Company Statement of Changes in Equity

For the year ended 31 December 2021

 

	Share Capital	Share    premium	Share-based payment reserve	Merger relief reserve	Retained      earnings	Total
	£	£	£	£	£	£
Balance at 1 August 2020	286	8,186,967	-	-	(8,092,153)	95,100
Bonus issues	4,911	(4,911)	-	-	-	-
Capital reduction	-	(8,182,057)	-	-	8,182,057	-
Issue of consideration shares	140,128	-	-	5,557,645		5,697,773
Issue of other shares	20,562	1,007,558	-	-	-	1,028,120
Costs of raising equity	-	(56,135)	-	-	-	(56,135)
Share-based payments	-	-	54,215	-	-	54,215
Loss and total comprehensive income for the period	-	-	-	-	(1,173,655)	(1,173,655)
Balance at 31 December 2020	165,887	951,422	54,215	5,557,645	(1,083,751)	5,645,418
Issue of shares	36,889	2,208,447	-	-	-	2,245,336
Costs of raising equity	-	(85,514)	-	-	-	(85,514)
Share-based payments	-	-	2,338,495	-	-	2,338,495
Loss and total comprehensive income for the year	-	-	-	-	(3,823,651)	(3,823,651)
	_______	_______	_______	_______	_______	_______
Balance at 31 December 2021	202,776	3,074,355	2,392,710	5,557,645	(4,907,402)	6,320,084
	_______	_______	_______	_______	_______	_______

 

Group and Company Cash Flow Statement

For the year ended 31 December 2021

 

		Group	Group	Company	Company
		Year ended 31 December 2021	Year ended 31 December 2020	Year ended 31 December 2021	5-month period ended 31 December 2020
		£	£	£	£
	Notes
Loss before tax		(4,174,533)	(2,154,698)	(3,890,085)	(1,173,655)
Adjustments to reconcile profit before tax to cash generated from operating activities:
Finance income	3	(1,622)	(603)	-	(603)
Finance costs	3	360	-	-	-
Share-based compensation	14	2,338,495	358,443	2,338,495	54,215
Depreciation and amortisation	2	152,386	22,270	145,920	16,638
Increase in accrued income, trade and other receivables	12	(54,577)	(83,297)	(141,678)	(370,302)
Increase in trade and other payables	13	682,374	1,000,240	559,196	1,069,655
		_______	_______	_________	_______
Cash used in operations		(1,057,117)	(857,645)	(988,152)	(404,052)
Income tax received	6	70,764	-	66,434	-
		_______	_______	_________	_______
Cash used in operating activities		(986,353)	(857,645)	(921,718)	(404,052)
Investing activities
Acquisition of property, plant and equipment	9	(17,371)	(9,144)	-	-
Acquisition of intangible assets	8	(404,568)	(335,436)	(404,569)	(242,916)
Investment in group companies	10	-	-	(201,985)	-
		_______	_______	_________	_______
Cash used in investment activities		(421,939)	(344,580)	(606,554)	(242,916)
Financing activities
Shares issued (net of costs)	14	1,571,457	1,212,032	1,571,457	647,759
Loans received		-	95,000	-	95,000
Interest and similar income	3	1,622	603	-	603
Interest and similar charges	3	(360)	-	-	-
		_______	_______	__________	_______
Cash generated from financing activities		1,572,719	1,307,635	1,571,457	743,362
Increase in cash and cash equivalents		164,427	105,410	43,185	96,394
Opening cash and cash equivalents		183,675	78,265	96,394	-
		_______	_______	________	_______
Closing cash and cash equivalents		348,102	183,675	139,579	96,394
		=====================	=====================	=====================	=====================

 

 

 

 

 

 

 

 

 

 

 

Notes to the Financial Statements

For the year ended 31 December 2021

 

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 1 Poultry, London, EC2R 8EJ. The main activities are set out in the Strategic Report of the 2021 Annual Report.

 

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 2020 and 31 December 2021, 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:

 

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 p/c on or after 1 January 2023).

•              Amendments to IAS 1, presentation of financial statements on classification of liabilities (effective p/c on or after 1 January 2023).

•              Amendments to IFRS 3 - reference to the conceptual framework (effective p/c on or after 1 January 2023)

•              Amendments to IAS 16

 

Some of these standards and amendments have not yet been endorsed by the EU which may cause their effective dates to change.

 

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:

 

•              IFRIC 23 Uncertainty over Income Tax Positions

•              Amendments to IFRS 9 Prepayment Features with Negative Compensation

•              Amendments to IAS 28 Long-term interests in Associates and Joint Ventures

•              IFRS 16 Leases

 

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 (formerly FXPress Payment Services 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

CS Commercial Limited                          -               100% owned by the Company

Cornerstone EBT Trustee Limited          -               100% owned by the Company

 

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

 

Although the consolidated financial information were issued in the name of Cornerstone FS plc ("Cornerstone"), the legal parent, the financial statements for the comparative year ended 31 December 2020, represent in substance the continuation of the financial information of the primary legal subsidiary, Cornerstone Payment Solutions Ltd.

 

For the year ended 31 December 2020 the assets and liabilities of the primary legal subsidiary are recognised and measured in the consolidated financial statements at the pre-combination carrying amounts and not re-stated at fair value. The retained earnings and reserves balances reflect the retained earnings and other reserves of the primary legal subsidiary immediately before the business combination and the results of the period from 1 January 2020 to the date of the business combination are those of the primary legal subsidiary only.

 

As Cornerstone Payment Solutions Ltd reversed into Cornerstone when Cornerstone did not have an existing trade, the transaction was not considered to be a business combination, as at the time of the reverse takeover, Cornerstone did not meet the definition of a business, under IFRS 3 "Business Combinations". As the transaction was capital in nature and completed through the issue of shares, it fell within the scope of IFRS 2 'Share-based payments'. Any difference in the fair value of shares deemed to be issued by the legal subsidiary (Cornerstone Payment Solutions Ltd) and the fair value of net identifiable assets in the legal parent (Cornerstone FS plc) forms part of the deemed cost of acquisition.

 

GOING CONCERN

 

The Group has bank balances of approximately £0.28m at the date of approval of these financial statements and is carefully managing its cash resources, with the support of its professional advisers and its key stakeholders, who are creditors of the business.

 

It also has convertible loan note facilities of a further £0.45m that are available to be called on 20-days' notice (£0.1m of which cannot be called until 13 January 2023).

 

The Directors have prepared cash flow forecasts covering a period extending 18 months from the date of approval of these financial statements, i.e., to 31 December 2023, taking into account projected increase in revenues, continued investment in the development of the software platform and organic sales and marketing efforts.

 

The cash flow forecasts assume that further equity fundraising will be necessary over the coming months in order to implement Cornerstone's growth strategy and for the Group to continue to operate as a going concern.

 

Although the Group has had past success in fundraising and continues to attract interest from investors, making the Board confident of fundraising success, there can be no guarantee that such fundraising will be available.

 

These circumstances indicate the existence of a material uncertainty, impacting the Company and the Group's ability to continue as a going concern. The financial statements do not include any adjustments that would result if the Company or Group was unable to continue as a going concern.

 

After careful consideration, the Directors consider that they have reasonable grounds to believe that the Group can be regarded as a going concern and for this reason they continue to adopt the going concern basis 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.

 

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:

 

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

 

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.

 

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 14.

 

ALTERNATIVE PERFORMANCE MEASURES

 

The Group uses the alternative performance measure of underlying profit/(loss) from operations. 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 underlying profit/(loss) from operations 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.

 

UNDERLYING PROFIT/(LOSS) FROM OPERATIONS

The Group uses underlying profit/(loss) from operations, defined as profit/(loss) from operations, adding back share-based compensation and transaction costs associated with the Group's AIM listing and acquisitions strategy.

 

The underlying loss from operations 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 2021	Year ended 31 December 2020
	£	£
	_______	_______
Total revenue	2,301,172	1,664,237
	_______	_______

 

 

	Group	Group
	Year ended 31 December 2021	Year ended 31 December 2020
2              LOSS FROM OPERATIONS	£	£
Loss from operations is stated after charging:
Share-based compensation on reverse acquisition	-	211,281
Other share-based compensation	2,338,495	147,162
Transaction costs	402,515	793,577
Expensed software development costs	97,556	42,333
Depreciation of property, plant and equipment	4,293	1,730
Amortisation of intangible assets	148,094	20,540
Short-term (2018 IAS 17 operating) lease rentals	86,434	70,697
	_______	_______

 

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

 

	Year ended 31 December 2021	Year ended 31 December 2020
	£	£
Audit Services
-   Statutory audit	25,000	15,000
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	30,250	16,500
	-------------------------	-------------------------
	73,250	31,500
	=========================	=========================
	Group	Group
3              INTEREST AND SIMILAR ITEMS	Year ended 31 December 2021	Year ended 31 December 2020
	£	£
i.      Total finance and other income	1,622	603
	_______	_______
ii.     Total finance costs	(360)	-
	_______	_______

 

 

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 2021	Year ended 31 December 2020
	Number	Number
Directors	8	-
Employees	14	9
	_______	_______
	22	9
	_______	_______

 

Employment costs	Year ended 31 December 2021	Year ended 31 December 2020
	£	£
Wages and salaries	1,309,251	618,522
Social security costs	182,414	68,455
Pension costs	38,307	5,930
Share-based compensation	2,195,782	26,787
	_______	_______
	3,725,754	719,694
	_______	_______

 

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 in the 2021 Annual Report.
		Year ended 31 December 2021	Year ended 31 December 2020
		£	£
Salaries and fees		680,553	116,786
Bonus		76,800	-
Share-based compensation		311,469	20,088
Social security costs		84,022	9,453
		_______	_______
		1,152,844	146,327
		_______	_______
		Number	Number
Number of Directors to whom retirement benefits are accruing under a defined contribution scheme		3	-
		_______	_______
		Year ended 31 December 2021	Year ended 31 December 2020
		£	£
	The remuneration in respect of the highest paid Director was:
	Salaries and fees	180,000	85,000
	Bonus	43,200	-
	Share-based compensation	177,000	15,452
	Pension and other benefits	9,000	-
		_______	_______
		409,200	100,452
		_______	_______

 

During the year no (2020: nil) Directors exercised any (2020: 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 £38,307 (2020: £5,930). At 31 December 2021 contributions of £25,864 remained outstanding and are included within other payables (2020: £2,490).

 

6              taxation

 

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

 

	Group	Group
	Year ended 31 December 2021	Year ended 31 December 2020
	£	£
	_______	_______
Current Tax:
Research & development tax credit	70,764	-
UK Corporation tax	-	-
Deferred tax	-	-
	_______	_______
Tax on loss on ordinary activities	70,764	-
	_______	_______
	Group	Group
	Year ended 31 December 2021	Year ended 31 December 2020
	£	£
Loss before taxation	(4,174,533)	(2,154,698)
	_______	_______
Loss multiplied by main rate of corporation tax in the UK of 19% (2020: 19%)	(793,161)	(409,393)
Effects of:
Surrender of tax losses for research & development tax credit refund	70,764	-
Expenses not deductible for tax purposes	66,649	155,158
Share-based payments	444,314	68,104
Other deductions in period	(702)	(1,446)
Tax losses carried forward	282,900	185,577
	_______	_______
Current tax	70,764	-
	_______	_______

 

As at 31 December 2021, the Group had prepared but not yet submitted a Research and Development tax credits reclaim, the estimated net benefit of which is approximately £158,000. During the year ended 31 December 2021 the Group received a Research and Development tax credit refund of £70,764 in respect of its reclaim for the year ended 31 December 2020.

 

As at 31 December 2021, the Group had tax losses carried forward of £4,147,682 (31 December 2020: £2,847,347). 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 2021 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.

 

7              LOSS PER SHARE

 

The loss per share of 21.24p is based upon the loss of £4,103,769 (2020: loss of £2,154,698) and the weighted average number of ordinary shares in issue for the year of 19,317,407 (2020: 14,370,030).

 

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

 

	Internally developed software	Software costs	Other	Total
	£	£	£	£
COST
At 1 January 2021	242,916	15,611	92,520	351,047
Additions	404,569	-	-	404,569
	_______	_______	_______	_______
At 31 December 2021	647,485	15,611	92,520	755,616
AMORTISATION
At 1 January 2021	16,638	13,437	-	30,075
Charge for the period	145,920	2,174	-	148,094
	_______	_______	_______	_______
At 31 December 2021	162,558	15,611	-	178,169
NET BOOK VALUE
At 31 December 2021	484,927	-	92,520	577,447
	_______	_______	_______	_______
At 31 December 2020	226,278	2,174	92,520	320,972
	_______	_______	_______	_______

 

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

 

Company INTANGIBLE ASSETS

	Internally developed software	Software costs	Other	Total
	£	£	£	£
COST
At 1 January 2021	242,916	-	-	242,916
Additions	404,569	-	-	404,569
	_______	_______	_______	_______
At 31 December 2021	647,485	-	-	647,485
AMORTISATION
At 1 January 2021	16,638	-	-	16,638
Charge for the period	145,920	-	-	145,920
	_______	_______	_______	_______
At 31 December 2021	162,558	-	-	162,558
NET BOOK VALUE
At 31 December 2021	484,927	-	-	484,927
	_______	_______	_______	_______
At 31 December 2020	226,278	-	-	226,278
	_______	_______	_______	_______

 

 

9              GROUP property, plant and equipment

 

	Computer Equipment £
COST At 1 January 2021 Additions     At 31 December 2021		15,675 17,371     33,046
DEPRECIATION At 1 January 2021 Charge for the period   At 31 December 2021		7,211 4,293   11,504
NET BOOK VALUE At 31 December 2021		21,542
At 31 December 2020		8,464

 

 

10            investments

 

	Investments in Subsidiaries £
Cost or Valuation At 1 January 2021 Additions     At 31 December 2021		6,147,773 201,985     6,349,758
Net Book value At 31 December 2021		6,349,758
At 31 December 2020		6,147,773

 

The Company's investment as at 31 December 2021 represents its investments in its direct subsidiaries of £6,347,773 in Cornerstone Payment Solutions Ltd (formerly FXPress Payment Services Ltd) (2020: £6,147,773) and £1,985 in Cornerstone - Middle East FZCO (2020: nil). 

 

During the year ended 31 December 2021 the Company invested a further £200,000 in support of the increased regulatory capital requirements for Cornerstone Payment Solutions Ltd in advance of it becoming an Authorised Electronic Money Institution.

 

Shares in subsidiary and associate undertakings are stated at cost. As at 31 December 2021, 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 (formerly FXPress Payment Services 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.
CS Commercial Limited (audit exempt)	Dormant	England and Wales	The Old Rectory, Addington, Buckinghamshire, MK18 2JR	100 per cent.
Cornerstone EBT Trustee Limited (audit exempt)	Dormant	England and Wales	The Old Rectory, Addington, Buckinghamshire, MK18 2JR	100 per cent.

 

 

 

12            current trade and other receivables

 

	Group	Group	Company	Company
	31 December 2021	31 December 2020	31 December 2021	31 December 2020
	£	£	£	£
Trade receivables	-	8,405	-	-
Prepayments and accrued income	90,360	24,623	31,118	9,600
Derivative financial assets at fair value	322,710	299,035	-	-
Other receivables	42,525	140,378	10,000	131,492
Amounts due from Group undertakings and undertakings in which the Company has a participating interest	-	-	170,229	-
Taxes and social security	37,649	97,718	37,649	97,718
	_______	_______	_______	_______
	493,244	570,159	248,996	238,810
	_______	_______	_______	_______

 

For the year ended 31 December 2021 £nil was recorded as a bad debt expense (31 December 2020: £nil).

 

As at 31 December 2021, 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 £158,000 (2020: £62,000) and has not been included in current receivables due to its contingent nature.

 

13             current trade and other payables

 

	Group	Group	Company		Company
	31 December 2021	31 December 2020	31 December 2021		31 December 2020
	£	£	£		£
Trade payables	346,255	525,064	212,561		238,654
Derivative financial liabilities at fair value	290,292	216,061	-		-
Other tax and social security	60,349	47,273	10,923		17,411
Other payables and accruals	484,814	430,795	244,033		290,773
Amount due to Group undertakings	-	-	435,659		516,999
	_______	_______	_______		_______
	1,181,710	1,219,193	903,176		1,063,837
	_______	_______	_______		_______

 

14            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 2021	16,588,608	165,886
Issue of new shares of £0.01	3,688,974	36,890
	_______	_______
Ordinary shares of £0.01 each at 31 December 2021	20,277,582	202,776
	_______	_______

At 31 December 2021 share subscriptions of £nil remained unpaid (31 December 2020: £131,492, comprising £2,630 share capital and £128,862 share premium).

 

 

The following changes in the share capital of the Company have taken place in year ended 31 December 2021:

 

•       On 26 February 2021, 24,326 Ordinary Shares were issued at a price of £0.407 each on the exercise of warrants.

•       On 6 April 2021, the Company placed 3,664,648 new ordinary shares at a price of £0.61 each on its admission to AIM.

 

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.

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 FXPress Payment Services 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 Inventive ("EMI") Scheme equity-settled share-based remuneration scheme for employees. 

 

Each of the option agreements under the EMI scheme provides that the relevant options vest, as to one third of the shares comprised in them, on each of the first three anniversaries of the date of grant. Once vested, 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.

 

	Ordinary shares	Weighted average exercise price
	No.	£
Outstanding as at 1 January 2020	-	-
Granted during the year	1,599,480	0.50
	_______	_______
Outstanding as at 1 January 2021	1,599,480	0.50
Granted during the year	-	-
	_______	_______
Outstanding as at 31 December 2021	1,599,480	0.50
	_______	_______

 

The weighted average contractual life of the options is five years (2020: zero).

No options were exercised during the current year (2020: nil).

 

Warrants

 

On 6 April 2021 the Company granted 63,114 warrants with an exercise price of £0.61 and a term of 2 years to the Company's broker Peterhouse Capital Limited, in connection with the Company's IPO and representing 5% of the number of shares issued to Peterhouse Capital Limited's investors on IPO.

 

 

The warrants were estimated to have a grant date fair value of £0.27 per warrant using the Black-Scholes valuation model.  The principal inputs into the model were:

 

Share price at grant date                   - 61 pence

Risk-free rate                                     - 0.8%

Expected Volatility                             - 80.6%

Contractual life                                  - 2 years

 

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.

 

On 26 February 2021, 24,326 warrants were exercised at a price of £0.407 each.

 

The Group share-based compensation charge for the year ended 31 December 2021 of £2,338,495 (2020: £147,162) consists of £7,102 in relation to the accelerated share-based payment charges in respect of the exercised warrants, £135,610 in relation to other warrants granted in Cornerstone (2020: £120,375), £306,833 in respect of the Cornerstone options (2020: £26,787), £81,370 in respect of equity settled share-based payments related to the non-executive Board member's service agreements (2020: £nil) and £1,807,580 of other share-based compensation (2020: £nil).

 

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 will be entitled to receive share-based incentivisation based on a multiple of revenue generation and contribution to profit. This will be measured at the end of both years. In the first year, any new ordinary shares earned under this incentivisation plan would be issued at the lower of the IPO Placing Price (61 pence per share) or the average closing price of Cornerstone shares for the 20 business days prior to issue. In the second year, any new ordinary shares earned under this incentivisation plan would be issued at the average closing price of Cornerstone shares for the 20 business days prior to issue.  The charge recognised in respect of this share-based incentivisation agreement is £1,807,580 for the year ended 31 December 2021 (2020: £nil) which is based on the forecasted performance of Robert O'Brien and his team over the two-year period as of the reporting date, and based on the share price at the grant date on 1 August 2021 of 29.5 pence per share.

 

15            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 £435,659 (2020: £516,999) to Cornerstone Payment Solutions Ltd.

 

During the year, the Company also provided working capital support to Avila House Limited and Cornerstone - Middle East FZCO. 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, Avila House Limited owed the Company £150,041 (2020: £nil) and Cornerstone - Middle East FZCO owed the Company £20,188 (2020: £nil).

 

Other related parties

All of the amounts below were in respect of the year ended 31 December 2021.

 

Terry Everson, a director of Cornerstone Payment Solutions Ltd and a significant shareholder in Cornerstone, was paid consulting fees of £1,250 via Hazelwood Financial Ltd, a company of which he is a director and significant shareholder (2020: £24,000). This fee prepaid a loan of made by the Group to Terry Everson leaving a net balance of £8,750 unpaid as at 31 December 2021 (31 December 2020: £10,000).

 

The Company and William Newton, a director of the company, entered into a convertible loan note instrument whereby the Company may borrow up to £350,000 from Willian Newton at any time until 31 December 2023. In the event of a drawdown and the Company issuing William Newton with unsecured convertible loan notes, the loan notes may be converted at a subscription price of 26.5 pence per share. To date, the Company has not drawn down on this facility.

 

As at 31 December 2021, a loan of £10,000 made by the Group to William Newton, a director of the Company remained unpaid (31 December 2020: £nil).

 

16             FINANCIAL INSTRUMENTS

 

                FINANCIAL ASSETS

 

	Group	Group	Company		Company
	31 December 2021	31 December 2020	31 December 2021		31 December 2020
	£	£	£		£
DERIVATIVE FINANCIAL ASSETS
Foreign currency forward contracts with customers	359,077	253,077	-		-
Foreign currency forward contracts with institutional counterparty	33	45,958	-		-
	_______	_______	_______		_______
	359,110	299,035	-		-
Cash and cash equivalents	348,102	183,675	139,579		96,394
Trade receivables	-	8,405	-		-
Other receivables	132,885	165,001	211,347		141,092
	_______	_______	_______		_______
	840,097	656,116	350,926		237,486
	_______	_______	_______		_______

 

FINANCIAL LIABILITIES

 

	Group	Group	Company		Company
	31 December 2021	31 December 2020	31 December 2021		31 December 2020
	£	£	£		£
DERIVATIVE FINANCIAL LIABILITIES
Foreign currency forward contracts with customers	290,292	55,869	-		-
Foreign currency forward contracts with institutional counterparty	-	160,192	-		-
	_______	_______	_______		_______
	290,292	216,061	-		-
Trade payables	346,255	525,064	212,561		238,654
Other payables	484,814	430,795	679,692		807,772
	_______	_______	_______		_______
	1,121,361	1,171,920	892,253		1,046,426
	_______	_______	_______		_______

 

                All financial assets and liabilities have contractual maturity of less than one year.

 

Derivative financial assets and liabilities

 

                Derivative financial assets not designated as hedging instruments

 

	31 December 2021		31 December 2020
	Fair Value	Notional Principal	Fair Value		Notional Principal
	£	£	£		£
Foreign currency forward contracts with customers	359,077	12,508,939	253,077		14,686,425
Foreign currency forward contracts with institutional counterparty	33	12,544	45,958		5,785,633
	_______	_______	_______		_______
	359,110	12,521,483	299,035		20,472,058
	_______	_______	_______		_______

Derivative financial liabilities not designated as hedging instruments

 

	31 December 2021		31 December 2020
	Fair Value	Notional Principal	Fair Value		Notional Principal
	£	£	£		£
Foreign currency forward contracts with customers	290,292	9,874,438	55,869		4,392,467
Foreign currency forward contracts with institutional counterparty	-	-	160,192		12,390,456
	_______	_______	_______		_______
	290,292	9,874,438	216,061		16,782,923
	_______	_______	_______		_______

 

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 loss on financial assets at fair value through profit or loss for year ended 31 December 2021 was £29,661 (2020: net gain of £4,839).

 

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 have 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.

 

17            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.

 

18            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.

 

Prior to becoming an Authorised Electronic Money Institution in August 2021, Cornerstone Payment Solutions Ltd was 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 €50,000, whichever is the higher.

 

Cornerstone Payment Solutions Ltd complied with both of these above requirements for the relevant periods during the year ended 31 December 2021.

 

19            EVENTS AFTER THE REPORTING DATE

 

Acquisition of Capital Currencies Limited

On 1 February 2022, the Company completed the acquisition of Capital Currencies Limited, a well-established foreign exchange broker specialising in the provision of currency exchange and international payments, authorised and regulated by the FCA as an authorised payment institution permitted to provide payment services.

 

The consideration payable for the Acquisition consists of £0.586 million in cash on completion subject to customary working capital adjustments with further earn-out consideration payable over two years after completion in two tranches 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 amount already paid to the sellers in respect of the Acquisition. One half of the earn-out will be satisfied in the issue of convertible loan notes to the sellers with a 6% coupon interest and the remaining half shall be satisfied by the issue of consideration shares to the sellers.

·      on the second anniversary of completion, three times Capital Currencies' revenue for the 12-month period leading up to 31 January 2024, less the amounts already paid (or deemed paid) to the sellers in respect of the Acquisition. The final earn-out payment shall be satisfied by the issue of consideration shares to the sellers.

 

Total consideration is capped at £3 million.

 

Any convertible loan notes issued to the sellers under the earn-out payment is for a term of 2 years from the date of issue and the sellers may elect to convert at any time prior to termination date. Any interest is payable quarterly in arrears with the principal repayable at the end of the two-year term. The conversion price per share is at the mid-market price of the Company's share in the 20 dealing days preceding the issue of the convertible loan notes.

 

Any consideration shares issued to the sellers under the earn-out payment is priced per share as the sum equal to the average mid-market

price of the Company's share in the 20 dealing days preceding the issue of the consideration shares.

 

Any shares received by the sellers under the Acquisition (save for any shares issued under the convertible loan notes) are subject to a 12-month lock-in from the date of issue (subject to certain limited exceptions) and, for a further period of 12 months thereafter, the sellers will only dispose of any interests in the shares on an orderly market basis through the Company's brokers. The sellers have also agreed that any shares issued under the convertible loan notes will only be disposed, for a period of 12 months from the date of issue, through the Company's brokers.

 

Other events after the reporting date

On 27 January 2022 the Company announced a placing and subscription raising total gross proceeds of £870,004 following which a total of 3,283,034 new ordinary shares of one penny each in the capital of the Company were admitted to AIM.

 

On 8 March 2022, the Company granted options over ordinary shares of 1 penny each in the capital of the Company. Julian Wheatland was granted 426,190 options at an exercise price of 36.15 pence per share. Judy Happe was granted 127,857 options at an exercise price of 36.15 pence per share.  In addition, the Company granted a further 239,407 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 8 April 2022, the Company allotted and issued 123,000 new ordinary shares of 1 penny each in the Company at a price of £0.265. The new shares were issued and allotted to the recipient as consideration for investor relations services.