Final Results

Cloudified Holdings Limited

28 March 2024

 

This announcement contains inside information for the purposes of Article 7 of the UK version of Regulation (EU) No 596/2014 which is part of UK law by virtue of the European Union (Withdrawal) Act 2018, as amended ("MAR"). Upon the publication of this announcement via a Regulatory Information Service, this inside information is now considered to be in the public domain.

Cloudified Holdings Limited

("Cloudified" or the "Company")

Final Results

Cloudified Holdings Limited ("Cloudified" or "CHL" or "the Group" or "the Company"), an AIM quoted cash shell announces its final results for the year ended 31 March 2023 (the "Period").

Highlights post Period

·      Disposal of Falanx Cyber Defence Limited and Falanx Cyber Technologies Limited and transition to a cash shell under AIM Rule 15 completed on 12 December 2023

·      All monies received from the disposal, all debt paid down with restructuring and reduction of central costs completed in December 2023

·      The directors are actively pursuing the acquisition of another company or business, in exchange for the issue of ordinary shares in a single transaction, a process known as a "reverse takeover" or "RTO", which will only be able to proceed with Cloudified shareholder approval. There can be no certainty that a suitable RTO opportunity will lead to a transaction.  If the board do not identify a suitable business to acquire via an RTO, funds will be returned to Shareholders via a members voluntary liquidation.

·      Cash of £567,000 as at 29 February 2024, with an expected future cost base of approximately £30,000 per month.

Review of the Period to 31 March 2023

·      Main activity was the disposal of the cyber security division

·      Loss from discontinued items of £1.36m (2022: £2.43m profit) with the prior period reflecting the £3.50m gain on the disposal of the strategic intelligence division in October 2022.

·      Loss from continuing operations of £1.2m (2022: £1.0m profit).  This loss represented costs which were not reflected in the cyber entities disposed of in December 2023. These costs subsequently reduced by around 75% to the current cash spend referenced above.

The Annual Report & Accounts for the year ended 31 March 2023 will shortly be available on the Company's website (https://cloudified-holdings.com/reports-and-results) in accordance with the electronic communication provisions under its Articles of Association and AIM Rule 20.

Enquiries:

Cloudified Holdings Limited Ian Selby, Director	Via IFC
WH Ireland Mike Coe/ Sarah Mather (Nomad) Fraser Marshall (Corporate Broking)	+ 44 (0) 207 220 1666
IFC Advisory Ltd Financial PR & IR Graham Herring / Zach Cohen	[phone]

Strategic Report

The Directors present the Strategic Report of the Company for the year ended 31 March 2023.

Business Review

Historically, the Group functioned as a provider of cyber security services to the SME market via its former subsidiary Falanx Cyber Defence Limited. On 12 December 2023, the Group finalised the sale of its cyber security assets, transitioning to a cash shell in accordance with AIM Rule 15 on the same day.

Throughout the financial year, the former cyber security business made several strategic investments aimed at promoting growth. Despite these efforts, there was no significant growth in Monthly Recurring Revenue (MRR). This triggered a comprehensive review to determine the best means of enhancing shareholder value. Shifts in the customer market landscape were observed, characterised by an increasing tendency among customers to procure services from Managed Service Providers ("MSPs"), and the emergence of the MSP driven Microsoft Sentinel as a prominent cyber security platform. Compounded by a decelerating economy and various external factors, the prospects of the former business operating as a self-sustaining business which could generate the necessary cash flows were diminished. Consequently, faced with the necessity to refinance debt amidst challenging equity (and debt) markets especially for small companies, the board decided to initiate a formal sale process. This sale was announced on 9 November 2023 and successfully concluded on 12 December 2023. As a result, all trading activities within the Group ceased, transitioning the Company into a cash shell.

The directors are actively pursuing the acquisition of another company or business, in exchange for the issue of ordinary shares in a single transaction via an RTO. Such a transaction will only proceed with the approval of shareholders. In deliberating the Company's future direction, the directors are committed to identifying opportunities that hold the potential for value creation and returns to shareholders over the medium to long term, whether in the form of capital appreciation or dividends. While the Company has pinpointed potential opportunities, it is important to note that at this stage there is no certainty that these opportunities will lead to a transaction.

Principal Risks and Uncertainties

On 12 December 2023 the Company became an AIM Rule 15 cash shell and as such will be required to make an acquisition or acquisitions which constitutes a reverse takeover under AIM Rule 14 (including seeking re-admission as an investing company (as defined under the AIM Rules)) on or before the date falling six months from that date or be re-admitted to trading on AIM as an investing company under AIM Rule 8 (which requires the raising of at least £6 million in cash via an equity fundraising on, or immediately before, re-admission). Failure to meet this deadline will result in the Company's ordinary shares would then be suspended from trading on AIM pursuant to AIM Rule 40. Admission to trading on AIM would be cancelled six months from the date of suspension should the reason for the suspension not have been rectified pursuant to AIM Rule 41.

The Group's results for the year are set out in the consolidated statement of comprehensive income.

Financial Review

Income Statement

In the year to 31 March 2023, continuing operations solely comprised of costs held in the Company.  Some of these were for support services (IT, finance, HR & legal) across the wider Group, as well as board and listing related costs. Towards the end of the year, they were reduced, and when the Group became a cash shell on 12 December 2023, they were very significantly reduced to an average of £30,000 per month to support the cash shell.

Discontinued operations (loss £1.36m, 2022: profit £2.44m) represented the trading of cyber security division, with the prior year also reflecting the £3.50m gain on the sale of the Assynt strategic intelligence division which completed on 6 October 2021. In 2023 the Cyber Division's revenues had grown by c.9% but this was much less than planned as referenced previously. This loss included all amortisation and interest costs in the Group, with the latter relating to borrowings held by the former subsidiary. On completion of the disposal these borrowing costs were wholly eliminated.

Statement of Financial Position

Assets (and liabilities) held for sale arising from discontinued activities represented items transferred on completion of the disposal. The intangible assets arose from goodwill, acquired customer bases and R&D assets and were wholly related to the cyber security division. The Reading premises, which were used by the discontinued operations but were leased by the Company, were assigned to the buyers on completion. Consequently, the premises related right of use asset (and associated liabilities), as well as office infrastructure, have all been included within items held for sale, and were transferred from the Group on completion of the disposal on 12^th December 2023.  Similarly, all trade debtors, R&D tax credit assets, deferred incomes, prepayments, creditors, accruals, and borrowings, which related to the cyber security division were transferred on completion of the sale and therefore also were transferred from the Group on the same day. 

Remaining assets & liabilities related to cash balances, routine prepayments and trade creditors and accruals.

Overall shareholders' funds decreased to £1.80m (2022: £4.35m) due to losses from continuing and discontinued operations. 

Cash Flow Statement

Losses incurred by the Group combined with the commencement in October 2022 of repayments of the loan (including increasing interest charges) from BOOST&Co led to an increase in cash outflows of £2.50m (2022 inflow £2.94m). 

Events After Reporting Date

On 9 November 2023, the Company announced the sale of its cyber security division. The purchaser, Thetis Bidco Limited, the owner of Wavenet Ltd, an MSP supported by MacQuarrie, acquired the division for an enterprise value of £4.2m, subject to customary adjustments for debt, intercompany balances, and working capital normalisation. Shareholder approval for the sale was obtained at the general meeting convened on 27 November 2023, with the transaction being finalised on 12 December 2023.

 Movements in cash since the completion of the disposal on 12 December 2023 to the 29 February 2024 are set out below.

	£'000
Enterprise Value (payable in cash)	4,200
Adjustments for borrowings, debt and working capital	(2,365)
Transaction Costs	(563)
Restructuring Costs	(705)
Cash at 29 February 2024	567

Following the completion of the sale, the Company swiftly adjusted its operational structure to align with its new status as a cash shell, resulting in significant reductions in Group expenses and the implementation of redundancies for executives and other personnel in accordance with their contractual terms. As of 29 February 2024, the Company's cash balances were approximately £567,000 which was greater the anticipated level forecasted at the time of the disposal announcement on 9 November 2023. The Group is now debt free, and the expected ongoing cost base is around £30,000 per month.

Consolidated income statement

for the year ended 31 March 2023

		2023	2022
	Note	£	£
Revenue	4	-	63,575
Cost of sales		-	-
Gross profit		-	63,575
Administrative expenses (continuing operations)		(1,195,191)	(1,017,705)
Operating loss		(1,195,191)	(954,130)
Finance income		5,607	104
Finance expense		-	(4,571)
Finance income / (expense) - net		5,607	(4,467)
Loss before income tax		(1,189,584)	(958,597)
Income tax credit		-	-
Loss for the year from continuing operations		(1,189,584)	(958,597)
Discontinued operations
(Loss) / Profit for the year from discontinued operations	5	(1,360,554)	2,443,179
(Loss) / Profit for the year		(2,550,138)	1,484,582
Loss per share from continuing operations
Basic & diluted loss per share	6	(23.0) p	(37.0) p

Profit / (Loss) per share from discontinued operations
Basic and diluted profit / (loss) per share	6	(25.8) p	28.0 p

		2023	2022
		£	£
Profit / (Loss) for the year		(2,550,138)	1,484,582
Other comprehensive income:
Exchange differences recycled to the income statement on disposal of business		-	109,030
Other comprehensive income for the year, net of tax		-	109,030
Total comprehensive income for the year		(2,550,138)	1,593,612
Attributable to:
Owners of the parent
Continuing operations		(1,189,584)	(958,597)
Discontinued operations		(1,360,554)	2,552,209
Total comprehensive income for the year		(2,550,138)	1,593,612

Consolidated statement of financial position

as at 31 March 2023

		2023	2022
	Note	£	£
Assets
Non-current assets
Property, plant and equipment		-	104,352
Intangible assets		-	3,262,662
Right of use asset		-	254,290
		-	3,621,304
Current assets
Trade and other receivables		127,799	1,192,220
Cash and cash equivalents		974,333	3,483,063
		1,102,132	4,675,283
Assets in a disposal group classified as held for sale		4,421,446	-
Total assets		5,523,578	8,296,587
Equity
Capital and reserves attributable to equity holders of the Company
Share capital		4,035,003	4,043,194
Shares based payment reserve		697,900	703,151
2022 liabilities reserve		-	1,000,000
Accumulated losses		(2,930,008)	(1,397,476)
Total equity		1,802,895	4,348,869
Liabilities
Non-current liabilities
Lease liability		-	149,691
Borrowings		-	2,094,739
			2,244,430
Current liabilities
Trade and other payables		265,738	804,908
Contract liabilities	4	-	529,496
Lease liability		-	103,182
Borrowings		-	265,702
		265,738	1,703,288
Liabilities directly associated with assets in a disposal group classified as held for sale	5	3,454,945	-
Total liabilities		3,720,683	3,947,718
Total equity and liabilities		5,523,578	8,296,587

Consolidated statement of changes in equity

for the year ended 31 March 2023

		Share	Accumulated	Translation	Share based	2022
		capital	losses	Reserve	payment reserve	Liabilities reserve	Total
		£	£	£	£		£
Balance at 1 April 2021		4,033,161	(2,943,989)	(107,777)	747,243	1,000,000	2,728,638
Loss for the year		-	1,484,582	-	-	-	1,484,582
Re-translation of foreign subsidiaries		-	-	(1,253)	-	-	(1,253)
Exchange differences recycled to the income statement on disposal of business		-	-	109,030	-	-	109,030
Transactions with owners:
Issue of share capital		10,033	-	-	-	-	10,033
Share based payment charge		-	-	-	17,839	-	17,839
Forfeited share options reversed through reserves		-	61,931	-	(61,931)	-	-
Balance at 31 March 2022		4,043,194	(1,397,476)	-	703,151	1,000,000	4,348,869
Profit for the year		-	(2,550,138)	-	-	-	(2,550,138)
Transactions with owners:
Capital reconstruction		-	1,000,000	-	-	(1,000,000)	-
Proceeds from trade of fractional shares		18	-	-	-	-	18
Costs of share consolidation		(8,209)	-	-	-	-	(8,209)
Share based payment charge		-	-	-	12,355	-	12,355
Forfeited share options reversed through reserves		-	17,606	-	(17,606)	-	-
Balance as at 31 March 2023		4,035,003	(2,930,008)	-	697,900	-	1,802,895

The share capital account represents the amount subscribed for share capital, net of share issue expenses. Share issue expenses comprise the costs in respect of the issue by the Company of new shares.

Accumulated losses represent the cumulative losses of the Group attributable to the owners of the parent.

The translation reserve represents the cumulative movement in the translation of foreign subsidiaries into the presentation currency unwound on the disposal of Assynt.

The share-based payment reserve represents the cumulative share option and warrant charges.

The 2022 Liabilities reserve was a special non distributable reserve in respect of certain longer-term liabilities including HMRC COVID -19 deferral and rental liabilities on the Reading office. This reserve was created as part of the capital variation in completed in February 2021. The balance on this account transferred to accumulated losses on 31 December 2022.

Consolidated cash flow statement

for the year ended 31 March 2023

		2023	2022
	Note	£	£
Cash flows from operating activities
Loss before tax from continuing activities		(1,189,584)	(958,597)
(Loss) / profit before tax from discontinued activities		(1,360,554)	2,433,650
(Loss) / profit before tax		(2,550,138)	1,475,053
Adjustments for:
Depreciation		61,418	64,275
Amortisation and impairment of intangibles		286,533	305,538
Amortisation of right of use assets		87,879	108,982
Impairment of goodwill		-	130,347
Share based payment		12,355	17,839
Gain on disposal of subsidiaries		-	(3,498,102)
Amortisation of borrowing costs		41,928	23,659
Net finance expense recognised in profit or loss		295,136	178,081
		(1,764,889)	(1,194,328)
Changes in working capital:
Decrease in trade and other receivables		(186,649)	(290,025)
Increase / (decrease) in trade, contract liabilities and other payables		122,997	(749,746)
Cash used in operations		(1,828,541)	(2,234,099)
Interest paid		(934)	(9,745)
Net cash used in continued operating activities		(1,829,475)	(2,243,844)
Cash flows from investing activities
Interest received		5,607	104
Acquisition of property, plant and equipment		(48,209)	(13,315)
Proceeds on disposal of subsidiaries, net of cash disposed		-	3,163,674
Net cash (used in) / generated from investing activities		(42,602)	3,150,463
Cash flows from financing activities
Repayment of lease liabilities		(62,951)	(95,998)
Interest on lease liabilities		(16,290)	(22,114)
Proceeds from borrowings		-	2,500,000
Repayment of borrowings		(265,702)	(7,906)
Loan transaction costs		-	(205,347)
Interest paid on borrowings		(283,519)	(146,291)
Proceeds from trade of fractional shares		18	10,033
Costs of share consolidation		(8,209)	-
Net cash (used in) / generated from financing activities		(636,653)	2,032,377
Net (decrease) / increase in cash equivalents		(2,508,730)	2,938,996
Cash and cash equivalents at beginning of year		3,483,063	545,321
Foreign exchange (losses)/gains on cash and cash equivalents		-	(1,254)
Cash and cash equivalents at end of year		974,333	3,483,063

Notes to the consolidated financial statements

for the year ended 31 March 2023

1.   General information

Cloudified Holdings Limited (the "Company" or "Cloudified") is a cash shell under Rule 15 of the AIM rules. This followed the disposal of its trading subsidiaries in the cyber security division on 12 December 2023. The Company is a public limited company which is listed on the AIM Market of the London Stock Exchange and is incorporated and domiciled in the British Virgin Islands. The address of its registered office is PO Box 173, Kingston Chambers, Road Town, Tortola, British Virgin Islands. The UK registered office is c/o Blake Morgan LLP, Apex Plaza, Forbury Road, Reading, RG1 1AX.

2.   Summary of significant accounting policies

The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been applied consistently to all the years presented unless otherwise stated.

2.1 Basis of preparation

These consolidated financial statements have been prepared in accordance with UK adopted International Accounting Standards. The functional and presentational currency for the financial statements is Sterling. The financial statements have been prepared under the historical cost convention, as modified by financial assets and financial liabilities at fair value through profit or loss.

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in note 3.

2.1.1 Going concern.

The company is now a cash shell and has no trading operations. On 29 February 2024 it had cash balances of £567,000 and a forecasted cash consumption rate of circa £30,000 per month comprising of directors' fees, audit costs and advisory fees. The sale of the Cyber Division in December 2023 included a Warranties and Indemnities insurance policy which caps the Company's liabilities (save in the case of fraud) at £1. The major expected cost going forward is expected to be professional fees which will be incurred on pursuing RTO opportunities. The board in conjunction with advisors will screen investment opportunities carefully ahead of incurring fees, to understand the ability of a target to list successfully via an RTO and will seek legally binding cost coverage and exclusivity protections from potential targets when agreeing heads of terms with them.  

The definition of a going concern is that of "any entity unless its management intends to liquidate the entity or to cease trading, or has no realistic alternative to liquidation or cessation of operations". The Directors have taken the decision to cease trading through the disposal of all subsidiaries of the Company and, as such, have prepared the financial statements on a basis other than a going concern. Where as a result of preparing the accounts on a basis other than going concern gains have not been recorded on assets in cases where the realization of assets are greater than the value held within the financial statements as a result of events that have occurred subsequent to 31 March 2023. The Directors do not consider that this basis of preparation has given rise to any material differences compared to the financial statements prepared on a going concern basis.

The directors will consider returning cash to shareholders by way of a solvent members voluntary liquidation process should a suitable transaction not be viewed as not likely to complete. The directors obtained such authority to appoint liquidators to carry out an MVL at the general meeting held on 27^th November 2023.

2.1.2 New and Revised Standards

Standards in effect in 2023 and 2024

There are a number of standards, amendments to standards, and interpretations which have been issued by the IASB that are effective in future accounting periods that the group has decided not to adopt early.

The following amendments are effective for periods beginning on or after 1 January 2023: 

-     Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2);

-     Definition of Accounting Estimates (Amendments to IAS 8); and

-     Deferred Tax Related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12).

The following amendments are effective for periods beginning on or after 1 January 2024:

-     IFRS 16 Leases (Amendment - Liability in a Sale and Leaseback);

-     IAS 1 Presentation of Financial Statements (Amendment - Classification of Liabilities as Current or Non-Current); and

-     IAS 1 Presentation of Financial Statements (Amendment -Current Liabilities with Covenants).

The Group does not expect any of the amendments issued by the IASB, but not yet effective, to have a material impact on the Group.

2.2 Consolidation

Subsidiaries

Subsidiary undertakings are entities that are controlled by the Company. The definition of control involves three elements: power over the investee; exposure or rights to variable returns and the ability to use the power over the investee to affect the amount of the investor's returns. The Group generally obtains power through voting rights. Subsidiaries are consolidated from the date at which the Group obtains the relevant level of control and are treated as disposed of, and so de-consolidated from the date at which that control ceases.

The acquisition method of accounting is used for all business combinations. On acquisition, the cost is measured at the aggregate of their fair values at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquire. Any costs directly attributable to the business combination are expensed as incurred. The acquiree's identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3 (Revised), "Business Combinations" are recognised at fair values at the acquisition date.

Goodwill represents the excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition date fair value of any previous equity interest in the acquiree over the fair value of the Group's share of the identifiable net assets acquired is recorded as goodwill. If, after reassessment, the Group's interest in the net fair value of the acquiree's identifiable assets, liabilities and contingent liabilities exceeds the cost of the business combination, the difference is recognised directly in profit or loss. Any subsequent adjustment to reflect changes in consideration arising from contingent consideration amendments are recognised in profit or loss.

Inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated. Accounting policies of subsidiaries have been adjusted where necessary to ensure consistency with the policies adopted by the Group. All subsidiaries are wholly owned by the Group.

2.3 Segmental reporting

In accordance with IFRS 8, segmental information is presented based on the way in which financial information is reported internally to the chief operating decision maker. The Group's internal financial reporting was historically organised along product and service lines, but this as a consequence of the disposal of trading operations on 12 December 2023, has been changed to reflect discontinued and continuing items. A business segment is a group of assets and operations engaged in providing products and services that are subject to risks and returns which are different from those of other business segments.

2.4 Revenue recognition

Revenue comprises the fair value of the consideration received or receivable for the sale of goods and services in the ordinary course of the Group's activities. Revenue is shown net of value-added tax, returns, rebates and discounts and after eliminating sales within the Group.

The Group recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the entity and when specific criteria have been met for each of the Group's activities.

Revenue is recognised on the following bases:

Class of revenue                  Recognition criteria

Subscription fees                   straight line basis over the life of the contract

Managed services                 straight line basis over the life of the contract

Consultancy                           on delivery of service to customers

Vulnerability assessment     on delivery of service to customers

Revenue is recognised as the client receives the benefit of the services provided under a commercial contract, in an amount that reflects the consideration to which the provider expects to be entitled for the transfer of the goods or services.

Performance obligations and timing of revenue recognition

Revenue from the provision of professional services such as penetration testing, consultancy and strategic intelligence assignments are recognised as services are rendered, based on the contracted daily billing rate and the number of days delivered during the period. Revenue from pre-paid contracts are deferred in the statement of financial position and recognised on utilisation of service by the client.

Revenue from cyber monitoring contracts (including installation), intelligence embedded analyst and report subscriptions includes advance payments made by the customer is deferred (as a contract liability) and is then subsequently recognised on a straight-line basis over the term of the contract. Where they are billed periodically in a monthly in arrears basis, revenues are recognised at that point.

Contracts values are typically fixed price, and the pricing level is based on management experience of pricing adequate mark up of prime cost. Where additional services need to be delivered outside of the contract a time and materials basis based on day rates is used.

Determining the transaction price

The Group's revenue is derived from fixed price contracts and therefore the amount of revenues to be earned from each contract is determined by reference to those fixed prices. Costs of obtaining long-term contracts and costs of associated sales commissions are prepaid and amortised over the terms of the contract on a straight-line basis. Commissions paid to sale staff for work in obtaining the Prepaid Consultancy are recognised in the month of invoice. The timing and any conditionality for the payment of commissions is governed under the then applicable sales incentive plan.

Revenues are exclusive of applicable sales taxes and are net of any trade discounts. There are no financing components in any of our revenue streams.

Contract Assets (accrued incomes) balance were £nil (2022: £21,100) as all arose from assets held for sale and were reflected in that balance. Contract Liabilities (deferred incomes) balance of £nil (2022: £529,496) were similarly included in assets held for sale.  All contract assets had short cash conversion periods and all assets at the year-end have since been monetised. All contract assets and liabilities related to discontinued items.

The Board considers that the information in note 4 adequately depicts how the nature, amount, timing and uncertainty of revenue and cash flow are affected by economic factors.

2.5 Taxation

The tax expense for the year represents the total of current taxation and deferred taxation. The charge in respect of current taxation is based on the estimated taxable profit for the year. Taxable profit for the year is based on the profit as shown in the income statement, as adjusted for items of income or expenditure which are not deductible or chargeable for tax purposes. The current tax liability for the year is calculated using tax rates which have either been enacted or substantively enacted at the reporting date.

Deferred tax is provided in full, using the liability method on temporary differences arising between the tax base of assets and liabilities and their carrying values in the financial statements. Deferred tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that, at the time of the transaction, affects neither accounting nor taxable profit or loss. Deferred tax is determined using tax rates which have been enacted or substantively enacted at the reporting date and are expected to apply when the related deferred tax asset is realised, or the deferred income tax liability is settled.

Deferred tax assets are recognised for all deductible temporary differences, carry forward of tax assets and unutilised tax losses, to the extent that it is probable that taxable profits will be available against which the deductible temporary differences, and the carrying forward of tax assets and unutilised tax losses can be utilised.

The carrying amount of deferred tax assets is reviewed at each reporting date and adjusted to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the deferred tax assets to be utilised. Conversely, previously unrecognised deferred tax assets are recognised to the extent that it is probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted at the statement of financial position date.

2.6 Foreign Currency

The Company has determined Sterling as its functional currency, as this is the currency of the economic environment in which the Company predominantly operates.

Transactions in currencies other than Sterling are recorded at the rates of exchange prevailing on the dates of the transactions. At each reporting date, the monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the reporting date. Non-monetary assets and liabilities are carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was determined. Gains and losses arising on exchange are included in profit or loss.

Foreign currency differences arising on retranslation are recognised in profit or loss.

In the case of foreign entities, the financial statements of the Group's overseas operations are translated as follows on consolidation: assets and liabilities, at exchange rates ruling on reporting date, income and expense items at the average rate of exchange for the period and equity at exchange rates ruling on the dates of the transactions. Exchange differences arising are classified as equity and transferred to a separate translation reserve. Such translation differences are recognised in profit or loss in the period in which the operation is disposed of. Foreign exchange gains and losses arising from monetary item receivable from or payable to a foreign operation, the settlement of which is neither planned nor likely within the foreseeable future, are considered to form part of net investment in a foreign operation and are recognised directly in equity.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate.

Foreign currency gains and losses are reported on a net basis.

2.7 Property, plant and equipment

All property, plant and equipment are stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items.

All assets are depreciated in order to write off the costs, less anticipated residual values of the assets over their useful economic lives on a straight-line basis as follows:

•    Fixtures and fittings: 5 years

•    Computer equipment: 3 years

•    Leasehold: 5 years

2.8 Intangible assets

Acquired intangible assets are shown at historical cost. Acquired intangible assets have a finite useful life and are carried at cost, less accumulated amortisation over the finite useful life. All charges in the year are shown in the income statement in administrative expenses.

Goodwill

Goodwill arising on acquisition is stated at cost. Goodwill is not amortised, but subject to an annual test for impairment. Impairment testing is performed by the Directors. Where impairment is identified, it is charged to the income statement in that period.

Software and brand licences

Acquired software and brand licences are shown at historical cost. Software and brand licences have a finite useful life and are carried at cost less accumulated amortisation. Amortisation is calculated using the straight-line method to allocate the cost of software and brand licences over the period of the licence. The brand and software licences have been fully amortised in previous accounting periods.

Research and development

Research expenditure is charged to the income statement in the year incurred.

Development costs that are directly attributable to the design and testing of identifiable and unique software products controlled by the Group are recognised as intangible assets when the following criteria are met:

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

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

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

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

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

Other development expenditures that do not meet these criteria are charged to the income statement in the year incurred. Development costs recognised as assets are amortised over their estimated useful life, which does not exceed 5 years.

Government tax credits available on eligible Research and Development expenditure ('R&D Tax Credits') and not reclaimable through other means are recognised in income and treated as a government grant.

Customer relationships

Customer relationships are amortised over the period expected to benefit as follows:

·    First Base: 10 years

2.9 Impairment of non-financial assets

Assets that are subject to depreciation or amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. A review for indicators of impairment is performed annually. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. Any impairment charge is recognised in the income statement in the year in which it occurs. When an impairment loss, other than an impairment loss on goodwill, subsequently reverses due to a change in the original estimate, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, up to the carrying amount that would have resulted, net of depreciation, had no impairment loss been recognised for the asset in prior years.

2.10 Financial instruments

The Group applies a simplified method of the expected credit loss model when calculating impairment losses on its financial assets which are measured at amortised cost such as trade receivables, other debtors and prepayments. This resulted in greater judgement due to the need to factor in forward-looking information when estimating the appropriate amount to provisions.

(a) Financial Assets

The Group's Financial Assets include Cash and Cash Equivalents, Trade Receivables and Other Receivables.

·      Initial Recognition and Measurement: Financial Assets are classified as amortised cost and initially measured at fair value.

·      Subsequent Measurement: Financial assets are subsequently measured at amortised cost, using the effective interest method, less impairment. Interest is recognised by applying the effective interest method, except for short-term receivables when the recognition of interest would be immaterial. The company only offers short (typically 30 day) periods of credit to its customers.

·      Derecognition of Financial Assets: The Company derecognises a Financial Asset only when the contractual rights to the cash flows from the asset expire, or it transfers the Financial Asset and substantially all the risks and rewards of ownership of the asset to another entity.

(b) Financial Liabilities and Equity Instruments

The Group's Financial Liabilities include Trade Payables, Accruals and Other Payables. Financial Liabilities are classified at amortised cost.

(c) Investments

Investments not in subsidiary undertakings are carried at fair value through profit and loss.

Classification as Debt or Equity. Financial Liabilities and Equity Instruments issued by the Company are classified according to the substance of the contractual arrangements entered into and the definitions of a Financial Liability and an Equity Instrument.

2.11 Share capital

Ordinary shares (of nil par value) in the Company are classified as equity. By definition all amounts arising from the issue of these shares are attributable to Share Capital as are any directly attributable (including any warrants issued as commissions) to issue of new shares are shown in equity as a deduction to the share capital account. The Company does not maintain a separate share premium account.

2.12 Reserves

The consolidated financial statements include the following reserves: translation reserve, share option reserve, 2022 Liabilities reserve and accumulated losses. Premiums paid on the issue of share capital, less any costs relating to these, are posted to the share capital account as referenced above.

2.13 Trade payables

Trade payables are obligations to pay for goods and services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities.

Trade payables are recognised initially at fair value and are subsequently measured at amortised cost using the effective interest method. As the payment period of trade payables is short, future cash payments are not discounted as the effect is not material.

2.14 Leases

When entering into a contract the Group assesses whether or not a lease exists. A lease exists if a contract conveys a right to control the use of an identified asset under a period of time in exchange for consideration. Leases of low value items and short-term leases (leases of less than 12 months at the commencement date) are charged to the profit or loss on a straight-line basis over the lease term in administrative expenses.

The Group recognises right-of-use assets at cost and lease liabilities on the statement of financial position at the lease commencement date based on the present value of future lease payments. The right-of-use assets are amortised on a straight-line basis over the length of the lease term. The lease liabilities are recognised at amortised cost using the effective interest rate method. Discount rates used reflect the incremental borrowing rate specific to the lease.

2.15 Pensions

The Company operates a defined contribution pension scheme under which fixed contributions are payable. Pension costs charged to the income statement represent amounts payable to the scheme during the year.

2.16 Share-based payments

The cost of share-based payment arrangements, which occur when employees receive shares or share options, is recognised in the income statement over the period over which the shares or share options vest.

The expense is calculated based on the value of the awards made, as required by IFRS 2, 'Share-based payment'. The fair value of the awards is calculated by using the Black-Scholes and Monte Carlo option pricing models taking into account the expected life of the awards, the expected volatility of the return on the underlying share price, vesting criteria, the market value of the shares, the strike price of the awards and the risk-free rate of return. The charge to the income statement is adjusted for the effect of service conditions and non-market performance conditions such that it is based on the number of awards expected to vest. Where vesting is dependent on market-based performance conditions, the likelihood of the conditions being achieved is adjusted for in the initial valuation and the charge to the income statement is not, therefore, adjusted so long as all other conditions are met.

Where an award is granted with no vesting conditions, the full value of the award is recognised immediately in the income statement.

2.17 Provisions

Provisions are recognised in the statement of financial position where there is a legal or constructive obligation to transfer economic benefits as a result of a past event. Provisions are discounted using a rate which reflects the effect of the time value of money and the risks specific to the obligation, where the effect of discounting is material.

Provisions are measured at the present value of expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time, value of money and the risks specific to the obligation. The increase in provision due to the passage of time is recognised as interest expense.

3.   Critical accounting estimates and judgements

The preparation of the Group financial statements in conformity with IFRSs as applied in accordance with the provisions of the Companies Act 2006 requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group's accounting policies. 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 present circumstances. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the Group financial statements are disclosed below.

Estimates:

Management do not consider there to be significant accounting estimates in respect of the year ended 31 March 2023 or 31 March 2022.

Impairment of intangible assets

All intangible assets related to the former cyber security business. The directors reviewed the totality of intangible assets held (being customer base and goodwill) compared to expected sales proceeds based on metrics from similar deals in the cyber security sector. The total NBV of intangibles prior to transfer to assets held for sale was £2.58m.  On the basis that the accounts are prepared on a basis other than going concern, we assessed whether there should be any material reductions in value to the assets held for sale at the balance sheet date based on our knowledge of events after the year end which showed that the assets were sold for an enterprise value of £4.2m and that no adjustment was therefore required.

Treatment of assets & liabilities held for sale and discontinued items.

On 12 December 2023, the Company announced that it had completed the disposal of Falanx Cyber Defence Limited and Falanx Cyber Technologies Limited (together the "Cyber Division") for an enterprise value of £4.2 million (payable in cash) to Thetis Bidco Limited. This represented all of the professional services and monitoring managed services operating segments other than some remaining operating costs supporting the AIM Rule 15 cash shell. In the year ended 31 March 2023, management were committed to selling the Cyber division with the sale of these businesses being considered highly probable within 12 months. There was a board meeting held on 30 March 2023 to discuss the sale of the Cyber Division and a letter was sent to BOOST&Co on 31 March 2023 outlining the position, therefore 31 March 2023 is considered to be the date the Cyber Division are classified as held for sale and therefore included in discontinued operations. All assets and liabilities relating to the cyber security division, including those which were held in the name of the parent company (such as the lease on the Reading offices) and the borrowings from BOOST&Co (which were held by Falanx Cyber Defence Limited) were therefore treated as items held for sale.

4.   Segmental reporting

As described in note 2, the Directors consider that the Group's internal financial reporting is organised along continuing and discontinuing lines of business following the disposal of the strategic intelligence business on 6 October 2021 and the disposal of the remaining cyber business on 12 December 2023.  At that point the operations of the group were ceased and remaining infrastructure reorganised to support a cash shell.

The results for the business operating segment for the years ended 31 March 2022 and 31 March 2021 are as follows:

	2023	2023	2023		2022		2022			2022
	£	£	£		£		£			£
	Continuing	Discontinued	Total	Continuing		Discontinued			Total
Professional services	-	2,748,579	2,748,579		63,575		2,640,731			2,704,306
Monitoring managed services	-	1,041,794	1,041,794		-		859,104			859,104
Assynt report & embedded analysts	-	-	-		-		1,005,191			1,005,191
Revenues from external customers	-	3,790,373	3,790,373		63,575		4,505,026			4,568,601
Gross Margin	-	1,362,908	1,362,908		63,575		1,609,149			1,672,724
Cyber operating expenses	-	(1,947,208)	(1,947,208)		-		(1,598,143)			(1,598,143)
Assynt operating expenses	-	-	-		-		(259,812)			(259,812)
Corporate operating expenses	(1,180,589)	-	(1,180,589)		(1,009,132)		-			(1,009,132)
Segment Reported EBITDA	(1,180,589)	(584,300)	(1,764,889)		(945,557)		(248,806)			(1,194,363)
Finance expense-net	5,607	(342,671)	(337,064)		(4,467)		(197,238)			(201,705)
Depreciation and amortisation	(2,247)	(433,583)	(435,830)		(2,865)		(475,930)			(478,795)
Impairment of goodwill	-	-	-		-		(130,347)			(130,347)
Share option expense	(12,355)	-	(12,355)		(5,708)		(12,131)			(17,839)
Profit on sale of discontinued operations	-	-	-		-		3,498,102			3,498,102
Segment loss before tax for the year	(1,189,584)	(1,360,554)	(2,550,138)		(958,597)		2,433,650			1,475,053

Segment assets consist primarily of property, plant and equipment, intangible assets, trade and other receivables and cash and cash equivalents. Unallocated assets comprise deferred tax assets, financial assets held at fair value through profit or loss and derivatives.

Segment assets, liabilities and capital expenditure for the year then ended are as follows:

			2023	2022
			Continuing	Continuing
			£	£
Contract assets			-	27,100
Other assets			1,101,356	8,296,487
Contract liabilities (deferred income)			-	529,496
Other liabilities			394,366	3,418,222
Capital expenditure - Tangible			-	13,315

Geographical information

Discontinued items historically operated in five geographical areas, although all were managed on a worldwide basis from the Group's head office in the United Kingdom. All non-current assets are in the United Kingdom.

A geographical analysis of revenue and non-current assets is given below. Revenue is allocated based on location of customer; non-current assets are based in the United Kingdom. Continuing revenues were nil in 2023 (2022: £63,575) with the prior year representing support by central functions to the buyers of Assynt which was sold on 6th October 2021.

Revenue by geographical location

	2023	2023	2023	2022	2022	2022
	Continuing	Discontinued	Total	Continuing	Discontinued	Total
	£	£	£	£	£	£
United Kingdom	-	3,100,163	3,100,538	63,575	3,457,696	3,521,271
Europe	-	216,009	216,009	-	293,859	293,859
The Americas	-	417,564	417,564	-	527,217	527,217
Australasia	-	56,637	56,637	-	99,294	99,294
Middle East and Africa	-	-	-	-	126,960	126,960
	-	3,790,373	3,790,748	63,575	4,505,023	4,568,601

Non-current assets			2023	2022
			Continuing	Continuing
			£	£
United Kingdom			-	3,621,304
			-	3,621,304

Contract Assets and liabilities all related to discontinued businesses.

	Contract	Contract	Contract	Contract
	Assets	Assets	Liabilities	Liabilities
	2023	2022	2023	2022
	£	£	£	£
At 1 April	-	63,992	-	(1,108,317)
Transfers in the year from contract assets to trade receivables	-	(63,992)	-	-
Transfers from contract liabilities to revenue in the year	-	-	-	842,732
Disposal in the year	-	-	-	235,604
Amount recognised as revenue in the year not yet invoiced	-	27,100	-	-
Amount invoiced in advance not recognised as revenue in the year	-	-	-	(499,515)
At 31 March	-	27,100	-	(529,496)

5.   Discontinued operations

On 06 October 2021, the Company announced that it had sold the Assynt Strategic Intelligence Division ("Assynt") for an enterprise value (cash consideration) of £4.6 million to Cross Atlantic LLC. Assynt, which represented the entirety of the Assynt operating segment, was classified as a discontinued operation at that date. Consequently, Assynt has not been presented as an operating segment in the segment note, and is therefore included in discontinued activities.

On 12 December 2023, Cloudified announced that it had completed the disposal of Falanx Cyber Defence Limited and Falanx Cyber Technologies Limited (together the "Cyber Division") for an enterprise value of £4.2 million payable in cash to Thetis Bidco Limited. This represented all the professional services and monitoring managed services operating segments other than some remaining operating costs supporting the AIM Rule 15 cash shell. In the year ended 31 March 2023, management were committed to selling the Cyber division with the sale of these businesses being considered highly probable within 12 months. There was a board meeting held on 30 March 2023 to discuss the sale of the Cyber Division and a letter was sent to BOOST&Co on 31 March 2023 outlining the position, therefore 31 March 2023 is considered to be the date the Cyber Division, including certain  costs of the Company which were in support of the Cyber Division, are classified as held for sale at 31 March 2023 and included in discontinued operations.

The results of the discontinued operations and the effect of the discontinued operations on the financial position of the Group were as follows:

Financial performance and cash flow information

Results of the discontinued operations for the year for Falanx Cyber Defence Limited and Falanx Cyber Technologies Limited (2022: the period disposed of Assynt)

		2023	2022	2022
		Cyber	Cyber	Assynt
Income statement		£	£	£
Revenue		3,790,373	3,478,733	1,026,294
Administrative expenses		(4,808,256)	(4,302,905)	(1,069,336)
Operating loss		(1,017,883)	(824,172)	(43,042)
Finance costs		(342,671)	(196,997)	(241)
Loss before income tax		(1,360,554)	(1,021,169)	(43,283)
Income tax credit		-	8,479	1,050
Loss from discontinued operations before gain on sale		(1,360,554)	(1,012,690)	(42,233)
Profit on sale of discounted operations		-	-	3,498,102
(Loss) / Profit from discontinued operation		(1,360,554)	(1,012,690)	3,455,869

		2023	2022
Cash flows from/(used in) discontinued operations		£	£
Net cash flows from operating activities		(1,072,624)	(388,485)
Net cash flows from investing activities		(48,209)	-
Net cash flows from financing activities		(549,221)	-
Net cash flows for the year		(1,670,054)	(388,485)
Intra-Group funding and transactions		1,568,601	323,031
Net cash flows from discontinued operations, net of intercompany		(101,453)	(65,454)

Effect of discontinued operations on the financial position of the Group

			2023		2022
Net assets disposed of and the gain on disposal			£		£
Assets of the disposal group
Property, plant & equipment			90,367		442
Intangible assets			2,976,129		4,293
Right of use asset			103,104		-
Trade and other receivables			1,251,846		174,021
Total assets			4,421,446		178,756
Liabilities of the disposal group
Trade and other payables			595,992		201,928
Contract liabilities			595,670		420,286
Borrowings			2,136,667		-
Lease liabilities			126,616		-
Total liabilities			3,454,945		622,214
Net assets of the disposal group			966,501		(443,458)
Consideration received in cash and cash equivalents, net of transactions costs			-		3,163,674
Gain on sale before income tax and reclassifications of FX translation reserve			-		3,607,132
Exchange differences received to the income statement			-		(109,030)
Gain on sale of discontinued operation			-		3,498,102
Net cash inflow arising on disposal:
Consideration received in cash and cash equivalents, net of transaction costs			-		3,163,674
Less cash and cash equivalents disposed of			-		-
			-		3,163,674

The disposal of the Cyber Division will be reflected in the accounts for the year to 31 March 2024.

6.   Basic and diluted earnings per share

Basic loss per share is calculated by dividing the loss attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the year. There are no dilutive share options at present as these would currently increase the loss per share.

Continuing operations
	2023	2022
	£	£
(Loss) / Profit for the year attributable to equity holders of the Company	(2,550,138)	(1,484,582)
Less (loss) / profit from discontinued operations	(1,360,554)	2,443,179
Loss from continuing operations	(1,189,584)	(958,597)
Total basic and diluted (loss)/profit per share from continuing operations (pence per share)	(23)	(18)

Continuing and discontinued operations
	2023	2022
	£	£
(Loss) / Profit for the year attributable to equity holders of the Company	(2,550,138)	1,484,582
Total basic and diluted profit / (loss) per share (pence per share)	(48)	28

Weighted average number of shares used as the denominator

	2023	2022*
Weighted average number of ordinary shares used as the denominator in the calculating basic earnings per share	5,264,212	5,254,012

Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares in issue to assume the conversion of all dilutive potential ordinary shares. The Company's dilutive potential ordinary shares arise from warrants and share options. In respect of the warrants, a calculation is performed to determine the number of shares that could have been acquired at fair value, based upon the monetary value of the subscription rights attached to the outstanding warrants. The number of shares calculated as above is compared with the number of shares that would have been issued assuming the exercise of the warrants.

At 31 March 2023, the potentially dilutive ordinary shares were anti-dilutive because the Group was loss-making. The basic and diluted earnings per share as presented on the face of the income statement are therefore identical. All earnings per share figures presented above arise from continuing and total operations and, therefore, no earnings per share for discontinued operations is presented.

IAS 33 requires presentation of diluted EPS when a company could be called upon to issue shares that would decrease earnings per share or increase the loss per share. For a loss making company with outstanding share options, net loss per share would be decreased by the exercise of the options Therefore per IAS 33:36 the antidilutive potential ordinary shares are disregarded in the calculation of diluted EPS.

7.     Events after the reporting period

On 9 November 2023, the Company announced the sale of its cyber security division. The purchaser, Thetis Bidco Limited, the owner of Wavenet Ltd, an MSP supported by MacQuarrie, acquired the division for an enterprise value of £4.2 million, subject to customary adjustments for debt, intercompany balances, and working capital normalisation. Shareholder approval for the sale was obtained at the general meeting convened on 27 November 2023, with the transaction being finalised on 12 December 2023.

 Movements in cash since the completion of the disposal on 12^th December 2023 to the 29 February 2024 are set out below.

	£'000
Enterprise value (payable in cash)	4,200
Adjustments for borrowings, debt and working capital	(2,365)
Transaction Costs	(563)
Restructuring Costs	(705)
Cash at 29 February 2024	567

Following the completion of the sale, the Company swiftly adjusted its operational structure to align with its new status as a cash shell, resulting in significant reductions in Group expenses and the implementation of redundancies for executives and other personnel in accordance with their contractual terms. As of 29 February 2024, the Company's cash balances were approximately £567,000 which was greater the anticipated level forecasted at the time of the disposal announcement on 9 November 2023. The Group is now debt free, and the expected ongoing cost base is approximately £30,000 per month.

On 27^th November 2023 the company changed its name from Falanx Cyber Security Limited to Cloudified Holdings Limited.

The statutory accounts for the year ended 31 March 2023 have not yet been delivered to the Registrar of Companies. The auditors have reported on them, and their report was unqualified and did not contain a statement, which had the Company been UK incorporated, would have been required under either Section 498 (2) or Section 498 (3) of the Companies Act 2006. It did include an emphasis of matter which explained that the directors having made the decision to dispose of the trading subsidiaries of the group, have made the decision to cease trading and therefore do not consider it to be appropriate to adopt the going concern basis of accounting in preparing the financial statements.  This final results announcement does not constitute statutory accounts under Section 435 of the companies Act 2000

 

END