Final Results

Brandshield Systems PLC

03 July 2023

 

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION AS STIPULATED UNDER THE UK VERSION OF THE MARKET ABUSE REGULATION NO 596/2014 WHICH IS PART OF ENGLISH LAW BY VIRTUE OF THE EUROPEAN (WITHDRAWAL) ACT 2018, AS AMENDED.  ON PUBLICATION OF THIS ANNOUNCEMENT VIA A REGULATORY INFORMATION SERVICE, THIS INFORMATION IS CONSIDERED TO BE IN THE PUBLIC DOMAIN.

3 July 2023

BrandShield Systems Plc

("BrandShield" or the "Company")

Final Results for the year ended 31 December 2022

BrandShield Systems plc (AIM: BRSD), a leading provider of cybersecurity solutions for brand oriented digital risk protection ("DRP"), announces its final results for the year ended 31 December 2022 ("FY 2022").

BrandShield specialises in the monitoring, detection and removal of online threats such as phishing attempts, scams, impersonation, fraud, counterfeit products and trademark infringements. The business was established to revolutionise the way companies can protect their digital assets outside their security perimeter. Ever since launch, BrandShield has introduced ground-breaking innovative technologies for Digital Risk Protection powered by artificial intelligence ("AI"), machine learning and big data analysis to provide the most automated and relevant solutions for the 21st century.

Financial highlights

·    55% increase in revenues to $6.39m ($4.13m in 2021)

·    61% increase in ARR to $8.42m ($5.22m in 2021)

·    Cash of $2.6m ($1.194m in 2021)

Operational highlights

·    53 new customers signed in 2022 (53 clients in 2021)

·    Generated strong new business impetus, expanding its presence in the financial, healthcare, consumer products, and media spaces via a number of key customer acquisitions

·    Bolstered reputation as a go-to DRP company of choice for brands operating in the financial services market

·    Prioritised the expansion of its market presence globally via strategic marketing and sales initiatives, and accordingly entered new geographies in FY 2022

·    Gained a number of new clients in the crypto space, including an online gaming client focused on the crypto gaming sub-sector

·    Delivered a strategic partnership with The Sandbox, a leading decentralised gaming virtual world and a subsidiary of Animoca Brands, to safeguard the crypto and HFT digital ecosystem

·    Secured a new business mandate with one of the world's largest consumer electronics brands to protect the business from illicit trade and unauthorised online sales

Post Period End

·    Strengthened its collaboration with the Pharmaceutical Security Institute ("PSI") and subsequently published its findings from its annual pharma fraud disruption programme:

o  From January 2022 to January 2023, BrandShield successfully detected and removed over 430 rogue pharmacies and 7,500 fraudulent marketplace listings

·    Strong growth trend has continued into 2023 with the May 2023 ARR figure standing at $9.3m, a 47.6% increase in ARR relative to May 2022

Outlook

The Group is focused on expanding BrandShield's market presence and bolstering its position as a leading provider of cutting-edge DRP solutions through securing new mandates to diversify its growing portfolio of clients alongside targeting further ARR growth. At a time when cyber-related threats continue to grow, the importance of Digital Risk Protection has become a necessity for businesses as they continue to navigate significant technological and social changes.

BrandShield is committed to building upon the strong customer traction it delivered in FY 2022 and the Company believes it is well-placed to meet its future growth objectives.

Yoav Keren, Chief Executive Officer of BrandShield, commented:

"We are pleased to report a strong performance across 2022, with the Company making significant financial and operational progress. In addition to generating strong revenues and expanding our customer base, we also further strengthened our team with a number of strategic hires as we continue to explore further commercial opportunities to consolidate our position at the forefront of the digital risk protection market.

As cyber-related crimes continue to evolve and new threats emerge, demand for digital risk protection services continues to rise in tandem, and our highly sophisticated AI-powered solutions have ensured we remain a go-to choice for brands across the globe looking to safeguard their online reputations.

Looking ahead, BrandShield remains confident in meeting expectations for the full year 2023 and in the Company's future growth prospects."

For further information please visit https://www.brandshield.com/ or contact:

BrandShield Systems plc Yoav Keren, CEO	[phone]
Spark Advisory Partners Limited (Nominated Adviser) Neil Baldwin / Andrew Emmott / James Keeshan	[phone]
Shore Capital (Broker) Toby Gibbs / James Thomas / Rachel Goldstein (Corporate Advisory) Henry Willcocks (Corporate Broking) Vigo Consulting (Financial Public Relations) Jeremy Garcia / Kendall Hill [e-mail]	[phone] [phone]

The full Group Annual Report and Financial Statements will be sent to shareholders later today and is available at www.brandshield.com.

Extracts from the Annual Report are set out below:

CHAIRMAN'S STATEMENT

Introduction

BrandShield Systems Plc. ("BrandShield" or the "Company") is a leading cybersecurity company that provides brand oriented digital risk protection. The Company specialises in the monitoring, detection and removal of online threats such as phishing attempts, scams, impersonation, fraud, counterfeit products and trademark infringements. The business was established to revolutionise the way companies can protect their digital assets outside their security perimeter. Ever since launch, BrandShield has introduced ground-breaking innovative technologies for online brand protection powered by artificial intelligence ("AI"), machine learning and big data analysis to provide the most automated and relevant solutions for the 21st century.

The Group delivered a strong performance during the period, generating revenues of $6.39m, up 55% from $4.13m in 2021, underpinned by solid business momentum, including multiple customer wins across a diverse range of sectors. BrandShield strengthened its financial foundations during the period, ending FY 2022 with available cash reserves of $2.6m, which will facilitate its continued expansion by enhancing the Group's R&D, marketing, and sales capabilities.

During the period, BrandShield raised a total of £4.25m in new equity and the Company has focused on deploying new capital to target profitability by increasing investment in marketing and sales initiatives and accelerating the growth of its customer footprint as well as Annual Recurring Revenues ("ARR"), a key performance indicator. BrandShield delivered on its ARR growth aspirations during the period, with the ARR as at the end of FY 2022 at $8.42m, representing a 61% increase from FY 2021 ($5.22m). This, alongside the significant expansion of its customer base to 183 (FY 2021: 130), demonstrates the robust operational progress achieved by the Company in FY 2022.

BrandShield hired 20 new employees across key departments in the period, including sales directors in the US and UK, to accelerate client growth in those regions. Expansion in the US remains a strategic priority for the Group, and North America now constitutes c.70% of BrandShield's total client base, spanning industries including financial services, healthcare, consumer goods and media and entertainment. Moreover, BrandShield recruited a sales director with the primary responsibility of developing partnership distribution channels to scale its client base.

Given a very strong Life Time Value to Customer Acquisition Cost ("LTV to CAC") ratio, the Board has been clear in its desire for the Company to continue to grow aggressively whilst ensuring profitability is pursued, and it remains a key intention to hit cash flow positive within our existing resources in 2024. BrandShield offers a superior product in a largely underserved market and, therefore, the priority must be on marketplace consolidation and achieving a leading position in the online brand protection competitive environment.

BrandShield has minority interests in assets inherited as a result of the Reverse Takeover ("RTO") transaction conducted with Two Shields Investments Plc in December 2020. These include holdings in WeShop Ltd (now renamed Community Social Investment Ltd) and legacy mining assets, namely Kalahari Key Mineral Exploitation Company (Pty) Ltd, Leopard Lithium Pty Ltd and International Geosciences Limited ("IGS"). These assets are considered non-core and we remain focused on the orderly disposal of these legacy investments where value can be realised for our shareholders.

BrandShield's core activities

BrandShield is a fast-growing provider of cyber solutions, delivering an end-to-end brand oriented digital risk protection solution to its global customer base. Its software protects customers from the financial costs and reputational damage caused by an increasing number of online threats including online scams, phishing, impersonation, and sale of counterfeit goods. Unlike traditional solutions, BrandShield's Software as a Service ("SaaS") operates outside of an organisation's perimeter and therefore requires no integration. BrandShield's highly developed software works by detecting potential threats, analysing them, prioritising them and then taking them down. BrandShield has developed a suite of proprietary AI-powered software that largely automates the analysis and prioritisation of fraudulent online cases. The technology uses big data and algorithms to find networks of fraudulent online activity and clusters of scammers.

BrandShield's software monitors millions of datapoints across many types of online platforms including websites, marketplaces, social media, mobile apps and Pay Per Click ads. The AI and machine learning nature of the software means that it is continually improving as it adds new datapoints and identifies new types of threats. In response to customer demand, BrandShield established its own in-house online hunting and enforcement team, consisting mostly of qualified lawyers with experience in IP law. The service is customised to the requirements of BrandShield's customers and experiences high success rates.

Strategy

Leveraging capital raised during the period, BrandShield is committed to driving the continued expansion of its offering globally, the keystone of the Board's overarching growth strategy. BrandShield is prioritising achieving profitability and cash flow positivity and continues to explore opportunities to expand its customer base, which already includes SMBs and large enterprises across five continents, demonstrating that the need for brands to secure external online brand protection services transcends international borders. As previously mentioned, the number of clients increased from 130 at year end 2021 to 183 at year end 2022, representing a significant period of growth.

The Company's ARR figure increased from $5.22m for FY 2021 to $8.42m in the period, a 61% increase year on year, and that upward trajectory has continued through the start of 2023 with the May 2023 ARR standing at $9.3m.

Cybersecurity is an ever-evolving sector, and this year we witnessed the emergence of a number of new and highly sophisticated cyberthreats which have the potential to tarnish the reputation of brands across the globe and disrupt their day-to-day operations. BrandShield is focused on ensuring it is positioned at the forefront of innovation in the digital risk protection services arena by investing in sales promotion, marketing and R&D activities to stay ahead of market trends, whilst strategically recruiting new employees with robust sector knowhow and experience.

BrandShield demonstrated the effectiveness of the Company's existing strategy by delivering significant operational and financial progress across FY 2022. Funding raised during the period will enable the Company to build on this momentum as it pursues further commercial opportunities to protect brands worldwide from a host of digital threats. Alongside this the Company has delivered significant cost savings as a result of increased efficiencies delivered through the adoption of the 'BrandShield 3.0' platform by our clients.  This has enhanced automation within the Company's enforcement processes and allowed a re-structuring to be carried out within the enforcement function which continues.  Cloud based costs have also been reduced since the period end which has reduced the Company's operational cash burn significantly. 

Across the year, the Company raised a total of £4.25m ($5.45m), which will enable BrandShield to continue to execute its strategy of aggressively targeting client growth whilst aiming for profitability in the medium to long term. Further, this investment will allow BrandShield to expand its marketing and sales efforts and to continue to drive ARR forwards. Given BrandShield's highly scalable SaaS platform, the Company is focused on the top line whilst customer conversion continues to be of paramount importance for 2023. That said, the Company believes it will get cash flow positive during 2024 without the need for further funding.

Outlook

As we look to the future, BrandShield is focused on securing new mandates to diversify its growing multi-sector portfolio of clients alongside targeting further ARR growth. In a time of rapid technological and social change where more emphasis is placed on a brand's online identity than ever before, an increasing number of companies recognise that securing external threat prevention and elimination assistance, such as that BrandShield offers, is now a necessity.

From e-commerce and crypto companies to businesses in the fashion and hospitality spaces, a fast-growing number of brands are trusting BrandShield to safeguard their reputations by providing comprehensive digital risk protection from a broad range of prevalent cyberthreats. With ARR and overall commercial revenue up, in addition to continued strong backing from investors, BrandShield is well-placed to deliver on our medium to long term growth aspirations.

Azriel Moscovici

Chairman

2 July 2023

Introduction

We are pleased to report a strong performance across FY 2022, with BrandShield delivering excellent financial and operational progress. Integral to our success is the progress the Company has made in delivering ARR of $8.42m as at year end, a 61% increase from FY 2021 ($5.22m), continuing the very strong growth trend. Encouragingly, that strong growth trend has continued into 2023 with the May ARR figure standing at $9.3m. 

This was underpinned by the acquisition of clients across a number of sectors and the ongoing investment in, and expansion of, the Company's marketing and sales functions. The Company now services over 200 clients, adding 53 across 2022, and a further 21 so far in 2023.

Given a very strong LTV to CAC ratio, we have been clear that BrandShield will continue to focus on aggressive growth within existing resources with a view to achieving positive cash flow in Q1 2024. Management believes BrandShield offers a superior product in a largely unserved market and, therefore, the priority must be on marketplace consolidation and achieving a leading position in the digital risk protection competitive environment.

Revenues for FY 2022 increased 55% to $6.39m, compared to FY 2021 $4.13m, with the Group reporting a loss of $7.33m (FY 2021: loss of $6.30m), which was in-line with management's expectations. $1.7m of the loss (2021 was $1.9m) can be attributed to share based payments calculations which do not reflect the actual operating loss of the Company from its operations of $5.77m (2021: $4.4m).

The Company added 53 new customers in FY 2022, built across a growing list of sectors and market-leading brands. These have included new or extended contracts with companies operating in the financial services, pharmaceutical, crypto, entertainment, fashion, sports, and cosmetics sectors.

BrandShield has delivered significant customer traction during the period, and whilst confidentiality agreements prevent the Company from disclosing all our successes, including some of the world's largest and well-known brands, the Company has been able to announce the following:

·     Delivered a strategic partnership with The Sandbox, a leading decentralised gaming virtual world and a subsidiary of Animoca Brands, to safeguard the crypto and HFT digital ecosystem

·     Secured a new business mandate with one of the world's largest consumer electronics brands to protect the business from illicit trade and unauthorised online sales

·     Strengthened its collaboration with the Pharmaceutical Security Institute ("PSI") and subsequently published its findings from its annual pharma fraud disruption programme:

o  From January 2022 to January 2023, BrandShield successfully detected and removed over 430 rogue pharmacies and 7,500 fraudulent marketplace listings

·     Gained a number of new clients in the crypto space, including an online gaming client focused on the crypto gaming sub-sector

·     Generated strong new business impetus, expanding its presence in the financial, healthcare, consumer products, and media spaces via a number of key customer acquisitions

·     Bolstered reputation as a go-to digital risk protection ("DRP") company of choice for brands operating in the financial services market

·     Prioritised the expansion of its market presence globally via strategic marketing and sales initiatives, and accordingly entered new geographies in FY 2022

The value that BrandShield can add to our clients was reinforced by the post period end publication of the Company's annual pharma fraud report, which was carried out in cooperation with PSI.

Over the 12-month period, BrandShield took down more than 7,500 fraudulent pharmaceutical listings across social media platforms, websites, and marketplaces, accounting for hundreds of thousands of dollars' worth of counterfeit drugs.

With the majority of fraudulent marketplace listings originating in regions including Indonesia, China, and India, and removed listings containing medicines relating to cancer, diabetes, and Covid-19 among others, the report highlights both BrandShield's global reach and the instrumental role the Company performs to protect individuals from potentially life-threatening online scams.

Market dynamics

According to global business consultancy group Frost & Sullivan ("F&S"), the DRP market is on a high growth trajectory as the number of cyberattacks on organisations' brands, customers, and employees continues to rise. The DRP market is increasing at a compound annual growth rate of 39.7% from 2021 to 2026, whilst F&S expects it to reach $917.7 million by 2026.

Against this favourable macroeconomic backdrop, BrandShield's prudent strategy is designed to ensure the Company is well poised to capitalise on the projected long-term global demand for reliable DRP services. As evidenced by the diverse nature of our new customer wins in 2022, this surge in demand is sector agnostic, and BrandShield intends to proactively explore further commercial opportunities across a range of industries as digital threat protection grows in importance for brands.

BrandShield has been recognised as the third best provider of cybersecurity solutions for brand oriented DRP globally in F&S' 2023 Global Digital Risk Protection New Product Innovation and Best Practices Award. BrandShield scored highly for its ability to stay sensitive to emerging trends and challenges in the technology space, and was also praised for its expansion into new markets and industry verticals, such as blockchain and gaming. F&S' industry experts commended BrandShield for its comprehensive brand protection capabilities, noting the highly adaptable features of the Company's AI-powered technology.

Our unique proposition

We believe that our technology is well placed to lead this transition as enterprises increase their online protection and move from focusing on internal cybersecurity to requiring solutions for external threats, providing comprehensive brand oriented digital risk protection solutions. BrandShield's market-leading solutions are underpinned by:

·     A mature product, creating higher barriers to entry;

·     Ongoing investment in R&D to ensure market leadership is maintained;

·     AI/ML powered technology;

·     Strong threat network detection capabilities;

·     Unique image recognition and Optical Character Recognition ("OCR") - focusing on detection of emerging threats on websites, social media and e-commerce marketplaces; and

·     Big data investigation tools with multi-brand and platform capabilities.

In addition, BrandShield adopts a multi-layered approach to the detection and mitigation of online threats, which includes Data Detection, Automated Analysis and Prioritisation, Easy-to-Use Interface and Highly Automated Takedown Actions.

Strategy

The further expansion of BrandShield's global customer footprint remains a core growth priority as the Company seeks to increase ARR from clients in a variety of sectors. This is being primarily achieved through the expansion of the marketing and sales activities.

Key pillars of the Company's long-term growth plan include the following strategic priorities:

·     Continue to invest in and grow the sales and marketing teams;

·     Specific expansion of the sales teams in the US and UK;

·     Establishing a broader marketing footprint;

·     Expansion of advertising, sales promotion and digital marketing campaigns; and

·    Ongoing Business-to-Business public relations and brand building activities.

Product development

Throughout 2022, the Company developed capability enhancements to its existing platform and expanded its AI protection solution to provide security against a range of new and evolving threats to digital assets.

BrandShield 3.0 version was launched during 2022, providing an enhanced layer of protection against external digital threats such as web fraud, phishing, social media scams, impersonations and online-counterfeiting.

BrandShield 3.0 is a completely new version of the BrandShield platform which was developed in accordance with the latest market requirements and to meet the most recent digital risk protection and brand protection challenges. The SaaS technology includes a completely new and robust infrastructure, and its innovative user interface is both intuitive and enables more ways to detect threat networks and carry out immediate takedowns whilst covering more threats in less time.

In addition, the Company launched NFT Shield^TM in October 2022, a bespoke AI solution aimed at detecting and removing illegitimate digital assets. With NFTs now playing a prominent role in the digital economy, the risk of online asset fraud has become more evident. In turn, BrandShield, in order to help safeguard an NFT economy currently worth approximately $3 billion, developed an AI solution to counter the growing number of fake listings, scams, and impersonations across NFT marketplaces.  

Key hires

The US is an important market for BrandShield, where c.70% of the Group's clients are based. In 2021, the Company established physical sales presences in the US as well as the UK, and BrandShield continued to build on this progress during 2022 by recruiting sales directors with considerable experience in both territories to further accelerate growth.

Outlook

The Company performed strongly throughout 2022, achieving significant financial and operational growth and augmenting its already strong DRP capabilities through innovative product launches. Strategic hires have already enabled the Company to enhance its marketing and sales functions in key regions, and once fully integrated, will facilitate new business development.

BrandShield's talented employees are the backbone of the business, and I would like to express my profound thanks to all staff for their continued hard work and tenacity throughout the year, which has been pivotal in helping the Company consolidate its position as a leading provider of cutting-edge DRP solutions.

With a significant and fast-growing global footprint, in addition to clients across a range of verticals, BrandShield is well positioned to continue to deploy its highly automated SaaS offering to capitalise on the high demand for DRP services.

Looking ahead, the Company remains confident in meeting expectations for the full year 2023 and in the Company's future growth prospects.

Yoav Keren

Chief Executive Officer

2 July 2023

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2022

		31 December 2022		As restated 31 December 2021
	Note	$		$
Revenue from contracts with customers	4	6,396,157		4,127,247
Cost of sales		(2,945,050)		(1,864,512)
Gross profit		3,451,107		2,262,735
Research and Development expenses	6	(2,996,276)		(2,721,553)
Sales and Marketing expenses	6	(4,150,684)		(2,950,617)
Operating expenses	6	(3,266,657)		(2,818,102)
		(10,413,617)		(8,490,272)
Operating loss		(6,962,510)		(6,227,537)
Depreciation		(29,201)		(42,464)
Depreciation of the right of use		(249,369)		-
Impairment loss		(46,952)		-
Net finance (expense)/ income	10	(51,874)		(33,372)
Loss before income tax		(7,339,906)		(6,303,373)
Income tax expense	11	-		-
Loss from continuing operations attributable to owners		(7,339,906)		(6,303,373)
Other comprehensive income:
Items that will or may be reclassified to profit or loss:
Exchange differences on translation		(49,869)		(102,319)
Total comprehensive loss attributable to owners		(7,389,775)		(6,405,692)
Basic and diluted earnings per share attributable to owners	12	(0.04)		(0.05)

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 31 DECEMBER 2022

		31 December 2022		As Restated 31 December 2021
	Note	$		$
NON-CURRENT ASSETS
Property, plant and equipment	13	180,777		47,839
Right of use asset - office lease	25	1,080,599		-
Financial assets at fair value through profit or loss	14	3,663,072		4,112,107
		4,924,448		4,159,946
CURRENT ASSETS
Trade and other receivables	15	2,791,518		825,066
Financial assets at fair value through profit or loss	16	18,220		20,534
Other financial assets		14,447		16,218
Cash and cash equivalents	17	2,605,605		1,194,275
Restricted cash		372,707		191,770
Assets classified as held for sale	18	254,023		337,870
		6,056,520		2,585,733
TOTAL ASSETS		10,980,968		6,745,679
CURRENT LIABILITIES
Short term loan and bank overdraft	23	2,278,645		1,626,357
Trade and other payables	24	5,969,822		2,807,924
Lease liability- current	25	321,727		-
		8,570,194		4,434,281
NON-CURRENT LIABILITIES
Lease liability- non current	25	795,557		-
Other payables		30,079		32,230
		825,636		32,230
TOTAL LIABILITIES		9,395,830		4,466,511
NET ASSETS		1,585,138		2,279,168

EQUITY
Share capital	21	9,929,842		9,299,228
Share premium	21	32,060,989		27,686,289
Reverse acquisition reserve		(20,653,597)		(20,653,597)
Other reserves	22	4,685,025		3,214,775
Retained earnings		(24,437,121)		(17,267,527)
TOTAL EQUITY		1,585,138		2,279,168

The Financial Statements were approved and authorised for issue by the Board of Directors on July 2, 2023 and were signed on its behalf by:

........................................................................ A Moscovici - Chairman            

COMPANY STATEMENT OF FINANCIAL POSITION

AS AT 31 DECEMBER 2022

		31 December 2022		31 December 2021
	Note	$		$
ASSETS
NON-CURRENT ASSETS
Financial assets at fair value through profit or loss	14	3,663,072		4,112,107
Investment in subsidiary	19	22,958,375		25,772,709
Loans to related party	20	4,625,778
Property, plant and equipment	13	923		2,072
		31,248,148		29,886,888
CURRENT ASSETS
Other receivables and prepayments	15	17,947		215,827
Loans to related parties	20	-		216,240
Financial assets at fair value through profit or loss	16	18,220		20,534
Other financial assets		14,447		16,218
Cash and cash equivalents	17	230,324		68,721
Restricted cash		1,510		-
Assets classified as held for sale	18	254,023		337,870
		536,471		875,410
TOTAL ASSETS		31,784,619		30,762,298
EQUITY
Share capital	21	9,929,842		9,299,228
Share premium	21	32,060,989		27,686,289
Other reserves	22	2,003,479		3,863,028
Retained earnings		(12,385,406)		(10,257,078)
TOTAL EQUITY		31,608,904		30,591,467
CURRENT LIABLILITIES
Trade and other payables	24	175,715		170,831
TOTAL LIABILITIES		175,715		170,831
TOTAL EQUITY AND LIABILITIES		31,784,619		30,762,298

BrandShield Systems PLC has used the exemption granted under s408 of the Companies Act 2006 that allows for the non-disclosure of the Income Statement of the parent company. The after-tax loss attributable to BrandShield Systems PLC for the twelve months 31 December 2022 was $2,298,640 (2021: $2,352,527). The Financial Statements were approved and authorised for issue by the Board of Directors on July 2, 2023 and were signed on its behalf by:

................................................... A Moscovici - Chairman

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2022

Share   capital Share premium Reverse acquisition reserve Other    reserves Retained earnings Total equity $ $ $ $ $ $ Balance at 1 January 2021    9,246,267        27,353,294 (20,653,597)         3,101,442    (12,646,446)     6,400,960 Loss for the year - - - - (6,303,373) (6,303,373) Exchange differences on translation - - - 1,023,680 - 1,023,680 Total comprehensive income for the year - - - 1,023,680 (6,303,373) (5,279,693) Exercise of options - - - (648,132) 648,132 - Expiry of options - - - (1,034,160) 1,034,160 - Share based payments - - - 1,897,944 - 1,897,944 Issue of share capital 52,961 332,995 - - - 385,956 Balance at 31 December 2021 9,299,228 27,686,289 (20,653,597) 4,340,774 (18,393,526) 2,279,168
Prior year adjustment	-	-	-	(1,125,999)	1,125,999	-
Balance at 31 December 2021 as restated	9,299,228	27,686,289	(20,653,597)	3,214,775	(17,267,527)	2,279,168
Loss for the year	-	-	-	-	(7,339,906)	(7,339,906)
Exchange differences on translation	-	-	-	(49,869)	-	(49,869)
Total comprehensive income for the year	-	-	-	(49,869)	(7,339,906)	(7,389,775)
Share based payments cancellation	-	-	-	(170,312)	170,312	-
Share based payments	-	-	-	1,690,431	-	1,690,431
Transaction costs	-	(111,261)	-	-	-	(111,261)
Issue of share capital	630,614	4,485,961	-	-	-	5,116,575
Balance at 31 December 2022	9,929,842	32,060,989	(20,653,597)	4,685,025	(24,437,121)	1,585,138

COMPANY STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2022

Share   capital Share premium Other    reserves Retained earnings Total equity $ $ $ $ $ Balance at 1 January 2021 9,246,267 27,353,294 3,949,949 (9,586,843)  30,962,667 Loss for the year - - - (2,352,527) (2,352,527) Exchange differences on translation - - (302,573) - (302,573) Total comprehensive income for the year - - (302,573) (2,352,527) (2,655,100) Exercise of options - - (648,132) 648,132 - Expiry of options - - (1,034,160) 1,034,160 - Issue of share capital 52,961 332,995 - - 385,956 Share based payments - - 1,897,944 - 1,897,944 Balance at 31 December 2021 9,299,228 27,686,289 3,863,028 (10,257,078) 30,591,467 Loss for the year - - - (2,298,640) (2,298,640) Exchange differences on translation - - (3,379,668) - (3,379,668) Total comprehensive income for the year - - (3,379,668) (2,298,640) (5,678,308) Exercise of options - - - - - Transaction costs - (111,261) - - (111,261) Issue of share capital 630,614 4,485,961 - - 5,116,575 Share based payments cancellation - - (170,312) 170,312 - Share based payments - - 1,690,431 - 1,690,431 Balance at 31 December 2022 9,929,842 32,060,989 2,003,479 (12,385,406) 31,608,904 CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2022 Year ended 31 December 2022 Year ended 31 December 2021 Note $ $ Cash flows from operating activities Loss for the year (7,339,906) (6,303,373) Adjustments for: Depreciation 13 29,201 42,464 Depreciation of the right of use 249,369 Fair value adjustment of financial assets 46,952 - Share based payment expense, net 27 1,690,431 1,897,944 Net finance expense, from lease 10 51,874 - Foreign exchange on operations 49,770 (56,515) Increase in trade and other receivables (1,921,486) (550,924) Increase in trade and other payables 3,204,713 1,006,810 Net cash outflow from operating activities (3,938,982) (3,963,594) Investing activities Purchase of property, plant and equipment 13 (197,943) (52,970) Net cash (outflow) / inflow/ from investing activities (197,943) (52,970) Financing activities Proceeds from issue of exercising warrants and options 25 - 385,957 Proceeds from issue of ordinary shares 21 5,116,574 - Share issue costs (111,261) - Repayment of right of use lease obligations (246,309) - Proceeds from loans and borrowings 652,288 1,626,357 Net cash inflow from financing activities 5,411,292 2,012,314 Net (Decrease) / Increase in cash and cash equivalents 1,274,267 (2,004,250) Cash and cash equivalents at beginning of year 1,194,375 3,198,525 Foreign exchange differences on cash 136,963 - Cash and cash equivalents at end of year 17 2,605,605 1,194,275 COMPANY STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2022 Year ended 31 December 2022 Year ended 31 December 2021 Note $ $ Cash flows from operating activities Loss before income tax (2,298,640) (2,352,527) Adjustment for: Depreciation 1,149 - Fair value adjustment of financial assets 46,952 - Share based payments 27 1,690,431 1,897,944 Foreign exchange on operations (76,828) 4,768 (Increase) in trade and other receivables 197,880 (203,256) Increase in trade and other payables 4,884 10,873 Net cash outflow from operating activities (434,172) (642,198) Cash flows from investing activities Purchase of property, plant and equipment - (2,072) Loans to related parties 20 (4,409,538) - Net cash outflow from investing activities (4,409,538) (2,072) Cash flows from financing activities Proceeds from issue of exercising warrants and options 21 - 385,957 Share issue costs (111,261) - Proceeds from issue ordinary shares 21 5,116,574 - Net cash inflow from financing activities 5,005,313 385,957 Net decrease in cash and cash equivalents 161,603 (258,313) Cash and cash equivalents at beginning of year 68,721 327,034 Foreign exchange differences on cash - - Cash and cash equivalents at end of year 17 230,324 68,721     There were no significant non-cash transactions in the year.

Basis of preparation

The consolidated financial statements of BrandShield Systems Plc have been prepared in accordance with UK-adopted international accounting standards and in accordance with the requirements of the Companies Act 2006.

The preparation of consolidated financial statements in accordance with UK adopted international accounting standards requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Company's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in Note 3.

The consolidated financial statements present the results for the Group and for the Parent Company for the year ended 31 December 2022. The comparative period for the Group and for the Parent Company is for the twelve months ended 31 December 2021.

The principal accounting policies are set out below and have, unless otherwise stated, been applied consistently in the financial statements. The presentational currency of the consolidated financial statements is US Dollars. The functional currency of the parent and the subsidiary is Pounds Sterling and New Israeli Shekel respectively.

Basis of consolidation

Subsidiaries are all entities over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases. Please refer to note 4 for information on the consolidation of BrandShield Limited and the application of the reverse acquisition under accounting principles IFRS 10. Under IFRS 10, inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated. When necessary, amounts reported by subsidiaries have been adjusted to conform with the Group's accounting policies.

1.          ACCOUNTING POLICIES - continued

Going concern

The financial statements have been prepared on the assumption that the Group will continue as a going concern. Under the going concern assumption, an entity is ordinarily viewed as continuing in business for the foreseeable future with neither the intention nor the necessity of liquidation, ceasing trading or seeking protection from creditors pursuant to laws or regulations. In assessing whether the going concern assumption is appropriate, the Directors take into account all available information for the foreseeable future, in particular for the twelve months from the date of approval of the financial statements.

Following the review of ongoing performance and cash flows, the Directors have a reasonable expectation that the Group has adequate resources to continue operational existence for the foreseeable future.

During 2022 the Company raised a total of £4.25m in new equity. The Company has focused on deploying new capital to target profitability by increasing investment in marketing and sales initiatives and accelerating the growth of its customer footprint as well as Annual Recurring Revenues. However, an increased emphasis has been placed on achieving a cash flow generative position in 2024.  The operational cash burn has been significantly reduced through various initiatives including the roll out of the enhanced 'BrandShield 3.0' platform to the Company's clients.  This has allowed greater automation to be achieved leading to wider re-structuring within certain areas of the Company, particularly within the enforcement division.  Other cost cutting has been achieved including a reduction in cloud based costs.  The Company also holds legacy investment assets that it is seeking to dispose of in an orderly way. Opportunities may arise to dispose of these however the Company is not reliant on this in a going concern scenario.    In addition, the directors have undertaken sensitivity reviews of the forecasts to model the effects of lower than budgeted growth and believe that cost reductions would be achievable if needed (albeit to the detriment of the Group's long term strategy) if required to avoid the need for a fundraise within the next 12 months.  These measures would include if required the Directors deferring an element of their salaries.  As such, the Directors consider that the Group will have access to adequate resources to meet operational requirements for at least 12 months from the date of approval of these financial statements. On this basis, the Directors have formed a judgement, at the time of approving the Financial Statements, that there is a reasonable expectation that the Group has access to adequate resources to continue in operational existence for the foreseeable future. For this reason, the Directors have adopted the going concern basis in preparing the Financial Statements.

EARNINGS PER SHARE

Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year.

Diluted earnings per share is calculated using the weighted average number of shares adjusted to assume the conversion of all dilutive potential ordinary shares.

In accordance with IAS 33 the share options and warrants in issue do not have a dilutive impact on the earnings per share for the year ended 31 December 2022 and the year ended 31 December 2021. The total number of potentially dilutive securities are 130,550,399 (2021: 36,786,285).

The weighted average number of shares is adjusted for the impact of the reverse acquisition as follows:

-               Prior to the reverse takeover, the number of shares is based on BrandShield Limited, adjusted using the share exchange ratio arising on the reverse takeover; and

-               From the date of the reverse takeover, the number of shares is based on the Company

On 4 February 2022, the Company issued 10,714,286 ordinary shares at 1 pence per share by way of placement raising £1,500,000.

                In May 2022, the Company issued 12,500,000 ordinary shares at 1 pence per share by way of placement raising £1,000,000.

In November 2022, the Company issued 29,166,667 ordinary shares at 1 pence per share by way of placement raising £1,750,000.

Reconciliations are set out below:

			31 December 2022
			Weighted
			average		Per-share
	Earnings		number of		amount
	$		shares		$
Basic and Diluted EPS	(7,339,906)		170,331,874		(0.04)
			31 December 2021
			Weighted
			average		Per-share
	Earnings		number of		amount
	$		shares		$
Basic and Diluted EPS	(6,303,373)		116,812,529		(0.05)

 

END