Final Results for the Year Ended 31 December 2021

RNS Number : 7286Q
Cornerstone FS PLC
30 June 2022
 

Certain information contained within this Announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulation (EU) No. 596/2014 ("MAR") as applied in the United Kingdom. Upon publication of this Announcement, this information is now considered to be in the public domain .

 

30 June 2022

Cornerstone FS plc

("Cornerstone", the "Company" or the "Group")

 

Final Results

Notice of AGM and Publication of Annual Report

 

Cornerstone FS plc (AIM: CSFS), the cloud-based provider of international payment, currency risk management and electronic account services to SMEs, announces its final results for the year ended 31 December 2021. In addition, the Company gives notices of its annual general meeting ("AGM") and publication of its annual report and accounts, both of which are now available to download from the Company's website at https://investors.cornerstonefs.com/document-centre/ .

 

Highlights

· Admitted to trading on AIM and raised gross proceeds of £2.7m through the placing of ordinary shares and convertible loan note facilities

· Total revenue increased by 38% to £2.3m (2020: £1.7m)

· Gross margin improved substantially to 51.6% (2020: 29.8%)  

· Onboarded 416 new clients (2020: 328)

· Strong strategic progress:

Significant growth in revenue generated by direct clients, which accounted for the majority of Group revenue

Appointed a new team to market the Group's services to businesses located in Asia that support high net worth individuals ("HNWIs") invest in the UK

Obtained authorisation as an Authorised Electronic Money Institution ("AEMI") to enable expansion of service offering

Expanded internationally with the opening of an office in Dubai

Post period, acquired Capital Currencies Limited ("Capital Currencies"), a well-established foreign exchange broker specialising in the provision of currency exchange and international payments

 

Julian Wheatland, Chief Executive Officer of Cornerstone, said:

 

"We have made excellent progress in delivering the strategic objectives that we outlined at the time of our IPO last year and also achieving a strong increase in revenue. In particular, we have significantly grown sales to direct clients, brought the majority of our white label business in-house, delivered substantial product enhancements and made acquisitions of other FX businesses. While we are still at the relative beginning of our journey, I am proud of what we have achieved to date. 

 

"The strong trading momentum of 2021 has been sustained into the current year and through the first half. The investments made last year into enhancing our product offering and strengthening our team are continuing to drive an increase in trading and expansion of our customer base. As a result, and combined with the contribution from the acquisition this year of Capital Currencies, the Board continues to expect to achieve significant revenue growth for full year 2022, in line with market expectations." 

 

 

Enquiries

 

Cornerstone FS plc

+44 (0)203 971 4865

Julian Wheatland, Chief Executive Officer

Judy Happe, Chief Financial Officer

 

 

 

SPARK Advisory Partners Limited (Nomad)

+44 (0)203 368 3550

Mark Brady, Neil Baldwin

 

 

 

SP Angel Corporate Finance LLP (Broker)

+44 (0)203 470 0470

Jeff Keating, Harry Davies-Ball

 


 

Luther Pendragon (Financial PR)

+44 (0)207 618 9100

Harry Chathli, Claire Norbury

 

 

 

About Cornerstone FS plc

 

Cornerstone FS plc is a payments focused fintech business that makes managing currency simple for SMEs. It provides international payment, currency risk management and electronic account services using a proprietary cloud-based multi-currency payments platform. These services are delivered directly and via white label partners on a SaaS basis to UK-based SMEs that engage in international trade. Cornerstone also serves some high-net worth individual clients.

 

Headquartered in the City of London with offices in Tunbridge Wells and Dubai, Cornerstone is admitted to trading on AIM under the trading symbol 'CSFS'. For more information, please visit www.cornerstonefs.com.



 

Operational Review

 

The year to 31 December 2021 has been a period of considerable development and successful growth for the Group. Cornerstone was admitted trading on AIM in April 2021 with an express strategy to build a business in the provision of payment services, foreign exchange and currency risk management. Since then, it has made excellent progress in delivering these objectives and achieved significant growth during the year, with that momentum having continued into 2022. 

 

Significant Progress since IPO

 

Cornerstone came to the market with the intention of pursuing an aggressive expansion strategy - which the Group began to deliver during the year.

 

The first step following the IPO was the appointment of a new team to market the Group's services to businesses located in Asia, with a primary focus on firms supporting HNWIs acquiring real estate in the UK. This is a large and growing market opportunity, which has been accelerated by the pandemic. The new team, which is based in London, joined from Vorto Trading Ltd ("Vorto"), which is Cornerstone's largest white label partner. Since coming on board in the second half of the year, the Asia team has performed incredibly well - surpassing expectations. By being part of Cornerstone's business and under the Cornerstone brand, the Asia team has been able to market a broader range of products and services, to a broader range of customers. 

 

The Group further expanded its geographical reach with the establishment of a new office in Dubai to market is services to foreign investors, particularly those investing in real estate in the Emirate and businesses located there. The Directors believe this represents a significant and expanding market opportunity. Robert O'Brien was appointed as General Manager APAC and Middle East to lead the new office, who was also previously at Vorto where he was the largest revenue generator. The Group is seeing strong demand for its services in Dubai, with the office having commenced generating revenue, and it is also providing Cornerstone with access to wider potential opportunities across the region.

 

A significant milestone was achieved, post year end in February, with the acquisition of Capital Currencies, a well-established foreign exchange broker that is authorised and regulated by the FCA as an authorised payment institution permitted to provide payment services. Capital Currencies is a strong strategic fit for Cornerstone as its client base is primarily UK corporates, with a particular focus on larger SMEs, with over 90% of revenue being generated by clients that it services directly. By bringing Capital Currencies' clients onto Cornerstone's technology platform, the Group can benefit from economies of scale and from the cross-selling of more services. The integration is progressing well with all significant integration milestones having been met. This includes progress on migrating all Capital Currencies customers onto the Cornerstone platform, and these customers have begun to be offered additional, higher value, services such as forward contracts.  The acquisition is expected to be earnings accretive from the current financial year.

 

Performance

 

Cornerstone achieved significant growth in 2021, with trading momentum increasing throughout the year. Revenue for the 12 months ended 31 December 2021 was £2.3m, a year-on-year increase of 38% (2020: £1.7m). This reflects a very strong second half of the financial year, with revenue 75% higher than in the first six months of 2021.

 

In line with the Group's stated strategy, this growth primarily reflects a significant increase in revenue generated by clients that the Group serves directly. The proportion of total revenue that was accounted for by direct clients increased to 56% compared with 12% for the previous year, being £1.3m (2020: £0.2m). A key contributor to this growth was the new Asia team that was brought on board in the second half of the year.

 

Revenue generated through the Group's introducer network (which is primarily white label partners, who use Cornerstone's technology, but also introducer brokers) accounted for 44% of total revenue (2020: 88%) and was £1.0m (2020: £1.4m). On a reported basis this represents a reduction due to some revenue that the Group previously generated through the introducer network now being serviced directly. However, on an underlying basis, there was an increase in revenue generated through the Group's introducer network in 2021 compared with 2020. 

 

By client type, there was an increase in revenue generated by both corporate accounts and HNWIs. This includes particularly strong growth in revenue from HNWIs, which was primarily due to the addition of the Asia team during the year. As a result, the proportion of total revenue accounted for by HNWIs increased to 25% (2020: 8%) with corporate accounts contributing 75% (2020: 92%).

 

The total number of clients that traded with Cornerstone during the year grew to 583 compared with 541 for 2020. Cornerstone onboarded 416 new clients in 2021, an increase from 328 in the previous year. This reflects the sustained expansion in the scale of Cornerstone's business.

 

Spot trades accounted for 96% of transactions (2020: 94%) and 89% of revenue (2020: 87%). Higher margin forward currency contracts accounted for 4% of transactions (2020: 6%) and 11% of revenue (2020: 13%). The difference between the volume of transactions and proportion of revenue reflects the higher levels of commission charged on forward transactions.

 

During 2021, transactions were conducted between 42 different currency pairs (2020: 59), with 91% of transactions being between various combinations of Sterling, Euros and US Dollars (2020: 88%).

 

Product Enhancement

 

During the year, and in line with the Group's stated strategy, the Group made a number of significant enhancements to its offer. Firstly, the Group undertook a major rebuild of the user interface of the platform to substantially modernise its appearance, streamline certain pathways and make the functionality more intuitive. This is part of the Company's ongoing programme of investment and development of the Group's technology platform as the Company looks to continuously expand and upgrade its features.

 

A key milestone was achieved with the receipt of FCA approval - via the Group's primary operating subsidiary, Cornerstone Payment Solutions Ltd (formerly FXPress Payment Services Ltd) - to become an AEMI. This allows the Group to receive payments and customer funds that can be held on account for an indefinite purpose and time - enabling Cornerstone to offer a more convenient service as customers can leave money with the Group rather than needing to put it into, and taking it out of, the system for each foreign exchange transaction or international payment. Importantly, being an AEMI will also enable Cornerstone to develop further technology-enabled products and services that take advantage of the UK's Open Banking Initiative. This forms a key part of the Group's vision to develop a fully-connected workflow platform for SMEs that will provide a single access point to manage and execute all of their payments - with or without an FX element.

 

Post year end, the Group made another significant enhancement through securing an additional payment partner and liquidity provider, Banking Circle, which sits alongside Currency Cloud and Velocity. All trades placed with the Group by clients are replicated in a back-to-back contract with a third-party liquidity provider, which provides pricing, execution and settlement services. By partnering with Banking Circle, not only does this provide more resilience by having multiple suppliers, but it expands the Group's business offering in several respects. Firstly, it enables the Group to provide clients with European IBANs (with some customers wanting a European IBAN rather than a UK IBAN). It also enables Cornerstone to service a broader range of countries and industries thanks to the range of services and partnerships that Banking Circle has in place.

 

Delivering on Strategy

 

Accordingly, since the IPO last year, the Group has made great progress in delivering against the stated strategy. In particular, the Group has:

 

· Made acquisitions of other FX businesses

· Brought the majority of its white label business in-house

· Significantly grown sales to clients that it serves directly

· Delivered product enhancements

· Obtained authorisation as an AEMI - an important step towards being able to develop a full-connected workflow platform for SME payments

· Expanded internationally

· Strengthened the management team - bringing in highly experienced individuals to drive the business forward

 

Financial Review

 

Revenue for the 12 months to 31 December 2021 increased by 38% to £2.3m compared with £1.7m for the previous year. This reflects sustained momentum throughout the year and underlying growth across the business - driven, in particular, by revenue generated by clients that the Group serves directly.

 

Revenue by origin Revenue generated by clients that the Group serves directly increased more than six-fold to £1.3m (2020: £0.2m), accounting for 56% of total revenue (2020: 12%). Revenue generated through the Group's introducer network (which is primarily white label partners, who use Cornerstone's technology, but also introducer brokers) was £1.0m (2020: £1.4m), representing 46% of total revenue (2020: 88%). While this represents a reduction in indirect revenue, on an underlying basis there was an increase due to some of the revenue that had previously been generated through the introducer network now being serviced directly.

 

Revenue by client type Corporate accounts remained the largest contributor to revenue by client type, generating £1.7m in 2021 (2020: £1.5m), accounting for 75% (2020: 92%) of total revenue. There was significant growth in revenue from HNWIs, which increased to £0.6m (2020: £0.1m) and accounted for 25% of total revenue compared with 8% for the previous year.

 

Revenue by product Revenue continued to be generated from the provision of foreign exchange and payments services in the form of spot and forward trades, accounting for 89% and 11% of revenue respectively (2020: 87% and 13%).

 

Gross margin improved substantially to 51.6% (2020: 29.8%) due to the increased contribution to revenue from clients that the Group serves directly. The improvement in gross margin combined with the greater revenue generated a significant increase in gross profit to £1.2m compared with £0.5m for the previous year.

 

Total administrative expenses were £5.4m in 2021 compared with £2.7m for the previous year. This primarily reflects an increase of:

· £1.9m in share-based compensation to £2.3m (2020: £0.4m), which includes £1.8m in share-based incentivisation for the new Asia team and the General Manager APAC and Middle East; and

· £1.1m in other administrative expenses to £2.6m (2020: £1.5m), which relates to expenses associated with the Group's IPO and other public company requirements.

 

Loss before tax was £4.2m for 2021 (2020: £2.2m loss), which primarily reflects the greater administrative expenses. Loss per ordinary share on a basic and diluted basis was 21.24 pence (2020: 14.99 pence loss).

 

As at 31 December 2021, the Group had cash and cash equivalents of £348k (31 December 2020: £184k). During the year, the Group raised gross proceeds of £2.2m via a placing of new ordinary shares. At year end, the Group also had access to £450k in convertible loan note facilities. Post year end, the Group raised gross proceeds of £870k through the placing of, and subscription for, new ordinary shares, which was partly used to fund the initial cash consideration and integration costs of the Group's acquisition of Capital Currencies Limited.

 

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, related to 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.

 

Outlook

 

The strong trading momentum of 2021 has been sustained into the current year and through the first half. In the first quarter of 2022, the Group achieved its highest ever quarterly revenue - reflecting underlying growth across the business as well as the first contribution from Capital Currencies. The investments made last year into enhancing Cornerstone's product offering and strengthening the team are continuing to drive an increase in trading volumes and expansion of the Group's customer base. As a result, the Board continues to expect to achieve significant revenue growth for full year 2022, in line with market expectations. 

 

The Group continues to pursue acquisition opportunities and is actively progressing its organic growth strategy - including plans to launch a new e-wallet solution this year and secure further integrations with accounting platforms. With a strong team and highly scalable platform, the Group continues to believe it is well-placed to take advantage of the meaningful opportunities to build a significant business offering technology-enabled international payment services.

 

Accordingly, the Board remains confident in Cornerstone's prospects and looks forward to reporting on its progress.

 

Notice of AGM and Publication of Annual Report

 

The Company gives notice that its AGM will be held at 11.00am BST on 25 July 2022 at the office of Luther Pendragon, 48 Gracechurch Street, London, EC3V 0EJ.

 

The Notice of AGM and form of proxy, along with the Company's annual report and accounts for the year ended 31 December 2021, have been posted to shareholders and will be made available on the Company's website: https://investors.cornerstonefs.com/document-centre/.

 

 

 


Group Statement of Comprehensive Income

For the year ended 31 December 2021

 


 

2021

 2020

 


Notes

£

£





REVENUE

1

2,301,172

1,664,237

Cost of sales


(1,113,995)

(1,167,929)





GROSS PROFIT


1,187,177

496,308


 



ADMINISTRATIVE EXPENSES

2



Share-based compensation

14

(2,338,495)

(358,443)

Further adjustments to underlying profit from operations (see below)


(402,515)

(793,577)

Other administrative expenses


(2,621,962)

(1,499,589)





TOTAL ADMINISTRATIVE EXPENSES


(5,362,972)

(2,651,609)





Underlying loss from operations


(1,434,785)

(1,003,281)

Stated after the add back of:




- share-based compensation on reverse acquisition


-

211,281

- other share-based compensation

14

2,338,495

147,162

- transaction costs

14

402,515

793,577





LOSS from operations

2

(4,175,795)

(2,155,301)





Finance and other income

3

1,622

603

Finance costs

3

(360)

-





LOSS BEFORE TAX


(4,174,533)

(2,154,698)





Income tax income/(expense)

6

70,764

-



 ________

 ________

LOSS FOR THE YEAR


(4,103,769)

(2,154,698)





TOTAL COMPREHENSIVE LOSS FOR THE YEAR

(4,103,769)

(2,154,698)





Loss per ordinary share - basic & diluted (pence)

7

(21.24)

(14.99)



 _______

 _______

 

All amounts are derived from continuing operations.

 

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

 

 

 

 

 

 

 

 

 

 

 

 

Group and Company Statement of Financial Position

As at 31 December 2021

 


 

Group 

Group

Company

Company


 

31 December 2021

31 December 2020

 

31 December

2021

 

31 December

2020


Notes

£

£

£

£

assets






NON-CURRENT ASSETS






Intangible assets

8

577,447

320,972

484,927

226,278

Tangible assets

9

21,542

8,464

-

-

Investments

10

-

-

6,349,758

6,147,773



 _______

 _______

 _______

 _______



598,989

329,436

6,834,685

6,374,051

CURRENT ASSETS






Trade and other receivables

12

493,244

570,159

248,996

238,810

Cash and cash equivalents


348,102

183,675

139,579

96,394



 _______

 _______

 _______

 _______



841,346

753,834

388,575

335,204



 _______

 _______

 _______

 _______

total assets


1,440,335

1,083,270

7,223,260

6,709,255



 _______

 _______

 _______

 _______

equity and liabilities






equity






Share capital

14

202,776

165,887

202,776

165,887

Share premium


3,074,355

951,422

3,074,355

951,422

Share-based payment reserve


2,392,710

54,215

2,392,710

54,215

Merger relief reserve


5,557,645

5,557,645

5,557,645

5,557,645

Reverse acquisition reserve


(3,140,631)

(3,140,631)

-

-

Retained earnings


(7,828,230)

(3,724,461)

(4,907,402)

(1,083,751)



 _______

 _______

 _______

 _______

TOTAL EQUITY

 

258,625

(135,923)

6,320,084

5,645,418


 

 _______

 _______

 _______

 _______

CURRENT LIABILITIES






Trade and other payables

13

1,181,710

1,219,193

903,176

1,063,837



 _______

 _______

 _______

 _______

TOTAL EQUITY AND LIABILITIES


1,440,335

1,083,270

7,223,260

6,709,255



 _______

 _______

 _______

 _______







 

A separate profit and loss account for the Parent company is omitted from the Group financial statements by virtue of section 408 of the Companies Act 2006. The Company loss for the year ended 31 December 2021 was £3,823,651 (five-month period ended 31 December 2020: loss of £1,173,655).

 


Group Statement of Changes in Equity

For the year ended 31 December 2021

 


Share capital

Share premium

Share-based payment reserve

Merger relief reserve

Reverse acquisition reserve

Retained earnings

Total


£

£

£

£

£

£

£









Balance at 1 January 2020

91,559

1,543,988

-

-

-

(1,569,763)

65,784









Parent company reflected on reverse acquisition

5,197

-

-

-

-

-

5,197

Issue of FXPress Payment Services Ltd shares prior to acquisition

12,037

565,426

-

-

-

-

577,463

Share-based payments for FXPress Payment Services Ltd shares prior to acquisition

-

-

92,947

-

-

-

92,947

Costs of raising equity in FXPress Payment Services Ltd

-

(50,000)



-

-

(50,000)

Reverse acquisition adjustment

(103,596)

(2,059,414)

(92,947)

-

2,557,142

-

301,185

Issue of shares

20,562

1,007,557

-

-

-

-

1,028,119

Issue of consideration shares

140,128

-

-

5,557,645

(5,697,773)

-

-

Costs of raising equity

-

(56,135)

-

-

-

-

(56,135)

Share-based payments (note 14)

-

-

54,215

-

-

-

54,215

Loss and total comprehensive income for the year

-

-

-

-

-

(2,154,698)

(2,154,698)


_______

_______

_______

_______

_______

_______

_______

Balance at 31 December 2020

165,887

951,422

54,215

5,557,645

(3,140,631)

(3,724,461)

(135,923)









Issue of shares

36,889

2,208,447

-

-

-

-

2,245,336

Costs of raising equity

-

(85,514)

-

-

-

-

(85,514)

Share-based payments (note 14)

-

-

2,338,495

-

-

-

2,338,495

Loss and total comprehensive income for the year

-

-

-

-

-

(4,103,769)

(4,103,769)


 _______

 _______

_______

_______

_______

_______

_______

Balance at 31 December 2021

202,776

3,074,355

2,392,710

5,557,645

(3,140,631)

(7,828,230)

258,625


 _______

 _______

_______

_______

_______

_______

_______


















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. T he 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 anyindication 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

 


£

£





 _______

 _______

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

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)

-


 _______

 _______

 

 

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.

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