Cornerstone FS PLC
Annual Report 2020

Plain-text annual report

Annual Report For the year ended 31 December 2020 Page 1 Contents Strategic Report ........................................................................................................................ Strategic Framework ..................................................................................................................... 2 Performance Highlights ................................................................................................................ 3 Chairman’s Statement .................................................................................................................. 4 Chief Executive Officer’s Review ................................................................................................ 5 Our Services ..................................................................................................................................... 8 Chief Financial Officer’s Review ............................................................................................... 10 Principal Risks and Uncertainties .............................................................................................. 12 Governance ............................................................................................................................... Board of Directors ......................................................................................................................... 15 Corporate Governance Report .................................................................................................. 17 Section 172 Statement ................................................................................................................ 20 Audit Committee Report ............................................................................................................. 21 Directors’ Remuneration Report .............................................................................................. 24 Directors’ Report ........................................................................................................................... 27 Financial Statements ............................................................................................................... Independent Auditor’s Report ................................................................................................... 32 Consolidated Financial Statements ........................................................................................ 38 Notes to the Financial Statements ......................................................................................... 43 Company Information ................................................................................................................. 68 Annual Report and Accounts 2020 1 STRATEGIC REPORT Strategic Framework Cornerstone is… A payments focused fintech business that makes managing currency simple for international SMEs With a clear strategy to grow via… Buy-and-build acquisitions  Roll-up and integrate independent FX brokers to drive scale and profitability Growing in-house sales capacity  Hiring experienced additional sales resource  Building our sales and marketing capabilities Developing broader products and services  Multi-currency e-money accounts, accounting system integrations and open banking services Focusing on larger SME customers  UK SMEs underserved by traditional banks  Larger clients will drive greater revenues …to create value for shareholders. Annual Report and Accounts 2020 2 Performance Highlights For the Group for the year ended 31 December 2020 STRATEGIC REPORT Revenue £1.7m (2019*: £1.2m) Payments Flow £462m (2019*: £336m) Number of Clients 732 (2019*: 530) New Clients Onboarded 328 (2019*: 181) Transformational Acquisitions Post Period FXPress Payment Services Avila House Admission to trading on AIM raising gross proceeds of £2.7m Financial Summary Revenue of £1.7m (2019*: £1.2m) Gross margin of 29.8% (2019*: 43.4%) Loss before tax of £2.2m (2019*: £0.08m loss), after incurring £1.2m in transaction costs and share-based payments during the year Loss per share of 14.99p (2019*: 0.73p loss) Cash and cash equivalents at 31 December 2020 of £0.2m (31 December 2019: £0.08m) Post period, raised gross proceeds of £2.7m through the placing of ordinary shares and convertible loan note facilities * For the audited nine-month period to 31 December 2019 Annual Report and Accounts 2020 3 Chairman’s Statement I want to begin my maiden statement as Cornerstone’s Chairman by acknowledging the contribution of all those involved in our successful IPO in April 2021. A trusted and dedicated team worked tirelessly to deliver our vision. We are now Cornerstone FS plc and have embarked on an ambitious journey. Amid a year of global upheaval, 2020 was a for us; establishing milestone period Cornerstone’s foundations, making two key acquisitions, and culminating, post period, in our admission to AIM. We have come to the market to build a significant business in the provision of payment services; foreign exchange and currency risk management. We are focused on sector consolidation, supported by acquisitions, our exceptional team, and our advanced and highly scalable platform. expertise the of for Our IPO is a key part of this strategy as we believe using Cornerstone’s shares as acquisition currency will be an attractive prospect sellers. Acquisition and integration will provide economies of scale and enhanced profitability through a lower marginal cost base. We will also grow organically, broadening our products and services with multi-currency e-money accounts and leveraging open banking services, as well as increasing our sales & marketing efforts. Our in-house technology capability will enable expansion of the range of services and will accommodate effective integration of acquisitions. STRATEGIC REPORT is the small, The UK As our CEO, Julian Wheatland, discusses further in his review, we are delivering this strategy against a supportive market backdrop. leading international location for foreign currency trading. Outside of the large financial institutions, the market is highly fragmented comprising numerous specialist brokerages – many of which are struggling to meet increasing regulatory burdens and the cost of new technology. We are focused on SME customers, an expanding segment of the UK business is typically under-served by major banks and financial institutions. In addition, the UK’s Open Banking the opportunity for us to develop additional services and functionality complementary to our existing offer. These trends support our ambitions. Initiative provides landscape that We have the people in place who can execute on our strategy. Our management team includes the founders of FXPress (our main operating subsidiary) and also several recent high-calibre appointments who, together, bring extensive experience in the foreign exchange payments market and in building growth technology businesses. We have an accomplished Board that has a of significant experience; a track record of delivery in capital markets, corporate governance, and finance, as well as commercial expertise. breadth depth and I look forward to working with our team and engaging with our stakeholders as we embark on our journey as a listed company and bring our strategy to life. Elliott Mannis Chairman 7 June 2021 Annual Report and Accounts 2020 4 Chief Executive Officer’s Review STRATEGIC REPORT is a great pleasure It to present Cornerstone’s first annual report as a public first as CEO. company – and my Cornerstone’s IPO, which successful occurred, post period, in April 2021 and raised £2.7m, was an important milestone and a key element in our strategy to grow the business through acquisition as well as continuing development of our own highly scalable, cloud-based software platform. transformational The period under review in this annual report was for Cornerstone. During 2020, we undertook two acquisitions to establish what Cornerstone is today: a fintech business that makes managing currency simple for international SMEs. While, along with the rest of the industry, our trading volumes were impacted by COVID- report that we 19, I am pleased to successfully navigated the disruption caused by the pandemic and progressed the delivery of our strategy. 2020 and Our accomplishments of subsequent to our employees, customers, shareholders and the Board, to whom I express my gratitude. IPO are thanks Transformational Acquisitions We completed the acquisition of FXPress Payment Services Ltd (“FXPress”), a provider of advanced payment systems as platform- as-a-service to SMEs, in September 2020. Alongside this, we disposed of the legacy Cornerstone consumer business, with FXPress becoming our main operating entity, and adopted the name ‘Cornerstone FS plc’ (having previously been ‘Cornerstone Brands’). This marked our foundational step towards our goal of building a significant business in the provision of international payment services for SMEs. Shortly thereafter, we acquired Avila House Limited (“Avila House”), a licensed small e- money institution. This expanded our product and service capability to provide to multi-currency clients with access accounts with IBAN numbers individual 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, we signalled our intention to establish a portfolio of products and services to optimise the foreign exchange payments process for small- and medium- sized businesses. Performance Ahead of the COVID-19 outbreak, FXPress, which is our main operating entity, was delivering strong growth, with revenue for the first half of 2020 being 28% ahead of the same period of 2019. However, the public in lockdowns and associated reduction economic activity led to a contraction in our trading volumes. As a result, for the full year, we delivered slight growth on a pro rata basis, with revenue of £1.7m for the 12 months ended 31 December 2020 compared with £1.2m for the nine months ended 31 December 2019. The majority of this revenue continued to be generated by clients we serve on a white label basis, with revenue generated through our introducer network (which is primarily white label partners but also introducer brokers) accounting for 88% (2019 period: 84%). Clients we serve directly contributed 12% (2019 period: 16%) of total revenue. By client type, corporates accounted for 92% of total revenue (2019 period: 91%) and high net worth individuals accounted for 8% (2019 period: 9%). As at 31 December 2020, we had 732 active clients, compared with 530 a year earlier, and during the year onboarded 328 new clients (2019: 181). trades accounted Spot for 94% of transactions (2019 period: 95%), and forward currency contracts for 6% (2019 period: 5%), and 87% of revenue (2019 period: 90%), with the difference reflecting the higher levels of Annual Report and Accounts 2020 5 commission transactions. charged on forward Brexit STRATEGIC REPORT 2020, FXPress conducted During transactions between 59 different currency (2019 period: 43), with 88% of pairs transactions various combinations of Sterling, Euros and US Dollars (2019 period: 89%). between being In total, payments worth over £462m were transacted through our platform in 2020 compared with approximately £336m for the nine months ended 31 December 2019. impacted by I am pleased to note that our sales have not the UK’s been directly withdrawal from the European Union. While, like the rest of the UK financial services industry, we are currently unable to market our services into the EU from the UK, we are not prevented from doing business in the region. We have relatively few European clients and they have continued to trade with us. We are also currently considering options to be able to resume marketing our services in the EU. Product Enhancement Markets As part of our continued and ongoing programme of investment and development of our cloud-based technology platform, several enhancements were implemented during the year. In addition to integration with new banking and payment partners, we 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 our trading volumes compared with the start of the year. However, Cornerstone successfully navigated the transition from office to home working for our employees, in line with government guidance, and implemented a number of cost saving measures. Our operations continued effectively with no disruption to service provision. This was achieved thanks to the cloud-based nature of our platform as well as the commitment of our employees who, on behalf of the Board, I would like to thank for their efforts. The onset of COVID-19 disrupted the growth trajectory of FX trading in the UK, with average daily turnover increasing by 49% between April 2016 and April 2019 only to decline by 15% by April 2020 (Bank of England’s Foreign Exchange Joint Standing Committee survey). However, there was recovery towards the end of the year: in October 2020, while 10% below the same period of the prior year, average daily turnover was 7% higher than six months earlier. In addition, despite the pandemic as well as the UK’s withdrawal from the European Union, the UK’s exports market managed to grow by £0.7 billion in 2020. Our target market also continued to expand in 2020. The number of SMEs in the UK increased during the year. Moreover, a study from Sage and Capital Economics found that, in response to the economic effects of COVID-19, many SMEs have turned to cross- border trade, with 67% of those surveyed either taking or considering measures to increase their revenue through exports in new markets. At the same time, the fundamental demand driver for our services remains: SMEs continue to seek better quality and more bespoke services than those provided by the major financial institutions traditionally dominating the foreign exchange market. Annual Report and Accounts 2020 6 STRATEGIC REPORT Strategy Execution & Outlook In 2020, we took the initial steps in executing on our growth strategy. We brought together the FXPress platform and business with the Avila House e-wallet services under the Cornerstone umbrella. We invested in sales automation technology as part of our plan to increase our sales efforts and we made a strategic hire with the appointment of a highly experienced Chief Product Officer. We achieved a fundamental milestone, post period, with the completion of our IPO on AIM, which lays the foundations for our pursuit of further acquisitions. Post year end, we have seen volumes increase and we have continued to expand our customer base. This year, we have 179 new customer accounts, opened increasing our total number of customers to over 810, which gives us a strong base on which to build. 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 opportunities to build a significant business offering technology-enabled international payment services. We look forward to reporting on our progress. Julian Wheatland Chief Executive Officer 7 June 2021 Annual Report and Accounts 2020 7 Our Services STRATEGIC REPORT Annual Report and Accounts 2020 8 We’re on a mission to reimagine the treasury and accounting workflow of businesses through our flagship product, bringing Open Banking, third party platforms and online multi-currency accounts together to provide finance teams with a 360 degree view of their financial operations. Page 2 Chief Financial Officer’s Review STRATEGIC REPORT I am pleased to present the Chief Financial Officer’s Review for the first annual report of Cornerstone FS plc. The 12 months ended 31 December 2020 covers a period prior to our IPO on AIM and primarily prior to the establishment of the Group. Basis of preparation 3 the IFRS under reverse time of Cornerstone completed the acquisition of FXPress Payment Services Ltd (“FXPress”) on 9 September 2020. As FXPress reversed into Cornerstone, when it did not have an existing trade, the transaction cannot be considered a business combination, as at the takeover, Cornerstone did not meet the definition of a business, “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) and the fair value of net identifiable assets in the legal parent (Cornerstone FS plc) will form part of In the deemed cost of acquisition. accounting for the acquisition of FXPress, the Group incurred a one-off share-based payment charge income statement of £0.2m. In addition, a merger relief reserve of £5.6m has been created at both the Group and Company level, and a negative reserve reverse acquisition created of £3.1m at the Group level. through its 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 for the nine-month period ended 31 December represent the results of FXPress only, and commensurate last with 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 FXPress’ within FXPress for the period following the acquisition on 19 October 2020 (see note 11 to the financial statements). Financial performance The Group’s revenue for the 12 months to 31 December 2020 was £1.7m compared with £1.2m 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, as discussed further in the Chief Executive Officer’s Review. 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%). 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), revenue which originating via white label partners and also introducer brokers, and from corporate clients for revenue by client type. comprises primarily sales Revenue by origin Revenue generated via the Group’s network of introducers was £1.4m for 2020 compared with £1.0m for the nine-month period ended 31 December 2019, accounting for 88% of total revenue (2019 period: 84%). Direct revenue was £0.2m for both 2020 and the prior nine-month period, accounting for 12% and 16% respectively. Revenue by client type Corporate accounts remained the largest contributor to revenue by client type, generating £1.5m in 2020 (2019 period: £1.1m), accounting for 92% (2019 period: 91%) of total revenue. High net worth individuals (“HNWIs”) generated £0.1m for both 2020 and the earlier period, accounting for 8% and 9% of total revenue respectively. Annual Report and Accounts 2020 10 Gross margin for 2020 was 29.8% (2019 period: 43.4%) with the reduction due to both the increasing proportion of revenue derived through our introducer network and that revenue being more greatly weighted towards network partners who receive higher rates of commission. Total administrative expenses were £2.7m in 2020 compared with £0.6m for the nine- month period ended 31 December 2019. This includes: • £0.8m the acquisitions of FXPress and Avila House and to the IPO (2019 period: £nil), which completed post year end; in costs related to to the • £0.4m in share-based payment charges (2019 period: £nil), including a £0.2m reverse related charge acquisition of FXPress; and staff and consultant costs of £0.9m compared with £0.3m 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 £2.2m for 2020 compared with £0.08m for the earlier period, which primarily reflects the greater administrative expenses, but lower gross margin. Loss per also the 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). Financial position As at 31 December 2020, the Group had cash and cash equivalents of £0.2m (31 December 2019: £0.08m). This followed a pre-IPO fund raise during the year amounting to £1.0m, of which £0.8m was received in cash and £0.2m 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 £0.2m of the increase in intangible assets to £0.3m (31 December 2019: £0.01m). STRATEGIC REPORT Post period, the Group’s balance sheet was strengthened with the raising of gross proceeds of £2.2m via a placing of new ordinary shares. The Group also has access to £0.45m in convertible loan note facilities (see note 19 to the financial statements). Key performance indicators The Group measures its performance using the following key indicators: Revenue • Why it is a KPI: This is the main source of income to the business and drives our business model. • Performance 2020: £1.7m (2019 period: £1.2m) Payments Flow • Why it is a KPI: This is the volume of funds passing through our platform and is an indicator of its scalability. As we focus on acquisitive growth, we expect to see a significant increase here without a commensurate increase in opex. • Performance 2020: £462m (2019 period: £336m) New Clients Onboarded • Why it is a KPI: It is a key indicator of future revenue growth, especially as we build out our product enhancements with a focus on making customers ‘stickier’. • Performance 2020: 328 (2019 period: 181) Operating Expenses • Why it is a KPI: Effective control of opex is key to the Group’s strategy and an indicator of sound management. • Performance 2020: £2.7m (2019 period: £0.6m) Judy Happe Chief Financial Officer 7 June 2021 Annual Report and Accounts 2020 11 STRATEGIC REPORT Principal Risks and Uncertainties The Directors consider the principal risks and uncertainties facing the Group, and the key measures taken to mitigate those risks, are as follows: Risk How the risk is managed Liquidity There is a risk that the Group will not have sufficient capital to meet the regulatory capital requirement for an authorised financial services business and that it is unable to meet its financial obligations when due. The Group operates a matched- principal brokerage model, meaning it executes a matching trade with its liquidity provider on receipt of a client order. The Group does not enter into speculative trades or trades funded from its own balance sheet and does not fund client margin calls from its own funds. In addition, the Group has an experienced finance team that provides effective management of the Group’s operational financial exposures, with a strong focus on cash control. Counterparty is a risk that the Group’s There services provider could liquidity its agreement with the terminate Group or that its systems may fail or are not operational for a period of time, which could have a materially the Group’s adverse business and operations. impact on Competition financial There is a risk that competitors with greater resources may develop software that is superior to the Group’s technology and they may also adopt more aggressive pricing models or undertake more extensive advertising marketing and campaigns. Such competitors may also attract key employees or prospective employees, which could level of service that the Group can give to its customers or the ability to expand its service offering. the Group’s impact the The Group has a very good working relationship with Velocity Trade International Ltd, its liquidity services provider, and has been trading on agreed terms for over ten years. However, should Velocity choose to terminate the agreement or should its systems has arrangements in place to transfer its business to another liquidity provider. the Group fail, Significant barriers to entry exist in the markets in which the Group operates, such as the requirement for the regulatory authorisation and technical and skill, experience required to develop a proprietary technology platform. expertise payments The Group’s management has extensive experience in the foreign exchange market, including of designing, building and running IT systems and departments in the financial services sector. A core tenet of the Group’s strategy is to grow via acquisition to benefit from the scalability of its platform as well as enhance its technology or service Annual Report and Accounts 2020 12 STRATEGIC REPORT offering. The Group’s vision is to become an end-to-end solution for SME payments processing, which would further integrate the Group’s technology customers’ into systems and increase ‘stickiness’. its the majority of The Board has established an incentive scheme employee share its senior and management significant shareholders or option holders, aligning their interests with those of the Group. are The Group employs an experienced Compliance and Money Laundering Reporting Officer who is responsible for monitoring the Group’s activities, managing the Group’s regulatory and reporting obligations and ensuring that all FCA requirements are adhered to. In addition, the Group retains the services of Compliancy Services, a specialist regulatory and compliance advisory service, to support the Compliance and Money Laundering Officer. Group’s experienced The management team seeks to adapt to adverse conditions. The cost base is closely monitored and cost saving measures would be implemented to maintain solvency if required. The Group’s vision is also to broaden its offering to become an end-to-end payments solution provider for SMEs, which would diversify the revenue mix. is entirely The Group’s platform deployed on Amazon Web Services, which is trusted by numerous major organisations that require robust, scalable, secure and cost-effective services. AWS has a number of internationally recognised certifications and accreditations demonstrating compliance with third- party assurance frameworks. Regulation Macro- economic, including COVID-19 Information technology Limited, Services subsidiary, FXPress The Group’s Payment is authorised and regulated by the FCA as an Authorised Payment Institution and Avila House Limited is a Small Electronic Money Institution. The withdrawal of, or any amendment to, a regulatory approval required by the subsidiaries or any of their Directors or employees could result in an adverse change to, or the cessation of, the Group’s business or a material part thereof. for foreign International trade is a key driver of demand exchange services. A slowdown in international trade caused by global macro- economic factors – such as economic and political conditions, and natural disasters and epidemics, including the ongoing impact of COVID-19 – could adversely impact the Group’s business transaction turnover. it is a risk that the Group’s There technology be platform may compromised or breached by cyber- attacks and that is unable to prevent or detect unauthorised access to, or disclosure of, clients’ confidential personal and financial information. Such an event could in breaches of obligations result under applicable laws or clients agreements and have an adverse Annual Report and Accounts 2020 13 impact on the Group’s reputation and financial performance. STRATEGIC REPORT Additionally, the Group uses two factor utilising authentication OAuth2 protocol for client login and periodically commissions penetration testing of its systems. Acquisitions is its ability to A key risk to the Group delivering its identify strategy acquisition opportunities and execute successful acquisitions (including migrating those businesses onto the is Group’s dependent on a number of factors, including sufficient funding. platform), which record The Directors of the Group have a of track demonstrable business growth through mergers and acquisitions, and integration. The Group’s platform has been designed it has the to be scalable and capability to process a significant increase transaction volume without the need for any redesign of platform architecture. A key element of the Group’s acquisition strategy is its ability to use its shares as acquisition currency. in Annual Report and Accounts 2020 14 GOVERNANCE Board of Directors Elliott Michael Mannis, CPA, CA, Non-Executive Chairman Committee Membership: Audit Committee, Remuneration Committee Elliott is the Chairman and shareholder of London Bridge Capital (an FCA authorised corporate finance firm). Elliott was formerly Chief Executive at D1 Oils, an AIM listed biofuels business and, prior to that, he was Group Finance Director at AWG, the FTSE 250 holding company for Anglian Water. In addition to his role at London Bridge Capital, Elliott is Chairman of Permastore Group, the independent non-executive at Infram Energy, and is an ambassador (previously a Trustee) for the Woodland Trust. Elliott qualified as a Chartered Accountant with Price Waterhouse in Vancouver, Canada and holds Canadian professional accountancy designations. He has worked in Europe, principally the UK, since 1988. Julian David Wheatland, CEng, Chief Executive Julian is an experienced Chief Executive with an extensive track record of scaling technology businesses through organic growth and acquisition. Julian was Chief Executive of a £400m international technology investment portfolio at Consensus Business Group, before leaving in 2009 to establish Hatton International, a finance and technology advisory firm providing services to the defence and energy sectors. From 2007, Julian served as a non-executive director and then chairman of Strategic Communication Laboratories (later renamed SCL Group), which subsequently, in 2017, acquired SCL Analytics, the holding company for the SCL/Cambridge Analytica companies. From 2015 Julian was CFO and COO of the SCL/Cambridge Analytica companies and, after these companies experienced significant difficulties, in April 2018 became a Director and CEO of these companies in order to achieve an orderly wind down of the business and place the companies into administration/bankruptcy. Julian has held numerous directorships in an executive and non-executive capacity, in both private and public companies. Judy Amanda Happe, ACA, Chief Financial Officer Judy is an experienced corporate executive and Chief Financial Officer with a background in fundraising, mergers and acquisitions and post-deal integration. Most recently Judy was CFO of XenZone (now AIM listed Kooth Plc). Prior to that Judy was with AVG Technologies for seven years including a period after its acquisition by Avast Software in October 2016. Starting as finance director, Judy moved through a number of roles giving her responsibility for post-deal integration, management and guidance for AVG’s portfolio of acquisitions and acting as joint single point of contact during the $1.3bn sale of AVG to Avast. Judy commenced her career as a chartered accountant with Saffrey Champness. Glyn Anthony Barker, FCA, Independent Non-Executive Director Committee Membership: Audit Committee (Chairman), Remuneration Committee Glyn is currently a non-executive director of Transocean Ltd, Chairman of Berkeley Group plc, Chairman of Irwin Mitchell and Senior Advisor to Novalpina Capital. Glyn was previously Managing Partner of PwC UK and Senior Independent Director of Aviva plc. Annual Report and Accounts 2020 15 GOVERNANCE Daniel Song Mackinnon, Independent Non-Executive Director Committee Membership: Audit Committee, Remuneration Committee Daniel (“Dan”) is a corporate financier. After graduating from the University of Oxford, he began his career with Rothschild working as an analyst in the Consumer, Real Estate and Healthcare teams. He then joined Emerald Investment Partners as Investment Director, working in a small team alongside the founder to originate, structure and execute a variety of transactions across multiple sectors, jurisdictions and public as well as private markets. Amongst others, this included the IPO of Cairn Homes Plc in 2015, raising €440m on the LSE Main Market, the mezzanine debt financing component of a £1.6bn fully funded take-private bid for pub company Punch Taverns plc in 2016 and the 2018 acquisition of a £180m debt position in Interserve plc and worked on the subsequent restructuring, de-listing and equitisation alongside Cerberus, Davidson Kempner & Angelo Gordon. Gareth Maitland Edwards, Non-Executive Director Committee Membership: Audit Committee, Remuneration Committee (Chairman), Gareth is a qualified solicitor and was previously a partner at law firm Pinsent Masons LLP, where he held both the positions of Global Head of Corporate and International Development Partner. He is currently a strategic consultant and an Executive Director of London Bridge Capital Limited, an FCA authorised corporate finance boutique. He has significant public markets experience and is Chairman of Honye Financial Services Limited and Senior Independent Director of Alina Holdings plc (previously known as The Local Shopping REIT plc) and Anemoi International Limited, which are all quoted on the London Stock Exchange; and he also brings significant AIM experience to the Board, having acted on the AIM Disciplinary and Appeals Committee until 2017 and is currently a Non-Executive Director of AIM quoted Various Eateries plc and Chairman of Nightcap plc. Philip Barry, Non-Executive Director Philip (“Phil”) is a co-founder of FXPress. Having worked previously in both the financial and property sectors, Phil moved to Monaco in 2006 to work with John Paul Thwaytes, another co- founder of FXPress, to help manage the foreign exchange exposure of a company portfolio. In 2010, Phil, together with Bill Newton and John Paul Thwaytes founded FXPress. Annual Report and Accounts 2020 16 Corporate Governance Report The Board recognises the importance of sound corporate governance and the Group has adopted the Quoted Companies (QCA Alliance Corporate Governance Code). The Board considers that the Group complies with the QCA Code in all respects, and details of its compliance can be found on the Corporate Governance page of Cornerstone’s website. The Board is for responsible The Board the management of the business of the Group, setting the strategic direction of the Group and establishing the policies of the Group. It is the Board’s responsibility to oversee the financial position of the Group and monitor its business and affairs on behalf of the shareholders, to whom the Directors are accountable. The primary duty of the Board is to act in the best interests of the Group at all times. The Board will also address issues relating to internal control and the Group’s approach to risk management. The Group will hold board meetings monthly and whenever issues arise which require the urgent attention of the Board. Processes are in place to ensure that each Director is, at all times, provided with such information as is necessary for them to discharge their duties. The Board has adopted Terms of Reference, which have a clear and specific schedule of matters reserved for the Board, including corporate governance, strategy, major investments, financial reporting and internal controls. Board Directors The Board comprises two Executive Directors, a Non-Executive Chairman and four Non-Executive Directors of which two (Glyn Barker and Daniel Mackinnon) are independent. The Board deemed to be GOVERNANCE considers that Glyn and Daniel are independent in character and judgement and that there are no business or other relationships likely to affect, or which could appear to effect, their judgement. The Board believes that it has an appropriate balance of sector, financial and public markets skills and experience, an appropriate balance of personal qualities and capabilities and an appropriate balance between executive and non-executive directors. The Non-Executive Directors are expected to devote at least two days per month to the affairs of the Group and such additional time as may be necessary to fulfil their roles. Brief biographical details of each of the Directors are set out in the Board of Directors section on pages 15-16. Board Committees The Group has established a remuneration committee (the “Remuneration Committee”) and an audit committee (the “Audit Committee”) with formally delegated duties and responsibilities. The Remuneration Committee comprises Gareth Edwards as Chairman, Glyn Barker, Dan Mackinnon and Elliott Mannis, and meets not less than twice each year. The committee is responsible for the review and recommendation of the scale and structure of remuneration for senior management, including any bonus arrangements or the award of share options with due regard to the interests of the shareholders and the performance of the Group. The Audit Committee comprises Glyn Barker as Chairman, Dan Mackinnon, Gareth Edwards and Elliott Mannis and meets not less than twice a year. The committee is responsible for making recommendations to the Board on the appointment of auditors and the audit fee and for ensuring that the is financial performance of the Group In properly monitored and reported. Annual Report and Accounts 2020 17 addition, the Audit Committee will receive and review reports from management and the auditors relating to the interim report, the annual report and accounts and the internal control systems of the Group. Board Effectiveness review regularly The Board will the effectiveness of its performance as a unit, as well as that of its committees, and the individual Directors and will monitor and promote a healthy corporate culture. The Non-Executive Chairman is responsible for ensuring an effective Board. The Group intends to establish a formal process for evaluating the performance of the Board, the committees and the individual Directors that against members of the Board provide a relevant and effective contribution. its objectives to ensure Shareholder Engagement The Group will seek to engage with shareholders to understand the needs and the expectations of all elements of shareholder base. The and full-year The Board is committed to open and ongoing engagement with the Group’s shareholders to understand the needs and expectations of all elements of the shareholder Board will base. communicate with shareholders primarily through the annual report and accounts; the interim results announcements; trading updates (where required or appropriate); annual general meetings; the investor relations section of the Cornerstone website; and, in due course, the Chief regular meetings between Executive Officer, Chief Financial Officer and institutional investors and analysts to ensure that the Group’s strategy, financials are business and communicated effectively. developments GOVERNANCE relations by its financial PR adviser, Luther Pendragon. Stakeholders The Board believes that its stakeholders (other than shareholders) are its employees, its customers and its counterparties. In order to understand their needs, interests and expectations, the Group will work directly and closely with customers, counterparties and staff to enhance its products and software platform to provide the best FX trading experience. its corporate social The Group takes responsibilities seriously and is focused on maintaining effective working relationships across a wide range of stakeholders, including employees, existing and new direct other intermediaries and professional advisers that it collaborates with as part of its business strategy, in order to achieve long- term success. Introducers, customers, The Executive Directors will maintain an ongoing dialogue with stakeholders to inform strategy and the day-to-day running of the business. Share Dealing Code The Group has adopted and operates a share dealing code governing the share dealings of the Directors and applicable employees with a view to ensuring compliance with the AIM Rules. The Directors consider that this share dealing code is appropriate for a company whose shares are admitted to trading on AIM. The Group to ensure compliance by the Directors and applicable employees with the terms of the share dealing code and the relevant provisions of the AIM Rules. takes proper steps Annual General Meeting The Chief Financial Officer is the primary contact for shareholders and there is a dedicated contact facility for shareholder questions and comments. The Group is its shareholder supported in managing The next Annual General Meeting of the Group will be held at 11.00am on Wednesday 30 June 2021 at the Group’s head office at 1 Poultry, London EC2R 8EJ. In view of the ongoing COVID-19 pandemic and the Annual Report and Accounts 2020 18 GOVERNANCE uncertainty regarding restrictions on travel and public gatherings, the Directors have decided that shareholders will not be permitted to attend the AGM in person. The Board remains committed to shareholder engagement and participation, and therefore shareholders will be able to access the meeting via teleconference link. Further details can be found in the Notice of AGM that has been published on the Group’s website. Annual Report and Accounts 2020 19 Section 172 Statement Section 172 of the Companies Act 2006 requires each Director of the Group to act in the way he or she considers, in good faith, would most likely promote the success of the Group for the benefit of its members as a whole. In this way, Section 172 requires a director to have regard, amongst other matters, to the: likely consequences of any decisions in the long-term; interests of the Group’s employees; need to foster the Group’s relationships with suppliers, customers and other material stakeholders; the Group’s impact of operations on local communities and the environment; desirability of the Group maintaining a reputation for high standards of business conduct; and need to act fairly between members of In discharging its Section 172 duties, the Board has considered the factors set out above and the views of key stakeholders. the Group. business Details of the key stakeholder engagement undertaken, and intended, by the Group to inform decision-making and enhance Board understanding are set out below. Customers The Directors engage with direct customers on an informal basis to ensure that the Group’s quality, efficiency and service levels meet both the standard expected by the customer and the very high standards the Group sets for itself. GOVERNANCE Employees The Directors intend to engage regularly with employees and maintain an open dialogue. Due to the small size of the Group’s current workforce, is currently conducted on an ad hoc basis, but the Directors intend to implement a formal structure as the team expands. this Counterparties, white label partners and introducers The Group operates an extensive network of white introducing broker relationships and there is a regular and these business ongoing dialogue with partners, proportional to their scale and importance to the Group. label and The Group’s principal counterparties, such as its liquidity provider, Velocity, are some of its stakeholder relationships and the Directors aim to have regular interaction with these partners. standing longest Investors The Board is committed to open and ongoing engagement with the Group’s shareholders to understand the needs and expectations of all elements of the shareholder Board will base. communicate with shareholders primarily through the annual report and accounts, announcements issued via the Regulatory News Service and the Annual General Meeting. There is a dedicated contact facility for shareholder questions and comments on the website. The Annual Report and Accounts 2020 20 Audit Committee Report Dear shareholder, I am pleased to present Cornerstone’s maiden Audit Committee report following our IPO in April 2021. The year under review in this annual report covers a period prior to the establishment of the Audit Committee, however I wish to take this opportunity to introduce you to the members of the committee and our role going forward. Membership and meetings The members of the Audit Committee are: • Glyn Barker (Chairman), Independent Non-Executive Director • Elliott Mannis, Non-Executive Chairman • Gareth Edwards, Non-Executive Director • Daniel Mackinnon, Independent Non- Executive Director The Audit Committee members, which include our two Independent Non-Executive Directors, bring a wealth of relevant financial, commercial and capital markets experience. In particular, Elliott Mannis qualified as a Chartered Accountant with Price Waterhouse in Canada and was Group Finance Director at AWG, the FTSE 250 holding company for Anglian Water, and I had a 35-year career with PwC, holding a number of senior posts including Managing Partner and Head of Assurance. Further biographical details can be found in the Board of Directors section on pages 15-16. intervals The Audit Committee will meet at least twice a year at appropriate in the financial reporting and audit cycle and otherwise as required. Only members of the committee have the right to attend the meetings. However, the Chief Financial Officer and external audit lead partner will be invited to attend on a regular basis and other non-members may be invited to attend as and when appropriate and necessary. GOVERNANCE The Company Secretary is secretary to the Audit Committee. Governance and effectiveness Outside of the formal meeting programme, the Chairman of the Audit Committee and, as appropriate, the other committee members, will maintain a dialogue with key the Group’s individuals governance, including the Chairman of the Board (who is a member of the committee), the Chief Executive, the Chief Financial Officer and the external audit lead partner. involved in its duties The committee undertakes in accordance with its terms of reference, which will be reviewed at least annually to ensure that they remain fit for purpose and in line with best practice guidelines. The committee will arrange for periodic reviews is of operating at maximum effectiveness. its own performance to ensure it Responsibilities and activities services, in a way that The Audit Committee’s responsibility is to ensure that financial information published by the Group properly presents its activities is fair, to stakeholders balanced and understandable. The Audit Committee oversees the effective delivery of audit including making recommendations to the Board on the appointment of auditors and the audit fee. In addition, the Audit Committee supports the Board in meeting its responsibilities in respect of overseeing the Group’s internal control systems, business risk management, arrangements for whistleblowing and related compliance issues. As noted above, going forward we will also report in the Group’s Annual Report on our activities during the year under review. This include, among other matters, an will explanation of how the Audit Committee has addressed the effectiveness of the Annual Report and Accounts 2020 21 external audit process; the significant issues that the committee considered in relation to the financial statements; and how these issues were addressed. Since its establishment in March 2021, the Audit Committee has met to approve the appointment of Haysmacintyre LLP as auditor and to approve this Annual Report and financial statements. In its advisory capacity, the Audit Committee confirmed to the Board that, based on its review of the Annual Report and financial statements and internal the disclosures, the Annual Report and financial statements, taken as a whole, are fair, balanced and understandable, and provide necessary information for shareholders to assess and its business model and performance, strategy. the Group’s controls position support that Risk management and internal controls review internal control and In supporting the Board in maintaining an effective internal control environment, the Audit Committee will keep under review the Group’s internal financial controls systems risk and other management the systems; methodology for reporting risk to the Board; set triggers for reporting and escalation of significant emerging the adequacy and security of the Group’s its employees and arrangements in concerns, contractors confidence, about possible wrongdoing in financial reporting or other matters; and review the Group’s procedures for detecting fraud and preventing bribery and receive reports on non-compliance. review risks; raise for to GOVERNANCE intend to review the risk register regularly throughout the year. is subject to In providing foreign exchange services to its clients, the Group legal requirements to deter and detect financial crime and is required to maintain a framework with appropriate mitigation measures and control mechanisms to manage the operational and security risks relating to the payment services it provides. Accordingly, the Group has implemented policies, controls and procedures to mitigate and effectively manage the risks of money laundering and terrorist financing. The Group conducts reviews of its anti- money using specialist third party compliance experts, with the most recent compliance audit concluding in May 2020. The Group is also required to submit regular reports to the FCA on a range of subject matters in this regard. compliance laundering Further details of the Group’s financial risk management are set out under note 16 to the financial statements. Internal audit audit function. At present, the Group does not have an internal The Audit Committee believes that, owing to the Group’s size, management is able to derive assurance as the adequacy and effectiveness of internal controls and risk management procedures without an internal audit function. However, the Audit Committee will keep under review the need for an internal audit function as the business develops. to The Group has established a risk framework including a risk register that is managed by the Chief Financial Officer and risk management policies, including anti- bribery, corruption, anti-money laundering and financial crime, financial risk, fraud, information security policies. The risk register is intended to be signed off annually by the Board and included in the Annual Report. The Chief Executive Officer and the Audit Committee technology and External auditor and independence Haysmacintyre LLP were appointed as external auditor in April 2021 following a competitive tender process. The auditor confirmed its independence as auditor of the Group through written confirmation to the Group, and the Audit Committee monitors the relationship to ensure that auditor independence and objectivity are maintained. Annual Report and Accounts 2020 22 GOVERNANCE A summary of fees paid to the external auditor, including the breakdown between fees for audit and non-audit services, is set out in note 2 to the financial statements. Glyn Barker Audit Committee Chairman 7 June 2021 Annual Report and Accounts 2020 23 Directors’ Remuneration Report GOVERNANCE The Remuneration Committee presents its report on Directors’ remuneration for the year ended 31 December 2020. The disclosures comply with the requirement of the Companies Act 2006, the Corporate Governance Code the Quoted Companies Alliance and applicable AIM Rules. of Remuneration Committee The Remuneration Committee was established in March 2021 in preparation for the Group’s IPO. Its members are: • Gareth Edwards (Chairman), Non- Executive Director • Elliott Mannis, Non-Executive Chairman • Glyn Barker, Independent Non- Executive Director • Daniel Mackinnon, Independent Non- Executive Director for the and review Directors The Remuneration Committee will meet at least twice each year. The committee is and responsible recommendation of the scale and structure of remuneration for the Chairman, the senior Executive bonus including management, arrangements or the award of share options with due regard to the interests of the shareholders and the performance of the Group. The remuneration of the Non- Executive Directors is a matter for the Board or the shareholders (within the limits set in the articles of association). No director or senior manager shall be involved in any decisions as to their own remuneration. any Service Agreements The Executive Directors are employed under service agreements that are subject to notice periods, for both the Group and the individual, of nine months for the Chief Executive Officer and six months for the Chief Financial Officer. Their service agreements include standard summary termination provisions and post termination restrictive covenants that apply for nine and six months for the Chief Executive Officer and Chief Financial Officer respectively. The Executive Directors are entitled to receive an annual salary of £180,000 and £140,000 for the Chief Executive Officer and the Chief Financial Officer respectively, with an entitlement to a pension contribution and discretionary bonus. In addition, the Group has entered into agreements with the Executive Directors to make an annual grant of options equal to 5% and 1.5%, for the Chief Executive Officer and Chief Financial Officer respectively, 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. Letters of Appointment Non-Executive Directors are appointed under a letter of appointment with the Director Non-Executive Group. appointments are subject to notice periods of three months for either the Group or the individual. The Chairman will receive a fee of £50,000 per annum and is entitled to an annual payment of £28,000 payable through the allotment of Ordinary Shares priced at the average mid-market closing price for the ten business days prior to such payment the audited Following being made. the Group turnover of consolidated exceeding £8 million, the Chairman will become entitled to receive a fee of £65,000 per annum and his entitlement to payment in shares will be £37,000 per annum. Annual Report and Accounts 2020 24 The Non-Executive Directors (excluding the Chairman) will receive a fee of £35,000 per annum and is entitled to an annual payment of £20,000 payable through the allotment of Ordinary Shares priced at the average mid- market closing price for the ten business days prior to such payment being made. Directors’ Remuneration GOVERNANCE Following the audited consolidated turnover of the Group exceeding £8 million, the Non- Executive Directors will become entitled to receive a fee of £50,000 per annum and their entitlement to payment in shares will be £28,000 per annum. The following table details the Directors’ remuneration for the years ended 31 December 2020 and 2019: Salary/ Fees £ Bonus £ Pension £ Benefits £ Executive Directors Julian Wheatland, CEO1 85,000 Judy Happe, CFO2 22,436 Non-Executive Directors Elliott Mannis, Chairman3 Glyn Barker3 Gareth Edwards4 Daniel Mackinnon3 - - - - Philip Barry5 9,350 - - - - - - - - - - - - - - - - - - - - - Total 2020 £ 85,000 22,436 - - - - 9,350 Total 2019 £ - - - - - - - 1. Appointed as a director of Cornerstone Brands Ltd on 22 July 2020. Service agreement with Cornerstone FS plc effective 1 October 2020. 2. Appointed 4 November 2020. 3. Appointment effective 6 April 2021. 4. Appointed as a director of Cornerstone Brands Ltd on 22 July 2020. Appointment as a Non-Executive Director of Cornerstone FS plc effective as of 6 April 2021. 5. Philip Barry was a director of FXPress prior to its acquisition by Cornerstone on 9 September 2020 and he was paid £58,000 in fees during 2020 (9 months ended 31 December 2019: £21,000), of which £9,350 covered the post-acquisition period. Mr Barry’s appointment as a Non-Executive Director of Cornerstone became effective 6 April 2021. In addition to the above, a share-based compensation charge of £20,088 was recognised in the year ended 31 December 2020 in respect of options granted to Directors (as disclosed in the following Directors’ Interests paragraph). The charge represents the fair value of options at the date of grant, recognised over the vesting period and comprised £15,452 in respect of Julian Wheatland and £4,636 in respect of Judy Happe. Social security costs of £9,453 were incurred in respect of the Directors’ remuneration listed above. Annual Report and Accounts 2020 25 GOVERNANCE Directors’ Interests During the year to 31 December 2020, the Group granted to directors the following options over ordinary shares: Date of grant Number of options Earliest date of vesting Exercise price Julian Wheatland, CEO 2 December 2020 922,677 2 December 2021 50 pence Judy Happe, CFO 2 December 2020 276,803 2 December 2021 50 pence The Group also agreed to make an annual grant of additional options to Julian Wheatland and Judy Happe equal to 5% and 1.5% respectively of any increase in the fully diluted capital of the Group 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. No other options are held by Directors. As at the date of publication of this Annual Report, the interests of the Directors in the share capital of the Group were as follows: Number of ordinary shares Percentage of issued share capital Executive Directors Julian Wheatland, CEO Judy Happe, CFO Non-Executive Directors Elliott Mannis, Chairman Glyn Barker Gareth Edwards Daniel Mackinnon Philip Barry* 24,593 8,196 199,852 22,728 327,952 0 3,561,922 0.12 0.04 0.99 0.11 1.62 0 17.57 * Philip Barry’s holding includes 356,173 ordinary shares of which he is not the beneficial holder. Annual Report and Accounts 2020 26 Directors’ Report audited The Directors present their annual report and financial statements for the year ended 31 December 2020. consolidated Principal Activities Cornerstone FS plc provides international payment, currency risk management and electronic account services using its proprietary cloud-based multi-currency payments platform. The Group primarily provides these services, on a white label SaaS basis via third-party aggregators, to SMEs that engage in international trade. A minority of the Group’s revenue is derived from servicing clients directly and from high- net worth individuals. The business also provides same currency payment services liquidity for services to other foreign exchange brokers. its customers and provides Business Review and Results The review of the Group’s business, strategy, principal risks and uncertainties and outlook are included in the Strategic Report section on pages 2-14. The consolidated financial statements for the year ended 31 December 2020 are set out on pages 38-67. The Group’s loss after taxation for the year was £2.2 million. Dividends The Directors do not recommend the payment of a dividend for 2020. The Directors do not anticipate paying dividends for at least two years following the IPO to enable the Group to focus and apply its resources to growth, both organically and through acquisition. Directors The following Directors held office during the year and up to the date of the approval of these financial statements (unless as otherwise indicated): GOVERNANCE • • Elliott Mannis (appointment effective 6 April 2021) Julian Wheatland (appointed as a director of Cornerstone Brands Ltd on 22 July 2020; service agreement with Cornerstone FS plc effective 1 October 2020) • Judy Happe (appointed 4 November 2020) • Glyn Barker (appointment effective 6 April 2021) • Gareth Edwards (appointed as a director of Cornerstone Brands Ltd on 22 July 2020; appointment as a Non-Executive Director of Cornerstone FS plc effective 6 April 2021) • Daniel Mackinnon (appointment effective 6 April 2021) • Philip Barry (appointment effective 6 April 2021) Biographies of the Directors, including their Board committee memberships, are set out on pages 15-16. Details of the Directors’ remuneration and their interests in the share capital of the Group can be found in the Directors’ Remuneration Report on pages 24-26. Directors’ Indemnity All Directors and officers of the Group have the benefit of the indemnity provision contained the Group’s Articles of Association. The Group also has Directors’ and Officers’ liability insurance in respect of itself and its directors and officers. in Share Capital is a public incorporated limited Cornerstone FS plc company in England and Wales and its shares are quoted on the AIM market of the London Stock Exchange. As at the date of approval of this Directors’ Report, the outstanding issued share capital of the Group comprised 20,277,582 ordinary shares of £0.01 each. There are no shares held in treasury. Further detail on the Group’s share capital can be found in note 14 to the financial statements. Annual Report and Accounts 2020 27 Significant Shareholders As at the date of approval of this Directors’ Report, to the best of the Group’s knowledge, the following shareholders had a significant interest in the Group’s issued share capital: GOVERNANCE Number of shares % of issued share capital Name Philip Barry* William Newton** Stephen Flynn John Paul Thwaytes Robert Lee Terence Everson 3,561,922 2,530,787 2,435,442 1,605,569 1,426,635 773,690 Vela Technologies plc 645,902 David Ryan*** 622,000 17.57 12.48 12.01 7.92 7.04 3.82 3.19 3.07 * Philip Barry’s holding includes 356,173 ordinary shares of which he is not the beneficial owner ** William Newton’s holding includes 81,967 ordinary shares registered in the name of his wife *** David Ryan’s holding includes 270,000 ordinary shares registered in the name of his wife Subsequent Events On 26 February 2021, 24,326 Ordinary Shares were issued at a price of £0.407 each on the exercise of warrants. On 17 March 2021, the Company and William Newton entered into a facility to borrow £350,000 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 £100,000 from Robert Lee at any time until 31 December 2023 on not less than 20 Business in consideration of Days’ notice the Company issuing Robert Lee with 6% unsecured convertible loan notes 2024. A drawdown notice was issued to Mr Lee on 17 May 2021 requesting payment of the £100,000 loan by 14 June 2021. loan notes 2024 bear The convertible 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 £50,000 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 £2,235,435. The shares sold under the placing represent approximately 18 per cent of the Company's issued share capital. In listing, connection with the Company’s 63,114 warrants were the Company’s broker, Peterhouse Capital Limited, on 6 April 2021 with an exercise price of 61 pence per share and expiry date of 6 April 2023. issued to There are no other events subsequent to the balance sheet date that require disclosure in these financial statements. Annual Report and Accounts 2020 28 Financial Instruments Disclosures regarding financial instruments are provided in note 16 to the financial statements. Donations The Group did not make any political or charitable donations during the year. Corporate Governance review of A the Group’s corporate governance is provided in the Corporate Governance Report on pages 17-19. Stakeholder Engagement Details of the Group’s engagement with stakeholders can be found in the Section 172 Statement on page 20 and in the Corporate Governance Report on pages 17-19. Auditor Haysmacintyre LLP have expressed their willingness to continue in office as auditor. A resolution to reappoint Haysmacintyre as the Group’s auditor will be proposed at the Annual General Meeting on Wednesday 30 June 2021. Disclosure of Information to Auditor The Directors who held office at the date of approval of this Directors’ Report confirm that, so far as they are each aware, there is no relevant audit information of which the Group’s auditors are unaware; and each Director has taken all the steps they might reasonably be to have taken as a Director to make themselves aware of any relevant audit information and to establish that the Group’s auditor is aware of that information. Going Concern During the year ended 31 December 2020, the Group made a loss of £2,154,698, which has resulted in the balance sheet showing a net liabilities position of £135,923. Post year- end, the Group’s balance sheet was strengthened with the raising of gross GOVERNANCE proceeds of £2.2m via a placing of new ordinary shares following the Company’s admission to AIM. The Group also has access to £0.45m 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 to indicate sufficient cash continue to finance the Group’s working capital requirements over the forecast period. resources 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 to be any material uncertainties pertaining to the Group’s ability to discharge its liabilities as they arise. there For these reasons, the Directors continue to the going concern basis of adopt the Group’s accounting financial statements. in preparing Statement of Directors’ Responsibilities The Directors are responsible for preparing the Strategic Report, the Directors’ Report and the financial statements in accordance with applicable law and regulations. Company law requires the Directors to prepare Group and Company financial statements for each financial year. The Directors are required by the AIM Rules of the London Stock Exchange to prepare Group financial statements in accordance International Financial Reporting with Standards (“IFRS”) as adopted by the European Union (“EU”) and have elected Annual Report and Accounts 2020 29 the under company Company in accordance with IFRS as adopted by the EU. to prepare statements law financial The financial statements are required by law and IFRS adopted by the EU to present fairly the financial position and performance of the Group and Company; the Companies Act 2006 provides in relation to such financial statements that references in the relevant part of that Act to financial statements giving a true and fair view are references fair presentation. their achieving a to Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and the Company and of the profit or loss of the Group for that period. In preparing each of the Group and the Company Directors are required to: statements, financial • select suitable accounting policies and then apply them consistently; • make judgements and accounting estimates that are reasonable and prudent; state whether they have been prepared in accordance with IFRS adopted by the EU; and • GOVERNANCE inappropriate to presume that the Group and the Company will continue in business. the Company’s The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group’s transactions and and disclose with reasonable accuracy at any time the financial position of the Group and the Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Group and the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Group’s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. On behalf of the Board Julian Wheatland Chief Executive Officer 7 June 2021 • prepare the financial statements on the is going concern basis unless it Annual Report and Accounts 2020 30 FINANCIAL STATEMENTS For the year ended 31 December 2020 Annual Report and Accounts 2020 31 FINANCIAL STATEMENTS Independent Auditor’s Report TO THE MEMBERS OF CORNERSTONE FS PLC Opinion We have audited the financial statements of Cornerstone FS PLC (the “Parent Company”) and its subsidiaries (the “Group”) for the year ended 31 December 2020 which comprise the Consolidated Statement of Comprehensive Income, the Consolidated and Parent Company Statement of Financial Position, the Consolidated and Parent Company Statements of Cash Flows, the Consolidated and Parent Company Statements of Changes in Equity and notes to the financial statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union. In our opinion, the financial statements: • give a true and fair view of the state of the Group’s and of the Parent Company’s affairs as at 31 December 2020 and of the Group’s loss for the year then ended; • have been properly prepared in accordance with IFRSs as adopted by the European Union; and • have been prepared in accordance with the requirements of the Companies Act 2006. Basis for opinion We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We are independent of the Group in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied to listed entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Conclusions relating to going concern In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate. Our audit procedures to evaluate the directors’ assessment of the Group and the Parent Company’s ability to continue to adopt the going concern basis of accounting included, but were not limited to: • Undertaking an initial assessment at the planning stage of the audit to identify events or conditions that may cast significant doubt on the Group and the Parent’s ability to continue as a going concern; • Evaluating the methodology used by the directors to assess the Group and the Parent’s ability to continue as a going concern; • Reviewing the directors’ going concern assessment and evaluating the key assumptions used and judgments applied; Annual Report and Accounts 2020 32 FINANCIAL STATEMENTS • Reviewing the liquidity headroom and applying a number of sensitivities to the base forecast assessment of the directors to ensure there was sufficient headroom to adopt the going concern basis of accounting; • Reviewing the appropriateness of the directors’ disclosures in the financial statements. Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Group's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.   Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.   Key audit matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) we identified. These matters included those which had the greatest effect on the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Key Audit Matter Description How the matter was addressed in the audit Reverse Acquisition accounting in the Group’s financial statements On 9 September 2020 the Parent Company acquired the entire share capital of FXPress Payment Services Limited (“FXPress”) satisfied by the issue of 1,401,275,638 ordinary shares for a consideration of £5,697,773. The acquisition has been treated as a Reverse Takeover since following the transaction, 96.42% of the shares in the Parent Company, were owned by previous FXPress shareholders. The Parent Company did not have an existing trade prior to the transaction and therefore did in not meet the definition of a business, accordance with IFRS 3: “Business Combinations” (“IFRS 3”) The transaction could not be considered to be a business combination and has been treated as a share-based payment transaction in accordance with IFRS 2 Share-based Payment (“IFRS 2”) There is a risk that the accounting treatment does not follow the requirements of IFRS 2 and IFRS 3. Our audit work reviewed and considered the Board’s assessment that the: • Transaction was a Reverse Takeover • Parent Company was not a business prior to the transaction and therefore the transaction was business combination not a • Transaction was a share-based payment within the scope of IFRS 2 We also reviewed the valuation of the share- based payment of £211,000 and the assumptions which underpinned it, as well as the consolidation adjustments in respect of the transaction. Annual Report and Accounts 2020 33 FINANCIAL STATEMENTS The Board assessed the full details of the takeover, concluding that the legal acquirer could not be defined as a business and therefore the accounting in treatment accordance with IFRS 2 and not IFRS 3. should be This has been reflected within the financial statements. Valuation of in Company’s financial statements investments the Parent How the matter was addressed in the audit The Parent Company acquired a new subsidiary, FX Press. Our audit work considered, but was not restricted to, the following work: The Parent Company’s Statement of Financial Position as at 31 December 2020 includes a total investment of £6,147,773, in 100% of the ordinary share capital of FXPress. There is a risk that this investment might be overstated within the financial statements. The Board concluded that there no impairment required to the carrying value of the investment, based on their assessment of the forecasted future cash flows of the business and the proximity of the acquisition to the year-end. Since 31 December 2020, the Parent Company has floated on AIM and raised cash to support its growth plans. Our application of materiality • A review of the calculation of the valuation of the initial investment in FXPress in line with the transaction documentation to ensure that the value had been calculated correctly. • A review of the impairment assessment prepared by the Board in respect of the carrying value of the investment in FXPress in accordance with forecast performance in all scenarios. the • A review of post year-end activity of the business. We apply the concept of materiality both in planning and performing our audit, in evaluating the effect of misstatements and in forming an option. For the purpose of determining whether the financial statements are free from material misstatement, we define materiality as the magnitude of a misstatement or an omission from the financial statements, or related disclosures, that would make it probable that the judgment of a reasonable person, relying on the information would have been changed or influenced by the misstatement or omission. We also determine a level of performance materiality, which we used to determine the extent of testing need, to reduce to an appropriately low level the risk that the aggregate of uncorrected and undetected misstatement exceeds materiality for the financial statements as a whole. Annual Report and Accounts 2020 34 FINANCIAL STATEMENTS The materiality for the Group financial statements as a whole was set at £118,000. This was determined with reference to a combination of 2% of gross assets of the Parent Company, since a key performance indicator ("KPI") is the valuation of the business and 5% of the projected Group loss for the year, the loss being a combination of both the revenue and operating expenses KPIs in an exceptional year. On the basis of our risk assessment and review of the Group’s control environment, performance materiality was set at 75% of materiality, being £88,500. The reporting threshold to the Audit and Risk Committee was set as 5% of materiality, being £5,900. If in our opinion differences below this level warranted reporting on qualitative grounds, these would also be reported. The materiality for the Parent Company financial statements was set at the same level as noted above. On the basis of our risk assessment and review of the Parent Company’s control environment, performance materiality was set at 75% of materiality, being £88,500 and the reporting threshold was the same as the Group. An overview of the scope of our audit Our audit scope included all components of the Group which are all registered companies in the United Kingdom. Our assessment of audit risk, our evaluation of materiality and our allocation of performance materiality determine our audit scope for the Group. This enables us to form an opinion on the financial statements. We take into account size, risk profile, the organisation of the Group and the internal control environment when assessing the level of work to be performed. Based on our assessment of the accounting processes, the industry in which the Group operates and the control environment we concluded that it was appropriate to undertake an entirely substantive audit approach. Our audit procedures included testing of income and expenditure, assets, liabilities and equities. We have set out how we tested the key audit matters in the Key Audit Matters section above. Other information The directors are responsible for the other information. The other information comprises the information included in the annual report, other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Annual Report and Accounts 2020 35 FINANCIAL STATEMENTS Opinions on other matters prescribed by the Companies Act 2006 In our opinion, based on the work undertaken in the course of the audit: • • the information given in the strategic report and the directors’ report for the financial year for which the financial statements are prepared is consistent with the financial statements; and the strategic report and the directors’ report have been prepared in accordance with applicable legal requirements. Matters on which we are required to report by exception In the light of the knowledge and understanding of the Group and the Parent company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors’ report. We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion: • adequate accounting records have not been kept by the Parent Company, or returns • adequate for our audit have not been received from branches not visited by us; or the Parent Company financial statements are not in agreement with the accounting records and returns; or • certain disclosures of directors’ remuneration specified by law are not made; or • we have not received all the information and explanations we require for our audit. Responsibilities of directors As explained more fully in the directors’ responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the Group’s and the Parent Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or the Parent Company or to cease operations, or have no realistic alternative but to do so. Auditor’s responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. Annual Report and Accounts 2020 36 FINANCIAL STATEMENTS Explanation as to what extent the audit was considered capable of detecting irregularities, including fraud. Based on our understanding of the company and industry, we identified that the principal risks of non-compliance with laws and regulations related to regulatory requirements for the Investment advisory business and trade regulations, and we considered the extent to which non- compliance might have a material effect on the financial statements. We also considered those laws and regulations that have a direct impact on the preparation of the financial statements such as the Companies Act 2006, income tax, payroll tax and sales tax. We evaluated management’s incentives and opportunities for fraudulent manipulation of the financial statements (including the risk of override of controls), and determined that the principal risks were related to posting inappropriate journal entries to revenue and management bias in accounting estimates. Audit procedures performed by the engagement team included: Inspecting correspondence with regulators and tax authorities; • • Discussions with management including consideration of known or suspected instances of • • non-compliance with laws and regulation and fraud; Evaluating management’s controls designed to prevent and detect irregularities; Identifying and testing journals, in particular journal entries posted with unusual account combinations, postings by unusual users or with unusual descriptions; and • Challenging assumptions and judgments made by management in their critical accounting estimate. A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report. Use of our report This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an Auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed. Simon Wilks (Senior Statutory Auditor) For and on behalf of Haysmacintyre LLP Statutory Auditors Date: 7 June 2021 10 Queen Street Place London EC4R 1AG Annual Report and Accounts 2020 37 FINANCIAL STATEMENTS Group Statement of Comprehensive Income For the year ended 31 December 2020 REVENUE Cost of sales GROSS PROFIT ADMINISTRATIVE EXPENSES Share-based compensation Further adjustments to underlying profit from operations (see below) Other administrative expenses TOTAL ADMINISTRATIVE EXPENSES Underlying loss from operations Stated after the add back of: - share-based compensation on reverse acquisition - other share-based compensation - transaction costs LOSS FROM OPERATIONS Finance and other income Finance costs LOSS BEFORE TAX Income tax expense LOSS FOR THE YEAR TOTAL COMPREHENSIVE LOSS FOR THE YEAR Loss per ordinary share – basic & diluted (pence) Year ended 31 December 2020 £ 9-month period ended 31 December 2019 £ Notes 1 1,664,237 (1,167,929) 1,240,938 (702,000) 496,308 538,938 2 14 14 14 2 3 3 6 7 (358,443) (793,577) (1,499,589) - - (620,117) (2,651,609) (620,117) (1,003,281) (81,179) 211,281 147,162 793,577 - - - (2,155,301) (81,179) 603 - - (370) (2,154,698) (81,549) - ________ - ________ (2,154,698) (81,549) (2,154,698) (81,549) (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. Annual Report and Accounts 2020 38 FINANCIAL STATEMENTS Group and Company Statement of Financial Position As at 31 December 2020 ASSETS NON-CURRENT ASSETS Intangible assets Tangible assets Investments CURRENT ASSETS Trade and other receivables Cash and cash equivalents TOTAL ASSETS EQUITY AND LIABILITIES EQUITY Share capital Share premium Share-based payment reserve Merger relief reserve Reverse acquisition reserve Retained earnings TOTAL EQUITY CURRENT LIABILITIES Trade and other payables TOTAL EQUITY AND LIABILITIES Group 31 December 2020 £ Group 31 December 2019 £ Company 31 December 2020 £ Company 31 July 2020 £ Notes 8 9 10 12 14 13 320,972 8,464 - _______ 329,436 570,159 183,675 _______ 753,834 _______ 1,083,270 _______ 165,887 951,422 54,215 5,557,645 (3,140,631) (3,724,461) _______ (135,923) _______ 1,219,193 _______ 1,083,270 _______ 6,076 1,050 - _______ 7,126 355,370 78,265 _______ 433,635 _______ 440,761 _______ 91,559 1,543,988 - - - (1,569,763) _______ 65,784 _______ 374,977 _______ 440,761 _______ 226,278 - 6,147,773 _______ 6,374,051 238,810 96,394 _______ 335,204 _______ 6,709,225 _______ 165,887 951,422 54,215 5,557,645 - (1,083,751) _______ 5,645,418 _______ 1,063,837 _______ 6,709,255 _______ - - 100 _______ 100 95,000 - _______ 95,000 _______ 95,100 _______ 286 8,186,967 - - - (8,092,153) _______ 95,100 _______ - _______ 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 £1,173,655 (seven-month period ended 31 July 2020: profit of £63,418). 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 Annual Report and Accounts 2020 39  FINANCIAL STATEMENTS Group Statement of Changes in Equity For the year ended 31 December 2020 Balance at 1 April 2019 Issue of shares Loss and total comprehensive income for the year Balance at 31 December 2019 Parent company reflected on reverse acquisition Issue of FXPress Payment Services Ltd shares prior to acquisition Share-based payments for FXPress Payment Services Ltd shares prior to acquisition Costs of raising equity in FXPress Payment Services Ltd Reverse acquisition adjustment Issue of shares Issue of consideration shares Costs of raising equity Share-based payments (note 14) Loss and total comprehensive income for the year Balance at 31 December 2020 Share capital £ 82,496 Share premium £ 1,146,676 Share-based payment reserve £ - 9,063 - _______ 91,559 5,197 12,037 - - (103,596) 20,562 140,128 - - - _______ 165,887 _______ 397,312 - _______ 1,543,988 - 565,426 - (50,000) (2,059,414) 1,007,557 - (56,135) - - _______ 951,422 _______ - - _______ - - - 92,947 (92,947) - - - 54,215 - _______ 54,215 _______ Merger relief reserve £ - - - _______ - - - - - - 5,557,645 - - - _______ 5,557,645 _______ Reverse acquisition reserve £ - - - _______ - - - - - 2,557,142 - (5,697,773) - - - _______ (3,140,631) _______ Retained earnings £ (1,488,214) - (81,549) _______ (1,569,763) - - - - - - - - - (2,154,698) _______ (3,724,461) _______ Total £ (259,042) 406,375 (81,549) _______ 65,784 5,197 577,463 92,947 (50,000) 301,185 1,028,119 - (56,135) 54,215 (2,154,698) _______ (135,923) _______ Annual Report and Accounts 2020 40 FINANCIAL STATEMENTS Company Statement of Changes in Equity For the five months ended 31 December 2020 Share capital £ Share premium £ Balance at 1 January 2020 Profit and total comprehensive income for the period 286 8,186,967 - - Balance at 31 July 2020 286 8,186,967 Bonus issues Capital reduction Issue of consideration shares Issue of other shares Costs of raising equity Share-based payments Loss and total comprehensive income for the period Balance at 31 December 2020 4,911 - 140,128 20,562 - - - _______ 165,887 _______ (4,911) (8,182,057) - 1,007,558 (56,135) - - _______ 951,422 _______ Share- based payment reserve £ - - - - - - - - 54,215 - _______ 54,215 _______ Merger relief reserve £ Retained earnings £ Total £ - - - (8,155,571) 31,682 63,418 63,418 (8,092,153) 95,100 - - 5,557,645 - - - - 8,182,057 - - - - _______ (1,173,655) _______ 5,557,645 _______ (1,083,751) _______ - - 5,697,773 1,028,120 (56,135) 54,215 (1,173,655) _______ 5,645,418 _______ Annual Report and Accounts 2020 41 FINANCIAL STATEMENTS Group and Company Cash Flow Statement For the year ended 31 December 2020 Group Year ended 31 December 2020 Notes £ Group 9-month period ended 31 December 2019 £ Company 5-month period ended 31 December 2020 £ Company 7-month period ended 31 July 2020 £ (2,154,698) (81,549) (1,173,655) 63,418 3 3 14 8,9 (603) - 358,443 22,270 - 370 - 3,656 (603) - 54,215 16,638 - - - 26,541 (83,297) (120,731) (370,302) 800,188 1,000,240 _______ (857,645) - _______ (857,645) 96,290 _______ 1,069,655 _________ (1,315,279) _______ (101,964) (404,052) (425,132) - _______ (101,964) - _________ (404,052) - _______ (425,132) 9 8 (9,144) (335,436) _______ (344,580) - - _______ - - (242,916) _________ (242,916) - - _______ - 14 1,212,032 - 95,000 603 - _______ 1,307,635 406,375 (381,300) - - (370) _______ 24,705 647,759 - 95,000 603 - __________ 743,362 - - - - _______ - 105,410 (77,259) 96,394 (425,132) 78,265 _______ 183,675 425,132 _______ - ===================== ===================== ===================== ===================== - ________ 96,394 155,524 _______ 78,265 Loss before tax Adjustments to reconcile profit before tax to cash generated from operating activities: Finance income Finance costs Share-based compensation Depreciation and amortisation (Increase)/decrease in accrued income, trade and other receivables Increase/(decrease) in trade and other payables Cash used in operations Income tax paid Cash used in operating activities Investing activities Acquisition of property, plant and equipment Acquisition of intangible assets Cash used in investment activities Financing activities Shares issued (net of costs) Repayment of shareholder loans Loans received Interest and similar income Interest and similar charges Cash generated from financing activities Increase/(decrease) in cash and cash equivalents Opening cash and cash equivalents Closing cash and cash equivalents Annual Report and Accounts 2020 42 FINANCIAL STATEMENTS 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. The Company was admitted to AIM, London Stock Exchange's market for small and medium size growth companies, on 6 April 2021. The registered office of the Company is The Old Rectory, Addington, Buckingham, England, MK18 2JR, and its principal business address is 1 Poultry, London, EC2R 8EJ. The main activities are set out in the Strategic Report on pages 2-14. 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, AMENDMENTS AND INTERPRETATIONS The following Standards and Interpretations have been considered and applied in these financial statements: • • • • IFRIC 23 Uncertainty over Income Tax Positions Amendments to IFRS 9 Prepayment Features with Negative Compensation Amendments to IAS 28 Long-term interests in Associates and Joint Ventures IFRS 16 Leases Annual Report and Accounts 2020 43 FINANCIAL STATEMENTS 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 - Avila House Limited - CS Commercial Limited Cornerstone EBT Trustee Limited - 100% owned by the Company 100% owned by FXPress Payment Services Ltd 100% owned by the Company 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 £2,154,698, which has resulted in the balance sheet showing a net liabilities position of £135,923. Post year-end, the Group’s balance sheet was strengthened with the raising of gross proceeds of £2.2m via a placing of new ordinary shares following the Company’s admission to AIM. The Group also has access to £450,000 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. Annual Report and Accounts 2020 44 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. Annual Report and Accounts 2020 45 FINANCIAL STATEMENTS 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 Software costs Other intangible assets – 3 years – 3 years – 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. Annual Report and Accounts 2020 46 FINANCIAL STATEMENTS 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. Annual Report and Accounts 2020 47 FINANCIAL STATEMENTS 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. Annual Report and Accounts 2020 48 FINANCIAL STATEMENTS 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: Total revenue 2 LOSS FROM OPERATIONS Loss from operations is stated after charging: Share-based compensation on reverse acquisition Other share-based compensation Transaction costs Expensed software development costs Depreciation of property, plant and equipment Amortisation of intangible assets Short-term (2018 IAS 17 operating) lease rentals Group Year ended 31 December 2020 £ _______ 1,664,237 _______ Group 9-month period ended 31 December 2019 £ _______ 1,240,938 _______ Group Year ended 31 December 2020 £ Group 9-month period ended 31 December 2019 £ 211,281 147,162 793,577 42,333 1,730 20,540 70,697 _______ - - - 43,000 729 2,926 69,992 _______ Annual Report and Accounts 2020 49 2 LOSS FROM OPERATIONS (continued) Amounts payable to the Group’s auditor in respect of both audit and non-audit services: FINANCIAL STATEMENTS Audit Services - Statutory audit Other Services The auditing of accounts of associates of the Company pursuant to legislation: - Audit of subsidiaries and its associates 3 INTEREST AND SIMILAR ITEMS i. ii. Total finance and other income Total finance costs 4 EMPLOYEES Year ended 31 December 2020 £ 15,000 9-month period ended 31 December 2019 £ - 16,500 ------------------------- 31,500 ========================= 8,000 ------------------------- 8,000 ========================= Group Year ended 31 December 2020 £ 603 _______ - _______ Group 9-month period ended 31 December 2019 £ - _______ 370 _______ 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): Directors Employees Year ended 31 December 2020 Number - 9 _______ 9 _______ 9-month period ended 31 December 2019 Number - 6 _______ 6 _______ Annual Report and Accounts 2020 50 EMPLOYMENT COSTS Wages and salaries Social security costs Pension costs Share-based compensation FINANCIAL STATEMENTS Year ended 31 December 2020 £ 9-month period ended 31 December 2019 £ 618,522 68,455 5,930 26,787 _______ 719,694 _______ 135,557 13,899 4,073 - _______ 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. Salaries and fees Share-based compensation Social security costs Number of Directors to whom retirement benefits are accruing under a defined contribution scheme The remuneration in respect of the highest paid Director was: Salaries and fees Share-based compensation Social security costs Year ended 31 December 2020 £ 9-month period ended 31 December 2019 £ 116,786 20,088 9,453 _______ 146,327 _______ - - - _______ _______ Number Number - - Year ended 31 December 2020 £ 9-month period ended 31 December 2019 £ 85,000 15,452 5,580 _______ 106,032 _______ - - - _______ - _______ During the year no (2019: nil) Directors exercised any (2019: nil) share options. Annual Report and Accounts 2020 51 FINANCIAL STATEMENTS 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 £5,930 (2019: £4,070). At 31 December 2020 contributions of £2,490 remained outstanding and are included within other payables (31 December 2019: £543). 6 TAXATION The tax on the loss on ordinary activities for the period was as follows: CURRENT TAX: UK Corporation tax Deferred tax Tax on loss on ordinary activities Loss before taxation Loss multiplied by main rate of corporation tax in the UK of 19% (9-month ended 31 December 2019: 19%) EFFECTS OF: Expenses not deductible for tax purposes Share-based payments Other deductions in period Tax losses carried forward Current tax Group Year ended 31 December 2020 £ _______ Group 9-month period ended 31 December 2019 £ _______ - - _______ - _______ Group Year ended 31 December 2020 £ (2,154,698) _______ - - _______ - _______ Group 9-month period ended 31 December 2019 £ (81,549) _______ (409,393) (15,494) 155,158 68,104 (1,446) 185,577 _______ - _______ 656 - - 14,838 _______ - _______ 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 £62,000. 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 £2,847,347 (31 December 2019: £1,860,098). 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. Annual Report and Accounts 2020 52 FINANCIAL STATEMENTS 7 LOSS PER SHARE The loss per share of 14.99p is based upon the loss of £2,154,698 (2019: loss of £81,549) 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. Annual Report and Accounts 2020 53 8 GROUP INTANGIBLE ASSETS COST At 1 January 2020 Additions Acquired through business combination At 31 December 2020 AMORTISATION At 1 January 2020 Charge for the period At 31 December 2020 NET BOOK VALUE At 31 December 2020 At 31 December 2019 FINANCIAL STATEMENTS Internally developed software £ - 242,916 - _______ 242,916 - 16,638 _______ 16,638 Software costs £ Other £ 15,611 - - _______ 15,611 9,535 3,902 _______ 13,437 - - 92,520 _______ 92,520 - - _______ - Total £ 15,611 242,916 92,520 _______ 351,047 9,535 20,540 _______ 30,075 226,278 _______ - _______ 2,174 _______ 6,076 _______ 92,520 _______ - _______ 320,972 _______ 6,076 _______ Other intangible assets comprise regulatory licenses held at cost and are not amortised in the first period of ownership. COMPANY INTANGIBLE ASSETS COST At 1 August 2020 Additions At 31 December 2020 AMORTISATION At 1 August 2020 Charge for the period At 31 December 2020 NET BOOK VALUE At 31 December 2020 At 31 July 2020 Internally developed software £ - 242,916 _______ 242,916 - 16,638 _______ 16,638 Software costs £ Other £ - - _______ - - - _______ - - - _______ - - _______ Total £ - 242,916 _______ 242,916 - 16,638 _______ 16,638 226,278 _______ - _______ - - _______ _______ - - 226,278 _______ - _______ _______ _______ Annual Report and Accounts 2020 54 9 GROUP PROPERTY, PLANT AND EQUIPMENT FINANCIAL STATEMENTS COST At 1 January 2020 Additions At 31 December 2020 DEPRECIATION At 1 January 2020 Charge for the period At 31 December 2020 NET BOOK VALUE At 31 December 2020 At 31 December 2019 Computer Equipment £ 6,531 9,144 15,675 5,481 1,730 7,211 8,464 1,050 Annual Report and Accounts 2020 55 10 INVESTMENTS FINANCIAL STATEMENTS Cost or Valuation At 1 August 2020 Additions Disposals At 31 December 2020 Net Book value At 31 December 2020 At 31 July 2020 Investments in Subsidiaries £ 100 6,147,773 (100) 6,147,773 6,147,773 100 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 £450,000 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 £5,697,773, 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 £100. 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. Annual Report and Accounts 2020 56 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: FINANCIAL STATEMENTS Subsidiary FXPress Payment Services Ltd Avila House Limited CS Commercial Limited (audit exempt) Cornerstone EBT Trustee Limited (audit exempt) 11 AVILA HOUSE ACQUISITION Principal Activity Foreign Exchange and Payment Services Country of Incorporation Northern Ireland E-money and Payment Services England and Wales Dormant Employee Benefit Scheme Trustee England and Wales England and Wales Registered Office 1 Elmfield Avenue, Warrenpoint, Newry, Co. Down, BT34 3HQ The Old Rectory, Addington, Buckinghamshire, MK18 2JR The Old Rectory, Addington, Buckinghamshire, MK18 2JR The Old Rectory, Addington, Buckinghamshire, MK18 2JR Percentage of Ownership 100 per cent. 100 per cent. 100 per cent. 100 per cent. 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 £92,685 (satisfied by £60,000 in shares and £32,685 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 £92,520, 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 £3,822, which is included in the consolidated financial statements. Annual Report and Accounts 2020 57 12 CURRENT TRADE AND OTHER RECEIVABLES FINANCIAL STATEMENTS Trade receivables Prepayments and accrued income Derivative financial assets at fair value Other receivables Amounts due from Group undertakings and undertakings in which the Company has a participating interest Taxes and social security Company Company Group 31 December 2020 £ Group 31 December 2019 £ 31 December 2020 £ 8,405 24,623 299,035 140,378 7,720 - 281,134 66,516 - 9,600 - 131,492 31 July 2020 £ - - - - - - 97,718 - _______ 570,159 _______ _______ 355,370 _______ - 97,718 _______ 238,310 _______ 95,000 - _______ 95,000 _______ For the year ended 31 December 2020, £nil was recorded as a bad debt expense (nine-month period ended 31 December 2019: £nil). 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: £nil). The estimated net benefit of the claim is approximately £62,000 and has not been included in current receivables due to its contingent nature. 13 CURRENT TRADE AND OTHER PAYABLES Trade payables Derivative financial liabilities at fair value Other tax and social security Other payables and accruals Amount due to Group undertakings Group 31 December 2020 £ 525,064 216,061 47,273 430,795 - _______ 1,219,193 _______ Group Company Company 31 December 2019 £ 101,577 249,989 5,458 17,953 - _______ 374,977 _______ 31 December 2020 £ 238,654 - 17,411 290,773 516,999 _______ 1,063,837 _______ 31 July 2020 £ - - - - - _______ - _______ Annual Report and Accounts 2020 58 FINANCIAL STATEMENTS 14 SHARE CAPITAL AND RESERVES Allotted, called up and fully paid Ordinary shares of £0.00001 each as at 1 August 2020 Bonus issue of £0.00001 shares 9 August 2020 Consolidation to £0.0001 9 August 2020 Issue of consideration shares of £0.0001 9 September 2020 Bonus issue of £0.0001 shares 10 September 2020 Issue of new shares of £0.0001 16 September 2020 Consolidation to £0.01 shares 2 October 2020 Issue of new shares of £0.01 October to December 2020 Ordinary shares of £0.01 each at 31 December 2020 Ordinary shares Share capital £ 286 2,573 - 140,128 2,336 1,344 - 19,219 _______ 165,886 _______ No. 28,597,462 257,377,158 (257,377,158) 1,401,275,638 23,363,722 13,438,678 (1,452,008,745) 1,921,853 _______ 16,588,608 _______ At 31 December 2020 share subscriptions of £131,492, comprising £2,630 share capital and £128,862 share premium, remained unpaid (31 July 2020: £nil). 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 £0.00001 each into 1 share of £0.0001 each; • • • • • • • on 9 September 2020, 1,401,275,638 new A ordinary shares of £0.0001 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 £0.0001 each were issued; on 16 September 2020, 13,438,598 new A ordinary shares of £0.0001 each were issued at a price of £0.005 each and 80 new A ordinary shares of £0.0001 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 £0.0001 each into 1 Ordinary Share of £0.01 each; on 3 October 2020, 1,390,018 Ordinary Shares were issued at a price of £0.50 each and 211,835 Ordinary Shares were issued in consideration for services at an equivalent price of £0.50 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 £0.50 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, £131,492 of issued share capital was unpaid (31 December 2019: £26,247). The following describes the nature and purpose of each reserve within owner’s equity: Share capital: Amount subscribed for shares at nominal value. Annual Report and Accounts 2020 59 FINANCIAL STATEMENTS 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. Outstanding as at 1 August 2020 Granted during the period Outstanding as at 31 December 2020 Ordinary shares No. Weighted average exercise price £ - 1,599,480 _______ 1,599,480 _______ - 0.50 _______ 0.50 _______ On 2 December 2020 Julian Wheatland was granted options over 922,677 Ordinary Shares at an exercise price of £0.50 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 £0.50 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 £0.50 per share. Annual Report and Accounts 2020 60 FINANCIAL STATEMENTS The Black-Scholes model was used for calculating the cost of options. The model inputs for the options issued were: - 2 December 2020 Grant date Share price at grant date - 50 pence - 50 pence Exercise price - 0.8% Risk free rate - 83.7% (based on reference to the Group’s quoted competitors) Expected volatility - 5 years Contractual life 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 £0.050 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 £0.016 per warrant at the grant date using the Black-Scholes valuation model. The principal inputs into the model were: Share price at grant date Risk-free rate Expected Volatility Contractual life - between 4.7 pence and 5.5 pence - 0.75% - 25% - 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 £92,947 for the year-ended 31 December 2020 (9 months ended 31 December 2019: £nil). 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 £0.31 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 £0.50 and a term of five years. The Cornerstone warrants were estimated to have an average grant date fair value of £0.342 per warrant using the Black-Scholes valuation model. The principal inputs into the model were: Share price at grant date Risk-free rate Expected volatility Contractual life - between 16.6 pence and 50 pence - 0.8% - 83.7% - between 4 years & 105 days and 5 years The Group share-based compensation charge for the year ended 31 December 2020 of £147,162 (9-month period ended 31 December 2019: £nil) consists of £92,947 in relation to the accelerated share-based payment charges in respect of the cancelled warrants in FXPress Payment Services Ltd, £27,428 in respect of the replacement warrants granted in Cornerstone and £26,787 in respect of the Cornerstone options. Annual Report and Accounts 2020 61 15 RELATED PARTY TRANSACTIONS FINANCIAL STATEMENTS 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 £516,999 (2019: £nil) 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 £50,000 (2019: £nil) 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 £49,323 were due to London Bridge Capital Limited, a company of which Gareth Edwards and Elliott Mannis are directors and Elliott Mannis is the shareholder. £36,135 remained due to London Bridge Capital Limited at the year-end (2019: £nil). Terry Everson, a director of FXPress Payment Services Ltd and a significant shareholder in Cornerstone, was paid consulting fees of £24,000 via Hazelwood Financial Ltd, a company of which he is a director and significant shareholder (9 months ended 31 December 2019: £54,000). As at 31 December 2020, a loan of £10,000 made by the Group to Terry Everson remained unpaid (31 December 2019: £nil). William Newton, a director of FXPress Payment Services Ltd and a significant shareholder in Cornerstone, was paid consulting fees of £8,333 (9 months ended 31 December 2019: £21,000). Stephen Flynn, a director of FXPress Payment Services Ltd and a significant shareholder in Cornerstone, was paid consulting fees of £68,871 via JF Technology (UK) Ltd, a company of which he is a director and significant shareholder (9 months ended 31 December 2019: £21,500). David Mason, a director of FXPress Payment Services Ltd, was paid consulting fees of £85,800 (9 months ended 31 December 2019: £nil). Jason Conibear, a former director of FXPress Payment Services Ltd, was paid consulting fees of £42,650 (9 months ended 31 December 2019: £15,000). Annual Report and Accounts 2020 62 16 FINANCIAL INSTRUMENTS FINANCIAL ASSETS DERIVATIVE FINANCIAL ASSETS Foreign currency forward contracts with customers Foreign currency forward contracts with institutional counterparty Cash and cash equivalents Trade receivables Other receivables FINANCIAL LIABILITIES DERIVATIVE FINANCIAL LIABILITIES Foreign currency forward contracts with customers Foreign currency forward contracts with institutional counterparty Trade payables Other payables FINANCIAL STATEMENTS Group 31 December 2020 £ Group Company Company 31 December 2019 £ 31 December 2020 £ 31 July 2020 £ 253,077 182,117 45,958 99,017 _______ 299,035 183,675 8,405 165,001 _______ 656,116 _______ _______ 281,134 78,265 7,720 66,516 _______ 433,655 _______ - - - - _______ - 96,394 - 141,092 _______ 237,486 _______ _______ - - - 95,000 _______ 95,000 _______ Group 31 December 2020 £ Group Company Company 31 December 2019 £ 31 December 2020 £ 31 July 2020 £ 55,869 120,754 160,192 129,235 - - - - _______ 216,061 525,064 430,795 _______ 1,171,920 _______ _______ 249,989 101,577 17,953 _______ 369,519 _______ _______ - 238,654 807,772 _______ 1,046,426 _______ _______ - - - _______ - _______ All financial assets and liabilities have contractual maturity of less than one year. Annual Report and Accounts 2020 63 Derivative financial assets and liabilities Derivative financial assets not designated as hedging instruments FINANCIAL STATEMENTS Foreign currency forward contracts with customers Foreign currency forward contracts with institutional counterparty 31 December 2020 31 December 2019 Fair Value £ Notional Principal £ Fair Value £ Notional Principal £ 253,077 14,686,425 182,117 4,986,924 5,785,633 45,958 _______ _______ 299,035 20,472,058 _______ _______ 99,017 _______ 4,971,285 _______ 281,134 9,958,209 _______ _______ Derivative financial liabilities not designated as hedging instruments Foreign currency forward contracts with customers Foreign currency forward contracts with institutional counterparty 31 December 2020 31 December 2019 Fair Value £ Notional Principal £ Fair Value £ Notional Principal £ 55,869 4,392,467 120,754 4,535,780 160,192 _______ 216,061 _______ 12,390,456 _______ 16,782,923 _______ 129,235 _______ 249,989 _______ 5,192,152 _______ 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 £4,839 (9 months ended 31 December 2019: £13,250). Annual Report and Accounts 2020 64 FINANCIAL STATEMENTS 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. Annual Report and Accounts 2020 65 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. FINANCIAL STATEMENTS 17 FINANCIAL COMMITMENTS The Group is not considered to have any operating lease commitments. The offices utilised by the Group are serviced offices, which have a short notice period and therefore it has not been considered necessary to disclose these as an operating lease commitment. 18 CAPITAL MANAGEMENT The capital structure of the business consists of cash and cash equivalents, debt and equity. Equity comprises share capital, share premium and retained losses and is equal to the amount shown as ‘Equity’ in the balance sheet. The Group’s current objectives when maintaining capital are to: • • safeguard the Group’s ability to operate as a going concern so that it can continue to pursue its growth plans; provide a reasonable expectation of future returns to shareholders; and • maintain adequate financial flexibility to preserve its ability to meet financial obligations, both current and long term. The Group sets the amount of capital it requires in proportion to risk. The Group manages its capital structure and adjusts it in the light of changes in economic conditions and the risk characteristics of underlying assets. The Company is subject to the following externally imposed capital requirements: • as a public limited company, the Company is required to have a minimum issued share capital of £50,000. 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 €50,000, whichever is the higher. 19 EVENTS AFTER THE REPORTING DATE On 26 February 2021, 24,326 Ordinary Shares were issued at a price of £0.407 each on the exercise of warrants. On 17 March 2021, the Company and William Newton entered into a facility to borrow £350,000 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 £100,000 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 £100,000 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 £50,000 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 Annual Report and Accounts 2020 66 FINANCIAL STATEMENTS 61 pence per ordinary share, raising gross proceeds of £2,235,435. 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. Annual Report and Accounts 2020 67 FINANCIAL STATEMENTS Registrar Neville Registrars Limited Neville House Steelpark Road Halesowen B62 8HD Financial PR Adviser Luther Pendragon 48 Gracechurch Street London EC3V 0EJ Company Information Registered Office The Old Rectory Addington Buckinghamshire MK18 2JR Principal Trading Address 1 Poultry London EC2R 8ET Company Registration Number 08367949 Company Secretary Hanh Jelf, TH Jelf LLP Nominated & Financial Adviser SPARK Advisory Partners Limited 5 St John’s Lane London EC1M 4BH Joint Brokers Peterhouse Capital Limited 80 Cheapside London EC2V 6EE Pello Capital Limited 7th Floor 10 Lower Thames Street London EC3R 6AF Auditors Haysmacintyre LLP 10 Queen Street Place London EC4R 1AG Solicitors TH Jelf LLP The Old Rectory Addington Buckinghamshire MK18 2JR Annual Report and Accounts 2020 68 

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