are subsequently recognised in revenue as or when the Group performs under contracts.

 

1.6        Functional and presentation currency

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

 

1.7        Business combinations

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

 

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

 

Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of the cost of the business combination over the Group's interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to the cash generating unit ("CGU") that is expected to benefit from the synergies of the combination. CGU to which goodwill has been allocated is tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. Any impairment loss is recognised directly in the income statement.

 

1.8        Foreign operations

The assets and liabilities of foreign operations are translated into Pound sterling using the exchange rates at the reporting date. The revenues and expenses of foreign operations are translated into Pound sterling using the average exchange rates, which approximate the rates at the dates of the transactions, for the period.

 

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

 

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

 

1.9        Intangible assets - research and development

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

 

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

 

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

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

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

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

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

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

 

Directly attributable costs that are capitalised as part of the software product include the software development employee costs and an appropriate portion of relevant overheads.

 

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

 

1.10       Property, plant and equipment

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

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

 

1.11       Depreciation and amortisation

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

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

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

Computers                                                  3.33

Furniture & fittings                                      3.33

 

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

 

1.12       Impairment of non-financial assets

The residual value of an asset is the estimated amount that the Group would currently obtain from disposal of the asset less the estimated costs of disposal, if the asset was already of the age and in the condition expected at the end of its physical life.

The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting date.

At the end of each reporting period management assesses whether the indicators of impairment of property, plant and equipment exists.

The carrying amounts of property, plant and equipment and all other non-financial assets are reviewed for impairment if there is any indication that the carrying amount may not be recoverable.

For the purpose of impairment testing the recoverable amount is measured by reference to the higher of value in use (being the net present value of expected future cashflows of a relevant cash generating unit) and fair value less costs to sell (the amount obtainable from the sale of an asset or cash generating unit in an arm's length transaction between knowledgeable, willing parties who are independent from each other less the costs of disposal).

Where there is no binding sale agreement or active market, fair value less costs to sell is based on the best information available to reflect the amount the Group would receive for the cash generating unit.

A cash generating unit is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets.

If the carrying amount of the asset exceeds its recoverable amount, the asset is impaired and an impairment loss is charged to the income statement so as to reduce the carrying amount in the statement of financial position to its recoverable amount.

A previously recognised impairment loss is reversed if the recoverable amount increases as a result of a reversal of the conditions that originally resulted in the impairment.

This reversal is recognised in profit or loss for the period and is limited to the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised in prior years.

 

1.13       Financial Instruments

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

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

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

 

  1.13 a Financial assets

Classification of financial assets

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

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

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

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

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

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

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

 

Amortised cost and effective interest method

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

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

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

 

Impairment of financial assets

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

Expected credit loss measurement

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

 

  1.13 b Financial liabilities and equity

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

 

Equity instruments

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

 

Financial liabilities

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

 

Financial liabilities at FVTPL

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

 

Financial liabilities subsequently measured at amortised cost

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

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

 

Derecognition of financial liabilities

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

 

1.14       Leases

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

1.15       Taxes

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

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

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

1.16       Share Based Payments

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

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

1.17       Investments

Shares in subsidiary undertakings are stated at cost less provision for impairment.  Unlisted investments are measured at fair value through profit or loss.

 

1.18       Intercompany Financing arrangements

The amortised cost methodology is applied to the financing arrangement between the Company and subsidiary Crossword Consulting Limited.  An assessment in undertaken to determine the market rate of interest for a similar loan given the credit rating of the subsidiary to apply discounting with the principal conceptually including a financing element.

 

1.19       Pension Obligations

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

 

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

 

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

 

1.20       Cash and Cash Equivalents

Cash comprises cash-in-hand and demand deposits.  Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash, and which are subject to an insignificant risk of change in value.

 

1.21       Accounting for Government Grants

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

 

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

 

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

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

The following are the key estimates that the directors have made in the process of applying the Group's accounting policies and have the most significant effect on the amounts recognised in the financial information. There are no further critical accounting judgements.

 

Fair value of options granted to employee

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

 

Convertible Loans

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

 

On legal execution of the loans the financial liability is initially measured at its fair value which is the face value of the loans.  Immediately after recognition, at fair value, the financial liability is measured at amortised cost, using a reasonable estimate of the Group's cost of capital. The difference between the fair value and the amortised cost is taken to the P&L account.

 

Impairment

An impairment assessment of the carrying value in the Company of the investment in subsidiaries is undertaken using an NPV model over the projected cash flows, with a discount rate based on the assessment of weighted average cost of capital.

 

Business combinations

The recognition of business combinations requires management to make estimates in order to determine fair value of consideration payable on acquisition as well as fair value of identifiable assets, particularly intangibles, and liabilities acquired. These estimates are based on all available information and in some cases assumptions with respect to the timing and amount of future revenues and expenses associated with an asset.

 

Deferred tax

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

 

 

 

2 Revenue and segmental information

 

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

 

£	Group 2022		Group 2021
Revenue from the sale of goods/licences	479,849		189,252
Revenue from the rendering of services	64,667		183,855
Revenue from consulting services	3,013,884		1,660,207
Software engineering revenue	89,600		137,823
Total Revenue	3,648,000		2,171,137

 

 

 

 

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

 

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

 

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

 

2022 £	Software product and services	Cybersecurity consulting	Eliminations	Total
Revenue	634,116	3,131,103	(117,219)	3,648,000
Cost of Sales	(136,287)	(2,619,375)	-	(2,755,662)
Other income	39,814	-	-	39,814
Gross Profit	537,643	511,728	(117,219)	932,152
Administrative expenses	(4,561,425)	(523,292)	117,218	(4,967,499)
Other operating expense	(226,447)	(78,010)	-	(304,457)
Financial income and expenses	(29,958)	(197,090)	-	(227,048)
Loss for the year before taxation	(4,280,186)	(286,666)	-	(4,566,852)
Tax credit / (expense)	1,144,302	-	-	1,144,302
Loss for the Year	(3,135,884)	(286,666)	-	(3,422,550)
Total Comprehensive Loss	(3,134,102)	(286,666)	-	(3,420,768)
Segment assets	10,413,274	1,594,370	(3,367,738)	8,639,905
Segment liabilities	4,234,893	2,649,280	(2,404,869)	4,479,304
EBITDA	(4,023,782)	(11,565)	-	(4,035,347)
2021* £
Revenue	462,108	1,784,309	(75,280)	2,171,137
Cost of Sales	(32,539)	(1,598,845)	-	(1,631,384)
Other income	152,347	-	-	152,347
Gross Profit	581,917	185,464	(75,280)	692,100
Administrative expenses	(2,956,758)	(600,331)	75,280	(3,481,809)
Other operating expense	(72,045)	(32,079)	-	(104,124)
Financial income and expenses	323,725	(82,512)	-	241,214
Loss for the year before taxation	(2,123,161)	(529,458)	-	(2,652,619)
Tax credit / (expense)	378,995	-	-	378,995
Loss for the Year	(1,744,166)	(529,458)	-	(2,273,624)
Total Comprehensive Loss	(1,757,386)	(529,458)	-	(2,286,844)
Segment assets	8,178,282	1,029,509	(2,327,403)	6,880,388
Segment liabilities	2,924,439	1,762,053	(1,410,951)	3,275,541
EBITDA	(2,168,462)	(414,866)	-	(2,583,328)
* Restated (as per note1.2)

 

 

 

During the year ended 31 December 2022 approximately 14% (2021: 17%) of the consolidated entity's external revenue was derived from sales to a major United Kingdom client in Cybersecurity consulting segment.  No other clients accounted for more than 10% of the consolidated entity's external revenue.                                                                                                                                                                  

 

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

 

 

3 Expenses by nature                

 

 

£		Group 2022		Group 2021
Staff and related costs		4,914,076		3,305,430
Consultancy and related costs		854,972		450,028
Professional fees		808,910		616,791
Property related costs		201,590		172,823
Depreciation		11,287		66,243
Amortisation		293,170		37,881
Capitalised costs		(162,680)		(138,067)
Other expenses		1,106,293		706,188
Total cost of sales, administrative and other operating expenses		8,027,618		5,217,317
Included in Cost Of Sales
£		Group 2022		Group 2021
Staff and related costs		1,874,960		1,133,519
Consultancy and related costs		854,972		450,028
Other expenses		25,730		47,837
Total cost of sales		2,755,662		1,631,384
Included in Administrative expenses
£		Group 2022		Group 2021
Staff and related costs		3,039,116		2,171,911
Professional fees		808,910		616,791
Property related costs		201,590		172,823
Capitalised costs		(162,680)		(138,067)
Other expenses		1,080,563		658,351
Total administrative expenses		4,967,499		3,481,809
Administrative expenses include-short term lease expense of £188,643 (2021: £171,714).
Expenses by geographic location
£		Group 2022		Group 2021
UK		7,355,231		4,695,737
Poland		672,387		521,580
Total cost of sales, administrative and other operating expenses		8,027,618		5,217,317

 

 

 

 

 

 

 

 

 

4 Staff Costs

 

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

 

£		Group 2022	Group 2021	Company 2022	Company 2021
Wages and salaries:
- Administrative		2,342,943	1,420,624	2,066,066	1,321,393
- Consulting		1,719,588	1,226,231	-	-
- Research and development		348,910	277,503	-	-
Social security costs		432,124	327,012	231,583	142,103
Other pension costs		70,511	54,061	47,838	37,003
		4,914,076	3,305,430	2,345,487	1,500,499

 

 

 

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

 

		Group 2022	Group 2021	Company 2022	Company 2021
Staff		52	42	30	17
Directors		11	9	8	8
Total		63	51	38	25

 

 

 

Share based payments

 

The amount recognised in respect of share-based payments was £130,452 (2021: £58,692).

 

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

 

There are no performance conditions attaching to these options. No options were exercised in 2022 (5,840 in 2021).

 

Total options issued as at 31 December 2022 amount to 2,278,653 (2021: 2,348,653).

 

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

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

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

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

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

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

• Dividend yield - 0%,

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

• Performance conditions - none.-                                                                                                                                                                                    

 

Reconciliation of share options - Company

 

		Weighted average exercise price		Weighted average exercise price
	2022	2022	2021	2021
		£		£
1st January	2,348,653	0.36	2,065,730	0.36
Granted during the period	10,000	0.33	352,923	0.36
Lapsed during the period	(85,000)	0.34	(64,160)	0.36
Exercised during the period	-	-	(5,840)	0.28
End of the period	2,273,653	0.36	2,348,653	0.36

 

 

The weighted average share Price at the exercise date was £0.36.

 

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

 

The weighted average remaining life of the options was 6.5 years (2021: 6.5 years).

 

5 Directors' Remuneration

 

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

 

2022 £	Basic Salary and Fees	Bonus	Taxable Benefits	Employer's Pension Contribution	Total
Executive Directors
Tom Ilube	130,000		3,926	1,321	135,247
Mary Dowd*	140,000	10,000	2,216	10,000	162,216
Non-Executive Directors
Sir Richard Dearlove	25,000		25,000		50,000
Ruth Anderson	12,000				12,000
Andy Gueritz	16,000				16,000
Dr David Secher	16,000				16,000
Robert Coles	12,000				12,000
Tara Cemlyn-Jones	12,000				12,000
Total	363,000	10,000	31,142	11,321	415,463
2021 £
Executive Directors
Tom Ilube	128,311		3,942	1,318	133,572
Mary Dowd*	130,000			10,000	140,000
Non-Executive Directors
Sir Richard Dearlove	25,000		25,000		50,000
Ruth Anderson	12,000				12,000
Andy Gueritz	16,000				16,000
Gordon Matthew	6,000				6,000
Dr David Secher	16,000				16,000
Prof David Stupples	4,750				4,750
Robert Coles	7,250				7,250
Tara Cemlyn-Jones	7,231				7,231
Total	352,541	-	28,942	11,318	392,801

 

 

* Denotes highest paid director

 

 

In the year ended 31 December 2022, certain of the directors received remuneration (which is included in the amounts above) through payments by the Group to third parties as follows: £12,000 was paid to Cumberland House Consulting Ltd for the services of R Coles (2021: £7,250); £12,000 was paid to Caprica Nelson Ltd for the services of R Anderson (2021: £12,000); £16,000 was paid to Cambridge KT Ltd for the services of D Secher (2021: £16,000).

 

Share Options issued

 

	Year	Share Options	Exercise Price	Total Value
Sir Richard Dearlove	2018	6,757	£              3.70	£                9,902
Mary Dowd	2018	7,936	£              3.15	£                9,993
Sir Richard Dearlove	2019	4,587	£              5.45	£              10,587
Sir Richard Dearlove	2019	5,208	£              4.80	£              10,576
Mary Dowd	2019	10,000	£              5.45	£              23,080
Mary Dowd	2020	25,000	£              0.31	£                2,903
Sir Richard Dearlove	2020	94,340	£              0.27	£                9,496
Sir Richard Dearlove	2021	70,423	£              0.36	£              25,000

 

 

 

In 2021 the Company implemented a Long Term Incentive Plan (LTIP) whereas awards have been made to the following executives - Mary Dowd, Stuart Jubb, Jake Holloway and Sean Arrowsmith. Each award is of nominal cost (£0.005) options to acquire up to 750,000 Crossword ordinary shares of 0.5p each which vest at the average mid-market price of the Ordinary Shares over the 20 trading days preceding the end of the performance period which ends on 30 September 2024. 25% of the options will vest if the Award Price is 50p, and 100% will vest if the Award Price is equal to or greater than 100p, with straight line vesting between 50p and 100p.                                     

6 Other Operating Income

 

			Group 2022		Group 2021
			£		£
Grant Income			39,814		152,347
			39,814		152,347

 

 

 

 

7 Other Operating Expense

 

		Group 2022		Group 2021
		£		£
Amortisation of intangible assets		293,170		37,881
Depreciation of property, plant and equipment		11,287		8,072
Depreciation of right-of-use assets		-		58,171
		304,457		104,124

 

 

 

8 Finance Costs

 

	Group 2022		Group 2021
	£		£
Finance cost of loan notes	272,400		184,149
Interest on deferred consideration	115,766		34,978
Right to use assets Interest	-		187
Other interest expense	7,596		1,231
	395,762		220,545

 

 

 

9 Gain on remeasurement of financial assets and liabilities

 

	Group 2022		Group 2021
	£		£
Gain on remeasurement of contingent consideration	170,283		-
Gain on revaluation of investment in Cyberowl	-		456,803
	170,283		456,803

 

 

 

 

10 Auditor's Remuneration

 

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

 

£	Group 2022		Group 2021
Fees for the parent company individual and consolidated financial statements	41,400		46,000
Fees for legal audit of subsidiary financial information	24,050		17,000
	65,450		63,000

 

11 Tax

£	Group 2022		Group 2021*
Corporation tax on profits for the period	6,115		5,396
R&D tax credit	(753,288)		(206,380)
Deferred tax credit	(397,129)		(178,011)
Total tax (credit) / expense	(1,144,302)		(378,995)

 

* Restated (as per note1.2)

 

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

 

The deferred tax liability arising on fair value revaluation on acquisitions of Verifiable Credentials Ltd, Stega UK Ltd (both in 2021) and Threat Status Ltd (in 2022), as reflected in note 12, has been offset with a deferred tax asset recognised in respect of losses brought forward from prior periods, resulting in deferred tax credit to the statement of comprehensive income.

 

There is a deferred tax liability of £114,201 arising on the fair value uplift of £456,803 of the unlisted investment in CyberOwl Limited. This deferred tax liability has been offset by trading losses of the group.

 

Corporation tax losses carried forward for offset against future year's trading profits amount to approximately £8.5m (2021: £4.8m). 

 

£	Group 2022		Group 2021*
Loss before taxation	4,566,852		2,652,619
Average rate of corporation tax	19.00%		19.00%
Tax on loss	(867,702)		(503,998)
Effects of:
Expenses not deductible for tax purposes	116,084		24,578
Additional deduction for R&D expenditure	(164,009)		(167,168)
Adjustments in respect of prior period	(354,777)		-
Tax rate changes / adjustments	(12,199)		104,124
Deferred tax not recognised	138,301		163,468
Total tax charge	(1,144,302)		(378,995)
* Restated (as per note1.2)

                                                                               

                                                                                               

 

                                                               

Factors that may affect future tax changes

 

On 24 May 2021 the Finance Bill was substantively enacted with the consequence that the main rate of corporation tax will increase from 19% to the rate of 25%, with effect from 1 April 2023, with a corresponding effect on deferred tax balances after that date.                                                

 

Polish Corporation Tax has been 19% until 1 January 2017, when Crossword started to benefit from the new small companies reduced rate of 15% adopted by the Parliament Act amendment to Polish CIT Law.

 

                                                                                               

12 Business Combinations

 

On 11 March 2022 the Group acquired 100% of the issued share capital of Threat Status Ltd ("TSL"), the threat intelligence company and provider of Trillion, the cloud-based software as a service platform for enterprise-level credential breach intelligence.

The net consideration used in the acquisition of TSL and the provisional fair value of assets acquired and liabilities assumed on the acquisition date are detailed below:

 

 

£	Book value	Adjustment	Fair value
Intangible assets	-	1,694,287	1,694,287
Tangible assets	1,208	-	1,208
Deferred tax asset	26,854	-	26,854
Non-current assets	28,062	1,694,287	1,722,349
Trade and other receivables	10,420	-	10,420
Cash and cash equivalents	90,007	-	90,007
Current assets	100,427	-	100,427
Deferred tax liability	-	423,572	423,572
Non-current liabilities	-	423,572	423,572
Trade and other payables	57,784	-	57,784
Current liabilities	57,784	-	57,784
Total fair value of net assets acquired	70,706	1,270,715	1,341,420
Fair value of consideration
Cash on completion			500,915
Deferred consideration in cash			343,339
Deferred consideration in shares			497,166
Total consideration			1,341,420

 

 

Acquisition costs of £16,894 relating to this transaction have been recognised as part of administrative expenses in the statement of comprehensive income.

Since the acquisition date, TSL has contributed £177,223 to group revenues and £127,483 to group result. If the acquisition had occurred on 1 January 2022, group revenue would have been £3,703,829 and group loss for the period would have been £3,229,407.

The acquisitions help to implement the Group's strategy to create a portfolio of subscription-based, enterprise-class products and services for its clients.                                                                                                                                                                                                                                                                                                                                                   

 

13 Intangible Assets

 

Software Development
£	Group 2022	Group 2021	Company 2022	Company 2021
Cost b/f	1,141,560	-	531,534	-
Acquired through business combinations	1,694,287	957,764	1,694,287	-
Additions	203,627	183,796	203,627	531,534
	3,039,473	1,141,560	2,429,447	531,534
Accumulated Depreciation
B/F	37,881	-	9,931	-
Charge for the period	293,169	37,881	222,310	9,931
C/d	331,050	37,881	232,241	9,931
Net Book Value	2,708,423	1,103,679	2,197,206	521,603

 

 

 Intangible assets comprise of 5 different software development projects with remaining useful life of approximate between 5 and 10 years each and the carrying amounts of £1,173,512, £810,244, £344,206, £255,491 and £124,970.

 

The intangible assets have been evaluated to determine whether there are any indicators of impairment. Assessment of the recoverable value for Identiproof software has been based on calculating the net present value of the future cash flows. The cash flow projections are based on the most recent 3 year forecast extrapolated to 5 years with a growth rate for revenue of 20% and costs of 10%. The pre-tax discount rate used in the calculation was 24%.

 

Please refer to note 15 for matters relating to impairment assessment for Nightingale product.

               

14 Tangible Assets

Computers
£	Group 2022	Group 2021	Company 2022	Company 2021
Cost b/f	31,845	24,675
Additions	48,971	-
Acquired through business combinations	1,207	7,170
	82,023	31,845	-	-
Accumulated Depreciation
B/F	26,385	21,124
Charge for the period	11,287	4,924
Translation adjustments	(688)	337
C/d	36,984	26,385	-	-
Net Book Value	45,039	5,460	-	-
Furniture and Fittings
£	Group 2022	Group 2021	Company 2022	Company 2021
Cost b/f	15,157	15,157	15,157	15,157
Additions
	15,157	15,157	15,157	15,157
Accumulated Depreciation
B/F	15,157	12,009	15,157	12,009
Charge for the period	-	3,148	-	3,148
C/d	15,157	15,157	15,157	15,157
Net Book Value	-	-	-	-
Right of Use Assets
£	Group 2022	Group 2021	Company 2022	Company 2021
Cost b/f	-	344,058	-	231,935
Disposals	-	(344,058)	-	(231,935)
	-	-	-	-
Accumulated Depreciation
B/F	-	280,694	-	196,687
Charge for the period	-	58,171	-	35,248
Translation adjustments	-	5,193	-	-
Disposals	-	(344,058)	-	(231,935)
C/d	-	-	-	-
Net Book Value	-	-	-	-
Total
£	Group 2022	Group 2021	Company 2021	Company 2021
Cost b/f	47,002	383,890	15,157	247,092
Additions/(disposals)	48,971	(344,058)	-	(231,935)
Acquired through business combinations	1,207	7,170	-	-
	97,180	47,002	15,157	15,157
Accumulated Depreciation
B/F	41,542	313,826	15,157	208,696
Charge for the period	11,287	66,243	-	38,396
Translation adjustments	(688)	5,530	-	-
Disposals	-	(344,058)	-	(231,935)
C/d	52,141	41,542	15,157	15,157
Net Book Value	45,039	5,460	-	-

 

 

 

 

15 Goodwill

 

The goodwill arises on acquisition of Stega UK Ltd in 2021 and forms a part of Nightingale cash generating unit. The goodwill has been tested for impairment alongside Intangible asset of NBV of £255,491 allocated to the same unit. The recoverable amount has been determined by value in use calculation. The cash flow projections are based on the most recent 3 year forecast extrapolated to 5 years with a growth rate for revenue of 25% and costs between 10% and 15%, these are based primarily on past experience. The growth rate beyond 5 year period is assumed as a perpetuity at 10%. The pre-tax discount rate used in the calculation was 24%.

 

 

£	Group 2022	Group 2021
B/F	875,277	-
Additions in the period	-	875,277
C/F	875,277	875,277

 

 

 

16 Unlisted Investments

£	Group 2022	Group 2021	Company 2022	Company 2021
Fair value at 1 January and 31 December	456,834	456,834	456,834	456,834

 

 

The above Group investment represents Crossword Cybersecurity Plc's 2022 - 3.1% (2021 - 4.4%) holding in CyberOwl Limited which was purchased on 18 April 2016.                                                                                               

 

The investment value has not changed during the period and has been based on the values from the latest fundraise by CyberOwl in August 2022.

                                                               

17 Investment in subsidiaries 

£	Company 2022		Company 2021
Cost b/f 1 January	1,637,518		458,164
Acquired during the year	1,341,420		1,088,740
Transfer to intangibles on hive up	(1,270,715)		-
Reversal of contingent consideration	(170,283)		-
Capital contribution	111,205		90,614
Cost c/f 31 December	1,649,145		1,637,518

 

 

 

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

 

Name	Registered office		Principal activity	2022	2021
	6th Floor, 60 Gracechurch Street, London EC3N 0HR United Kingdom			%	%
Crossword Consulting Limited			Cybersecurity services	90	90
Crossword Cybersecurity SP Z.o.o.	ul. Wiejska 12a, 00-490  Warszawa, Poland		Cybersecurity services	100	100
Stega UK Ltd	6th Floor, 60 Gracechurch Street, London EC3N 0HR United Kingdom		Cybersecurity services	100	100
Verifiable Credentials Ltd	6th Floor, 60 Gracechurch Street, London EC3N 0HR United Kingdom		Cybersecurity services	100	100
Crossword Cybersecurity LLC	PO Box 808, Alwattayah / Muttrah / Muscat Governorate, Postcode: 100, Oman		Cybersecurity services	90	90
Threat Status Ltd	6th Floor, 60 Gracechurch Street, London EC3N 0HR United Kingdom		Cybersecurity services	100	-

 

 

 

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

 

 

18 Trade and Other Receivables

 

£	Group 2022	Group 2021	Company 2022	Company 2021
Trade receivables	1,110,697	509,576	505,451	192,975
Other receivables	524,721	254,451	445,603	247,274
Prepayments	239,066	149,309	183,160	105,101
Accrued income	133,883	140,708	23,383	131,025
VAT Refund	69,683	12,033	46,421	-
Intercompany receivables within one year	-	-	714,507	162,247
	2,078,050	1,066,076	1,918,525	838,622

 

 

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

 

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

 

Of the above amounts held within the Group, £32,735 is denominated in Polish Zloty with the remainder in GBP (2021: £18,419).                                                                                     

Foreign exchange risk is currently minimal as balances in Polish Zloty are between the parent and its wholly owned subsidiary.                                                                                     

19 Trade and Other Payables

 

£	Group 2022	Group 2021	Company 2022	Company 2021
Trade payables	659,282	331,043	1,025,828	459,753
Employment taxes and VAT payable	306,168	242,642	69,300	56,790
Accruals	434,705	226,623	187,197	164,284
Deferred income	460,853	331,198	279,125	94,333
Deferred consideration	568,146	261,606	568,146	261,606
Other payables	27,629	20,546	17,179	13,194
	2,456,783	1,413,658	2,146,775	1,049,960

 

 

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

 

The deferred income relates to contract liabilities arising from contracts with customers.

 

Of the Trade and Other Payables amounts held within the Group, £83,965 (2021: £57,836) is denominated in Polish Zloty with the remainder in GBP.                                                                                      

 

20 Other Current Liabilities    

 

£	Group 2022	Group 2021	Company 2022	Company 2021
Convertible loan notes	-	1,351,471	-	1,351,471
Bank loan	17,000	17,167	-	-
	17,000	1,368,638	-	1,351,471

 

 

 

21 Other Non-current Liabilities

 

£	Group 2022	Group 2021	Company 2022	Company 2021
Deferred consideration	492,151	111,900	492,151	111,900
Contingent consideration	-	180,652	-	180,652
Deferred grant income	132,692	132,693	-	-
	624,843	425,245	492,151	292,552

           

 

 

22 Share Capital

 

Allotted called up and fully paid

 

Number of shares (all ordinary shares £0.005 each)	2022		2021
B/f	74,957,150		51,320,900
Shares Issued in period	17,446,565		23,636,250
C/d	92,403,715		74,957,150

 

 

 

 

The shares issued in the period were ordinary shares of £0.005 at a premium of £3,563,151 (2021: £6,452,830).

All shares carry the same voting and capital distribution rights.    

 

£
Share Capital	2022		2021
Cost b/f	374,786		256,605
Shares Issued in period	87,233		118,181
	462,019		374,786
Share Premium
B/f	14,971,221		8,518,391
Shares Issued in period	3,563,151		6,452,830
C/d	18,534,372		14,971,221

                                                                               

 

 

 

23 Loss per share

               

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

 

During the year the calculation for basic loss per share was based on the loss for the year attributable to owners of the parent of £3,408,149 (2021: £2,229,296) divided by the weighted average number of ordinary shares of 80,022,937 (2021: 64,491,462).

                                                                               

24 Reserves                   

 

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

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

 

 

 

 

25 Financial Instruments

 

£
Current Financial Assets	Group 2022	Group 2021	Company 2022	Company 2021
Financial assets measured at amortised cost
Trade and other receivables	1,769,301	904,735	1,688,943	733,521
Cash and cash equivalents	2,077,771	3,373,062	1,746,530	3,106,817
Non-Current Financial Assets
Financial assets measured at amortised cost
Loan to subsidiary	-	-	1,067,185	918,206
Financial assets measured at fair value through profit or loss
Financial investments	456,834	456,834	456,834	456,834
	4,303,906	4,734,631	4,959,493	5,215,378

 

 

 

The financial investments comprise of investment in CyberOwl Ltd, which has been valued on the basis of valuation per share at as March 2022 during the investment round, multiplied by the number of shares the Company owns in it. This methodology of determining a fair value equates to a level 2 assessment based on observed transactions of share price in recent transactions in the entity's equity.                                                                

 

 

£
Current Financial Liabilities	Group 2022	Group 2021	Company 2022	Company 2021
Financial liabilities measured at amortised cost
Trade and other payables	1,689,761	839,818	1,798,351	898,836
Loans	17,000	17,167	-	-
Convertible loan notes	-	1,351,471	-	1,351,471
Non-Current Financial Liabilities
Financial liabilities measured at amortised cost
Loans	51,000	68,000	-	-
Convertible loan notes	1,329,678	-	1,329,678	-
Non-current deferred consideration	492,151	111,900	492,151	111,900
Financial liabilities measured at fair value through profit or loss
Non-current contingent consideration	-	180,652	-	180,652
	3,579,590	2,569,008	3,620,180	2,542,858

 

 

 In relation to the loan there was a fair value revaluation of £195,685 (2021: £nil) recorded in Convertible debt reserve arising from the loan notes being initially measured at fair value and subsequently measured at amortised cost.

 

During the year, the management changed its estimate that Stega would achieve its revenue target for the period between 12 and 18 months from the date of acquisition and concluded that this will be very unlikely. Therefore, contingent consideration, recorded as part of acquisition accounting for Stega, has been reversed via Income Statement in full.

 

Reconciliation of Level 3 fair value measurements of financial liabilities:      

 

£		Contingent consideration
B/f		180,652
Unwinding of discount		(10,369)
Reversed		(170,283)
C/d		-

                                                                                                                                                               

 

 

26 Financial Instruments - Risk

 

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

Market risk                                                                                            

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

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

There are no derivatives and hedging instruments.                                                                                        

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

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

 

Credit risk                                                                                             

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

               

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

 

 

 

 

 

Financial Assets
£	Group 2022	Group 2021	Company 2022	Company 2021
Cash and cash equivalents	2,077,771	3,373,062	1,746,530	3,106,817
Trade and other receivables	1,769,301	904,735	1,688,943	733,521
Loan to subsidiary	-	-	1,067,185	918,206
Financial investments	456,834	456,834	456,834	456,834
Total	4,303,906	4,734,631	4,959,492	5,215,378

 

                                                                                               

Liquidity risk                                                                                         

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

 

Financial Liabilities	2022		2021
£	due < 1 year	due 1 - 2 years	due < 1 year	due 1 - 2 years
Trade payables	659,282	-	331,043	-
Accruals	434,705	-	226,623	-
Deferred consideration	568,146	492,151	261,606	111,900
Contingent consideration	-	-	-	180,652
Other Payables	27,629	-	20,546	-
Loans	17,000	51,000	17,167	68,000
Convertible loan notes	-	1,329,678	1,351,471	-
Total	1,706,762	543,151	2,208,456	360,552

                                                                                               

 

 

27 Capital management

 

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

                                                                               

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

                                                                               

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

 

28 Pensions

 

Employer contributions to the Group defined contribution pension scheme for employees in the United Kingdom were £70,695 (2021: £46,509).  A defined contribution scheme is a pension plan under which the Group pays fixed contributions into a separate entity.

                                                                                                                                                                               

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

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

                                                                                               

29 Related Party Transactions

 

 

 

2022	Crossword Consulting Limited	Crossword Cybersecurity SP Z.o.o	Stega UK Limited	Verifiable Credentials Limited	Cumberland House Consulting Limited
Services received from £	102,877	746,355	42,000	-	-
Services supplied to £	-	-	-	-	318,800
Balance trade payable to £	-	284,420	-	-	-
Balance trade receivable from £	143,779	-	156,870	1,385	54,235
Intercompany loan receivable from £	1,178,367	-	88,818	-	-
2021
Services received from £	274,099	580,704	7,000	-	-
Services supplied to £	-	-	-	-	-
Balance trade payable to £	150,311	102,067	4,200	-	-
Balance trade receivable from £	165,757	-	-	10,736	-
Intercompany loan receivable from £	918,207	-	-	-

 

 

Tom Ilube, CEO, had made a loan of £250,000 to the Company on the same terms as the other Lenders as described in note 30. This loan was repaid in December 2022.

                                                                                               

The Company has a related party relationship with its key management who are the Executives: Tom Ilube, Mary Dowd, Jake Holloway, Sean Arrowsmith and Stuart Jubb, whose total compensation amounted to £796,444 (2021: £793,233).                                                                                             

 

30 Convertible Loan Notes

 

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

 

£		Convertible Loan Notes
B/f 2022		1,400,000
Expired in the period		(1,400,000)
Extended loans		700,000
Increased loan amounts		150,000
Additional loans issued in the period		650,000
C/d 2022		1,500,000

 

 

The discounted amount of the Convertible Loan Notes at the year end was £1,329,678.

The equity component of the Convertible Loan Notes at the date of issue was £195,685.

 

Repayment of the loan notes is at the end of the term, in cash, save that each lender may opt to convert part or all of their loan into Ordinary Shares at £0.252.  On repayment of the loans in cash, each lender will be issued warrants valid for three months to subscribe for Ordinary Shares representing 10% of the value of the loan at £0.252.                                                                                                                                                                                        

The loan from Tom Ilube, CEO, for an amount of £250,000 was repaid in December 2022.

                               

31 Controlling Party

 

The Company does not have a controlling party.                                                                                           

 

32 Subsequent Events

 

There are no events after the reporting date to be disclosed.