TIDMCSFS
RNS Number : 0926B
Cornerstone FS PLC
08 June 2021
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 .
8 June 2021
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 2020. 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*
-- Transformational acquisitions to position Cornerstone as a
fintech business focused on providing foreign currency
management:
o FXPress Payment Services Ltd ("FXPress"), a provider of
advanced payment systems as platform-as-a-service to SMEs
o Avila House Limited ("Avila House"), a licensed small e-money
institution
-- Revenue of GBP1.7m (2019: GBP1.2m)
-- Transacted payments worth over GBP462m (2019: GBP336m)
-- Onboarded 328 new clients (2019: 181)
-- Total number of clients increased to 732 (2019: 530)
-- Post period, Cornerstone was admitted to trading on AIM and
raised gross proceeds of GBP2.7m through the placing of ordinary
shares and convertible loan note facilities
* While the consolidated financial information has been issued
in the name of Cornerstone FS plc, the legal parent, it represents
in substance the continuation of the financial information of the
legal subsidiary, FXPress. As such, the prior-period comparatives
represent the results of FXPress only and are for a nine-month
period commensurate with FXPress' last accounting reference period.
See 'Basis of Consolidation' in the notes to the financial
statements for further information.
Julian Wheatland, Chief Executive Officer of Cornerstone,
said:
"It is a great pleasure to present Cornerstone's first annual
results as a public company following our IPO in April 2021. Amid a
year of global upheaval, 2020 was a milestone period for us;
establishing Cornerstone's foundations, making two key acquisitions
and culminating, post period, in our admission to AIM. While, along
with the rest of the industry, our trading volumes were impacted by
COVID-19, we successfully navigated the transition to home working
with no disruption to our operations or service provision.
"We have come to the market to build a significant business in
the provision of technology-enabled international payment services,
foreign exchange and currency risk management. While we are still
at the beginning of our journey, with our strong team and highly
scalable platform, we believe we are well-placed to take advantage
of the meaningful organic and acquisition opportunities that will
enable us to achieve this. We look forward to reporting on our
progress."
Enquiries
+44 (0)203 971
Cornerstone FS plc 4865
Julian Wheatland, Chief Executive
Officer
Judy Happe, Chief Financial Officer
+44 (0)203 368
SPARK Advisory Partners Limited (Nomad) 3550
Mark Brady, Neil Baldwin
Peterhouse Capital Limited (Joint +44 (0)207 469
Broker) 0930
Heena Karani, Lucy Williams
+44 (0)203 700
Pello Capital Limited (Joint Broker) 2500
Dan Gee, Mark Treharne
+44 (0)207 618
Luther Pendragon (Financial PR) 9100
Harry Chathli, Claire Norbury, Joe
Quinlan
Operational Review
The year to 31 December 2020 was transformational for
Cornerstone. It undertook two acquisitions to establish what
Cornerstone is today: a fintech business that makes managing
currency simple for international small- and medium-sized
businesses ("SMEs"). Whilst, along with the rest of the industry,
trading volumes were impacted by COVID-19, the Group successfully
navigated the disruption caused by the pandemic and progressed the
delivery of its strategy. This culminated with Cornerstone's
successful IPO, which occurred, post period, in April 2021 and
raised GBP2.7m. The IPO is a key element in the Group's strategy to
grow the business through acquisition as well as continuing
development of its own highly scalable, cloud-based software
platform.
Transformational Acquisitions
Cornerstone completed the acquisition of FXPress, a provider of
advanced payment systems as platform-as-a-service to SMEs, in
September 2020, which became the Group's main operating entity.
Alongside this, the Group disposed of the legacy Cornerstone
consumer business and adopted the name 'Cornerstone FS plc' (having
previously been 'Cornerstone Brands'). This marked the foundational
step towards the Group's goal of building a significant business in
the provision of international payment services for SMEs.
In October 2020, the Group acquired Avila House, a licensed
small e-money institution. This expanded the Group's product and
service capability to provide clients with access to multi-currency
accounts with individual IBAN numbers where they can deposit and
retain funds for future use. By bringing together the e-money
assets of Avila House and the technology of FXPress, the Group
signalled its intention to establish a portfolio of products and
services to optimise the foreign exchange payments process for
SMEs.
Performance
Ahead of the COVID-19 outbreak, FXPress, was delivering strong
growth, with revenue for the first half of 2020 being 28% ahead of
the same period of 2019. However, the public lockdowns and
associated reduction in economic activity led to a contraction in
trading volumes. As a result, for the full year, the Group
delivered slight growth on a pro rata basis, with revenue of
GBP1.7m for the 12 months ended 31 December 2020 compared with
GBP1.2m for the nine months ended 31 December 2019.
The majority of this revenue continued to be generated by
clients the Group serves on a white label basis, with revenue
generated through its introducer network (which is primarily white
label partners but also introducer brokers) being GBP1.4m and
accounting for 88% (2019 period: GBP1.0m and 84%). Clients that the
Group serves directly generated GBP0.2m for both 2020 and the prior
nine-month period, accounting for 12% and 16% respectively.
By client type, corporate accounts generated GBP1.5m in 2020
(2019 period: GBP1.1m), accounting for 92% (2019 period: 91%) of
total revenue. High net worth individuals ("HNWIs") generated
GBP0.1m for both 2020 and the earlier period, accounting for 8% and
9% of total revenue respectively. As at 31 December 2020, the Group
had 732 active clients, compared with 530 a year earlier, and
during the year onboarded 328 new clients (2019: 181).
Spot trades accounted for 94% of transactions (2019 period: 95%)
and 87% of revenue (2019 period: 90%), and forward currency
contracts accounted for 6% of transactions (2019 period: 5%) and
13% of revenue (2019 period: 10%). The difference between the
volume of transactions and proportion of revenue reflects the
higher levels of commission charged on forward transactions.
During 2020, FXPress conducted transactions between 59 different
currency pairs (2019 period: 43), with 88% of transactions being
between various combinations of Sterling, Euros and US Dollars
(2019 period: 89%).
In total, payments worth over GBP462m were transacted through
the FXPress platform in 2020 compared with approximately GBP336m
for the nine months ended 31 December 2019.
Product Enhancement
As part of the Group's continued and ongoing programme of
investment and development of its cloud-based technology platform,
several enhancements were implemented during the year. In addition
to integration with new banking and payment partners, the Group
introduced new platform features including:
-- virtual IBANs to allow each client to have their own account
in their name with a unique IBAN;
-- integration with Xero, a popular accounting platform, to
allow seamless organisation of payment runs; and
-- the launch of payment tracking, to allow clients to see the
progress of their payments en route to the payee.
COVID-19
As noted, COVID-19 and the associated economic slowdown resulted
in a reduction in trading volumes compared with the start of the
year. However, Cornerstone successfully navigated the transition
from office to home working for its employees, in line with
government guidance, and implemented a number of cost saving
measures. The Group's operations continued effectively with no
disruption to service provision. This was achieved thanks to the
cloud-based nature of its platform as well as the commitment of
Cornerstone's employees.
Brexit
The Group's sales have not been directly impacted by the UK's
withdrawal from the European Union. While, like the rest of the UK
financial services industry, the Group is currently unable to
market its services into the EU from the UK, it is not prevented
from doing business in the region. The Group has relatively few
European clients and they have continued to trade with the Group.
The Group is also currently considering options to be able to
resume marketing its services in the EU.
Financial Review
While the consolidated financial information has been issued in
the name of Cornerstone FS plc, the legal parent, it represents in
substance the continuation of the financial information of the
legal subsidiary, FXPress. As such, the prior-period comparatives
represent the results of FXPress only and are for the nine-month
period ended 31 December commensurate with FXPress' last accounting
reference period. The results of Cornerstone have been added to the
Group financials from 9 September 2020. The results of Avila House
are consolidated within FXPress for the period following the
acquisition on 19 October 2020. See 'Basis of Consolidation' in the
notes to the financial statements for further information.
The Group's revenue for the 12 months to 31 December 2020 was
GBP1.7m compared with GBP1.2m for the nine months to 31 December
2019, representing slight growth on a pro rata basis. This reflects
a strong first half of the year being largely offset by a weaker
second half due to the impact of the COVID-19 pandemic. Revenue was
generated almost entirely from the provision of foreign exchange
and payments services in the form of spot and forward trades,
accounting for 87% and 13% of revenue respectively (nine-month
period ended 31 December 2019: 90% and 10%).
As noted above, the slight increase in total revenue was due to
growth in the Group's core revenue streams, namely: sales generated
from its introducer network (for revenue by origin), which
primarily comprises revenue originating via white label partners
and also introducer brokers, and sales from corporate clients for
revenue by client type.
Gross margin for 2020 was 29.8% (2019 period: 43.4%) with the
reduction due to both the increasing proportion of revenue derived
through the Group's introducer network and that revenue being more
greatly weighted towards network partners who receive higher rates
of commission.
Total administrative expenses were GBP2.7m in 2020 compared with
GBP0.6m for the nine-month period ended 31 December 2019. This
includes:
-- GBP0.8m in costs related to the acquisitions of FXPress and
Avila House and to the IPO (2019 period: GBPnil), which completed
post year end;
-- GBP0.4m in share-based payment charges (2019 period: GBPnil),
including a GBP0.2m charge related to the reverse acquisition of
FXPress; and
-- staff and consultant costs of GBP0.9m compared with GBP0.3m
in the nine-month period ended 31 December 2019 as the Group
prepared itself for growth and its IPO.
The Group recognised a loss before tax of GBP2.2m for 2020
compared with GBP0.08m for the earlier period, which primarily
reflects the greater administrative expenses, but also the lower
gross margin. Loss per ordinary share on a basic and diluted basis
was 14.99 pence (2019 period: 0.73 pence), primarily due to the
greater loss, but also due to the larger share capital in 2020 (see
note 14 to the financial statements).
As at 31 December 2020, the Group had cash and cash equivalents
of GBP0.2m (31 December 2019: GBP0.08m). This followed a pre-IPO
fund raise during the year amounting to GBP1.0m, of which GBP0.8m
was received in cash and GBP0.2m arose through the issue of new
ordinary shares to settle service fee payments. During the year,
the Group also continued to invest in the development of its
technology platform, which accounted for GBP0.2m of the increase in
intangible assets to GBP0.3m (31 December 2019: GBP0.01m).
Post period, the Group's balance sheet was strengthened with the
raising of gross proceeds of GBP2.2m via a placing of new ordinary
shares. The Group also has access to GBP0.45m in convertible loan
note facilities.
Strategy Execution and Outlook
In 2020, Cornerstone took the initial steps in executing on its
growth strategy. The FXPress platform and business was brought
together with the Avila House e-wallet services under the
Cornerstone umbrella. The Group invested in sales automation
technology as part of its plan to increase its sales efforts and it
made a strategic hire with the appointment of a highly experienced
Chief Product Officer. The Group achieved a fundamental milestone,
post period, with the completion of its IPO on AIM, which lays the
foundations for the pursuit of further acquisitions.
Post year end, trading volumes have increased and the Group has
continued to expand its customer base. This year, 179 new customer
accounts have been opened, increasing the Group's total number of
customers to over 810, which gives a strong base on which to
build.
While Cornerstone is still at the beginning of its journey, with
a strong team and highly scalable platform, the Board believes that
the Group is well-placed to take advantage of the meaningful
opportunities to build a significant business offering
technology-enabled international payment services.
Notice of AGM and Publication of Annual Report
The Company gives notice that its AGM will be held at 11.00am
BST on Wednesday 30 June 2021 at 1 Poultry, London, EC2R 8EJ.
In view of the ongoing COVID-19 situation and the uncertainty
regarding restrictions on travel and public gatherings, the
directors have decided that shareholders (or any other guest,
including a proxy of a shareholder that is not the Chairman of the
AGM) will not be permitted to attend the AGM in person. The Company
will arrange for a minimum quorum of two shareholders necessary to
conduct the business of the AGM to be present at the meeting,
either in person or by electronic means.
The Board remains committed to shareholder engagement and
participation, and therefore shareholders will be able to access
the meeting via teleconference link. Please note that this
teleconference link will allow shareholders to listen to the
business of the AGM only - it will not be possible to use this
facility to vote or ask questions. There will not be any
presentations given by the directors at the AGM. Shareholders are
invited to submit questions in writing in advance of the AGM, which
will be responded to orally at the meeting.
Further information on registering to access the AGM via
teleconference and on submitting questions, along with details of
the resolutions to be proposed at the meeting, can be found in the
Notice of AGM that has been posted to shareholders and is available
on the Documents page of the Investor section of the Company's
website here: https://investors.cornerstonefs.com/document-centre/
.
In addition, the Company has today published its annual report
and accounts for the year ended 31 December 2020, which is
available on the Documents page of the Investor section of its
website here: https://investors.cornerstonefs.com/document-centre/
.
Group Statement of Comprehensive Income
For the year ended 31 December 2020
Year 9-month
ended period ended
31 December 31 December
2020 2019
Notes GBP GBP
REVENUE 1 1,664,237 1,240,938
Cost of sales (1,167,929) (702,000)
GROSS PROFIT 496,308 538,938
ADMINISTRATIVE EXPENSES 2
Share-based compensation 14 (358,443) -
Further adjustments to underlying profit
from operations (see below) (793,577) -
Other administrative expenses (1,499,589) (620,117)
TOTAL ADMINISTRATIVE EXPENSES (2,651,609) (620,117)
Underlying loss from operations (1,003,281) (81,179)
Stated after the add back of:
- share-based compensation on reverse
acquisition 14 211,281 -
- other share-based compensation 14 147,162 -
- transaction costs 793,577 -
------------------------------------------- ----- ------------ -------------
LOSS from operations 2 (2,155,301) (81,179)
Finance and other income 3 603 -
Finance costs 3 - (370)
LOSS BEFORE TAX (2,154,698) (81,549)
Income tax expense 6 - -
________ ________
LOSS FOR THE YEAR (2,154,698) (81,549)
TOTAL COMPREHENSIVE LOSS FOR THE YEAR (2,154,698) (81,549)
Loss per ordinary share - basic
& diluted (pence) 7 (14.99) (0.73)
_______ _______
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 2020
Group Group Company Company
31 December 31
31 December 31 December 2020 July
2020 2019 2020
Notes GBP GBP GBP GBP
assets
NON-CURRENT ASSETS
Intangible assets 8 320,972 6,076 226,278 -
Tangible assets 9 8,464 1,050 - -
Investments 10 - - 6,147,773 100
_______ _______ _______ _______
329,436 7,126 6,374,051 100
CURRENT ASSETS
Trade and other receivables 12 570,159 355,370 238,810 95,000
Cash and cash equivalents 183,675 78,265 96,394 -
_______ _______ _______ _______
753,834 433,635 335,204 95,000
_______ _______ _______ _______
total assets 1,083,270 440,761 6,709,225 95,100
_______ _______ _______ _______
equity and liabilities
equity
Share capital 14 165,887 91,559 165,887 286
Share premium 951,422 1,543,988 951,422 8,186,967
Share-based payment reserve 54,215 - 54,215 -
Merger relief reserve 5,557,645 - 5,557,645 -
Reverse acquisition reserve (3,140,631) - - -
Retained earnings (3,724,461) (1,569,763) (1,083,751) (8,092,153)
_______ _______ _______ _______
TOTAL EQUITY (135,923) 65,784 5,645,418 95,100
_______ _______ _______ _______
CURRENT LIABILITIES
Trade and other payables 13 1,219,193 374,977 1,063,837 -
_______ _______ _______ _______
TOTAL EQUITY AND LIABILITIES 1,083,270 440,761 6,709,255 95,100
_______ _______ _______ _______
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 five-month
period ended 31 December 2020 was GBP1,173,655 (seven-month period
ended 31 July 2020: profit of GBP63,418).
The financial statements were approved by the Board of Directors
and authorised for issue on 7 June 2021 and are signed on its
behalf by:
Julian Wheatland
Chief Executive Officer
Group Statement of Changes in Equity
For the year ended 31 December 2020
Share-based Reverse
Share Share payment Merger relief acquisition Retained
capital premium reserve reserve reserve earnings Total
GBP GBP GBP GBP GBP GBP GBP
Balance at 1
April 2019 82,496 1,146,676 - - - (1,488,214) (259,042)
Issue of
shares 9,063 397,312 - - - - 406,375
Loss and total
comprehensive
income
for the year - - - - - (81,549) (81,549)
_______ _______ _______ _______ _______ _______ _______
Balance at 31
December 2019 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)
_______ _______ _______ _______ _______ _______ _______
Company Statement of Changes in Equity
For the five months ended 31 December 2020
Share-based Merger
Share payment relief Retained
Capital Share premium reserve reserve earnings Total
GBP GBP GBP GBP GBP GBP
Balance at 1 January
2020 286 8,186,967 - - (8,155,571) 31,682
Profit and total comprehensive
income for the period - - - - 63,418 63,418
Balance at 31 July
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
_______ _______ _______ _______ _______ _______
Group and Company Cash Flow Statement
For the year ended 31 December 2020
Group Group Company Company
Year ended 9-month 5-month 7-month
31 December period period period
2020 ended ended ended
31 December 31 December 31 July
2019 2020 2020
GBP GBP GBP GBP
Notes
Loss before tax (2,154,698) (81,549) (1,173,655) 63,418
Adjustments to
reconcile profit
before tax to cash
generated
from operating
activities:
Finance income 3 (603) - (603) -
Finance costs 3 - 370 - -
Share-based
compensation 14 358,443 - 54,215 -
Depreciation and
amortisation 8,9 22,270 3,656 16,638 26,541
(Increase)/decrease
in accrued
income, trade and
other receivables (83,297) (120,731) (370,302) 800,188
Increase/(decrease)
in trade
and other payables 1,000,240 96,290 1,069,655 (1,315,279)
_______ _______ _________ _______
Cash used in
operations (857,645) (101,964) (404,052) (425,132)
Income tax paid - - - -
_______ _______ _________ _______
Cash used in
operating
activities (857,645) (101,964) (404,052) (425,132)
Investing activities
Acquisition of
property, plant
and equipment 9 (9,144) - - -
Acquisition of
intangible
assets 8 (335,436) - (242,916) -
_______ _______ _________ _______
Cash used in
investment
activities (344,580) - (242,916) -
Financing activities
Shares issued (net
of costs) 14 1,212,032 406,375 647,759 -
Repayment of - (381,300) - -
shareholder loans
Loans received 95,000 - 95,000 -
Interest and similar
income 603 - 603 -
Interest and similar - (370) -
charges
_______ _______ __________ _______
Cash generated from
financing
activities 1,307,635 24,705 743,362 -
Increase/(decrease)
in cash
and cash
equivalents 105,410 (77,259) 96,394 (425,132)
Opening cash and
cash equivalents 78,265 155,524 - 425,132
_______ _______ ________ _______
Closing cash and
cash equivalents 183,675 78,265 96,394 -
===================== ===================== ===================== =====================
Notes to the Financial Statements
For the year ended 31 December 2020
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 on pages 2-14 of the
annual report and accounts.
These financial statements have been prepared in accordance with
International Financial Reporting Standards as adopted by the
European Union ("IFRS") for the year ended 31 December 2020 and the
comparative 9-month period to 31 December 2019, 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 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 the financial statements requires management
to make estimates and assumptions that affect the reported amounts
of revenues, expenses, assets and liabilities, and the disclosure
of contingent liabilities at the date of the financial statements.
If in the future such estimates and assumptions, which are based on
management's best judgement at the date of the financial
statements, deviate from the actual circumstances, the original
estimates and assumptions will be modified as appropriate in the
year in which the circumstances change.
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 2021).
-- Amendments to IAS 1, presentation of financial statements on
classification of liabilities (effective p/c on or after 1 January
2022).
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, AMMENTS 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:
FXPress Payment Services Ltd - 100% owned by the Company
Avila House Limited - 100% owned by FXPress Payment Services 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 has been issued
in the name of Cornerstone FS plc ("Cornerstone"), the legal
parent, it represents in substance continuation of the financial
information of the primary legal subsidiary, FXPress Payment
Services Ltd.
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 recognised in the
consolidated financial statements 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 FXPress Payment Services Ltd reversed into Cornerstone when
Cornerstone did not have an existing trade, the transaction cannot
be considered 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 is capital
in nature and completed through the issue of shares, it falls
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 (FXPress Payment Services 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
During the year ended 31 December 2020, the Group made a loss of
GBP2,154,698, which has resulted in the balance sheet showing a net
liabilities position of GBP135,923. Post year-end, the Group's
balance sheet was strengthened with the raising of gross proceeds
of GBP2.2m via a placing of new ordinary shares following the
Company's admission to AIM. The Group also has access to GBP450,000
in convertible loan note facilities.
The Directors have prepared a cash flow forecast covering a
period extending 24 months from 31 December 2020. The Directors
have taken into account the placing proceeds mentioned above, the
historical growth and the inherent risks and uncertainties facing
the Group's business, and have derived forecast assumptions that
are their best estimate of the future development of Group's
business. The Directors have also run various scenario planning
forecasts alongside their best-estimate forecast assumptions, which
all indicate sufficient cash resources to continue to finance the
Group's working capital requirements over the forecast period.
The Directors are mindful of COVID-19 and the impact that this
has had on operations is discussed further in note 20. The Board
have reviewed forecasts in light of this and do not consider there
to be any material uncertainties pertaining to the Group's ability
to discharge its liabilities as they arise.
For these reasons, the Directors continue to adopt the going
concern basis of accounting in preparing the Group's financial
statements.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
revenue
The Group applies IFRS 15 Revenue from Contracts with Customers
for the recognition of revenue. IFRS 15 established a comprehensive
framework for determining whether, how much and when revenue is
recognised. It affects the timing and recognition of revenue items,
but not generally the overall amount recognised.
The performance obligations of the Group's revenue streams are
satisfied on the transaction date or by the provision of the
service for the period described in the contract. Revenue is not
recognised where there is evidence to suggest that customers do not
have the ability or intention to pay. The Group does not have any
contracts with customers where the performance obligations have not
been fully satisfied.
The Group derives revenue from the provision of foreign exchange
and payment services. When a contract with a client is entered
into, it immediately enters into a separate matched contract with
its institutional counterparty.
Spot and forward revenue is recognised when a binding contract
is entered into by a client and the rate is fixed and determined.
Revenue represents the difference between the rate offered to
clients and the rate received from its institutional
counterparties.
INVESTMENTS
Investments in subsidiary undertakings are accounted for at cost
less impairment.
FINANCIAL INSTRUMENTS
Financial assets and financial liabilities are recognised on the
Group Statement of Financial Position when the Group has become a
party to the contractual provisions of the instrument.
Derivative financial instruments
Derivative financial assets and liabilities are carried as
assets when their fair value is positive and as liabilities when
their fair value is negative. Changes in the fair value of
derivatives are included in the income statement. The Group's
derivative financial assets and liabilities at fair value through
profit or loss comprise solely of forward foreign exchange
contracts.
Trade, loan and other receivables
Trade and loan receivables are initially measured at their
transaction price. Trade and loan receivables are held to collect
the contractual cash flows which are solely payments of principal
and interest. Therefore, these receivables are subsequently
measured at amortised cost using the effective interest rate
method. The Directors have considered the impact of discounting
trade and loan receivables whose settlement may be deferred for
lengthy periods and concluded that the impact would not be
material.
An impairment loss is recognised for the expected credit losses
on trade and loan receivables when there is an increased
probability that the counterparty will be unable to settle an
instrument's contractual cash flows on the contractual due dates, a
reduction in the amounts expected to be recovered, or both.
Impairment losses and any subsequent reversals of impairment
losses are adjusted against the carrying amount of the receivable
and are recognised in profit or loss.
Trade payables
Trade payables are initially recognised at fair value and
subsequently at amortised cost using the effective interest
method.
Equity instruments
Equity instruments issued by the Group are recorded at the
proceeds received, net of direct issue costs.
Financial liabilities
Financial liabilities are classified according to the substance
of the contractual arrangements entered into. An instrument will be
classified as a financial liability when there is a contractual
obligation to deliver cash or another financial asset to another
enterprise.
Cash and cash equivalents
Cash and cash equivalents comprise cash in hand, deposits held
at call with banks and other short-term highly liquid investments
with original maturities of three months or less.
For the purposes of the Cash Flow Statement, cash and cash
equivalents consist of cash and cash equivalents as defined above,
net of any outstanding bank overdraft which is integral to the
Group's cash management.
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.
CRITIAL 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 and equipment
to determine whether there is any indication that those assets have
suffered an impairment loss. If any such indication exists, the
recoverable amount of the asset is estimated in order to determine
the extent of the impairment loss (if any).
Where the asset does not generate cash flows that are
independent from other assets, the Group estimates the recoverable
amount of the cash-generating unit to which the asset belongs. An
intangible asset with an indefinite useful life is tested for
impairment annually and whenever there is an indication that the
asset may be impaired.
Recoverable amount is the higher of fair value less costs to
sell and value in use. In assessing value in use, the estimated
future cash flows are discounted to their present value using a
pre-tax discount rate that reflects current market assessments of
the time value of money and the risks specific to the asset for
which the estimates of future cash flows have not been
adjusted.
If the recoverable amount of an asset (or cash-generating unit)
is estimated to be less than its carrying amount, the carrying
amount of the asset (or cash-generating unit) is reduced to its
recoverable amount. An impairment loss is recognised immediately in
profit or loss, unless the relevant asset is carried at a revalued
amount, in which case the impairment loss is treated as a
revaluation decrease.
Where an impairment loss subsequently reverses, the carrying
amount of the asset (or cash-generating unit) is increased to the
revised estimate of its recoverable amount, but so that the
increased carrying amount does not exceed the carrying amount that
would have been determined had no impairment loss been recognised
for the asset (or cash-generating unit) in prior years. A reversal
of an impairment loss is recognised immediately in profit or loss,
unless the relevant asset is carried in at a revalued amount, in
which case the reversal of the impairment loss is treated as a
revaluation increase.
SHARE-BASED COMPENSATION
The fair value of share-based awards is measured using the
Black-Scholes model which inherently makes use of significant
estimates and assumptions concerning the future applied by the
Directors. Such estimates and judgements include the expected life
of the options and the number of employees that will achieve the
vesting conditions. Further details of the share option scheme are
given in note 14 .
ALTERNATIVE PERFORMANCE MEASURES
The Group uses the alternative performance measure of underlying
profit/(loss) from operations. This measure is not defined under
IFRS, nor is it a measure of financial performance under IFRS.
This measure is sometimes used by investors to evaluate a
company's operational performance with a long-term view towards
adding shareholder value. This measure should not be considered an
alternative, but instead supplementary, to profit/(loss) from
operations and any other measure of performance derived in
accordance with IFRS.
Alternative performance measures do not have generally accepted
principles for governing calculations and may vary from company to
company. As such, the underlying profit/(loss) from operations
quoted within the Group Statement of Comprehensive Income should
not be used as a basis for comparison of the Group's performance
with other companies.
UNDERLYING PROFIT/(LOSS) FROM OPERATIONS
The Group uses underlying profit/(loss) from operations, defined
as profit/(loss) from operations, adding back share-based
compensation and transaction costs associated with the Group's AIM
listing and acquisitions strategy.
The underlying loss from operations is reconciled back to the
loss from operations within the Group Statement of Comprehensive
Income.
1 revenue and SEGMENTAL REPORTING
All of the Group's revenue arises from activities within 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
9-month
Year ended period ended
31 December 31 December
2020 2019
GBP GBP
_______ _______
Total revenue 1,664,237 1,240,938
_______ _______
Group Group
9-month period
Year ended ended 31
31 December December
2020 2019
2 LOSS FROM OPERATIONS GBP GBP
Loss from operations is stated after charging:
Share-based compensation on reverse acquisition 211,281 -
Other share-based compensation 147,162 -
Transaction costs 793,577 -
Expensed software development costs 42,333 43,000
Depreciation of property, plant and equipment 1,730 729
Amortisation of intangible assets 20,540 2,926
Short-term (2018 IAS 17 operating) lease rentals 70,697 69,992
_______ _______
Amounts payable to the Group's auditor in respect of both audit
and non-audit services:
Year ended 31 9-month period
December 2020 ended 31 December
2019
GBP GBP
Audit Services
* Statutory audit 15,000 -
Other Services
The auditing of accounts of associates
of the Company pursuant to legislation:
* Audit of subsidiaries and its associates 16,500 8,000
------------------------- -------------------------
31,500 8,000
========================= =========================
Group Group
9-month period
Year ended ended 31
31 December December
3 INTEREST AND SIMILAR ITEMS 2020 2019
GBP GBP
i. Total finance and other income 603 -
_______ _______
ii. Total finance costs - 370
_______ _______
4
Employees
The average monthly numbers of employees in the Group (including
the Directors) during the year was made up as follows (the Company
has no employees other than the Directors):
Year
ended 9-month period
31 ended 31
December December
2020 2019
Number Number
Directors - -
Employees 9 6
_______ _______
9 6
_______ _______
9-month period
Year ended ended 31
31 December December
Employment costs 2020 2019
GBP GBP
Wages and salaries 618,522 135,557
Social security costs 68,455 13,899
Pension costs 5,930 4,073
Share-based compensation 26,787 -
_______ _______
719,694 153,529
_______ _______
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 on pages 24-26
of the annual report and accounts.
9-month period
Year ended ended 31
31 December December
2020 2019
GBP GBP
Salaries and fees 116,786 -
Share-based compensation 20,088 -
Social security costs 9,453 -
_______ _______
146,327
_______ _______
Number Number
Number of Directors to whom retirement benefits
are accruing under a defined contribution
scheme - -
9-month period
Year ended ended 31
31 December December
2020 2019
GBP GBP
The remuneration in respect of the highest
paid Director was:
Salaries and fees 85,000 -
Share-based compensation 15,452 -
Social security costs 5,580 -
_______ _______
106,032 -
_______ _______
During the year no (2019: nil) Directors exercised any (2019:
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
GBP5,930 (2019: GBP4,070). At 31 December 2020 contributions of
GBP2,490 remained outstanding and are included within other
payables (31 December 2019: GBP543).
6 taxation
The tax on the loss on ordinary activities for the period was as
follows:
Group Group
9-month period
Year ended ended 31
31 December December
2020 2019
GBP GBP
_______ _______
Current Tax:
UK Corporation tax - -
Deferred tax - -
_______ _______
Tax on loss on ordinary activities - -
_______ _______
Group Group
9-month period
Year ended ended 31
31 December December
2020 2019
GBP GBP
Loss before taxation (2,154,698) (81,549)
_______ _______
Loss multiplied by main rate of corporation
tax in the UK of 19% (9-month ended 31 December
2019: 19%) (409,393) (15,494)
Effects of:
Expenses not deductible for tax purposes 155,158 656
Share-based payments 68,104 -
Other deductions in period (1,446) -
Tax losses carried forward 185,577 14,838
_______ _______
Current tax - -
_______ _______
As at 31 December 2020, the Group had prepared but not yet
submitted a Research and Development tax credits reclaim, the
estimated net benefit of which is approximately GBP62,000. It has
not been recognised as an asset due to its contingent nature.
As at 31 December 2020, the Group had tax losses carried forward
of GBP2,847,347 (31 December 2019: GBP1,860,098). 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 2020 was 19.0%. The UK government has indicated that
the rate of corporation tax may be increased to 25% with effect
from 1 April 2023.
7 LOSS PER SHARE
The loss per share of 14.99p is based upon the loss of
GBP2,154,698 (2019: loss of GBP81,549) and the weighted average
number of ordinary shares in issue for the year of 14,370,030
(2019: 11,221,348).
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
GBP GBP GBP GBP
COST
At 1 January 2020 - 15,611 - 15,611
Additions 242,916 - - 242,916
Acquired through business combination - - 92,520 92,520
_______ _______ _______ _______
At 31 December 2020 242,916 15,611 92,520 351,047
AMORTISATION
At 1 January 2020 - 9,535 - 9,535
Charge for the period 16,638 3,902 - 20,540
_______ _______ _______ _______
At 31 December 2020 16,638 13,437 - 30,075
NET BOOK VALUE
At 31 December 2020 226,278 2,174 92,520 320,972
_______ _______ _______ _______
At 31 December 2019 - 6,076 - 6,076
_______ _______ _______ _______
Other intangible assets comprise regulatory licenses held at
cost and are not amortised in the first period of ownership.
Company INTANGIBLE ASSETS
Internally
developed Software
software costs Other Total
GBP GBP GBP GBP
COST
At 1 August 2020 - - - -
Additions 242,916 - - 242,916
_______ _______ _______ _______
At 31 December 2020 242,916 - - 242,916
AMORTISATION
At 1 August 2020 - - - -
Charge for the period 16,638 - - 16,638
_______ _______ _______ _______
At 31 December 2020 16,638 16,638
NET BOOK VALUE
At 31 December 2020 226,278 - - 226,278
_______ _______ _______ _______
At 31 July 2020 - - - -
_______ _______ _______ _______
9 GROUP property, plant and equipment
Computer Equipment
GBP
COST
At 1 January 2020 6,531
Additions 9,144
At 31 December 2020
15,675
-------------
DEPRECIATION
At 1 January 2020 5,481
Charge for the period 1,730
At 31 December 2020
7,211
-------------
NET BOOK VALUE
At 31 December 2020 8,464
-------------
At 31 December 2019 1,050
-------------
10 investments
Investments
in
Subsidiaries
GBP
Cost or Valuation
At 1 August 2020 100
Additions 6,147,773
Disposals (100)
At 31 December 2020
6,147,773
------------
Net Book value
At 31 December 2020 6,147,773
------------
At 31 July 2020 100
------------
The Company's investment as at 31 December 2020 represents the
initial investment in FXPress Payment Services Ltd on 9 September
2020 and a further GBP450,000 invested on 31 December 2020.
On 9 September 2020, the Company acquired the entire issued
share capital of FXPress Payment Services Ltd ("legal subsidiary")
for a consideration of GBP5,697,773, satisfied by the issue of
1,401,275,638 shares.
Prior to the acquisition, on 7 July 2020, the legacy business
and trade of Cornerstone (formerly Cornerstone Brands, a consumer
product business) together with its trade, assets and liabilities,
was hived down to a newly incorporated wholly-owned subsidiary,
CSTT Limited ("CSTT"). Cornerstone's investment in CSTT, stated at
cost, was GBP100. The disposal of CSTT to the prior owners of the
legacy business was approved by shareholders at a general meeting
on 26 August 2020 and completed on 9 September 2020.
As the legal subsidiary reversed into the Company ("legal
parent"), without an existing trade, this transaction cannot be
considered a business combination, as the legal parent did not meet
the definition of a business, under IFRS 3 "Business
Combinations".
As the transaction is capital in nature and completed through
the issue of shares it falls 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 and the fair value of
net identifiable assets in the legal parent will form part of the
deemed cost of acquisition.
Shares in subsidiary and associate undertakings are stated at
cost. As at 31 December 2020, Cornerstone FS plc owned the
following principal subsidiaries which are included in the
consolidated accounts:
Principal Country Registered Percentage
Subsidiary Activity of Incorporation Office of Ownership
------------------------ ------------ ----------------- ----------------- -------------
FXPress Payment Services Foreign Northern 1 Elmfield 100 per
Ltd Exchange Ireland Avenue, cent.
and Payment Warrenpoint,
Services Newry,
Co. Down,
BT34 3HQ
Avila House Limited E-money England The Old 100 per
and Payment and Wales Rectory, cent.
Services Addington,
Buckinghamshire,
MK18 2JR
CS Commercial Limited Dormant England The Old 100 per
(audit exempt) and Wales Rectory, cent.
Addington,
Buckinghamshire,
MK18 2JR
Cornerstone EBT Trustee Employee England The Old 100 per
Limited Benefit and Rectory, cent.
(audit exempt) Scheme Wales Addington,
Trustee Buckinghamshire,
MK18 2JR
11 Avila House acquisition
On 19 October 2020 FXPress Payment Services Ltd acquired the
entire issued share capital of Avila House Limited ("Avila House"),
a company which has a small electronic money institution licence
focused on multi-currency e-wallets, for a total consideration of
GBP92,685 (satisfied by GBP60,000 in shares and GBP32,685 in cash).
The acquisition was made in line with the Group's strategy to allow
clients to leave funds on deposit, effectively providing them with
multi-currency current accounts.
The Group determined that the activities and assets acquired
represent a business as defined under IFRS 3 Business Combinations
and has accounted for the transaction accordingly.
The net assets acquired at the date of acquisition were
determined to be GBP92,520, representing the fair value of the FCA
registered small electronic money institution licence, which was
the only asset held by Avila House at the time of acquisition.
No goodwill arose as a result of the acquisition.
Since the acquisition date, Avila House has not generated any
revenue (also in line with the Group's product development roadmap)
and generated a loss of GBP3,822, which is included in the
consolidated financial statements.
12 current trade and other receivables
Group Group Company Company
31 December 31 December 31 December 31 July
2020 2019 2020 2020
GBP GBP GBP GBP
Trade receivables 8,405 7,720 - -
Prepayments and accrued income 24,623 - 9,600 -
Derivative financial assets at fair
value 299,035 281,134 - -
Other receivables 140,378 66,516 131,492 -
Amounts due from Group undertakings
and undertakings in which the Company
has a participating interest - - - 95,000
Taxes and social security 97,718 - 97,718 -
_______ _______ _______ _______
570,159 355,370 238,310 95,000
_______ _______ _______ _______
For the year ended 31 December 2020, GBPnil was recorded as a
bad debt expense (nine-month period ended 31 December 2019:
GBPnil).
As at 31 December 2020, 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 (31 December 2019:
GBPnil). The estimated net benefit of the claim is approximately
GBP62,000 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 31 December 31 December 31 July
2020 2019 2020 2020
GBP GBP GBP GBP
Trade payables 525,064 101,577 238,654 -
Derivative financial liabilities
at fair value 216,061 249,989 - -
Other tax and social security 47,273 5,458 17,411 -
Other payables and accruals 430,795 17,953 290,773 -
Amount due to Group undertakings - - 516,999 -
_______ _______ _______ _______
1,219,193 374,977 1,063,837 -
_______ _______ _______ _______
14 Share capital AND Reserves
Allotted, called up and fully paid
Ordinary
shares Share capital
No. GBP
Ordinary shares of GBP0.00001 each
as at 1 August 2020 28,597,462 286
Bonus issue of GBP0.00001 shares 9
August 2020 257,377,158 2,573
Consolidation to GBP0.0001 9 August
2020 (257,377,158) -
Issue of consideration shares of GBP0.0001
9 September 2020 1,401,275,638 140,128
Bonus issue of GBP0.0001 shares 10
September 2020 23,363,722 2,336
Issue of new shares of GBP0.0001 16
September 2020 13,438,678 1,344
Consolidation to GBP0.01 shares 2 October
2020 (1,452,008,745) -
Issue of new shares of GBP0.01 October
to December 2020 1,921,853 19,219
_______ _______
Ordinary shares of GBP0.01 each at
31 December 2020 16,588,608 165,886
_______ _______
At 31 December 2020 share subscriptions of GBP131,492,
comprising GBP2,630 share capital and GBP128,862 share premium,
remained unpaid (31 July 2020: GBPnil).
The following changes in the share capital of the Company have
taken place in the five-month period ended 31 December 2020:
-- On 26 August 2020, the Company issued 9 bonus shares for
every share in issue and subsequently consolidated such shares, in
respect of each relevant class of shares, on the basis of 10 shares
of GBP0.00001 each into 1 share of GBP0.0001 each;
-- on 9 September 2020, 1,401,275,638 new A ordinary shares of
GBP0.0001 each were issued as consideration shares to FXPress
Payment Services Ltd shareholders pursuant to the acquisition;
-- on 10 September 2020, 23,363,722 new bonus E ordinary shares of GBP0.0001 each were issued;
-- on 16 September 2020, 13,438,598 new A ordinary shares of
GBP0.0001 each were issued at a price of GBP0.005 each and 80 new A
ordinary shares of GBP0.0001 each were issued for the purposes of
ensuring there would be a whole number of shares in issue upon the
proposed consolidation on 2 October 2020;
-- on 2 October 2020, the entire issued share capital of the
Company comprising different classes of shares were re-designated
and consolidated on the basis of 100 shares of GBP0.0001 each into
1 Ordinary Share of GBP0.01 each;
-- on 3 October 2020, 1,390,018 Ordinary Shares were issued at a
price of GBP0.50 each and 211,835 Ordinary Shares were issued in
consideration for services at an equivalent price of GBP0.50 per
share;
-- on 19 October 2020, 120,000 Ordinary Shares were issued as
consideration shares to the shareholders of Avila House in
accordance with the terms of the share purchase agreement; and
-- on 1 December 2020, 200,000 Ordinary Shares were issued at a price of GBP0.50 each.
All Ordinary Shares are equally eligible to receive dividends
and the repayment of capital and represent equal votes at meetings
of shareholders.
As at 31 December 2020, GBP131,492 of issued share capital was
unpaid (31 December 2019: GBP26,247).
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 optionholder'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 optionholder's death). Otherwise the options lapse five
years after the date of grant. The options also lapse, inter alia,
if the optionholder is adjudged bankrupt or proposes a voluntary
arrangement or other scheme in relation to his/her debts.
Weighted
average
Ordinary exercise
shares price
No. GBP
Outstanding as at 1 August 2020 - -
Granted during the period 1,599,480 0.50
_______ _______
Outstanding as at 31 December 2020 1,599,480 0.50
_______ _______
On 2 December 2020 Julian Wheatland was granted options over
922,677 Ordinary Shares at an exercise price of GBP0.50 per share.
The Company has also agreed to make an annual grant of additional
options to Julian Wheatland equal to 5% of any increase in the
fully diluted capital of the Company which has occurred in the 12
months immediately prior to the date of grant to be exercisable at
a price equal to the average mid-market closing price of the
Ordinary Shares over the relevant 12-month period.
On 2 December 2020 Judy Happe was granted options over 276,803
Ordinary Shares at an exercise price of GBP0.50 per share. The
Company has also agreed to make an annual grant of additional
options to Judy Happe equal to 1.5% of any increase in the fully
diluted capital of the Company which has occurred in the 12 months
immediately prior to the date of grant to be exercisable at a price
equal to the average mid-market closing price of the Ordinary
Shares over the relevant 12-month period.
On 2 December 2020 a further 400,000 options were granted to
other senior employees at an exercise price of GBP0.50 per
share.
The Black-Scholes model was used for calculating the cost of
options. The model inputs for the options issued were:
Grant date - 2 December 2020
Share price at grant date - 50 pence
Exercise price - 50 pence
Risk free rate - 0.8%
Expected volatility - 83.7% (based on reference to the Group's quoted competitors)
Contractual life - 5 years
Market performance conditions were ignored in determining the
fair value of options.
The weighted average contractual life of the options is five
years (2019: zero).
No options were exercised during the current year (2019:
nil).
Warrants
Between 15 January 2020 and 31 March 2020 FXPress Payment
Services Ltd granted 14,911,060 warrants to various advisors,
employees and directors with an average exercise price of GBP0.050
and a term of five years. Due to failure to satisfy a vesting
condition specified at the grant date, the fair value of 9,155,930
warrants issued to employees and ex-employees was assessed to be
zero.
The remaining 5,755,130 warrants were estimated to have an
average fair value of GBP0.016 per warrant at the grant date using
the Black-Scholes valuation model. The principal inputs into the
model were:
Share price at grant date - between 4.7 pence and 5.5 pence
Risk-free rate - 0.75%
Expected Volatility - 25%
Contractual life - 5 years
In connection with the reverse acquisition of the Company on 9
September 2020, the Directors of Cornerstone wrote to the holders
of the 9,155,930 outstanding FXPress Payment Services Ltd warrants,
agreeing to exchange their warrants for warrants in Cornerstone in
return for waiving all rights under their FXPress Payment Services
Ltd warrants.
As a result of the effective cancellation of the FXPress Payment
Services Ltd warrants, FXPress Payment Services Ltd recognised an
accelerated share-based payment charge of GBP92,947 for the
year-ended 31 December 2020 (9 months ended 31 December 2019:
GBPnil).
On 3 October 2020 Cornerstone granted 778,460 warrants to the
former holders of FXPress Payment Services Ltd warrants with an
average exercise price of GBP0.31 and an average term of four years
and 117 days. Between 5 October 2020 and 10 December 2020
Cornerstone granted 1,000,000 warrants with an exercise price of
GBP0.50 and a term of five years. The Cornerstone warrants were
estimated to have an average grant date fair value of GBP0.342 per
warrant using the Black-Scholes valuation model. The principal
inputs into the model were:
Share price at grant date - between 16.6 pence and 50 pence
Risk-free rate - 0.8%
Expected volatility - 83.7%
Contractual life - between 4 years & 105 days and 5 years
The Group share-based compensation charge for the year ended 31
December 2020 of GBP147,162 (9-month period ended 31 December 2019:
GBPnil) consists of GBP92,947 in relation to the accelerated
share-based payment charges in respect of the cancelled warrants in
FXPress Payment Services Ltd, GBP27,428 in respect of the
replacement warrants granted in Cornerstone and GBP26,787 in
respect of the Cornerstone options.
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 FXPress Payment Services 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 GBP516,999 (2019:
GBPnil) to FXPress Payment Services Ltd.
Other related parties:
All of the amounts below were in respect of the year ended 31
December 2020.
Fees of GBP50,000 (2019: GBPnil) in connection with fundraising
activities were due to LGEC Capital Partners LLP, of which Gareth
Edwards is a Designated Member. The amount was unpaid at the
year-end.
Corporate finance advisory fees of GBP49,323 were due to London
Bridge Capital Limited, a company of which Gareth Edwards and
Elliott Mannis are directors and Elliott Mannis is the shareholder.
GBP36,135 remained due to London Bridge Capital Limited at the
year-end (2019: GBPnil).
Terry Everson, a director of FXPress Payment Services Ltd and a
significant shareholder in Cornerstone, was paid consulting fees of
GBP24,000 via Hazelwood Financial Ltd, a company of which he is a
director and significant shareholder (9 months ended 31 December
2019: GBP54,000). As at 31 December 2020, a loan of GBP10,000 made
by the Group to Terry Everson remained unpaid (31 December 2019:
GBPnil).
William Newton, a director of FXPress Payment Services Ltd and a
significant shareholder in Cornerstone, was paid consulting fees of
GBP8,333 (9 months ended 31 December 2019: GBP21,000).
Stephen Flynn, a director of FXPress Payment Services Ltd and a
significant shareholder in Cornerstone, was paid consulting fees of
GBP68,871 via JF Technology (UK) Ltd, a company of which he is a
director and significant shareholder (9 months ended 31 December
2019: GBP21,500).
David Mason, a director of FXPress Payment Services Ltd, was
paid consulting fees of GBP85,800 (9 months ended 31 December 2019:
GBPnil).
Jason Conibear, a former director of FXPress Payment Services
Ltd, was paid consulting fees of GBP42,650 (9 months ended 31
December 2019: GBP15,000).
16 FINANCIAL INSTRUMENTS
FINANCIAL ASSETS
Group Group Company Company
31 December 31 December 31 December 31 July
2020 2019 2020 2020
GBP GBP GBP GBP
DERIVATIVE FINANCIAL ASSETS
Foreign currency forward contracts
with customers 253,077 182,117 - -
Foreign currency forward contracts
with institutional counterparty 45,958 99,017 - -
_______ _______ _______ _______
299,035 281,134 - -
Cash and cash equivalents 183,675 78,265 96,394 -
Trade receivables 8,405 7,720 - -
Other receivables 165,001 66,516 141,092 95,000
_______ _______ _______ _______
656,116 433,655 237,486 95,000
_______ _______ _______ _______
FINANCIAL LIABILITIES
Group Group Company Company
31 December 31 December 31 December 31 July
2020 2019 2020 2020
GBP GBP GBP GBP
DERIVATIVE FINANCIAL LIABILITIES
Foreign currency forward contracts
with customers 55,869 120,754 - -
Foreign currency forward contracts
with institutional counterparty 160,192 129,235 - -
_______ _______ _______ _______
216,061 249,989 - -
Trade payables 525,064 101,577 238,654 -
Other payables 430,795 17,953 807,772 -
_______ _______ _______ _______
1,171,920 369,519 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 2020 31 December 2019
Notional Notional
Fair Value Principal Fair Value Principal
GBP GBP GBP GBP
Foreign currency forward contracts
with customers 253,077 14,686,425 182,117 4,986,924
Foreign currency forward contracts
with institutional counterparty 45,958 5,785,633 99,017 4,971,285
_______ _______ _______ _______
299,035 20,472,058 281,134 9,958,209
_______ _______ _______ _______
Derivative financial liabilities not designated as hedging
instruments
31 December 2020 31 December 2019
Notional Notional
Fair Value Principal Fair Value Principal
GBP GBP GBP GBP
Foreign currency forward contracts
with customers 55,869 4,392,467 120,754 4,535,780
Foreign currency forward contracts
with institutional counterparty 160,192 12,390,456 129,235 5,192,152
_______ _______ _______ _______
216,061 16,782,923 249,989 9,727,932
_______ _______ _______ _______
Fair value is the price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between
market participants at the measurement date. Foreign currency
forward contracts are measured at fair value on a recurring
basis.
There are three levels of fair value hierarchy:
-- Level 1 - the fair value of financial instruments traded in
active markets is based on quoted market prices at the end of the
reporting period.
-- Level 2 - valuation techniques for which the lowest level
input that is significant to the fair value measurement is directly
or indirectly observable.
-- Level 3 - valuation techniques for which the lowest level
input that is significant to the fair value measurement is
unobservable.
Foreign currency forward contracts with customers generally
require immediate settlement on the maturity date of the individual
contract and fall into level 2 of the fair value hierarchy above.
Level 2 comprises those financial instruments which can be valued
using inputs other than quoted prices that are observable for the
asset or liability either directly (i.e. prices) or indirectly
(i.e. derived from prices). The fair value of forward foreign
exchange contracts is measured using observable forward exchange
rates for contracts with a similar maturity at the reporting
date.
The net gain on financial assets at fair value through profit or
loss for year ended 31 December 2020 was GBP4,839 (9 months ended
31 December 2019: GBP13,250).
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 proceeds from the IPO fund
raise, the historical growth in the Group's business and the
inherent risks and uncertainties facing the Group's business to
assess the Group's working capital requirements.
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. Client funds are transferred to Velocity via Currency
Cloud 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 GBP50,000.
FXPress Payment Services Ltd, a wholly-owned subsidiary of the
Company, is subject to the following capital requirement under the
Payment Service Regulations 2017:
-- either 10% of fixed overheads for the preceding year or the
initial capital requirement of EUR50,000, whichever is the
higher.
19 EVENTS AFTER THE REPORTING DATE
On 26 February 2021, 24,326 Ordinary Shares were issued at a
price of GBP0.407 each on the exercise of warrants.
On 17 March 2021, the Company and William Newton entered into a
facility to borrow GBP350,000 from William Newton at any time until
31 December 2023 on not less than 20 Business Days' notice in
consideration of the Company issuing William Newton with 6%
unsecured convertible loan notes 2024.
On 25 March 2021, the Company and Robert Lee entered into a
facility to borrow GBP100,000 from Robert Lee at any time until 31
December 2023 on not less than 20 Business Days' notice in
consideration of the Company issuing Robert Lee with 6% unsecured
convertible loan notes 2024. A drawdown notice was issued to Robert
Lee on 17 May 2021 requesting payment of the GBP100,000 loan by 14
June 2021.
The convertible loan notes 2024 bear interest at the rate of 6%
per annum and will be redeemable on the occurrence of usual events
of default and, in any event, on 31 March 2024. They may be
converted in tranches of GBP50,000 at a subscription price of 61
pence per share at any time until a redemption notice is
served.
On 6 April 2021, the Company was admitted to AIM, London Stock
Exchange's market for small and medium size growth companies. The
Company placed 3,664,648 new ordinary shares at a price of 61 pence
per ordinary share, raising gross proceeds of GBP2,235,435. The
shares sold under the placing represent approximately 18 per cent
of the Company's issued share capital. In connection with the
Company's listing, 63,114 warrants were issued to the Company's
broker, Peterhouse Capital Limited, on 6 April 2021 with an
exercise price of 61 pence per share and an expiry date of 6 April
2023.
20 COVID-19
The COVID-19 pandemic developed rapidly in 2020, with a
significant number of cases. Measures taken by the UK government to
contain the virus have affected economic activity. The Group has
taken a number of measures to monitor and mitigate the effects of
COVID-19, such as safety and health measures for its people such as
social distancing and working from home.
All staff have successfully worked remotely during
government-advised lockdowns and have had full access to the
Group's technology platform that allows them to connect virtually
and continue to operate as normal on business activities.
The impact on the Group's business and results has not been
significant. The Group will continue to follow the UK government
policies and advice and do its utmost to continue its operations in
the best and safest way possible without jeopardising the health
and safety of its people.
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END
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