Group and Company Cash Flow Statement

For the year ended 31 December 2022

 

		Group	Group	Company	Company
		Year ended 31 December 2022	Year ended 31 December 2021	Year ended 31 December 2022	Year ended 31 December 2021
		£	£	£	£
	Notes
Loss before tax		(5,787,197)	(4,174,533)	(6,131,818)	(3,890,085)
Adjustments to reconcile profit before tax to cash generated from operating activities:
Finance income	3	(37,947)	(1,622)	-	-
Finance costs	3	171,257	360	162,757	-
Equity-settled share-based payment		32,595	-	32,595	-
Share-based compensation	15	4,284,039	2,338,495	4,284,039	2,338,495
Depreciation and amortisation	8 & 10	401,164	152,386	296,133	145,920
Increase in accrued income, trade and other receivables	12	(845,866)	(54,577)	(451,724)	(141,678)
Increase in trade and other payables	14	757,250	682,374	896,573	559,196
		_______	_______	_________	_______
Cash used in operations		(1,024,705)	(1,057,117)	(911,445)	(988,152)
Income tax received	6	158,188	70,764	158,188	66,434
		_______	_______	_________	_______
Cash used in operating activities		(866,517)	(986,353)	(753,257)	(921,718)
Investing activities
Acquisition of property, plant and equipment	10	(17,198)	(17,371)	-	-
Acquisition of intangible assets	8	(422,713)	(404,568)	(422,713)	(404,569)
Acquisition of subsidiary, net of cash acquired	9	(552,128)	-	-	-
Investment in Group companies	11	-	-	(631,335)	(201,985)
		_______	_______	_________	_______
Cash used in investment activities		(992,039)	(421,939)	(1,054,048)	(606,554)
Financing activities
Shares issued (net of costs)	15	1,992,694	1,571,457	1,992,694	1,571,457
Loans received	13	225,000	-	225,000	-
Interest and similar income	3	37,947	1,622	-	-
Interest and similar charges	3	(62,841)	(360)	(54,341)	-
		_______	_______	__________	_______
Cash generated from financing activities		2,192,800	1,572,719	2,163,353	1,571,457
Increase in cash and cash equivalents		334,244	164,427	356,048	43,185
Opening cash and cash equivalents		348,102	183,675	139,579	96,394
		_______	_______	________	_______
Closing cash and cash equivalents		682,346	348,102	495,627	139,579
		=====================	=====================	=====================	=====================

 

The Notes to the Financial Statements form an integral part of these financial statements.

 

 

Notes to the Financial Statements

For the year ended 31 December 2022

 

BAsis of preparation

 

Cornerstone FS plc is a public limited company, incorporated and domiciled in England. The Company was admitted to AIM, London Stock Exchange's market for small and medium size growth companies, on 6 April 2021. The registered office of the Company is The Old Rectory, Addington, Buckingham, England, MK18 2JR, and its principal business address is 75 King William Street, London EC4N 7BE. The main activities are set out in the Strategic Report of the Company's annual report and accounts for the year ended 31 December 2022.

 

These financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the United Kingdom ("IFRS") for the years ended 31 December 2021 and 31 December 2022, and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS. The financial statements have been prepared in sterling, which is the Group's presentation currency and the functional currency of each Group entity. They have been prepared using the historical cost convention except for the measurement of certain financial instruments.

 

The parent company accounts have also been prepared in accordance with IFRS (as adopted by the United Kingdom) and using the historical cost convention. The accounting policies set out below have been applied consistently to the parent company where applicable.

 

Monetary amounts in these financial statements are rounded to the nearest pound.

  

The preparation of financial statements in conformity with IFRS requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting year. These estimates and assumptions are based upon management's knowledge and experience of the amounts, events or actions. Actual results may differ from such estimates.

 

The critical accounting estimates are considered to relate to the following:

 

Fair values of assets acquired in business combinations: The Group recognises the fair value of customer relationships acquired through business combinations reflecting discounted future cash flows from the acquired customers and incorporating an estimated rate of attrition of the customer base.

 

Deferred consideration: Total compensation for acquisitions includes an element of deferred consideration payable, subject to the revenue performance post-acquisition. Management use historical information and management forecasts to estimate a liability, using the discounted cashflow methodology, to derive a fair value of the deferred consideration payable.

 

Intangible assets: The Group recognises intangible assets in respect of software development costs. This recognition requires the use of estimates, judgements and assumptions in determining whether the carrying value of such assets is impaired at each year end.

 

Investments in subsidiary undertakings (Company financial statements only): The Company's Statement of Financial Position includes investments stated at cost in its subsidiary undertakings. The continuing recognition at cost requires judgements and estimates including an assessment of whether the carrying value of such investments is impaired at each year end.

 

NEW STANDARDS AND INTERPRETATIONS

As of the date of approval of these financial statements, the following Standards and Interpretations which have not been applied in these financial statements were in issue but not yet effective:

 

·      IFRS 17 Insurance Contracts (effective for periods commencing 1 January 2023)

·      Amendments to IAS 1, presentation of financial statements on classification of liabilities (effective for periods commencing on or after 1 January 2023)

·      Amendments to IAS 8 - definition of accounting estimates (effective for periods commencing 1 January 2023)

 

The Directors anticipate that the adoption of these Standards and Interpretations in future periods will have no material impact on the financial statements of the Group. The Group does not intend to apply any of these pronouncements early.

 

IMPACT OF NEW INTERNATIONAL REPORTING STANDARDS, AMENDMENTS AND INTERPRETATIONS

The following Standards and Interpretations have been considered and applied in these financial statements:

 

·      COVID-19-Related Rent Concessions beyond 30 June 2021 - Amendment to IFRS 16

·      Onerous Contracts - Cost of Fulfilling a Contract (Amendments to IAS 37)

·      Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS 16)

 

There has been no material impact on the financial statements as a result of adopting these Standards and Interpretations.

 

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and its subsidiary undertakings. Entities are accounted for as subsidiary undertakings when the Group is exposed to or has rights to variable returns through its involvement with the entity and it has the ability to affect those returns through its power over the entity.

 

Details of subsidiary undertakings and % shareholding:

Cornerstone Payment Solutions Ltd       -               100% owned by the Company

Cornerstone - Middle East FZCO            -               100% owned by the Company

Avila House Limited                               -               100% owned by Cornerstone Payment Solutions Ltd

Capital Currencies Limited                     -               100% owned by the Company

Pangea FX Limited                                  -               100% owned by the Company

 

All subsidiary undertakings have an accounting reference date ended 31 December.

 

On 23 December 2022, the Company announced the agreement of the sale of Avila House Limited to Aspire Commerce Ltd. Avila House remained under the control of the Group until the sale completed on 26 April 2023 following receipt of regulatory approval from the Financial Conduct Authority ("FCA").

 

BUSINESS COMBINATIONS

The Group financial statements recognise business combinations using the acquisition method when control is transferred to the Group. The consideration transferred in the acquisition is generally measured at fair value, as are the identifiable net assets acquired. Any goodwill that arises is tested annually for impairment. Any gain on a bargain purchase is recognised in profit or loss immediately. Transaction costs are expensed as incurred, except if related to the issue of debt or equity securities. The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts are generally recognised in profit or loss.

 

Any contingent consideration is measured at fair value at the date of acquisition. If an obligation to pay contingent consideration that meets the definition of a financial instrument is classified as equity, then it is not re-measured and settlement is accounted for within equity. Otherwise, other contingent consideration is re-measured at fair value at each reporting date and subsequent changes in the fair value of the contingent consideration are recognised in profit or loss.

 

GOING CONCERN

 

During the year ended 31 December 2022, the Group made an adjusted EBITDA loss (excluding non-cash share-based compensation, depreciation & amortisation costs and non-recurring transactions costs) of £869,319. At 31 December 2022 the Group balance sheet showed a net liabilities position of £89,901, including a negative profit and loss reserve of £10,924,791, and a cash balance of £682,346. Post year-end, the Group's balance sheet has strengthened with the conversion of a £225,000 loan note to equity on 6 February 2023 following receipt of permission from the FCA for a shareholder to increase their shareholding beyond 9.9% of the issued share capital of the Company. Further, the Group received proceeds of £300,000 on 26 April 2023 following the completion of the sale of Avila House Limited.

 

Although the Group has historically generated losses, the trading position of the Group has continued to improve since the year-end with a strong focus on cost control combined with strong revenue growth. As a result, the Group expects to begin generating a cash inflow before financing activities during 2023. 

 

The Directors have prepared cash flow forecasts covering a period to 31 December 2024. The Directors have derived forecast assumptions that are their best estimate of the future development of the Group's business taking into account projected increase in revenues, continued investment in the development of the software platform and organic sales and marketing efforts.

 

The Directors have prepared various scenario planning forecasts alongside their best-estimate forecast assumptions, including a scenario in which sales growth falls below management expectations and various cash mitigation measures are implemented, which all indicate sufficient cash resources to continue to finance the Group's working capital requirements over the forecast period.

 

For these reasons, the Directors continue to adopt the going concern basis of accounting in preparing the Group's financial statements.

 

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

revenue

The Group applies IFRS 15 Revenue from Contracts with Customers for the recognition of revenue. IFRS 15 established a comprehensive framework for determining whether, how much and when revenue is recognised. It affects the timing and recognition of revenue items, but not generally the overall amount recognised.

 

The performance obligations of the Group's revenue streams are satisfied on the transaction date or by the provision of the service for the period described in the contract. Revenue is not recognised where there is evidence to suggest that customers do not have the ability or intention to pay. The Group does not have any contracts with customers where the performance obligations have not been fully satisfied.

 

The Group derives revenue from the provision of foreign exchange and payment services. When a contract with a client is entered into, it immediately enters into a separate matched contract with its institutional counterparty.

 

Spot and forward revenue is recognised when a binding contract is entered into by a client and the rate is fixed and determined. Revenue represents the difference between the rate offered to clients and the rate received from its institutional counterparties.

 

INVESTMENTS

Investments in subsidiary undertakings are accounted for at cost less impairment.

 

FINANCIAL INSTRUMENTS

Financial assets and financial liabilities are recognised on the Group Statement of Financial Position when the Group has become a party to the contractual provisions of the instrument.

Derivative financial instruments

Derivative financial assets and liabilities are carried as assets when their fair value is positive and as liabilities when their fair value is negative. Changes in the fair value of derivatives are included in the income statement. The Group's derivative financial assets and liabilities at fair value through profit or loss comprise solely of forward foreign exchange contracts.

Trade, loan and other receivables

Trade and loan receivables are initially measured at their transaction price. Trade and loan receivables are held to collect the contractual cash flows which are solely payments of principal and interest. Therefore, these receivables are subsequently measured at amortised cost using the effective interest rate method. The Directors have considered the impact of discounting trade and loan receivables whose settlement may be deferred for lengthy periods and concluded that the impact would not be material.

 

An impairment loss is recognised for the expected credit losses on trade and loan receivables when there is an increased probability that the counterparty will be unable to settle an instrument's contractual cash flows on the contractual due dates, a reduction in the amounts expected to be recovered, or both.

 

Impairment losses and any subsequent reversals of impairment losses are adjusted against the carrying amount of the receivable and are recognised in profit or loss.

Trade payables

Trade payables are initially recognised at fair value and subsequently at amortised cost using the effective interest method.

Equity instruments

Equity instruments issued by the Group are recorded at the proceeds received, net of direct issue costs.

Financial liabilities

Financial liabilities are classified according to the substance of the contractual arrangements entered into. An instrument will be classified as a financial liability when there is a contractual obligation to deliver cash or another financial asset to another enterprise.

Cash and cash equivalents

Cash and cash equivalents comprise cash in hand, deposits held at call with banks and other short-term highly liquid investments with original maturities of three months or less.

For the purposes of the Cash Flow Statement, cash and cash equivalents consist of cash and cash equivalents as defined above, net of any outstanding bank overdraft which is integral to the Group's cash management.

 

Goodwill

Goodwill arising on consolidation represents the excess of the cost of acquisition over the Group's interest in the fair value of the identifiable assets and liabilities of a subsidiary, associate or jointly controlled entity at the date of acquisition. Goodwill on acquisition of subsidiaries is separately disclosed in note 9.

 

Goodwill is not amortised; it is recognised as an asset, allocated to cash generating units for the purpose of impairment testing and reviewed for impairment at least annually. Any impairment is recognised immediately in profit or loss and is not subsequently reversed.

 

other INTANGIBLE aSSETS

An intangible asset, which is an identifiable non-monetary asset without physical substance, is recognised to the extent that it is probable that the expected future economic benefits attributable to the asset will flow to the Group and that its cost can be measured reliably. The asset is deemed to be identifiable when it is separable or when it arises from contractual or other legal rights.

 

Amortisation is charged on a straight-line basis through the profit or loss within administrative expenses. The rates applicable, which represent the Directors' best estimate of the useful economic life, are as follows:

 

Customer relationships                          - 5 years

Internally developed software                - 3 years

Software costs                                       - 3 years

Other intangible assets                          - 3 years (no charge in the first period of ownership)

 

property, plant and equipment

All property, plant and equipment is initially recorded at cost and is subsequently measured at cost less accumulated depreciation and any recognised impairment loss.

 

Depreciation, which is charged through the profit or loss within administrative expenses, is provided at rates calculated to write off the cost less residual value of each asset over its expected useful life, as follows:

 

Computer equipment                                    - 25% straight line

Leasehold improvements                              - in line with the term of the underlying leased asset

 

The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss.

 

PROVISIONS

Provisions are recognised when the Group has a present obligation as a result of a past event which it is probable will result in an outflow of economic benefits that can be reliably estimated.

 

SHARE CAPITAL

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in share premium as a deduction from the proceeds.

 

SHARE-BASED COMPENSATION

Where share options are awarded to employees, the fair value of the options at the date of grant is charged to the income statement over the vesting period. Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each balance sheet date so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of options that eventually vest. Market vesting conditions are factored into the fair value of the options granted.

 

As long as all other vesting conditions are satisfied, a charge is made irrespective of whether the market vesting conditions are satisfied. The cumulative expense is not adjusted for failure to achieve a market vesting condition.

 

Where the terms and conditions of options are modified before they vest, the increase in the fair value of the options, measured immediately before and after the modification, is also charged to the income statement over the remaining vesting period. Where equity instruments are granted to persons other than employees, the income statement is charged with fair value of goods and services received.

 

Cancelled or settled options are accounted for as an acceleration of vesting and the amount that would have been recognised over the remaining vesting period is recognised immediately.

 

The proceeds received net of any attributable transaction costs are credited to share capital (nominal value) and share premium when the options are exercised.

 

Fair value is measured by use of the Black-Scholes pricing model which is considered by management to be the most appropriate method of valuation.

 

employee benefits

The Group operates a defined contribution pension scheme. The pension costs charged in the financial statements represent the contribution payable by the Group during the year.

 

The costs of short-term employee benefits are recognised as a liability and an expense in the period the related service is rendered at the undiscounted amount of the benefits expected to be paid in exchange for that service.

 

TAXATION

Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted at the reporting date. Current income tax relating to items recognised directly in equity or other comprehensive income is recognised in equity and not in the consolidated statement of comprehensive income.

 

Deferred income tax is provided on all temporary differences at the reporting date arising between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax assets and liabilities are offset when the Group has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.

 

Deferred tax assets have not been recognised in respect of the Group's tax losses carried forward.

 

Research and Development tax credits are not recognised as receivables until the claims have been submitted and agreed by HMRC.

 

CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

 

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

 

The Group makes estimates and assumptions concerning the future. The resulting accounting judgements will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

 

IMPAIRMENT

At each accounting reference date, the Group reviews the carrying amounts of its intangibles, property, plant & equipment and investments to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any).

 

Where the asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. An intangible asset with an indefinite useful life is tested for impairment annually and whenever there is an indication that the asset may be impaired.

 

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

 

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

 

Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried in at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

 

DEFERRED CONSIDERATION

Total compensation for acquisitions includes an element of deferred consideration payable, subject to the revenue performance post-acquisition. Management use historical information and management forecasts to estimate a liability, using the discounted cashflow methodology, to derive a fair value of the deferred consideration payable.

 

SHARE-BASED COMPENSATION

The fair value of share-based awards is measured using the Black-Scholes model which inherently makes use of significant estimates and assumptions concerning the future applied by the Directors. Such estimates and judgements include the expected life of the options and the number of employees that will achieve the vesting conditions. Further details of the share option scheme are given in note 15.

 

ALTERNATIVE PERFORMANCE MEASURES

 

The Group uses the alternative performance measure of adjusted EBITDA/(EBITDA loss). This measure is not defined under IFRS, nor is it a measure of financial performance under IFRS.

 

This measure is sometimes used by investors to evaluate a company's operational performance with a long-term view towards adding shareholder value. This measure should not be considered an alternative, but instead supplementary, to profit/(loss) from operations and any other measure of performance derived in accordance with IFRS.

 

Alternative performance measures do not have generally accepted principles for governing calculations and may vary from company to company. As such, the adjusted EBITDA/(EBITDA loss) quoted within the Group Statement of Comprehensive Income should not be used as a basis for comparison of the Group's performance with other companies.

 

During the year ended 31 December 2022, the Group adopted adjusted EBITDA as an alternative performance measure having made reference to underlying profit/(loss) from operations in prior periods. The Group adopted the new alternative performance measure in order to more closely align with competitors, financial analyst coverage and the Group's own guidance.

 

ADJUSTED EBITDA/(EBITDA LOSS)

The Group uses adjusted EBITDA/(EBITDA loss), defined as profit/(loss) from operations, adding back share-based compensation, transaction costs associated with the Group's acquisition strategy and depreciation & amortisation charge.

 

The adjusted EBITDA loss is reconciled back to the loss from operations within the Group Statement of Comprehensive Income.

 

1              revenue and SEGMENTAL REPORTING

 

                 All of the Group's revenue arises from its activities within the UK (although a proportion of revenue is derived from customers incorporated or residing outside of the UK). Management considers there to be only one operating segment within the business based on the way the business is organised and the way results are reported internally.

                

Revenue is as follows:

 

	Group	Group
	Year ended 31 December 2022	Year ended 31 December 2021
	£	£
	_______	_______
Total revenue	4,821,996	2,301,172
	_______	_______

 

 

	Group	Group
	Year ended 31 December 2022	Year ended 31 December 2021
2              LOSS FROM OPERATIONS	£	£
Loss from operations is stated after charging:
Share-based compensation	4,284,039	2,338,495
Transaction costs	99,365	402,515
Expensed software development costs	86,941	97,556
Depreciation of property, plant and equipment	14,622	4,293
Amortisation of intangible assets	386,541	148,094
Short-term (2018 IAS 17 operating) lease rentals	252,308	86,434
	_______	_______

 

 

Amounts payable to the Group's auditor in respect of both audit and non-audit services:

 

	Year ended 31 December 2022	Year ended 31 December 2021
	£	£
Audit Services
-   Statutory audit	40,000	25,000
Other Services
Due diligence services	-	18,000
The auditing of accounts of associates of the Company pursuant to legislation:
-   Audit of subsidiaries and its associates	49,450	30,250
	-------------------------	-------------------------
	89,450	73,250
	=========================	=========================

 

 

3              INTEREST AND SIMILAR ITEMS

 

	Year ended 31 December 2022	Year ended 31 December 2021
	£	£
Total finance and other income
Bank interest receivable	37,947	1,622
	=========================	=========================
Total finance costs
Unwinding of discount	108,416	-
Loan note interest	53,500	-
Other interest payable and charges	9,341	360
	-------------------------	-------------------------
	171,257	300
	=========================	=========================

 

4              EMPLOYEES

 

The average monthly numbers of employees in the Group (including the Directors) during the year was made up as follows (the Company has no employees other than the Directors):
	Year ended 31 December 2022	Year ended 31 December 2021
	Number	Number
Directors	7	8
Employees	27	14
	_______	_______
	34	22
	_______	_______
Employment costs	Year ended 31 December 2022	Year ended 31 December 2021
	£	£
Wages and salaries	1,977,588	1,309,251
Social security costs	251,010	182,414
Pension costs	49,200	38,307
Share-based compensation	4,155,094	2,195,782
	_______	_______
	6,432,892	3,725,754
	_______	_______

 

remuneration of key management personnel
The remuneration of the Directors, who are the key management personnel of the Group, is set out below in aggregate. Further information about the remuneration of the individual directors is provided in the Directors' Remuneration Report of the Company's annual report and accounts for the year ended 31 December 2022.
		Year ended 31 December 2022	Year ended 31 December 2021
		£	£
Salaries and fees		794,712	680,553
Bonus		43,044	76,800
Share-based compensation (credit) / charge		(125,443)	311,469
Social security costs		123,024	84,022
		_______	_______
		835,337	1,152,844
		_______	_______
		Number	Number
Number of Directors to whom retirement benefits are accruing under a defined contribution scheme		3	3
		_______	_______
		Year ended 31 December 2022	Year ended 31 December 2021
		£	£
	The remuneration in respect of the highest paid Director was:
	Salaries and fees	140,000	180,000
	Bonus	31,360	43,200
	Share-based compensation charge	30,173	177,000
	Pension and other benefits	7,046	9,000
		_______	_______
		208,579	409,200
		_______	_______

 

During the year, 1,348,867 options were forfeited by Julian Wheatland, a former director, leading to a share-based compensation credit for the year ended 31 December 2022 in respect of Mr. Wheatland of £192,452 (year ended 31 December 2021: share-based compensation charge of £177,000).

During the year, no (2021: nil) Directors exercised any (2021: nil) share options.

 

5               Pension costs

 

The Group operates a defined contribution pension scheme. The scheme and its assets are held by independent managers. The pension charge represents contributions due from the Group and amounted to £49,200 (2021: £38,307). At 31 December 2022 contributions of £59,054 remained outstanding and are included within other payables (2021: £25,864).

 

 

 

6               taxation

 

The tax on the loss on ordinary activities for the period was as follows:

 

	Group	Group
	Year ended 31 December 2022	Year ended 31 December 2021
	£	£
	_______	_______
Current Tax:
Current tax credit	(158,188)	(70,764)
Deferred tax credit	(17,177)	-
	_______	_______
Income tax credit	(175,365)	(70,764)
	_______	_______
	Group	Group
	Year ended 31 December 2022	Year ended 31 December 2021
	£	£
Loss before taxation	(5,787,197)	(4,174,533)
	_______	_______
Loss multiplied by main rate of corporation tax in the UK of 19% (2021: 19%)	(1,099,567)	(793,161)
Effects of:
Surrender of tax losses for research & development tax credit refund	(158,188)	(70,764)
Expenses not deductible for tax purposes	29,261	66,649
Share-based payments	814,037	444,314
Other adjustments in period	65,825	(702)
Tax losses carried forward	190,444	282,900
	_______	_______
Current tax credit	(158,188)	(70,764)
	_______	_______

 

As at 31 December 2022, the Group had prepared but not yet submitted a Research and Development tax credits reclaim, the estimated net benefit of which is approximately £135,000 During the year ended 31 December 2022, the Group received a Research and Development tax credit refund of £158,188 (2021: £70,764) in respect of its reclaim for the year ended 31 December 2021.

 

As at 31 December 2022, the Group had tax losses carried forward of £5,013,429 (31 December 2021: £4,147,682). Deferred tax has not been recognised in respect of these tax losses. The standard rate of corporation tax applicable to the Group for the year ended 31 December 2022 was 19%. The UK government has announced, with effect from 1 April 2023, an increase in the corporation tax main rate from 19% to 25% for companies with profits over £250,000 and the introduction of a small profits rate of 19% applicable to companies with profits of not more than £50,000, with marginal relief available for profits up to £250,000.

 

DEFERRED TAX

 

The Group recognised the following movement in deferred tax liabilities (year ended 31 December 2021: £nil):

 

	Balance as at 1 January 2022		Acquired in business combination		Recognised to profit or loss	Non-current balance as at 31 December 2022
	£		£		£	£
Intangibles	-		116,993		(17,177)	99,816
	_______		_______		_______	_______

Based on the valuation of acquisition intangibles and enacted UK corporation tax rates, during the year ended 31 December 2022 the Group has acquired deferred tax liabilities of £80,382 in relation to its acquisition of Capital Currencies Limited and £36,611 in relation to its acquisition of Pangea FX Limited (note 9). The deferred tax will be released to the income statement as the underlying intangible assets are amortised or otherwise recognised via impairment in profit or loss.

 

7               LOSS PER SHARE

 

The loss per share of 17.26p (2021: 21.24p) is based upon the loss of £5,611,832 (2021: loss of £4,103,769) and the weighted average number of ordinary shares in issue for the year of 32,506,335 (2021: 19,317,407).

 

The loss incurred by the Group means that the effect of any outstanding warrants and options would be considered anti-dilutive and is ignored for the purposes of the loss per share calculation.

 

8              GROUP INTANGIBLE ASSETS

	Goodwill	Customer relationships	Internally developed software	Software costs	Other	Total
	£	£	£	£	£	£
COST
At 1 January 2022	-	-	647,485	15,611	92,520	755,616
Additions	-	-	422,713	-	-	422,713
Acquired through business combinations	1,086,262	615,756	-	-	-	1,702,018
	_______	_______	_______	_______	_______	_______
At 31 December 2022	1,086,262	615,756	1,070,198	15,611	92,520	2,880,347
AMORTISATION
At 1 January 2022	-	-	162,558	15,611	-	178,169
Charge for the period	-	90,408	296,133	-	-	386,541
	_______	_______	_______	_______	_______	_______
At 31 December 2022	-	90,408	458,691	15,611	-	564,710
NET BOOK VALUE
At 31 December 2022	1,086,262	525,348	611,507	-	92,520	2,315,637
	_______	_______	_______	_______	_______	_______
At 31 December 2021	-	-	484,927	-	92,520	577,447
	_______	_______	_______	_______	_______	_______

 

Other intangible assets comprise regulatory licenses held at cost and are not amortised.

 

Company INTANGIBLE ASSETS

	Internally developed software	Total
	£	£
COST
At 1 January 2022	647,485	647,485
Additions	422,713	422,713
	_______	_______
At 31 December 2022	1,070,198	1,070,198
AMORTISATION
At 1 January 2022	162,558	162,558
Charge for the period	296,133	296,133
	_______	_______
At 31 December 2022	458,691	458,691
NET BOOK VALUE
At 31 December 2022	611,507	611,507
	_______	_______
At 31 December 2021	484,927	484,927
	_______	_______

9              BUSINESS COMBINATIONS

 

CAPITAL CURRENCIES LIMITED

The Group acquired 100% of the share capital of Capital Currencies Limited ("Capital Currencies") on 1 February 2022. Capital Currencies was a well-established foreign exchange broker located in Tunbridge Wells, specialising in the provision of currency exchange and international payments. Capital Currencies is authorised and regulated by the FCA as an authorised payment institution permitted to provide payment services.

The rationale for the acquisition was to expand Cornerstone's presence in its core target market and, in line with the Group's stated strategy, increase revenue generated by direct clients. By bringing Capital Currencies' clients onto Cornerstone's technology platform, the Group benefits from the rationalisation of payments to banking partners across the combined organisation as well as recognising other synergistic savings, such as in compliance costs and overheads.

The recognised value of assets acquired and liabilities assumed and the fair value of consideration at the date of acquisition were as follows:

	£
Intangibles	423,064
Tangible fixed assets	14,584
Trade and other receivables	27,842
Cash acquired	58,351
Trade and other payables	(57,939)
Deferred tax provision	(80,382)
Net assets on acquisition	385,520
Goodwill on acquisition	1,043,319
Total consideration	1,428,839
Initial consideration - cash	586,335
Deferred contingent consideration	842,504
Total consideration	1,428,839

 

 

 

Goodwill comprises the value of expected synergies arising from the acquisition and additional value attributed by the acquirer in relation to the future expected cash flows, which is not separately recognised.

In determining the value of acquired customer relationships, forecast cash flows were discounted using a weighted average cost of capital ("WACC") of 13%. Based on the valuation of the intangibles and enacted UK corporation tax rates a deferred tax provision of £80,382 was recognised as a result of the identified intangible asset.

Deferred consideration related to the acquisition of Capital Currencies was agreed at acquisition as payable as follows:

·      On the first anniversary of completion, two times Capital Currencies' revenue for the 12-month period leading up to 31 January 2023, less the initial cash consideration already paid.

·      On the second anniversary of completion, three times Capital Currencies' revenue for the 12-month period leading up to 31 January 2024, less cumulative amounts already paid.

Deferred consideration has been assessed using historical information and management forecasts to estimate amounts payable which have been discounted at a WACC of 13%. 

As disclosed in note 20, on 18 March 2023, the Company announced it had agreed a variation of the above deferred consideration payments that postponed the above measurement and settlement periods by one calendar year in each instance and gave the Company the option to settle the deferred consideration in cash.  The discounted consideration shown above does not reflect the impact of this extension.

PANGEA FX LIMITED

The Group acquired 100% of the share capital of Pangea FX Limited ("Pangea") on 1 September 2022. Pangea FX is a specialist FX and treasury consultancy with a strategic focus on helping its clients control the impact currency volatility has on their business, primarily through providing a bespoke service to corporate clients in the UK.

The rationale for the acquisition was to accelerate the Group's growth through the addition of two experienced senior sales executives - the principals of Pangea - who are responsible for leading the Group's sales function in the UK and Dubai. The Group has also benefited from the migration of Pangea's existing client base to the Cornerstone platform as well as certain operational synergies such as from closing the Pangea operating base and relocating the employees to the Group's main office.

The recognised value of assets acquired and liabilities assumed and the fair value of consideration at the date of acquisition were as follows:

	£
Intangibles	192,962
Tangible fixed assets	976
Trade and other receivables	30,737
Cash acquired	856
Trade and other payables	(12,568)
Deferred tax provision	(36,611)
Net assets on acquisition	176,081
Goodwill on acquisition	42,944
Total consideration	219,025
Initial consideration - cash	25,000
Payment to discharge Directors' loans	21,447
Loan notes (undiscounted)	172,578
Total consideration	219,025

 

 

 

Goodwill comprises the value of expected synergies arising from the acquisition and additional value attributed by the acquirer in relation to the future expected cash flows, which is not separately recognised.

In determining the value of the acquired customer relationships that comprise the intangible assets, forecast cash flows were discounted using a WACC of 13%. Based on the valuation of the intangibles and enacted UK corporation tax rates a deferred tax provision of £36,611 was recognised as a result of the identified intangible asset.

The payment of the loan note principal of £172,578 is contingent on achieving future revenue targets over a period of two years from the acquisition date. Based on current and forecast performance it has been assumed that the contingent consideration will be paid in full. A 6% coupon rate is payable on the loan note principal, quarterly in arears. As the loan note debt instrument is expected to be held to maturity, with the only related cash flows being the principal and interest, the loan note principal is shown without any time-value discount.               

 

 

 

 

 

 

 

10            GROUP property, plant and equipment

	Computer equipment		Leasehold improvements		Total
	£		£		£
COST
At 1 January 2022	33,046		-		33,046
Additions	17,198		-		17,198
Acquired through business combinations	976		14,583		15,559
	_______		_______		_______
At 31 December 2022	51,220		14,583		65,803
AMORTISATION
At 1 January 2022	11,504		-		11,504
Charge for the period	8,275		6,347		14,622
	_______		_______		_______
At 31 December 2022	19,779		6,347		26,126
NET BOOK VALUE
At 31 December 2022	31,441		8,236		39,677
	_______		_______		_______
At 31 December 2021	21,542		-		21,542
	_______		_______		_______

11            investments

	Investments in Subsidiaries £
Cost or Valuation At 1 January 2022 Additions		6,349,758 1,667,864
		8,017,622
Net Book Value At 31 December 2022		8,017,622
At 31 December 2021		6,349,758

 

The Company's investment as at 31 December 2022 represents its investments in its direct subsidiaries of £6,367,773 in Cornerstone Payment Solutions Ltd (2021: £6,347,773), £1,428,839 in Capital Currencies (2021: £nil), £219,025 in Pangea FX Limited (2021: £nil) and £1,985 in Cornerstone - Middle East FZCO (2021: £1,985).

 

During the year ended 31 December 2022, the Company invested a further £20,000 in support of the increased regulatory capital requirements for Cornerstone Payment Solutions Ltd.

 

Further, as disclosed in note 9 investments in subsidiaries acquired in the year amounted to £1,428,839 in respect of Capital Currencies, which was acquired on 1 February 2022 (year-ended 31 December 2021: £nil) and £219,025 in respect of Pangea FX Limited (2021: £nil).

 

 

 

 

Shares in subsidiary and associate undertakings are stated at cost. As at 31 December 2022, Cornerstone FS plc owned the following principal subsidiaries, which are included in the consolidated accounts:

Subsidiary	Principal Activity	Country of Incorporation	Registered Office	Percentage of Ownership
Cornerstone Payment Solutions Ltd	Foreign Exchange and Payment Services	Northern Ireland	1 Elmfield Avenue, Warrenpoint, Newry, Co. Down, BT34 3HQ	100 per cent.
Cornerstone - Middle East FZCO	Consultancy	United Arab Emirates	Dubai Silicon Oasis, DDP, Building A2, Dubai, United Arab Emirates	100 per cent.
Avila House Limited	E-money and Payment Services	England and Wales	The Old Rectory, Addington, Buckinghamshire, MK18 2JR	100 per cent.
Capital Currencies Limited	Authorised Payment Institution	England and Wales	The Old Rectory, Addington, Buckinghamshire, MK18 2JR	100 per cent.
Pangea FX Limited	Foreign Exchange White Label	England and Wales	The Old Rectory, Addington, Buckinghamshire, MK18 2JR	100 per cent.

 

 

CS Commercial Limited and Cornerstone EBT Trustee Limited, which were dormant and 100% owned by the Company, were both dissolved during the year.

 

 

 

 

12            current trade and other receivables

 

	Group 31 December 2022	Group 31 December 2021	Company 31 December 2022	Company 31 December 2022
	£	£	£	£
Trade receivables	221,669	-	-	-
Prepayments and accrued income	131,010	90,360	39,465	31,118
Derivative financial assets at fair value	635,473	322,710	-	-
Other receivables	53,062	42,525	-	10,000
Amounts due from Group undertakings	-	-	363,359	170,229
Taxes and social security	297,896	37,649	297,896	37,649
	_______	_______	_______	_______
	1,339,110	493,244	700,720	248,996
	_______	_______	_______	_______

 

For the year ended 31 December 2022 £nil was recorded as a bad debt expense (31 December 2021: £nil).

 

As at 31 December 2022, the Group had a contingent asset in respect of Research and Development tax credits for which a reclaim had been prepared, but not yet submitted. The estimated net benefit of the claim is approximately £135,000(2021: £158,000) and has not been included in current receivables due to its contingent nature.

 

13             loan notes                                                                                                                                                                     

 

	Group	Group	Company	Company
	31 December 2022	31 December 2021	31 December 2022	31 December 2021
	£	£	£	£

 

CURRENT
Convertible loan notes	225,000	-	225,000	-
	_______	_______	_______	_______

 

NON-CURRENT
Loan notes	2,172,578	-	2,172,578	-
	_______	_______	_______	_______

 

The current convertible loan note of £225,000 was issued pursuant to the Company's fundraising on 5 August 2022 to a placee pending approval from the FCA to allow the placee to increase their shareholding to over 10%. The FCA granted such approval and the loan note was converted into 3,461,538 new ordinary shares of one penny each at an exercise price of 6.5 pence per share on 6 February 2023 (see note 20).

 

The non-current non-convertible loan notes comprise £2,000,000 issued to Robert O'Brien (the "Robert O'Brien loan note") and £172,578 of deferred consideration in relation to the acquisition of Pangea FX Limited (see note 9). Both loan notes have a 6% coupon rate payable quarterly in arrears. The Robert O'Brien loan note was issued pursuant to a settlement of his share-incentivisation arrangement with the Company and was due for repayment on 31 July 2025. Post year end, the repayment date was varied to 31 July 2026. The Pangea FX Limited loan note is payable on 31 August 2024 contingent upon achieving future revenue targets over a period of two years from the acquisition date. Based on current and forecast performance it has been assumed that the loan notes will be paid in full.

 

 

14             current trade and other payables

 

	Group	Group	Company	Company
	31 December 2022	31 December 2021	31 December 2022	31 December 2021
	£	£	£	£
Trade payables	362,035	346,255	162,128	212,561
Derivative financial liabilities at fair value	563,676	290,292	-	-
Other tax and social security	515,750	60,349	50,640	10,923
Other payables and accruals	527,816	484,814	179,818	244,033
Amount due to Group undertakings	-	-	1,425,555	435,659
	_______	_______	_______	_______
	1,969,277	1,181,710	1,818,141	903,176
	_______	_______	_______	_______

 

15            Share capital AND Reserves

 

Allotted, called up and fully paid
	Ordinary shares	Share capital
	No.	£
Ordinary shares of £0.01 each as at 1 January 2022	20,277,582	202,776
Issue of new shares of £0.01	27,758,617	277,586
	_______	_______
Ordinary shares of £0.01 each at 31 December 2022	48,036,199	480,362
	_______	_______

At 31 December 2022 share subscriptions of £nil remained unpaid (31 December 2021: £nil).

 

The following changes in the share capital of the Company have taken place in year ended 31 December 2022:

 

·      On 27 January 2022, 3,283,034 ordinary shares were issued at a price of £0.265 in connection with a placing and subscription

·      On 8 April 2022, 123,000 ordinary shares were issued at a price of £0.265 in consideration for investor relations services

·      On 5 August 2022, 13,230,765 ordinary shares were issued at a price of £0.065 in connection with a placing

·      On 5 August 2022, 6,386,818 ordinary shares were issued at a price of £0.100 being the equity element of a settlement with Robert O'Brien and his team related to their share-based incentivisation agreement

·      On 24 August 2022, 360,000 ordinary shares were issued at a price of £0.10025 in part settlement of the share-based remuneration for the non-executive board and company secretary in respect of the year ended 31 December 2021

·      On 7 October 2022, 4,375,000 ordinary shares were issued at a price of £0.008 upon conversion of a loan note

 

All ordinary shares are equally eligible to receive dividends and the repayment of capital and represent equal votes at meetings of shareholders.

 

The following describes the nature and purpose of each reserve within owner's equity:

Share capital: Amount subscribed for shares at nominal value.

Share premium: Amount subscribed for share capital in excess of nominal value, less costs of share issue.

Share-based payment reserve: The share-based payment reserve comprises the cumulative expense representing the extent to which the vesting period of warrants and share options has passed and management's best estimate of the achievement or otherwise of non-market conditions and the number of equity instruments that will ultimately vest.

Deferred consideration reserve: Reflects equity-based contingent consideration on the acquisition of subsidiaries.

Merger relief reserve: Effect on equity of the consideration shares issued over their nominal value.

Reverse acquisition reserve: Effect on equity of the reverse acquisition of Cornerstone Payment Solutions Ltd.

Retained losses: Cumulative realised profits less cumulative realised losses and distributions made, attributable to the equity shareholders of the Company.

 

Options

 

The Company operates an Enterprise Management Incentive ("EMI") Scheme equity-settled share-based remuneration scheme for employees. 

 

Under the scheme the options are exercisable at any time. The options are also exercisable in the event of a change of control. If the option holder's employment within the Group is terminated, other than for gross misconduct, any options vested may be exercised within 90 days of such termination (12 months in the case of the option holder's death), otherwise the options lapse five years after the date of grant. The options also lapse, inter alia, if the option holder is adjudged bankrupt or proposes a voluntary arrangement or other scheme in relation to his/her debts.

 

	31 December 2022		31 December 2021
	Number	Weighted average exercise price	Number		Weighted average exercise price
		£			£
Outstanding at the beginning of the year	1,599,480	0.50	1,599,480		0.50
Granted during the year	1,893,454	0.23	-		-
Forfeited/waived during the year	(1,786,603)	(0.46)	-		-
	_______	_______	_______		_______
Total outstanding	1,706,331	0.24	1,599,480		0.50
	_______	_______	_______		_______
Total exercisable	184,535	0.50	533,160		0.50
	_______	_______	_______		_______

The Black-Scholes model was used for calculating the cost of options. The model inputs for each of the options issued were:

GRANT DATE	8 March 2022	8 March 2022	8 March 2022	1 September 2022
Exercise price (pence)	36.2	61.0	26.5	10.0
Share price at grant date (pence)	16.5	16.5	16.5	9.0
Risk free rate	2.1%	2.1%	2.1%	2.7%
Expected volatility	90.1%	90.1%	90.1%	129.5%
Contractual life (years)	5	5	5	5

 

The expected volatility reflects the assumption that historical volatility of comparable quoted companies is indicative of future trends, which may not necessarily be the actual outcome.

The weighted average contractual life of the options is five years (2021: five years).

No options were exercised during the current year (2021: nil).

The Group's share-based compensation charge for the year ended 31 December 2022 of £4,284,039 (2021: £2,338,495) consists of £128,943 in relation to warrants granted in Cornerstone (2021: £142,712), a net credit of £222,577 in respect of the Cornerstone options (2021: charge of £306,833), £36,836 in respect of equity settled share-based payments related to the non-executive Board member's service agreements (2021: £81,370) and £4,340,837 of other share-based compensation (2021: £1,807,580).

 

 

Other share-based compensation

 

On 27 September 2021 the Company announced the appointment of Robert O'Brien as General Manager APAC and Middle East. As part of his remuneration package over the first two years he and his team were entitled to receive share-based incentivisation based on a multiple of revenue generation and contribution to profit.

 

Upon initial recognition of the share-based incentivisation, the forecasted performance of Robert O'Brien and his team over the two-year period, resulted in an expected share-based compensation charge over the two-year period of £6,148,417 based on the share price at the grant date on 1 August 2021 of 29.5 pence per share.

 

On 4 August 2022, the Company announced the variation of the share incentive arrangement between the Company and Robert O'Brien and his team. The terms of the original incentivisation arrangements were varied such that 1) Mr. O'Brien was issued a loan note with a value of £2 million and carrying a coupon rate of 6%, repayable by the Company on 31 July 2025 (which was subsequently varied to be repayable on 31 July 2026); 2) Mr. O'Brien was issued and allotted 4,286,818 new ordinary shares at a price of 10p per share; 3) the three senior members of Mr. O'Brien's team were allotted and issued 2,100,000 new ordinary shares at a price of 10p per share; and 4) the issue of a further 5,113,182 new ordinary shares to Mr. O'Brien at a price of 10p per share following receipt from the FCA of permission for Mr. O'Brien to increase his holding to more than 9.9% of the issued share capital of the Company. As a result of the agreed settlement, the Company recognised an accelerated charge for the year ended 31 December 2022 such that the full value of the total charge estimated upon initial recognition of £6,148,417 has been cumulatively expensed (£4,340,837 for the year ended 31 December 2022 and £1,807,580 for the year ended 31 December 2021).

 

A transfer from the share-based payment reserve to the profit and loss reserve of £5,186,984 was recognised for the year ended 31 December 2022 reflecting the issue of the £2 million loan note, allotment of 6,386,818 new ordinary shares at a price of 10p per share to Robert O'Brien and his team (£3,153,950) and the issue of 329,492 shares at a price of 10.025 pence per share on 28 August 2022 in respect of equity-settled remuneration under the non-executive Board member's service agreements.

 

No warrants were granted in the year.

 

16            Related party transactions

 

Details of key management compensation are included in note 4. Key management are considered to be the Directors of the Group. 

 

Transactions with subsidiaries

During the year, the Company and Cornerstone Payment Solutions Ltd entered into various transactions with each other including software development charges, licenses fees and working capital support. The net balance of transactions between the companies are held on an interest-free inter-Group loan which has no terms for repayment. At the year end, the Company owed £1,404,408 (2021: £435,659) to Cornerstone Payment Solutions Ltd.

 

During the year, the Company also provided working capital support to Avila House Limited, Cornerstone - Middle East FZCO and Capital Currencies Limited. The net balance of transactions between the companies are held on an interest-free intra-Group loan which has no terms for repayment. At the year end, Avila House Limited owed the Company £259,617 (2021: £150,041), Cornerstone - Middle East FZCO owed the Company £60,500 (2021: £20,188) and Capital Currencies Limited owed the Company £43,242 (2021: £nil).

 

Other related parties

All of the amounts below were in respect of the year ended 31 December 2022.

 

During the year ended 31 December 2022, the Group generated revenue of £1,617,467 under a referral agreement with Atlantic Partners Asia ("APA"), a significant shareholder in the Company (year ended 31 December 2021: £481,330). As at 31 December 2022, APA owed the Group £221,669 (31 December 2021: £nil).

 

As at 31 December 2022 an amount of £8,750 was due from Terry Everson, a director of Cornerstone Payment Solutions Ltd and a shareholder in Cornerstone (31 December 2021: £8,750).

 

On 28 September 2022 William Newton, a director and significant shareholder of the Company, assigned his un-drawn convertible loan note of £350,000 to APA.

 

During the year ended 31 December 2022, William Newton repaid a loan made by the Group to him of £10,000 (balance outstanding as at 31 December 2021: £10,000).

 

During the year ended 31 December 2022, the Group incurred charges of £45,000 (2021: £nil) under a computer services agreement with JF Technology (UK) Ltd of whom Stephen Flynn (a former Director of the Company and a significant shareholder) is a director and a majority shareholder. As at 31 December 2022 £18,000 was payable to JF Technology (UK) Ltd (balance outstanding as at 31 December 2021: £nil).

 

The transactions with Robert O'Brien are disclosed in notes 13, 15 and 20.

 

17             FINANCIAL INSTRUMENTS

 

                FINANCIAL ASSETS

 

	Group	Group	Company		Company
	31 December 2022	31 December 2021	31 December 2022		31 December 2021
	£	£	£		£
DERIVATIVE FINANCIAL ASSETS
Foreign currency forward contracts with customers	504,106	359,077	-		-
Foreign currency forward contracts with institutional counterparty	131,367	33	-		-
	_______	_______	_______		_______
	635,473	359,110	-		-
Cash and cash equivalents	682,346	348,102	495,627		139,579
Trade receivables	221,669	-	-		-
Other receivables	184,072	132,885	402,824		211,347
	_______	_______	_______		_______
	1,723,560	840,097	898,451		350,926
	_______	_______	_______		_______

 

FINANCIAL LIABILITIES

 

	Group	Group	Company		Company
	31 December 2022	31 December 2021	31 December 2022		31 December 2021
	£	£	£		£
DERIVATIVE FINANCIAL LIABILITIES
Foreign currency forward contracts with customers	165,156	290,292	-		-
Foreign currency forward contracts with institutional counterparty	398,520	-	-		-
	_______	_______	_______		_______
	563,676	290,292	-		-
Trade payables	362,035	346,255	162,128		212,561
Other payables	527,816	484,814	1,605,373		679,692
Loan notes	2,397,578	-	2,397,578		-
	_______	_______	_______		_______
	3,851,105	1,121,361	4,165,079		892,253
	_______	_______	_______		_______

 

All financial assets and liabilities have contractual maturity of less than one year with the exception of loan notes of £2,172,578 (2021: £nil).

 

 

 

 

Derivative financial assets and liabilities

 

                Derivative financial assets not designated as hedging instruments

 

	31 December 2022		31 December 2021
	Fair Value	Notional Principal	Fair Value		Notional Principal
	£	£	£		£
Foreign currency forward contracts with customers	504,106	9,042,956	359,077		12,508,939
Foreign currency forward contracts with institutional counterparty	131,367	3,377,597	33		12,544
	_______	_______	_______		_______
	635,473	12,420,553	359,110		12,521,483
	_______	_______	_______		_______

 

                Derivative financial liabilities not designated as hedging instruments

 

	31 December 2022		31 December 2021
	Fair Value	Notional Principal	Fair Value		Notional Principal
	£	£	£		£
Foreign currency forward contracts with customers	165,156	3,337,362	290,292		9,874,438
Foreign currency forward contracts with institutional counterparty	398,520	8,715,534	-		-
	_______	_______	_______		_______
	563,676	12,052,896	290,292		9,874,438
	_______	_______	_______		_______

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Foreign currency forward contracts are measured at fair value on a recurring basis.

 

There are three levels of fair value hierarchy:

·      Level 1 - the fair value of financial instruments traded in active markets is based on quoted market prices at the end of the reporting period.

·      Level 2 - valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable.

·      Level 3 - valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.

 

Foreign currency forward contracts with customers generally require immediate settlement on the maturity date of the individual contract and fall into level 2 of the fair value hierarchy above. Level 2 comprises those financial instruments which can be valued using inputs other than quoted prices that are observable for the asset or liability either directly (i.e., prices) or indirectly (i.e., derived from prices). The fair value of forward foreign exchange contracts is measured using observable forward exchange rates for contracts with a similar maturity at the reporting date.

 

The net gain on financial assets at fair value through profit or loss for year ended 31 December 2022 was £3,300 (2021: net loss of £29,661).

 

Financial instruments - risk management

 

Financial assets primarily comprise trade and other receivables, cash and cash equivalents and derivative financial assets. Financial liabilities comprise trade and other payables, shareholder loans and derivative financial liabilities. The main risks arising from financial instruments are market risk (including foreign currency risk and interest rate risk), liquidity risk, credit risk and counterparty risk.

 

Market risk

 

Market risk for the Group comprises foreign exchange risk and interest rate risk. The Group operates as a riskless matched principal broker for deliverable non-speculative spot and forward foreign currency transactions, with each trade with its clients matched with an identical trade with an institutional counterparty. Therefore, foreign exchange risk is mitigated through the matching of foreign currency assets and liabilities between clients and institutional counterparties which move in parity.

 

The Group's cash balances are primarily held in Pound Sterling and the Group does not hold significant cash balances in foreign currencies.

 

Interest rate risk affects the Group to the extent that it implicitly impacts the price of foreign currency forward contracts. However, this risk is mitigated in the same way as foreign currency risk.

 

Liquidity risk

 

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group has extensive controls to ensure that it has sufficient cash or working capital to meet its cash requirements to mitigate this risk.

 

As per the Going Concern note above, the Directors have prepared a cash flow forecast taking into account a projected increase in revenues and continued investment in the development of the Group's platform and organic sales & marketing efforts and the inherent risks and uncertainties facing the Group's business to assess the Group's working capital requirements. The Board reviews cash flow projections on a regular basis and has authority controls in place so as not to commit to material expenditure without being satisfied that sufficient funding is available to the Group.

 

The Group also has systems in place to monitor the margin requirements of its clients and its margin requirement with the institutional counterparty for the back-to-back foreign currency forward contract on a real-time basis and request any necessary top up payment from the clients. The Group also has the right to close any position if no margin is given.

 

Credit risk

 

Credit risk is the risk that clients do not meet their contractual obligations in respect of the currency spot and forward contracts which leads to a financial loss. All customers are subject to credit verification checks. Approximately 90% of the Group's trades are spot currency contracts which are required to be settled within two working days. For forward currency contracts, as noted above, clients are required to provide margin that mitigates credit exposure. Trade limits are applied to all clients. The Group has systems to monitor trade limits and collateral requirements on a real-time basis. The Group does not have any significant concentration of exposures within its client base.

 

Counterparty risk

 

Each trade between a client and the Group is matched with an identified trade with Velocity Trade International ("Velocity"), which is a global foreign exchange liquidity and trade provider that provides pricing, execution and settlement services for the Group.

 

The Group also has brokerage accounts with alternative institutional counterparties and could transact with them instead if Velocity is unable to provide liquidity.

 

Management of settled and open trades are conducted via Currency Cloud, the GV (formerly Google Ventures) backed global payments and FX platform, and Banking Circle. Client funds are safeguarded with Banking Circle in line with the Group's requirements under the Electronic Money Regulations 2011 for additional protection and to reduce counterparty risk.

 

18            Financial commitments

 

The Group is not considered to have any operating lease commitments. The offices utilised by the Group are serviced offices, which have a short notice period and therefore it has not been considered necessary to disclose these as an operating lease commitment.

 

19            CAPITAL MANAGEMENT

 

The capital structure of the business consists of cash and cash equivalents, debt and equity. Equity comprises share capital, share premium and retained losses and is equal to the amount shown as 'Equity' in the balance sheet. The Group's current objectives when maintaining capital are to:

 

•       safeguard the Group's ability to operate as a going concern so that it can continue to pursue its growth plans;

•       provide a reasonable expectation of future returns to shareholders; and

•       maintain adequate financial flexibility to preserve its ability to meet financial obligations, both current and long term.

 

The Group sets the amount of capital it requires in proportion to risk. The Group manages its capital structure and adjusts it in the light of changes in economic conditions and the risk characteristics of underlying assets.

 

The Company is subject to the following externally imposed capital requirements:

·      as a public limited company, the Company is required to have a minimum issued share capital of £50,000.

 

Cornerstone Payment Solutions Ltd, a wholly-owned subsidiary of the Company, is subject to the following capital requirement under the Electronic Money Regulations 2011:

·      2% of the average outstanding e-money issued by the Electronic Money Institution (based on a 6-month rolling average), or the initial capital requirement of €350,000, whichever is the higher.

 

Capital Currencies Limited, a wholly-owned subsidiary of the Company, is subject to the following capital requirement under the Payment Service Regulations 2017:

·      either 10% of fixed overheads for the preceding year or the initial capital requirement of €20,000, whichever is the higher.

 

Cornerstone Payment Solutions Ltd and Capital Currencies Limited complied with the above requirements for all periods during the year ended 31 December 2022.

 

20            EVENTS AFTER THE REPORTING DATE

 

Variation of Incentivisation and Settlement Arrangements

 

On 8 March 2023, the Company announced that it had agreed to vary certain incentivisation and settlement arrangements with Robert O'Brien, General Manager APAC and Middle East, and Craig Strong, Director of Capital Currencies.

 

The repayment date of Mr. O'Brien's £2 million loan note has been extended by one year such that it is now repayable by the Company on 31 July 2026.

 

The Company has agreed with Mr. Strong to vary the terms of the original earn-out consideration in respect of the Capital Currencies acquisition as follows:

·      The first tranche of the earn-out consideration is now assessable on revenue performance for the year ending 31 January 2024 and the second tranche is assessable on revenue performance for the year ending 31 January 2025 - both representing an extension of one year.

·      The Company now has the option, at its discretion, to satisfy one or both of the earn-out payments in cash as opposed to one half of the first tranche being payable in ordinary shares and the other half in convertible loan notes and the second tranche to be payable in ordinary shares.

 

Other events after the reporting date

 

On 13 January 2023, the Company issued and allotted 806,182 new ordinary shares at a price of 6.501 pence per share to a Non-Executive Director, the Company Secretary and four former Non-executive Directors as part of their annual remuneration set out in the Company's admission document dated 26 March 2021.

 

On 13 January 2023, the Company granted options over ordinary shares of 1 penny each in the capital of the Company. James Hickman was granted 1,000,000 options at an exercise price of 10 pence per share and 1,000,000 options at an exercise price of 20 pence per share. Judy Happe was granted 550,000 options and Jordanna Curtis 200,000 both at an exercise price of 10 pence per share. In addition, the Company granted a further 299,180 options to other staff members.  All options are intended to qualify as Enterprise Management Incentive options pursuant to the Income Tax (Earnings and Pensions) Act 2003.

 

On 6 February 2023, the Company issued and allotted 8,574,720 new ordinary shares following receipt of permission from the FCA for Robert O'Brien and Mark Horrocks to increase their respective shareholdings beyond 9.9% of the issued share capital of the Company. The shares were issued at a price of 10 pence and 6.5 pence per share respectively. The shares issued to Mark Horrocks were for the conversion of a £225,000 loan note issued to him as part of the Company's fundraising announced on 5 August 2022.

 

On 26 April 2023, the Group completed the sale of Avila House Ltd to Aspire Commerce Ltd and received £300,000 in cash in consideration following the receipt of regulatory approval from the FCA.